Here are some quotes from the "Daily Reckoning"
" we say the United States can pay off its debts in a currency whose value it alone controls...
But what if it weren't true? What if the feds couldn't control the value of the dollar? What if inflation didn't happen - at least, not the way we all expect?"
"
But just because you add to the money supply doesn't mean prices MUST rise. Instead, it means only that that MAY rise...under certain conditions."
Japan is an interesting exception;
"First, the authorities ran a steady double-digit growth in the money supply for over a decade, while the Japanese banks were initially in denial, and then the government injected nearly 10% of GDP directly into the banks' capital bases. Yet even after money as a proportion of GDP had doubled, Japan's banks were still shrinking lending.
"The Bank of Japan, believing it had perhaps just lacked imagination, doubled M1 money supply again, this time over the much shorter period of two to three years from 2001."
This is roughly equivalent to the Fed spending not $1 trillion to buy up Treasury paper, but $10 trillion.
"Yet the impact on Japanese bank lending was...nothing," James continues. "Bank lending continued to fall by 5%-6% a year, as it had done for the prior three years."
James lived in Japan for many years. He reports that when the Japanese economy finally began to pick up in 2006, the government became very concerned that all that money it had put into circulation would suddenly turn into consumer price inflation. But it didn't happen. Instead, the little flower of growth was crushed in the downturn of '07-'08...and now Japanese prices seem to be headed down again."
The plan is to trash the dollar to make it easy to repay our debt.
"They want to lower the debt burden by instigating inflation. They want to increase the velocity of money - by lightening it up a little so people are eager to get rid of it. They want to get lenders lending, and consumers consuming - all eager to turn over their dollars as fast as possible. They want to shift the burden of losses from the people who made them to the people who didn't. Well, what if the dollar doesn't cooperate? What if it grows heavier? What if it seems more solid? And what if dollar-denominated debts sticks like tar to the people who incurred it?
Seems impossible, doesn't it? And yet, that is what happened in the Land of Rising Sun. "
"And when the Fed monetizes debt, it's not as if it buys it directly from mom and pop. Who owns the debt? Well, the biggest holder is China. When the Fed buys U.S. Treasury debt from China, the cash doesn't automatically fall into the U.S. consumer slipstream.
The Chinese could horde the money. Or they could use it to buy U.S. businesses - big business, such as GM and Caterpillar. In effect, what the Fed is really doing is facilitating a massive transfer of real wealth - from America to foreigners. By holding up the price of U.S. Treasuries (by buying them itself) the Fed is funneling cash to the foreign owners. The foreigners then redeem the cash for major U.S. assets (at low prices).
Maybe that was the deal the feds worked out with the Chinese. Or maybe these are just the collateral and unforeseen consequences of a foolish plan. We don't know. But it doesn't necessarily put a lot of extra cash on the street.
And then, even if it were on the street, it may not stay there for long. The feds can put in a lot more money. It doesn't mean it necessarily chases consumer products and drives prices higher. In fact, in a real depression, people tend to hoard money. They save. The more fearful they are, the more they squeeze their coins and clutch their bills. Instead of circulating freely, money disappears into drawers, bank vaults, and billfolds. Let's say the feds add a colossal sum - $10 trillion - to the dollar money supply. Even that could quickly be stashed away...in pockets...bank vaults...business holdings. Remember, most of it is in electronic form. What difference would it make to consumer prices if every account holder added a zero or two?
Our old friend John Mauldin sends this comment:
"On the Fed printing money: there is one small thing to watch. What if they print it, put it in the banks and then the banks instead of lending it to each other at 1.25% in LIBOR decide to deposit it at the Fed for .25% because they are worried about security and counter-party risk, which is a lot of the reason Fed reserves have exploded. They could print $5 trillion and if it all goes back to the Fed then where is the inflation? We need to pay close attention to where the money goes."
GOV is trying their damnedest to stop deflation. So far, it's not working. WE refuse to incur more debt.
The whole Keynesian economic idea is shit. This was proved in the '70s when we had stagflation. Prices went up even when there was economic stagnation.
This is from Puru Saxena;
" However, even now, total credit in the United States is expanding due to rampant borrowing by the U.S. government. So, I don't expect deflation to take hold; rather, I anticipate accelerating inflation, which has always led to rising asset and consumer prices."
" If history is any guide, nations that engage in monetary inflation always diminish the purchasing power of their currency"
This from Robert Murphy;
"This Keynesian orthodoxy was shattered in the 1970s when the United States suffered through "stagflation," which was high unemployment and high inflation. This outcome was not supposed to be possible, according to the popular macroeconomics models"
"As with stagflation during the 1970s, hyper-depression will blow up the prevailing "cutting edge" models of the macroeconomy."
" The 1970s proved that the Fed cannot fix structural problems with the economy by showering it with new money. Hyper-depression is simply stagflation squared."
While GOV is working to trash the dollar, other countries are agitating to dump it. Even Geitner acknowledged that there would probably be a new currency that would displace the dollar.
This is a site called "The Burning Platform" It has a lot of info and graphs,,,, and a lot of Thoreau. He advocates letting the whole thing crash down rather than enslaving our kids.
http://theburningplatform.com/economy/w ... -the-world
I think that the bankers have a great plan to put all of us over a barrel for a long time.
Dan
I don't post things because I believe that they are the absolute truth. I post them because I believe that they should be considered.
