Posted on 12/01/2008 6:52:35 AM PST by gpk9
Recent actions by Congress, the US Treasury, and the Federal Reserve Bank, to "fix" the current financial crisis are having the opposite effect. They are making it worse.
We have the same causes this time we have had in previous financial crises. Falling demand for goods and services. It's lack of demand, same as previous financial crises.
Government is telling us it is a supply problem. Lack of money to lend. Lack of available credit.
It's never a supply problem. It's never lack of supply. There is plenty of money to lend. People qualified to borrow money can borrow all the money the need.
It's always a demand problem. It's always lack of demand. People aren't borrowing money because they don't want to borrow money, or they aren't qualified to borrow money. That is why financial institutions are failing. They make money only when they lend money. People are not borrowing.
Government knows this. Congress knows it. The US Treasury knows it. The Federal Reserve Bank knows it. They know it is lack of demand to borrow money.
The current financial crisis was caused by people borrowing money who were not qualified to borrow money.
Government was responsible for that. Congress forced financial institutions to lend money to people who were not qualified to borrow money. So government caused this financial crisis more or less. Their policies caused this crisis.
Now they're telling us they will fix it. They're trying to fix it on the supply side by increasing the supply of money to lend. You can't fix it on the supply side. It's impossible.
Truth is, they're not fixing it. They're doing nothing to increase demand. In fact, everything they're doing is reducing demand further.
They are turning a national financial crisis into a national financial disaster. They will destroy this economy, and are destroying this economy as we speak.
bttt
This is what deflation looks like — Why borrow? Why invest? Putting cash in a hole in the ground starts to look like a smart strategy.
bttt
They have to destroy the U.S. economy to get us into the one world government.
The mechanism to do this has now been implemented and it will be tweaked as necessary by the messiah.
In a troubled economy how do we explain the 2nd biggest ever box office take at the movies for the Thanksgiving weekend? How about the 18% surge in retail sales at over the Thanksgiving weekend? Finally, I don’t know the numbers, but traveling from SW Pennsylvania to the Grand Strand in SC for the holiday I’ve never seen so much traffic in the 10+ years I’ve been making the trip. If it wasn’t for the “news” I’d have no idea there was a problem with the economy.
I keep reading both sides of the argument, one side saying that we're going into a deflationary recession/depression and the other side saying that we're headed for a hyper-inflationary depression. I'd really like to see a good civil debate here on FR laying out the pros and cons of each sides reasoning, if that can be done without the all too often requisite name-calling and insults. These are serious times for all of us and I think it behooves all FReepers to weigh the evidence for themselves and begin preparing their families for the likely fallout.
Personally, I tend to think we will see a period of time of deflationary recession, due to the current economic crisis, but if the government does what I think it will have to do soon to increase the available money supply to give to all the financial institutions to try and loosen up credit, they will have to start printing tons of new money, and that increase in the money supply will be what pushes us into a hyper-inflationary mode. Let me be the first to say, I hope I'm wrong, but, the question is, how does one best prepare himself and his family for a hyper-infaltionary cycle? I would welcome any opinions on this.
Hyperinflation has never happened in a time of falling house prices. This is the Great Deflation - and the Fed has no idea how to stop it. They have all kinds of tools to fight inflation (especially wage inflation, which they have stopped cold over the past decade) but there isn't enough cash in the world to pump into the system to keep asset values at their 2007 levels. Everyone is going to have to adjust to the fact that their net worth is 50% or less of what they actually thought it was. That's the kind of thing that makes voters very, very angry when it finally dawns upon them, so it's no wonder this great Fed/Treasury/Goldman Sachs game of "hide the garbage" is going on.
Most of America's financial success and status has been based on the idea that the ski slope would keep going, but we've reached the end of the ramp and there are no more future earnings out there to borrow today's prosperity from.
Where you are dead wrong is the idea that there is no credit crunch at the institutional level. Please take some beginner's economics classes before you write screeds like this.
The money that a lending institution has is never all liquid. Part of it is liquid, part is invested in ventures and part of it is already lent out. In order to have money to loan, it is common for lending institutions to get loans themselves, from central banks.
Lending institutions are like individuals when it comes to credit. They are supposed to pay back their loans on schedual and are deemed credit worthy based on their performance.
When a large chunk of money is lost to the central banks, because large institutions like Lehman Brothers go belly up, the central banks don't just say "oh well". They become more selective about who they loan their now diminished funds to. A lending institution that is on the bubble like Citibank will be faced with a refusal for new loans until it sorts out it's problems.
We haven't seen the credit crunch yet, but it is real and it is out there.
The question is, which is the wiser path, Bailing out financial institutions, so that they remain credit worthy (and still possibly failing later) or allowing these institutions to fail and accepting the tumbling of the dominoes that will follow. A depression is not a pretty thing.
Sorry if my post seems a little offensive to you but this is serious business here.
“They become more selective about who they loan their now diminished funds to. A lending institution that is on the bubble like Citibank will be faced with a refusal for new loans until it sorts out it’s problems.”
What planet do you live on ? We (the taxpayers) just gave Citibank $ 331 billion with much more to come. We haven’t asked ANY financial institution to clean up its act. If we have, I haven’t seen enough bankruptcies that would force transparency. AIG, JPM, MS, Wells Fargo, Citibank, and Wachovia would be high on my list, with many others to follow.
Get real. The Fed is giving the banks and any other institution that becomes a bank (like GMAC and GE and GS) whatever they “need” to continue to cover their losses and prop them up to pretend there is no credit problem.
great post; to prepare for the inevitable hyperinflationary cycle you offshore cash into a “currency” savings account, preferably the Aussie or New Zealand Dollar. Those accounts are paying 5% to 6% respectively. You also position cash in oils and metals. BPT and PCU are good examples because they pay dividends. At the top of the cycle, the market will crash again. My guess is that the hyperinflation market top may well be above 12,000 on the DOW. (cheap dollars make for more dollars, cash flow, into the coffers of corporations pushing stock prices up). Take profits, stash the cash and then wait for the Fed’s next “invevitable” move, raising interest rates. Then you start building a ladder of muni bonds because at about the same time, taxes will soar. We’ve been through this before, it’s not rocket science.
What makes this cycle unusual is that it’s compounded by political instability and what I’m starting to hear reports of as “mental” depression. There’s a “mental” component to this downturn that’s difficult to define or quantify, but we’re hearing reports of doctor’s offices being swamped with patients reporting stress and depression related problems. People are responding, not by cutting back but rather, by cutting out non-discretionary spending. Oddly, the candidate of Hope has produced a wave of hopelessness.
I think the key to what people are thinking is how much money was spent on discretionary items on Black Friday.
Your thinking is 100% in line with mine.
This sounds like the news we have gotten from Zimwabee for the last few years.
Terrible conditions. Productive farms taken from the owners and given to the workers ... that do not or will not work them properly; and production plummeted and starvation is happening. Super hyper inflation has been the status for many months now.
We see it happening and are powerless to know how to slam the brakes on before we drop over the precipice.
It is ever true that It takes a defined purpose, targeted planning, and the will and strength to carry out the plan. Do we have it?
Who? What? When? Where? How?
This is America, this type of thing is not supposed to happen here. Our system has bee subverted right in front of our face.
We have allowed wickedness to occur in and through our government. It took place without precedent, without the will of the people, via, political correctness, abortion paid by the taxpayers, affirmative action, the the ACLU, activist judges, removal of God from schools, and government facilities, Removing the 10 Commandments from the courthouse in Arkansas in spite of Judge Roy Moore refusal to obey the court order to do so. Did we rise up and throng there to show our support for the Judge and the monument itself?
We all know this already. But are we ready to recognize that step by step and incrementally these unwanted changes advanced without much resistance? No public outcry was made, like we made on immigration legislation this last year.
Now we know the intent is there to go ahead with the amnesty and have open borders. The bail out was passed over the objections of millions or opponents.
This current Democratic administration set to go in January has intentions to CHANGE AMERICA. Our “Constitution is a list of negative rights”; according to Obama.
History tells of of regime changes (Hitler, Lenin, Stalin, Poi Pot, Mao, etc., that simply took over and oppressed the people and ruled harshly in tyranny. Are we so foolish to believe it could not happen to us. We must have a voice, an effective voice.
We prayed during the election, we confessed our sins, we asked for forgiveness ... we as a nation have not turned from our wicked ways. God says in
2 Chronicles 7:14 Young's Literal Translation
“ 14and My people on whom My name is called be humbled, and pray, and seek My face, and turn back from their evil ways, then I — I hear from the heavens, and forgive their sin, and heal their land.”
We have not done the “turn from our wicked ways part”
We have the way ... now what?
So if there is no credit crisis, then why is it that the Fed has to buy up commercial paper issued by large corporations because the marketplace won’t? Why is it that the Baltic Dry shipping index is at catastrophic levels because buyers don’t trust their banks’ letters of credit? Why was the TED Spread previously near historically high levels and is still at high levels? Why does nobody trust corporate debt enough to buy corporate bonds, with everyone instead fleeing to short-term treasury bills that pay basically no yield?
Lack of consumer demand is part of the problem, but only part of it.
I've got to think there's some things the average Joe can do, if not but to buffer some of the full brunt of impact from a hyper-inflationary spiral. I'd like to find and read any historical accounts of what others did to survive (financially) in past instances (like Germany, Argentina, etc.) I mean, surely there were some folks in past occurences that were able to weather the financial collapse without losing everything.
Thanks, good info. Help me understand more. How does one “offshore cash into a “currency” savings account”? How can the average Joe accomplish this? What’s the financial vehicle to do that? What are the acronyms BPT and PCU short for?
BPT = British Petroleum Prudhoe Basin Royalty Trust. Wait to buy until we hit oil low. 52 week range=58.08 - 108.40.
PCU=Southern Copper; wait till we hit commodities lows 52 week range=9.12 - 41.93. Both have been paying in excess 9% dividend yeild. To offshore, go to http://www.offshore.hsbc.com/1/2/home. I’ve not done it yet and you’ll want to verify accuracy with a phone call, but I’m relatively certain it’s a legitimate link. You can do much the same by buying Exchange Traded Fund FXA, (Austrailian currency). It’s paying 5% interest. 52 week range=60.59 - 98.84. All of these are contrarian plays and are somewhat risky; timing is everything. Watch and wait as the Fed presses the gas peddle, cranks up the currency presses to motor boat speed and injects too much currency into the system. What I believe is that we’re headed for the classic currency devaluation, which per some in today’s news, is what China is doing with it’s currency.
Read Tonight Bump!
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excerpt from your link ...
HISTORY
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