The Long Cold Winter

[ygmir]

I loved my time in Estonia............

[can't sit still]

Talinin ?

[can't sit still]

Geekster, we 2 are gradually drifting towards a Moot point. [Extremely important and endlessly discussable] My plate is QUITE full. You align with the textbook. I see severe limitations with it. No economic theory is useful if it can't be used to plan. Since our current economic institutions did NOT warn about the biggest collapse since the great depression, I would have to question their validity. Truth-be-told, they only had to compare our recent expansion to historically similar expansions and, there wouldn't be any surprises.
Nobody wanted to be the first to speak out.

In general, our current monetary and business systems assume non-terminating growth.
These systems are entirely inadequate to model;
Finite farmland
Finite minerals
Finite water
Finite petroleum
Etc.
Since these items are of unknown supply, they could never be included in a model anyway. I have a graph somewhere showing the remaining amount of proven reserves for about 14 metals. VERY short supply.
I believe that the models show unlimited credit expansion. I assume that all the [non-Japanese] models show unlimited population increase.
The models worked OK,, until they no longer worked.

I'm, sure that you're familiar with the Grand Banks. 200 years ago, everyone believed that they could NEVER be fished out. Well, reality changes,,, models lose applicability.

The Austrian school seems to have the most predictive model now. http://mises.org/

The other item that our internal models never allowed for was the development of containerized shipping. This chopped off our competitive legs in manufacturing. The reduced labor and capital costs in Asia were suddenly applicable to a whole new range of products that had previously been immune to competition.

Shipping costs are patently important, as demonstrated by the market loss of Japan. They're closer to Asia and they got whacked sooner. This problem was exacerbated by the fact that they have very few raw materials in domestic supply.

Our models are pathetically inadequate to predict things like a "giant sucking sound"

[can't sit still]

I'm not really certain what thread I want to post this in. I may change a few words and crosspost it.

I'm trying to investigate, intuitively, the many facets of our current problems.

An indictment of the corporation

We hear about the corporate takeover of America. We near the term "corporatocracy". In the end, what does it mean? How does it affect us?
We have to examine what a corporation is and what it's effect is on society.
Wiki; "A corporation is an institution that is granted a charter recognizing it as a separate legal entity".
"Corporations exist as a product of corporate law, and their rules balance the interests of the management who operate the corporation, creditors, shareholders, and employees"

Essentially, a corporation is an undying legal entity. This is a VERY important aspect to remember. There are a couple of other undying entities; Governments and the Vatican.
Wiki says that a corporation is operated for the benefit of management, creditors, shareholders and employees. This list is also of great importance.

An examination of Corporations, Governments or the Vatican shows that all of these undying entities are solely concerned with their survival and flourishing. They are all, essentially, legal constructs. They have no heart, soul or mind. Their focus is entirely on greed because greed is the only survival mechanism that is applicable to a entity that does not reproduce. The legal entity can only perpetuate itself if it's non-corporeal body is manifested as wealth and influence.

Also, a corporation works diligently to survive. This is demonstrated by it's efforts at avoiding liability. A corporation has most or all of the rights of an individual but, only very limited liability. Since a corporation never reproduces, it works very aggressively to protect itself.
A corporation becomes very powerful,,, especially as an aggregation. It has no morals, concern or empathy. It has no conscience and, almost no limitations.
It has no awareness of the family or the needs of the family.

A corporation is an undying legal entity that survives by aggregating to itself the assets of human producers so that it can benefit the shareholders, creditors and employees. . A government is an undying legal entity that aggregates to itself the assets of human producers so that it can benefit those same humans. The humans strive to perpetuate that Government as long as it is beneficial to the humans who originated it. The Vatican strives to aggregate resources produced by humans. The humans receive a non-monetary benefit back from the Vatican.

These three groups are constructs that are outside the normal constructs of society. The normal constructs of society are the Family and Clan. The Clan is often super-extended for the sake of commerce and protection. The Clan affiliation is stretched out over a larger group to encompass a nation.

Starting in about the 19 th century, various power groups tried to stretch this clan umbrella even further to form nation-states. This seems to work for a while but, lately we see many states fragmenting back to clan groups. They align along the lines of race, religion, area, or language. They felt that they weren't well served by a nation state.

The basis of the Clan is the Family. Where is the difference between a nation state and a Family / Clan? Why do populations feel better-served by a clan / family? The key to all this is the essence of the family.

The Family

A family, unlike a corporation perpetuates itself by reproduction. In a family, the elderly are objects of familial affection and repositories of wisdom and experience. In a family, the young are cherished members who are objects of familial affection and also, the promise of future perpetuation. The producing members of a clan bestow an equal share of their productivity on both of these 2 groups. THIS is the important distinction.

In the corporation, the benefits are bestowed ONLY on the producing members of the corporation. The non-producing elements are eliminated to cut waste and maximize profits. The corporation never worries about reproduction,,, only perpetuation of it's non-corporal existence.
The clan supports all members. The corporation supports only those who are directly contributing to it's perpetuation.

Government was formed to act as an enlarged version of the clan. To provide benefits to ALL the members.
As government is reshaped from clan / family priorities to corporate priorities, it's areas of support are reshaped to reflect it's new priorities. A corporate takeover of Government will naturally result in Government cutting out the waste brought about by supporting it's non-producing members.

Japan is a country that is well steeped in the corporate culture. They now consider it a "bother" to have children,
" 60% of Japanese women in their 20s to 30s feels that it’s unnecessary for them to have children at any stage of their lives"
http://www.notcliche.com/lbw/40-of-japa ... e-children
Wiki; "The population ranking of Japan dropped from 7th to 8th in 1990 and from 8th to 9th in 1998 and 10th since."
This is what the corporate mentality has done for Japan.

Germany is well steeped in corporate culture. Look what it has done for them;
No Brakes on Germany's Population Freefall"
http://www.dw-world.de/dw/article/0,,2138258,00.html

The corporation, being a blind "construct" is unaware of it's effect on people.
Japan is searching for some kind of corporate remedy for it's fiscal problems. It admits that they are related to it's demographic problems. It's corporate mentality can't be expected to come to the conclusion that the corporate mentality IS the cause. THAT is why Japan can't find a solution for it's national malaise.
In it's essence and it's manifestation, the corporate mentality is anti-family.

It's interesting to note that the oldest of the "undying", the Vatican, stridently calls for more children.
When GOV acted in the interests of the whole body politic, it made great efforts to support children. Looking around now, we see that children have a higher poverty rate than adults. We see that families have twice the poverty rate as couples or singles. The corporatocracy barely pays lip service to the welfare of children.

At the same time, we have to examine the welfare of the elderly. They are no longer producing for the corporations. The corporation only supports them begrudgingly.
"According to the same study, 81% of corporate pension plans are underfunded. Furthermore, contributions by S&P 500 companies into their defined-benefit plans decreased from $65 billion in 2003 to $48.3 billion in 2004. "
http://archive.newsmax.com/archives/art ... 4053.shtml

This is endemic to most corporations. The same is true of the Social Security fund. It was raided years ago for wars and boondoggles.
At one time, corporations payed 30% of the support to GOV. Since they got the reigns of power, they have reduced this to about 3%. They found it far more cost-effective to pay the politicians directly rather than to pay taxes.

The priorities and maintenance of the living have been superseded by the priorities and maintenance of the undying. As GOV is taken over by the undying, it's priorities are taken over and turned inwards solely for the support of GOV and, of course, corporations.

A recent court decision has made the corporation even more powerful. As corporations gain even more control, we can expect their priorities to control decisions, NOT the needs of humans.
As a non-thinking construct, we can expect a corporation to avoid ANY diminishment of it's power,,, no matter the cost to humans. If a corporation demands the repayment by the public of it's bad gambling debts, the human cost does NOT enter into consideration.
If the corporation finds it expedient to cause catastrophically bad pollution, it will. Only the monetary advantage enters the equation.
Since the corporation has no mechanism to be aware of it's negative effect on the number and well-being of the human population, it will blindly continue to DESTROY them.
Dan

[can't sit still]

This is a very interesting reply that I received from Wallace Klinck. He is a champion of Social Credit. IF one takes the attitude that our current situation is NOT just a setback but, rather a start of a dis-integration, than we have to come up with some extreme changes. John Tainter has a remarkable book about the collapse of complex societies.
We are getting closer to the maximum carrying-capacity of Terra. We are going into climate change. We do have to have some big changes to deal with. Our leaders are demonstrably unable and unwilling to change course.
If we don't set an agenda, mother nature will set one.

From Wally;

Thanks, Dan.

I think that it is only proper that any organization or association should serve the interests of those affiliated with it. Otherwise there would be no incentive to participate. As Douglas said, anyone who does anything without having in mind some sort of "profit" must be functioning without focus or direction and might be regarded as insane. Because of the present financial rules, unsustainable debt accumulation causes the failure and buyouts of smaller units of production leading to an unnatural aggregation of producers into larger and larger producing corporate entities. This is undesirable because it causes undue concentration of ownership and control of the community's productive assets. This leads to more concentration of political control with finance at the apex of the power structure. Bigger is not alway better from the standpoint of efficiency and the concentration of increasingly unaccountable economic and consequent political power is a threat to the natural freedoms of the people. (Only today I was listening to a radio show guest sounding the alarm about the quickening recommendations, from "high" places, for a world currency in order to "protect" the world from such events as the recent financial crisis--an entirely unnecessary crisis engineered no doubt for the very purpose of lending credibility amongst the public to such a world encompassing power initiative.)

But beyond these considerations, the fundamental purpose of production is consumption and the larger purpose of industry is to serve the needs of consumers at large. Financial credit extended to industry allows industry to draw on the general resources of the community in order to produce new wealth which should be accessible by the community as consumers. This is a claim that goes beyond owners, management and workers and vest in the community as a whole. Industry draws upon a vast Cultural Heritage of accumulated Unearned Increments of Association which is inherited from ages past and labour plays a decreasing role in the productive process. Therefore, the entire community has a right to draw from the general pool of production. In recognizing this principle Social Credit seeks to redress the existing inequitable situation caused by an inherent and increasing general deficiency of purchasing power caused by the interaction of the financial system with an increasingly capital-inensive economy, increasing allocated capital costs in consumer prices being primarily responsible for the growing deficiency of effective consumer income. It is proposed to confer upon each citizen an inalienable inheritance in the form of a beneficial share in the communal capital. In a Social Credit dispensation, the consumer is not only to be charged with capital depreciation as at present. He or she is also to be credited in consumer prince with capital appreciation. The consumer is to be credited by way of increased automatic access to the physical proceeds of industry with a beneficial share in the real communal capital. The National (Consumer) Dividend and Compensated Price (reduction of consumer prices) are presented as the appropriate mechanisms to achieve this end. It is not proposed to expropriate owners of business or to replace experts by non-experts, nor to arbitrarily set or control prices but rather to adjust overall prices, on a macro-economic level, by a factor determined by a ratio determined by the monetary valuation of the observed rate of national consumption divided by the rate of production. By ensuring that each individual and each family has the security that inheres in full and automatic access to all real wealth as it flows into the consumer market an entirely different attitude would tend to emerge regarding the family and the desirability of having children which can properly be cared for without financial restraints which today are disintegrative to family life.

Of course, the insecure nature of the existing financial-economic system forces citizens of all nations to look far beyond their own national borders for economic opportunity essential to their survival. This is causing vast migrations of people which constitute a threat to the established cultures and institutions of those nations that are receiving such massive flows of migrants. If all nations had balanced price-systems in the context of sound financial arrangements for initiating production and ensuring consumer access to the proceeds of such production wherein the producer could be assured of recovering his costs of producing consumer-desired real wealth, and the consumer had no need for resort to debt in order to access these goods, people would be far less motivated to desert their own nations and cultures. One can easily understand the relentless opposition to Social Credit by the internationalist elements who seek world power.

Sincerely
Wally

[can't sit still]

This is another reply that I received. These people are REALLY thinking.

A corporate structure is just a convenient bookkeeping procedure. A corporation is no more evil than a partnership or simple proprietorship. Most corporations are small family structures. The problems come in when a governing unit -all of them - grant irresponsibilities to the corporate ownership, as with the very-wrong idea of LIMITED LIABILITY. This allows the share owners to escape any responsibility for the wrongs created by the corporation, financial or otherwise, while they are free to rake in the profits. Smaller family corporations have no such benefit financially, as when contracting bank loans, the officers/owners usually have to personally add their guarantee to any corporate one.

Government represents the collective irresponsibility of the people. When it applies to everyone, it is not as bad as when it applies to a favored few. Were it not for LIMITED LIABILITY there could never be such huge corporate structures with huge absentee ownership, stretching across state and national boundaries. The criminal Wall Street gang would keep their money invested closer to home, where they'd have personal oversight. Smaller family corporations would predominate.

I repeat, THERE IS NOTHING WRONG WITH CORPORATIONS, the wrongness is in the GRANTING OF IRRESPONSIBILITY BY LEGISLATORS.

Irresponsibility is wrong, wrong, wrong!!!

--
Best regards,.
Bob Taft
The Taft Ranch
Upton, Wyoming
(307) 465-2447

[can't sit still]

This is a quote from Big Bad Bald Ben Bernanke;
"Mr. Bernanke noted that “unconventional policies have costs and limitations that must be taken into account in judging whether and how aggressively they should be used.â€

[can't sit still]

I forgot to mention the primary benefit of corporate structure. It is that since a corporation is non-corporeal, it does not die. So ownership may be transferred to beneficiaries when a shareholder dies, and the corporation is not plundered by government, as is the case with partnerships and proprietorships, often resulting in the demise of the whole business.
--
Best regards,.
Bob Taft
The Taft Ranch

[geekster]

http://news.yahoo.com/s/ap/20101015/ap_ ... nvestments

SAN FRANCISCO – Venture capitalists poured less money into U.S. startups in the third quarter and split this among more companies, signaling that investors are trying to be more economical with their funds.

The reason is because we have an idiotic Congress which removed the special treatment of gains from venture capital and now venture capital is taxed at the same rate as any other capital gain.

They are moving their money overseas where venture capital gains are either not taxed or taxed at a very low rate.

On one hand this Congress talks about creating jobs yet they take actions that are guaranteed to kill job creation by anyone but government.

[geekster]

I forgot to mention the primary benefit of corporate structure. It is that since a corporation is non-corporeal, it does not die. So ownership may be transferred to beneficiaries when a shareholder dies, and the corporation is not plundered by government, as is the case with partnerships and proprietorships, often resulting in the demise of the whole business.

That is one of the things the idiots who run around waiving their arms at the "evil corporations" don't understand. Practically every small business in their town is a "corporation". Without it, every business in this country would die when the owner does because 50% of it would be confiscated by the government "death tax" and the inheritors would have to sell the business to pay the tax.

[can't sit still]

So, should we get rid of the corporations or , get rid of the death tax?
Few things are all bad or all good. The death tax has gone a long way towards wiping out small farmers in favor of large corporations. Cargill is the largest privately held corporation in the U.S. Is this good or bad? The small farmer is losing his ass because he has no control over the middle-man, like Cargill does. Food is a necessity. As consolidation continues to eliminate competition, monopoly pricing follows sure as night follows day.

Worldwide consolidation and increased monopoly pricing is a zero-sum game. Aggregate worldwide purchasing power is declining. So, as monopolies raise prices, they will get reduced sales. Eventually, purchasing power will be reserved for necessities.
This is also true for taxes. VAT, Carbon, etc. With a finite limit to disposable AND spendable income, any tax increases will result in diminished consumer spending.

Huge margins made possible by monopoly pricing have to came from somewhere. Huge tax increases have to come from somewhere. Taxes are mostly pissed away to support parasites. They often support those who already have plenty of money. Huge margins are often frittered away supporting corporate insiders who aren't truly productive.

These expenses added to the back of the working man are mostly a wealth transfer. There won't be any added wealth creation. The corporations and their puppets are fighting over a shrinking economy.
Will high monopoly-corporate margins fall flat?
Will tax-spend fall flat?
Will the working man fall in his grave?
There is just way too much extraction taking place for the economy to remain healthy.
Far too many parasites in 3 piece suits.
So far, they are all very much above the law. What are people inclined to do when they see their tormentors are immune to the legal system?

[can't sit still]

The Austrians are really keeping on top of this crash. There are also some good links in the "comments"
http://birdflu666.wordpress.com/2010/10 ... #more-3065

[geekster]

And the Australian economists are saying that the US is using methods from the Robert Mugabe school of economics:

http://www.news.com.au/business/us-econ ... 5940206587

[gyre]

You guys are really missing out if you aren't watching Spooks.
Brilliant writing.

The latest one was about people tampering with the banking system, using financial backing from a russian bank.
Different motives on all sides.

The show runs as MI-5 in many places.

[can't sit still]

Geekster, you're not giving credit to Gideon Gono. Here's a few quotes.
His impressive C.V.
HHHMMMM,, no quotes. you can't copy.
http://www.zimdaily.com/beta/news272359.html

[can't sit still]

Well, the monetary reform people are burning up the airwaves with all their ideas. There is more resolve and info in Europe than in America. Richard Eastman has made a list of the ones that he knows well;

And from the living:

Fellow students of economics with similar views of the usury problem and the social credit solution -- this is my circle on economics and political science -- (whether or not they include me in their circles is for me beside the point, many do definitely do not) -- but for sure these people have the right to claim themselves sympatico with me on economic questions without my objection. Some listed here I don't know at all (Zarlenga) or hardly know (Helen Brown,Henry Makow) ) some are new to me but I have such similar views we are instantly close allies (Migchels)

Leading reformers with worked out programs of reform (anti-usury, yet not social credit) :
Helen Brown
Stephen Zarlenga
Joost van Stennis
Anthony Migchels [email protected]
Richard C. Cook

Douglas Social Credit -- the program I endorse in combination with populist reforms -- these are the great teachers I know of -- "Socreds" tend to teach rather than lead -- following an example set by CH Doulgas himself -- me included.

Wallace Klinck
Vic Bridger
Peter Haines
James Innes


Islamic Finance Principles (free of usury)
Abu Zahrin Abu Bakar (Indonesia) www.halaljournal.com

Popuist Generalists (System Comprehenders) and Sui Generis (individual thinkers in a class by themselves)

Deanna Spingola
Dan Anon
Vicky Davis http://www.channelingreality.com/
Amber H. http://www.citizensamericaparty.org/
Henry Makow http://henrymakow.com/ http://www.activistpost.com/2010/10/aft ... egins.html)
Jeff Rense www.rense.com Is he a teacher or a university?
Mark S. Bilk -- www.cosmicpenguin.com
Wendell Solomons (Sri Lanka) worldcity -- first discussion group
Peter Meyers (Australia) -- although not in contact for the last year or so
Elmer Lane
Bob Taft
Kevin Barrett <kbarrett>
John Wilson (Australia) common law expert and champion

Michael Chossudovsky -

Of course there are many others out there -- some perhaps better than people I know -- these are just the people I know of, or, rather, the ones who have come to my (failing) mind.


The idea of debt-free money NOT created by a private party is important. The damage done by usury is much debated;
http://www.henrymakow.com/interest_-_ou ... slave.html
There is a general recognition that the fraud of the FED has to come to an end. There are 2 main camps regarding the solution. The goldbugs and the pure-fiat. The pure-fiat seem to have better ideas.
The claim is made that the PTB will NEVER allow gold-money without interest. Interest is regarded as quite evil. There is reason behind that because the money for the interest is not created when the principle is created. It's all very complex with lots of variables.

I've been trying to pound into these people that, while it's a good idea to came up with alternative money schemes, they're ignoring one small detail. How to do the purge.
We're working on it.

[1durphul]

http://www.salon.com/technology/rare_ea ... upid_fight

China has decided to blockade rare-earth metal shipments to the United States.

What do you think the outcome is going to be?

I seriously wonder what would happen if the United States were to "revalue" the chinese Yuen at trillionths of a cent on the dollar, and then send china a penny as a "fuck you, we paid off the loan we took."

[can't sit still]

1durphul, the Chinese are not stupid. They undoubtedly made this move after much consideration. These rare earths are extremely critical to all areas of high-tech. The only U.S. rare-earth mine is in Mountain Pass, Calif. It is not geared up for much production. I speculate that U.S. stocks are critically low. Russia just announced that their stockpiles of Palladium are gone.
Here is a list of RE uses;
http://web.stratfor.com/images/writers/ ... 9617327557
China has 20% of the population and only 6 % of the water. They are currently importing 460,000 tons of wheat a month. That's just wheat. There are big wheat crop failures in the Soviet bloc. They can't provide for China and have stopped exporting. That leaves U.S. and Canada. Either China pulled a stupid move or they have an ace up their sleeve.

China will have to big against OPEC and Japan for food staples.

[can't sit still]

I have some excellent news for all of you. QE is pushing up commodity prices. Gold is going way up. OPEC likes to see gold directly tied to oil. Most of us use a LOT more oil than gold. It will hurt all of us when commodities go up. The economy will be much healthier if oil does NOT spike. The fact is; oil producers are fighting over reduced market because of reduced consumption. Just as they devalue their currency, they devalue their oil. A petroleum spike just before winter would cause a lot of suffering.
It does not look like it will happen.
" Right now, there are 141M barrels earmarked for November delivery and, if this month is typical, only about 20M are actually needed"
http://ilene.typepad.com/ourfavorites/2 ... -well.html

[geekster]

China has decided to blockade rare-earth metal shipments to the United States.

What do you think the outcome is going to be?

The rare-earth's aren't really all that rare. The US has some of the largest deposits of them in the world. The problem is that it is a lot cheaper to mine them in China with labor that charges 50 cents a day than it is in the US where some union thug wants $100,000 a year to lean on a shovel.

It just means that "green energy" will get even less "green" and will cost a fortune.

"Well, the monetary reform people are burning up the airwaves with all their ideas. "

Time to buy TBT. That is an ETF that is ultra-short US Treasuries. As inflation and interest rates go up, treasuries will go down. For every unit treasuries drop, TBT goes up two units.

That one might make you more money than a commodity investment will.

[can't sit still]

Geekster, the idea of shorting Treasuries is quite attractive. Interest rates are going up. But, D.C. has been doing their best to burn the shorts. Everybody is talking short but, nobody is giving a timeline.
I had a friend who had a friend who made a Molotov cocktail out of a 5 gallon Sparkletts bottle. It eventually occurred to him that he couldn't light it and then throw it far enough away that it wouldn't burn him too.
Say that you short treasuries and they crash in a BIG way. Your payoff will be in dollars that everyone is trying to unload.
China just upped the ante in the rare earths battle;
http://www.nytimes.com/2010/10/20/busin ... ml?_r=3&hp

[can't sit still]

This is a very informative read. Do not read it if you have trouble sleeping.
http://www.alternativeinvestingfacts.co ... t19-10.pdf

[can't sit still]

This is a good graph of where the money is;


Margit Kennedy's graph on the percentage of the money supply
circulating in finance as opposed to the real economy.
The dip around the Y2k is because of the introduction of the Euro. Forex
speculators lost a little bit of the market because they could no longer
manipulate European exchange rates.

[can't sit still]

Everyone wants to predict where the economy is going. They want to avoid losses and make profits. Since so much of the action is hidden, there is lots of speculation.
It helps to compare the U.S. to other countries. GB is cutting 500,000 public service jobs. It sounds like they want to cut expenditures to preserve their currency. The U.S. GOV is hiring LOTS of people. Does that mean that they want to crash the economy,,, and the currency?
It has long be reckoned that GOV / banks would sacrifice the dollar to preserve the banking system. Are they going to trash the dollar and then let the FED be nationalized? How could the banks possibly trash the dollar and still save the banking system? Will the banks crash the treasury AND dollar and still hope to survive?
There is very little possibility of saving the economy. Even if GOV manages to inflate away the debt, the hyperinflation will destroy purchasing power and the economy.
Each recession has resulted in price hikes with NO wage increase. I suppose that hyperinflation could re-invigorate the export economy but, it would trash domestic consumption. No tax receipts and No funding.
Carbon and VAT will never happen if there's no economy to tax.

The FEDs will soon be forced to GUT the pension laws. This will give a break to corporations and states. It won't add a cent to the consumer economy.
The banks were just winging it, hoping to grow out of the problem. THAT isn't happening. GOV is hoping for a miracle. The current plan for GOV seems to be lots more spending and lots more tax. I'm not sure how long GOV can continue to claim that stimulus is helping the economy.
I see NO sign from the Feds that they will rescue the states.

Banks control GOV. Evidently, GOV will do anything to avoid a default [to banks] . Banks want to see ALL obligations remain intact.
It appears that banks want full speed ahead on dollar creation because NOTHING else offers any hope. This is from the Daily Reckoning;

The Daily Reckoning Presents
The US Dollar is Doomed
Puru Saxena
Puru Saxena
Austerity be damned, at this rate Mr. Bernanke will go down in the history books as one of the greatest money creators ever to have walked this planet!

Never mind sky-high deficits and a crushing debt overhang, at its most recent FOMC meeting, the Federal Reserve all but guaranteed another round of quantitative easing.

While the American central bank did not officially expand its quantitative easing program last month, it did reiterate its willingness to institute more aggressive monetary policy measures in order to combat the risks of deflation. Furthermore, Mr. Bernanke did officially downgrade the Federal Reserve's outlook for inflation.

The truth is that the US is insolvent and its policymakers will stop at nothing in order to avoid sovereign default. So, it should come as no surprise that at its latest meeting, the Federal Reserve downplayed the risk of inflation, thereby setting the stage for another round of money creation.

Make no mistake; Mr. Bernanke has already created copious amounts of money. Granted, the Federal Reserve's previous monetisation was highly secretive, but you can be sure that it did occur. Allow us to explain:

You will recall that during the depths of the financial crisis, the Federal Reserve expanded its own balance-sheet and bought all sorts of toxic assets from the financial institutions. By doing so, Mr. Bernanke created money out of thin air and bailed out the major banks.

Thus, the banks were able to dump their garbage assets on to the Federal Reserve and once they received the newly created cash in exchange for these securities, they loaned this money to the US government by purchasing US Treasuries. In summary, in the previous round of quantitative easing, the Federal Reserve created new money and instead of lending it directly to the US government, it used the banking cartel as its conduit. Back then, not only did the Federal Reserve create more than a trillion dollars, it also dropped its discount rate to almost zero; thereby allowing banks to borrow money cheaply! It should be noted that since the banks were able to obtain such inexpensive funding from the Federal Reserve, they had absolutely no qualms about re-investing this capital in US Treasuries.

At first glance, the Federal Reserve's stealth monetisation plan seemed flawless. The banks offloaded their toxic assets on to the Federal Reserve, they made fortunes by investing in US Treasuries and the American government got access to a cheap source of funding. Magic!

Despite the fact that this financial wizardry was a lifeline for American policymakers and their banking cronies, let there be no doubt that it was an unmitigated disaster for the American public. Not only did the Federal Reserve nationalise the banks' losses but more importantly, Mr. Bernanke's money creation efforts have seriously undermined the viability of the US Dollar.

It is noteworthy that since bailing out the major banks and orchestrating the stealth monetisation, the Federal Reserve has been busy purchasing US Treasuries. Furthermore, it is now almost certain that in next month's FOMC meeting, Mr. Bernanke will unleash yet another round of quantitative easing. In other words, in order to fund Mr. Obama's out of control spending, Mr. Bernanke will create even more dollars out of thin air! Allegedly, this new round of money creation will drive interest-rates lower, thereby helping the US economic recovery. Or so the story goes.

Unfortunately, as any serious student of economic history knows, there is no such thing as a free lunch. By adding trillions of additional dollars to the monetary stock, Mr. Bernanke may succeed in bailing out his friends in high places but he is seriously jeopardising the US Dollar. In fact, bearing in mind the recent developments, it has become clear to us that the Federal Reserve wants to debase its currency. In our humble opinion, the US Dollar is a doomed currency and there is a real risk of an abrupt plunge in its value.

If our assessment turns out to be correct and Mr. Bernanke unleashes the second phase of quantitative easing, you can be sure that the US Dollar will slide against most un-manipulated currencies (which are few and far between) and hard assets. In fact, monetary inflation is the prime reason why we believe that the ongoing bull-market in stocks and commodities will continue for several more months.

Look. The US economy is swimming in debt and the total obligations (including social security, Medicare and Medicaid) now come in at around 800% of GDP! Furthermore, this year alone, Mr. Obama's administration plans to spend another US$3.5 trillion, meanwhile the US Treasury will raise roughly US$2.2 trillion from issuing new government debt! Clearly, these numbers are unsustainable and you can bet your bottom dollar that the Federal Reserve will end up buying a large proportion of the newly issued US Treasury securities. As the American central bank funds more and more of Mr. Obama's spending by creating new money, it will trash the value of its currency. In fact, given the growing imbalance between the government's spending and tax receipts, very high inflation is inevitable and even hyperinflation cannot be ruled out.

For the sake of their financial well being, it is crucial that investors understand that inflation or even hyperinflation is a monetary phenomenon and a strong economy is not a pre-requisite for the debasement of a national currency. Whatever the reason, if a central bank decides to significantly increase the quantity of money in the system, that currency's purchasing power will always diminish. This is how fiat-money regimes have operated since the beginning of time and this era is no different.

It is interesting to note that throughout recorded history, the worst excesses of inflation occurred only in the 20th century. Undoubtedly, this was a direct consequence of the adoption of fiat-money.

The following chart highlights all the hyperinflationary episodes in recorded history and as you can see, with the exception of the French Revolution (1789-1796), all of the other disasters occurred in the last century. In fact, it is an ominous sign that 29 out of the 30 recorded hyperinflations in human history occurred during the 20th century!

Hyperinflations in History

Let there be no doubt, a paper money system usually ends in the reckless destruction of money and it is no coincidence that all hyperinflations in history have occurred in the presence of discretionary paper money regimes. Furthermore, it is important to understand that a political system based on democracy is inherently inflationary and political leaders have been responsible for all major inflations in the past. Conversely, history has shown that monetary systems binding the hands of political leaders are essential for keeping inflation in check. If history is any guide, metallic monetary systems have shown the largest resistance to inflation and this is due to the fact that currencies anchored by a tangible asset cannot be inflated ad infinitum.

It is our conjecture that the current monetary system is absolutely pathetic; a system designed to enslave society. Unfortunately, the vast majority of humans do not understand the endless inflation agenda and this is why the perpetrators get away with this crime. Furthermore, let it be known that the Federal Reserve is largely responsible for the incredible inflation we have experienced over the past century.

The chart below plots the cost of living in Britain, France, Switzerland and the US. As you will note, the cost of living in these nations was relatively stable for over 160 years (1750-1913) but once the Federal Reserve came to power in 1913, everything changed. Suddenly, the cost of living exploded in these nations, so it should be clear that the Federal Reserve's covert policy of currency inflation and debasement is solely responsible for this mind numbing inflation.

Cost of Living in Various Nations

Unfortunately, the Federal Reserve and its allies have not finished inflating and over the following years, they will create even more confetti money. Under this scenario, cash will continue to lose purchasing power and the asset poor middle-class will get even more impoverished. If our assessment is correct, cash will prove to be a disastrous 'asset' over the next decade and once the Federal Reserve's manipulation ends, fixed income securities will also depreciate in value.

Bearing in mind our grave concern about high inflation and the very real possibility of hyperinflation, we continue to favour hard assets such as precious metals and energy. At present, we have allocated roughly half of our clients' capital to these sectors and it is our belief that this should be an adequate inflation hedge.

Regards,

Puru Saxena,
For The Daily Reckoning

[1durphul]

When it is all boiled down and distilled Americans are a civil people.

Here in California where we have astronomical unemployment (22% according to 60 minutes last night) we haven't had any riots. Nobody is storming the Bastille. Our electricity, gas and water still flows.

http://www.huffingtonpost.com/2010/10/2 ... 73392.html

So I wonder if the Long Cold Winter is going to involve the terrible things this thread envisions. The great depression had it's uprisings, but society as a whole managed to keep from being pulled into chaos.

What would be the trigger that would cause the collapse of civility? I don't think hunger would do it, unless there were outright starvation.

[can't sit still]

1 durphul, the LONG, cold winter has barely started. The job losses have barley started. The public sector is only getting started at layoffs;
http://globaleconomicanalysis.blogspot. ... bs-in.html
America had a lot of accumulated wealth. It will take a long time to spend it down. I would guess that 95 % of the pension funds will fail. They aren't funded. Where will they get the funds to be solvent. Will the old folks have to go to camp Haliburton to get heat and food?
Listen to Adrian Salbuchi. He enumerates all the things that happened in Argentina. The same things are happening here. Read about the cartoneros
http://www.vqronline.org/articles/2007/ ... ite-train/
During the great depression,about 44 % of Americans lived on the farm. This was a help. We didn't have food stamps back then. Few cities had enough money for soup lines.
It was very tough times. "it becomes apparent that 5.5 million children and two million grown-ups are missing"
http://www.cherada.com/articulos/10-mil ... ssion-time
Market forces have overwhelmed the country and GOV is printing money to help the banks. Since GOV / banks are the source of the problem, they aren't going to provide the solution. GOV has lots more plans for you and your money;
http://theeconomiccollapseblog.com/arch ... le-in-2011
We're at the bottom of the second.

[geekster]

Ok, folks, here we go ...

Inflation-protected securities sold at negative yields for the first time ever on Monday as traders anticipate that the Federal Reserve will start a new round of asset purchases.

Get that? If you want a $10,000 security, you might have to pay $10,100 for it. It yields less than it cost to buy it. Negative interest.

Also, read an interesting article today where the writer had head firmly implanted in the rectum. It was an article with arm waiving about a "global food crisis" because the price of commodity foods are "skyrocketing". Well, yeah, if you pay for them in DOLLARS they are skyrocketing. And it isn't because the food is any more expensive, it is because this administration is turning our currency into monopoly money. People paying in Yen see the price of corn the same as it was six months ago. Only people paying in dollars are seeing the price rise because it takes more dollars to buy any given thing on the commodity markets ... gold, wheat, corn, cotton, whatever.

This administration is criminal for what it is about to do to our children and old people. They are getting ready to create an economic debacle of epic proportions. I honestly don't know if he will last till 2012 as there will likely be hoards of people with pitchforks and torches on the lawn pretty soon.

Do you get that, folks? The longer you hold those securities the more money it COSTS you? Man, that sounds like one hell of an investment.

Obama and his whole tribe of idiots that he brought in with him need to go. WORST.PRESIDENT.EVER. This guy makes Jimmy Carter look like Calvin Coolidge.

[1durphul]

Obama and his whole tribe of idiots that he brought in with him need to go. WORST.PRESIDENT.EVER. This guy makes Jimmy Carter look like Calvin Coolidge.

Name three bad things Obama has done (that are real, not imagine, and not fortune telling about a future where he supposedly does these bad things.)

Ready? Set... GO!

[1durphul]

Obama and his whole tribe of idiots that he brought in with him need to go. WORST.PRESIDENT.EVER. This guy makes Jimmy Carter look like Calvin Coolidge.

Name three bad things Obama has done (that are real, not imagined, and not fortune telling about a future where he supposedly does these bad things.) Please provide links to a non-partisan website so that I don't have to waste my time refuting your crazy-wing-nut links.

Ready? Set... GO!

[geekster]

1. Has absolutely no practical experience in being executive of anything. Hasn't even run so much as a lemonade stand in his life. At least Carter had run a farm.

2. His administration is staffed with the least amount of practical experience of any administration in modern history. He picked people whose viewpoints and opinions he liked, not people with any experience at doing what they were tasked to do. Hell, a labor union boss is now chairman of the NY Fed.

3. Tim Geithner appointed Treasury Secretary.

From all appearances every single move this man has made moves made by his appointees seem absolutely designed to destroy the economy. It looks intentional. They are doing exactly what should not be done.

Why is the Fed buying more US treasury debt? In order to keep interest rates artificially low. Why are they keeping interest rates artificially low? Because there are still a bazillion holders of adjustable rate mortgages that would default if rates went up. What is the result of interest rates being kept artificially low? The dollar is plummeting.

What would be a different course? Well, rather than simply flooding money out there, why not offer to convert all those adjustable rate mortgages to fixed and then let rates find their own levels?

They continue treating the symptoms without addressing the cause. They use TARP for everything but buying "troubled assets" unless it is buying a couple of auto makers for the labor unions.

But you don't have to listen to me. Just watch what happens over the next 12-24 months. It will begin to get really bad right after the first of the year.