|
The
Great Fed-Financed Dollar Decline and Stock Market Rally of 2009 New
An Alternative to Capitalism?
Posted, Friday, September
25, 2009 10:54 pm "Home of the
Brave?" ... The following problems have
become inherent in our economy. What does that mean? It means they will be
around for a while: Needless poverty, unemployment,
inflation, the threat of depression, taxes, crimes related to profit (sale of
illicit drugs, stolen IDs, muggings, bribery, con artists, etc.), conflict of
interest, endless red tape, a staggering national debt plus a widening budget
deficit, 48 out of 50 states in debt, cities in debt, counties in debt,
skyrocketing personal debts, 50 percent of Americans unhappy at their work,
saving for retirement and our children's education, health being a matter of
wealth, competing in the "rat race", the need for insurance, being
a nation of litigation, being subject to the tremors on Wall Street, fear of
downsizing and automation, fear of more Enrons, outsourcing, bankruptcies, crippling
strikes, materialism, corruption, welfare, social security, sacrificing
quality and safety in our products for the sake of profit, the social problem
of the "haves" vs. the "havenots" and the inevitable
family quarrels over money. Have we become gluttons for punishment? My
college professor once said, "You can get used to hanging if you live
long enough!" ...Yes, there is
something we can do. We can look into ourselves for an answer. We may find
that we have the strength to carry out our internal economic affairs without
the need to use money. Yes, we will still need to use money when dealing with
other countries. There is no question that a way of life without money will
alleviate if not completely eliminate all of the previously mentioned
problems. Yet, we scoff at the idea. We are totally convinced that money is a
necessity. We cannot imagine life without money. Perhaps the time has come to
think otherwise. It is completely obvious our present economy no longer
satisfies our present day needs. ...Cooperation will
replace wasteful competition. We will all work together as a team. Work will
become a way to help people, to meet people or to be part of something
meaningful. It is a proven fact that people like to help one another. An
esprit de corps will naturally build up and make work more enjoyable. Even
the most menial task becomes easier when people work together. Yes, work will
become more of a "togetherness" thing. ...Yes, we will still
import and export goods with foreign countries as our needs dictate; but what
money will be used in place of the almighty dollar? Would the dollar have any
value if everything is free in the USA? Would that be a problem? We would,
however, still be able to use the currency of the country we are doing
business with. For example, if we export goods to Germany, we would accept
marks or euros in payment. The euros would then be deposited in our national
treasury for future use. The money could then be used to import goods or
perhaps send Americans overseas on vacation. Yes, a way of life
without money could be compared to the kibbutz which now exist in Israel. Can
you picture the USA as one big kibbutz? However, ownership of property will
remain the same as it is today. Our government will remain the same. Our free
enterprise system will remain in place as it is today. There will be no need
for money or any substitute for money since everything will be free. The advantages of a way
of life without money stagger the imagination; but they are real and cannot
be disputed. Perhaps it is time for us to grab the brass ring? "The Human Race
has improved everything except the Human Race.“ Adlai Stevenson John _____________ Answer by R. T.: I admire your
idealism and romantism. May I remind you
that the principle of “everything will be free
according to need” was tried for three-quarters of a century in many
countries, and it was called communism. It failed. New
Money Creation without Inflation.
Posted, Thursday,
September 24, 2009 9:56 am When the FED took over
troubled assets on its balance sheet, it produced central bank money on the
right side, but this newly created money is subtotaly sequestered / pledged,
thats probably the clue. Now, that's the reason
why the FED pays interests to the Banks as part of its Seignorage as long as
it receives payments out of the toxic waste it holds on the left side. So - what I guess nobody
is understanding - the monetary base was expanding, but the banks can't use
the fresh money fully for credit creation (even if they wanted to), the money
is inert. Stefan Answer by R. T.: Yes. The monetary
base expanded but not the money supply, as long as the banks' deposits at the
N.Y. Fed bank remain there. As to the money the Fed could make on the toxic
assets it took as collateral, nobody will ever know because the Fed refuses
to be audited. New
Trouble Ahead?
Posted, Wednesday,
September 23, 2009 9:00 pm Your analysis is by far
most accurate and complete on topics that relate to the current crisis. By this time I have
already read numerous articles on different websites with authors views
ranging from traditional economics (who do not know what to expect in future
other than general "inflation thing" ) to conspiracy theorists who
hype about tens of trillions of dollars in debt (that will be simply impossible
to repay), international Money and Banking conspiracy, and the coming
collapse of the dollar. Your view on that topic
has actually stricken me, as being totally comprehensive in terms that you
fully analyze actions, done by the Fed and the Treasury, what they meant to
do and what they achieved by this, and somewhat prophetic (you predicted
about B.Bernanke saying that "the recession is finally over" 3
months before that actually happened). Your analogies with the past is also a
nice thing, Japanese recession and so on. For which we all must thank you. And this brings two
questions: 1) Do you believe that
the current pattern of crisis will remind that of the Great Depression (with
stock market rebounding quickly before testing new lows)? 2) What is the best hedge
against coming hyperstagflation. Are silver and gold stocks good enough to
protect against troubles lying ahead? That information really
would be very valuable to all of us who read your articles and appreciate
them as much as I do. Once again, thank you very much! Andrei Answer by R. T.: Reality is complex and
difficult to anticipate in advance. So many things can happen and it's
difficult to protect oneself against every unforeseen event. For example, if
Israel (or the U.S.) were to attack Iran and if Iran were to close the Strait
of Hormuz, the price of oil would quickly rise to $150 US a barrel and the
current recession could be turned into a worldwide economic depression.
Inflation and interest rates would rise and the stock market would plunge
further down than most people expect. For the time being, it's true
that the Fed can generate sufficient liquidity to raise all boats... for a
while. This does not guarantee that economic activity will necessary follow.
From 1932 to 1937, the US stock market was rising at the same time as the
real economy remained in depression. My feeling is that an important stock
market correction is just around the corner. During the coming
stagflation, the challenge is to protect one's real income or purchasing power.
Prices will keep increasing while money incomes will stagnate. Gold and
silver are good stores of value but they do not generate income. The IMF has
just announced that it will sell for $15 billion of gold. The central banks
want to prevent the gold price from going too much above $1,000 an ounce.
Unless China's central bank scoops up this extra gold on the market, gold
prices could stabilize for a while, but the secular trend is up. Essentials,
i.e. food, energy and pharmaceuticals, could be the best place to be invested
for the retiring baby-boomers. Nouveau
Nouvelles règles comptables.
Posté, mercredi,
le 23 september, 2009 6:54 am Vous dites: “But who really
paid and has continued to pay for this imaginative recapitalization of
American banks, and who profits the most? First of all, of
course, bank profits, specially those profits by big international banks,
have exploded. Bank stocks have followed suit with tremendous gains. That's
why I say the stock market rally since March 5 (2009) has been a liquidity-driven
rally, engineered by the Fed.'' Faut voir
également ce que donnent les nouvelles pratiques comptables qui
donnent l'opportunité de présenter des bilans avec la valeur
des actifs, selon des valeurs hypothétiques; afin de savoir vraiment
si les profits sont rééls ou fictifs. On pourrait être
surpris.... Gilbert. New
"Money" and
"Currency".
Posted, Tuesday,
September 22, 2009 8:46 pm Just a brief suggestion:
It might serve your purposes to resist using the terms "money" and
"currency" as interchangeable, for money (gold) can be currency,
but currency (paper certificates) cannot be money. Unless it is something
of value, it cannot be money: http://www.marketoracle.co.uk/Article7235.html Edward _________________________ Answer by R. T.: Money,
as a means of exchange, is anything that is generally accepted as payment for
goods and services and repayment of debts. The US dollar is such a means of
exchange. It is fiat money. In economics, the term currency can refer either
to a particular currency, for example the US dollar or the euro, or to the
coins and banknotes of a particular currency. Historically,
money in the form of currency, usually gold and/or silver, has been the norm.
Nowadays, gold and silver are considered precious metals and a form of
commodities. No fiat money, and that includes the Swiss franc, has a fixed
value in precious metals. That does not mean that gold and/or silver are not
stores of value and a protection against fiat money inflation. However, gold
and silver are rarely used as means of exchange. New
Basic Economics.
Posted, Tuesday,
September 22, 2009 6:51 pm There is something that defies my logic and
understanding of basic economics. The Treasury supplies the special paper on
which to print money to the Fed. The Fed then prints the money on this
donated paper. The Treasury issues t-bills to the Fed and gets printed paper
(money) in return. Gov't then funnels these freshly minted dollars back into
the banking system, getting toxic debt (no value) in return. Now the
government has piles of toxic debt and the money it has given back to the Fed
and banking system for bad debt is disbursed in a manner that goes
unreported. The government i.e. the public then, presumably, has to pay the
interest on this money. I have heard of traditional socialism where the gov't
takes from the haves to give to the have nots. This sounds like the reverse
or corporate socialism. In the meantime the bankers receiving these bailouts
get huge bonuses while the tax payer who pays the interest on the loans is
just trying to hang onto his job. But now the same taxpayer
can go to the banks and borrow this free money from the banks and pay a
higher interest for a second time. The bank is collecting twice from the same
guy. In my mind this defies logic. What am I missing? If I had to make an
analogy it would be like me going to a Mercedes Dealer. I select the nicest
car on the lot. The dealer, then, gives me the car for free, and agrees to
pay me interest on the value of the car. In your scenario the government
is pumping enormous amounts of money into the banking system and they are not
lending the money to the public, or corporations. To have a recovery someone
has to be priming the pump ie stimulating the economy. The banks still seem
to be in big trouble and won't lend, the government is not pushing money into
the hands of the public and corporations to any degree, so who is left to
stimulate the economy. Furthermore the gov't is proposing big new spending
programs like socialized medicine and Cap and Trade that will burden the tax
payer even more. Bernake then says the recession is over. Again, something
does not compute. Seems like my understanding of economics is flawed. Rick _____________________ Answer by R. T.: When it is said that the
Fed prints money, this is a figure of style. The Fed does not physically
“print” money. It creates money. The printing of dollar bills is
the responsibility of the Bureau of Engraving and
Printing. It produces about 16.65 million $1 bills per day; which means that
the mean life of a $1 bill is about 21 months: How does the Fed create
money? When the Fed lends money
to the banks or to brokers, it creates bank deposits in its books that
represent new money. This is high-power money because the banks can lend
their new cash to borrowers and this increases the money supply by a
multiple. That's what can create inflation: too much money chasing too few
goods. That's the reason why the Fed
has decided to pay interest on the banks' deposits in its books as of October
2008. The Fed does not want the banks to create inflation. It primarily wants
to make the banks more liquid and better capitalized. As to the Treasury, when it
borrows, it issues bills or bonds with different maturities and paying a
certain interest rate. Banks can buy these issues and profit from the spread
they paid the Fed to borrow the funds (nearly nothing these days) and the
interest paid by the Treasury. This is a risk-free operation by the banks
that increases their profits (and bonuses). Since the government spends the
proceeds, this could create inflation down the road. In fact, the banks
prefer to lend to the government rather than to busines or consumers, because
this is risk-free. The Fed can also lend directly to the government by buying
new Treasury issues. This is less costly to the government (and to curent and
future taxpayers) because the Fed's net profits are returned to the
government at the end of the year. New
Canadians as “hewers of wood and drawers of water”. Posted, Tuesday,
September 22, 2009 6:19 pm Dr. Tremblay's articles
are being widely circulated and appreciated here on Vancouver Island, B. C.
(Canada). They are probably circulated through out the province. Most of us
have our own list serves. What I would love to see
is an analysis on the impact of this on Canadians as well as a critique of
what actions the Canadian Government is taking to try and offset the damage
cause by the Great Fed-Financed Dollar Decline. Perhaps they are not taking
any action other than bailing out our own banks to the tune of $75 billion. There is a great deal of
criticism being cast by the Opposition Leaders regarding cut backs but no
good analysis being given by any of these yahoos. They no doubt believe we
will not understand or that we will and will become angry. Here in B.C., another
swindle called the HST is being imposed on the population. http://thetyee.ca/Opinion/2009/09/22/HSTMyths/
"As thousands
protest, BC's government wildly spins its Harmonized Sales Tax". By Bill Tieleman, Today,
TheTyee.ca I am a retired senior
living for the past few years on an extremely modest pension. Already I am
having difficulty getting to the end of the month. The increases in the cost
of food and energy are rarely discussed by our politicians. Of course they,
themselves do not feel it like people similar to myself. There are many of us
too. I feel that food has increased by at least 50% over the past three
years. I suppose this is in part because of the decrease in the value of our
dollar which has been going on for years now as well as increased
transportation costs. A very sneaky way of stealing money from the population
and lowering everyone's income. Perhaps I am wrong as I am not an economist.
I just know that something is very very wrong for people like myself and even
for many who are better off than I. I worked hard all of my life and paid my
taxes. Now as a senior I am suffering. I am incredibly angry about this. It
is a good thing I am old as otherwise I would be looking for a Che Guevara to
take to the hills with. Thanks for reading this.
I don't really expect you to do the article I am requesting. I would just
like you to. Thank you for what you
are doing. I appreciate it. Stephanie, _________________ Answer by R. T.: The demise of the US dollar will
sooner or later translate into higher oil and gold prices and other
commodities. This in turn will push the Canadian dollar (and the Aussie and
New Zealand dollars) higher. The danger for Canada, if the
government does not take countermeasures, is disindustrialization because of
an over-valued Canadian dollar. This is called the “Dutch
disease” that renders the industrial sector non-competitive. This has
already begun in Canada, especially in Ontario, Quebec and British Columbia.
If this were to last many years, Canadians would thus be pushed back to the
status of “hewers of wood and drawers of water” for the
Americans. New
Long Overdue
Posted, Tuesday,
September 22, 2009 6:10 pm Simply one very pertinent
article, long over due some might say. Of course this email will
be forwarded to very many people, like all get out. As always, thanks for the
heads up and do take care. JZ |