I’d be willing to bet that – except for gold and silver -- Obama’s key “handler” (Soros) is short every U.S. market and has his “boy” talking the markets down every day.
Posted on 03/24/2009 7:55:28 PM PDT by 2ndDivisionVet
"The best way to destroy the capitalist system is to debauch the currency," said Lord Keynes.
Ben Bernanke disagrees. A student of the Depression, the Fed chair appears far more fearful of deflation -- a vicious cycle of falling prices, debt defaults, home foreclosures and rising unemployment.
Deflation is what America underwent in the 1930s. A Fed-created bubble burst, causing margin calls to go out to stockholders, who ran to their banks that, besieged, collapsed, wiping out a third of our money. As Milton Friedman, who won a Nobel for his thesis that the Federal Reserve caused the Great Depression, told PBS in 2000:
"For every $100 in paper money, in deposits, in cash, in currency, in existence in 1929, by the time you got to 1933 there was only about $65, $66 left. And that extraordinary collapse in the banking system, with about a third of the banks failing ... with millions of people having their savings essentially washed out, that decline was utterly unnecessary.
"(T)he Federal Reserve had the power and the knowledge to have stopped that. And there were people at the time who were ... urging them to do that. So it was ... clearly a mistake of policy that led to the Great Depression."
Is Bernanke fighting the war of 1929 in 2009? Surely, today, with the explosion in M1, the basic money supply, there is no shortage of dollars out there, even if they are not circulating fast enough.
To end our recession, Bernanke may be running an even greater risk: hyper-inflation. This has destroyed more nations than deflation or even depression.
Recall: It was French military intervention in the Ruhr in 1923, to force payment of war reparations, and Weimar's decision to let the currency fall and pay the French in cheap marks that led to the wipeout of the German middle class, the discrediting of that democratic republic and the Munich beer-hall putsch of Adolf Hitler.
"The first panacea for a mismanaged nation," said Ernest Hemingway, "is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunists."
Which brings us to last week's shocker.
The Fed will buy up $300 billion in long-term Treasury bonds and spend $750 billion more buying sub-prime mortgages to remove them from the balance sheets of ailing big banks, to get the banks lending again.
Bernanke is printing money to buy U.S. bonds.
This new gusher from the Fed, after the $700 billion TARP bailout, comes on top of a Congressional Budget Office estimate that this year's deficit will be $1.85 trillion, 13.1 percent of gross domestic product, more than twice the share of the U.S. economy of the largest previous postwar deficit.
Concluding the dollar is being abandoned in a frantic Fed effort to stop the recession, markets reacted instantly. The dollar plunge was the steepest since the Plaza Agreement of 1985. Gold shot up to $950 an ounce. Silver had a 12 percent run-up, the sharpest ever. Oil prices surged above $50 a barrel. Commodity markets advanced.
The Fed seems to have confirmed the fears of Premier Wen Jiabao, who said that China is "definitely a little worried" about the value of the U.S. bonds Beijing has purchased with the dollars piled up from her trade surpluses with the United States.
Can one blame the Chinese? They have already been burned on their U.S. investments. And if the defense of the dollar against its ancient enemy inflation is being abandoned, and protecting the dollar is to take a back seat to the Fed's fight to avoid deflation, than it is indeed time to get out of the dollar and dollar-denominated assets.
For inflation is theft. It make liars and cheats of governments. By eroding the value of a currency, inflation punishes savers and creditors and rewards debtors. And what nation is the biggest debtor of them all? The United States of America.
Insidiously, inflation consumes the value of cash, savings, municipal bonds, corporate bonds, Treasury bonds and T-bills. Friends who lent America money, who bought our debt in good faith, are robbed and made fools of, while speculators who bet against America by shorting the dollar in the currency markets are vastly rewarded.
Given the $3.6 trillion budget Obama plans, the $1.8 trillion in red ink he will run by Oct. 1 and the trillions the Fed is pumping into the economy, gross domestic product should spike, as it did after the far smaller stimulus package of 2008
We will feel a healthy glow, and folks will begin to sing, "Happy Days Are Here Again."
Yet, one senses that we are doing again exactly what we have done before in this generation. Rather than endure the pain and accept the sacrifices to cure us of our addiction, we are going back to the heroin. And this time, with Dr. Bernanke handling the needle, we may just overdose.
If this happens it will be Obama’s fault and there will be no denying it.
So, will Buchanan now cheer the upshot of these balance of payments, you know, once the Chinese quit buying and gettin burned on Treasuries? A capital account surplus [hint: what happen when the Chinese purchase our assets] is equal to a cuurent account deficit (aka trade deficit for those that worry about such things). So, if the capital accounts begin decreasing, the so-called trade deficit will improve. Is this not something like what Buchanan-types would wanted?
SPOT ON.
And that COMPLETE Keynes quote is this:
“By a continuing process of inflation, governments can
confiscate, secretly and unobserved, an important part of the
wealth of their citizens. There is no subtler, no surer means of
overturning the existing basis of society than to debauch the
currency. The process engages all the hidden forces of economic
law on the side of destruction, and does it in a manner which not
one man in a million is able to diagnose.”
John Maynard Keynes, The Economic Consequences of The Peace, 1920
Of course there will be denying it. The MSM will be full of "Bush's Fault".
But since Obama may not be worried about the next election, because he thinks there will not be one, he can ruin the economy at will, as long as it results in more power and control for the government, and of course for him.
I’d be willing to bet that – except for gold and silver -- Obama’s key “handler” (Soros) is short every U.S. market and has his “boy” talking the markets down every day.
“I invite the reader’s attention to the much more serious consideration of the kind of lives our ancestors lived, of who were the men, and what the means both in politics and war by which Rome’s power was first acquired and subsequently expanded; I would then have the reader trace the process of our moral decline, to watch, first, the sinking of the foundations of morality as the old teachings was allowed to lapse, then the rapidly increasing disintegration, then the final collapse of the whole edifice, and the dark dawning of our modern day when WE CAN NEITHER ENDURE OUR VICES NOR FACE THE REMEDIES NEEDED TO CURE THEM”.
The Early History of Rome
Livy ( Titus Livius ) 64 B.C.to 17 A.D.
What do you mean “there will be no denying it”? Of course there will be “denying it”.
I’m confused — are you not aware that the average Joe’s opinion on practically every topic is formed by the mass media? Or are you unaware that the Forces of Evil control the mass media?
If 2008 taught us anything, it taught us that despite the Internet and Talk Radio, for the average American, reality is whatever That Guy On TV says it is. If That Guy On TV says that the Great Asteroid Collision of 2032 is the fault of George W. Bush, then that will be the truth as far as the public is concerned.
Obama spin meisters won’t be able to sell it. Even a cud chewing Obamanite knows his money does not go as far. THEY will turn on him first.
The only way to escape the inflationary trap is to convert your monetary wealth to real property — i.e. goods or knowledge with actual value — and to become as self-sufficient as possible. Liquidate your paper wealth and convert it to property, tools, trade goods, education in practical trades, that sort of thing, not stocks, bonds, or anything with a “value” denominated in currency alone.
I hope you’re right, but it’s a faint hope.
B-Chan:
-—”Liquidate your paper wealth and convert it to property, tools, trade goods, education in practical trades, that sort of thing, not stocks, bonds, or anything with a “value” denominated in currency alone.”
Actually, I’ve thought that buying real estate would be a good thing at some point.
But your comment to not buy stocks doesn’t make sense because a stock is based on the value of a company which has assets and presumably, earnings.
Wouldn’t you (or anyone else here) agree that buying stock (shares) in stable companies is a GOOD inflationary hedge?
Not trying to argue here, just want some dialogue on the subject because I’ve been pondering this a lot lately (are stocks a good inflationary hedge?)...
Take an XOM (Exxon) for example: In an inflationary environment, the price of their product will go up and their profits too (although their overhead will go up too). Perhaps companies that sell commodities will fare best?
Comments anyone?
The Fed is unconstitutional.
I don’t trust the markets anymore. Sure, XOM’s a stable company today, just as GE was yesterday and Union Carbide last month. Come the next Middle East war, though, the price of crude busts $180 and suddenly U.S. Marshals are knocking on the door in Irving. “This company is hereby enjoined under the Defense Production Act (Pub. L. 81-774) of September 8, 1950 to place its petroleum exploration, drilling, refining, and transporting activities under the control of the Defense Priorities and Allocation System as specified in 15 CFR §§700 - 700.93.”
Spend the money in Vegas instead....it’s on the level there.
YOu’re absolutely right about crude going to go up well over $100. So energy is the gold of the future in an inflationary environment.
they don't call them "sheeple" for nothing....
its like watching people sleep walk thru their lives...no connection between them and reality....
No, that is not what the “Buchanan Types” want, it is what the “Obama Types” want. It is exactly as in this article what the “
“Buchanan Types” are warning us against. But, just in case you are the type that throws out the baby with the bath water because the tub says made in Buchanan on it. Remember that Common Sense also tells us that Zimbabwe politics do not mix well with free markets or prosperity. Once can not spend their way out of debt.
I do not like the inflation and over-injecting of the money supply. But, I cannot stand Buchanan, and his desire to want things both ways is going to provoke me to point out his inconsistencies.
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