The Long Cold Winter

[geekster]

Oh, I absolutely agree. This is how your taxes are being spent on "stimulus"

Despite President Obama's pledge to retain more hi-tech jobs in the U.S., a federal agency run by a hand-picked Obama appointee has launched a $22 million program to train workers, including 3,000 specialists in IT and related functions, in South Asia.

Following their training, the tech workers will be placed with outsourcing vendors in the region that provide offshore IT and business services to American companies looking to take advantage of the Asian subcontinent's low labor costs.

http://www.informationweek.com/news/sof ... =226500202

Makes me want to puke.

And the pisser is that I honestly, truly, and sincerely believe that I could do a lot more good for my community with $22 million of govt money than these assholes are doing.

[geekster]

Manitoba (Reuters) - Chicago wheat futures soared on Thursday, settling up the permitted daily maximum for the first time in two years after No. 3 exporter Russia said it would temporarily halt grain shipments.

Russia's worst drought on record has devastated crops in parts of the country and caused international grain prices to spike as markets placed bets that without shipments from one of the world's leading exporters, global supplies would be restricted.

Chicago Board of Trade soft red winter wheat has risen seven of the past eight days and buying by funds and traders initially spilled across the grain markets. Corn and soybeans pared most of their gains to end up 0.8 and 0.2 percent respectively.

http://www.reuters.com/article/idUSTRE6742QQ20100805

This is going to be interesting. We have drought in Russia that has resulted in their removing their crop from world markets for domestic use only. The US no longer has a wheat surplus as more land has been shifted from wheat production to corn. Global markets are already responding with wheat prices climbing. This will impact most those countries with little in the way of a wheat crop.

South Africa, the largest wheat producer in Africa was expected to see its wheat plantings fall over 10% this past year. While Argentina has a good crop, plantings are down and Argentina only exports once domestic supply requirements have been harvested and set aside. Argentina is expected to ship about 8 million metric tons of wheat, most of it to its neighbor Brazil who is the world's second largest wheat importer.

Watch the weather.

[can't sit still]

Geekster, in another circle where I post, food shortages are the center piece. Pork bellies are at an all-time high. This is particularly devastating to the Burning bacon eaters.
Pakistan also has big food problems. . Floods, etc. If we are indeed in global cooling, that will make water even more scarce. This will hit the Chinese particularly hard. They have 20 % of the world's population and only 6 % of the world's water.

My survival thread has morphed into an unemployment thread. Maybe I should morph it into a drought and famine thread.
OPEC has to be getting pretty nervous. Years ago, Saudi started up wheat production. It was a success. The wheat produced cost 5 times the market value though.

There is a nascent belief that GOV is NOT talking about coming food shortages so that people will have NO time to ramp up planting. A couple of references;
http://www.fourwinds10.com/siterun_data ... 1258238910

This page talks about all the counties that are being declared disaster areas are also going to have a record harvest. Something stinks;
http://www.marketskeptics.com/2009/11/u ... st-as.html

[geekster]

Christina Romer, one of President Obama's top economic advisers, plans to step down effective Sept. 3.

Romer, head of the president's Council of Economic Advisers, has been one of the administration's most prominent voices on the economy, making frequent appearances on TV and at White House events to promote Obama's policies. She also was reported to have butted heads with other members of Obama's economic team, in particular Larry Summers, director of the National Economic Council.

In December, she and Summers even seemed to contradict each other -- in interviews conducted on the same day -- on whether the recession had ended.

"Everybody agrees that the recession is over," Summers said.

"Of course not," Romer said in a separate interview.

The clash appeared at the time to speak not just to the differing views on the economy within Obama's inner circle but also to the sharply conflicting signals out of the economy itself, which continues to struggle to rebound.

...

She also is returning to the University of California, Berkley as an economics professor. (well that explains everything)

Meanwhile:

The number of Americans receiving federal aid through the Supplemental Nutrition Assistance Program
, commonly known as food stamps, soared to a record 40.8 million in May, according to government data released shortly before the Senate voted to cut billions from the food stamps budget.

and

WASHINGTON -- Initial requests for jobless benefits rose last week to their highest level since April, a sign that hiring remains weak and some companies are still cutting workers.

The Labor Department said Thursday that new claims for unemployment insurance rose by 19,000 to a seasonally adjusted 479,000. Analysts had expected a small drop. Claims have risen twice in the past three weeks.

Riding Obama's bus is a little bumpy these days.

[geekster]

Looks like the wheels are falling off the cart:

Social Security will pay out more this year than it gets in payroll taxes, marking the first time since the program will be in the red since it was overhauled in 1983, according to the annual authoritative report released Thursday by the program's actuary.

US Postal Service loses $3.5 bln in third quarter

Fannie Mae Seeks $1.5 Billion From U.S. Treasury After 12th Straight Loss

Oh, and I have no problem with the subject of famine in your survival thread as that is the most likely disaster we will face. About every 500 years or so we have a major volcanic eruption that messes up the climate for a century or so. The worst in recorded history was probably the eruption in 535 AD of Krakatoa that brought about the Dark Ages. It took 10 years before people would see the sun at full brilliance again. A repeat of that today would be pure mayhem and it WILL happen again, as it does over and over in geological history.

[can't sit still]

Not to worry about social security. They have $ 7.1 trillion in non-negotiable IOUs from treasury. We work til we're 70 so that we can pay in bunches of money. Then, the few of us who are left get to collect what's left of OUR money.
Good graphs;
http://towneforcongress.com/economy/the ... ictures-2/
More bumps

[Token]

'tis why I enrolled myself into some agriculture classes at Pierce College for the fall semester.

Can't be too prepared when putting food on the table stops being a proverb.

[can't sit still]

Pierce,,, Winnetka U,,,, Bandini tech
I had a friend who taught rodeo there. He was proud of the fact that he only had one student fatality.

[can't sit still]

Several idiots have said "deficits don't matter". Greece learned other wise. Now, the U.S. deficit is seriously dragging down the economy.
"So the nominal GDP has been growing at only $4 billion per month, while new Federal debt has been accumulating at around $100 billion per month. Yes, this period represents the worst of the so-called Great Recession -- but never in history has the Federal debt grown at a rate of 25x GDP for two years running! "

"federal debt will be about $9 trillion at the September fiscal year end, and at the built-in 3x GDP growth rate will reach $12 trillion when the next president is sworn in in January 2013. Adding in state and local debt, we'd be at $15 trillion or a Greek-scale 100% of GDP before the next president picks his or her cabinet."

"Fifth, there's no possibility in either this world or the next of obtaining the needed $700-$1,000 billion structural deficit reduction by spending cuts alone"
OK, so they cut a $ trillion out of the budget and it still won't fix things.
"the economy is freighted down with $30 trillion in excess debt; "

"corporate-sector cash assets have indeed increased by $279 billion since the December 2007 peak, and now total $1.72 trillion. But non-financial corporate-sector debt according to the same table, has increased by $480 billion and now stands at $7.2 trillion -- so that corporate debt net of cash has actually increased by $200 billion during the Great Recession. Stated differently, corporate debt net of cash was $5.3 trillion or 36.7% of GDP at December 2007 and is now $5.5 trillion or 37.6% of GDP"

http://www.minyanville.com/businessmark ... 0/id/29500

The above article makes it clear that the economy will be sick for a long time. Here's another article that talks about the same thing;
http://news.goldseek.com/GoldSeek/1280988360.php
Sadly, a sick economy will continue to shed jobs.
Dan

[geekster]

To SOME extent deficits don't matter as long as they are kept under control.

For example, imagine you make $100,000 a year. You can easily afford a $1,000 per month house payment. The thing is that people eventually retire so you expect to get that paid off at some point. Governments don't retire so they can keep that payment up forever. Now as long as the interest payments on their deficit spending remain reasonable, deficit spending can continue forever without much consequence. The problem comes when government becomes addicted to buying something now and putting it on their credit card. If they are actually able to repay the bonds when they mature, things are fine. If they must continually repay maturing bonds by issuing new ones and never paying them off, then we have what amounts to an adjustable rate mortgage. When interest rates rise, debt must be refinanced at the higher rate. That gives a level of unpredictability to the cost of rolling over debt.

I have no problem with deficit spending, per se. But I have a huge problem with continually rolling over old debt into new debt.

[geekster]

http://www.publicintegrity.org/articles/entry/2305/

[quote]“It appeared that Fannie Mae officers were focused on maximizing incentive payments available to Fannie Mae under various federal programs – even if this meant wasting taxpayer money and delaying the implementation of high-priority Treasury programs,â€

[can't sit still]

This isn't really news;
US Debt to Overtake GDP in 2012

http://dailyreckoning.com/bloomberg-us- ... p-in-2012/

This is another interesting article. They make the case that the destruction of credit is so huge, no amount of money printing can cause inflation.
"And if you count all the derivatives, all the domestic and foreign debt that exists, you've got about a quadrillion dollars worth of IOUs out there and already written. I just don't think central banks can or will replace all of that debt with money"

"What is it going to take to create inflation? It's going to require that they create something like 100 trillion dollars worth of new money"
GOV / Banks are more than willing to create zillions of dollars of credit. They have no possibility of creating an equal amount of money.

The banks have maneuvered the economy so that almost all purchasing power is tied up in credit , NOT money. We pulled our future purchasing power to today. The banks don't want to get in any deeper so, they've cut off credit. They broke the chain. Neither us nor the banks can survive on current earnings.
WE can , fairly painlessly, declare bankruptcy. I believe that 1.6 million Americans will declare bankruptcy this year.
The banks can declare bankruptcy too but, it is usually fatal.

"The Fed hardly has any U.S. Treasury bonds anymore; its portfolio is full of mortgages and all sorts of junk. The private market and other governments have sopped up all these Treasury bonds. The government could decide to “print, print, print,â€

[can't sit still]

Just to be balanced, here's a vid comparing Us to Japan. They [NIA] insist that we'll get hyperinflation, not deflation.

[geekster]

Well, there is a possibility of hyperinflation if "quantitative easing" is used. That is what amounts to negative interest or paying the banks to borrow money from the federal reserve. Another avenue in which it could manifest is a program that is being run up the flagpole to forgive principal on Fannie Mae and Freddie Mac backed loans that are under water. If they do that, it could restart the entire housing bubble all over again and I doubt they could get the capital reserves that they pumped into the lender banks back out fast enough.

So the bank has money in reserve to cover against default of a marginal mortgage. The generous taxpayer comes along and forgives the under water principal amount on these mortgages. Now the bank has this reserve they no longer need and there is suddenly a fire sale on money as they start lending like crazy. Now you have a flood of money and when you have more dollars chasing a given amount of goods, you get inflation.

One strategy the govt could use is something like the following:

30 treasury debt issued in 1980 is costing the US govt 11%. 1981-1982 debt is costing 13% to 14%. If rates could be kept low for another year or so, a lot of that debt can just be rolled over for a fixed rate of about 4% for the next 30 years. Social security trust fund debt could also be rolled over into regular debt for about that much, too. Then borrow like a wild man over the course of the next year at these low rates, forgive the principal on those mortgages and inflate the living piss out of the economy. So you borrow a dollar in 2010 and pay it back with a dollar worth only 30 cents in 2040.

What that does is cuts China off at the knees and will really piss them off. So they buy a bunch of bonds at some low fixed rate only to see inflation kick in and lose their ass on principal as the underlying currency loses value.

[can't sit still]

Geekster, I see little chance of a new housing bubble. There is probably a 10 year supply of houses on the market. They are dumping houses for less than it costs to build a new one. While it's true that we are building about 300,000 + new houses a year, I doubt that the market could absorb any new building spurt.
I also doubt that any big quantity of liar-loans could be originated. No foreign investors are going to buy MBSs. I doubt that domestic institutions would either. Also, the credit rating agencies have been saddled with some stiff regulations.

Here's an interesting article that claims that the Boomers will liquidate RE if their pension benefits are reduced. That would throw huge amounts of RE onto the markets.
http://news.goldseek.com/GoldSeek/1281361151.php

"“With 75% of the ‘assets’ held by retired and soon-to-be retired Americans consisting of real estate,â€

[geekster]

The boomers ARE going to dump that RE on the market as they retire. That is the entire reason they bought it. They bought a home when they were maybe in their late 20's or early 30's and planned to live there until they retired, then sell it and the equity on the home would finance their retirement and move someplace cheaper to live. Many can still do that even with today's depressed values but when that slug of boomer sales hits the market, that will be the "second shoe".

We have been in a bit of a lull because the number of people reaching retirement age has actually been dropping a bit from 2007 through 2010. This is because the birth rate was falling from 1942 to 1945 as more men of prime reproductive age were shipped overseas in WWII. It picked up in 1946 and by 1947 it is "Katy, bar the door" which means that in 2011 and 2012 and from then on for about 15 years we have an increasing number of people retiring each year reflecting the increasing number of births in their respective birth years.

I still believe that the worst of this comes in 2011 and 2012. We aren't there yet. We are in a bit of a lull before the storm, sort of like 1931. Things didn't get really bad until 1932 and 1933, some three to four years after the stock bubble burst.

They keep talking of a "double dip" but I am not seeing anything that shows we are out of the first dip yet. Dumping free money into the economy and calling that "growth" is dishonest as it isn't growth. We lost over 150,000 jobs in this country last month alone. Yeah, the unemployment numbers are going down because people are now dropping out of the labor force faster than people are getting laid off. Once benefits expire, you are technically no longer "unemployed".

[can't sit still]

Here's a good article from Mish. He talks about a "regime change" that all economists fail to recognize.
http://globaleconomicanalysis.blogspot. ... blems.html
There is no such thing as a double-dip recession in this case. Credit grew at 6 times the rate of the GDP. When credit collapsed, the economy was given a transfusion to keep it animated. This temporary animation can't possibly be called a recovery. It's a single dip and it's going to go on for many years.
"Watkins missed when the regime change occurred and possibly what the regime change even is (changing social attitudes on housing, consumption, risk taking, and debt, by consumers and banks alike).

The "attitude change" was the game-changer, NOT the event (the collapse of Lehman)."
The bankers would like us to resume our old spending patterns. If this "attitude change" sets in as a permanent idea, there will be no going back to the time when public consumption was 70% of the economy. The ever-present specter of high unemployment will insure caution on the part of consumers. You never know if you will be the next to be let go.
GOV is heavily massaging all the numbers to try to keep Americans from learning to spend responsibly. The bankruptcy laws in this country are what people use to strike back at the banks. If you do a BK or send them "jingle mail", they have no defense or escape. They screwed the system real good laughing all the way to their vaults. People are collectively taking their revenge.

[geekster]

Beware the "________" Act of "______"

http://www.techdirt.com/articles/201008 ... 0540.shtml

[Sail Man]

Ran across this on another forum. I haven't looked at any of these videos yet so let the viewer beware, myself included when I have the time.

It is off of the threepercenter.org board.

TerrorStorm Full length version:

Endgame blueprint for global enslavement:

Invisible Empire - FULL MOVIE:

Obama Deception HQ Full length version:

Fall of the Republic HQ full length version:

Fabled Enemies Full Length:

The Power of Nightmares:

ZEITGEIST:

ZEITGEIST II ADDENDUM:

Hyperinflation Nation:

The Dollar Bubble:

Loose Change:

Police State 4: The Rise of FEMA:

Reflections And Warnings - An Interview With Aaron Russo:

America:Freedom To Facism: -

The Road To Tyranny (Part 1): -

The Road To Tyranny (Part 2):

America: Destroyed by Design:

The Blind and The Dead:

don't tread on me rise of the republic:

Shadow Government: http://www.mojvideo.com/video-shadow-go ... a4adad6e07

Melt up:

[geekster]

[youtube][/youtube]

[geekster]

[youtube][/youtube]

[geekster]

Uh, oh

Aug. 13 (Bloomberg) -- This week's plunge in U.S. stocks triggered a technical indicator known as the Hindenburg Omen that may signal a more severe selloff, according to analysts who follow charts to predict market moves.

The market signal, named for a German zeppelin that caught fire and crashed more than seven decades ago, occurs when an unusually high number of companies in the New York Stock Exchange reach 52-week highs and lows. The indicator last occurred in October 2008, according to UBS AG.

...

The indicator may suggest "a savage equity downturn is imminent," said Albert Edwards, a London-based strategist at Societe Generale SA, who has told investors to favor bonds over stocks for more than a decade. "Equities are tottering on the edge as increasingly recessionary data becomes apparent. It would not take much to tip them over that edge."

The Hindenburg signal was triggered yesterday as the proportion of stocks reaching new one-year highs and lows both exceeded 2.2 percent of the total listed on the NYSE, according to Michael Riesner, a technical analyst at UBS in Zurich.

[can't sit still]

BTW "although every NYSE crash since 1985 has been preceded by a Hindenburg Omen."
http://en.wikipedia.org/wiki/Hindenburg_Omen

[geekster]

Decent show segment on the economy, John Batchelor from yesterday, first hour.

http://podfuse-dl.andomedia.com/800185/ ... 81510a.mp3

[geekster]

Looks like eBay, Adobe, and Twitter have all decided to expand in Utah rather than in California. A recent business friendly survey has come out showing Utah second most "business friendly" state behind only Virginia. California was ranked dead last.

[can't sit still]

Not much action on this thread. I'm going to have to repost about the European oligarchs that own the FED. That got a reaction last time.

I read here and there. LOTS of people with lots of analysis and lots of solutions. The very worrying problem is that all of them miss the real structural problems. Either I'm deluded or they're all blind or willfully blind.

In 1908, Henry Ford paid his guys $5 a day. This was when gold was selling for $ 20.67 and ounce. A quarter ounce of gold today goes for $ 412. He wanted his workers to be able to afford to buy his cars.

In the 30s and 40s, about 42 % of Americans worked on the farm. When farming was automated and mechanized, they moved to industry. With the advent of CNC manufacturing and office computers, much of industry has been automated and mechanized. Where did these displaced workers go?

Real wages in the U.S. have stagnant since 1971. Price inflation hasn't let up at all.
http://www.foodtimeline.org/foodfaq5.html#candybar
http://www.foodtimeline.org/foodfaq5.html
The cost of higher education has risen more than twice as fast as inflation.

Mortgages in 1950 were for 5 years. Now, they reach 50 years. We continue to reach further and further into the future for future wages to pay for living today. We spent the last 60 years inventing labor-saving devices and at the same time,,, tried to keep full employment. This didn't work so we borrowed 80 % of the savings worldwide and put everybody to work for the GOV. 50% of Americans depend directly or indirectly on a check from GOV.

AMERICANS HAVE NO MONEY !! Credit has increased at 6 times the rate of the increase in GDP. We're spending our future wages today.

The pundits are coming up with increasingly bizarre ideas to remedy the problem;
http://online.wsj.com/article/SB1000142 ... 84072.html

The average credit card per household is $ 15.788. Your share of the GOV unfunded liabilities is about $ 488,000

We approved NAFTA and "most favored nation trading status" for china to push out manufacturing jobs. Then, we outsourced millions of other jobs.
Henry Ford seems to be the last capitalist who was aware of the fact that ,,,, you have to pay good money to the producers if you expect to receive good money from the consumers.
Americans have lost purchasing power for the last 40 years. They made up for it in a temporary way by pulling future wages to the present. The banks that run the country are acutely focused on credit creation. GOV is acutely focused on LOTS of consumer spending.
Banks/GOV have various plans to get credit to the consumer. Do you see any plans to get purchasing power to the consumer?
GOV / banks are working / plotting feverishly to uphold the value of housing. It's inconceivable that they aren't aware that the value of a house is directly correlated with the wages in the same area. Do you see any workable plans to "produce" PRODUCTIVE jobs?
Do you see any plans to severely reduce the size of GOV to make us a bit more competitive?
Utilization of manufacturing capacity is diminishing. Productivity is diminishing. Employment is diminishing. It's about 21%. Have you seen any plans to turn this around? {Besides WW III]

With the industrialization of BRIC and the Asian Tigers, there has been an enormous increase in the manufacturing capacity worldwide. Have you seen any viable plans for making the U.S. competitive with the rest of the world? They manufacture and they increase their purchasing power.
We're slowly bled to death by our Keynesian bureaucracy and attempts at empire. Can you see any plan by the PTB to turn this around? Americans have a certain amount of income. GOV plans to institute a LOT more taxes. Carbon, VAT, Health, etc. What effect do you think this will have on the economy? Does GOV even care?

They want us to spend like crazy but, they have no plan to increase our purchasing power. We'd have to be crazy.
Steve Wynn has something to say about DC;
http://www.infowars.com/steve-wynn-takes-on-washington/

[can't sit still]

This is an excellent article with lots of graphs;
http://home.comcast.net/~lcmgroupe/2010 ... roblem.htm
" I-America has a Structural problem, not a cyclical business cycle problem. Though the cyclical business cycle was greatly worsened by the financial crisis, I would argue that the structural problem facing the US is actually a contributor to what caused the financial crisis.

II- America has a Credit demand problem, not a Credit supply problem. It isn’t that the banks won’t lend, but rather that few can any longer afford or qualify (on any reasonably and historically sound basis) to borrow. "
The fact is, Americans have not been credit-worthy for several years. The banks kept loaning to people who could not repay.

"At that time the US added 3 Million net jobs which reflected the creation of 33.4 Million new positions while obsolescing or cutting 30.4 Million old positions"
This is VERY important to consider. We've continuously obsoleted millions of jobs. We just aren't creating new jobs to absorb the newly "surplus" workers.
"It is more than a little disconcerting that after 13 Trillion in stimulus measures we see business spending on capital investment STILL shrinking in the US."
If $ 13 trillion can't get things rolling, what can? Credit grew at 6 times the rate of GDP. We're maxed-out and we're broke. We borrowed tons of cheap money and drove up prices. The party is OVER.
The consumer has historically represented about 64% of the economy. Credit jacked that up to 78%. It's all going to revert,, and not just down to 64%. At the same time that we're no longer productive we also have to pay off huge debts.
Gonna be tough.

[can't sit still]

Dunno, if anyone is reading this stuff. My last 2 posts were to show that the PTB have no clue what to do about the structural problems. The system is bing bled white by banking powers that continue to withdraw wealth from the economy and stash it out of circulation. This gives them a lot of wealth and control. The PTB have gone overboard and crashed the system. There are many arguments that this is the desired end result to achieve world GOV and fascist control.
I'm sure that this is true for some circles.

I'm also sure that there are many other "power groups" that recognize that a a socialist command economy would be the death of most commerce. Fidel Castro just admitted that Cuba's economic system flat out does not work. Vladimir Putin warned Obama NOT to try socialism,,, it just does not work. The bankers are going to ride this Keynesian horse right off a cliff. Then what?

There are solutions. C.H. Douglas proffered 'Social Credit" many years ago. The current problem is that people don't have enough purchasing power to keep the economy running and lubricated. The whole fiat money system is designed as a ripoff. Keynesian economics could work,, maybe. It requires GOV to store up a surplus in the good years. NOT likely to happen.
Social Credit looks pretty good. It might need a bit of tweaking but, it looks far more stable than Keynes ever did.

Just so people are aware of alternatives to the current system, I'm going to post ideas that I believe have merit. In the coming years, it's going to become painfully obvious that we need a whole new system.
These systems would, of course, take away much of the power of the bankers.


"What Really Works" -- Joel Skousen's framework of an honest and rational market system solution to the current economic crisis -- his alternative -- his answer to my "socialist" Social Credit proposals. Worth reading very closely.

Second letter from Joel Skousen:


To: Dick Eastman
Sent: Sunday, September 05, 2010 8:46 AM
Subject: Re:What really works

Sorry, about my dismissive comment, but I really get irritated when people on our side can't see that the insider controlled system, paying themselves interest on money they create is NOT the free market at work. Your turning to an outright socialist solution rather that see what the free market could actually do, was what turned me off. So, while I don't have time to provide you a complete solution, I'll provide the basic framework.

First, you have to start from basic principles: People are not equal in talents, abilities, nor work ethic, and never will be. In short, people differ in true worth, and that worth must never be dictated by others, but each person is free to present his worth as he wants it viewed, and every other person is equally free to judge another's worth as he sees fit---especially as it involves spending his money or property in hiring the services of another. Any system that restricts people's judgment restricts a fundamental right to discriminate. Any system to rewards (hands out money, etc) equally and not according to worth distorts what is true and fair and creates inequalities elsewhere. (It also destroys the purposes of God on earth in testing people according to individual worth)

Second, The so-called elite are never smart enough to make economic and trade decisions for others. Nor can any system collect all of the information necessary minute by minute and condense it fast enough so that experts can make all of the decisions necessary for markets to operate. Only individuals negotiating within each person's limited sphere of interest are capable of making decisions about their best interests (precisely because they only have to deal with one decision at a time--not that of everyone else). Mistakes are sometimes made in these small trade decisions (pay too much, or don't judge quality very well), but over time, people learn to correct bad decision or they get poorer and poorer. The poor will always be with us, but it's only fair when poverty is the result of chronic bad judgement and no arbitrary restrictions against opportunity.
The free market, hence, is a NON-economic system---no system of control or direction, just unlimited free choice with a tight legal structure that ensures that fundamental property rights (correctly defined) are protected equally, and that no one can aggress or defraud another. No one is allowed to direct any economic choice by force of government (as to who should buy or sell, hire or not, and at what price). Everything is left to free negotiation and choice, and one can't force another to even enter into negotiations---that too must be free.

Third, The key, then is the constitutional legal structure that prohibits redistribution of wealth, allows for unlimited voluntary choice and discrimination in judgment so as to ensure that people are free to make the most of their negotiations with others in their own worth or the worth of the product they want to sell. I have outlined this legal system in my writings on Law and Government at my website www.joelskousen.com

Fourth, As to money, You have to get government out of the money business altogether except to ensure that fraud in private money is not taking place. Starting with the premise that everyone has the right to trade voluntarily and without coercion, anyone can create bills of exchange (money) based upon stored commodities in their possession. The value of those bills of exchange will depend upon the perceived worth of the product, the insured ability to redeem those bills in such a commodity and other things such as how easy is it to take possession, storage costs and tradability of the stored product to others. So, gold, silver, platinum, have turned out to be the most favored items for redeemable bills of exchange---because they pack a lot of value in a small package, are durable, divisable etc. Wheat and corn have also been successful before, although the bulk is a problem if you want redeemability. So, in short, money is all commodity based and 100% redeemable. Government checks the warehouses to ensure that no one is printing more bills than there is commodity to back it. In other words, absolute no fiat money is allowed.

Eventually, the companies (private banks) with the strongest warehouses, best products, and best record of safety will win out, and their money will become more desirable (and demand for it rises). That also raises the price of things in certain bills, and allows for other bills of exchange to compete at lower prices. Competing money is always good, and it keeps the system honest, in concert with government inspections.

That said, Conspiracies among powerful and wealthy men will always exist, and great care has to be taken to make sure they don't control the legal process of inspection and prosecution for fraud. But at least with this non-economic system, there is no mechanism for them to gain government backed monopoly or control of money. When all money and trade is based on 100% value of product, economic growth is slow and gradual and safe. Booms and Busts come from fiat money and credit which takes off rapidly when there is no req. for 100% commodity backing. All of the evils of speculation come from the ability of people to make deals without full backing (naked shorts, buying on margin without someone putting up full collateral, etc)---make all those things illegal and you solve all the great evils of the derivatives scandal and mortgage backed scandals etc. there are a lot more complexities than that, but that's how you shut down the advantage the Rothchilds and others have created.

The other big issue is proper taxation, which I cover in my Law and Government section. In essence, taxes have to be directly related to a government service received (lots of user fees rather than general taxation), and then all general taxes (courts, police and military) have to be allocated in direct proportion to the two types of entities that are protected by those general government services: people (head tax) and property. There would be no taxes on income or business transactions allowed since those invade privacy and distort trade. If government has to use business to collect a user fee (such as a gasoline tax) they must pay the business to do so---can't do it by force.

This system works, is fair, and deters fraud, and denies politicians the ability to attract votes by promises of benefits of freebes.

Fiat money and "social credit" systems, in contrast, are based upon the concept of getting something for nothing---and violate all principles of reward according to worth. Currently, only the insider bankers get something for nothing (within the money system). That is why there is heavy inflation mainly within the speculative economy, and little is flowing over to the consumer economy (the Speculative markets have become an economy within the economy, and only big insider players have full access to this realm). The Social credit system pumps the money directly into the people's hands and thus is highly inflationary to consumer prices within the real economy, as I stated before.

Neither is good, just or fair to the pool of existing money which has been traded for fair value of people's efforts (even if it started out as fiat money). You can't have a system that mixes a system of money based upon both fair voluntary exchange and a free handout---because the free handout portion will eventually destroy the incentive to use it to trade for real value). Once a free handout or credit is given, it is directly inflationary---and it instantly reduces people's former value traded money. Within the value traded bulk of old money, there always exists a resistance to price increases, since people only have a limited amount of money. Once new fiat money is injected, to the receivers, their resistance to buying more is sudden decreased, and prices will start to rise till they reach resistance again. If a steady or regular flow of fiat money is forthcoming, there will surely arise an inflationary mentality of "get rid of the new money quickly" before prices rise again. There is no way to keep any sense of a store of value in money that is openly inflated. Currently, the government hides the inflation by fudging the numbers and injecting new money only into a few places with the elite, so it takes time to trickled down. Only the first users get the benefit of buying with prices that have not yet inflated. But the social credit system doesn't solve anything by injecting equally to everyone---it only massively accelerates the velocity of money and inflation---which quickly becomes self-defeating.

In summary, While the free market can't guarantee equality of result (nothing can, because equality never can exist and never will exist), it alone guarantees that at least the inequalities will be based upon fairness---that each person is receiving as close to his or her own truth worth. this happens because each person is always seeking to have his worth accepted by others as he feels it is, and everyone else is seeking to make sure they don't pay out more rewards than is necessary. That tension is what keeps things always moving towards fairness. The people who have inflated values of their own worth are stymied by people's ability reject them and to not pay what they want, and greedy people are stymied (over time) by people's ability to move on and seek better returns elsewhere, leaving them only with the lower worth people. Sure, inequalities and taking advantage of people's hardship situations do exists but the more freedom to maneuver that exists, the quicker they can be bypassed.

This may not be the final answer, but, it may very well be a step towards the right answer.
Dan

[can't sit still]

This is another solution offered by Ellen Brown;


This proposal will take us half way to Heaven: Ellen Hodgson Brown wants the Fed to begin buying state-bank issued bonds instead of Rothschild Wall Street bonds to goose the money supply. This solves the problem that money pumped to Wall Street never reaches Bedford Falls or Peoria or Yakima. Brown definitely has seen the "two loop" problem and found a solution to it. (If you want to tell Ellen how fond you are of her courage and wisdom you'd better do it fast.) I believe Brown is giving us the very best -- quickest to implement and be felt by us -- thing that can be done. Other changes we all hope for will take too much time. Finally here is a plan that both uses treasury money and spreads it to the states -- nearer the households -- where they can be first spenders, rather than the pals of international speculators who as often as not do their spending on investments in China. This chick is the only economic reformer with national reputation and respect who is offering a solution that does not involved "helping" a blood deprived patient by giving him a transfusion in the right arm by pumping blood out of his left arm while keeping a few tea cups of blood out for the vampire doctors to sip as interest.

But who has enough blood left in him to lift himself off the gurney and fight for this one?

Richard Eastman
Yakima, Washington

-----------------------

"Printing dollars to pay the debt (referred to by Russell as "inflating the debt away") might actually eliminate the debt without creating inflation. This is because federal bonds and Federal Reserve Notes are interchangeable forms of liquidity. Government securities trade around the world just as if they were money." . . .

September 8, 2010


Ellen Brown
.



Time for Helicopter Ben to Drop Some Money on Main Street
by Ellen Brown

The Federal Reserve is proposing another round of "quantitative easing," although the first round failed to reverse deflation. It failed because the money went to banks, which failed to lend it on. To reverse deflation, the money needs to be funneled directly to state and local economies. The Fed may not be authorized to "monetize" state bonds, but it COULD buy bonds issued by state-owned banks.

In 2002, in a speech that earned him the nickname "Helicopter Ben," then- Federal Reserve Chairman Ben S. Bernanke famously said that the government could easily reverse a deflation, just by printing money and dropping it from helicopters. "The U.S. government has a technology, called a printing press (or, today, its electronic equivalent)," he said, "that allows it to produce as many U.S. dollars as it wishes at essentially no cost." Later in the speech he discussed "a money-financed tax cut," which he said was "essentially equivalent to Milton Friedman's famous 'helicopter drop' of money." You could cure a deflation, said Professor Friedman, simply by dropping money from helicopters.

It seems logical enough. If there is insufficient money in the money supply (deflation), the solution is to put more money into it. But if deflation is so easy to fix, then why has the Fed's massive attempts to date failed to do the job? At the Federal Reserve's Jackson Hole summit on August 27, Chairman Bernanke said he would fight deflation with his whole arsenal, including "quantitative easing" (QE) - purchasing long-term securities with money created on a computer. Yet, since 2008, the Fed has added more than $1.2 trillion to "base money" doing just that, and the economy is still in a serious deflationary spiral. In the first quarter of this year, the money supply actually shrank at a record annual rate of 9.6 percent.

Cullen Roche at The Pragmatic Capitalist has an answer to that puzzle. He says that as currently practiced, QE is not really a money drop. It is just an asset swap:

"[T]he Fed doesn't actually 'print' anything when it initiates its QE policy. The Fed simply electronically swaps an asset with the private sector. In most cases it swaps deposits with an interest bearing asset."

The Fed just swaps Federal Reserve notes (dollar bills) for other assets (promissory notes or debt) that can quickly be turned into money. The Fed is merely trading one form of liquidity for another, without raising the overall water level in the pool.

The mechanics of how QE works were revealed in a remarkable segment on National Public Radio on August 26, describing how a team of Fed employees bought $1.25 trillion in mortgage bonds beginning in late 2008. According to NPR:

"The Fed was able to spend so much money so quickly because it has a unique power: It can create money out of thin air, whenever it decides to do so. So ... the mortgage team would decide to buy a bond, they'd push a button on the computer - 'and voila, money is created.'

"The thing about bonds, of course, is that people pay them back. So that $1.25 trillion in mortgage bonds will shrink over time, as they get repaid. Earlier this month, the Fed announced that it will use the proceeds from the mortgage bonds to buy Treasury bonds - essentially keeping all that newly created money in circulation. The decision was a sign that the Fed thinks the economy still needs to be propped up with extraordinary measures."

"Extraordinary measures" was a reference to Section 13(3) of the Federal Reserve Act, which allows the Fed in "unusual and exigent circumstances" to buy "notes, drafts and bills of exchange" (debt instruments) from "any individual, partnership or corporation" satisfying its requirements. The Fed was supposedly engaging in these extraordinary measures to "reflate" the money supply and get credit flowing again. Yet, the money supply continued to shrink. The problem, as Roche explains, is that the dollars were merely being swapped for other highly liquid assets on bank balance sheets. That this sort of asset swap will not pump up a collapsed money supply has been shown not only by the Fed's failed experiments over the last two years, but by two decades of failed QE policy in Japan, an economy which remains in the deflationary doldrums. To reverse deflation, it seems, QE needs to be directed somewhere else besides the balance sheets of private banks. What we need is the sort of helicopter drop described by Bernanke in 2002 - one over the towns and cities of the real economy.

There is another interesting lesson suggested by two decades of failed QE: it might actually be possible for the government to "print" its way out of debt, without triggering the dreaded hyperinflation long warned of by pundits. Swapping dollars for debt hasn't inflated the circulating money supply to date because federal debt securities already serve as forms of "money" in the economy.

The Textbook Money Multiplier Model … and Why It Is Obsolete

Beginning with some definitions, QE is explained in Wikipedia like this:

"A central bank ... first credit its own account with money it has created ex nihilo ('out of nothing'). It then purchases financial assets, including government bonds, mortgage-backed securities and corporate bonds, from banks and other financial institutions in a process referred to as open market operations. The purchases, by way of account deposits, give banks the excess reserves required for them to create new money, and thus a hopeful stimulation of the economy, by the process of deposit multiplication from increased lending in the fractional reserve banking system."
"Deposit multiplication" is the textbook explanation for how credit expands as it circulates through the economy. In the textbook model, banks must retain "reserves" equal to 10 percent of outstanding deposits (including deposits created as loans). With a 10 percent reserve requirement, a $100 deposit can support a $90 loan, which gets deposited in another bank, where it becomes an $81 loan, and so forth, until a $100 deposit becomes $1,000 in credit money.

The theory is that increasing the banks' reserves will stimulate this process, but both the Federal Reserve and the Bank for International Settlements (BIS) now concede that the process has not been working in the textbook way. (The BIS is "the central bankers' central bank" in Basel, Switzerland.) The futile effort to push more money into bloated bank reserve accounts has been compared to adding more apples to shelves that are already overstocked with apples. Adding more reserves to a banking system that already has more reserves than it can use has no net effect on the money supply.

The failure of QE either to increase bank lending or to inflate the money supply was confirmed in a March 24 paper by Federal Reserve Vice Chairman Donald L. Kohn, who wrote:

"The huge quantity of bank reserves that were created [by QE] has been seen largely as a byproduct of the purchases [of debt instruments] that would be unlikely to have a significant independent effect on financial markets and the economy. This view is not consistent with the simple models in many textbooks or the monetarist tradition in monetary policy, which emphasizes a line of causation from reserves to the money supply to economic activity and inflation."

The textbook model is obsolete because banks don't make lending decisions based on how many reserves they have. They can always get the reserves they need. If customers don't walk in the door with new deposits, the bank can borrow deposits from other banks, something they can now do at the very low Fed funds rate of .2 percent (one-fifth of 1 percent). And if those deposits are not available, the Federal Reserve itself will supply the reserves. This was confirmed in a BIS working paper called "Unconventional Monetary Policies: An Appraisal," which observed:

"[T]he level of reserves hardly figures in banks' lending decisions. The amount of credit outstanding is determined by banks' willingness to supply loans, based on perceived risk-return trade-offs, and by the demand for those loans. . . .

"The aggregate availability of bank reserves does not constrain the expansion [of credit] directly. The reason is simple: ... in order to avoid extreme volatility in the interest rate, central banks supply reserves as demanded by the system. From this perspective, a reserve requirement, depending on its remuneration, affects the cost ... of loans, but does not constrain credit expansion quantitatively. ... [A]n expansion of reserves in excess of any requirement does not give banks more resources to expand lending. It only changes the composition of liquid assets of the banking system. Given the very high substitutability between bank reserves and other government assets held for liquidity purposes, the impact can be marginal at best."
Again, one form of liquidity is just substituted for another, without changing the overall level in the pool.

If bank reserves do not constrain bank lending, what does? According to the BIS paper, "the main ... constraint on the expansion of credit is minimum capital requirements." These capital requirements, known as "Basel I" and "Basel II," were imposed by the BIS itself. It is interesting that the BIS knows that the main constraints on bank lending are its own capital requirements, yet it is talking about raising them, in an economic climate in which lending is already seriously impaired. Either the BIS is talking out of both sides of its mouth, or its writers don't read each other.

A Solution to the Federal Debt Crisis?

Another interesting aside arising from all this is the suggestion that the government could actually print its way out of debt - it could print dollars and buy back its bonds - without creating inflation. As Roche observes:

"[QE] in time of a balance sheet recession is not actually inflationary at all. With the government merely swapping assets they are not actually 'printing' any new money. In fact, the government is now essentially stealing interest bearing assets from the private sector and replacing them with deposits. ... [T]his policy response would in fact be deflationary not inflationary."

Roche concludes, "the inflationistas have been wrong and the USA defaultistas have been horribly wrong." The inflationistas are the pundits screaming that QE will end in hyperinflation, and the defaultistas are those insisting that the US must eventually default on its debt. Representing both camps, for example, is Richard Russell, who writes:

"In my opinion, the US MUST default on its debt. There are two ways to default. One is simply to renege on the debt.... The other way to default on the debt is to inflate it away. I'm absolutely convinced that this is the path that the US will take. If the US inflates enough, then over time (many years) the devalued dollar will tend to reduce the power of the debts."

The failed QE experiments in Japan and the US suggest, however, that there is a third alternative. Printing dollars to pay the debt (referred to by Russell as "inflating the debt away") might actually eliminate the debt without creating inflation. This is because federal bonds and Federal Reserve Notes are interchangeable forms of liquidity. Government securities trade around the world just as if they were money. A $100 bond represents a claim on $100 worth of goods and services, just as a $100 bill does. The difference, as Thomas Edison said nearly a century ago, is merely that "the bond lets money brokers collect twice the amount of the bond and an additional 20 percent, whereas the currency pays nobody but those who contribute directly in some useful way.... Both are promises to pay, but one promise fattens the usurers and the other helps the people."

The Fed's earlier attempts at QE involved swapping $1.25 trillion in mortgaged-backed securities (MBS) for dollars created on a computer screen. As noted in the NPR segment, many of those securities have come due and have gotten paid off, putting cash in the Fed's till. The Fed now proposes to use this money to buy long-term Treasury debt rather than MBS. That means the Fed will, in effect, be buying the government's debt with dollars created on a computer screen. The privately-owned Federal Reserve is not actually an arm of the federal government, but if it were, the government would thus be printing its way out of debt - just as Helicopter Ben proposed in 2002. Recall that he said, "the U.S. government has a technology, called a printing press" - the US government, not the central bank that has done all the QE to date.

Running the government's printing presses to pay its bills has not seriously been tried since the Civil War, when President Lincoln saved the North from a crippling war debt at usurious interest rates by printing greenbacks (US notes). Other countries, however, have tested and proven this model more recently. They include Germany, which pulled itself out of a massive financial collapse in the early 1930s by printing a form of currency called "MEFO bills"; and Australia, New Zealand and Canada, all of which successfully funded public works in the first half of the 20th century simply by advancing the credit of the nation. China, Malaysia, Guernsey, Jersey, India, Argentina, and other countries have also revived their economies at critical times by this means. The US government could do this, too. It could print dollars (or type them into electronic bank accounts) and spend the money on the sorts of local public projects that would put people back to work and get the economy rolling again.

How to Reverse a Deflation: Do a Helicopter Drop on the States

The government could pay its bills by issuing greenbacks as Lincoln did, but it probably won't, given the current deadlock in Congress. Today, only the Federal Reserve chairman seems to be in a position to act unilaterally, without asking anyone's permission. Chairman Bernanke could execute his own plan and generate the credit needed to get the economy churning again, by aiming his QE tool at the states. After all, if Wall Street (which got us into this mess) can borrow at 0.2 percent, underwritten by the Fed as "lender of last resort," then state and local governments should be able to as well. Chairman Bernanke could credit the Fed's account with money created ex nihilo (out of nothing) and swap it for state and municipal bonds at the Fed funds' rate.
A "state" might not qualify as an "individual, partnership or corporation" under Section 13(3) of the Federal Reserve Act, but a state-owned bank would. Bruce Cahan, an attorney and social entrepreneur in Silicon Valley, California, proposes that the Fed could diversify its role by buying long-term bonds in existing or newly-chartered, state-owned banks. These banks, which would have a mandate to serve state and local communities, would more quickly and accountably lend for in-state purposes than private banks do now. They could be required to use accepted transparency accounting standards to trace how the proceeds of their loans flowed into the economy. Local needs would thus determine how best to jumpstart and keep alive businesses and households that the "too big to fail" megabanks no longer want to fund on fair credit terms. Adding a state-owned bank would also bring competition to regional banking markets such as that of the San Francisco Bay area, which are now dominated by out-of-state megabanks. By funding state-owned banks, the Fed could inject "liquidity" where it is most needed, in local markets where workers are hired and real goods and services are sold.

[can't sit still]

THE IMPOSSIBLE DREAM

Well, America has lost about $ 10 trillion in RE value. Since the banks are so heavily invested in RE, they are trying to maintain the value. There are millions of houses that are worth less than their mortgage,, nothing new. Also, they are building about 350,000 new houses a year. So, the builders are adding a million new houses in the same time period that a million people have lost their house to the bank. OK, that all sounds pretty stupid.

People use wages to buy a house. There haven't been any new jobs added in the last 10 years. Wages haven't gone up since 1970. So, aggregate purchasing power is way down,,, prices are way up from historical norms,,, supply is WAY up,,, credit has been withdrawn by the $ trillions.
The banks hope/need to maintain RE prices.
Geithner, Rubin and Summers are hard at work to make it happen. Now, They have a new asshole to work on the project.
"With Obama’s recent nomination of sub-prime lending apostle and all around housing bubble cheerleader Austan Goolsbee chairman of the Council of Economic Advisers, the disastrous bailout of the FIRE Economy will continue. "

http://www.itulip.com/forums/showthread ... -destroy-t

The banks are claiming that they are legitimately owed all this money. Since the people who signed NINJA loans can't payback, then the public at large will have to do it.
There are only 2 legitimate purposes for a bank. To asses risk and to allocate capital.
The banks fucked -up big time at assessing risk. Businesses that make bad decisions must go under. The banks allocated capital to a sector that was already over-built. Any business that lets themselves be blinded by greed does not deserve to be in business.

The Greenspan "put" removed all hazard from the banks. This was very short-sighted. The risk was transferred to the public. The public can't pay it either. So, the banks got their payoff but, destroyed the dollar. The last hope of the banks is/was to tax the crap out of the productive sectors of the economy.
The productive sectors of the economy are just too weak to keep up with the principle and the interest of the debt.
GOV has to continually roll-over $ trillions in bonds. They have been wildly successful in keeping interest rates very low. It won't go on forever.