The Coming Double Dip Recession
Recessions, until the last 20 years, tended to huddle together for warmth. The last recession was rewritten to be shorter by the NBER, but had many of the characteristics of being a double dip recession, or one very long recession. The odds of a recession this year are approaching unity, because George W. Bush does not want to deliver fiscal stimulus to Democratic constituencies. That's really when expansions end, when one of the players would rather not take the consequences of continuing the expansion. In 2000 that was Alan Greenspan, this time around, it is George W. Bush.
It will be a shallow recession, because of the vast monetary stimulus being used to prop up US housing, and the global desire to keep the resources boom, the flip side of a resources bubble, in place. This means that inflation will not be broken, and very shortly after the end of the present recession, which will be made worse by the ending of Iraq based stimulus in the short term, we will be back in an devaluationary crisis similar to this one. There is not enough investment supply: that is a stream of businesses which will pay the natural cost of money. There is too much investment demand chasing too little supply, which means real returns must fall, except in those limited areas where there are resource benefits. Lack of Investment Supply. Put it on your wall and frame it.
Of course, the Republicans will find a way to blame this on either the Democratic majority in Congress or the incoming Democratic president...
New housing is in deep trouble. I spoke with a contractor this evening who told me that new construction is drying up and that he expects a lay-off soon.
Oh my, I was a Frist!
Too much credit. Overvalued real estate. Dollar dropping rapidly.
If you loaned out 2million dollars 10 years ago to be paid back in 30 years, the money coming back in is worth much less then the money you put out. Think about it.
It could be very bad.
Tagline in hindsight 20 years from now...
"And you thought Enron was bad!"
we are all fucked
im lucky...im single with no kids (for the first time, im less depressed that no one wants me) the only person who will hurt in my household is me
and i only take up one space in a soup line, and i can deal with living in a one room dump
i feel bad for everyone with families
It's all ___________'s fault!
(Just fill in the blank with the name of the new Democratic President or, if the GOP wins, Nancy Pelosi)
c_ray_86 @ 3:
Exactly! ...inflation. or put another way ...currency devaluation...The fed is printing too much of the stuff...money.
any body here know who owns the fed? ...is it democratically owned or republican owned?
As in all economic cycles, first the gain then the pain and there will be plenty to go around because there is so much debt within the system. This was a perfect setup for the Republicans who have wasted hundreds upon hundreds of billions of dollars on a war we didn't need while ramping up a war industry that could have been put to better use using their technologies and brain power towards creating more fuel efficient cars and trucks, alternate forms of energy to power the nationl grid and just in time to hand this financial mess over to the Democrats.
I know I heard someone say it before, but it wouldn't surprise me if the next president whether Democratic or Republican is only a one term wonder due to the outrage coming from an electorate that can o longer afford their homes, fuel for their cars when oil surpasses $150 a barrel and the inabilty to feed thier families.
Just where was Congress when al of this money was being spent? Kissing the presidents ass because they were too cowardly in standing up to him.
uncle joe mccarthy @ 5:
wont be no soup lines this time , best search the river banks of dead fish!!!!!!!!!!!!!
milquetoast @ 7:
The central bank or the Federal reserve is a Republican bastion ad has been for many years. The two major banks that make up the Fed are Citibank and JP Morgan Chase. Want to send a message to them? Take your business to other banks. Hurting them financially is the only language they know.
Isn't this the kind of crap that was blamed on Jimmy Carter?
Other than demanding that people be honest with themselves, I really will never understand why right-wingers hate Jimmy Carter so much, or so constantly anoint him Worst President Ever. ..
How could Bill Clinton forsake us like this?! His womanizing drove millions of Americans into shantytowns!
ten trillion debt. If I was China I'd be dumping. If the US walked in my place looking for credit, I'd call the cops.
Clavis @ 11:
Bush should get that accolade, hands down as the worst president ever. But I think Olberman has already been there ad done that.
I wonder what my "social security' check will by 25 yrs from now if I ever even get it...
bread 5 bucks a loaf..
milk 10 bucks a gallon
corn puff cereal 8 bucks a box...
thanks federal reserve guys...thanks alot!
......Bastards
Andrew @ 8:
oh hell they were up to thier asses glomming some of that war profits thierselves!
All fine n' dandy, but just keep the following rules in mind, rules we all must defer to...
1. If the economy tanked early in George's presidency, it was fully because of 9-11, not because of George.
2. If aspects of the economy recovered in the past several years, it was because of George, and not due to other influences.
3. Aspects of the economy which never recovered did so in spite of George's brilliant fiscal leadership.
4. Aspects of the economy which have tanked in the past year or longer are 100% caused by the Democratic Congress, and not because of George.
There, it's just that simple, as clearly spelled out in the GOP playbook. One should NEVER question George's fiscal wisdom: After all, "I think I got a B in Econ 101" said George the Younger on 9-20-07. Who could ever go up against that level of genious?
I used to think we were a better country than this, but greed wins out again with profit made from death and destruction. Money talks and bullshit walks.
This sounds like a good time for more tax cuts for the wealthy!
Clavis @ 11:
Carter inherited all kinds of problems and worked very hard to fix them, even some of them were beyond his control. So four years later Reagan was elected because he made people "feel" good. Finally, three years into the Reagan administration, we climbed out of the economic slump, due in large part to things Reagan had nothing to do with either. So Reagan got reelected.
c_ray_86 @ 3:
Not necessarily, as interest and rate adjustments take care of making a loan adaptable to inflation.
Trust me, banks are not the ones losing value...
myiq2xu @ 20:
There is a reason why Republicans make such sucky parents...
For a party that seems to tout "responsability" left and right, the GOPers sure are never for making any sort of compromises whatsoever.
Anyone who has not been wearing shades thinks this is old news. It is still very important so tell everyone. This is not partisan either. Both parties feel that their spending is endless and the next generation can deal with the debt. This war has just given the common folk a magnifying glass to the devaluation of the dollar. Don't fear! The North American Union/Security and Prosperity Partnership/ Project for a North American Community (whatever title you choose) will save us with a replacement of the dollar called the AMERO. A universal currency for all of North America. Go back to sleep. The politicians and banks would never allow anything like a depression happen. History repeating itself is hyperbole.
Andrew @ 10:
The message I want to send to them is...Stop printing money out of thin air or the American people are gonna (repeal the federal reserve act) and start using gold and silver coin again...like the constitution says!
LA Confidential....is up on this.........me,myself and I think .....hmmmm.....could get ugly.
a stimulus package will take to long to get through, raise the debt and waste tax payers money. We need to let the market self correct. Also, the lesson needs to be learned by the lenders and home owners alike , no bailout!
Andrew @ 18:
"Money doesn't talk, it swears." -- Bob Dylan
MeMyselfAndI @ 21:
In fact they are because the assets they hold are losing value by the day as more and more dollars are printed which increases inflationary pressures. The government has gotten quite good at playing with the numbers as if anyone were to believe that inflation is only running at 2%. The best way to prove this is simply by looking at the price of gold. Had you invested in gold in January of 2007, you would have seen a return on your investment of 31% compared to 6.4% in the Dow. As of todays close the Dow is down 10% and gold continues to $900 on its next stop to $1,650 per ounce as the dollar continues to fall.
It's simple economics. Gold is the ultimate barometer of inflation and it's screaming like hell that things are going to get a lot worse. The banks are losing asset value as the value of homes continues to fall with no end in sight.
I think they need to put this in plain English if they want me to understand what they're saying. This buzzword stuff doesn't cut it.
During the great depression, and prices were forced to drop because of lack of spending, thoes who had big money found that their $1.00 now bought 10 times what it did, bushco's money worth 10x more....I wonder.
milquetoast @ 24:
The problem with gold and silver is everyone is on fiat currency, which means that ain't gonna fly in the global market. The other problem is those are finite resources, like oil. And the third problem is if we went to precious metals as currency tomorrow, who do you think is going to buy up all the gold and stash it in order to corner that resource and make themselves more wealthy? Hint: it ain't you and me.
Jeffrey @ 23:
Oh boy...goody goody gumdrops...(cant wait)
2 questions
will our new money be made out of gold and silver?
and how will my social security fund be tranferred/converted (into Amero's)
John West @ 29:
I'm reading the comments here in order to understand what in the hell the quote at the top means.
this HAS been ugly for some time. It's just that the gubmint has been successful at manipulating numbers with the complicity of the media. Economists know that the busch appointees are dumber than a sack of stones. the commodoties markets, especially for oil and gas, are rife with speculation and driven by rumors and false news and even misleading government reports.
but retail sales numbers don't lie, especially around christmas. this winter, EVERYTHING was on sale. the consumer now has to choose between eating and driving to work. and they keep trying to use the same formula in the media to keep us distracted.
they keep trying to ignore the large elephant in the room: the government has been transformed by the repugs into a funnel for upward redirection of wealth.
Lollimom @ 33:
It means we're FUBAR...yep.......after the nitwit Preznit leaves office......the shit will it the fan....yep.
Blue Buddha @ 31:
Gold and silver aren't the problem, it's our government and the Federal Reserve that controls it. Gold and silver are not the only precious metals around and Kennedy knew that which is why he wanted to go back to a silver standard. That executive order was never overturned by any president to this day, but has also never bee put into effect. Today a basket of metals can be used such as gold, silver, platinum and palldium. Why is it the rest of the world sees the metals especialy gold as currency? Why do you think banks all over the world store it? Becasue for the last five thousand years it is the only real money that mankind has ever known.
When something is finite, it has greater value. Ask yourself why the Congress which controls weight and measures says all of our gold holdings are only worth $42.50 an ounce when the rest of the world says it is worth early $900 an ounce?
The founders knew the control a central bank could have over a government if they were allowed to print worthless paper with nothng to back it which is why they didn't want a central bank to begin with and we held out until the robber barrons created one in 1913.
mudshark @ 35:
Now tell me what this means:
Globalism is horrible to the USA in terms of employment. It's great for those who own stocks in companies that outsource, though.
No we won't have a Depression. That would be a bad label for the media to apply. Maybe they can call it a "Dark Holler" or "Belly Flop".
After all, history doesn't repeat itself, but it certainly rhymes...
(Humblest permanent respect to Mark Twain. Would that we had a dozen like him now trying to pull ourselves from the moral gutter Bush & Co have pushed us into after the mugging.)
Lollimom @ 37:
known knowns....what we do know..............known unknowns....what we know might happen........unknown unknowns.....worst case senarios.
scenarios...sorry about that....
Any of the Reps or Dems running for Prez candidate, even mentioned this in "what they'll do for our country" in any of their speeches? Any of them?
mudshark @ 25:
Yes it could. I've been preparing since Bush was installed in 2000. I knew right then oh shit. Here we go again.
L.A. Confidential @ 43:
yep...we've had this conversation before.......me,I'm heading south.
Yes, I am saving now and have nearly eliminated any credit debt. This is going to be a long hard run, thanks Free-Market Republicans, I’m certain none of you will be scathed! It's time to re-regulate every fucking thing on the map, that is the primary responsibility of government, that or they're there to mismanage and completely fail the people!
mudshark @ 44:
If I can find a sane place on this planet to live I'll let you know.
ConcernedCanuck @ 42:
Mention what? double dip recession? or printing money out of thin air and causing inflation?
milquetoast @ 47:
Anything to do with economy
bilhelm-X @ 45:
Smart. Very Smart.
L.A. Confidential @ 46:
Maine
Jo @ 50:
Is the Bush Compound Walled Off from the Rest of the state?
It will take heroic efforts to avoid the logical result of Bush's inane administration, and keep this 'recession' from becoming a depression.
Preacher Boob @ 52:
Even in that case it's going to be a long slow slog out of the muck. I can imagine the Bush Cabal is pretty nervous right now because if this falls apart before the general election the Jig is up.
L.A. Confidential @ 51:
Probably. But Maine is the only state that borders just one other state. We could all go to Canada. That would show 'em.
Kennebunkport, well, we could give that to Massachusetts. They might want it back. They used to own the whole damned state.
BTW, will there be a run on the banks?
the economic nightmare about to strangle the US economy is another good reason
to string up bush and cheney on a bridge in iraq.
L.A. Confidential @ 49:
Unfortunately, people are using their credit cards to cover thier mortgage. They just didn't get it.
http://www.iht.com/articles/ap/2008/01/08/america/Economy.php
c_ray_86 @ 3:
not if you invested in fiscal metals--gold and silver......excellent return even now.
this could be cut off before it ends in bread lines...
but nooooo you all think ron paul is crazy.
he is the only president who understands economics enough to fix this mess.
If the GOP could govern half as well as the sell themselves, we would all be living high on the hog.
All you have to do is look at the 20th Century economic charts and it's clear that the economy does better when Democrats are in charge. But somehow the GOP has sold themselves as the party that manages the economy better.
The shit makes no sense.
Ryan @ 58:
How does he plan to do that. I'm serious. If you know something, please tell me. I'm not trying to be flip or smartass.
Ryan @ 58:
yes he sure can fix this mess......quarantine for homosexuals, sending all the mexicans and afro-americans out of the country and stomp to death all the jews......yah, that's just what we need, as ass sucking.....bigot, homophobe, anti-semite.
Ryan @ 58:
Yeah. Take yer medication pal, and the voices in your head will go away.
Ryan @ 58:
not everybody!
Jo @ 54:
Not if they can keep people distracted with Clinton versus Obama, and Britneys latest escapade.
Banks are already starting to set withdrawal limits also. Most people don't realize that.
dadams @ 57:
Good luck even with that in these circumstances. 881.80 is beyond the reach of most Americans unless they pay for it with their credit cards. And if a loaf of bread sells for an ounce of gold, knowing how greedy the PTB are, the gold ain't going last long.
myiq2xu @ 62:
keep it coming...
the fed won't stop devaluing your money either. keep buying what the money masters feed ya!
Axium payroll services firm files for liquidation bankruptcy
San Jose Mercury News, USA - 7 hours ago
AP LOS ANGELES—Axium International Inc., the entertainment industry's third-largest payroll services and accounting firm, filed for liquidation bankruptcy.
U.S. consumer debt hits a record $2.51 trillion.
L.A. Confidential @ 64:
I took all my money out last year and bought Canadian dollars. Better investment that what my savings was paying. Or even CDs. After one gets over being nervous with all that cash around you never think about it. It is safe from fire and flood and stuff like that.
We have no credit card debt. And our mortgage is about $500 a month. We decided not to pay it off because we would be spending dollars that are worth more now than they will be when the mortgage is paid.
We live simply.
ConcernedCanuck @ 42:
Yes Ron Paul
One of the many reasons why I have been overlooking the (R) lately and really admiring and watching so many more videos of his just to hear what he'll say.
I haven't heard one other candidate say a thing about it.
Correct me if I'm wrong Please.
http://www.youtube.com/watch?v=QBOIZmuP1P8
I thought everything was Clinton's fault. And will be doubly so if Hillary wins the white house.
I'm glad to see that more and more people seem to be cognizant of what the causes of recessions are (previous Fed credit expansion). The internet truly is a remarkable thing, in that the ideas of the most brilliant economist of all time seem to be spreading throughout the country (with a little help from a certain Presidential candidate) like wildfire.
Sadly, the mainstream media is STILL light years behind the internet, resulting in the majority of the population being ignorant and hence dangerous to the cause of liberty and hence prosperity. There are just way too many "economists" and "experts" giving lectures filled with fallacy on the news and in schools. Idiots like Krugman, Friedman, Nordhaus and other socialist, Keynesian nightmare economists make this country a land full of intellectual toxic waste. These morons spread ideas that are in line with what causes depressions in the first place. They will tell you that the reason for this recession is that too many people "destructively" seek to hold more cash reserves, thus decreasing overall spending for goods. The solution for these schmoes is that there should be more spending, and if people won't do it themselves, then they should be forced to.
Of course they never once talk about WHY people seek to hold more in cash reserves; I don't consider their explanations satisfactory because it always boils down to blaming the victims for disastrous Fed policies. Besides, if people hold more in cash (that includes businesses as well as individuals), then in the long run overall profits will rise in the economy, thus preventing any further increase in cash holdings by creating a strong incentive to invest in capital equipment and labor.
After 80 years of absolute disastrous booms and busts created by the Fed (who have their intellectual sanction from people like Krugman et al), they STILL want you to believe that the government can fix things for you, that we shoudl "trust them" to make things right. This is tantamount to a kidnapper ANTICIPATING his victim's Stockholm Syndrome by telling his victim that "you should like me, as I am keeping you alive for another day".
Disgusting....
Jeez, I knew this months ago. When do these asses actually mingle with the common folk? Middle class people have been suffering for the last 3 years. Yet, we see a bunch of pretty people tell us "All is fine! Now back to the latest missing white chick." I wonder how much these people make? Enough to sell their soul?
yes he sure can fix this mess......quarantine for homosexuals, sending all the mexicans and afro-americans out of the country and stomp to death all the jews......yah, that's just what we need, as ass sucking.....bigot, homophobe, anti-semite.
You are missing the point.
You should stop reading attack pages and just listen to what he has to say.
It's some crazy truth man.
Here's a better one ...
Ron Paul on CNBC Talking Monetary Policy 11-8-07
http://www.youtube.com/watch?v=hZsZ0_OLer4
Jo @ 60:
Ron Paul was/is on the house committee that oversees the federal reserve...and here he is giving Ben Bernanke some lip...no other candidates seem to talk about money or financial subjects...http://www.youtube.com/watch?v=yAwvlDJgJbM
here he is just the other night on CNN.at the end of the video his fans start chanting...End the Fed! End the Fed!
http://www.youtube.com/watch?v=I_9NnrlmX-M&eurl=http://www.questforfairt...
crazy huh?...end the fed!%*&#$...hmmmmm
they (The Fed) doesnt anwer to congress...(exept say yes when our govt needs more war money)
and they do kinda suck.(currency devaluation is bad)
I guess fiat currency only works with an economy behind it?
P.D. @ 72:
You should add an extra zero to your "3 years", because that is how long it has been since our standard of living has improved, regardless of what the published GDP or CPI or PPI says.
GDP is nothing but an indicator for the quantity of money in an economy, not how many goods are produced and the quality of those goods. And CPI? Don't even get me started on how they fudge THAT useless number. If the prices of certain goods rise "too much", prices which are caused by inflation due to the Fed, then they are discarded for being "too volatile".
The establishment is nothing but idiots who cannot hack it in a free market and who do everything they can to keep their own standard of living high at the expense of the rest of the people who have no idea why they are having a tough time. Unfortunately, many of these poor folk (and the elite to an even larger extent), are ignorant of economics and blame "sub-prime" lenders and business in general. It's a shame.
milquetoast @ 75:
its true.
i don't care how you feel about his domestic policy. if you want the U.S. to survive, hold your nose and vote for the ONLY man who understands what is going on.
Given that the aristocracy and corporations are Bush's natural constituency - the economic citizens of the US - and given that there will likely be 'adjustments' to economic policy that will harm these 'citizens' in the next government ... I wonder. How far will a fascist leader go in order to protect the economic citizens of a country?
Will Bush trigger extraordinary presidential powers to protect the economic citizenry?
I had always assumed that if extraordinary presidential powers were triggered it would be the result of Bush coveting power. But that may not be the case.
A false flag would still be needed - even something as trivial as a speedboat filled with Iranians hurling insults against a carrier battle group might do.
This could be a very ugly year.
milquetoast @ 75:
Thanks!
Jo @ 60:
Ron Paul schools Ben Bernanke
http://www.youtube.com/watch?v=T9FyeLHFiKM
Ryan @ 77:
If people were educated they would vote for him. Of course people when they hear this may think BULLSHIT, but these people truly are going to sooner or later discover what went wrong. Paul is trying to get us out of this mess WHILE WE STILL HAVE JOBS. If we ignore him, and vote for the status quo candidates (every single other candidate is a status quo candidate when it comes to the economy), then we do so at OUR OWN PERIL. More people need to wake up and learn about Austrian economics. The sooner they do that, the better off this country will be. Paul was taught personally by Rothbard, one of the best economists of the 20th century, so his ideas are not some batshit insane blabber by a "right-wing" kook. His ideas have been shown time and time again to be true from the Romans, to the Dutch, to the British, to the Germans, to the Argentinians, to the USA. It is simply amazing to me that hardly anyone understands that fiat currencies have NEVER EVER EVER worked for any country at any time in the history of the world. It has a 100% failure rate.
Why can't more people see that 100% failure rate based on 100% fallacious doctrines means there is a strong likelihood for failure again? Do people think that if they ignore it it will go away? Friggin ostrich syndrome that is...
milquetoast @ 80:
Ron Paul Schools Ben Bernanke AGAIN, and Harder
http://www.youtube.com/watch?v=yAwvlDJgJbM&feature=related
Chicago School economics making regifting Hoover's administration one foreclosure at a time
jr @ 84:
Fuck ya, we can all blame good ol' MIlton Friedman, who is the government spokesman for free markets. Yet he wasn't all that for our freedom and prosperity, since he said "free market in money? Not a chance".
Now we are reaping what he and the other Chicago-ites sewed with their destructive ideas.
milquetoast @ 81:
Thanks again. I watched it.
Republicans blame democrats and vice versa. Partisan cheerleading does that.
The FED raised rates and burst a housing bubble, which like the stock bubble bursting, is spilling over into the "real economy". Expansions simply do not go on like perpetual motion. Hoover did not want a Great Depression. It occured because there was a credit bubble that burst along with the stock bubble. Now we have a credit bubble along with a housing bubble.
500 trillion dollars in derivatives.
Let someone imagine they can deal with that bubble when it bursts.
Paul was taught personally by Rothbard, one of the best economists of the 20th century, so his ideas are not some batshit insane blabber by a "right-wing" kook. His ideas have been shown time and time again to be true from the Romans, to the Dutch, to the British, to the Germans, to the Argentinians, to the USA. It is simply amazing to me that hardly anyone understands that fiat currencies have NEVER EVER EVER worked for any country at any time in the history of the world. It has a 100% failure rate.
Why can't more people see that 100% failure rate based on 100% fallacious doctrines means there is a strong likelihood for failure again? Do people think that if they ignore it it will go away? Friggin ostrich syndrome that is...
Great post.
it's easy to forget in modern times that history is still doomed to repeat itself.
jr @ 84:
... and then, since foreclosures just take too damn long, we have all the Randian Vienna School rejects trying to one up the Chicago neo-cons by shelving the whole shebang.
I always get a chuckle that at a time when we need a good heart surgery, the Paultards see horse medicine practicioner as their messiah.
I blame everyone in Washington, D.C. for allowing this to happen. The real debt with unfunded entitlement liabilities is more than $50 trillion. No one in Washington wants to do the right thing for fear of losing elections. They have all bankrupt the country. This is not only a republican problem even though the debt based on doctored books increased by $3.4 trillion under Bush. The democrats have been just as liable for not speaking out against and pushing their own pork. If they (democrats and republicans) applied the same accounting practices they require of corporations they would all be in jail. There just is no more accountability in Washington. It is always someone else's fault and they do not care as long as we are kept in the dark and keep voting for them.
And this issue is not discussed in the debates. ABC does a nice setup to discuss this issue and then we have a 15 minute discussion on who the real candidate for change is. What change are you talking about? Will that change keep America from becoming a third world has been? I don't know because they never addressed the issue. Wake up America.
CNBC gets it...
CNBC Kudlow and Co. Roundtable Ron Paul Love-Fest
http://www.youtube.com/watch?v=aNH5Xy8_0NM&feature=related
Ron Paul on CNBC Talking Monetary Policy 11-8-07
http://www.youtube.com/watch?v=hZsZ0_OLer4
KCThinker @ 90:
"If they (democrats and republicans) applied the same accounting practices they require of corporations they would all be in jail."
I think this is the best comment on this post. Good job!
Aeon @ 38:
-------------
Globalism is part of the deflation phase of the inflation/deflation cycle.
Europe has outsourced jobs. Japan builds cars in the U.S. for the U.S. market, which outsources Japanese jobs.
I got mine, let them get theirs, economic protectionism, was part of The Great Depression. Anti China protecionism has come into vogue. Shades of Smoot-Hawley.
That which is old, becomes new again.
sixhundredsixtysix @ 88:
Paul was taught personally by Rothbard, one of the best economists of the 20th century, so his ideas are not some batshit insane blabber by a "right-wing" kook. His ideas have been shown time and time again to be true from the Romans, to the Dutch, to the British, to the Germans, to the Argentinians, to the USA. It is simply amazing to me that hardly anyone understands that fiat currencies have NEVER EVER EVER worked for any country at any time in the history of the world. It has a 100% failure rate.
Why can't more people see that 100% failure rate based on 100% fallacious doctrines means there is a strong likelihood for failure again? Do people think that if they ignore it it will go away? Friggin ostrich syndrome that is...
Great post.
it's easy to forget in modern times that history is still doomed to repeat itself.
The British pound has had its ups and downs for sure, but it's still around and one of the stronger currencies out there. True all currencies eventually crumble but the root cause dishonesty, not the type of currency per se. Remember precious metals can be debased, it has it's downsides as well. The U.S. Dollar may crash tomorrow or it may not crash for 300 more years, but I wouldn't hold my breath.
unfrozencaveman @ 95:
Great post.
it's easy to forget in modern times that history is still doomed to repeat itself.
The British pound has had its ups and downs for sure, but it's still around and one of the stronger currencies out there. True all currencies eventually crumble but the root cause dishonesty, not the type of currency per se. Remember precious metals can be debased, it has it's downsides as well. The U.S. Dollar may crash tomorrow or it may not crash for 300 more years, but I wouldn't hold my breath.
The root cause IS dishonesty. But the point they are making is that the power to create money makes it so that corrupt people come to the forefront to take advantage of it. You're right, maybe not today, maybe not tomorrow. But in our case, it is TODAY. It took many decades for it to happen, but we finally have a totally and completely corrupt government hell bent on using the power to create money.
If economists from the 20th century have said all along that fiat currencies will eventually fail FOR ONE REASON OR ANOTHER, then there is no excuse on the part of those who thought it can last forever, because they were aware and they knew. They just didn't care.
Ron J. at #87 got it right -- we are in the terminal phase of a credit collapse. This isn't inflationary, folks. It's deflationary. We are going to wipe out nearly $5 trillion of leveraged growth that was created since 2001.
Liquidity is 1% cash and 80% financial derivatives in our economy. The compound effect of this unwinding is going to inflict a lot of pain.
Confidence in the credit markets is gone. Lending has seized-up. Banks are building vault-cash to shore up reserves, because default rates are going to dramatically raise reserve requirements. Have you been paying attention to all the CD and Savings Account specials from the major money center banks and key financial intermediaries?
The unwinding in the equity markets will start right after Op-ex, or sooner if Countrywide blows-up beforehand.
Welcome to George Bush's America. Land of the freak-outs and home of the debt-slaves.
Ryan @ 91:
I am not economist but I do not think they get it. They just look at Ron Paul and see more ways to get rich. The talking heads on the clip you provided avoid the proverbial elephant in the room. All nice talk but it does not address the underlying issues with the American economy. We are based on consumerism. We base economic strength byy how many houses are built and refrigerators are sold. What? We hardly make anything for export anymore. We have unsustainable entitlement programs. We have runaway federal and personal debt. We have no sensible energy policy. Why do you think the dollar is dropping? Because everyone sees us as a bad investment. Would you invest in a company that loses hundreds of billions of dollars a year? I sure would not.
Yet we talk about expanding our army, playing world policeman and paying for everyone to have healthcare. We simply cannot afford this anymore and until we address this with real hard choices it will get worse and worse until we are a third world country with matching infrastructure. Just tying the currency to this or that will not solve this. Leadership with the ability to articulate to the American people what we are really facing will. Leadership to propose and implement real solutions will. And Ron Paul ain't the answer. None of the presidential candidates get it. And if they do they sure won't talk about it because the solutions will likely piss everyone off and no one will vote for them. Truth hurts folks.
KCThinker @ 98:
Yes we are based on consumerism. But that is because our idiotic "intellectuals" say that spending ALWAYS has to increase each and every year in order to have a healthy economy. They simply have no idea that the majority of spending in the country is business or business, or in other words, capital goods industries, NOT consumption. Before you invoke GDP, it doesn't take into account GROSS investment (which is what capital expenditures represent), only net investment (Gross minus depreciation). That is why it APPEARS that most money goes towards consumption.
Of course they look at Ron Paul and see more ways to "get rich". But the difference with Paul is that we will ALL get more rich by having our REAL wages increase every year, since we won't have that blasted Fed anymore.
And our dollar is not dropping primarily due to everyone not wanting dollars. That is just the outcome of the fact that the Fed is printing too much. The value of anything drops when its supply increases, and this is true for paper dollars as much as oil, paper clips, and pizza.
Drew @ 99:
L.A. Confidential @ 53:
I'm ready. I dumped my dollars, cashed in my 401K, and reinvested in a tin cup, and a silo full of apples.
Ron Paul is sounding downright prophetic again!
The only candidate w/ a viable plan for Iraq/foreign policy and thus the economy!
Please read this... there is no current Edwards articles sorry for this not relating to the above article!
http://www.latimes.com/news/politics/la-na-chamber8jan08,0,4301350.story...
sixhundredsixtysix @ 88:
Labeling Rothbad one of the greatest economists of the XX century, is akin to refer Dr. Kevorkian as worthy heir to multiple novel prices in physiology and medicine...
milquetoast @ 47:
Our money is based on debt. We have nearly doubled the national debt in Bush's 7 years. What do you think that does to the money supply?
It's not printed out of 'thin air' -- it's printed as a result of uncontrolled spending which results in trillions of dollars of national debt.
I think we are headed for far worse then a recession, but possibly a full on depression. Say good bye to your BMW, Volkswagon, dodge neon and your house.
Bush/Cheney have been in charge for the past seven years.
This is your mess repubs, now clean it up or face impeachment and criminal charges.
Drew @ 72:
Yet, many are still ignorant of current problems: Anyone discussing current economic conditions and not factoring oil supply is essentially playing at puzzling with pieces missing. Basic crude oil - light crude, which powered the last 100 years - production has been falling since 2005. Overall all liquids production has been flat since then while demand has been rising. Simple supply and demand. It's not just speculation. In '73, GDP fell by the same percentage as US oil supply. Think about it.
Real Estate Mortgage firms eliminated 90,000 jobs in 2007, the third larged entertainment industry payroll firm Axium just filed for liquidation bankrupcty.
Sure pubs, it's just "our perception" of the problem, isn't it?
uncle joe mccarthy @ 5:
I feel ya uncle joe. I'm in the same boat. I've sort of seen this on the distant horizon ever since the Net bubble and had a terrible feeling stuff would blow up in our faces. Bubbles always pop, no matter (in spite of) how well Newsweak tells you things are going. But yeah, I'm single and no dependents and work in education which was a conscious plan to evade the economic fallout of this bubble. So many friends out here in the 909/951 area of southern California are seeing a complete fall off of work, really really steeply, of construction. We're all gonna die.
myiq2xu @ 59:
It does when you consider the, uh, liberal media, and their role in promoting, the uh, reckless, uh, liberal use of money. The media are handmaidens to the Bush fascists in this. Any sort of stones or accountability and all this shit could have been avoided. Dumbasses. Y'all better hope the Chinese are tolerant masters.
The most interesting aspect of this story is just how little it is being reported in the Main Stream Media. The United States seem to go on its merry way as a nation. All is good and great thinks the average citizen as the nation drives itself straight for the cliff. The GOP are the main leaders of this herd mentality.
It's time for local business leaders to get together and start taking charge. Fascist corporatism creates a psychology of learned victimization. Millions of people in the country and we can't find ANY new way to make money??
If activity is created within local communities - we just start passing the money back and forth to each other. Avoid big businesses where the profits go to a few.
We need to start talking to each other and figure out what to do NOW. Where I live, many have lost their white collar jobs. They walk around like the living dead and refuse to take any positive action.
We have to realize that little in Washington is going to change - not with election fraud. We have to "pick up the pieces" and start moving on.
Well,
in Norway 25 % of businesses estimate they will hire more employees this year, as opposed to the second most optimistic country in Europe, England at 11%.
We are facing a crisis of lack of working people, and even yesterday a shop nearby (for baby articles), had to close, as they could get noone to stand behind the counter.
The govt. is currently considerign softening the rules on employing foreigners, to a greater extent than already done.
Shame the threshold due to housing cost is so high, but we could use a few people here. Most of us have english as second language too.
Does anyone in the US study history anymore? Anyone remember how communism came about? Pretty much a simple formula to understand. Large amount of increasingly desperate have-nots finally snap and lash out at increasingly small amount of ultra rich. Republicans/Neo-conservatives/Free Marketeers have this curious gap in their logic synapses...they decry class warfare but just can't grasp that it's the outright, biased and highly-anti-social policies favouring the ultra rich that causes it. And they always think that the military/police/secret police will protect them and their wealth. Except they forget that the military/police have families who also feel the pain of acute economic disparity, and will gladly rise up to oust them once properly motivated by the harshness of the times.
Neo-conservativism is anti-social behaviour.
As noted is some previous posts " eliminate your credit card debt" or debt in general.
Next you might consider moving to Norway as per Norse's post @ #114. Other alternates are northern Alberta , Canada or Abu Dabii , U.A.E.
We have been through recssions before.
Washington has a problem with that $ 10 trillion dollar debt ( projected Jan. 2009).
It would be better if that federal debt was at the Jan. 2001 level some $ 5 trillion.
So much for the lline " tax cuts stimulate the economy". I heard that line 30 years ago, and it did not work then.
This is why the Republican party has no real viable candidate for prez (other than Paul and the establishment doesn't event WANT to consider him). When the new Dem prez and the Dem congress, the GOP can blame them for the coming train wreck. However, I predict, the train wreck is happening now, Bush and his stupid Reaganomics will get their just blame, and we can forever flush Reaganomics down the stool where it belongs. It's going to be a bumpy ride folks but this is when America is at it's best! We need to pull together as a very large and powerful family and kick these world government elitists right in the ass, take OUR country back and truely honor those soldiers and veterans who fought for us with the bravery and valor that made America strong. Pax Americana, you can kiss my ass! Long live the free and the brave.......AMERICANS!!!!!
No, they will blame it on Bill Clinton!
MeMyselfAndI,
Your comparisons are stupid. You should really read up a little more you sound silly.
I'm not a Ronbot or Paultard or whatever other trite little name you can come up with. I see the truth and gravitate to it. I haven't heard one good argument to the contrary to what Paul is saying and he totally owns anyone on any subject they talk about.
It's not about blind following or considering him some kind of messiah. It's about one man saying the things that no one else does pertaining to extremely important subjects in each of our lives.
I have not donated, nor contributed and consider just about all things that define the modern rebublican to be pure evil. But this guy makes more sense then anyone I've ever heard in politics. Please cite another politician who is more grounded in reality and I'll start watching and listening to that individual.
KCThinker @ 98:
You are close, but have it backwards... we are a bad investment because the dollar is losing value. The dollar is dropping in purchasing power because we are just printing more of it. Who is going to want to invest in something that is going to pay them back in a depreciating currency? Any gains made by the investment will likely be erased by the losses taken in the currency.
Ron Paul isn't claiming that stopping the debasement of our currency will solve all our problems, it is just one of the issues that need to be addressed. Fixing the currency problem will at least allow people to save money again without fear of it being worthless when they find something to spend it on. This point is especially critical for people who are trying to save up enough money to get by when they decide to retire or they can no longer work.
2002 gas was 1.45 a gallon..Milk was 1.09 a gallon........here gas yesterday was 3.48 for regular and milk is 4.00.........yeah....it's happening.
it is sad so many americans do not understand economics. the situation is great-never been better. the earth is flat. globalism is good. the economy is growing at a robust 15%. i am a day trader. i can sit in my underwear and trade pork belly futures and the lastest IPO on bratz dolls on the iraq stock market. i don't need health insurance because the free market shows it is a bad investment. i have a closet full of italian suits and bought a BMW on my credit card. i don't worry about a recession because CNBC said there is always a bull market somewhere. it is important to remember the fundamentals. only a chump would save money for the future. spend it as fast as you get it. ship any good paying job overseas. let every undocumented worker into the counrtry so that there is a ton of competition for the shitty jobs left here. i pay an undocumented worker 1.00$ a month plus a cheese sandwich to auto detail my BMW. i used to pay him in pesos but since the dollar went in the tiolet i changed the terms of his employment. he can take it or leave it. i used to say god bless america but now i say god bless the global economy
Nouriel Roubini, economics professor at NYU has a good blog, check it out here:
http://www.rgemonitor.com/blog/roubini
It's..........Hillary's fault!!!!!
Whatever it takes to destroy capitalism is alright by me. Americans need a swift kick in the ass.
c. atrox @ 125:
-----------------
Be careful what you wish for.
'flatearth friedman @ # 122'
You have a very good understanding of economics.
Just a few points and questions.
The US economy is not growing at a robust 15% . China's economy is.
Insurance is not a good investment except maybe for catastrophic events.
There's always a bull market somewhere, but I have missed most of them.
How many miles do you have on your BMW ?
I will need a new car soon and I have learned ( it's taken many years)
that its better to buy second hand.
You should not have bought your car on your credit card.
Norse @ 114:
No one would stand behind the counter? Oh yeah, THAT'S the job that no American would want. You see, the labor market runs BOTH ways. The owner wants a worker to fill a job, they have to PAY the worker a wage that wants the worker to be there. This is EXACTLY why American's are raising hell about ILLEGAL immigrants. They will take a lower pay because, gasp, THEY DON'T PAY TAXES, SOC SECURITY, Pensions, insurance and the like. And if the owner gets caught, a slap on the wrist is all they get. My advice to you is go BACK to where you came from and make your OWN COUNTRY a more livable place and leave that behind the counter job to an AMERICAN worker.
flatearth friedman @ 122:
----------------------
You do not understand economics. Every boom ends in a bust. There are no exceptions.
The stock market grew at 15%. It then lost half its value. The housing market grew at 15%. You see what the result is now. A global economy that is growing at 15% will follow the same couorse. It is written in the law of cycles.
flatearth friedman @ 122:
FEF, your ideas are intriguing to me and I wish to subscribe to your newsletter. ;)
PS. Will anybody but me be thrilled when this election is over so that the RP spammers will retreat to the rocks they crawled out from under?
Note that pretty much everyone except the administration, Chamber of Commerce cheerleaders, and right-leaning political pundits are saying we are already in a recession.
This administration will NOT say that we are in a recession, ever. They will leave that to the Republican leadership to point to the Bush admin declaration 'no recession' when the recession is full-blown in the coming Democratic administration. Then they will be able to sit back and say "hey, this didn't happen on our watch".
As for me, I'm wondering who will end up with my mortgage when Countrywide tanks.
Gary
Washington has a problem with that $ 10 trillion dollar debt ( projected Jan. 2009).
It would be better if that federal debt was at the Jan. 2001 level some $ 5 trillion.
So much for the lline " tax cuts stimulate the economy". I heard that line 30 years ago, and it did not work then.
--------------------
Debt expansion is what grows the economy. Greenspan dropped the rate to 1% to induce borrowing. Bernanke opened the FED discount window to induce banks to borrow from the FED.
In 1930, borrowing came to a screeching halt. A credit bubble had burst.
The government "paid for" the current tax cuts by borrowing and spending money.
In 2000, a credit bubble existed. Greenspan made it bigger, with his 1% FED rate.
With the burst housing bubble, the credit bubble may have also burst.
Housing peaked in 2005. It took until 2007 for the fallout to really hit hard. The repurcussions of the credit bubble may also take time to build up steam, assuming an easing of the current credit crunch.
A 5 trillion dollar debt would be better than a 10 trillion dollar debt. The problem is that the economy grows on the expansion of credit. Debt has to be created at a faster and faster rate, just so current debt can be repaid. The FED creates credit. It does not print money.
Of course they will and the sheeple will believe it.
KCThinker @ 100:
"Not being into economics like you obviously are I am admittedly confused on some points. Capital expenditures require a need for the expenditure and the ability to borrow that money (investment) or use cash reserves, right?"
The actual significance of investment (which means money that is saved and not spent on final product) lies at the gross level of business saving out of sales revenues, not fresh NEW acts of saving which is what you were probably taught in school (like I was). Capital accumulation and economic progress does not require fresh new acts of saving out of income in order for us to progress. It just seems that way because the money supply increases each year, resulting in higher incomes and hence a dropping ration of savings to income if already saved up people didn't save any further. Each year business expends an amount for wages and capital goods, which in turn result in consumer goods revenue (from the wages) and capital goods industry revenues (to the sellers of capital goods). When wages and capital goods are bought, this is SAVING and investment. Imagine how much saving goes on in the economy, it's a huge number. This is good, but it is being ravaged by inflation and that's why we're losing productivity, jobs, and experiencing rising prices.
So in summary, investment does not HAVE to be funded by borrowing. It comes, for the most part, from revenues.
"If no one has money to lend anyone we have less investment and a credit crunch, right?"
If money can disappear from EVERYONE's bank account, which is what is happening, then either it was burned or it was not real to begin with. The latter is why we are having problems, because if money disappears from existence (due to it being realized by the people as not being real, which is all it takes), then ALL business suffers and hence there is a recession due to decreased profits commensurate with the decreased sales revenues due to deflation (decrease in money supply). In a gold economy, however, once money comes into existence, it STAYS in existence. Thus if some business cannot attract sales revenues, it was because another business or businesses attracted those sales revenues. Overall then, there is never an economy-wide decrease in sales revenues. If money is hard to come by for one business, it was because another business got the money.
"That money is already tied up somewhere waiting for a return on investment. I see your point that GDP should include gross investment because although that investment is a liability for one company another company gains by providing whatever that expediture went to like a new building or new equipment."
You got it. You just realized what even many economics professors cannot see. I wouldn't say you don't know a lot, you know more than some professors I know!! It's true that capital goods investment by one company is equivalent to sales revenues for the sellers of those capital goods for another company.
"But companies also need a reason for capital expenditures like they are growing and need more manufacturing capacity, right?"
Of course, but there is no economy wide "decline in profits" if more investments are made (the fallacious declining marginal efficiency of capital doctrine you and I were taught).
"Somewhere down the chain it all comes back to me buying company x's product and then company x needs to purchase something from company y like raw materials that went into the widget I bought and company y buys something from company z on and on."
Yes that is true, but it should be looked at as being a truth EVENTUALLY held true. The direction does not go from wages upwards. It goes from profits downwards. This is what I mean: You do not actually "fund" EVERYTHING TODAY by your consumer spending. What is most difficult for most people to see is: how can there be so much capital investment and so little consumer spending? How can this be profitable? The answer is very simple. It is that capital goods are used to produce capital goods! Thus capital expenditures become a COST which is deducted from both consumer goods industries AND capital goods industries!! Costs do not show up only for consumer goods production, they also show up for capital goods production. But you're right, EVENTUALLY it is paid for by the consumer, but it's not necessary to be paid for TODAY.
"All the employees from company x, y, and z buy stuff too. However, a side impact to all that consumption is less savings (America has a negative savings rate) which reduces the amount of money available for investment. Am I simplifying this too much or just not getting it? Please let me know."
You are getting right. Too much consumption can only be done if there is less saving (in a gold economy). But in a fiat economy, both saving (capital expenditures) and consumption (consumer goods) can increase. The problem is that if the money comes out of nothing, then the economy becomes distorted, hence risky and ready for a correction.
"I am also not convinced that Ron Paul's solutions will lead to real wage increases. Please explain how exactly that will happen given the economic problems we are facing in this country."
Simple. If gold were the currency, then the increase in the supply of gold would be relatively modest, say 1 or 2% per year, say 1.5% per year. This means that overall spending in the economy increases by 1.5% per year, meaning prices rise by 1.5% per year.
Now productivity always increases in a free economy, which is another word used to describe being able to produce more with the same labor, and is almost always higher than 1 or 2% per year, by known estimates it's usually around 4-5% per year. Let's be conservative and say 4% increase per year. This means that 4% more goods are being produced each year solely because of things like innovation, labor saving machinery, and technology. Now, here's the trick: Because the supply of money increases at 1.5% per year, acting to raise prices by 1.5% per year, and productivity rises by 4% per year, which acts to LOWER prices by 4% per year, that means that if you make any wage whatsoever, your REAL wage rate will INCREASE BY 2% EACH AND EVERY YEAR.
In other words, it's equivalent to having no inflation in the economy, meaning no increases in prices, but YOU, ME, EVERYONE still getting a 2% raise each year for your whole life!!! Imagine this, for "minimum wage" would one day be able to buy a car, a house, family of 4, vacations each year, etc. All it takes is time!
THAT is how Paul's ideas will make everyone rich. He is incorrectly labelled as being a business richer, people poorer kind of guy, when he is actually thinking about YOU and ME.
Stormcrow @ 115:
-------------------------
Do you understand what is happening in China? People in general, have more now than they ever did under communism.
Free marketeers and synapses. Water seeks its own level when a river flows free.
You can manipulate it by catching it behind a dam, but it eventually makes its way to the sea. Sometiimes a storm floods the lake with water, breaking the dam.
Manipulating marketeers have a gap in their logic synapses. Hoover reasoned that if industry maintained wages, in the face of falling prices, that people would spend their way out of the 1930 recession. Roosevelt had the same idea and expanded on it.
It didn't work.
The law of cycles is that every cycle has an up and a down phase. Economies expand and contract. Inflation goes up and down- the down phase called deflation.
Bernanke says he will not allow deflation to happen here. He is a market manipulateer.
The law of cycles guarantees that he will fail. the government is a market manipulateer.
It will step in and attempt to manipulate. But the storm will be flooding the lake behind the dam. The dam will burst anyway.
The cycle will complete itself, no matter how hard they fight it. The cycle is bigger than anybody.
Ron.j @ 134:
Cool analogy.
Greenspan is the guy who actually created this mess, by making the choice to inflate. Bush created the "need" to inflate by requiring funds for his war. Greenspan blames Bush and Bush blames Greenspan. In other words, our fearless leaders cannot even agree upon who is to blame. By simply logic, one or both of them MUST be to blame, because problems like inflation and deflation do not occur in a vacuum. Why aren't either of them admitting they are wrong? It's because market manipulators NEVER take the blame for the mess they created by manipulating the market. They blame the victims, that is, they blame free people.
I like your thought that the cycle is "bigger than anyone". THAT is the often misconstrued saying "the invisible hand" that top tier economists say is always there. Sooner or later, these market manipulators must come to face the fact that they cannot run the market like it's a private business with a CEO to head it all. The market is ruthlessly efficient, and anyone presumes to know how to "manage" it, they, and the rest of us, will be in for a nasty surprise. But it shouldn't be a surprise because of what the Austrians have been saying ALL ALONG. But they were ignored, ridiculed, and in some cases BLAMED for what goes on!!
Comeuppance is sweet indeed. I just feel sorry for all those people who lost their homes. It didn't need to happen. Greenspan is a fuck.
Jo @ 50:
Maine? I was born in Maine. No employment,3 weeks of summer,young people leaving in droves.With oil prices climbing,needing to heat your home for EIGHT MONTHS while snow reaches your roof? That is 'sane'?
myiq2xu @ 6:
He destroyed the unions. He racked up the national debt. He stripped any power that regulators had or cut their funding. He ignored the gas crunch of the 70s and pushed for more oil dependency. He cut taxes on rich people and raised them on poor and middle class people.
Let's see, what else didn't he do that's destroyed this country economically.
BTW, what is investment supply? He never gives a decent definition.
I am not a conspiracy nut, but this bad economy is what those behind the scenes want. When the economy tanks, businesses become cheaper and so the international bankers will gobble everything up when the shit hits the fan. They never go broke it seems. Wonder why? It's because they fund both sides of wars. Prescott Bush (GW's grandfather) funded the Nazis in WW2.
Drew @ 138:
True.
It must be remembered that in a bad market, depression, what have you ... the amount of money never changes ... it just changes hands. The rich get richer in bad markets.
Sixhundredsixtysix @ 139:
I don't forget that...
Drew @ 140:
Oh and in a depression, the amount of money does change. It decreases in a depression. That's actually what causes depressions. That's because around 90% of the money that circulates as money is not money but credit. Once the central bank turns the money spigot off, THEN people start to seek cash for reserves, which decreases the money supply.
Republican: Thanks to the bush tax cuts, we have instant economic upturn!
Democrat: Well, Clinton greatly reduced the National Debt.
Republican: Well, all major economic policies usually take 8 years to see any effect, so that was Bush 1's doing.
Democrat: ... You're a moron.
xxx @ 142:
*spits coffee*
This is gobbledy gook and I wager any amount of money the person writing it is not an economist. Dude! Recessions don't occur because one needs company or another one to spoon with! Geez!
centralilgirl @ 128:
Well, we don't have that huge a problem with illegal immigration, and the counter job was just an example I read about yesterday. Think the minimum hourly wage is roughly equivalent to 10-11 USD nowadays, could be wrong though.
But all kinds are needed, we have a local bus company who had to resort to going to Poland, recruiting 10 bus drivers at once, train them and check if they could work, then go back for a new batch, in order to get enough drivers.
Funny thing was, they all had in their contracts, that they could return to Poland for Christmas vacation if they so chose, and woops, almost no bus routes running around Christmas.
"There is not enough investment supply: that is a stream of businesses which will pay the natural cost of money. There is too much investment demand chasing too little supply, which means real returns must fall, except in those limited areas where there are resource benefits."
Seeing as how this topic is so important, I feel obligated to set things right for the good of us all. I am tremendously concerned about our well-being, and I know that the only way out of it is to become as knowledgeable as one can. So, I will write what I have learned. If you don't want to know, that's ok too. But everyone will sooner or later find out what went wrong.
The above quoted statement from the post is a prime example of why nobody knows what the hell is going on. The writer says that there is not enough "investment supply" commensurate with the "investment demand". This may not be so bad if you just read it as is, but it is the beginnings of terrible consequences. For it is saying in effect that the problem is not that previous supply increases by the Fed causes future supply decreases, but rather that the problem is that since people want more than what exists, which by the way only itself exists because of becoming used to continuous Fed credit expansion, we should simply increase the supply of investment funds, presumably by asking the good ol' Fed to print more in order to satisfy this unsatisfied "investment demand".
Investment "demand" chasing investment "supply"? Excuse me, but how else can one measure demand but with money? Demand is not a "want", it is how much money people can spend. "Demand" in the proper sense should mean the amount of money people are able and willing to use as exchange, and in this case it is the amount of money people are able and willing to invest, which is naturally measured in dollars. What the writer of this sentence is unaware of is that a "need" for funds is not a "demand" for funds. The "need" he speaks of is always in existence, and it is virtually infinite. It can be accelerated by making people used to continuous Fed credit injections, but you cannot eliminate it. People by their very nature desire more than they have. This is the basis for economic progress. If everyone "stopped" wanting, then there would be massive death tolls because people need material goods to survive but nobody would produce any because nobody wants money anymore.
The sentence also highlights the utter ignorance of how returns are generated. Returns (profits) are simply the difference between two demands, i.e. demand for products of business minus the demand for factors of production by business (wages and capital). Both of these demands are measured in money, i.e. DEMANDS. When the Fed accelerates the rate of money creation, what happens is that profits go up (naturally), investments go up (naturally), and here is the most important thing: business and people in general will start to lower their cash balances because they find that somehow there is always more money coming into existence from somewhere, and so they can safely have small cash balances yet still be able to provide for the future. Business is especially sensitive to this process, and so they too rely more and more on credit and less and less on cash holdings. The longer this process continues for (meaning how long the Fed injects money), the more lower cash balances will become. What will bring this whole deck of cards down is simply the Fed stopping the printing press. Once that happens, people and business find that their relatively small cash holdings cannot maintain their standard of living or business operations like before. The result is that more and more businesses start to seek cash in order to fund their operations. But if everyone is doing this, then business finds that the supply of funds is not enough to fund their operations, i.e. there is a CREDIT CRUNCH.
Where is there any mention of this????
What the writer is ALSO ignorant of is that the actual significance of saving (and hence investment) does not lie at the net level, or how much can be saved out of profits and/or incomes, which is what fiat money systems always encourage, but rather it lies at the gross level. Saving out of income as a permanent phenomenon is only possible if there is an increase in the quantity of money, for if the money supply stopped increasing, then saving would arise solely out of sales revenues, and capital accumulation would continue on the basis of falling prices of capital goods.
If anyone wants to take the time to find out more, please read:
"Capitalism", which can be found here for free!!!!
http://www.capitalism.net/Capitalism/CAPITALISM_Internet.pdf
Read the whole book over a period of two years and I will GUARANTEE to you that you will not only have a better understanding of the "dreary science", but you will also become able to analyze any social or political situation and have the knowledge to refute fallacies, dogmas, and superstition.
It is the best "investment" you can make, because one, it costs ZERO dollars, and two, you will gain a PRICELESS good in return: Knowledge for life.
Double-dip Rocky Road?
If you put it that way everyone will want some.
ConcernedCanuck @ 48:
Yes, his name is Ron Paul. But Ted Turner and Rupert Murdoch don't want you to know too much about him. He has said repeatedly that we are heading toward a depression with this fiat empire. He also says that if taken care of immediately we might only have a short term recession. Once again, don't worry. China will send imports of food (hopefully lead-free). Our steroid hungry meat industry and fluoride tainted water and produce will keep us healthy and content also. Don't forget McDonalds will still be around. While eating our cardboard flavored BigMac we can talk about how it was all because of G.W. Bush and it wa only coincidental that Pelosi campaigned about impeachment until she took office. Then said it would be a waste of tax payer money. New Hampshire voter fraud only had a BAD effect on Obama and Ron Paul. Several business headquarters have moved overseas. It takes more than a gallon of petroleum to make a gallon of ethanol. A new national ID card is what the SS officers used to keep the Jews and dissenters "SAFE". Then we can laugh about how we fell for the false flag ops like the Gulf of Tonkin. Funny how history repeats istelf (or rhymes).
Ron Paul would destroy the government, and tell people suffering as a result that it's their own fault. In the 19th, century bank runs and depressions were fairly common, brutal but common. People who did the right thing and put away some money in the bank, could lose everything. With the creation of the FDIC at least the money partially assured. Ron Paul wants to destroy the FDIC.
Only in America would the elites make economic decisions that would have far reaching consequences, and then if they screw it up, they get golden parachutes, and in a short time another 8 figure income, and then tell the citizens most hurt, your on your own.
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