History of Money & Fractional Reserve Banking System

 

• 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.

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Catastrophic Fall in 2009 Global Food Production

• Last year we saw horrendous food price increase on the back of a commodity boom before it collapsed in the 2nd half of 2008. Commodity prices have plunged dramatically and hopes are that there will not be any worldwide food crisis any more.
   
• However, Eric deCarbonnel is highlighting the dangerous drought the world is currently in and it will likely cause a food production collapse. Catastrophic Fall in 2009 Global Food Production : 
   
  The countries that make up two thirds of the world’s agricultural output are experiencing drought conditions. Whether you watch a video of the drought in China, Australia, Africa, South America, or the US , the scene will be the same: misery, ruined crop, and dying cattle.
   
  China
  The drought in Northern China, the worst in 50 years, is worsening, and summer harvest is now threatened. The area of affected crops has expanded to 161 million mu (was 141 million last week), and 4.37 million people and 2.1 million livestock are facing drinking water shortage. The scarcity of rain in some parts of the north and central provinces is the worst in recorded history.
   
  The drought which started in November threatens over half the wheat crop in eight provinces – Hebei, Shanxi, Anhui, Jiangsu, Henan, Shandong, Shaanxi and Gansu. 
   
  Australia
  Australia has been experiencing an unrelenting drought since 2004, and 41 percent of Australia’s agriculture continues to suffer from the worst drought in 117 years of record-keeping. The drought has been so severe that rivers stopped flowing, lakes turned toxic, and farmers abandoned their land in frustration:
   
  A) The Murray River stopped flowing at its terminal point, and its mouth has closed up.
  B) Australia’s lower lakes are evaporating, and they are now a meter (3.2 feet) below sea level. If these lakes evaporate any further, the soil and the mud system below the water is going to be exposed to the air. The mud will then acidify, releasing sulfuric acid and a whole range of heavy metals. After this occurs, those lower lake systems will essentially become a toxic swamp which will never be able to be recovered. The Australian government’s only options to prevent this are to allow salt water in, creating a dead sea, or to pray for rain. The United States
   
  California
  California is facing its worst drought in recorded history . The drought is predicted to be the most severe in modern times, worse than those in 1977 and 1991. Thousands of acres of row crops already have been fallowed, with more to follow. The snowpack in the Northern Sierra, home to some of the state’s most important reservoirs, proved to be just 49 percent of average. Water agencies throughout the state are scrambling to adopt conservation mandates.
   
  Texas
  The Texan drought is reaching historic proportion . Dry conditions near Austin and San Antonio have been exceeded only once before—the drought of 1917-18. 88 percent of Texas is experiencing abnormally dry conditions, and 18 percent of the state is in either extreme or exceptional drought conditions. The drought areas have been expanding almost every month. Conditions in Texas are so bad cattle are keeling over in parched pastures and dying. Lack of rainfall has left pastures barren, and cattle producers have resorted to feeding animals hay. Irreversible damage has been done to winter wheat crops in Texas. Both short and long-term forecasts don’t call for much rain at all, which means the Texas drought is set to get worse.
   
  Augusta Region (Georgia, South Carolina, North Carolina)
  The Augusta region has been suffering from a worsening two year drought. Augusta’s rainfall deficit is already approaching 2 inches so far in 2009, with January being the driest since 1989.
   
  Florida
  Florida has been hard hit by winter drought, damaging crops, and half of state is in some level of a drought.
    
  South America
  Argentina
  The worst drought in half a century has turned Argentina’s once-fertile soil to dust and pushed the country into a state of emergency. Cow carcasses litter the prairie fields, and sun-scorched soy plants wither under the South American summer sun. Argentina’s food production is set to go down a minimum of 50 percent, maybe more. The country’s wheat yield for 2009 will be 8.7 million metric tons, down from 16.3 million in 2008. Concern with domestic shortages (domestic wheat consumption being approximately 6.7 million metric ton), Argentina has granted no new export applications since mid January .
   
  Brazil
  Brazil has cut its outlook for the crops and will do so again after assessing damage to plants from desiccation in drought-stricken regions. Brazil is the world’s second-biggest exporter of soybeans and third-largest for corn.
   
  Brazil’s numbers for corn harvesting:
   
  Harvested in 2008: 58.7 million tons
  January 8 forecast: 52.3 million tons
  February 6 forecast: 50.3 metric tons (optimistic)
  Harvested in 2009: ???
   
  Paraguay
  Severe drought affecting Paraguay’s economy has pushed the government to declare agricultural emergency. Crops that have direct impact on cattle food are ruined, and the soy plantations have been almost totally lost in some areas.
   
  Uruguay
  Uruguay declared an “agriculture emergency” last month, due to the worst drought in decades which is threatening crops, livestock and the provision of fresh produce.
  The a worsening drought is pushing up food and beverage costs causing Uruguay’s consumer prices to rise at the fastest annual pace in more than four years in January.
   
  Bolivia
  There hasn’t been a drop of rain in Bolivia in nearly a year. Cattle dying, crops ruined, etc…
   
  Chile
  The severe drought affecting Chile has caused an agricultural emergency in 50 rural districts, and large sectors of the economy are concerned about possible electricity rationing in March. The countries woes stem from the “La Niña” climate phenomenon which has over half of Chile dangling by a thread: persistently cold water in the Pacific ocean along with high atmospheric pressure are preventing rain-bearing fronts from entering central and southern areas of the country. As a result, the water levels at hydroelectric dams and other reservoirs are at all-time lows.
   
  Horn of Africa
   
  Africa faces food shortages and famine . Food production across the Horn of Africa has suffered because of the lack of rainfall. Also, half the agricultural soil has lost nutrients necessary to grow plant, and the declining soil fertility across Africa is exacerbating drought related crop losses.
   
  and many more countries… see Catastrophic Fall in 2009 Global Food Production 
        
• Eric deCarbonnel on the implications :
   
  Stocks of foodstuff are dangerously low
  Low stocks of foodstuff make the world’s falling agriculture output particularly worrisome. The combined averaged of the ending stock levels of the major trading countries of Australia, Canada, United States, and the European Union have been declining steadily in the last few years:
   
  2002-2005: 47.4 million tons
  2007: 37.6 million tons
  2008: 27.4 million tons
   
  These inventory numbers are dangerously low, especially considering the horrifying possibility that China’s 60 million tons of grain reserves doesn’t actually exists .
   
  Global food Catastrophe  
  The world is heading for a drop in agricultural production of 20 to 40 percent, depending on the severity and length of the current global droughts. Food producing nations are imposing food export restrictions. Food prices will soar, and, in poor countries with food deficits, millions will starve. 
   
• Will we see a major catastrophe on top of the Great Depression we are in ? The analysis provided by Eric deCarbonnel is pretty convincing. 

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Is the World Heading Towards Pandemic Avian Flu ?

• I have been tracking the spread of the H5N1 bird flu for some time now. It does not look like we are winning the battle. H5N1 does not spread from human to human easily at all. There have been few, if any cases of human to human transmission. Nevertheless, avian flu has been spreading to many countries and affecting the human population that comes into close contact with the birds. See H5N1 – Bird Flu for the spread of it into : Indonesia, India, Bangladesh, China, Japan, Vietnam…. etc.
   
• There is an alarming report from AFP about a major Japanese company asking their employee’s families to fly home over bird flu fears, Panasonic to fly home workers’ families over bird flu fears :
    
  Panasonic Corp. has ordered Japanese employees in some foreign countries to send their families home to Japan in preparation for a possible bird flu pandemic, a spokesman said Tuesday.
   
  Family members of Japanese employees in parts of Asia, the Middle East, Africa, Russia, former Soviet states and Latin America will fly back to Japan by the end of September, Panasonic spokesman Akira Kadota said.
   
  The firm decided to take the rare measure “well ahead of possible confusion at the outbreak of a global pandemic,” he said.
   
  Eight people have contracted the H5N1 bird flu virus in China alone this year — five of whom died.
   
  “The bird flu cases reported so far are infections from bird to human, but once an infection between human beings is reported, things can get chaotic with many other companies trying to bring back their employees,” Kadota said.
   
  “We wanted to take action early before it gets difficult to book flight tickets,” he said. The company did not say how many family members would return to Japan. Employees and their families in North America, Western Europe, Australia, New Zealand and Singapore will not be affected.
   
  The H5N1 strain of the virus that is most dangerous to humans first emerged in Asia in 2003 and has since caused nearly 250 deaths, according to World Health Organisation figures.
   
  Bird flu, or avian influenza, kills mainly birds but scientists fear it could mutate to jump from human to human, sparking a global pandemic.
   
• Are they paranoid? Probably?

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Global Economy Falling Apart !

• 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.
  Japan, where industrial output plunged a record 9.6 per cent month on month in December, is due to announce fourth-quarter gross domestic product data next week. Polls of economists suggest GDP will have fallen more than 3 per cent compared with the previous quarter – an annualised decline of more than 10 per cent.
   
  “From October to December the scale of negative growth [in GDP] may have been unimaginable – and we have to consider the possibility that there could be even greater decline between January and March,” Mr Momma said in a speech on Monday.
   
  His remarks came as a private research company reported a 16 per cent year-on-year rise in the number of bankruptcies among Japanese companies to 1,360 in January, the highest level for six years. Total debts left by failed companies rose 44 per cent from a year earlier to Y839bn ($9.2bn), Tokyo Shoko Research said.
    
  Many of Japan’s companies have suffered from the domestic slowdown and a sudden dearth of demand for exported goods including cars and electronics, as well as problems securing credit from banks. The effect on companies’ capital spending has been marked, with core private-sector machinery orders plunging 17 per cent quarter on quarter in the three months to December, the steepest fall on record.
   
• 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. 
   

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Paul C. Roberts – Morons Causing the Collapse of America!

• 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. 
     

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