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 zorbman
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 Economic crisis explained in simple language 
#9101915 - 10/19/08 11:29 PM (4 years, 6 months ago) |
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I think this article pretty much sums up our current situation without all the technical talk using language anyone can understand.
THE CASINO OF PAPER MONEY
Our present economy is best understood as a casino. In the casino, house chips in varying denominations, e.g. dollars, euros, pounds, pesetas, pesos, yuan, yen, krona, drachma, won, etc have been substituted for gold and silver.
This is because the casino is run solely for the profit of the bankers; and through control and issuance of their paper chips, the bankers are able to control much of what happens on the casino floor.
The bankers make sure that the governments who issue the paper chips do so at the direction of central banks. Through their influence over the central banks, the bankers control the flow of chips without which the patrons cannot play.
Question: Who are the patrons and what role do they play in the casino?
Answer: The patrons are the producers, savers, and entrepreneurs without whose activities the casino would come to a halt. In the casino, they are known as marks, suckers who provide the on-going profits of the casino.
The casino’s hidden skim: Through the constant issuance of paper chips, governments insure the value of previously issued paper chips will fall thereby forcing patrons to gamble their earnings at the casino tables in order to preserve their paper savings and to perhaps gain by so doing.
The casino’s hidden advantage; While the casino patrons, sic marks, can only bet their earnings and savings on a 1:1 basis, in the private gaming rooms upstairs, the casino owners are able to draw on house credit and leverage their bets by 20, 30, or even 40 times their original sum.
What went wrong: After 1999, the casino owners began betting the savings of the downstairs patrons (bank savings deposits and insurance investments allowed by the repeal of Glass-Steagall) and bet this money on subprime CDOs, credit-default swaps, derivatives, emerging market equities, commodities, etc. and used house credit to leverage their bets far beyond the original amounts.
At first, winnings skyrocketed driven by the vast amounts of leveraged money available from the repeal of Glass-Steagall, providing even more incentive for the casino owners to borrow and wager even more. But, in 2007, the luck of the house changed
Even in rigged games, if the sums bet are large enough, the losses can be staggering and can break the bank, sic the house/casino. With bets leveraged 40:1, a fall of only 2.5 % completely wipes out the bettor. A fall of 100 % takes out not only the bettor but the enormous amount of credit extended to the bettor by the house.
Some of the losses incurred by subprime CDOs are as high as 90 %. The losses on Lehman’s bonds are over 90 %. The reason why financial markets are in such trouble is the trillions of dollars in credit extended by the banks is now gone and, as a consequence, almost all banks are bankrupt.
With the casino now broke, governments have announced that they will guarantee the value of all paper chips issued by the casino. Governments do not want bettors to cash in their paper chips because they know the banks are broke and do not have the cash to cover either their bets and/or the chips they issued.
Now the casino patrons are being forced to subsidize the casino while their governments are frantically issuing more chips hoping that by so doing the now terrified patrons will return to the now empty tables and continue to bet what little they have left.
Good luck.
THE END OF AN ERA
The failure of our credit based capital markets and our democratic process is symptomatic of the changes taking place on our planet. The bankers’ system of paper money has so undermined all commercial activity along with our political institutions that the flaws of both are now obvious to all.
The bankers’ system of credit and paper money began in England in 1694, was moved to the US in 1913 and from there spread to the rest of the world, much like STDs. Debt and worthless money like sexually transmitted diseases are unintended results of initially pleasurable activity, in this case, economic expansion.
Unfortunately, there is no penicillin that can cure our ailing economy; and the ones responsible, the bankers, are mistakenly hoped by many to have the answers. They don’t. They made the problems and will only make them worse. Wait and see.
At the end of eras, institutions are found incapable of providing the solutions and answers they once did. Capitalism, which drove economic expansion for 250 years, is now stumbling and has fallen on its own sword, debt, which it once used to enslave others; and, democracy, previously the hope of mankind has become a caricature of the hope it once promised.
BETTER TIMES ARE COMING
The end of eras are always succeeded by the beginning of another. Endings, however, are meant to clear away the old in order to make way for the new. We are seeing the collapse of that which is familiar. It has been an extraordinary era and its ending will be no less so.
http://www.drschoon.com/
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Why does changing the party in power never change policy? Could it be that the views of both parties are essentially the same? - Ron Paul
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LayYouIn
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 Re: Economic crisis explained in simple language [Re: zorbman]
#9102159 - 10/20/08 12:29 AM (4 years, 6 months ago) |
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there must be some way that they can fix it. 
maybe the world leaders will think of something when they meet at the summit.
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zorbman
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Re: Economic crisis explained in simple language [Re: LayYouIn]
#9102225 - 10/20/08 12:46 AM (4 years, 6 months ago) |
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Quote:
there must be some way that they can fix it.
Not all the king's horses and all the king's men.
I am sorry to say that $5 trillion is not nearly enough to stop up to $1000 trillion from deleveraging globally. This is a vast sum of money. The bailouts and injections of liquidity simply cannot work.
Governments cannot prevent a market correction. Governments cannot make unprofitable businesses profitable. The bubbles in the stock market and real estate must be allowed burst. This is what bubbles do. By intervening, government only deepens and prolongs the damage.
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Why does changing the party in power never change policy? Could it be that the views of both parties are essentially the same? - Ron Paul
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 GnosticWarrior
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Re: Economic crisis explained in simple language [Re: zorbman]
#9104491 - 10/20/08 04:29 PM (4 years, 6 months ago) |
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I like that Casino analogy!
What, I don't understand is if the money supply is increasing, that will cause inflation. The deleveraging of certain assets is not shrinking the money supply is it?
In other words the total amount of chips issued by the casino is still the same or more, right? And the deleveraging is just the amount of chips (action) wagered in certain games like slots are being moved to other games like craps?
Well, i'm not certain but that's my take on it right now.
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LayYouIn
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Re: Economic crisis explained in simple language [Re: zorbman]
#9106236 - 10/20/08 10:17 PM (4 years, 6 months ago) |
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Quote:
zorbman said:
Not all the king's horses and all the king's men.
they'll have to come up with something...i mean, come on man. we have them all getting together and discussing this, they should be able to come up with something.
in a best case scenario, without ending the fed(or anything similar), what do you think could happen of this(best case)?
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zorbman
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Re: Economic crisis explained in simple language [Re: GnosticWarrior]
#9106303 - 10/20/08 10:27 PM (4 years, 6 months ago) |
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Quote:
What, I don't understand is if the money supply is increasing, that will cause inflation. The deleveraging of certain assets is not shrinking the money supply is it?
No. It isn't. The money supply is increasing but since so many people are cashing out of the casino stock market the increased demand for dollars has temporarily increased the dollar's value which is deflationary. Combine that with plummeting home values and stock prices as well as decreased consumer spending (70% of GDP) and you have a deflationary scenario.
Where I differ from most is that I take the current Fed chairman at his word that he will respond to such a scenario by greatly increasing the money supply resulting in tremendous inflation. And unless someone has been living under a rock for the last few weeks they can see that is exactly what is happening with all these promises of "liquidity".
Where do people think all this magic money is coming from??
Btw, I could make my case by posting ALL of Bernanke's quotes in one thread with stated intent to print his way out of deflation but I prefer to dribble them out one-by-one in my sig. 
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Why does changing the party in power never change policy? Could it be that the views of both parties are essentially the same? - Ron Paul
Edited by zorbman (10/21/08 12:56 AM)
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zorbman
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Re: Economic crisis explained in simple language [Re: LayYouIn]
#9106509 - 10/20/08 10:57 PM (4 years, 6 months ago) |
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Quote:
they'll have to come up with something...i mean, come on man. we have them all getting together and discussing this, they should be able to come up with something.
"They" created the crisis!
Oh sure they'll go through the motions and try something. The public will eventually demand it. Just like when the average person takes their child to the doctor with a cold.
Well guess what?
There is no cure for the common cold!
But how many doctors have the guts to tell Mommy the best thing is to do nothing?
No. He will prescribe some remedy. Anything but appearing inactive and presumably uncaring. But in reality the best thing for a cold is to let it run its course. A fever is the body's way of raising the thermostat beyond the pathogen's threshold of survival. Anything which reduces the fever actually strengthens and prolongs the cold.
This economic crisis was caused by easy credit which created a bubble. The bubble naturally wants to burst like all bubbles. Trying to cure a crisis caused by easy credit by throwing even more money at it is like throwing gasoline on a raging fire!
It is insane.
Let it burn itself out.
Sorry to be the bearer of bad news but the die has already been cast.
Bankers gambled with our money and we lost. 
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Why does changing the party in power never change policy? Could it be that the views of both parties are essentially the same? - Ron Paul
Edited by zorbman (10/21/08 12:59 AM)
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LayYouIn
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 Re: Economic crisis explained in simple language [Re: zorbman]
#9107324 - 10/21/08 01:20 AM (4 years, 6 months ago) |
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hmmmm, i see.
questions, questions, questions...
how significant was it for the DOW to do this...
...and did it stop bombing naturally or did something happen?
...just looking over the DOW back to the 1930's and up until now...it just bombed... (that would significant, right)
why is the stock market rebounding right now?
why has gold/silver dropped(especially silver)?
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zorbman
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Re: Economic crisis explained in simple language [Re: LayYouIn]
#9107731 - 10/21/08 02:28 AM (4 years, 6 months ago) |
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Quote:
how significant was it for the DOW to do this...
Very significant. From a technical standpoint (that deserves its own thread) you can see from the graph that the DOW broke from a base of 11K (it had tested it once before) and pretty rapidly from there rose to 14k..It tried to advance but was pushed back down to previous support at 11k and when it failed to rally from there it got SLAMMED back down beneath support at 10k.
Quote:
why is the stock market rebounding right now?
Suckers rally. People who have been living under a rock the past few weeks think folks temporarily went crazy for some reason and they are so smart they have discovered a bottom.
Quote:
why has gold/silver dropped(especially silver)?
Good question.
As I said here in another thread, there was a very temporary flight to cash out of losing positions and that is deflationary and thus bad for gold. Silver got slammed especially hard since it doubles as both money and an industrial metal. Of course, industrial output drops during a recession/depression. That presents a once in a lifetime opportunity for smart money.
Silver is a steal right now under ten dollars!
I recommend everyone buy silver NOW. Go for it!
Two years ago when I was predicting a recession most people said I was crazy in the Political forum. That's fine- history is on my side. Fiat currencies have a lifespan and ours is an elderly man on life support right now.
Follow the average person and you will get average profits or lose your money.
Precious metals are in the midst of a bull market and have gotten ahead of themselves- they have corrected. Don't get scared now!
Nothing goes straight up.
The trend is your friend.
Buy now. Thank me later. 
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Why does changing the party in power never change policy? Could it be that the views of both parties are essentially the same? - Ron Paul
Edited by zorbman (10/21/08 02:43 AM)
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whattheheck
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Re: Economic crisis explained in simple language [Re: zorbman]
#9107908 - 10/21/08 03:00 AM (4 years, 6 months ago) |
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I'm really feeling like crap is going to hit the fan and it's just a matter of "them" figuring out how to bleed the thing out as slow as possible.
With all that's gone on, do you think we're going to see a "slow bleed" or at some point does the bottom HAVE to fall out?
If we are going to see the whole thing slowly vanish, how much longer do we have (do you think?) of normalcy? Everywhere I go, people are thinking nothings going on, you know, it was "just a blip".
Maybe I'm a bit paranoid?
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A society whose whole idea is to eliminate suffering and bring it's members the greatest amount of comfort and pleasure is doomed to be destroyed -Thomas Merton
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GnosticWarrior
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Re: Economic crisis explained in simple language [Re: zorbman]
#9108176 - 10/21/08 04:23 AM (4 years, 6 months ago) |
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Quote:
zorbman said:
No. It isn't. The money supply is increasing but since so many people are cashing out of the casino stock market the increased demand for dollars has temporarily increased the dollar's value which is deflationary. Combine that with plummeting home values and stock prices as well as decreased consumer spending (70% of GDP) and you have a deflationary scenario.
 I like this answer. Helps me to understand the casino better. Never thought about the strength of the USD being deflationary, but that's what happens when people take their chips off the table.
This also makes sense, why we could have seen a bottom in the stock market already. The suckers rally, would be that with an increased money supply, Dow 14k in 2011 lets say, would not have the same value as Dow 14k made back in 2007. 14k is just a number right? Nothing to do with a benchmark of value.
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GnosticWarrior
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Re: Economic crisis explained in simple language [Re: whattheheck]
#9108230 - 10/21/08 04:52 AM (4 years, 6 months ago) |
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Quote:
whattheheck said:
Everywhere I go, people are thinking nothings going on, you know, it was "just a blip".
Maybe I'm a bit paranoid?
You're right in being paranoid. The sad part is, that the Fed, wants to prevent people from panicking by masking reality. The bursting of the bubble did cause some damage to some individuals and companies. But to prevent more from occuring (short term), the Fed will print more money. Those assets lost, are/will be in the hands of new owners, and their price levels will rise back to or above the bubble era prices. But, this time its value will not be the same due to inflation.
When inflation hits, is when the real damage will come home to roost. Homeowners who survived foreclosure during the first round, could get later lose it, when food and energy prices rise faster than their income can support. They'll have negative cash flow. But the property prices, could still be at '06-'07 levels. Companies who depend on consumer spending could still lose profits, bcs the consumer is still tapped out.
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whattheheck
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Re: Economic crisis explained in simple language [Re: GnosticWarrior]
#9108285 - 10/21/08 05:09 AM (4 years, 6 months ago) |
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Yeah, I mean, the past few weeks I investigated A LOT about what was going on. I mean 100+ hours isn't really all that much overall, but I learned a lot, and no matter where i looked or dug, the overwhelming conclusion was that sooner or later, this is going to explode in a very serious way, and the only real hope was for the governments to see what Z is talking about and let things happen.
Of course they didn't and now there's even more fuel for the eventual explosion. But that's just the opinion of EVERYTHING I read. They have to be wrong. Right?
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A society whose whole idea is to eliminate suffering and bring it's members the greatest amount of comfort and pleasure is doomed to be destroyed -Thomas Merton
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GnosticWarrior
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Re: Economic crisis explained in simple language [Re: whattheheck]
#9108351 - 10/21/08 05:31 AM (4 years, 6 months ago) |
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imho, their is certain destruction that is unavoidable, and some that might be unnecessary. The system so far has encouraged consumers to spend their money that is not essential for their survival.
Man needs food, water, clothing, shelter and all that stuff. But does man need a Caddillac Escalade, an XBox and all the games, or what ever consumer product that is non-essential for ones existence? So to me any industry that caters to excesses or luxuries will or might be hurt. It can't go on forever.
If a consumer is strapped now, he or she could avoid some pain by realizing that the fantasy is ending, buckles down, and makes every dollar count in areas that are of true necessity. The Fed is hoping that by printing more money, the game will continue.
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whattheheck
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Re: Economic crisis explained in simple language [Re: GnosticWarrior]
#9108363 - 10/21/08 05:35 AM (4 years, 6 months ago) |
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But will it? It seems that there are FAR too many issues to be avoided. That basically America is bankrupt, owing about 60 Trillion dollars, that there's 50-60 trillion of these buys swaps out there waiting to pop up and barf all over things. That there's 595 Trillion in derivatives worldwide when the GDP for the world is a tenth of that.
Seems like it all has to implode soon. Of course I hope not. Even being "poor" in America is good stuff 
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A society whose whole idea is to eliminate suffering and bring it's members the greatest amount of comfort and pleasure is doomed to be destroyed -Thomas Merton
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LayYouIn
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Re: Economic crisis explained in simple language [Re: zorbman]
#9111637 - 10/21/08 08:54 PM (4 years, 6 months ago) |
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Quote:
zorbman said:
Precious metals are in the midst of a bull market and have gotten ahead of themselves- they have corrected. Don't get scared now!
what do mean by, "they have corrected"? does that mean that they are currently at the price they should be sold at, and before the price was higher than it should have been?
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zorbman
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Re: Economic crisis explained in simple language [Re: GnosticWarrior]
#9113080 - 10/22/08 12:52 AM (4 years, 6 months ago) |
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Quote:
The suckers rally, would be that with an increased money supply, Dow 14k in 2011 lets say, would not have the same value as Dow 14k made back in 2007. 14k is just a number right? Nothing to do with a benchmark of value.
Exactly! In economic terms the 14k value would be known as the "nominal" value and the 2007 value is called the "real" value. The nominal price is simply the price of the day as stated and the real price is the one adjusted for inflation. It has to be reconstructed to arrive at it.
That is one reason inflation can be so deceptive. At first it can make you feel richer when in reality your dollar is worth less and less.
whattheheck: I had to educate myself on this stuff as well. A little over 3 years ago I began doing that after I became aware that most Americans are economically illiterate. What I have learned since then about the true state of the economy really disturbed me. But back then people would treat me like I was nuts when I told them the economy will be in recession > depression within a few short years.
Now I'm just another guy on a message board talking about the same thing everyone else is. People can see it now. I just wish more people could spot these trends before they develop into unavoidable situations.
The thing people can do now is prepare for what's coming. There is no need for fear- this is a once in a lifetime investment opportunity! I look upon it as a great challenge.
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Why does changing the party in power never change policy? Could it be that the views of both parties are essentially the same? - Ron Paul
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zorbman
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Re: Economic crisis explained in simple language [Re: whattheheck]
#9113780 - 10/22/08 03:25 AM (4 years, 6 months ago) |
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Quote:
If we are going to see the whole thing slowly vanish, how much longer do we have (do you think?) of normalcy?
The answer to that is above my pay grade. 
If I could answer to that level of specificity I'd be a millionaire right now. The truth is I don't know exactly when it will play out but I can tell you this: There will be certain signposts along the way. Markers which when reached will trigger a further level of collapse.
There will almost certainly be another slippage when the Christmas holiday retail sales figures come in. I feel those are going to be very, very disappointing.
All I can say as far as timing is at some point relatively soon all that money that has been created and temporarily soaked up overseas is going to start flooding back home while the products and titles to real wealth flow out of America in a gigantic vortex.
It will be the largest single transfer of wealth in history from those who hold paper to those who hold things of real value.
The day you see that the trade deficit really starts reversing itself (the average person will think is a good thing) - that will be the real tip-off the game is over. Trillions returning to the U.S. will skyrocket interest rates and inflation. The dollar will go into freefall and the days of the global monetary system will be numbered.
I am really sorry to have to say that but you asked and that is what I am seeing.
So these are some of the signposts to watch for but it would be incredibly foolish to wait until the crowd begins stampeding for the exits for you to try to get out that door. Everyone who is able should use the recent pullbacks in gold and silver as an opportunity to prepare for That Hour.
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Why does changing the party in power never change policy? Could it be that the views of both parties are essentially the same? - Ron Paul
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whattheheck
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Re: Economic crisis explained in simple language [Re: zorbman]
#9113803 - 10/22/08 03:32 AM (4 years, 6 months ago) |
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Yeah, I hear ya. I mean Zorb, I read probably over 100 people's take on it, from those who are "the sky is falling types" to the BBC, to self professed Bulls, and everybody was stunned at what they were seeing. The general consensus was, "if this is as bad as it looks, and it only keeps getting worse by the day but let's pretend (again this is the "best case scenario") then we are seriously screwed."
Could they ALL be wrong? Even with a junior high education, when you look at the numbers, something MAJOR MUST occur at some point.
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A society whose whole idea is to eliminate suffering and bring it's members the greatest amount of comfort and pleasure is doomed to be destroyed -Thomas Merton
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whattheheck
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Re: Economic crisis explained in simple language [Re: whattheheck]
#9113818 - 10/22/08 03:34 AM (4 years, 6 months ago) |
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We've got 2 to 3 years of somewhat normalcy I'd say. 
That is, if you call this normal.
Reason for edit: Forgot I live in a zoo. 
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A society whose whole idea is to eliminate suffering and bring it's members the greatest amount of comfort and pleasure is doomed to be destroyed -Thomas Merton
Edited by whattheheck (10/22/08 03:35 AM)
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geokills
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 Re: Economic crisis explained in simple language [Re: LayYouIn]
#9113833 - 10/22/08 03:39 AM (4 years, 6 months ago) |
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Quote:
LayYouIn said:
what do mean by, "they have corrected"? does that mean that they are currently at the price they should be sold at, and before the price was higher than it should have been?
I've always understood that a correction equates to a roughly 10% decline in asset value.
It does NOT infer that the price is now correct, as a stock can become a depressed stock as it loses even more value.
Loosely defined, a correction is simply an asset that has experienced a significant decline in value.
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zorbman
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Re: Economic crisis explained in simple language [Re: whattheheck]
#9113848 - 10/22/08 03:42 AM (4 years, 6 months ago) |
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I think one possible indicator that would give us a better idea of when TSHTF is known as the "velocity of money".
"The velocity of money is the average frequency with which a unit of money is spent in a specific period of time. Velocity affects the amount of economic activity associated with a given money supply."
http://en.wikipedia.org/wiki/Velocity_of_money
Right now most of the money which has been created is sitting idle in accounts. Only when it begins circulating in a big way will its effects truly be felt.
So some charts monitoring that would be helpful.
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Why does changing the party in power never change policy? Could it be that the views of both parties are essentially the same? - Ron Paul
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0xYg3n
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Re: Economic crisis explained in simple language [Re: zorbman]
#9114447 - 10/22/08 10:10 AM (4 years, 6 months ago) |
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We're almost in a recession.
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LeftyBurnz
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Re: Economic crisis explained in simple language [Re: 0xYg3n]
#9115659 - 10/22/08 03:21 PM (4 years, 6 months ago) |
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Quote:
0xYg3n said:
We're almost in a recession.
were already in recession, and have been for a few years. were almost in a DEPRESSION.
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The strongest reason for the people to retain the right to keep and bear arms is, as a last resort, to protect themselves against tyranny in Government."
~Thomas Jefferson
A free people ought not only to be armed and disciplined but they should have sufficient arms and ammunition to maintain a status of independence from any who might attempt to abuse them, which would include their own government.
~George Washington
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LayYouIn
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Re: Economic crisis explained in simple language [Re: LeftyBurnz]
#9117487 - 10/22/08 08:39 PM (4 years, 6 months ago) |
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Quote:
leftysurprise said:
were already in recession, and have been for a few years. were almost in a DEPRESSION.
im starting to believe this more and more.
it seems like all the worlds governments could get together and think up of SOMETHING...i doubt(and hope) our government wouldn't board up houses and send the occupants to the streets, when they could just say, "live there for free, for now".
im gonna make a poll in the pub.
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Green_T
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Re: Economic crisis explained in simple language [Re: LayYouIn]
#9118309 - 10/22/08 11:17 PM (4 years, 6 months ago) |
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*Deleted*
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"I have sworn upon the altar of god eternal hostility against every form of tyranny over the mind of man" - Thomas Jefferson
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Their vial of acid, which is on the table over there, tastes vile because they're incompetent chemists.
Edited by Green_T (08/02/11 05:52 PM)
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meams
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Re: Economic crisis explained in simple language [Re: Green_T]
#9120055 - 10/23/08 09:15 AM (4 years, 6 months ago) |
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mmmmmmmmm.
"Consumers will be pleased to learn that falling energy prices are driving the deceleration of consumer prices, possibly even pushing our economy into short-term deflation." from dismal.com
The recent fall in gas prices (which i'm sure most people were happy to see) is just proof that this situation has reached the international field, depicted by a large drop in energy demand (specifically oil). However, the spreading of this crisis has lead other countries to flee to the dollar - which is causing much of its current rise.
We may not think much of it here, but internationally - in times of crisis, the Dollar is "as good as gold".
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LeftyBurnz
Mr. I Eat Butthole
Registered: 06/21/05
Posts: 23,590
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Re: Economic crisis explained in simple language [Re: meams]
#9122020 - 10/23/08 05:51 PM (4 years, 6 months ago) |
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dont get too used to the gas prices. opec is slashing BPD production to counter the plummeting prices.
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The strongest reason for the people to retain the right to keep and bear arms is, as a last resort, to protect themselves against tyranny in Government."
~Thomas Jefferson
A free people ought not only to be armed and disciplined but they should have sufficient arms and ammunition to maintain a status of independence from any who might attempt to abuse them, which would include their own government.
~George Washington
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LayYouIn
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Re: Economic crisis explained in simple language [Re: zorbman]
#9156693 - 10/29/08 11:48 PM (4 years, 6 months ago) |
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Quote:
zorbman said:
Not all the king's horses and all the king's men.
how long do you think we have before things get really bad?
what do you think 'the gathering' of presidents/"financial people" will bring?
what do you think about this stuff i got in the mail today?...
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whattheheck
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Re: Economic crisis explained in simple language [Re: LayYouIn]
#9157223 - 10/30/08 01:29 AM (4 years, 6 months ago) |
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Holy crap son, is that gold?
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A society whose whole idea is to eliminate suffering and bring it's members the greatest amount of comfort and pleasure is doomed to be destroyed -Thomas Merton
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LayYouIn
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Re: Economic crisis explained in simple language [Re: whattheheck]
#9160455 - 10/30/08 08:31 PM (4 years, 6 months ago) |
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no, that's silver...185 oz.
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zorbman
Be Prepared
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Re: Economic crisis explained in simple language [Re: LayYouIn]
#9160825 - 10/30/08 09:51 PM (4 years, 6 months ago) |
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Quote:
LayYouIn said:
Quote:
zorbman said:
Not all the king's horses and all the king's men.
how long do you think we have before things get really bad?
what do you think 'the gathering' of presidents/"financial people" will bring?
what do you think about this stuff i got in the mail today?...
I believe I addressed the first two questions earlier in the thread. We probably have up to two years before things get really bad. Ironically, the fear right now is deflation but inflation is already baked into the cake. And it will be rising. People are ignoring the obvious effects of the Fed pumping trillions into the economy. That spells inflation every time. And it will be massive.
That's a beautiful pic! 
Don't you dare get suckered into selling too early!!
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Why does changing the party in power never change policy? Could it be that the views of both parties are essentially the same? - Ron Paul
Edited by zorbman (10/30/08 10:24 PM)
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LayYouIn
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Re: Economic crisis explained in simple language [Re: zorbman]
#9161505 - 10/30/08 11:54 PM (4 years, 6 months ago) |
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i wont. im planning on keeping it for a long time...unless i can make it all back by selling the 100 oz bar.
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whattheheck
Chief Love Lover
Registered: 06/01/07
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Re: Economic crisis explained in simple language [Re: LayYouIn]
#9161711 - 10/31/08 12:29 AM (4 years, 6 months ago) |
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Quote:
LayYouIn said:
no, that's silver...185 oz.
That's beautiful 
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A society whose whole idea is to eliminate suffering and bring it's members the greatest amount of comfort and pleasure is doomed to be destroyed -Thomas Merton
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meams
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Re: Economic crisis explained in simple language [Re: zorbman]
#9170986 - 11/02/08 03:24 AM (4 years, 6 months ago) |
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Quote:
zorbman said:
I believe I addressed the first two questions earlier in the thread. We probably have up to two years before things get really bad. Ironically, the fear right now is deflation but inflation is already baked into the cake. And it will be rising. People are ignoring the obvious effects of the Fed pumping trillions into the economy. That spells inflation every time. And it will be massive.
That's a beautiful pic!
Don't you dare get suckered into selling too early!!
Hrm... It may be 3:17 on a saturday, but I'm going to chime in.
The fed right now is combating deflation expectations by cutting rates (as of last wednesday). Deflation causes extreme volatility in all aspects of business environment: How do you write a contract when you dont know what the value of your dollar will be in a few days/months/next year?
So, the Fed's goal (as always) is to maintain price stability and foster economic growth.
Last week they cut the fed funds rate 50 basis points, pumping money into the system, instant inflation. However, in this specific instance, inflation is exactly what we want! It is the antithesis to our immediate problem: deflation. How can anyone expect deflation (remember, expectations of deflation are just as disasterous as deflation itself) when the government is tactically creating inflation? They can't, and as a result - business remains functioning normally.
But what happens when price levels turn around and these monetary injections start causing price levels to rise (inflation)? Whomp! The Fed jacks rates up, sucks liquidity out of the market, and controls the price levels yet again.
Price stability is vital to the proper functioning of our world economy.
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zorbman
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Re: Economic crisis explained in simple language [Re: meams]
#9172105 - 11/02/08 01:56 PM (4 years, 6 months ago) |
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I agree that price stability is the stated goal of the Fed but I don't have faith that they can always fine tune the economy to the level of detail desired. They seem to be over-correcting like a driver who needs to steer right to avoid the tree in the road but instead sharply veers right and ends up in the ditch. It is human nature and these people are human. I'm pretty sure about that.
A good current example of extremes is the credit bubble itself. Too much easy money for too long and look where we are today. The Fed is now on pace to doubling the money supply in just over four years. That sounds like a recipe for inflation above and beyond what is needed to offset deflation.
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Why does changing the party in power never change policy? Could it be that the views of both parties are essentially the same? - Ron Paul
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meams
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Re: Economic crisis explained in simple language [Re: zorbman]
#9173142 - 11/02/08 06:03 PM (4 years, 6 months ago) |
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Sure, the fed over-corrects at times - but you must remember: steering the economy is like driving a cruise-liner down a canal. In order to turn the ship, you gotta start steering half a mile beforehand, but due to lack of information you can only see 100yards in front of you. It's hard, but they do a pretty good job (in my opinion).
Your right about the housing bubble. Greenspan and his 1% target rate for 12+ mo created conditions for a perfect storm of investors searching high returns. Housing bubbled, and subsequently burst. These things happen, and there'll be another asset bubble if the Fed keeps rates too low for too long this time (which they won't).
Look, I'm not pretending to be an expert in the Federal reserve, but I do feel I know volumes more than joe the plumber. The minds sitting around the board of governors table are some of the brightest economic thinkers of our time. They are human, and as a result - their decisions are not perfect. But sadly the perfect system does not exist, and I for one feel that what we're currently working with is just fine. Until we have a system we know will work better, without having to undertake significant costs in transfering to that system - there won't be (and shouldn't be) any changes (unless those deemed necessary by he Fed, for example, the new policy tools designed to distribute targeted credit to specificly needy institutions).
For all of you who think the Fed is a joke and that this crisis was going to be the next Great Depression (not saying any of you specifically, but I know you're out there)... You can thank the Federal Reserve for generating the policy tools necessary to provide targeted credit to the right institutions to ensure that this simple credit crisis didn't turn into a great depression (as it did in the 30s, since the FDIC & Fed weren't in existence).
I <3 economics
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Yrat
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Re: Economic crisis explained in simple language [Re: meams]
#9176634 - 11/03/08 11:46 AM (4 years, 6 months ago) |
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The Fed was created in 1913
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"There are a thousand hacking at the branches of evil
to one who is striking at the root."
-Henry David Thoreau
Strike The Root
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zorbman
Be Prepared
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Posts: 5,746
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Re: Economic crisis explained in simple language [Re: meams]
#9177139 - 11/03/08 01:38 PM (4 years, 6 months ago) |
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Quote:
steering the economy is like driving a cruise-liner
And sometimes that cruise ship hits an iceberg. I think the Titanic has some similarities to our current situation with the Fed in that human beings often become the victim of hubris and think they can overcome nature. I don't think throwing money at this particular problem will help although it may temporarily make things seem better.
Like you I am betting that Fed-created inflation will overcome deflation. However, IMO the obligations they are taking on and monetizing are too gigantic without inciting an eventual panic among our foreign creditors and causing a dangerous drop in the dollar.
Quote:
You can thank the Federal Reserve for generating the policy tools necessary to provide targeted credit to the right institutions to ensure that this simple credit crisis didn't turn into a great depression
One can also thank the Fed for reducing the purchasing power of the dollar by 95% since its inception. And right now they are working to dramatically reduce it even further by cranking up the printing press. I posted a pic here recently of the unprecedented growth in the money supply this year and it has actually gone vertical clear off the chart!
One other point: the Fed can provide credit to banks but they cannot force them to loan that money out. Right now they are using it to shore up their balance sheets. Which underlines the fact that money naturally wants to go where it will. All these interventions and manipulations by Congress and the Fed cannot correct the misallocations of capital which are currently being exposed for everyone to see.
The bubble needs to burst rather than be re-inflated into an even bigger bubble. Instead of dealing head-on with our financial problems our so-called leaders keep trying to push them further and further into the future for someone else to deal with. And it gets harder and harder to do so. Eventually there is going to be a reckoning.
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Why does changing the party in power never change policy? Could it be that the views of both parties are essentially the same? - Ron Paul
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meams
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Re: Economic crisis explained in simple language [Re: zorbman]
#9177273 - 11/03/08 02:06 PM (4 years, 6 months ago) |
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Eventually.
To quote a great economist: "In the long run, we're all dead."
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zorbman
Be Prepared
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Re: Economic crisis explained in simple language [Re: meams]
#9177971 - 11/03/08 04:49 PM (4 years, 6 months ago) |
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Quote:
meams said:
Eventually.
To quote a great economist: "In the long run, we're all dead."
 That's what they're banking on.
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Why does changing the party in power never change policy? Could it be that the views of both parties are essentially the same? - Ron Paul
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meams
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Re: Economic crisis explained in simple language [Re: zorbman]
#9179643 - 11/03/08 10:19 PM (4 years, 6 months ago) |
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yep, and they'll continue to bank on it.
My problem with this recurring argument (i pretty much argue the same point in every thread: the world isn't ending) is that of all the criticism I hear, I never read anybodys recommendations for alternative systems.
I keep reading about how bad the fed is, how bad our current monetary system is, etc. etc. But i never hear proposed alternatives. Naturally our current system is by no means perfect, but until someone comes up with an alternative arrangement that can be instituted without total financial collapse then we'll be stuck with what we have.
I keep hearing how we should just let the system come tumblin' down and start it anew. Well - what are your guarentees that the new system operates at a level even remotely close to what we currently have? What if we start up a new system and it fails to work as designed - inducing a flatline of economic activity?
I guess what i'm trying to say here is: Our government is going to use the tools they are aware of to stave off economic collapse until it is absolutely inevitable, and thus, realized. It does not make sense from a cost/benefit standpoint to give up our current ways & means to "test run" economic structures.
I guess i'm just rambling again. does anything I ever post make sense to anyone? I sit here rather confident in my reasoning/deductions... am I simply confused? misguided? ignorant?
I am on a constant path to enlightenment in those subjects I deem relative to my life. Both (a) economics, and (b) my deductive reasoning, are subjects I deem relevant, so if anybody has any constructive criticism - please let me know.
Even if we never get anywhere in these debates - i sure do love participating in them
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LayYouIn
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Re: Economic crisis explained in simple language [Re: meams]
#9179708 - 11/03/08 10:31 PM (4 years, 6 months ago) |
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as long as your in one of the richer countries you shouldn't have much to complain about.
Gov't to borrow a record $550B in current quarter
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meams
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Re: Economic crisis explained in simple language [Re: LayYouIn]
#9181345 - 11/04/08 09:18 AM (4 years, 6 months ago) |
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Yep, we're borrowing money to get us out of trouble. So are hoards of other countries. I was reading some articles the other day in the economist, and mid-size countries with a dwarf GDP relative to ours are still borrowing in the hundreds of billions.
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LayYouIn
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Re: Economic crisis explained in simple language [Re: meams]
#9184426 - 11/04/08 09:10 PM (4 years, 6 months ago) |
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by "borrowing", we are just printing out our own currency(dollars) and then giving them to foreign countries, right?
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meams
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Re: Economic crisis explained in simple language [Re: LayYouIn]
#9185446 - 11/04/08 11:31 PM (4 years, 6 months ago) |
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no.
Our government sells treasury bonds to foreign entities, which we then must repay with interest.
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zorbman
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Re: Economic crisis explained in simple language [Re: meams]
#9186720 - 11/05/08 02:49 AM (4 years, 6 months ago) |
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Quote:
My problem with this recurring argument (i pretty much argue the same point in every thread: the world isn't ending) is that of all the criticism I hear, I never read anybodys recommendations for alternative systems.
I am not an economist (something I'm quite proud of) and it is beyond my pay grade and the scope of this thread I created to come up with an alternate monetary system but there is an existing thread here to discuss such a thing:
http://www.shroomery.org/forums/showflat.php/Cat/0/Number/9113200/an/0/page/1
Quote:
Our government sells treasury bonds to foreign entities, which we then must repay with interest.
Well most of the T-bills are bought by foreign governments and some are bought by ourselves. All of them are added as assets to the balance sheet of the Federal Reserve which actually profits from the debt of the American people!
Think about that.
They actually profit from our debt and it is in their interest to create even more debt.
Is it any wonder our nation is drowning in debt?
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Why does changing the party in power never change policy? Could it be that the views of both parties are essentially the same? - Ron Paul
Edited by zorbman (11/05/08 03:04 AM)
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meams
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Re: Economic crisis explained in simple language [Re: zorbman]
#9187646 - 11/05/08 10:28 AM (4 years, 6 months ago) |
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i'm confused as to how they profit from issuing Tbills? I understand the Fed gets them as assets - but having assets it not the same thing as profit.
Yes, the Fed gets them as assets on their balance sheet, which they doll out to the institutions that need them most - at this point in time. This is done through various lending facilities (TAF, PCDF, MMMLFFSLKJS: etc. etc) and has done a pretty good job of keepign our economy from collapsing.
Maybe you should become an economist, because I don't see any epic problem with the way the money from Tbills is being used - keeping our economy alive
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Redstorm
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Re: Economic crisis explained in simple language [Re: zorbman]
#9187812 - 11/05/08 11:21 AM (4 years, 6 months ago) |
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Assets != income or revenue.
Edit: Damn you, Meams. You beat me to it.
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0xYg3n
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Re: Economic crisis explained in simple language [Re: Redstorm]
#9188567 - 11/05/08 01:52 PM (4 years, 6 months ago) |
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Hi Redstorm. 
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zorbman
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Re: Economic crisis explained in simple language [Re: meams]
#9188809 - 11/05/08 02:34 PM (4 years, 6 months ago) |
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Quote:
I understand the Fed gets them as assets - but having assets it not the same thing as profit.
My understanding is that when the government needs money they create bonds. The Fed keeps those bonds and gives the government the money which the Fed has created. They then charge interest on the bonds which is why it is listed as an asset- it generates revenue.
This process is burying us in debt and has eroded the purchasing power of the dollar to 5 percent of what it was at the Fed's inception.
This system cannot continue much longer- you are seeing the global monetary system strain and begin to crack under the weight of this enormous debt. I fail to see how throwing even more credit-based money around will do anything but further erode the value of the dollar while creating even more debt. We are witnessing the endgame of this system of things.
Quote:
I don't see any epic problem with the way the money from Tbills is being used - keeping our economy alive
It is killing our economy. The reason most people don't see it is it has occured over a long time frame. We have to create more and more debt money to service our past debt. With compounding interest the debt eventually becomes unmanagable. We are rapidly reaching that point today.
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Why does changing the party in power never change policy? Could it be that the views of both parties are essentially the same? - Ron Paul
Edited by zorbman (11/05/08 02:51 PM)
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GnosticWarrior
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Re: Economic crisis explained in simple language [Re: zorbman]
#9189111 - 11/05/08 03:35 PM (4 years, 6 months ago) |
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I've been hearing about conspiracy theories about the FED but I couldn't find any worthy sources to prove this. I personally don't believe it to be so.
No doubt, that the U.S. govt. has increasing debt and interest payments. The interest goes to the treasury bond holders. My understanding is that the FED issues and also redeems these bonds. The Treasury does the actual printing of currency.
So there is no conspiracy. There is just a demand somewhere for govt. to spend more money than it takes in via taxes, so the difference is made up by selling treasury bonds. You might be surprised that the Chinese and Japanese institutions who own treasuries will be the primary beneficiaries of the interest owed and not the FED.
We the people of this democracy has not kept the govt. debt in check. We keep electing the politicians who like to spend your money.
I respect Jim Rogers but maybe he is wrong in blaming the FED. I don't hear Buffett criticizing them. However, I do think JR is a smarter man than me when it comes to the economy.
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meams
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Re: Economic crisis explained in simple language [Re: zorbman]
#9189225 - 11/05/08 03:54 PM (4 years, 6 months ago) |
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zorbman said:
Quote:
They then charge interest on the bonds which is why it is listed as an asset- it generates revenue.
You realize the bonds we create we PAY interest on? Therefore, they're a greater LIABILITY than they are an ASSET, which is why they generate DEBT?
Perhaps you just typed it up wrong, but if the foundation of your beliefs are based on that statement, then it's no wonder we disagree on so many levels.
Gnostic - thanks for the post, and I agree.
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zorbman
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Re: Economic crisis explained in simple language [Re: GnosticWarrior]
#9189236 - 11/05/08 03:55 PM (4 years, 6 months ago) |
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Quote:
I've been hearing about conspiracy theories about the FED but I couldn't find any worthy sources to prove this. I personally don't believe it to be so.
I am not claiming a conspiracy and I am not a conspiracy buff. This is my honest understanding of how the process works. It does sound like a scam.
Quote:
You might be surprised that the Chinese and Japanese institutions who own treasuries will be the primary beneficiaries of the interest owed and not the FED
.
I realize this. The Fed also keeps some of the bonds. Their balance sheet has expanded nicely in the last few weeks.
The Constitution granted congress alone the power to issue currency; I do not see why we need to pay someone to issue our own money to us. Maybe someone can explain that to me.
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Why does changing the party in power never change policy? Could it be that the views of both parties are essentially the same? - Ron Paul
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zorbman
Be Prepared
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Re: Economic crisis explained in simple language [Re: meams]
#9189256 - 11/05/08 03:57 PM (4 years, 6 months ago) |
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Quote:
You realize the bonds we create we PAY interest on? Therefore, they're a greater LIABILITY than they are an ASSET, which is why they generate DEBT?
Yes, I already stated we pay interest on the bonds to the holders of those bonds such as the Federal Reserve. They are a liability to us and an asset to them.
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Why does changing the party in power never change policy? Could it be that the views of both parties are essentially the same? - Ron Paul
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Yrat
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Re: Economic crisis explained in simple language [Re: zorbman]
#9189425 - 11/05/08 04:36 PM (4 years, 6 months ago) |
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Quote:
zorbman said:
It does sound like a scam.
it is the oldest and most successful pyramid scheme ever conceived.
--------------------
"There are a thousand hacking at the branches of evil
to one who is striking at the root."
-Henry David Thoreau
Strike The Root
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meams
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Re: Economic crisis explained in simple language [Re: zorbman]
#9189435 - 11/05/08 04:39 PM (4 years, 6 months ago) |
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ok.
so how does it generate revenue?
If we pay interest on the bonds, then we pay more than we receieve, and thusly - they can in no way be considered revenue-generating.
edit: i see what your saying. the Fed holding Tbills means they generate revenue from the interest. I understand what your saying now
Also, the fed was created to be an independent entity that controls our monetary policy. Keeping it separate from Congress ensures that the greed of politicans does not influence our monetary policy or damage our economy (a statement I'm sure you'll disagree with).
I still dont understand where your coming from though. I understand he general idea your trying to convey, but am just not seeing the rational behind it.
Edited by meams (11/05/08 04:44 PM)
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meams
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Re: Economic crisis explained in simple language [Re: Yrat]
#9189468 - 11/05/08 04:46 PM (4 years, 6 months ago) |
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Quote:
Yrat said:
Quote:
zorbman said:
It does sound like a scam.
it is the oldest and most successful pyramid scheme ever conceived.
elaborate.
Post the definition of a pyramid scheme, and then please tell me how this 'scam' is one.
thnx.
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GnosticWarrior
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Re: Economic crisis explained in simple language [Re: zorbman]
#9191717 - 11/05/08 11:32 PM (4 years, 6 months ago) |
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Quote:
zorbman said:
Quote:
I've been hearing about conspiracy theories about the FED but I couldn't find any worthy sources to prove this. I personally don't believe it to be so.
I am not claiming a conspiracy and I am not a conspiracy buff. This is my honest understanding of how the process works. It does sound like a scam.
Quote:
You might be surprised that the Chinese and Japanese institutions who own treasuries will be the primary beneficiaries of the interest owed and not the FED
.
I realize this. The Fed also keeps some of the bonds. Their balance sheet has expanded nicely in the last few weeks.
The Constitution granted congress alone the power to issue currency; I do not see why we need to pay someone to issue our own money to us. Maybe someone can explain that to me.
Sorry, didn't mean to imply you were backing a conspiracy theory. My guess, the bonds the FED holds, is what they couldn't sell. Maybe they can sell it later if there's a demand for it. But it's not for profit. The taxpayer will still have to cough up the money eventually.
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eatyualive
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Re: Economic crisis explained in simple language [Re: whattheheck]
#9304207 - 11/24/08 03:34 PM (4 years, 5 months ago) |
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canadian free press estimates our debt closer to 56 trillion. 175k per taxpayer. and counting before all these bailouts. our current direction is the wrong direction. thanks for the info zorb. you and i read similar sources. i find alot of what you post what im reading daily!
let the truth be known.
many of these views and articles can be found
at financialsense.com.
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Every piece of information or picture posted has nothing to do with reality.
Click 4 Eat's Reference Guide
Edited by eatyualive (11/24/08 03:37 PM)
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eatyualive
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Re: Economic crisis explained in simple language [Re: Yrat]
#9304312 - 11/24/08 03:56 PM (4 years, 5 months ago) |
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Quote:
Yrat said:
Quote:
zorbman said:
It does sound like a scam.
it is the oldest and most successful pyramid scheme ever conceived.
yes it is. its evil.
but if your on the receiving end of the power and money,one might say your a genius or the fed is a genius.
they alone, have found a way to control the masses and actually have the masses give away all of their sovereign rights willingly. and no one even stands up to them.
and no conspiracy here. these things can be found in daily news articles across the globe. you just have to be willing to dig for the truth. to me its plain as day as i have no bias for political lies nor conformity to societies lies.
Quote:
zorbman said:
Quote:
If we are going to see the whole thing slowly vanish, how much longer do we have (do you think?) of normalcy?
The answer to that is above my pay grade.
If I could answer to that level of specificity I'd be a millionaire right now. The truth is I don't know exactly when it will play out but I can tell you this: There will be certain signposts along the way. Markers which when reached will trigger a further level of collapse.
There will almost certainly be another slippage when the Christmas holiday retail sales figures come in. I feel those are going to be very, very disappointing.
All I can say as far as timing is at some point relatively soon all that money that has been created and temporarily soaked up overseas is going to start flooding back home while the products and titles to real wealth flow out of America in a gigantic vortex.
It will be the largest single transfer of wealth in history from those who hold paper to those who hold things of real value.
The day you see that the trade deficit really starts reversing itself (the average person will think is a good thing) - that will be the real tip-off the game is over. Trillions returning to the U.S. will skyrocket interest rates and inflation. The dollar will go into freefall and the days of the global monetary system will be numbered.
I am really sorry to have to say that but you asked and that is what I am seeing.
So these are some of the signposts to watch for but it would be incredibly foolish to wait until the crowd begins stampeding for the exits for you to try to get out that door. Everyone who is able should use the recent pullbacks in gold and silver as an opportunity to prepare for That Hour.
exactly hyperinflation due to everyone buying shit back with usd bc they have no confidence in it. rightly said!
as it is, europe and asian nations are wary of the usd. talking of changing currency. chinas talking of buying gm, ford. all we need is for china(i think they hold the highest amount of usd out there) to start buying everything from us with our own us dollars and boom. final nail in the coffin.
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Edited by eatyualive (11/24/08 04:32 PM)
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dirtydirt
Strangerest
Registered: 06/05/08
Posts: 133
Last seen: 1 year, 9 months
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Re: Economic crisis explained in simple language *DELETED* [Re: eatyualive]
#9305155 - 11/24/08 06:24 PM (4 years, 5 months ago) |
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Post deleted by dirtydirtReason for deletion: rararararar
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LayYouIn
Taurus
Registered: 09/28/06
Posts: 4,402
Loc: Organ
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Re: Economic crisis explained in simple language [Re: dirtydirt]
#9307300 - 11/24/08 11:15 PM (4 years, 5 months ago) |
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cool NEW video.
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dirtydirt
Strangerest
Registered: 06/05/08
Posts: 133
Last seen: 1 year, 9 months
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Re: Economic crisis explained in simple language [Re: LayYouIn]
#9328863 - 11/28/08 09:26 PM (4 years, 5 months ago) |
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its like the casinos do for paper money what the banks do for credit
Edited by dirtydirt (12/07/08 03:55 PM)
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LayYouIn
Taurus
Registered: 09/28/06
Posts: 4,402
Loc: Organ
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Re: Economic crisis explained in simple language [Re: LayYouIn]
#9793762 - 02/14/09 04:17 AM (4 years, 3 months ago) |
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Quote:
LayYouIn said:
how significant was it for the DOW to do this...
right now the DIJA is at 7,850.41...looking at a chart, that's where it was in 1997 and then in 1998 it was in the 8,000 area. that's a decade ago.
what does that mean?
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meams
Blessed
Registered: 01/11/05
Posts: 17,446
Loc: In a Tree
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Re: Economic crisis explained in simple language [Re: LayYouIn]
#9794582 - 02/14/09 10:39 AM (4 years, 3 months ago) |
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it means i need to get a fucking job so i can get in at the bottom and ride the wave of economic recovery back to the top
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LunarEclipse
Mr. Dogma Free
Registered: 10/31/04
Posts: 10,672
Loc: The Hand
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Re: Economic crisis explained in simple language [Re: meams]
#9794779 - 02/14/09 11:43 AM (4 years, 3 months ago) |
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Quote:
meams said:
i need to get a fucking job so i can get in at the bottom and ride
keep plugging away
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Silversoul
Holon
Registered: 01/01/05
Posts: 22,562
Loc: Mostly harmless
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Re: Economic crisis explained in simple language [Re: meams]
#9803501 - 02/15/09 07:01 PM (4 years, 3 months ago) |
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Quote:
meams said:
I keep reading about how bad the fed is, how bad our current monetary system is, etc. etc. But i never hear proposed alternatives. Naturally our current system is by no means perfect, but until someone comes up with an alternative arrangement that can be instituted without total financial collapse then we'll be stuck with what we have.
Well, I'm less hard on the Fed than many people, but I personally think it was a mistake to make it independent of the government. Those worrying about the debt that all this borrowing is incurring tend to exaggerate the problem, but they are right that it is a problem. But it's a problem we don't need to have. There's no reason why the government should have to borrow its own money at interest. Therefore, in agreement with the American Monetary Institute, I propose the following:- Nationalize the Federal Reserve and put it under the control of the Treasury Department.
- End fractional reserve banking softly by printing money and putting it into banks until they have full reserves.
- Spend money into existence via infrastructure rather than borrowing it at interest.
Some will cry "inflation," but it would actually maintain price stability much more easily because as money is spent into existence, real wealth will be created in the process. The government could then spend all the money necessary for the economy without generating debt or inflation.
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