[SkyPilot]

First it was Greece. Now it is Ireland. Soon it will be Portugal and Spain.

With the collapse of the Irish economy, its people are going to be forced into what amounts to economic slavery. There is plenty of blame to go around in that nation - namely out of control spending, pensions, and banks that made loans to everyone and anyone regardless of the risks (sound familiar?)

The tide is rising around our ankles now, but we chose to look away, and pretend it is all a dream.

Many foolish Americans believe that our nation is somehow immune to the fiscal realities that have overtaken Europe. Because of Obama, our national debt stands at $13.8 trillion and is accelerating at warp speed.

Nothing can stop the coming global economic collapse now, (short of a miracle) and I don't see our nation's leaders on their knees praying.

We have become a nation of "takers." We aborted our future generations, and now ask who will pay for it all.

[Yet_Again]

Stopping deflation is easy...

...it’s stopping the hyperinflation that happens as a result of your efforts to stop deflation that is hard.

[ClearCase_guy]

I'm probably missing the "nuances", but I think this argument boils down to --

Deflation doesn't have to be the end of the world. A flexible economic system can make adjustments and deal with this.
Deflation is only a big problem if society has lots of government intrusion in the economy and if debt levels are very high.

Fortunately, we are pursuing a wise policy of more government intervention and multiple years of trillion dollar deficits.

Yeah, and when my house is on fire, I throw gasoline on it.

[sickoflibs]

Interesting article. Almost no-one I know understands that it was the Federal Reserve’s actions contracting money supply, raising interest rates, that triggered the housing bubble burst; anymore do they know that low interest rates-easy money supply contributed to creating the housing bubble.

Second, I can see where deflation would be problem when wages and other costs are not allowed to deflate, it results in unemployment.

“ First, the risk: Deflation is a chain of events in which consumer spending declines, prices fall, and business activity contracts. When that cycle repeats, it gets worse every time. Goods are cheap, but you're too broke to afford them. Nobody wants what you have to sell, and soon you don't have a job.

Deflation is survivable when wages and prices are free to adjust — e.g., in the absence of minimum wage laws and mandatory health insurance. Even though they're working at lower wages, consumers are not much worse off because prices are lower. But deflation is dangerous when it occurs in a high-debt environment like the one we're living in now. With more income going to debt payments, there is less to spend on other things. This empowers a recession and creates even more deflation. Eventually, the economy collapses under the weight of its own debt.”

“Quantitative easing,” the Fed's ongoing act of increasing the money supply, may be an attempt to avoid that scenario. But the Fed's seemingly rational response to consumer inflation may have unwittingly played a role in facilitating the financial and economic collapse of September 2008. “

“Dial back to the middle of 2006, when the U.S. economy appeared to be running strong. That October, prices started to climb. Inflation peaked at 11.69 percent (annualized) by June 2008. The Fed, watching this month-by-month tip into unsustainable inflation, started to reduce its holdings of treasury securities beginning in October 2007. Less than a year later, its ownership of this government debt had fallen from $779 billion to a low of $478 billion. The reduction contributed to an increase in treasury yields beginning in May 2008. There is no other way to put it: This was quantitative tightening.”

“But the strategy backfired. Economists peg the recession as starting in October 2007, just when the Fed began pulling back. Despite rising prices, the underlying economy was weak at the time: The real estate and mortgage markets were wobbly; the trade imbalance was climbing; interest rates were on the rise. Tightening the money supply was like lighting the fuse to the bomb that led to the collapse of September 2008. What followed was a period of significant deflation, with prices falling by nearly 20 percent (annualized) in the following month. Unemployment began its inevitable rise, soon hitting 10 percent. “

“It would be misguided to blame the entire collapse on the Fed. This was a unique conflation of problems that had been building up in our financial/economic system for years”

[The Comedian]

Got Silver? ping.

"Economic Holocaust" ping.

Moderate volume ping list watching the slow motion Economic Holocaust.

FReepmail me if you want on or off
The Comedian's "Economic Holocaust" ping list...

Frowning takes 68 muscles.
Smiling takes 6.
Pulling this trigger takes 2.
I'm lazy.

[RWB Patriot]

“Despite the logic of much of the criticism being aimed at the Fed, it may be doing what it has to do to keep the country from spiraling down into a deeper recession.”

This is funny in light of the fact that it is government actions that usually turn a mild recession into what we now call a depression (same thing happened in the Great Depression).

[April Lexington]

There is plenty of blame to go around in that nation - namely out of control spending, pensions, and banks that made loans to everyone and anyone regardless of the risks (sound familiar?)

The better answer would have been to let the banks collapse and then have the government provide a safety net until the banking system was restored. Socializing the risk of loss has led to the enslavement of the taxpaying serf class to protect the banks. People are going broke all over the world so that banks can survive. Isn't THAT special?

[April Lexington]

Why do we not have a Federal statute that makes it a crime to run a bank into the ground? Seems cratering a bank is a systemic risk and those who impoverish billions of people should, at least, have their (&^*& whacked!

[csmusaret]

The only thing I can think of that’s worse than having the Fed is not having the Fed. I can just imagine where we would be by now if Congressional Committees chaired by Dodd and Franks were in charge of the printing presses.