The Final Collapse of the Economy

[ACCT]

Just a thought I’ve pondered on once or twice, but is there something wrong with a competing privatized monetary system to challenge the US backed public Dollar? How about multiple competing privatized monetary systems -you know, to bail ourselves out of the mess the gov. Created?

They could all be interchangeable at banks, that way if one failed, another would take its place… Just food for thought for when after the dollar crumbles.

Course we’d have to allow for the socialists to have their own privatized system too, which would be kind of seperate and on its own -but still interchangeable with the other monies.

I believe that the euro was a mistake… Instead of consolidating we should be doing the opposite for many reasons.

Cashless Money

I gave a talk to my sociology class about the cashless society in 1967. I predicted that someday the technology would exist to eliminate cash. The selling point will be convenience. Isn’t a credit card used for a cashless transaction?

A universal cashless society is not desirable. How do I know? I think that the Bible says so. The Bible says that no one will be able to buy or sell without the mark of the Beast. How is that possible without technology and a cashless society?

There have been times in history when apolitical currency, or “free banking,” was the rule and not the exception. Prominent examples are Scotland from 1728 to 1845, Canada for much of the nineteenth century, and the United States from 1836 to 1863 (perhaps even until 1913).[6] The perceived success of those systems depends upon the bias of the observer; however, Dowd, a supporter of apolitical currency notes:

A note-clearing system was developed during the free banking period in Scotland and was widely credited with checking potential over-issues of notes. . . . Scotland appeared to enjoy a relatively stable system of note issue. In England, by contrast, there was a series of acute crises in the early 19th century, and many observers blamed these on over-issues of notes by the Bank of England.[7]

I am starting my own monetary system. At the present time I do not produce enough food from my garden to sell. However, in the future I will only accept silver for produce from my garden. I will accept 1 ounce silver coins for 10% above the spot price of silver. I have enough of the Federal Reserve’s monopoly money! The day will come when all of the money in the world will not buy one ounce of silver.

 

[ACCT]

.
What impact will the massive, unprecedented amounts of money that the world’s central bankers are creating out of thin air have on you, personally?

How will they affect the value of your money — your income, savings and investments?

Perhaps even more importantly, what are the consequences for your cost of living? For your standard of living? For your prospects for a rich and secure retirement?

 

[ACCT]

The numbers are enormous: The U.S. Federal Reserve, the European Central Bank, the Bank of England and the Bank of Japan have dumped an amount equal to more than ten trillion U.S. dollars into the global economy.

Laid end to end, that amount of money would stretch out for 868 million miles — enough to encircle the Earth more than 36 thousand times.

None of that money has a single cent of intrinsic value behind it. It is little more than counterfeit money — fiat money: Electronic blips and bleeps that serve only to gut the value of every other dollar, euro, yen and pound in circulation.

You’re already suffering the consequences. Every time you stop at a gas station, buy groceries or pay your utility bills, you’re paying the price for this global orgy of money printing.

You’re paying an emotional price, too: Every time you awake in a cold sweat wondering how you’ll survive if prices keep rising — especially in retirement.

All that phony money was supposed to jump-start the global economy. Instead, after a short period of slightly better economic data, nearly all of the economy’s leading indicators are turning sour again.

Employment. Manufacturing. Home prices — all are headed south again.

Most of Europe is already in the grips of a savage new recession. Between massive losses on the government debt they own and the cratering economy, Europe’s major banks — many of them, the biggest banks the world has ever seen — are hanging by a thread.

So** not only has this orgy of money printing driven your cost of living sky-high … not only has it abjectly FAILED to stimulate the economy … **
That failure now virtually guarantees yet another massive round of money printing and MORE leaps in your cost of living!

 

[davidmlamb]

One of the biggest confusions in the current mess in the housing market is the claim that it is the result of greed. The problem with that explanation is that greed is always a feature of human interaction. It always has been. Why, all of a sudden, has greed produced so much harm? And why only in one sector of the economy? After all, isn’t there plenty of greed elsewhere? Firms are indeed profit seekers. And they will seek after profit where the institutional incentives are such that profit is available. In a free market, firms profit by providing the goods that consumers want at prices they are willing to pay. (My friends, don’t stop reading there even if you disagree - now you know how I feel when you claim this mess is a failure of free markets - at least finish this paragraph.) However, regulations and policies and even the rhetoric of powerful political actors can change the incentives to profit. Regulations can make it harder for firms to minimize their risk by requiring that they make loans to marginal borrowers. Government institutions can encourage banks to take on extra risk by offering an implicit government guarantee if those risks fail. Policies can direct self-interest into activities that only serve corporate profits, not the public.

No free market economist thinks “greed is always good.” What we think is good are institutions that play to the self-interest of private actors by rewarding them for serving the public, not just themselves. We believe that’s what genuinely free markets do. Market exchanges are mutually beneficial. When the law messes up by either poorly defining the rules of the game or trying to override them through regulation, self-interested behavior is no longer economically mutually beneficial. The private sector then profits by serving narrow political ends rather than serving the public. In such cases, greed leads to bad consequences. But it’s bad not because it’s greed/self-interest rather because the institutional context within which it operates channels self-interest in socially unproductive ways.

To call the housing and credit crisis a failure of the free market or the product of unregulated greed is to overlook the myriad government regulations, policies, and political pronouncements that have both reduced the “freedom” of this market and channeled self-interest in ways that have produced disastrous consequences, both intended and unintended.

The current mess is thus clearly shot through and through with government meddling with free markets, from the Fed-provided fuel to the CRA and land-use regulations to Fannie and Freddie creating an artificial market for risky mortgages in order to meet Congress’s demands for more home-ownership opportunities for low-income families. Thanks to that intervention, many of those families have not only lost their homes, but also the savings they could have held onto for a few more years and perhaps used to acquire a less risky mortgage on a cheaper house. All of these interventions into the market created the incentive and the means for banks to profit by originating loans that never would have taken place in a genuinely free market.

In the end, all I can ask of you is that you continue to think this through. Explaining this crisis by greed won’t get you far as greed, like gravity, is a constant in our world. Explaining it as a failure of free markets faces the obvious truth that these markets were far from free of government. Consider that you may be mistaken. Consider that perhaps government intervention, not free markets, caused profit-seekers to undertake activities that harmed the economy. Consider that government intervention might have led banks and other organizations to take on risks that they never should have. Consider that government central banks are the only organizations capable of fueling this fire with excess credit. And consider that various regulations might have forced banks into bad loans and artificially pushed up home prices. Lastly, consider that private sector actors are quite happy to support such intervention and regulation because it is profitable.

Greed is the love of money and the love of money IS the root of all evil (1 Tim 6:3-10)! People need to learn to practice te virtue of temperance.

CCC 2407 In economic matters, respect for human dignity requires the practice of the virtue of temperance, so as to moderate attachment to this world’s goods; the practice of the virtue of justice, to preserve our neighbor’s rights and render him what is his due; and the practice of solidarity, in accordance with the golden rule and in keeping with the generosity of the Lord, who "though he was rich, yet for your sake . . . became poor so that by his poverty, you might become rich."190

David

 

[JimG]

Greed is the love of money and the love of money IS the root of all evil (1 Tim 6:3-10)! People need to learn to practice te virtue of temperance.

CCC 2407 In economic matters, respect for human dignity requires the practice of the virtue of temperance, so as to moderate attachment to this world’s goods; the practice of the virtue of justice, to preserve our neighbor’s rights and render him what is his due; and the practice of solidarity, in accordance with the golden rule and in keeping with the generosity of the Lord, who "though he was rich, yet for your sake . . . became poor so that by his poverty, you might become rich."190

David

And when any nation spends grossly more than it takes in, that is an example of lack of temperance. The U.S. Government alone spends about $5 billion every day more than it’s income. I would call that a lack of temperance, and worse. It’s a recipe for disaster.

 

[ACCT]

And when any nation spends grossly more than it takes in, that is an example of lack of temperance. The U.S. Government alone spends about $5 billion every day more than it’s income. I would call that a lack of temperance, and worse. It’s a recipe for disaster.

Ther Federal Reserve System was created in 1913. The net result is a system created by the love of money. Do what you can to get away from that financial system before it totally crashes.

 

[ACCT]

“The law of unintended consequences, often cited but rarely defined, is that actions of people—and especially of government—always have effects that are unanticipated or ‘unintended.’ Economists and other social scientists have heeded its power for centuries; for just as long, politicians and popular opinion have largely ignored it (Rob Norton).”

 

[ACCT]

The evidence everywhere is unequivocal: Despite trillions in printed dollars, euros, pounds, and yen … despite the passage of almost four years since the heart of the credit crisis … despite all the proclamations of government bureaucrats and central bankers,** the economy and capital markets remain on the ropes!**

 

[davidmlamb]

The evidence everywhere is unequivocal: Despite trillions in printed dollars, euros, pounds, and yen … despite the passage of almost four years since the heart of the credit crisis … despite all the proclamations of government bureaucrats and central bankers,** the economy and capital markets remain on the ropes!**

The Market is nearly where it was at before it crashed in 2008 and my portfolio has never done better than it has now. My mother’s portfolio has done pretty good too and the company my father started in 1981 (now ran by my brother) has more than doubled its business since 2007. About the only thing that has not dramatically improved is the housing market which is actually a good thing for some.

My theory is the housing market was over-inflated for years and the bubble finally burst. Because the average working class person does not make what they use to make (accounting for inflation). Most working class people today are incapable of buying a home in a pre 2008 over-inflated housing market. The housing market may never recover until the average american worker receives a just and living wage like they did when working class people belonged to a union and held the same job for 35+ years. Those days are gone and with it is the housing market. Be that as it may, the people hurting in the housing market are people who still own their homes they had before the crash. For new people coming into the housing market its great! I sold my house in 2005 and have rented since. But now I am able to purchase a nice home at 1980 prices!

Our entire economy collapsed because of bad policies and lack of laws governing the financial markets. This is something that cannot be fixed over night. It is something that will take 10 + years to fix but the economy and the job market has been improving and to claim it has not is simply unjustified.

David

 

[ACCT]

The Market is nearly where it was at before it crashed in 2008 and my portfolio has never done better than it has now. My mother’s portfolio has done pretty good too and the company my father started in 1981 (now ran by my brother) has more than doubled its business since 2007. About the only thing that has not dramatically improved is the housing market which is actually a good thing for some.

My theory is the housing market was over-inflated for years and the bubble finally burst. Because the average working class person does not make what they use to make (accounting for inflation). Most working class people today are incapable of buying a home in a pre 2008 over-inflated housing market. The housing market may never recover until the average american worker receives a just and living wage like they did when working class people belonged to a union and held the same job for 35+ years. Those days are gone and with it is the housing market. Be that as it may, the people hurting in the housing market are people who still own their homes they had before the crash. For new people coming into the housing market its great! I sold my house in 2005 and have rented since. But now I am able to purchase a nice home at 1980 prices!

Our entire economy collapsed because of bad policies and lack of laws governing the financial markets. This is something that cannot be fixed over night. It is something that will take 10 + years to fix but the economy and the job market has been improving and to claim it has not is simply unjustified.

David

A plunging U.S. economy does not necessarily translate into a bear market for stocks.

Between 1932 and 1937 the U.S. stock markets rallied 287% from their 1932 crash low, despite the fact that the U.S. economy bottom-bounced in a depression for years longer.

We will see a new long-term bull market because:

1. A flight of capital from Europe, just like we saw in the 1930s.
2. A sovereign debt crisis that will fully hit Washington in the face

The U.S. bond markets are going to completely implode, and the money and capital that will be draining out of the bond markets will flee into top quality U.S. stocks.

Bottom line: Blue chip stocks are a better bet than defunct U.S. bonds and a bankrupt and failed U.S. socialist government.

 

[ACCT]

The Market is nearly where it was at before it crashed in 2008 and my portfolio has never done better than it has now. My mother’s portfolio has done pretty good too and the company my father started in 1981 (now ran by my brother) has more than doubled its business since 2007. About the only thing that has not dramatically improved is the housing market which is actually a good thing for some.

My theory is the housing market was over-inflated for years and the bubble finally burst. Because the average working class person does not make what they use to make (accounting for inflation). Most working class people today are incapable of buying a home in a pre 2008 over-inflated housing market. The housing market may never recover until the average american worker receives a just and living wage like they did when working class people belonged to a union and held the same job for 35+ years. Those days are gone and with it is the housing market. Be that as it may, the people hurting in the housing market are people who still own their homes they had before the crash. For new people coming into the housing market its great! I sold my house in 2005 and have rented since. But now I am able to purchase a nice home at 1980 prices!

Our entire economy collapsed because of bad policies and lack of laws governing the financial markets. This is something that cannot be fixed over night. It is something that will take 10 + years to fix but the economy and the job market has been improving and to claim it has not is simply unjustified.

David

You may be earning a few more bucks in the stock market, but you are losing much more every time you fill up your gas tank and grocery cart!

Fasten your seatbelt, my friend. I’m talking about one of the biggest, most widespread, momentous floods of pure, unadulterated monetary inflation this world has seen!

Governments and the Federal Reserve have no clue what honest money is. Their sin is the love of money. God did not create government monopoly money. God created gold and silver.

 

[davidmlamb]

You may be earning a few more bucks in the stock market, but you are losing much more every time you fill up your gas tank and grocery cart!

Fasten your seatbelt, my friend. I’m talking about one of the biggest, most widespread, momentous floods of pure, unadulterated monetary inflation this world has seen!

Governments and the Federal Reserve have no clue what honest money is. Their sin is the love of money. God did not create government monopoly money. God created gold and silver.

Your claims are nothing more then a right wing spin. The rising cost of inflation is do to the supply and demand of oil period . The only solution is to deminish the demand by virtue of alternative fuels which cannot be developed over night. The rising cosat of fuel has nothing to do with the Obama administration. They cannot wave a wand and fix it like you suggest the GOP can.

Moreover, the government is not greedy for money that is preposterous. Political authority has the right and duty to regulate the legitimate exercise of the right to ownership for the sake of the common good. Why don’t you explain to us how exactly is government being greedy for money? Greed implies a profit or surplus of wealth. Can you prove that the US government has made a profit from their “greed?”

Governments were created by God to support the common good of all and not to serve the free market apart from the totality of human society (CCC 2402-2406). It was not the government that collapsed our economy it was the greed of Corporate America and that is self evident. I suggest you read Romans 13:1-6 and CCC 2401-2436; and CCC 1897-1912 and get familiar with the teachings of the Magesterium instead of the gospel of right wing comnservatism.

David

 

[ACCT]

Your claims are nothing more then a right wing spin. **The rising cost of inflation is do to the supply and demand of oil period . **The only solution is to deminish the demand by virtue of alternative fuels which cannot be developed over night. The rising cosat of fuel has nothing to do with the Obama administration. They cannot wave a wand and fix it like you suggest the GOP can.

David

I taught economics. Only governments can cause inflation! If there were no monetary inflation, and the price of oil increased, then consumers would have to cut back somewhere else. The net result would be zero inflation. Here are some of the test questions that I gave my students:

INFLATION

Who causes inflation? “Government and the government alone is responsible for any rapid increase in the quantity of money…Businessmen do not cause inflation (Friedman).”

Why is inflation called a monetary phenomenon? “Inflation occurs when the quantity of money rises appreciably more rapidly than output, and the more rapid the rise in the quantity of money per unit of output, the greater the rate of inflation (Friedman).”

How does the government increase the quantity of money? “The U.S. Treasury, one branch of government, sells bonds to the Federal Reserve, another branch of government. The Federal Reserve pays for the bonds with freshly printed Federal Reserve Notes or by entering a deposit on its books to the credit of the U.S. Treasury. The Treasury can then pay its bills with either the cash or a check drawn on its account at the Fed. When the additional high-powered money is deposited in commercial banks by its initial recipients, it serves as reserves for them and as the basis for a much larger addition to the quantity of money (Friedman).”

Who pays for inflation? All holders of money pay for inflation.
Explain how inflation is paid. “The extra money printed is equivalent to a tax on money balances. If the extra money raises prices by 1 percent, then every holder of money has in effect paid a tax equal to 1 percent of his money holdings (Friedman).”
Is inflation serious? Inflation is a serious disease that can destroy a society. “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 **(Keynes).”

What is the cure for inflation? The cure for inflation is a slower rate of increase in the quantity of money.

How long does it take to cure inflation? It takes time. It takes years for inflation to develop and it takes years to cure inflation.

What are the unpleasant side effects of the cure? There will be a long period of slow economic growth and higher than usual unemployment. There is no way to avoid these side effects.

 

[ACCT]

Moreover, the government is not greedy for money that is preposterous. Political authority has the right and duty to regulate the legitimate exercise of the right to ownership for the sake of the common good. Why don’t you explain to us how exactly is government being greedy for money? Greed implies a profit or surplus of wealth. Can you prove that the US government has made a profit from their “greed?”

David

The Federal Reserve, a group of central bankers, creates money. The government does not create money. The Federal Reserve, created in 1913, is indeed responsible for the sin of love of money. At the risk of over simplification, they can create money out of nothing and then loan that money to you. This fiat currency is dishonest money.

 

[ACCT]

Fiat Money

Welcome to fiat money. A Federal Reserve Note is an IOU nothing. If you were to turn in a Federal Reserve Note, you would get another Federal Reserve Note. What we have is a cookie jar with no gold in the cookie jar!

100% Commodity Money
The process of creating money started innocently enough. Jewelers deal with gold every day. Jewelers would store people’s gold. Jewelers would issue receipts or deposit slips for that gold. People would trade those receipts as if they were gold. Every receipt was backed by 100% gold.

Then lending and banking begins. Depositors wanted interest on their deposits of gold. Others wanted to borrow gold. The jeweler could print some private money and have the borrower sign an IOU.

Fractional Commodity Reserve Money
These new private banks discover something. Not everyone wants to withdraw gold at the same time. The new banker can issue more paper money than gold. This is fractional backing with gold as reserves and the rest with IOU’s.

Then begins the process of changing what a reserve is, and what functions as a reserve. Some jewelers and/or banks get greedy and lend out too much paper money. There is a run on banks, banks fail and people loose their gold. The government steps in and prohibits private bank money. Only the government prints money. The government replaces gold reserves with government money. However, government currency is still redeemable in gold. Reserves still function as “backing” but now government currency is also a reserve along with gold. Next, over time, there is a practice of suspending gold payments in the process of changing what is a reserve. In effect, redeemable currency is replaced with non-redeemable government money. Reserves are then no longer “backing,” and government currency serves as backing. Reserves (government money) no longer have intrinsic value. Government reserves are not intended to give confidence in the sense that gold reserves did.

Fractional Fiat Reserve
Government money and deposits at the central bank act as replacements for gold. The Federal Reserve Act of 1913 creates the structure (cookie jar) of the Fed. By 1931 (off the gold standard) The Federal Reserve Act allows the system to convert completely to fiat reserves. In 1913 the Fed requires the banks to place part of their reserves (fiat money) at the Fed. Then the Fed deposits become reserves. **The last step is that the Fed can create reserves out of nothing. **

There is nothing in the cookie jar. A Federal Reserve Note is an IOU nothing. Demand determines the price of our money. ** If demand were to evaporate, so would our money. FINI (FINISHED).**

 

[ACCT]

We have yet to pay the full financial price for the economic policies of the economist Keynes and the socialist policies of FDR and the Democrat Party. My guess is that we may not have long to wait. Hyperinflation may just around the corner. Inflation is headed to double digits. Enjoy your government monopoly money while you can. The value of the dollar is evaporating. The dollar will probably lose 50% of its purchasing power in the next 3-4 years.

 

[davidmlamb]

The Federal Reserve, a group of central bankers, creates money. The government does not create money. The Federal Reserve, created in 1913, is indeed responsible for the sin of love of money. At the risk of over simplification, they can create money out of nothing and then loan that money to you. This fiat currency is dishonest money.

Okay…since your post suggest the federal reserve is an entity apart from government how is government being greedy? How is the federal reserve creating wealth? If they print more money they are not creating wealth they are devaluing the dollar. That cannot be contrued as “greed.” Moreover you did not even address half my post which deals with corporate greed undermining the common good. That is the root of the economic collapse of both 1929 and 2008.

David

 

[davidmlamb]

We have yet to pay the full financial price for the economic policies of the economist Keynes and the socialist policies of FDR and the Democrat Party. My guess is that we may not have long to wait. Hyperinflation may just around the corner. Inflation is headed to double digits. Enjoy your government monopoly money while you can. The value of the dollar is evaporating. The dollar will probably lose 50% of its purchasing power in the next 3-4 years.

There are a lot greater “socialist policies” in Europe, Canada, and the rest of the free world than in the United States. Yet even Greece is better off for the working class than we are now. The Euro remains stronger than the dollar as does the British pound. So your implication that “socialist policies” is the root of our economic woes is bogus.

Roosevelt was a hero which is why he was re-elected 4X and if you ask elderly working class retirees more than 90% of the time they will tell you they are greatful to Roosevelt for creating the Social Security System. The problem with Social Security is the rich collect it. There should be a means test to receive it based on private retirement income and assets. That would fix the Social Security and Medicare system over night. Social Security was meant for exactly what it spells out SOCIAL-SECURITY. The rich do not need SOCIAL SECURITY because they are already SOCIALLY SECURE! Social Security is a tax that pays a PUBLIC benefit. It is not a savings account nor was it ever meant to be. Social Security by your standards is “Socialism.”

David

 

[JimG]

FDR’s policies prolonged Depression by 7 years, UCLA economists calculate.

 

[ACCT]

FDR’s policies prolonged Depression by 7 years, UCLA economists calculate.

Yes, it is clear that prolonging the boom by ever lager doses of credit expansion will have only one result: to make the inevitable ensuing depression longer and more grueling. It looks like the current stimulus monetary policy is a recipe for inflation, economic bust and lower living standards.

Causes of the Great Depression

What caused the Great Depression? I found three different answers. Which one is correct?

During the 1930’s government blamed business for the Depression. (Some things never change.) It was the fault of the capitalism! Keynes entered the picture and monetary policy has never been the same since. Additionally, “the Keynesian revolution…provided both an appealing justification and a prescription for extensive government intervention (Friedman).”

Milton Friedman says that the Federal Reserve failed to create bank liquidity. The Fed tightened credit when it should have eased credit. “The depression was a failure of government in an area in which the government had from the first been assigned responsibility – ‘To coin money, (and) regulate the Value thereof’ (Friedman).’

Douglas Noland, like Misses and Rothbard, believes that “Depressions are the unavoidable consequence of reckless boom time money and credit excess, rampart speculation and the resulting severe structural and economic distortions. At some point, bank reserves and ‘liquidity’ become virtually irrelevant to the greater issue of intractable economic imbalances and maladjustments, and the instability of debt structures. This was the case after the ‘Roaring 20’s,’ and it is once again the case today.”

P.S. Answer #1 is incorrect. Government, not business, caused and prolonged the Great Depression. We are now entering into the Greater Depression, thanks to a socialist government.