- This is a documentary (by the Ludwig von Mises Institute) on the history of money and the fractional reserve banking system. It traces the evolution of money and the creation of the Federal Reserve through the founding fathers, civil war …, gold standard, Great Depression, gold confiscation, Roosevelt’s New Deal, collapse of Bretton Woods.. to the modern era.
- It explains the modern banking system and how the Federal Reserve manages money supply by Open Market action, interest rates and reserve requirements.
- What is the cause of the Boom Bust cycle? How about the Federal Reserve? What destroys the Dollar ? Money printing out of thin air by Federal Reserve causing inflation and currency debasement. The Federal Reserve is the cause of most of the economic ails in the world.
- The Federal Reserve is a private corporation and thrives on secrecy. It does not serve the best interest of Americans. What we need is a Sound Money system. A gold backed currency system.
- More indications are coming in that the world economy is rapidly falling apart. No government in the world knows how to correct the problem. In fact Western governments are adopting policies that will greatly prolong the depression.
- Bank of England to issue grimmest warning yet on economy :
Mervyn King will this week present the Bank of England’s most pessimistic assessment yet of the outlook for Britain’s economy, after a slew of official figures confirming that activity has “fallen off a cliff” since the autumn.
When the Bank’s monetary policy committee reduced borrowing costs to just 1% last Thursday, it acknowledged that “the global economy is in the throes of a severe and synchronised downturn”. Its latest forecasts, to be published on Wednesday, will reveal how hard it expects the UK to be hit. “The upcoming inflation report is likely to show a bleak forecast, with a severe recession,” predicted Michael Saunders, UK economist at Citigroup.
King said in a speech to the CBI last month that there was a consensus among the Bank’s contacts in the UK and abroad that after Lehman Brothers went bust in September, “orders and confidence had, in the same telling phrase, ‘fallen off a cliff’”.
Official figures on Friday showed industrial production fell at the fastest pace since the 1970s in the final quarter of 2008, a pattern echoed across the eurozone and in the US. Economists will be scrutinising the report for signals that the MPC is preparing to jump to “quantitative easing”, the radical approach of pumping more cash into the economy.
- The Independent UK reports in This is the worst recession for over 100 years :
Britain is facing its worst financial crisis for more than a century, surpassing even the Great Depression of the 1930s, one of Gordon Brown’s most senior ministers and confidants has admitted.
In an extraordinary admission about the severity of the economic downturn, Ed Balls even predicted that its effects would still be felt 15 years from now. The Schools Secretary’s comments carry added weight because he is a former chief economic adviser to the Treasury and regarded as one of the Prime Ministers’s closest allies.
Mr Balls said yesterday: “The reality is that this is becoming the most serious global recession for, I’m sure, over 100 years, as it will turn out.”
He warned that events worldwide were moving at a “speed, pace and ferocity which none of us have seen before” and banks were losing cash on a “scale that nobody believed possible”.
The minister stunned his audience at a Labour conference in Yorkshire by forecasting that times could be tougher than in the depression of the 1930s, when male unemployment in some cities reached 70 per cent. He also appeared to hint that the recession could play into the hands of the far right.
“The economy is going to define our politics in this region and in Britain in the next year, the next five years, the next 10 and even the next 15 years,” Mr Balls said. “These are seismic events that are going to change the political landscape. I think this is a financial crisis more extreme and more serious than that of the 1930s, and we all remember how the politics of that era were shaped by the economy.”
- The alarm bells are ringing non stop in Japan. The Japanese cabinet is characterising this as an emergency. Mure Dickie writes in Japan faces ‘unimaginable’ contraction :
Japan’s economy faces an “unimaginable” contraction, the chief economist of its central bank warned on Monday, as figures revealed surging bankruptcies and a big fall in machinery orders. The warning from Kazuo Momma, head of the Bank of Japan’s research and statistics department, underscored the gloom surrounding the world’s second-largest economy as export orders dry up, companies shut down production lines and consumers stop spending.
- The bond market is signaling : No Confidence and the DJIA collapsed 382 points to 7888 last night. Tim Geithner’s bad bank plan just do not inspire confidence. Ambrose Evans-Pritchard writes in Bond market calls Fed’s bluff as global economy falls apart :
The yield on 10-year US Treasury bonds – the world’s benchmark cost of capital – has jumped from 2pc to 3pc since Christmas despite efforts to talk the rate down.
This level will asphyxiate the US economy if allowed to persist, as Fed chair Ben Bernanke must know. The US is already in deflation. Core prices – stripping out energy – fell at an annual rate of 2pc in the fourth quarter. Wages are following. IBM, Chrysler, General Motors, and YRC, have all begun to cut pay.
Who can blame bond vigilantes for going on strike? Nobody wants to be left holding the bag if and when the global monetary blitz succeeds in stoking inflation. Governments are borrowing frantically to fund their bail-outs and cover a collapse in tax revenue. The US Treasury alone needs to raise $2 trillion in 2009.
Where is the money to come from? China, the Pacific tigers and the commodity powers are no longer amassing foreign reserves ($7.6 trillion). Their exports have collapsed. Instead of buying a trillion dollars of extra bonds each year, they have become net sellers. In aggregate, they dumped $190bn over the last fifteen weeks.
The Fed has stepped into the breach, up to a point. It has bought $350bn of commercial paper, and begun to buy $600bn of mortgage bonds. That helps. But still it recoils from buying Treasuries, perhaps fearing that any move to “monetise” Washington’s deficit starts a slippery slope towards an Argentine fate. Or perhaps Bernanke doesn’t believe his own assurances that the Fed can extract itself easily from emergency policies when the cycle turns.
As they dither, the world is falling apart. Events in Japan have turned deeply alarming. Exports fell 35pc in December. Industrial output fell 9.6pc. The economy is contracting at an annual rate of 12pc. “Falling exports are triggering a downward spiral of production, incomes and spending. It is important to prepare for swift policy steps, including those usually regarded as unusual,” said the Bank of Japan’s Atsushi Mizuno.
The European Central Bank’s refusal to follow the lead of the US, Japan, Britain, Canada, Switzerland and Sweden in slashing rates shows how destructive Europe’s monetary union has become. German orders fells 25pc year-on-year in December. French house prices collapsed 9.9pc in the fourth quarter, the steepest since data began in 1936. “We’re dealing with truly appalling data, the likes of which have never been seen before in post-War Europe,” said Julian Callow, Europe economist at Barclays Capital.
Spain’s unemployment has jumped to 3.3m – or 14.4pc – and will hit 19pc next year, on Brussels data. The labour minister said yesterday that Spain’s economy could not “tolerate” immigrants any longer after suffering “hurricane devastation”. You can see where this is going.
Ireland lost 36,500 jobs in January – equal to a monthly loss of 2.3m in the US. As the budget deficit surges to 12pc of GDP, Dublin is cutting wages, disguised as a pension levy. It has announced “Rooseveltian measures” to rescue the foundering companies.
Meanwhile, Eastern Europe is imploding. Industrial output fell 27pc in Ukraine and 10pc in Russia in December. Latvia’s GDP contracted at a 29pc annual rate in the fourth quarter. Polish homeowners have had the shock from Hell. Some 60pc of mortgages are in Swiss francs. The zloty has halved against the franc since July.
- Former Asst. Treasury Secretary, Paul Craig Roberts on the US$2 Trillion deficits. How is the Obama administration going to finance this? America does not have any savings to finance this. So it will have to be financed by foreigners or Monetization of Debt.
- The only way out is to print more money out of thin air. Americans have a bunch of mad morons running the government. The United States government runs on ‘hubris’, in their delusional world where they are the sole super power so anything is possible.
- Paul C. Roberts writes in U.S. Economy Imploding as Obama Follows Failed NeoCon Policies :
Is there intelligent life in Washington, DC? Not a speck of it. The US economy is imploding, and Obama is being led by his government of neconservatives and Israeli agents into a quagmire in Afghanistan that will bring the US into confrontation with Russia, and possibly China, American’s largest creditor.
The January payroll job figures reveal that last month 20,000 Americans lost their jobs every day. In addition, December’s job losses were revised up by 53,000 jobs from 524,000 to 577,000. The revision brings the two-month job loss to 1,175,000. If this keeps up, Obama’s promised three million new jobs will be wiped out by job losses.
Statistician John Williams (shadowstats.com) reports that this huge number is an understatement. Williams notes that built-in biases in seasonal adjustment factors caused a 118,000 understatement of January job losses, bringing the actual January job loss to 716,000 jobs.
The payroll survey counts the number of jobs, not the number of employed as some people have more than one job. The Household Survey counts the number of people who have jobs. The Household Survey shows that 832,000 people lost their jobs in January and 806,000 in December, for a two month reduction of Americans with jobs of 1,638,000.
The unemployment rate reported in the US media is a fabrication. Williams reports that “during the Clinton Administration, ‘discouraged workers’ those who had given up looking for a job because there were no jobs to be had–were redefined so as to be counted only if they had been ‘discouraged’ for less than a year. This time qualification defined away the bulk of the discouraged workers. Adding them back into the total unemployed, actual unemployment, [according to the unemployment rate methodology used in 1980] rose to 18% in January, from 17.5% in December.”
In other words, without all the manipulations of the data from a government that lies to us every time it opens its mouth, the US unemployment rate is already at depression levels.
US policymakers have ignored the fact that consumer demand in the 21st century has been driven, not by increases in real income, but by increased consumer indebtedness. This fact makes it pointless to try to stimulate the economy by bailing out banks so that they can lend more to consumers. The American consumers have no more capacity to borrow.
With the decline in the values of their principal assets–their homes–with the destruction of half of their pension assets, and with joblessness facing them, Americans cannot and will not spend.
Adding to the brewing disaster, Obama has been deceived by his military and neoconservative advisers into expanding the war in Afghanistan, a large mountainous country. Obama intends to use the draw-down of US soldiers in Iraq to send 30,000 more American troops to Afghanistan. This would bring the US forces to 60,000–600,000 fewer than US Marine Corps and US Army counterinsurgency guidelines define as the minimum number of soldiers necessary to bring success in Afghanistan–and less than half as many as the army that was unable to occupy Iraq.
When economies tank, as the American one is doing, tax revenues collapse. The millions of unemployed Americans are not paying Social Security, Medicare, and income taxes. The stores and businesses that are closing are not paying federal and state income taxes. Consumers with no money or credit to spend are not paying sales taxes.
The Washington Morons, and morons they are, have given no thought as to how they are going to finance a fiscal year 2009 budget deficit of some two to three trillion dollars. The practically nonexistent US saving rate cannot finance it. The trade surpluses of our trading partners, such as China, Japan, and Saudi Arabia, cannot finance it.The US government really has only two possibilities for financing its budget deficit. One is a second collapse in the stock market, which would drive the surviving investors with what they have left into “safe” US Treasury bonds. The other is for the Federal Reserve to monetize the Treasury debt.
Monetizing the debt means that when no one is willing or able to purchase the Treasury’s bonds, the Federal Reserve buys them by creating bank deposits for the Treasury’s account. In other words, the Fed “prints money” with which to buy the Treasury’s bonds. Once this happens, the US dollar will cease to be the reserve currency.
In addition, China, Japan and Saudi Arabia, countries that hold enormous quantities of US Treasury debt in addition to other US dollar assets, will sell, hoping to get out before others.
The US dollar will become worthless, the currency of a banana republic.
The US will not be able to pay for its imports, a serious problem for a country dependent on imports for its energy, manufactured goods, and advanced technology products.
Obama’s Keynesian advisers have learned with a vengeance Milton Friedman’s lesson that the Great Depression resulted from the Federal Reserve permitting a contraction of the supply of money and credit. In the Great Depression good debts were destroyed by monetary contraction. Today bad debts are being preserved by the expansion of money and credit, and the US Treasury is jeopardizing its credit standing and the dollar’s reserve currency status with enormous quarterly bond auctions as far as the eye can see.