Posted on 05/13/2011 5:58:23 PM PDT by drellberg
'A financial crisis is surely going to happen as big or bigger than the one we had in 2008 if we continue to behave the way we're behaving," says Stanley Druckenmiller, the legendary investor and onetime fund manager for George Soros. Is this another warning from Wall Street that Congress must immediately raise the federal debt limit to prevent the end of civilization?
(Excerpt) Read more at online.wsj.com ...
This is as important as anything published recently.
The main problem with the government not being allowed to borrow more money is that it can simply print money instead. Of course, now it does both.
What to do if they kick the can down the road, I just do not know.
The GOP will raise taxes now in return for cuts in 10 years.
bm
I'm with you on the "BM"...anybody that had anything to do with Soros is waaaay beyond soiled goods.
Look at it like this:
We are on a Train going 200 mph towards a cliff. the choice is either hit the emergency brake and jack knife the train or go full speed ahead off the cliff. Even attempting to slow down will not prevent us from going off that cliff. The Bankers and Wall St will make absolute sure of this if we attempt to do anything but go full speed ahead, see Andrew Jackson and Nicolas Biddle.
Great article. Thanks for posting.
BM, `cause I wanna come back in time and see if he was accurate or was spewing some sort of economic double-talk for his own self interest.
I've been thinking a lot about Jackson. I think he is under-rated as a president. I admire how he handled the Second Bank. What we need is a president with the courage to kill the Fed.
I think at this point, we need a POTUS who is willing to take on the banks in a way that the bankers simply cannot ignore. Their personal liberty and fortunes must be put at risk, since this is the only message they understand.
In a couple of years, we’re going to be in a really bad place fiscally and economically that costs us serious, serious pain to reverse course.
At this point, a POTUS with a clue (and that’s none of the candidates I’ve seen to date) about the threat posed by the Fed and the large investment banks would put the banks on notice: Quit sweeping your problems under the rugs and into back broom closets, ‘fess up and clean up... or we will shut you down, nationalize your operation and clean it up ourselves.
“Too big to fail” really means “too big to allow to exist.”
The banks, being used to blustering and buffalo’ing their way around DC would laugh and say “Yea, whatcha gonna do?”
At this point, a POTUS with a spine should call their bluff: use executive authority to declare the banks a clear and present danger and national security risk to the United States. Suspend Posse Comitatus, send in the Marine and Army MP’s to arrest all the exec’s of i-banks, brokerage houses, the works and haul them down to DC in cuffs. Close the stock, bond and commodity markets for a week while the POTUS and SecTreas have a little chit-chat with the various execs. The chair and regional presidents of the Fed should be there in cuffs too.
The message should be about that of Jackson: “You bankers have used the funds of the national banking system to gamble on foodstuffs and energy of the nation to your benefit and our detriment. When you’ve achieved gains, you’ve kept them for yourselves, and when you’ve had losses, you’ve come crying to the taxpayers to make you whole. Game’s over, boys, one way or the other.”
Then spell it out for the densest ones, and guys like Blankfein, claiming that Goldman is “doing God’s work,” will be especially obtuse. It can be “game over” in one of two ways: a) Ugly for them and their profits if they clean it up, or b) much, much uglier than (a) if the government (ie, the SEC, IRS, FBI, et al) goes in to clean it up. Their choice.
Thanks for posting. I now have it as another reference for my own on the subject noted below.
Up to WW II any creditable currency was pegged to a gold/silver standard, which would have included the money of Washington’s time as President. During the Revolution the Continental Congress tried printing paper currency not backed by real assets to pay for the war, and hence the term “not worth a Continental”. Then during the Civil War, both the Union and Confederacy issued paper currency unsupported by real assets. Depending on Union fortunes, the paper traded as low as 40% in relation to gold coins. By 1864 Confederate currency had a gold value of five cents on the dollar. The U.S. didn’t try anything like that again until FDR confiscated gold coins during the Depression, but silver coins were still minted and still freely circulated.
While WWII destroyed most economies of the world, the United States prospered. The only way to restart international economic activity was for the U.S. to take the lead, which it did with the Bretton Woods Agreement. Every currency had a fixed value in relation to the dollar, and the U.S. kept everything functioning by buying and selling gold at $35 an ounce. Therefore, once again there was a U.S. gold standard and the dollar became the world’s reserve currency. However, Americans could not take their Federal Reserve Notes to a Fed bank and trade them for gold.
The U.S. unilaterally abrogated the agreement in August 1971, allowed the dollar to float in relation to the trading whims involving other paper currencies. Until about 1968 people could still trade their Federal Reserve notes for Silver Certificates and obtain packets of silver from a Federal Reserve Bank. When the government renounced that option, silver coins quickly disappeared from circulation.
The problem at the present moment is that the dollar is backed by the full faith and credit of the government and nothing else. When much of the world looses faith in the U.S. as a reliable engine driving the world economy, then the dollar’s status as a reserve currency is jeopardized. The memory of the United States as “The Arsenal of Democracy” fades to be replaced by the realization of the United States as “A Gulag of Dependency”. At the margin, the country expects the rest of the world to buy our long term bonds issued in ever increasing amounts to finance current government expenditures dedicated over 50% to social welfare and interest. Without any real assets backing the dollar, people are troubled by this country’s behavior and can decide the dollar is “not worth a Continental”. Such contemplation is already widespread, because through Quantitative Easing (QE) programs the Federal Reserve already had to buy $100 of billions of bonds the world would not purchase.
However typical of all central bankers, Ben Bernanke believes he can overcome these international fears by applying his intellect to macro-economic models providing dubious information for precisely timed money supply, which allow timely adjustments for identification and reaction to increases in money velocity. Supposedly he would sell bonds and reduce the money supply with a precision that prevents inflation from taking hold or a recession from occurring. He would proceed in such a manner as to concurrently allay any fears of a Congress and an Administration in an election year. This result has probably not been achieved since the seven years of plenty and famine in Egypt when Joseph obeyed the word of God from his dreams.
To carry the Jewish/Christian analogy further compare the character of God to the enormity of the hubris committed by the Federal Reserve and the Treasury Department as they style themselves after the Creature. The new money is not printed, but spoken into existence in exactly the same manner as God created the heavens and the earth in Genesis.
However unlike God’s creation, money has no substance at any time. In spite of that people do exchange items of real value such as labor, cars, and food for words spoken over a phone by a twenty something Fed bond trader. This person calls a company such as Goldman Sachs that has an inventory of securities brokered for the Treasury Department or the banks, and pays let’s say $1 billion for securities. Until the trader speaks “$1billion”, the money to pay for the notes or bonds does not exist. Anyone else purchasing the bonds does so with dollars already in circulation.
One analogy to explain the looming inflation might be to consider a flood control dam. The water that builds up behind it during the winter and spring could be considered QE1, QE2, QE3, etc. The face of the dam would be the current moribund economic activity causing a very low velocity of money as indicated by such questions as “Why do I want to borrow if no one wants to buy? or “Why do I want to buy when I don’t have a job?” Now stagflation happens when the reservoir gets so full with QE’s that some water just has to go over the top, even though economic activity remains anemic.
But when the economy picks up money begins to actively circulate. Now the increased velocity of money exponentially multiplies the QE’s, and the increased pressure shatters the face of the dam. Just as a wall of water scours out the stream bed and washes all before it, inflation now rages through the economy and destroys people’s financial asset values and their purchasing power.
Now all this seems fairly insane, until you realize that every member of the G-20 behaves in much the same way, and do understand their precarious situation. Since all currencies have about the same connection to reality, finding one or several of sufficient magnitude and viability to replace the dollar as a worldwide medium of exchange or store of value becomes perplexing. An individual country might think they have a solution, but they know they must also survive during the resulting chaos as all countries seek similar solutions. I imagine something like the final scene in “The Good The Bad and The Ugly”. The members of the G-20 are standing in a circle with open graves behind them. They are all contemplating how they are going to successfully outdraw the other nineteen members and survive the resulting mayhem.
The Good, The Bad and the Ugly: http://www.youtube.com/watch?v=sXldafIl5DQ
I completely agree.
Imagine changing our tax laws to encourage keeping savings and capital investments in the USA, which will bring back most of that money I mentioned back to the US financial system. The boost in liquidity from such a change would help turn around our economy faster than an F-16 doing a high-speed turn.
I don’t think so...
Congress Has More Authority Than They’re Using Over The National Debt
Posted on Friday, May 13, 2011 11:10:43 AM by dont_tread_on_malik
Former White House lawyer, David B. Rivkin, Jr., who is often ahead of the curve in matters of conservative strategy, addressed the country’s runaway debt problem in a May 12 editorial written for The Wall Street Journal.
The article, written by Rivkin and law colleague Lee Casey, specifically points to Section Four of the 14th Amendment, which forbids any default on the outstanding federal debt. “Section Four can become a powerful hammer for the budget hawks if Congress simply reclaims its constitutional pre-eminence in the borrowing process,” the piece argued.
Rivkin then pointed out that the 14th Amendment forbids dishonoring “the validity of the public debt of the United States, authorized by law” which makes the country a greater credit risk since the U.S. constitutionally cannot default on its financial obligations.
Congress should promptly increase the debt ceiling, Rivkin wrote, but with one key caveat: “The increase can be used only for borrowing to service existing obligations.”
(Excerpt) Read more at officialwire.com ...
http://www.freerepublic.com/focus/f-news/2719368/posts
Its not what if? Its when?
Need to get rid of all personal debt now.
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