Those who know not history, are doomed to repeat it.
Posted on 10/03/2008 8:20:31 AM PDT by Santiago de la Vega
Monetary base jumps to 939.472 from 874.750 for two week period.
From September 10 till the 24th the Fed added nearly $65 billion dollars in High Powered money.
At an annual rate, this is a jump of more than 500%.
Gold
Must be new math. That's not a 500% increase.
Oh! I see! If this rate of increase continued, it would be an annual rate of 500%! Oh! That's different!
Saaaaaaaaaay ... what would the rate be if this continued for the next 10 years?
Inflation.
No, the Feds should just buy up all the “surplus cars” that GM and Ford can manage to produce.
Theft by government.
I don’t think people realize just how much the Fed needs to pump liquidity in the short run. There are hundreds of businesses and corporations that depend on short term debt and commercial paper for their working capital. Whole solid businesses are close to bankruptcy solely because of the lack of liquidity.
Those who know not history, are doomed to repeat it.
I fixed your errors for you.
Maybe we should invest in Zimbabwe dollars.
Hey! Mayeb thats the way to look at this mess! The Fed is going to buy up houses the way the government buys up corn and wheat farmers DO NOT produce
Why not. They are doing it with cheese. There are factories that make cheese that sell everything they make to the government. The government puts it in storage and pays hundreds of million annually in storage costs. When the cheese is close to being bad, they give it away.
Talk about a misleading title.
The is no reason for the bailout.
This bailout among other actions will put us in to hyper-inflation combined with soon to be double diget interest rates and double diget unemployment rates.
Worse part is the laws that brought this problem about are not only still on the books but have been reinforced in the bailout bill.
No consernative would support this bill.
The passage of this bill is a mortal wound to the free markets here in the US.
This is simply a game of chicken between the banks and Gub’ment. Backdoor Barney told them to make the loans and the socialists in our Gub’ment would force the lunkheaded masses to pay for it. BROKE AND FREE... BROKE AND FREE!!
The current crisis is wildly DEflationary. The economy is facing violent contractions and can absorb all this money and more.
You notice anything funny about the headline versus the body?
not when gold is $847 an ounce
You mean that it's an actual increase of 7.4% but that the author annualized it and still missed the math?
I agree... but MAN did my gold stocks get hammered yesterday. Ouch!!
The first $150 billion will go directly overseas to Japan, China and 2 Brit banks.
W and Paulsen are being blackmailed (by Asian banks) to pay up the worthless paper FM sold to those banks, or they are going to dump US Treasury bonds/notes.
Not to mention the hedge fund guru's are gobbling each other up with many of those funds frozen and the rich elite are screaming they can't get their money now, even with penalties. That's the crisis.
Businesses and individuals can still get loans for what they want provided they have a good credit history, aren't overextended with debt at this time and go to a sound institution.
It's the 'venture' capital (i.e. credit) that has dried up as the domino effect has started on the global unregulated credit derivative market (economy).
Yes. It is a question of moderate recession or deep recession or depression. This is not a binary situation.
W and Paulsen are being blackmailed (by Asian banks) to pay up the worthless paper FM sold to those banks, or they are going to dump US Treasury bonds/notes.
Sorry, I don't do paranoid fantasies.
The gold top in real dollars is something like $2200.
Eight-fifty gold does not impress me.
Amendment: The inflationary policies of the Fed helped to CREATE the problems faced by the banking system. The ooly guy warning about this last year was Ron Paul.
Perhaps deflationary initially, as the housing and real estate market crashes back to real value levels from the over-inflated values they soared to, but if the fed reserve and government continues injecting huge volumes of our currency into the global market, then sooner or later the money supply glut will force a devaluation of the dollar which will cause inflation. If not abated, hyperinflation isn't out of the picture ala 1920's Germany. I hope you are right. I pray that I am not.
It’s gonna be deep....not enough money the US has to stop the global reaction. We’re just (the taxpayer) buying up the $1.3 trillion immediately of toxic ACORN (CRA) loans trying to soften the global crash. The money is there and the Wall St. banks (what’s left) demands to taxpayer to give them money. Stocks are up because of it. Sound banks are sitting on their cash. The big boy hedge funds will drive the crash as they are way over leveraged.
If the credit markets are melted, there could be an inflation risk down the road. It's up to the Fed to draw back on the spigot with the right timing.
But inflation has known therapies, treatments and cures, in contrast, DEflation is a tough nut to crack. Last time we faced it in significant magnitude, the New Deal prolonged and deepened the symptoms and only World War cured it.
Agreed.
But the rescue plan is more than palliative. Melting commercial credit markets--soonest possible--works to prevent depression and mitigate the severity of recession.
Under either scenario, yours or mine, it sounds like we’re screwed and gonna suffer for some time. :-(
it should ideally be in the $400-$500 range.
I guess that's a rhetorical question because the answer is, yes, of course it is. Thus my real question, why the need for whatever that thing they're getting ready to pass other than buying up some funky "assets"? Is the total amount outside the scope of the Fed or is the bailout just a naked payoff?
Yes. It is a question of suffering for months or for years. Does one prefer a stress fracture of the femur, or a compound fracture? A toothache or an abscess? A 2% contraction in GDP or a 12% contraction?
And so forth.
These graphs indicate that there is plenty of extra cash in the market? If so, where or why is there a claim of lack of liquidity?
Steve Forbes wrote: “The first prescription for a cure is to formally strengthen the dollar and announce it publicly. A year ago August the price of gold was more than $650 per ounce. In late 2003 it had breached $400. The Fed should declare that its goal for gold is around $500 to $550. That would stabilize the buck—and stability is essential if animal spirits and risk taking are to revive.”
ok that’s a different range than the one I gave but it’s better to pick a price that’s too high than too low otherwise borrowers will get spanked.
The claim is that the extra cash in the market is not being used to issue loans, it’s just sitting there.
But don’t you think that if the fed keeps pumping new billions of dollars into the global money supply, that at some point it becomes awash in dollars backed by nothing but the good(?) faith and credit of the U.S. government and at some point that will not suffice for foreign interests that own so many of our dollars and they will demand that the dollar be devalued thus setting off a potential inflationary spiral?
I have heard that claim. “Banks are hoarding money” if true how long can they keep that up? Banks make the bulk of their money by lending out money not keeping it in the bank.
nobody wants to make any transactions because they are afraid they’d be taken down
Brian Wesbury wrote:
http://www.ftportfolios.com/Commentary/EconomicResearch/2008/10/1/how_to_start_the_healing_now
Mark-to-market accounting causes so much mayhem because it forces financial firms to treat all potential
losses as if they were cash losses. Even if the firm does not sell at the excessively low price, and even if the net present value of current cash flows of these assets is above the market price, the firm must run the loss through its capital account. If the loss is large enough, then the firm can find itself in violation of capital requirements. This, in turn, makes it vulnerable to closure, nationalization or forced sale.
Because the government has been so aggressive with the use of these capital regulations, private capital has been scared away. Just about the only transactions taking place in the subprime marketplace have been sales to private equity firms that do not have to mark assets to market prices. Their investors agree to commit capital for the long haul, and because they are able to bend the current holders of these assets over the knee of the accounting rules they get prices that virtually guarantee a huge profit.
It is a potential risk.
How about this hair-brained metaphor: we could be hit by a runaway boulder—this IS a slide area—but first let’s get the hell out of the way of the on-rushing train.
The real issue with the "bailout".
There are no guarantees that a similar situation won't occur, despite the purchase of "illiquid assets".
See Japan, 1991-1999, for what happens when government efforts to stimulate an economy are thwarted by money hoarding.
I just don’t want to dodge an oncoming train just to get hit by a landslide boulder. ;-)
“There are hundreds of businesses and corporations that depend on short term debt and commercial paper for their working capital.”
If they don’t have the capitol to make their material purchases and payroll they should be put out of business.
We ran a business for 57 years and never borrowed money to run it.
Very simply, we never bid a project that we didn’t have at least 4 months capitol in the bank for material and payroll.
Well duh.
We could look at the YOY number instead of projecting a shorter time frame. But that's less scary. I guess the Fed should do less during a crisis?
So what?
No business or person for that matter should operate on borrowed money.
Gold almost 20% below the July high must be proof that inflation is out of control.
Because it makes Allah angry?
“Because it makes Allah angry?”
What has some goat screwing rag head got to do with anything?
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.