The Economy

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???

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.

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.

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

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

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.

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

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

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.

Well, it seems that the economy is getting more attention these days. I'll try to keep this short. I saw this coming in 2005 so, it's not a surprise.
California is a good study for our problems. All democracies eventually fail. Here in california, we voted for prop 13 to reduce our taxes. Then, we sold lots of bonds to pay for the party. Instant pleasure and deferred pain.
When the Govinator was elected, he demanded that the legislature reduce expenditures. They refused. Then Arnold put Prop 76 on the ballot,,, the so-called "Live Within Our Means" budget. We voters voted it down. Well, now Ca is flat broke and still has to service $ 56 billion in bond obligations.
We now have instant pain and deferred pleasure.

Washington sold $ <2.5> billion in bonds every day. GOV ran up the debt to where we paid $ <450> billion in interest-only payments. Debt is about $ 12 trillion. It doesn't really matter because there is no way that we can pay it back.

GOV now says that they are going to borrow $ 3 trillion next year. That's nice.
Saudi's income is down 1/2 trillion. China is going to do a stimulus. Russia needs to protect the ruble. Japan is going into recession and is going to do a stimulus.
ALL of these countries are selling US bonds to cover their deficits.

GOV can pass all the bailouts that it wants. They won't be funded. Do you think that Germany and France are going to buy $ 3 trillion? The FED created $ 1 trillion from 1913 to sept of '08. In the next 3 months, they created an additional $ 2 trillion. It isn't making any difference. Also, there are limits on just how much debt can be monetised.

The US spent $ 5 trillion a day last year. Their current revenues are falling like a stone and GOV is talking about tax cuts???

My prediction of a banking meltdown was not very popular when I started this thread.
I'll make another unpopular prediction.
The US GOV is going to collapse,,, most likely before 2010. There just isn't any way that we can continue to service our external debt. GOV will have to declare force majeure.
If you look at the you-tube presentations from Gerald Celente of Trends Research, he is very clear of where we are going. He also has a very impressive track record. ALL the news outlets agree that he is rarely wrong.
The Mises Institute has predicted ALL of the financial upheavals correctly.

The Dallas FED says that our unfunded liabilities have risen to $ 92 trillion. The IRS says that GOV revenue will drop to <40> % in a couple of years. Our debt to GDP ratio is absymal. Just as nobody wants to lend to Calif, the same is true for the US.
Just as Soros recently told everyone to get out of the pound sterling, Bob Chapman has told all his investors to get out of the dollar. Other governments are saying that treasuries are just another bubble.

You can call all of this alarmist but," they" are not in Davos for the skiing.
Dan

If they defaulted on their debt, and then taxed the rich, they would find they could live within their means... But, since you could not prevent business from moving there they would go.. We need a national government...The way it stands we don't have one government going broke, but fifty one... When governments borrow they borrow from the very people they could tax, if they had the will instead of taxing them they make the richer... Cool if you're rich...Bummer if you work for a living...

It isn't so much the wealthy that need to be taxed. It is the group of people and corporations that go around gutting countries;
Financial Coup d?Etat at The Catherine Austin Fitts Blog


The problems coming our way are the worst that the modern world has seen;
[SIZE=+1]"If we can use the Baltic Dry Index (BDI) as a guide for the next 12 months of product delivery and food availability in the stores we shop in then the BDI says shelves will be virtually empty of almost every product we use each and every day. "[/SIZE]http://www.rense.com/general85/des.htmYears ago, corporations paid 1/3 of the tax burden. In the true fascist style, Business was allowed to write new tax code. Corporations now pay 3 % of the tax burden.
Gordon Brown planning international agreement on tax avoiders | Business | guardian.co.uk

A big part of the problem is that corporations use much of their profits to invest in financial instruments. This money would serve all of us much better if it went back into the producing economy. As more profits are produced, the economy gets poorer;
William Brittain-Catlin: How offshore capitalism ate our economies - and itself | Comment is free | The Guardian

So much of the proceeds of our work have been plowed into financial instruments that there isn't enough left to run the economy. Petrov thinks that it is going to get very bad;
Worse than the Great Depression.
Reportedly, there are $ 1.4 quadrillion in derivatives that are going to fail. Our GDP is only $ 50 trillion worldwide. There is no way that all of this malinvestment is going to work out smoothly;
Worse than the Great Depression.
Plant a garden.
Dan

If the government wants to do a stroke, it will make sure there is food on every table... And if wants to make sure there is no revolution they should make sure people have cable television, or satalite.... Of course, if they lose their houses they may not cart off the tv; but bread and circus still go for something...The thing is, that throwing money at the problem is a problem, and there could be a run on the money as early as this summer... That is were planning should be in place, because the factory farms and old time farmers will need something for their food if the cash turns to crap... And yes; I have a garden, usually a vegetible garden, and strawberries too...Makes great jamb...

Great,,, send some jam. The truth is that 11 % of American households reported food insecurity last year;
ERS/USDA Briefing Room - Food Security in the United States I'm sure that with unemployment rising at over 1/2 million a month, food insecurity is growing. The problem is that bare-knuckles capitalism only rewards the producers. Those who aren't producing get left out in the cold. Since so many of the producers are machines, there are fewer and fewer niches for living producers.

As far as circuses go, that is another story. GOV is delaying the switchover to digital. GOV is committing $ billions to make sure that everyone has digital reception. GOV isn't paying enough attention to food but, is really pushing digital TV
If you read the science behind the digital signals, it starts to make sense; http://www.raven1.net/synthtel.htm The brain is electric. GOV seems to think that it can do direct programming. I'll pass !

Is it true That United State birth Certificates are considered Stock in the market? If so, I think I know how our government operates and see some really big errors in their philosophy.

Well, time marches on. Change isn't exactly what we had in mind. We still have too many wars.
A new term entered our vocabulary a few years ago; "jobless recovery"
There haven't been any new jobs added to the producing sector since 1971. The latest predictions for recovery call for a "jobless recovery" They also call for a "poverty stricken recovery" I am having trouble understanding how it can be called a recovery if it's jobless and poverty stricken.
34 million in America are receiving food stamps. Roughly 32 million are under or unemployed. 1 % of American adults are in the prison system.

Ca. ran out of unemployment insurance money in Jan. They're borrowing $1 B a month from the Feds.
The myopic view from DC seems to believe that we can have 25 % unemployment and still be in recovery. Automation continues to eliminate the human producer,,,, and then it goes looking in vain for a solvent consumer.
The banks are capitalized til their vaults are overflowing. The problem is that all their bonds and bills are just promises to be redeemed by future goods and services. Since the US is not price competitive, we won't be producing those future goods and services.

50 % of the cost for any item here is for financing. It varies. 19 % for trash collecting,,,, 78 % for public housing. GOV spends 36 % of the GDP. Let's say that taxes add 25 % to the cost of an item. US GOV spends hundreds of $ billions for defense. China spends $ 8 Billion. China has state credit and it is much cheaper than our usurious banks. Labor, materials, energy, transportation and profit cost 25 %
So the first 75 % of the cost of an item is for the parasites. That's a 300 % markup for the parasites. Our labor costs aren't what make us non-competitive. The US will be price competitive in manufacturing when we remove the parasites.
As long as we have imports, we have to have exports. The world has their own manufacturing and they don't need ours. Our utilization of industrial capacity is about 60 %. Our corporate bond default rate is at 10.9 % headed for 18.7 %. I doubt that manufacturing is going to pay for oil imports.
Our debt-service takes 41 % of our budget. The CBO says that that will go to 100 % in a few years and 200 % a few years after that. Every few months, the feds raise up the projected deficit.

Our environmental protection laws tend to add expense to natural resource production. Other countries produce timber and minerals for less money. Agriculture is doing OK but profits are down 38 % from 2 years ago. With the parasitism of GOV and banks, I don't see a way for the US to be competitive and make some money in the future.
I bought a little farmland to help out my friends and family.

What makes it a recovery is that there are less people producing more and cheaper, and more people forced onto a subsistence existence consuming, but not producing, and thinking they have no rights to anything better...If the government will not tax the rich who own everything, and they cannot tax the shrinking middle class, then they are forced to rob from everyone with inflation, or rob from the future with deficit spending... In any event they court disaster...Bankruptcy is the mother of revolution...They will not be able to play the game of funny money forever... They will be put out of business, or they will have to make war on the people or see us destroyed by plague if they will have more of our wealth than they already do... The country must support us all, but if all of us is less, then the rich can keep more.... Consider how the black death in Europe spurred the rise of capitalism... It freed up the capital of many generations which soon became true capital in the hands of a few...There is nothing about this world that would not be improved with the deaths of of a hundred million... The poor would be no poorer then, and the rich could be richer by far...