Free Republic

The problem: the settlement system for the US government bond market has broken down THE US TREASURY market, the foundation of government bond and corporate bond markets worldwide, is suffering a crisis of confidence at the worst possible moment. Investors in treasuries are the lenders enabling the US government bail-out of the country’s broken financial institutions. That leaves them financing purchases of equity of volatile and highly questionable worth and backing a ragbag of distressed assets. For now, treasury yields are at record lows across the term structure as investors with cash to invest conclude that they can trust no...

The Wisdom of Ludwig Von Mises "The credit expansion boom is built on the sands of banknotes and deposits. It must collapse. * * * * * * "There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved. * * * * * * "The boom is called good business, prosperity, and upswing. Its unavoidable aftermath, the readjustment of...

The Fed Is Out of Ammunition A discredited dollar is a likely outcome of the current crisis. By CHRISTOPHER WOOD With an estimated $4 trillion in housing wealth and $9 trillion in stock-market wealth destroyed so far in the United States, there is little doubt that we are witnessing a classic debt-deflation bust at work, characterized by falling prices, frozen credit markets and plummeting asset values. Those who want to understand the mechanism might ponder Irving Fisher's comment in 1933: When it comes to booms gone bust, "over-investment and over-speculation are often important; but they would have far less serious...