Some time back I read a book titled ‘The Dollar Crisis – Causes, Consequences, Cures’ by Richard Duncan published in 2003 updated in 2005 that discussed the issues we were facing then, and what might happen today. If I could type the whole book and post it here I would. You might find the excerpts I have typed below interesting, I include the issue we are facing now, ‘Deflation’ which just happens to be the chapter title and how a bailout in our current situation will not work.

I also wanted to add some solutions so I included a small part that lays out better alternatives, what good is bitching if you have no solutions? I hope everyone reads this and enjoys.

There is worse to come
The experience in the United States will be remarkably similar to that which unfolded in Japan and the Asia Crisis countries when their credit bubbles deflated. The economic crisis in the U.S. may be less severe than in those countries, since the property market bubble is not as extreme in America as it was elsewhere; on the other hand, there will be no “engine of economic growth” no export of last resort, to help the United States export its way out of crisis in the way the seemingly insatiable U.S. market helped the other post-bubble economies during the 1990s.

The global economy will soon enter a deflation-induced slump similar to the one that has gripped Japan for the last decade. Moreover, the two policy responses developed to treat economic downturns in the 20th century – Keynesianism and monetarism – are unlikely to be able to restore global growth this time around. Government, which spent lavishly during the recessions and economic expansions both over the last 50 years, now may not have sufficient fiscal firepower left to jump-start the economy at this time when fiscal stimulus is so badly needed. Fiscal stimulus has failed completely to restore economic growth in Japan. Worse still, an aggressive monetary policy response would do more harm than good. Excessive monetary expansion, in the form of international dollar liquidity, created the global economic bubble in the first place. Additional aggressive expansion of the global money supply would succeed, at best, only in creating a new round of asset price bubbles that would ultimately implode in an even more terrible economic collapse.

Monetary policy works through credit expansion. When the government wishes to expand the money supply, it buys assets (such as government bonds) from banks, increasing their liquidity. In theory, the banks, in turn, lend more to businesses, which are expected to increase their investment and hire more workers, thereby eventually stimulating consumption and the economy overall. In a post-bubble economic environment, characterized by excess capacity, bankrupt corporations, and overly indebted consumers, monetary policy does not work. Although the liquidity position of the banks is improved by the government’s actions, there are neither a sufficient number of creditworthy borrowers to lend to (given the very large number of debtors unable to repay their existing debts), nor a sufficient number of clients who want to borrow, due to the lack of money-making investment opportunities left in a glutted marketplace. Consequently, the increased money supply never reaches the consumers and personal consumption does not revive.

If you think the bailout or stimulus packages will work, he goes onto explain a dynamic called a liquidity trap we are likely to experience as a result, his conclusion:

Conclusion
Existing policy tools are likely to prove to be incapable of resolving the current global economic crisis. Keynesianism and monetarism have both been too abused during the preceding decades to be effective now. Similarly, bailing out depositors of failed banks may solve one set of problems by preventing a collapse in the money supply, only to produce another set of problems by perpetuating the excessive pool of credit that was responsible for causing the crisis in the first place.

If we persist in the direction that is now being embraced our options to avoid a global depression is hyperinflation or resort to war. However he presents the following to alter our course.

Solutions
Foremost among the prerequisites that are essential to foster a balanced expansion of global supply and demand is a steadily expanding global minimum wage. There is no way around the fact that aggregate supply can not long expand at a faster rate than the growth in the underlying purchasing power of the public. The absolute necessity of expanding wage rates in the developing (or, rather, industrializing) world, and suggestions as to how that could be achieved, are topics addressed in Chapter 12.

Next, the international monetary system must be rehabilitated in order to put an end to the explosion of global money supply that gushes from the U.S. current account deficits. A mechanism to ensure that trade between nations is balanced rather than persistently unbalanced must be put in place to end the destabilizing impact that unbalanced trade has on the global economy. Policy makers must learn to master the global money supply detailed in Chapter 13.

About the Author: Richard Duncan has worked as a financial analyst in Asia for more than 16 years, conducting research and publishing investment reports on companies, industries, and economies from India to Korea.

In 1993, Mr. Duncan was one of the first to warn of the impending collapse of the Thai economy and the Thai stock market in a series of published reports and speeches directed at institutional investors. At the height of the Asian crisis, he worked as a consultant for the International Monetary Fund in Thailand. Subsequently, he joined the World Bank in Washington DC as a Financial Sector Specialist focusing on issues related to the economic crisis in Asia.
http://www.business-in-asia.com/books/dollar_...

Just doing my best to give C&L readers a different perspective.

Vegas :)

Christmas is coming...people like to look at the catalogues and window shop even if they have no money.

... to the back of the $10T already owed. When those $10T are all repaid, we'll worry about this.

the military budget and why he will stay in Iraq and put more and more troops in Afghanistan:

http://www.informationclearinghouse.info/arti...

*Note: No Dennis Kucinich types in an Obama Administration. Pro-war hawks all.

And one more thing....with oil past peak and global warming being a HUGE problem, Obama's discussion of rebuilding the crumbling infrastructure should have a MAJOR emphasis on linking all major U.S. cities with high quality railroad lines. We're gonna have to move our food, people and other stuff from city to city somehow and in the near future it won't be moving with big semi-trucks up and down the interstate highways.

all you do is bitch about what Obama might do. Bitch, bitch, bitch.

He's not even the president yet. Not one policy decision is in place and you have him blowing Cheney.

I'm sorry if you don't have a problem with the people with which Obama has chosen to be surrounded by.

I do.

I can read and analyze a person's resume. Can you?

Take the blinders off dude and be nice.

No need to tell anyone on any thread to "Fuck off!" because we're actually digging deep and doing the hard research.

It may be simply that some of us have been around longer than others, and most of us have BTDT. I remember when Jimmy Carter was elected in 1976 and all the euphoria at the time that "change" was finally going to sweep across America and the world after Nixon.

One of Carter's first appointments was Zbigniew Brisinski. We all groaned at the time and realized that nothing was going to change. Obama's picks have stirred that 1976 memory, at least for me.

IF what they are saying has basis in fact and is not condescending towards our entire populace. Not every American is an idiot. And, yes, I know that many are.

I will NEVER thank someone for calling us stupid Americans. (Have you been following the threads over the last week?) I value thought out analysis and input from an international perspective. I strongly resent insinuations about what a clueless lot we are.

Tomorrow is built upon NOW.

I can't access my e-mail right now. :^(
Oh well, see ya.