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DOW 6800, S&P 720, NASDAQ 1310 - Page 82

post #1621 of 1894
Thread Starter 

Staggering statistic I came across; of course, the media has said over and over that there isn't a better place your money other than equities! Boy is that not true.

 

Today, the S&P 500 is at 1208. The first time it hit 1200 was in 1998. That means the S&P 500 is at roughly the same level it was in 1998.

Unfortunately, that doesn’t mean you break even over 13 years — after inflation, you lose a ton. The official inflation rates between 1998 and 2011 equal to about 2.4%.

That means if you put $100,000 into the S&P 500 in 1998, and waited for 13 years, you’d have about $73,560. After waiting about 13 years. That’s pathetic.

 

Pretty long, but definitely and MUST read; this will help you better understand why things are the way they are today:

The Nixon Shock

How Nixon stopped backing the dollar with gold and changed global finance, a 40-year-old decision that still echoes in Greece, Ireland, and the U.S.

 

http://www.businessweek.com/magazine/the-nixon-shock-08042011.html

 

post #1622 of 1894

it will be really ugly today.....

post #1623 of 1894
Quote:
Originally Posted by bigbull View Post

Staggering statistic I came across; of course, the media has said over and over that there isn't a better place your money other than equities! Boy is that not true.

 

Today, the S&P 500 is at 1208. The first time it hit 1200 was in 1998. That means the S&P 500 is at roughly the same level it was in 1998.

Unfortunately, that doesn’t mean you break even over 13 years — after inflation, you lose a ton. The official inflation rates between 1998 and 2011 equal to about 2.4%.

That means if you put $100,000 into the S&P 500 in 1998, and waited for 13 years, you’d have about $73,560. After waiting about 13 years. That’s pathetic.

 

 

Interesting statistic... puts things into perspective. Looks like we're going around in circles!
 

 

post #1624 of 1894
Thread Starter 

Good read;

 

Cohan: Ending the Moral Rot on Wall Street, Part 1

 

What will it take for Americans to finally get the message that much of Wall Street, in its current form, is a corrupt enterprise in need of a top-to-bottom overhaul, a task that the year-old Dodd-Frank law, for all its verbosity, barely attempts? There is ample evidence in the detritus left behind by the ebb tide of the worst financial crisis since the Great Depression. There are the thorough -- and thoroughly damning -- reports (along with thousands of pages of accompanying internal Wall Street documents) produced by the Financial Crisis Inquiry Commission and the Senate’s Permanent Subcommittee on Investigations. More was exposed by Anton Valukas, the chairman of the Chicago law firm Jenner & Block LLP, in his investigation of the accounting shenanigans engaged in by a handful of Lehman Brothers Holdings Inc. (LEHMQ)’s executives in the months leading up to that firm’s spectacular bankruptcy in September 2008. Each examination revealed layer upon layer of behavior that should make us seethe with anger. These include the decision to manufacture and sell mortgage-backed securities that were stuffed with loans of questionable value, plus the worthless AAA ratings placed on them by ratings services paid by Wall Street to do so. Also the business model that encouraged bankers and traders to take asynchronous risk with other peoples’ money with the knowledge that by the time things went wrong, billions of bonus dollars would be paid out, and no effort would be made to hold anyone accountable.

 

Link to full article - http://www.bloomberg.com/news/2011-08-08/ending-moral-rot-on-wall-street-part-1-commentary-by-william-d-cohan.html

post #1625 of 1894

What will it take for Americans to take notice and action? That time is nigh:

 

http://www.infowars.com/pollster-americans-are-pre-revolutionary/

 

"

Pollster: Americans Are “Pre-Revolutionary”

Just 17 per cent believe U.S. government has consent of the governed

Paul Joseph Watson
Infowars.com
Monday, August 8, 2011

Don't tread on Me

Amidst riots in central Europe that have now spread to London and a debt downgrade that threatens to plunge the United States into a double-dip recession, Americans’ lack of confidence in their leadership is so crippled that they are now “pre-revolutionary,” according to pollster Pat Caddell.

A new Rasmussen poll shows that just 17 per cent of Americans believe that the U.S. government has the consent of the governed, an all time low. This dovetails with a record low for Congress’ approval rating, which stands at a paltry 6 per cent, while 46 per cent of Americans think most members of Congress are corrupt, with just 29% believing otherwise.

“The number of voters who feel the government has the consent of the governed – a foundational principle, contained in the Declaration of Independence – is down from 23% in early May and has fallen to its lowest level measured yet,” according to Rasmussen.

The poll was conducted before Friday’s U.S. debt downgrade, indicating that the figures could be even more dire in the aftermath of what some analysts believe is a precursor to a new great depression.

The results of this survey indicate that Americans are now “pre-revolutionary” says pollster Pat Caddell, who described the outcome of the poll as “unprecedented”.

This conclusion follows Caddell’s observation last November that “a sea of anger is churning” amongst Americans who “want to take their country back” and that the nation stood on the brink of a “pre-revolutionary moment”.

  • A d v e r t i s e m e n t

Caddell’s conclusion that Americans are on the verge of rising up against a system in which they have lost all trust cannot be easily dismissed as partisan rhetoric. Despite working for numerous Democratic presidential candidates, including Jimmy Carter and Joe Biden, Caddell has been a vociferous critic of both Democrats and Republicans on several issues.

Back in early 2008, before the collapse of Lehman Brothers and the start of the financial crisis, we warned that inflation and economic uncertainty would cause a massive social dislocation, which would lead to riots globally. Gerald Celente and others repeated the warning in late 2008. Over the last 18 months, we have now witnessed such scenes across the Middle East and in France, Spain, Greece, Italy and most recently London.

Indeed, the only major western country not to experience significant social unrest since the economic collapse is America, although anecdotal evidence of rising crime and thefts suggests a turning point could be just around the corner.

Should violence plague American streets as a result of a deepening economic crisis, U.S. troops have already been prepared to deal with such a crisis.

As we reported three years ago, U.S. troops returning from Iraq were being re-allocated to occupy America, running checkpoints and training to deal with “civil unrest and crowd control” under the auspices of a Northcom program that revolved around deploying 20,000 active duty troops inside America to “help” state and local officials during times of emergency.

The date set for the completion of this program was 2011, just in time to deal with the “pre-revolutionary” fervor that many fear will now manifest itself in Greece-like mayhem as a result of the fallout from the debt downgrade and America’s slide towards economic collapse.

*********************

Paul Joseph Watson is the editor and writer for Prison Planet.com. He is the author of Order Out Of Chaos. Watson is also a regular fill-in host for The Alex Jones Show.  

post #1626 of 1894
Thread Starter 

Three really good videos; Highly recommend you all see them.

 

Notice how one of the videos Timmy Geithner said on national television, that there is no possible way of a U.S debt downgrade, yet today Timmy said he was 'shocked' at the downgrade.

What's more, you have CNBC., FOX, CNN, etc constantly bashing S&P for downgrading U.S debt, when it was the very investment banks of Wall St that payed these rating agencies back in '08 to stay mum about the CDOs they were rating, and to rate them AAA no matter what. So wait, now S&P is the bad guy? What you have here essentially is S&P and the pigs on Wall St messing around in bed together, yet the media is trying to portray it as if it's all S&P fault; I mean the blame has to be assumed by someone right? Can't be the investment banks, to much rancor on that end. It's got to be S&P this time, why not?. Same deal with the constant bashing of Washington; does anybody really think these people are not in it?

 

What we are seeing is the destruction of this country. You really have to be delusional to think otherwise.

 

 

By the way, Cramer recommended BAC not too long ago just right before it starting crashing. Seems reminiscent of when he recommended Bear Sterns. Keep your eyes wide open.

 

 

 

 

 

post #1627 of 1894
Thread Starter 

vtjohn; long time no see. Glad to see your postthumbup.gif

 

A somber speech by President John F. Kennedy, but one that fully encapsulates the reality of today's world.

The people need to stand; they need to stand now.

 

Pay close attention to every word President Kennedy says. Mind you this was a former President of the United States, not a random guy trying to make a name for himself.

 

Remember that government in Latin means control (govern) of the mind (ment - derived from the word 'mente').

 

 

 

 

 

 

 

post #1628 of 1894

If you go to :45 at this video you have Geithner saying there will be no risk for a downgrade. I wonder why he wanted to step down.horse.gif

 

post #1629 of 1894

I love the fact that over the last 3 years this particular thread is nearly always page 1 when i check in.

 

Dylan Ratigan calling out the banksta's tonight...

post #1630 of 1894
Thread Starter 

Trying to keep it that way vtjohnthumbup.gif

I want this to be a source for everyone of unbiased news. News that is not meddled with in order to create this facade on what's truly going on in this torn world of ours. After all, we the people have a unique opportunity here to truly bring change. It's been done before and it will be done again. I can guarantee it. While these people are secretly looking to take over the Middle East to create a Third World War, people are enraged and taking on the streets (London being the latest) protesting. I heard somewhere in the 'news' that it was because this guy died in Tottenham; that a lie. You're telling me that 40K+ people took the streets because this one guy died? No, it's because over in London, the current austerity measures are essentially robbing people from whatever few assets they have left. Remember that 90% of the taxes paid around the world are either a) voluntarily under law (such as the income tax; although if you don't pay it, Uncle Sam will put your in prison, even though there the government has no factual evidence to put in you jail, but since the judiciary system in most countries are controlled by these very same people in charge, it doesn't matter), or b) financial engineered tools (laws) that are there to transfer wealth from you and I to these corporations, even though none of them are necessary to fund and operate public works!  Most the of our taxes goes to support the Industrial War complex that the U.S has become.

 

Don't believe me? Let's take a stroll down memory lane - when were taxes first introduced in history? Back in Egypt to tax cooking oil; basically the Pharaohs (i.e. today modern elites) wanted to extract wealth from the 'citizens' by forcing them to use cooking oil which was taxed by get thsi, 50% of price of the cooking oil. This was done to not only extract their wealth, but to control them. IT wasn't until later on in history, really at the height of the Roman empire that Great Britain began to tax the &hit out of the people on things such as land and property. Guess were all of that money when to? Not to maintain the city, but to support the lives of these bankers who sent out tax collectors to collect money from the people (if you didn't pay the tax, you were ousted of the city).

 

Last comment I want to make; you all have to remember that wars are the best stimuli to economic growth. History has proven this with World War I and II, the Korean War, the Vietnam War, and yes, even the recent Iraq war. Just take a look at how much GDP, productivity and wages grew in the 10 years following the wars. With today's economy looking grim by the day, these people in power will want nothing else but to create a world war to make up for this spending binge of the last 50+ years!. As I posted a few pages back, do not be surprised to see a third World War unravel within the next 5 - 20 years! The U.S is strategically moving into the Middle East, forcefully removing their enemies in countries such as Syria, Libya, Lebanon, Iraq, etc (Afghanistan was done for a different reasons (i.e. to take control of the $3T+ mineral cash bank that the country is sitting on (this was even reported about a year ago by the 'media'), while forming alliances with countries that they now they ought not to have on their 'bad side' (i.e. Turkey).  Just take a map and notice how and were the U.S is moving into? Notice that it is trying to surrounding the one enemy it cannot buy nor beat - Iran; why? because the U.S knows Iran has the nuke and if the U.S dares invade them, you can bet will use the nuke and close down the strait of Hormuz, irregardless of what happens around the world. This is why the Israel, being the mighty military arm that it is, hasn't had the balls to attack Iran. Once that happens, they'll turn their back on Russia and launch a bigger war (i.e. World War III) with them. I know its' hard to believe and may be wrong in my assessment, but when I see the U.S forcefully asking Ghadaffi of Libya (which remember had close ties with none other than Goldman Sachs), Al-Assad from Syria, etc to step down and more than 1/2 of all navy carriers and warships near the Middle East and Asia, I begin to wonder what the game really is.

 

 

On the video, what can I say? Dylan is awesome! This is exactly what we need. The guy couldn't have it said it better. Is there any doubt why he was ousted (or why he decided to leave) CNBC? It's because that network is saturated with a bunch of ideological or/and former Goldminites (ever wonder why more than half the people have on or people they employ, have at some point worked for Goldman?). On the main page of the forum, StokJock-e praised Melissa Lee; don't know about that. The few times I've seen her, she just says what you would expect her to say? Not much at all (i.e. whatever lies are conjured by her boss - Goldman). 

 

Note: I noticed I went in all direction with post above, lol. But at least I vented some of my thoughts.

post #1631 of 1894
Quote:
Originally Posted by bigbull View Post

Staggering statistic I came across; of course, the media has said over and over that there isn't a better place your money other than equities! Boy is that not true.

 

Today, the S&P 500 is at 1208. The first time it hit 1200 was in 1998. That means the S&P 500 is at roughly the same level it was in 1998.

Unfortunately, that doesn’t mean you break even over 13 years — after inflation, you lose a ton. The official inflation rates between 1998 and 2011 equal to about 2.4%.

That means if you put $100,000 into the S&P 500 in 1998, and waited for 13 years, you’d have about $73,560. After waiting about 13 years. That’s pathetic.

 

Pretty long, but definitely and MUST read; this will help you better understand why things are the way they are today:

The Nixon Shock

How Nixon stopped backing the dollar with gold and changed global finance, a 40-year-old decision that still echoes in Greece, Ireland, and the U.S.

 

http://www.businessweek.com/magazine/the-nixon-shock-08042011.html

 


Not only that but soon you will pay capital gains. Take that and inflation and it's ugly. 

 

post #1632 of 1894
Quote:
Originally Posted by bigbull View Post

Is this Weather Bill?

 

 

 

 



 

post #1633 of 1894
Thread Starter 

I thought so BigShurl.

 

While people here are having a hissy fit over the downgrade of U.S credit from the prestigious AAA to AA+, the second biggest buyer of U.S debt - China, has lowered U.S credit by yet another notch to A+. By bond rating standards, the U.S is just 5 notches from being downgraded to 'junk' status. I said it before and I said it again, it is highly likely that you will see U.S debt get downgraded to AA by one inf ot all three rating agencies by 2012.

 

In my books, I would view view U.S debt as CCC+; the only reason it's that high is because the is highly liquid at to some extent, serviceable. Other than that, it's junk.

 

Note: The author of this piece says that S&P was the only agency with the balls to lower the rating of U.S debt. While that's true, remember that these rating agencies were and are most likely in bed with Wall St, so to say they had 'the fortitude to tell the truth' is a stretch in my opinion. I see it more as the S&P following through on their end (i.e. helping out the Goldman's, etc); this latest meltdown is in my opinion engineered. The backstop is there, their just not willing to use at this very moment.

Beijing Downgrades US-Treasury to A+ - Is Anybody Listening?

Link to full article - http://www.sirchartsalot.com/article.php?id=155

 

Of the big-3 credit rating agencies, only the S&P rating agency had the courage and fortitude to speak the truth, about the severe deterioration of America’s financial status. S&P shocked the political establishment in Washington, by following through with its threat to downgrade US Treasury debt to AA+ on the evening of August 5th. S&P added that the US Treasury debt could be downgraded further, if the crooked and inept politicians in Washington haven’t taken any meaningful moves to cut the size of its mounting debt.

 

Yet the most important voice in the debate about the credit worthiness of America’s debt, is not the twisted opinions of the US-credit rating agencies, but rather, that of China’s credit rating agency - Dagong Global Credit Rating, which downgraded US-Treasury’s debt from A+ to single-A last week. “The US decision to raise the borrowing ceiling will not change the fact that the growth of its debt has outpaced its overall economic growth and fiscal revenue. “It may further erode the country’s debt paying ability in the coming years,”Dagong Global said. It also issued a negative outlook.  “The rise of the US-debt ceiling helped temporarily avoid a debt default but has not improved its solvency and the increasing government debt burden will deteriorate the US sovereign debt crisis.”

 

Beijing1.gif

 

 

Beijing2.gif

 

Beijing4.gif

post #1634 of 1894
Thread Starter 

A few comments;

 

Recently I've heard the media belittle Europe's decision to curb short selling by stating that it causes long term imbalances. Although this is true and something I agree with, need I remind these pundits that they were the chief supporters of the short sell ban back when the U.S first implemented it in 2008? Back then, they said that this would 'end the bear raids in financials and actually increase market liquidity!' (two points that are completely not true; just look how illiquid Chinese markets were, and to a certain point still are, because they banned short selling). Now all of the sudden that Europe wants to put the breaks on some if these bear raids (not end them, two very different concepts) in some of these European banks, these pundits come out and bash European regulators for their decision? Ok....

 

Second, if no one here believes banks (commercial or investment) in Europe are being the target of some high frequency traders mainly here in the states, you really have to reevaluate your views. Names like Societe Generale, Commerz Bank, Banco Santander, have been victims of 'bear raids' based on unfounded rumors; whoever created these rumors and took the floor off these banks (by essentially (and in part) drying up the share-float in these bank stocks), engineered this latest draw-down. These people obviously made a lot of money at the expense of these European banks, and more importantly, at the expense of the European investor. The point here is that you have to mindful of these raids because despite popular belief, they do exist and will they take ahold, you have to very careful. These people do not care who they target and what the end result is; eventually, thsi will end bad for even the orchestrators.

 

Note: Implementing safeguards such as curbing short selling in my opinion fine, as long as they are temporary and lifted!

 

Good read for the weekend;

 

London Rioters Vs. Stock Market Traders: Who's More Destructive?

 

Note: I agree with some points made, but not all of them (especially the comparisons between both groups); nonetheless, a good read.

 

 

 

post #1635 of 1894
Great article below, to be read slowly so you can digest it in time. I'm going straight back to read it once again (and perhaps again) as is the case with many good articles posted in this thread. This article deals with issues of Fed not announcing more QE at latest FOMC, as well as what they have been doing instead. When reading the last parts of this article, note the correlation between the market draw down beginning July 27th, and the commencement of this Fed activity on the same date. Coincidence? Decide for yourself.

http://ftalphaville.ft.com/blog/2011/08/12/652166/the-feds-secret-qe-equivalent/

Excerpt:

It’s now very possible that the majority of the FOMC voting committee believes more QE could plunge the system into a desperate capital preservation frenzy, resulting in nothing else than self-imposed and voluntary capital destruction.

That the system is so broken, it doesn’t matter how much liquidity the Fed creates because it won’t be able to get any further than the immediate banking community. And that’s because banks still can’t find enough credit worthy people to lend to.
post #1636 of 1894
Thread Starter 

Brilliant read Rando! Recommend everyone read it.

 

As stated in the article you shared with us, reverse repos are nothing more but a masqueraded form of QE; at least in this case (this may sound counter intuitive to many since reverse repos by definition flush reserves out of the banking system). The way I see it is that apart from puttign a floor on interest rates, these reverse repos are also being exercised to put a floor on the U.S dollar. Remember that the Fed is not only trying to fend off deflation (or capital preservation which would lead to capital destruction) here in the states, but it also wants to avert a deflationary spiral from cresting in Europe. By keeping the dollar weak but not too weak, the Fed can keep the interest differential with other central banks (mainly the ECB), and therefore enter some of these swap arrangements. Part of the attempt to resuscitate the U.S economy has hinged on this belief that the Fed can endlessly monetize debt; as the article stated and as I've been warning for years now, markets are fast approaching the day of reckoning. With consumers here in the states being discouraged from saving and in some sense, discouraged from deleveraging from debt, the Fed is playing this one close; they fully understand that they need to avoid the grips of deflation at all costs. The only way to this at this point is to exercise some of these reverse repos for the time being, and keep inflation expectations alive by propping the likes of gold and silver higher. With the same token, the Fed does not want to create rampant speculation in these commodities as it would create a bubble which would then lead to a period of capital destruction, one that the Fed cannot withstand as it would send the global economy into the a deflationary vortex!

 

I still have to mull over some facts, but that's my general thinking. Feel free opine.

 

 

Quote:
Originally Posted by rando View Post

Great article below, to be read slowly so you can digest it in time. I'm going straight back to read it once again (and perhaps again) as is the case with many good articles posted in this thread. This article deals with issues of Fed not announcing more QE at latest FOMC, as well as what they have been doing instead. When reading the last parts of this article, note the correlation between the market draw down beginning July 27th, and the commencement of this Fed activity on the same date. Coincidence? Decide for yourself.

http://ftalphaville.ft.com/blog/2011/08/12/652166/the-feds-secret-qe-equivalent/

Excerpt:

It’s now very possible that the majority of the FOMC voting committee believes more QE could plunge the system into a desperate capital preservation frenzy, resulting in nothing else than self-imposed and voluntary capital destruction.

That the system is so broken, it doesn’t matter how much liquidity the Fed creates because it won’t be able to get any further than the immediate banking community. And that’s because banks still can’t find enough credit worthy people to lend to.


 

post #1637 of 1894
Thread Starter 

Unbelievable

 

Fool Me Twice: Bank of America Plays Hide And Seek Using Fannie Mae

It looks like no one was fooled when the Wall Street Journal’s (WSJ) Dan Fitzpatrick reported that Bank of America (BAC) had sold the servicing rights to of 400,000 loans with an unpaid principal balance of $73 billion to Fannie Mae for $500 million. There were numerous reports yesterday calling the deal a “backdoor bailout.” BAC is not selling the assets themselves only the rights to service the mortgage and collect those fees. The WSJ’s Fitzpatrick strongly hints that the portfolio is expected to deteriorate further making collection tough.

 

The taxpayer once again gets screwed. I've said it a millions tim and I'll ay it again - people are getting robbed right in front of their eyes and most don't even notice it. I have a feeling that will soon end.

 

post #1638 of 1894
Quote:
Originally Posted by bigbull View Post

I still have to mull over some facts, but that's my general thinking. Feel free opine.

 

 



 


Part of what makes it tough to figure exactly what the Fed is after here is due to the number of factors in play, they are taking cash/currency out of the system through reverse repos, putting it into the system with QE1 and QE2 as we knew them. They don't want inflation, they don't want deflation They want a weak dollar, but not too weak so at times they want to strengthen it. They help equities with QE and hurt it with these reverse repos. It just seems like from almost every angle they want things to be in a precise place, but each of these items cannot exist in harmony with all of the others so the Fed will never have everything just right, which they seem to need to be able to do in order to stave off an incredibly long and terrible time for our economy and nation. Despair has seemed inevitable for years now, for you, for me, for many of us here. The only constant in all of this is the Fed has been the banks' lackey throughout, which is really a shame because even some of the more astute financial minds I know in real life are totally sold on the Fed being a benevolent and good entity, they label me a conspiracy theorist within a few minutes.

The big run in gold certainly backs your belief of the reverse repos pushing people into gold and the like. Gold fell by about 80 bucks once the markets bounced late this week, but to a level that would have been an all-time high just a week before... Fed dodging a bubble bullet there? Also I noticed the dollar was moving a lot more sideways than the market, the market-dollar inverse relationship seemed to have weakened by more than half later in the week, also somewhat reinforcing an assertion you made, that being the Fed is trying to cauterize the dollar's wounds. What this boils down to is probably that beyond the Fed kissing the banks' behinds, they want to shield this fact from the view of the people, and by preventing the banks from passing along their cash carrying costs to their depositors, essentially if you think about it just another form of cost push inflation, the bank customer will be none the wiser. Granted these are the richest of bank customers, but still I don't like the principle. Also it reeks when the Fed says they are doing this but they are not going to be drawing down the bank's reserves. I guess the Fed has found yet another tool to help delay the inevitable, I can't see it being much better than that in a best-case scenario. The one thing I don't get is that the Fed is enhancing the appeal of being in cash to the big depositor, who might have been charged deposit fees but now won't. Perhaps this is a trivial side effect in the bigger game, because intuitively you'd think this would do nothing to help get him back in the equity markets.
post #1639 of 1894

good read

 

 

Why QE Didn’t Cause Hyperinflation

7 Comments

Ben Bernanke, and the Keynesians were right: Quantitative Easing has not caused the kind of inflation that the non-mainstream Austrian economists claimed that it would. The theory was that a soaring monetary base, and the zero-interest-rate-policy would lead to easy money flowing like a tsunami, and creating such a gush that inflation on goods and services — the change in cost from month-to-month and year-to-year — would soar, making life impossible for those on fixed incomes, and in a worst-case-scenario — like Zimbabwe, or Weimar Germany — forcing consumers to use an armful or wheelbarrow of cash to purchase a loaf of bread. Let’s look at the monetary base:


That is a huge spike! But what is the monetary base? The monetary base — also known as M0 — is the total amount of coins, paper and bank deposits in the economy. Quantitative easing injects new money into the monetary base, and as we can see above, has great increased it. So why can I still buy bread without a wheelbarrow? That is because the monetary base and the money supply are two different things. In a fractional-reserve banking system, deposits in banks can be lent, re-deposited, and lent again. Government policy determines the number of times that money can be lent — in the United States, total credit cannot exceed lending by more than ten times. The money supply — which accounts for fractional reserve lending — is known as M2. Let’s look at it:


So banks must be hoarding cash? That’s right. They are:

And what effect has quantitative easing had on prices? Here’s the CPI (inflation for consumers):

And the PPI for raw goods, intermediate goods, and finished goods (inflation for producers):



We are not experiencing an inflationary storm, not by any means. More like struggling over a mild deflationary slump. Hyperinflation is characterised by inflation in the thousands or millions of percent, and although the monetary base has increased fast enough to hugely inflate the currency, that hasn’t materialised. To understand why, we have to understand the phenomenon that quantitative easing sought to combat. Ben Bernanke’s academic career was characterised by his study of the Great Depression, and specifically the idea that following from the Wall Street crash of 1929, deflation made debt much harder to repay, leading to bank failures, leading to a credit contraction on fears of more deflation, leading to even more deflation, and so on in a kind of spiral of death. Quantitative easing has sought to prevent that spiral of death, and to prevent deflation from causing the real value of old debt from spiking, which would cause even more defaults, even less lending confidence, and even more deflation. And it has been relatively successful. But — very much like the Japanese response to its housing bubble in the 1990s — it does not seem to have done enough to allow a resumption in growth. From Dr. Housing Bubble:

The collapse in housing prices has been similar in both [the United States and Japan] and the path of each bubble seems extremely similar.  For example, the above chart looks at Japan real estate starting in 1984 and aligns U.S. home prices starting in 1997.  So a decade sets both bubbles apart but the path is unmistakable.  Japan gave up all gains in their housing bubble bust and the U.S. housing market has yet to reach that trough.  Does this mean a baseline of 1997 is where a true bottom will be reached?  Hard to say yet there is little evidence to show for a rise in home prices.  There is still over 6,000,000 homes in the shadow inventory that need to be liquidated at some point and will add pressure to home prices on the downside.  In terms of bank housing lending collapsing and real estate values imploding we are two for two between Japan and the United States.

Essentially, in both the United States and Japan, credit bubbles fuelling a bubble in the housing market collapsed, leading to a stock market crash, and asset price slides, triggering deflation throughout the respective economies — much like following the 1929 crash. Policy makers in both countries — at the Bank of Japan, and Federal Reserve — set about reflating the bubble by helicopter dropping yen and dollars. Fundamental structural problems in the banking system that contributed to the initial credit bubbles — in both Japan and the United States — have not really ever been addressed. Bad businesses were never liquidated, which is why there has not been aggressive new growth. So Japan’s zombie banks, and America’s too big to fail monoliths blunder on. Policy makers “saved the system”, and ever since then have gradually dealt with slowdowns through monetary and fiscal easing.

Hyperinflation is an entirely different phenomenon. It tends to occur not when countries print too much money, but when they produce and circulate too few goods and services. The money printing is usually a desperate after effect. The classic examples of Weimar Germany and Mugabe’s Zimbabwe confirm this idea — Weimar Germany was devastated by the production standstill in the Ruhr industrial region, and Robert Mugabe obliterated Zimbabwe’s agricultural infrastructure. So — as Japan enters its third lost decade — is the United States headed for a growth-free and deflation-heavy future?

In my view the answer is no, for one very simple reason. Japan has been in a state of stasis supported by debt. While its government has massive debts — over 220% of GDP — these debts are predominantly owed to domestic creditors. Japan also has a very high personal and household savings rate. America, on the other hand, is in huge debt to hostile foreign creditors, but not only this, monetary easing is not so much a domestic policy as it is an international one, because of the dollar’s role as the global reserve currency. Essentially Japan’s slowdown and life-support was never quite as threatening to its ability to produce the necessary goods and services as America’s. Japan is less dependent on imports than America, which relies on its largest creditor to export vast quantities of consumer goods, basic materials and components. Japan does not have the same corrosive trade deficit with China.

So will we ever get to see hyperinflation in America? It depends on China’s response to America’s slouch. If — as mainstream economists hope — China can be patient enough to allow America to resolve its debt problems, eradicate its trade deficit, and manufacture more at home then hyperinflation is very unlikely. America may stumble through a lost decade, before new technologies, and new business models finally pull America out of the slump. American policy makers might even have the foresight to let failed business models fail and liquidate failed businesses, allowing for new growth to take root, and avoiding Japanese zombification.

If China, on the other hand, decides that it is sick of being America’s foot stool, then America has a massive problem. Entering into a trade war with a nation that holds so much of America’s debt, and produces so much of the goods that sit on American shelves is an extremely risky proposition. A drastic fall in goods circulating in America — as the result of Chinese export tariffs, yuan flotation, or an outright export ban — could be a hyperinflation trigger. Bank reserves accumulated during QE would quickly be lent out as more and more money chases fewer and fewer goods.

But a greater danger still might be an oil slowdown. Is it any coincidence that Saddam Hussein’s Iraq was invaded by the American Empire very shortly after turning his back on the dollar and demanding payment in Euros?  Certainly, the case can be made that Saddam was being petty and vindictive, but with a slumping American economy, with a devalued dollar, and with mounting American debt concerns, Arab patience with America — and Arab willingness to sell oil for dollars, rather than yuan, roubles, or gold — will certainly be tested. If both China and Arabia turn their back on America, hyperinflation would be almost a certainty.

Of course, the American strategy since Nixon and Kissinger has been that American military supremacy is enough to essentially give America a free lunch. But there ain’t no such thing. That policy has depleted American manufacturing, and piled-on American debt to the point where the dollar is almost certain to be dethroned as the international reserve currency. And it is at that point that all the models break down.

 

 

 

 

post #1640 of 1894

nice video to watch if you have time

 http://www.youtube.com/watch?v=wYuLjGQQ-jg

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