Why Is America
Debauching Its Currency?
U.S. Refuses To Address Its Chronic Debt Problems
America Preparing For
The Kingdom Of The Anti-Christ
And he had power to give life unto the image of the beast, that the image of the beast should both speak, and cause that as many as would not worship the image of the beast should be killed. And he causeth all, both small and great, rich and poor, free and bond, to receive a mark in their right hand, or in their foreheads: And that no man might buy or sell, save he that had the mark, or the name of the beast, or the number of his name. Here is wisdom. Let him that hath understanding count the number of the beast: for it is the number of a man; and his number is Six hundred threescore and six.
(Rev. 13:15-18)
Why S&P downgraded the US credit rating
Sept. 4, 2011
Views And Commentaries
By The UnDollars Digest
http://undollars.com/
US Budget
• U.S. Tax revenue: $2,170,000,000,000
• Fed budget: $3,820,000,000,000
• New debt: $ 1,650,000,000,000
• National debt: $14,271,000,000,000
• Recent budget cut: $ 38,500,000,000
Now let’s remove 8 zeros and pretend it’s a household budget.
• Annual family income: $21,700
• Money the family spent: $38,200
• New debt on the credit card: $16,500
• Outstanding balance credit card: $142,710
• Total budget cuts: $385
A Conspiracy of Counterfeiters
Pat Buchanan
“Lenin is said to have declared that the best way to destroy the Capitalist System was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens.” “Lenin was certainly right,” John Maynard Keynes continued in his 1919 classic, “The Economic Consequences of the Peace.” “There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”
On the Brink of Inflationary Disaster
The PhD Standard
“There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.” — John Maynard Keynes
This week, Federal Reserve “money printing” became a focal point of American political discourse. Across the Atlantic, a worsening banking crisis failed to diminish German resolve against backing the issuance of “Eurobonds.” Many of us have read and pondered Keynes’s famous quote on debauching the currency so often we’re rather numb to it. But in light of recent developments, it’s worth reminding readers that history is unequivocal: The soundness of money – monetary stability – is fundamental to the well-being of both the economy and society. The myriad consequences of prolonged monetary instability are these days increasingly difficult to disregard.
I have argued that the global financial “system” for decades now has operated in a unique environment. I know of no comparable period in history where there were no restraints on either the quantity or quality of global Credit creation. I have further posited that “Unconstrained Credit is the Bane of Capitalism.” Unfettered finance ensures severe pricing distortions, speculative excess, the misallocation of resources, Bubble dynamics, acute financial and economic fragility – and the “debauching” of currencies across the globe. Again, increasingly difficult to disregard.
Compare & Contrast: 2011 vs. 2008:
“Best I can tell, the strongest bull argument going is that governments will support the markets. Well, the markets are in a world of hurt when that faith evaporates. This wasn’t much of an issue in 2008.” I thought a paragraph from today’s Financial Times (“This is Not a 2008 Redux,” Jennifer Hughes) succinctly captured the consensus view: “At the bottom of all of this is a lurking fear that this is 2008 all over again. But it is not. Since then banks have written down swathes of dud loans and assets, they have built up capital and most immediately important, they have access to central bank liquidity should the market freeze up. Granted, major banks back on life support would, and should, send markets reeling, but the central bank option means investors would not face the cliff-edge event that was Lehman’s collapse.”
With astonishing market volatility, faltering marketplace liquidity, collapsing global bank stocks and the imposition of limited bans on short-selling, the unfolding global financial crisis this week definitely recalled the 2008 experience. As the FT noted, there are important differences. There are, as well, some critical similarities. I thought it was worth delving into a little “Compare and Contrast” – from my analytical perspective.
Doug Noland’s Credit Bubble Bulletin
August 24 – Bloomberg (Jim Brunsden): “Regulators said they might not have enough information to assess the threat over-the-counter derivatives pose to the financial system. Shortfalls in available data may undermine attempts to use so-called trade repositories as a tool to improve market oversight, the Committee on Payment and Settlement Systems and the International Organization of Securities Commissions said… The lack of details on the value of trades ‘presents a potential gap in the data that authorities may require to fulfill’ their mandates, the organizations said… The value of outstanding OTC derivatives was about $601 trillion at the end of last year…”
August 25 – Bloomberg (David Yong and Yumi Teso): “A dollar-supply crunch in Europe is creating a shortage in Asia’s financial centers, pushing up the cost of obtaining the greenback through the swap market. …Singapore’s five-year basis swap and Hong Kong’s one-year contract dropped to the lowest since at least 1999 this month, which means parties paying for the U.S. Currency must accept a discount to benchmark interbank rates for their local currency…. ‘European banks are having difficulties with their dollar funding and that has spread to Asia, but it isn’t yet as bad as in 2008,’ said Tetsuo Yoshikoshi, a senior economist at Sumitomo Mitsui Banking…”
Wall Street Aristocracy Got $1.2 Trillion in Fed’s Secret Loans
“…Access to Fed backup support “’leads you to subject yourself to greater risks,’” Herring said. “’If it’s not there, you’re not going to take the risks that would put you in trouble and require you to have access to that kind of funding..’.” Citigroup Inc. (C) and Bank of America Corp. (BAC) were the reigning champions of finance in 2006 as home prices peaked, leading the 10 biggest U.S. banks and brokerage firms to their best year ever with $104 billion of profits.
By 2008, the housing market’s collapse forced those companies to take more than six times as much, $669 billion, in emergency loans from the U.S. Federal Reserve. The loans dwarfed the $160 billion in public bailouts the top 10 got from the U.S. Treasury, yet until now the full amounts have remained secret.
China Researcher: US May Be On Its Way To Default On Debt
The U.S. may be on its way to default on its debt despite the U.S. government’s ability to print more money, a Chinese think tank researcher said Monday. There is no guarantee for sovereign debt, which increases the risks the lenders face, said Wang Tianlong, a researcher at the China Center for International Economic Exchanges, a think tank supervised by the country’s economic planner, adding that the issuer could be more careless in using the loans.
In the short term, the U.S. doesn’t have much ability to reduce its deficit, Wang said in an opinion piece published in Securities Times. He added that the U.S. lacks the political system to guarantee that it will not default on its debt. There is also no way to punish the issuer country if it falsifies its accounting and there is no way to restructure the issuer either, Wang said. Wang’s comments come after the U.S. Vice President Joe Biden said the U.S. “never will default” on its government debt and reassured Beijing that Chinese investments in the U.S. are safe.
Doug Noland’s Credit Bubble Bulletin
Central Banking Watch:
August 17 – Reuters: “European Central Bank policymaker Juergen Stark, turning to monetary policy… warned against too-low interest rates. Noting that the Frankfurt-based central bank had never cut its main interest rate to an extremely low level, he added: ‘Keeping interest rates too low for too long carries risks.’ ‘Such a policy contributes to excessive risk-taking and wrong investments and therefore undermines an economy’s growth potential…”
August 17 – Bloomberg (Jeannine Aversa and Tom Keene): “Charles Plosser, president of the Federal Reserve Bank of Philadelphia, said the Fed will probably need to raise interest rates before mid-2013 and that policy makers should have waited to see how the economy performed before pledging to hold rates at record lows for two years. ‘It was inappropriate policy at an inappropriate time,’ Plosser… said… ‘We’re reacting too quickly here… A little patience might be a good idea.’”
Central Banks’ Demand for Gold Quadrupled in Second Quarter
Central banks are topping up their gold reserves, quadrupling their total purchases from the market in the last quarter as they seek to reduce their dependence on traditional reserve currencies such as the U.S. dollar. Even with gold prices at record highs, emerging markets’ central banks have revived the official sector’s gold-buying interest. They are diversifying their foreign-exchange reserves, which have grown along with their export industries. More recently, they have also bought gold in reaction to the persistent sovereign-debt crises affecting traditional reserve currencies, like the dollar and the euro. Analysts say this trend is likely to continue.
Even Goldman Sachs Secretly Believes
That An Economic Collapse Is Coming
Sept. 4, 2011
Even Goldman Sachs Secretly Believes That An Economic Collapse Is Coming
by The Economic Collapse Blog
http://theeconomiccollapseblog.com/archives/even-goldman-sachs-secretly-believes-that-an-economic-collapse-is-coming
Goldman Sachs is doing it again. Goldman is telling the public that everything is going to be just fine, but meanwhile they are advising their top clients to bet on a huge financial collapse. On August 16th, a 54 page report authored by Goldman strategist Alan Brazil was distributed to institutional clients. The general public was not intended to see this report. Fortunately, some folks over at the Wall Street Journal got their hands on a copy and they have filled us in on some of the details. It turns out that Goldman Sachs secretly believes that an economic collapse is coming, and they have some very interesting ideas about how to make money in the turbulent financial environment that we will soon be entering.
In the report, Brazil says that the U.S. debt problem cannot be solved with more debt, that the European sovereign debt crisis is going to get even worse and that there are large numbers of financial institutions in Europe that are on the verge of collapse. If this is what people at the highest levels of the financial world are talking about, perhaps we should all start paying attention. There is a tremendous amount of fear in the global financial community right now. As I wrote about the other day, the financial world is about to hit the panic button. Things could start falling apart at any time. Most of these big banks will not admit how bad things are publicly, but privately there is a whole lot of freaking out going on.
According to the Wall Street Journal, Brazil believes that "as much as $1 trillion in capital may be needed to shore up European banks; that small businesses in the U.S., a past driver of job production, are still languishing; and that China's growth may not be sustainable." Perhaps most startling of all is what the report has to say about the debt problems of the United States and Europe. For example, this following excerpt from the report sounds like it could have come straight from The Economic Collapse Blog....
“Solving a debt problem with more debt has not solved the underlying problem. In the US, Treasury debt growth financed the US consumer but has not had enough of an impact on job growth. Can the US continue to depreciate the world’s base currency?”
Remember, this statement was not written by some guy on the Internet. A top Goldman Sachs analyst put it into a report for institutional investors. The report also goes into great detail about the financial crisis in Europe. Brazil writes about how the euro is headed for trouble and about how dozens of financial institutions in Europe could potentially be in danger of collapse.
But in any environment Goldman Sachs thinks that it can make money. The following is how Business Insider summarized the advice that Brazil gave in the report regarding how to make money off of the impending collapse in Europe.... Buy a six-month put option on the Euro versus the Swiss Franc, thus betting the Euro will drop against the Franc (the Franc being the currency that an official Goldman report recently referred to as the most overvalued in the world)
Buy a five-year credit default swap on an index of European corporate debt—the iTraxx 9. This is a bet that some of these companies will default, and your insurance policy, the CDS, will pay off
This is so typical of Goldman Sachs. They will say one thing publicly and then turn around and do the total opposite privately.
For example, prior to the financial crisis of 2008, Goldman Sachs was putting together mortgage-backed securities that they knew were garbage and marketing them to investors as AAA-rated investments. On top of that, Goldman then often privately bet against those exact same securities. The CEO of Goldman Sachs has even acknowledged that the investment bank engaged in "improper" behavior during 2006 and 2007. For much more on the history of all this, please see this article: "How Goldman Sachs Made Tens Of Billions Of Dollars From The Economic Collapse Of America In Four Easy Steps." So will Goldman Sachs ever get into serious trouble for any of this? No, of course not.
Yeah, they will get a slap on the wrist from time to time, but the reality is that the top levels of the federal government are absolutely littered with ex-employees of Goldman Sachs. Goldman is one of the "too big to fail" banks and they are going to continue to do pretty much whatever they feel like doing. Sadly, the power of the "too big to fail" banks just continues to grow. At this point, the "big six" U.S. banks (Goldman Sachs, Morgan Stanley, JPMorgan Chase, Citigroup, Bank of America, and Wells Fargo) now possess assets equivalent to approximately 60 percent of America's gross national product. Goldman Sachs was the second biggest donor to Barack Obama's campaign in 2008, so don't expect Obama to do anything about any of this.
We have a financial system that is deeply, deeply corrupt and all of that corruption is a big reason why things are falling apart. Sadly, the 54 page report mentioned above is right - we really are facing a global debt meltdown and we really are heading for an economic collapse. You aren't going to hear the truth from the mainstream media or from our politicians because "keeping people calm" is much more of a priority to them than telling the truth is. The debt crisis in the United States is unsustainable and the debt crisis in Europe is unsustainable. Right now we are in the calm before the storm, and nobody knows exactly when the storm is going to strike. But let there be no doubt - it is coming.
The amazing prosperity that we have enjoyed for the last several decades has largely been a debt-fueled illusion. It was a great party while it lasted, but now it is coming to an end and the aftermath of the coming crash is going to be absolutely horrific. Keep watch and get prepared. We don't know exactly when the collapse is going to happen, but it is definitely on the way and now even Goldman Sachs is admitting that.
The New World Economy
The biggest change in the world economy since the early 1970's is that flows of money have replaced trade in goods as the force that drives exchange rates. As a result of the relentless integration of the world's financial markets, differences in national economic policies can disturb interest rates (or expectations of future interest rates) only slightly, yet still call forth huge transfers of financial assets from one country to another. These transfers swamp the flow of trade revenues in their effect on the demand and supply for different currencies, and hence in their effect on exchange rates. As telecommunications technology continues to advance, these transactions will be cheaper and faster still. With uncoordinated economic policies, currencies can get only more volatile.
Alongside that trend is another - of ever-expanding opportunities for international trade. This too is the gift of advancing technology. Falling transport costs will make it easier for countries thousands of miles apart to compete in each others' markets. The law of one price (that a good should cost the same everywhere, once prices are converted into a single currency) will increasingly assert itself. Politicians permitting, national economies will follow their financial markets - becoming ever more open to the outside world. This will apply to labour as much as to goods, partly thorough migration but also through technology's ability to separate the worker form the point at which he delivers his labour. Indian computer operators will be processing New Yorkers' paychecks.
In all these ways national economic boundaries are slowly dissolving. (see Why Is America Committing Suicide? After Historic Downgrade, U.S. Must Address Its Chronic Debt Problems World Preparing For The Kingdom Of The Anti-Christ) As the trend continues, the appeal of a currency union across at least the main industrial countries will seem irresistible to everybody except foreign-exchange traders and governments. In the phoenix zone, economic adjustment to shifts in relative prices would happen smoothly and automatically, rather as it does today between different regions within large economies (a brief on pages 74-75 explains how.) The absence of all currency risk would spur trade, investment and employment.
The phoenix zone would impose tight constraints on national governments. There would be no such thing, for instance, as a national monetary policy. The world phoenix supply would be fixed by a new central bank, descended perhaps from the IMF. The world inflation rate - and hence, within narrow margins, each national inflation rate- would be in its charge. Each country could use taxes and public spending to offset temporary falls in demand, but it would have to borrow rather than print money to finance its budget deficit. With no recourse to the inflation tax, governments and their creditors would be forced to judge their borrowing and lending plans more carefully than they do today. This means a big loss of economic sovereignty, but the trends that make the phoenix so appealing are taking that sovereignty away in any case. Even in a world of more-or-less floating exchange rates, individual governments have seen their policy independence checked by an unfriendly outside world.
As the next century approaches, the natural forces that are pushing the world towards economic integration will offer governments a broad choice. They can go with the flow, or they can build barricades. Preparing the way for the phoenix will mean fewer pretended agreements on policy and more real ones. It will mean allowing and then actively promoting the private-sector use of an international money alongside existing national monies. That would let people vote with their wallets for the eventual move to full currency union. The phoenix would probably start as a cocktail of national currencies, just as the Special Drawing Right is today. In time, though, its value against national currencies would cease to matter, because people would choose it for its convenience and the stability of its purchasing power.
The alternative - to preserve policymaking autonomy- would involve a new proliferation of truly draconian controls on trade and capital flows. This course offers governments a splendid time. They could manage exchange-rate movements, deploy monetary and fiscal policy without inhibition, and tackle the resulting bursts of inflation with prices and incomes polices. It is a growth-crippling prospect. Pencil in the phoenix for around 2018, and welcome it when it comes.
And he causeth all, both small and great, rich and poor, free and bond, to receive a mark in their right hand, or in their foreheads: And that no man might buy or sell, save he that had the mark, or the name of the beast, or the number of his name. Here is wisdom. Let him that hath understanding count the number of the beast: for it is the number of a man; and his number is Six hundred threescore and six (Revelation 13:16-18).
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