The Economy

[can't sit still]

Aristoddler said "and still think it's a good idea"
I would argue that "thinking" doesn't enter the picture. It costs 1 1/2 million dollars for a loaf of bread in Zimbabwe. The inflation rate is about 26,000%. The leaders were running out of money and decided to print some more to fix the problem.
Maybe greed displaces logic.... dunno.
The US comptroller-general, David Walker has quit his job. He spent a year or so trying to go around the country and tell people that we are broke. He gave up.

Greenspan engineered this mess and then found a fall guy in Bernanke. Then he ran as fast as he could. Now, dozens of republicans are retiring.

When the recently seated democrats in congress had the opportunity to vote to maintain or abolish the Haliburton camps, they voted to maintain them. Makes you wonder what they know that we don't know.

The reported losses so far have only been about 5 trillion. The Japanese haven't said a word yet. The last 2 paragraphs of this post have some interesting speculation about Japan. The International Forecaster

I'm not one to be alarmist but, the fundamentals of this problem are huge. The FED lowered the interest rate twice in 1 week. Nothing happened. Now, the FED has a new plan to pump 64 B to the banks wether they want it or not. The FED has also said that they reserve the right to pump money to ANY entity that they want. Fed, top central banks to flood markets with cash - MarketWatch

You've undoubtedly heard the famous quote from Bernanke that he "would drop money from helicopters". In the fourth week of december, the central banks "created" 3/4 of a trillion dollars [euros etc] Nobody would take it.

No responsible entity, private or institutional wants to take on any more debt. It's slowly starting to sink in that liquidity is NOT wealth,, it's debt.

This is a "sea change" in attitudes. The US can't sell bonds,,, California can't sell bonds. Northern Rock is going to be nationalised. The FDIC has 40 banks on "death watch".

"Fractional reserve" banking and the "British Banking system" got carried away in their greed. There are 450 trillion $ in derrivatives that is like a "snowman in the hot sun" With a worldwide GDP of only 50 trillion, how could we possbly generate 720 trillion in derrivatives?

The US has sucked in 80% of the savings worldwide. It now has a combined debt of 38 trillion. It doesn't take a great leap of logic to figure out that we could more easly repay this debt if we trashed our currency.

Since this makes our exports cheaper on the world market, other countries are trashing their currencies.
It's called "competitive devaluation",,,, a race to the bottom.

No fiat currency has ever survived . The US "printed" money to finance the Viet-Nam war. The french took note of this and demanded gold because the currency had been debased. Nixon broke the gold/dollar connection and destroyed the Bretton-Woods agreement. This was the first step to destruction of the dollar and the worldwide currency agreement.

The dollar has lost 99% of it's value since the FED was established. Lately, it's been on a real roll. Greenspan is no dummy. He did what he did on someone's orders. Who, and for what purpose remains to be seen.

This isn't accidental. Greenspan lobbied for years to repeal the Glass-Steagal act that protected consumers and banks. Bush made sure that the consumer didn't have a chance at protection. washingtonpost.com
It's somebody's plan???

[step314]

What people seem to forget is that as long as banks lend almost all the money they take in, the total debt that people owe to banks will always be just a little less than the money they have deposited there; people on average will feel less secure and free. The banking crisis may end up being a blessing in disguise if required reserves at banks are required to be much higher than they are now. There's nothing wrong with paper money, it's just that every time a bank makes a loan, it ought to be required to keep in reserve a substantial fraction of that loan. (Reserves being tied to deposits is another reasonable approach so long as care is taken to deal with the situation of banks selling loans, e.g., as with mortgage-backed securities.)

People make the argument that banks perform a very valuable service by loaning almost every penny they take in. But really, if loans were so valuable to people, Why is it that when required reserve ratios are high, interest rates on loans are not astronomical? It is because when people are well-off, thank you very much, it makes them not want loans much. There is only one right way out of this crisis, and that is to tighten credit while simultaneously flooding the economy with newly created money. It is what should have been done long ago. True, tightening credit is something that might happen because they banks are forced to do it to stay afloat rather than because the government demands it, but whatever, so long as the government has enough sense to flood the economy with new money and ultimately re-introduce stiff reserve requirements, things should be OK if not better than they were before. And no, I don't think that flooding the economy with new money will be inflationary, because money that banks as a whole create by lending is of course inflationary as well, and there will be much less of that.

[Fido]

Do you ever think that money might be the cyphen through which the wealth of a nation is drawn? Every time inflation robs people on fixed incomes, which is everybody, the wealth of the country is piled up. Everytime government taxes labor they give property a ride, and the wealth grows. Every time the government advances money to the rich to be loaned to those too poor to keep up the pretense, wealth flows to wealth. If only the rich have money, something to sell for money, and a method of protecting wealth from taxation, the whole notion of money becomes meaningless. Do you think things cost more? No. Your money is worthless.

Since money has done its work of making fluid the transfere of wealth to the rich it is losing its value. If america is sold, 90 % in the hands of 1%, what is there left to part with that is not needed for life? Maybe we can sell our rights if we can find some rights not already compromised. What shall we do as a country if we if we can't force some one to take our dollars. I think the rich should get out of the dollar like a noose. It has done its work. But now, the dollar has been discredited. It was the work of geniuses.

[can't sit still]

There are far too many people who believe that money is wealth. It's only paper. Electronic money is even less tangible.
This is a 5 part vid that, while simplistic, is extremely informative.

YouTube - 1. Corrupt Banking System - Cartels Robbing the Public

This paper by C H Douglas is the definitive look at money;
C.H. Douglas: Pioneer of Monetary Reform

Historically, wealth came out of the ground. You worked your butt off and created useful things. When bankers came along, they didn't feel like working So, they fiddled with money instead. This fiddling with money might gain them a living but it didn't creat any wealth. They're , for the most part parasitic.

With the invention of the British Banbking system in about 1680, they went from parasitism to major bloodsucking. The key to our present system is the lie that bankers preach; wealth and liquidity are the same thing.

Then, they creat unlimited liquidity and trade it for your wealth. Just as we send paper to the Sauds for oil, bankers trade their funny money for the fruits of your labor. The problem now is that the bankers believe their own lie. There are about 720 trillion in derrivatives with a GDP of 50 trillion.

When the music stops, there are going to be quite a few "people" who can't find a chair. The current world supply of liquidity is like a big fat snowman left out on a hot day. Those holding physical things will have something in their hand. Those holding bank-created liquidity/debt will have zilch.

Knowing this,,,at last, liquidity is making a desperate attempt to convert itself into something tangible. The price of commodities has gone through the roof. It is driving up the price of food to where it is unaffordable to millions of people. The big banks are flat out broke, yet, they face at least 2 more years of foreclosures.

The center of the problem in the US is the fact that we've been maintaining our standard of living with other people's money. This is coming to an end.
What do we have left. Well, lets see. In the name of enviornmentalism, we got rid of our smokestack industries. We don't do heavy manufacturing. We don't save money so we can't do financing any more. The Yen carry trade is done for.

We have 37 T in debt and 50 T in legacy debt. The 37 T works out to about 440,000$ per person. We outsourced our good jobs. Where are we going to get 87 trillion dollars in the next couple of decades?

The ethanol program was used to drive up the price of food commodities but, we can't expect to survive on just ag exports.
A century ago the French were a big fish in a small pond. The world grew up around them and they weren't big anymore. The world has grown up around the US and we can't control things like before.
We're in a period of adjustment.
Dan

[can't sit still]

When I saw that the fundamentals of our financial system were headed off a cliff, I was looking to discuss it with people who had some grasp of history. I posted an essay at Burning Man. There was almost no imput.

I posted here thinking that a group with an awareness of philosophy would have an awareness of history. I was surprised at how little the problem was discussed.
Now, the banks are starting to crash; Mish's Global Economic Trend Analysis: Ten Financial Entities On The Brink
I wasn't prescient about this. It's been projected for years. One needs to read sites like; Prudent Bear, The International Forcaster, Market Oracle
One of the good things about Americans is their general positive attitude.
On the other side of this is American's seeming inability to discuss or cope with bad news.
It's generally agreed that the "Money Interests" control big portions of our lives. It's only through communication and discussion that we can avoid some of the worst traps.
At this moment, there are 3 US carrier battle groups off of Iran. There are another 50 ships headed there. A blockade is expected but denied,, yeah right.
There is also a Russian carrier battle group headed to Syria. At best, it's saber-rattling. At worst, it's nuclear war. Israel is outnumbered by Lebanon, Syria and Iran. Russia is outnumbered by the US.
The money powers are yanking the chains. The outnumbered powers may decide that they have to initiate any action with nukes.
The money powers are taking us down a very dangerous road.

Main stream media barely said a word when the dicider vaporised a few hundred tons of depleted uranium. Are tactical nukes the next step?

Lots of people have claimed from the begining that the dicider had/has no intention of leaving office at the end of his term. Would a nuclear war in the middle-east give him perceived justification to cancel the elections?

The hawks seem desperate to start a war before the end of the year. Democratic capitalism seems to be on it's way out to be replaced by autocratic capitalism. Since "power" seems to attract the already corrupted, I don't see this as an improvement.

It's all very interesting but starting to get dangerous.
Dan

[Fido]

Can't sit still... Money is an equivelent of wealth, and a conduit of wealth. It used to be with gold, that people actually exchanged one value for another. Now, the value must be turned to paper for the exchange to occur. Since business and government can manipulate money they can manipulate people, and since their money can be turned to property, or their property can be turned to money they are set on both ends. Only if they ruin the money supply totally can they lose in the long run. For example, if people were forced to carry thousand dollar bills around in bushel baskets to buy bread, they they could all start by paying off their houses, since the money is legal tender for all debts. But without a debt you can't make anyone trade a real good for a handful of printed paper. And look out because they are turning all their money to shet.

[can't sit still]

Yes Fido, I agree with you on all of this. The first job of bankers is to get you to believe that their paper has intrinsic value. The second job is to get you to believe that debt has the same value as wealth.
The bankers believed their own BS and now have mountains of debt that they would like to believe is wealth. The deleveraging has cost them $ 1/2 trillion. It is expected to cost another $1 trillion.

The systemic shock is expected to take down Lehman, Citi and thousands of others. There are serious questions about the survivability of the system. No fiat currency has ever survived long term. Central banks have colluded to try to insure that you have no other choice besides their paper.

Mac and Mae have to roll over about $300 billion before october. There aren't any prospective buyers. The stockholders have all deserted. We would have to borrow the money from China to pay China for it's investments in ther GSEs.
GOV borrowing has grown at 27% while gov tax incomes has declined at 6%. Entitlements are growing at 7% with GDP growth flat. GOV has to inject 6$ into the economy to get $1 in growth.
GOV can only sell 90 day bonds,,, no long term. Investors don't see long-term viability for the US. GOV needs to sell <2.5> billion a day in bonds to survive. The bond offerings that don't sell are bought by the social security admin.
When Ronald Raygun entered office, the debt was $1 trillion. When he left, it was $4 trillion. Our combined debt is now $37 T with 92 T in legacy debt. When foreign investors stop paying for the party,,, the party stops.
That is the position of California right now. Ca can't sell bonds, but still has to service existing bonds. The legislature is gridlocked because they have no idea how to pass on that much pain. Years ago, the Govenator tried to get an initiative passed,,, the "Live Within Our Means" bill. Californians rejected it. The deficit is 20 B and growing at 1 B a month.
The party is over and the check has arrived.

At the base of all this is the simple fact that we have spent the last 50 years inventing labor-saving devices and, at the same time, trying to keep full employment.
50% work directly or indirectly for GOV. GOV borrows 2.5 billion a day to pay them. Combine this with the fact that GOV has to inject $6 into the economy to get $1 growth in the GDP. History has plenty of examples to show us what the inevitable outcome is going to be.

A very large part of our production is done by computer controlled machines. As artificial intelligence allows even more work to be taken over by machines, there will be fewer and fewer jobs for warm bloods.
So,,, our producers will be cold blood and our consumers will be warm blood. Where are the jobs that the consumers will need to earn $ to buy products of the cold-bloods?

JFK hated the FED and printed U.S. Notes backed by our 4 billion ounces of silver. He was killed weeks later and LBJ stopped the printing. The silver was sold off so some other do-gooder didn't get any stupid ideas.
After 44 years, the silver ran out in Oct of 05. I bought silver 2 weeks later since the market would no longer be depressed by the 4B ounces. It sold for $7.50 an ounce.

The world has consistently used more silver for industry than it produces.
The supply is pretty much gone. Reportedly, there is more above-ground gold than silver. All the mints are out. If you want an investment that looks better than paper, silver looks good.
Dan

[can't sit still]

Everyone is wondering just how far the economy will fall. Obviously, it's hard to say. The losses to home equity is about $ 6 trillion and a couple trillion more in the financial industry. Add in $3 trillion to Wall street. The FDIC is about bust. Selling WaMu instead of saving it allowed the FDIC to dodge that bullet.

The banking industry is required by law to recapitalize the the FDIC without limits. They don't want to fork out the cash. They want us to do it. A week ago, they said $700 billion would fix things. 2 weeks ago, the banking industry borrowed $45 billion a day from the FED. Last week, they borrowed $188 billion a day from the FED.

What does that say about a $700 billion bailout. Now, they're saying,,,Oh what we actually said was $5 trillion. You must not have heard right.

Investors are trying to protect $1 quadrillion in derivatives,,,, $450 trillion in hedge funds,,, $1 trillion in unsecured credit-card debt, a few hundred billion in ABS and a few trillion in commercial loans. Citi, WellsFargo and B of A are expected to go into into the limbo where AIG? went. Wachovia is gone.

GOV is only trying to stop/forestall panic. The banks have taken in $6.24 trillion in deposits. Just over $6 trillion of that is gone. Investors have already pulled out a couple trillion out of money markets, etc. If the public loses confidence in the banks, it will get ugly fast. Unfortunately, our fractional reserve banking system involves a lot more CON, than confidence.

The Chinese GOV told the Chinese banks to stop loaning to America. Our major creditors have been meeting and have banded together to make sure that they get paid. If the crash gets much worse, GOV will declare force majeure and default.
We're currently paying $2 billion a day, interest-only on a combined debt of $37 trillion.

GOV is trashing the dollar as fast as possible to diminish the value of foreign debt repayment. Our creditors lose 15% a year on their US bonds. They're not happy about this
. If we default, they will probably insist that the BIS and IMF institute austerity measures to insure repayment. The IMF is already here doing our books. The US Comptroller-General, David Walker was unable to certify that our books were honest so the IMF will be quite busy. Georgy boy told the IMF that they could do our books but not release the results until he left office.

Since our military produces no income, the IMF will probably demand that the general economy receives the limited oil imports.... so that it can produce payback.

We just go along for the ride. We'll see what happens. Dan

[Fido]

The government uses inflation to rob from the poor because it will not tax the rich, which is hardly so strange considering that the government is usually the rich. It does not matter is you sell the family farm for X amount of dollars. To keep even that amount you must risk it with a nest of thieves on wall street because to stash it under the mattress means it is robbed of value while you sleep on it. Or you can lose it all at once because interest and profits have drained all the wealth out of society. Societies have to produce enough goods and values. Our economist do not tell you that labor creates value. Well too few are laboring to create value, and even then, enough people laboring have to have enough of what they produce to buy back what they produce, and they still need markets abroad. We long ago ceased to be a market for our own goods and became a market for goods we used to produce now produced abroad. Interest has sucked all the free wealth, the capital of generations past, poof, gone; never to return to farmers or working people. Now government is giving tax money of future generations to business for free because they can no longer extract wealth from us because it is gone. This will not save them, nor save us; but it will doom the government.