Sunday, August 16, 2009
Here is a pertinent quote:
The Fed pretty clearly pre-arranged, either explicitly or by "suggestion", that the Primary Dealers take up the auction with the promise that The Fed would immediately monetize half what the Primary Dealer's took!
Folks, this is beyond bad - it is pernicious and outrageous conduct by The Federal Reserve in conspiracy with the Primary Dealers, both of which are now desperately trying to prop up the US Government Bond Market through subterfuge rather than just buying up the bond issue from Treasury when originally put to the market!
Also an interesting article about our coming 'Zimbabwe Moment'
Saturday, August 8, 2009
People like Bernie Madoff were sentenced to life in prison for conducting things like this in the private sector. The difference is, people volunteered their money to Bernie Madoff. The government is currently forcing us to invest in its pyramid schemes like social security, medicare, and medicaid.
Again, I call for Obama to pardon Madoff and appoint him treasury secretary. We need his experience on a federal level.
Thursday, August 6, 2009
Monday, August 3, 2009
If it is working so well for Cash for Clunkers, why not extrapolate it into the housing market?
Tuesday, July 21, 2009
Sunday, July 19, 2009
Tuesday, July 14, 2009
Thursday, July 9, 2009
An interesting paragraph that I think is very relevant to emphasize is in the middle of the essay. Rothbard explains how with bank credit expansion, or the creation of money not entirely backed by a commodity such as gold, it causes increased investment in the capitol goods industry which drives up wages for workers in those industries. When the workers receive their increased pay and begin consumption they then bid up prices in their own country causing the cost of living in their country to rise. This makes it more expensive to purchase goods from their home country and it causes an imbalance between imports and exports. The resulting trade deficits result in real money being driven out of the country as other countries try to redeem their paper money for gold.
The interesting point to make is that not only has this exact pattern played out in our country, but it has been made worse by the fact that our currency is currently being used as the standard for central banks worldwide. So essentially instead of other countries redeeming the paper money immediately for gold (which would result in a depression much earlier), they are almost forced to hold onto the money in their banks. This status has allowed us to inflate our currency almost perpetually at the expense of the rest of the world.
It is also time to get out of our heads the idea that we are exporting jobs and importing goods because our economy is so much better than other countries. We do it for exactly the reasons that Rothbard explains in this essay written decades ago -- because we have inflated our currency so much in the last 30 years.
Here is the paragraph I was referring to:
The banks, then, happily begin to expand credit, for the more they expand credit the greater will be their profits. This results in the expansion of the money supply within a country, say England. As the supply of paper and bank money in England increases, the money incomes and expenditures of Englishmen rise, and the increased money bids up prices of English goods. The result is inflation and a boom within the country. But this inflationary boom, while it proceeds on its merry way, sows the seeds of its own demise. For as English money supply and incomes increase, Englishmen proceed to purchase more goods from abroad. Furthermore, as English prices go up, English goods begin to lose their competitiveness with the products of other countries which have not inflated, or have been inflating to a lesser degree. Englishmen begin to buy less at home and more abroad, while foreigners buy less in England and more at home; the result is a deficit in the English balance of payments, with English exports falling sharply behind imports. But if imports exceed exports, this means that money must flow out of England to foreign countries. And what money will this be? Surely not English bank notes or deposits, for Frenchmen or Germans or Italians have little or no interest in keeping their funds locked up in English banks. These foreigners will therefore take their bank notes and deposits and present them to the English banks for redemption in gold--and gold will be the type of money that will tend to flow persistently out of the country as the English inflation proceeds on its way. But this means that English bank credit money will be, more and more, pyramiding on top of a dwindling gold base in the English bank vaults. As the boom proceeds, our hypothetical bank will expand its warehouse receipts issued from, say 2500 ounces to 4000 ounces, while its gold base dwindles to, say, 800. As this process intensifies, the banks will eventually become frightened. For the banks, after all, are obligated to redeem their liabilities in cash, and their cash is flowing out rapidly as their liabilities pile up. Hence, the banks will eventually lose their nerve, stop their credit expansion, and in order to save themselves, contract their bank loans outstanding. Often, this retreat is precipitated by bankrupting runs on the banks touched off by the public, who had also been getting increasingly nervous about the ever more shaky condition of the nation's banks.
The bank contraction reverses the economic picture; contraction and bust follow boom. The banks pull in their horns, and businesses suffer as the pressure mounts for debt repayment and contraction. The fall in the supply of bank money, in turn, leads to a general fall in English prices. As money supply and incomes fall, and English prices collapse, English goods become relatively more attractive in terms of foreign products, and the balance of payments reverses itself, with exports exceeding imports. As gold flows into the country, and as bank money contracts on top of an expanding gold base, the condition of the banks becomes much sounder.
Sunday, July 5, 2009
I am officially launching a campaign to urge Barack Obama to pardon Bernie Madoff and appoint him treasury secretary of the United States of America.
Before you send me death threats, think about it. This is a guy that was able to perpetrate one of the largest Ponzi schemes in the history of the United States for decades.
We need this kind of experience in Washington DC! Bernie Madoff is a man that was able to win trust of his clients and urge them to invest large amounts of hard earned savings in his firm. He was able to successfully rearrange the numbers to show large returns on their investments and pay out huge bonuses even while the US was going through a tough recession. In the end, Madoff was unable to back up his investments and lost around 60 billion dollars of his investors money, but he graciously took the fall and didn't spread the blame.
This is the man our country needs in an age where we are running up huge trade deficits with foreign countries. Who would deny that our current social security system and medicare systems aren't gigantic pyramid schemes modeled after Enron and Madoff's investments? We are in the midst of feverishly trying to perpetuate our own enormous Ponzi scheme and this is the man Obama needs to tap into. Our GDP is 70% consumption which is far more than we are able to afford given out levels of production so we are purchasing foreign goods for consumption with borrowed money, often from the very country we are receiving imports from. If these countries wake up to the realization that we will never be able to pay up, then its lights out just like for Madoff's investors.
This is why we need Madoff's experience at a time like this.
I am adding a new book to the 'must read' section. I am just finishing it and it is well worth the read. It is called Crash Proof by Peter Schiff. This is an excellent book which details the problems with our economy and how to avoid personal disaster. We need more people to understand these principles and to stop listening to the mainstream economists and politicians who got us into our problems.
Friday, June 26, 2009
Wednesday, June 24, 2009
His last point is interesting. He points out that since our government has been injecting so much money into the global economy, prices in emerging economies have been rising even before we see the effects of inflation in this country. So despite our efforts to alliviate global poverty, we cannot match the federal reserve's ability to create it.
It might be a surprise, however, that the only economists who don't believe in free money were the only ones to predict the collapse of the housing bubble. In fact Krugman, a very influential economist of the type Obama takes his policies from, advocated for the inflation of the housing bubble.
Its no wonder that people like this keep telling lay people that keynesian macroeconomics is too complex to be understood by everyone. It is utter nonsense. Everyone knows that the answer to money problems is not to take out more debt and go on spending sprees. Here are more quotes from Krugman.
I like this quote from the first article:
'What is damning about these quotes is not that he necessarily caused anything. What is devastating about them is that they expose the intellectual bankruptcy of his economic principles. Those who look up to him like the second coming of Adam Smith should realize that the neo-Keynesian principles that lead him to advocate aggressive interest-rate cuts and mammoth public spending now, are the very same principles that led him to advocate inducing a housing bubble then. He would himself affirm that his economic principles haven't fundamentally changed since then. So the conclusions and policy prescriptions he infers from them are just as wildly wrong now as they were then.'
When will we stop listening to these quacks?
Monday, June 22, 2009
Inflation of the magnitude that sits on the horizon in the United States would literally impoverish all of its citizens. The cost of living will skyrocket and it will literally be more productive to stay home and get rid of your money than to spend the day at work. This is our future unless we take drastic action.
One day we might look back at the last three decades and wonder. How is it that an entire generation of American politicians could be so irresponsible to impoverish their citizens.
Sunday, June 21, 2009
We have a disturbing trend developing in the country. Companies starting with Fannie Mae and Freddie Mac, our financial industries, and lately our automotive industry have been proven to be grossly mismanaged and an unbearable burden on our economy. We desperately need these institutions to liquidate and free up their capital so that the market can adjust. Instead we have been told time and time again that these companies are 'too big to fail'. So we have handed these failing, mismanaged companies hundreds of billions of borrowed dollars with the misled idea that they will somehow become profitable enterprises. These companies are rather 'too big to bail out' and if we don't realize this soon they may drag the entire country down the drain with them.
When will we realize that this money doesn't exist? We don't have a big pot of money to hand out to these failing institutions. The federal government is piling up so much debt right now to fund our own bloated budget, our bail outs, and government stimulus packages that only a fool would believe that we will pay it off. How much longer are other countries going to be stupid enough to lend to us?
Our government is like our crazy drunk uncle who is always getting involved in Ponzi schemes. Not only has he squandered his own fortune but he is in debt to his eyeballs. The problem is, our insane, inebriated uncle has the PIN number to our savings account and is funding his schemes with your and my money and future. When will the public reject this?
California needs to make massive cuts right now to become a functional government. Borrowing money to bail out California would be even more disastrous because it would set a precedent to other states who are sure to require cuts in this environment also.
Saturday, June 20, 2009
There is a strong argument against the federal reserve meddeling with the money supply. As Andrew Jackson said: 'if the people really knew what the central bank did, there would be a revolution tomorrow.'
If the lecture was informative read this book by Thomas Woods. It is a refreshing, understandable, and common sense approach to understanding the current meltdown.