Joe's Investo-Blog

http://pragcap.com/those-who-ignore-history

by The Pragmatic Capitalist (pragcap.com)

My position over the last 2 years has been as follows: this is a Main Street debt crisis. I have been highly critical of the government’s incessant interventionist policies over the last few years largely because they ignore the actual problems at hand. First it was Mr. Bernanke saving the banks because he believed the credit crisis started with the banking sector. The great monetarist gaffe ensued. Tim Geithner piled on with the PPIP. FASB jumped on board the bank rescue plan by altering the accounting rules. And then the icing on the cake was the Recovery Act, which, in my opinion, just shoveled money into the hole that had become the output gap, without actually trying to target the real cause of the crisis – those burdened by the debt. In essence, the various bailouts primarily targeted everyone except the people who really needed it.
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Asset Allocation, Banks, Economics, Financial Crises, Growth Asset Allocation, debt, deleveraging, Economics, economy, EU, fiscal policy, history, strategy, The Administration, US treasury

…Especially for Currency Issuing Soveriegn States

Escaping the Sovereign Debt Trap: The Remarkable Model of the Commonwealth Bank of Australia

http://www.globalresearch.ca/PrintArticle.php?articleId=20473

by Ellen Brown

The current credit crisis is basically a capital crisis: at a time when banks are already short of the capital needed to back their loans, capital requirements are being raised. Nearly a century ago, the Commonwealth Bank of Australia demonstrated that banks do not actually need capital to make loans – so long as their credit is backed by the government. Denison Miller, the Bank’s first Governor, was fond of saying that the Bank did not need capital because “it is backed by the entire wealth and credit of the whole of Australia.” With nothing but this national credit power, the Commonwealth Bank funded both massive infrastructure projects and the country’s participation in World War I.

President John Adams is quoted as saying, “There are two ways to conquer and enslave a nation. One is by the sword. The other is by debt.” The major conquests today are on the battlefield of debt, a war that is raging globally. Debt forces individuals into financial slavery to the banks, and it forces governments to relinquish their sovereignty to their creditors, which in the end are also private banks, the originators of all non-cash money today. Read more…

Banks, Currencies, Economics, Financial Crises, Inflation/Deflation Banks, collapse, Currencies, debt, deflation, Economics, exchange rates, history, IMF, inflation, The Fed, trade, US treasury

http://www.thefiscaltimes.com/Issues/The-Economy/2010/07/23/What-Can-the-Fed-Still-Do.aspx

By BRUCE BARTLETT, The Fiscal Times on Jul 23, 2010

This week, Federal Reserve Board chairman Ben Bernanke testified before Congress that the Fed is prepared to take additional actions to stimulate the economy in the event that growth falters. Unfortunately, the Fed does not yet appear to be considering an end to its ill-advised policy of paying interest on excess reserves at banks, which is in effect a subsidy to them for not lending.

Historically, the Fed operates primarily through short-term interest rates. It largely controls a special rate called the federal funds rate, which is the rate at which banks borrow reserves from each other on overnight loans.

Although it is generally assumed that the fed funds rate automatically impacts longer-term rates, there is little evidence that this is the case. In 2004, the fed funds rate was 1.35 percent, the corporate bond rate was 5.63 percent, and the home mortgage rate was 5.77 percent. Then the Fed tightened and the fed funds rate rose to 5 percent. But the corporate bond rate was about the same at 5.56 percent and so was the mortgage rate at 6.41 percent. Now the fed funds rate is close to zero and the corporate bond rate is 4.69 percent and the mortgage rate is just over 5 percent.
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Banks, Economics, Inflation/Deflation Banks, debt, deflation, Economics, liquidity trap, monetary policy, quantitative easing, The Fed

Money Supply Confuses Deflation’s Confused Proponents
By John Tamny

http://www.realclearmarkets.com/articles/2010/07/27/money_supply_confuses_deflations_confused_proponents_98592.html

The great British political economist John Stuart Mill long ago noted that “the whole of goods in the market” composes “the demand for money.” To put it more simply, money is just the measuring rod that facilitates the real exchange of actual goods and labor.

As such, when production and labor increases, so does the supply of money. Conversely, when both decrease the supply of money declines. To make basic what is basic, money supply’s expansion and decline is a function of production.

This is important in light of all the handwringing among deflation’s confused proponents at present, Ambrose Evans-Pritchard of the Daily Telegraph the most notable in this regard. Watching the “Ms” in decline, Evans-Pritchard notes that they did much the same in the 1930s, and naturally suggests we’re headed for a 1930s style Great Depression.

Assuming we are, it can’t be stressed enough that a decline in the monetary aggregates would be and is a symptom of reduced economic activity, not a driver of same as Evans-Pritchard supposes.

Considering deflation itself, the total perversion of its meaning continues to reach staggering heights. That deflation is always and everywhere a symptom of rising currency values doesn’t seem to concern its true believers despite the fact that the world’s currencies are mostly in decline. That Japan’s deflation was a function of the yen tripling in value against gold (the opposite direction of the world’s currencies today) is wholly ignored by a deflation cult convinced that Japan’s sufferance of an overly strong yen mirrors a period of broad currency weakness. That prices fall all the time thanks to productivity enhancements doesn’t concern its religionists either. That there’s little interest in accessing credit during periods of deflation (borrowers aren’t eager to take out loans that will rise in cost) hasn’t shaken the beliefs of an economic sect that mistakes an inflationary lack of credit for deflation.
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Banks, Currencies, Economics, Inflation/Deflation Asset Allocation, Banks, Currencies, debt, deflation, Economics, exchange rates, fiscal policy, history, inflation, liquidity trap, monetary policy, monetary velocity, quantitative easing, The Fed, US treasury

To My Clients:

Our accounts are up 5.3 % for the Quarter and up 11.2 % for the year 2010 to date.

Even though the broad stock market indexes are all down over 10 % this past quarter, we have been fortunate once again to show positive returns in our accounts with a targeted and conservative approach. Our tech stock, Sandisk, was up over 20%, our gold stocks were up 12% and our long-term treasury bonds were up 10%. The largest portions of our accounts remain invested in cash and short-term treasury securities. Short-term interest rates will remain at historic lows and we expect long-term interest rates to continue to decline even as federal debt surges.

The alleged “recovery” recently has been showing signs of weakness and debt problems continue across the globe leading to volatility and weakness in the stock markets. There is considerable discussion among economists and analysts as to whether we will enter into a double dip recession. We don’t necessarily agree and tend to follow a recent new term to describe the current outlook for the economy which is “muddle through”. Read more…

Asset Allocation, Banks, Bonds, Economics, Gold, Inflation/Deflation, Markets, Portfolio Management Asset Allocation, Bonds, debt, Economics, economy, fiscal policy, liquidity trap, monetary policy, Portfolio Management, stock market, stock picks, Stocks, strategy, The Fed

http://comstockfunds.com/default.aspx?act=Newsletter.aspx&category=SpecialReport&newsletterid=1534&menugroup=Home&AspxAutoDetectCookieSupport=1

We understand that we have discussed the debt problem in this country for what seems to be forever, but we can’t stop talking about it now that the debt is clearly the catalyst for the latest stock market downturn. Debt is discussed by the pundits on financial TV also, but in almost every case the discussion revolves around government deficits relative to GDP or government debt relative to GDP. They are constantly comparing the U.S. government debt to every other country in the world (especially Portugal, Italy, Ireland, Greece, and Spain-PIIGS). We believe that the government debt should be taking a back seat to the private debt which is much larger and must eventually be deleveraged.
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Banks, Currencies, Economics, Financial Crises, Inflation/Deflation, uncategorized Banks, Bonds, collapse, debt, deflation, Economics, economy, fiscal policy, history, inflation, liquidity trap, monetary policy, monetary velocity, quantitative easing, The Fed, US treasury

by James Galbraith
May 12, 2010

source: http://voices.washingtonpost.com/ezra-klein/2010/05/galbraith_the_danger_posed_by.html

James Galbraith is an economist and the Lloyd M. Bentsen Jr. chair in government and business relations at the University of Texas at Austin. He’s also a skeptic of the prevailing concern over America’s long-term deficit. With many people now comparing America’s fiscal condition to Greece, I spoke with Galbraith to get the other side of the argument. An edited transcript of our conversation follows.

EK: You think the danger posed by the long-term deficit is overstated by most economists and economic commentators.

JG: No, I think the danger is zero. It’s not overstated. It’s completely misstated.

EK: Why?

JG: What is the nature of the danger? The only possible answer is that this larger deficit would cause a rise in the interest rate. Well, if the markets thought that was a serious risk, the rate on 20-year treasury bonds wouldn’t be 4 percent and change now. If the markets thought that the interest rate would be forced up by funding difficulties 10 year from now, it would show up in the 20-year rate. That rate has actually been coming down in the wake of the European crisis.

So there are two possibilities here. One is the theory is wrong. The other is that the market isn’t rational. And if the market isn’t rational, there’s no point in designing policy to accommodate the markets because you can’t accommodate an irrational entity.
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Banks, Bonds, Currencies, Economics, Inflation/Deflation Banks, Bonds, congress, Currencies, debt, deflation, Economics, EU, exchange rates, fiscal policy, IMF, inflation, monetary policy, Politics, The Administration, US treasury

To My Clients:

Our accounts are up 5.4% Y-T-D and up 25.1% for the last twelve months.

The markets continue to show buoyancy as the economy very slowly begins a recovery. To a degree, this is largely a result of the Fed’s ineffectual efforts of getting money in circulation. Using the lowest interest rates in generations, the tactic is still seeking evidence of success. The curse of our banking system that in order to create money in circulation, it is wholly dependent upon loan and debt creation to inject money into the economy. However, consumers having been severely burned, no longer want to be in debt and, banks likewise, don’t really want to lend, sometimes even to their best credits. Money in circulation cannot grow unless people borrow and banks lend. Given the recent rising markets, it appears that banks are largely pumping and loaning money into financial assets instead of into bricks and mortar businesses that create jobs. Full recovery will still take some time.

Having said all of that, the economy is Read more…

Asset Allocation, Banks, Economics, Financial Crises, Gold, Markets, Portfolio Management, Stocks Asset Allocation, Banks, collapse, debt, Economics, economy, monetary policy, performance, Portfolio Management, stock market, Stocks, strategy, The Fed

• Force Credit Default Swaps onto Transparent Exchanges
• “Too Big to Fail” Must Go
• Excessive Leverage Must Go
• Separate Commercial and Investment Banking – Again

Read the entire John Mauldin article here: http://www.frontlinethoughts.com/article.asp?id=mwo040910

Credit Default Swaps

What happened in the last credit crisis was that interlocking credit default swaps among so many banks made the ENTIRE system too big to fail. AIG basically sold naked options in the form of credit default swaps to all. Yet nothing has changed. We again have credit default swaps (CDS) growing, and no one knows who could be overextended. Once again, everyone could be dependent on everybody else, and we have no idea if there is a Bear, Lehman, or AIG in these woods. CDS’s are good things, just like futures. But they must go to a transparent exchange. There needs to be position limits, just as there are in futures and commodities. There needs to be very transparent pricing and commissions. And someone needs to monitor who owns them and what risks they are taking.

Too Big to Fail Must Go
We have large banks that take massive risks, which allow them to pay huge bonuses to management and traders; and then if they have problems the taxpayer has to take the losses. We can see why the banks like it. The problem is that parts of these large banks are essentially hedge funds, working with cheap commercial deposit money and putting the entire bank at risk. As taxpayers, we don’t want to be taking the risk so some big bank can have a trading desk and make large profits that only benefit their shareholders and management, where we have to pick up the pieces with our tax dollars when they fail. Separate traditional banking and investment banks. Commercial banks should be boring, traditional lending to customers, services, etc.

Excessive Leverage Must Go
The problem of too big to fail is ultimately one of leverage. If a small bank fails, no one really notices. If a giant bank fails and puts the system at risk, it costs us a lot. We must reduce the allowable leverage the larger a bank gets? This would clearly reduce their risk and encourage them to only make prudent bets (otherwise known as loans), as their risk capital would be limited. If they wanted to make more loans, then they could raise more capital or retain more earnings. Would that hurt earnings and shareholders and limit share prices? Yes, but the world of privatizing the gains and socializing the risks must become a thing of the past.

Banks, Economics, Financial Crises, Markets, Politics Banks, collapse, congress, debt, economy, Politics, Regulators, The Administration

Read the entire article here: http://baselinescenario.com/2010/03/04/why-exactly-are-big-banks-bad/#more-6656

Big banks cannot be reined in through some clever tweaking of the rules. The issue before us is intensely political – just as it was in the first decade of the twentieth century (and in Jackson’s era). There is again a confrontation between concentrated financial power and our democracy. One side will win and the other side will lose.

The banks start with a definite edge. The public relations machines of today’s bankers may be even more effective than those of Morgan and Rockefeller – although the campaign contributions and control of the Senate exercised by those titans was immense.

But it is still early days – the Senate legislation expected this week or next will achieve nothing, except make the stakes clearer and motivations more transparent. If the banks win this round, as seems likely, they will become even larger – and more dangerous. At current scale, our megabanks bring no social benefits and great social risks.

Just as a hundred years ago, the consensus on big banks has to change. In this instance, either we break them up or they will soon break us all.

Banks, Financial Crises, Politics Banks, collapse, history, Politics, Regulators, The Fed, US treasury

Ok, by now you should be able to tell that I have a distinct distaste for anything bankerish. Frank Capra’s characterization in “It’s a Wonderful Life” seems to have been about spot on for nearly all bankers. Herewith, I now share with you another enlightenment from Doonesbury. Enjoy:

Banks, Humor Banks, fraud, Humor, The Fed

What the Peoples Bank of China Can and Cannot do with its Foreign Currency Reserves

http://mpettis.com/2010/02/what-the-pboc-cannot-do-with-its-reserves/

February 22nd, 2010 by Michael Pettis

China did not reduce its dollar holdings
Beijing is not Washington’s banker
Can PBoC reserves protect China?
Balance sheet mismatches
Are there no winners and losers?
Wealth is transferred within China

It is a real toss-up as to which generates more bizarre comment in the international press: Beijing’s long-feared dumping of US Treasuries, or the use and value of the PBoC’s central bank reserves. The revelation last week that Chinese holdings of US Treasury obligations fell in December by $34.2 billion, to $755.4 billion, generated a frisson of fear and excitement, leading one prominent newspaper to worry that “If there is one thing that gets investors twitchy, it is the fear that China is losing its appetite for US government bonds.”

And shouldn’t they get twitchy? After all this reduction in Chinese holdings of Treasury bonds comes from the USG’s TIC data, so it must be true that China is dumping dollars, right?

No need to twitch, it means no such thing. Read more…

Banks, Bonds, Currencies, Economics, Financial Crises Banks, Bonds, collapse, Currencies, debt, Economics, exchange rates, fiscal policy, inflation, monetary policy, The Administration, The Fed, trade

Here’s a guy who finally understands his job. Let’s see if Pres. Obama understands his and get’s behind this guy. It still remains to be seen if the banks really do own Congress and are able to derail this upstart.

CFTC’s Gensler Turns Back on Wall Street to Push Derivatives Overhaul

By Ian Katz and Robert Schmidt
Bloomberg News
Friday, February 12, 2010

http://www.bloomberg.com/apps/news?pid=20601109&sid=a3OkrdITAZtA&pos=10

WASHINGTON — Gary Gensler, chairman of the Commodity Futures Trading Commission, is shattering any illusions that his 18 years at Goldman Sachs Group Inc. would make him sympathetic to Wall Street’s effort to weaken derivatives legislation.

Over a private lunch at the Waldorf Astoria hotel on Jan. 6, Gensler, 52, told bank executives that while he once shared their goals — to boost revenue and increase their bonuses — his responsibility now was to American taxpayers. And if he gets his way, Gensler said, their firms will be less profitable, according to three people familiar with the discussion.

Attending the lunch were David B. Heller, co-head of the securities division at Goldman Sachs; Seth Waugh, chief executive officer of Deutsche Bank Americas; Timothy O’Hara, head of global credit at Credit Suisse Holdings USA Inc., and Robert P. Kelly, CEO of Bank of New York Mellon Corp. When one banker asked Gensler what he sees as the biggest obstacles to reform, he gestured toward his hosts and replied, “You.”

Read more…

Banks, Financial Crises, Politics Banks, collapse, Politics, Regulators, The Administration

To My Clients:

Our accounts are up 24.1 % for the year 2009.

Our accounts, together with the stock and bond markets, have performed quite well this past year despite large holdings in each account of low yielding T-bills and Treasury bonds. It is still quite difficult to find reasons not to continue our successful defensive strategies of the past three years in which we’ve been quite fortunate to obtain positive returns in each year.

The credit crisis is far from over, and although there are indications that the recession is coming to an end, it also appears that it will be a far from robust recovery. The best that can be said of the economy is that it has stopped declining. Employment continues to lag and will continue to be a severe drag on any recovery. In spite of the Federal Reserve’s efforts to stimulate monetary growth, it is not happening, as banks remain fearful of lending and continue to leave their reserves on deposit at the Fed. What little stimulus we are seeing seems to be finding its way into the financial markets so far, with little to show in the real economy.

The dollar has been declining for most of this past year with only recent signs of a turnaround. This has contributed to our Read more…

Asset Allocation, Banks, Bonds, Currencies, Economics, Financial Crises, Gold, Inflation/Deflation, Markets, Portfolio Management Asset Allocation, Banks, Bonds, Currencies, debt, deflation, economy, exchange rates, Gold, inflation, monetary policy, performance, Portfolio Management, stock market, strategy, The Fed, trade

Recently Sally Hutchins commented on a recent post as follows:

Please continue. So printing more money is creating more debt? Educate me. Love, Sally

Love? Yep. She’s my adorable sister.

Hi Sally:

Let me try to answer your question as succinctly as I can.

“Printing money” is a term used today that nobody really knows what it means. Historically it meant the government physically printed little pieces of paper which were then spent into circulation by buying goods and services the government needed. For example, in the Revolutionary War, the government printed continentals to pay the troops. Allegedly, British counterfieting rendered the currency eventually worthless. Again, when New York Bankers refused Abraham Lincoln additional financing during the Civil War, Lincoln then decided simply to print “greenbacks” to pay the troops. It worked. Merchants accepted greenbacks because Lincoln decreed that greenbacks would be accepted by the government for the payment of taxes. “Greenbacks” remained in circulation for decades and largely contributed to massive subsequent economic growth.

Today, 99 percent of all money in circulation isn’t currency at all, but mere electronic blips or signals recorded on the computerized ledgers of the banking system. Obviously actual printing of money doesn’t really happen anymore in any meaningful way. However, “money creation” is probably a more appropriate term. Money is created when a bank makes a loan. Presto. That’s it. I already know that you’re going to ask Read more…

Banks, Economics, Financial Crises, Inflation/Deflation, Politics Banks, collapse, Currencies, debt, deflation, Economics, economy, fiscal policy, history, inflation, monetary policy, Politics, taxes, The Fed, US treasury, war

Harsh lessons we may need to learn again
By Joseph E. Stiglitz (China Daily)

http://www.chinadaily.com.cn/opinion/2009-12/31/content_9249981.htm

Joseph Stiglitz recounts five “harsh lessons” from 2009:

1. Markets are not self-correcting.
2. Recent Markets failed because too-big-to-fail financial institutions had perverse incentives.
3. Keynesian policies do work.
4. There is more to monetary policy than just fighting inflation.
5. Not all innovation leads to a more efficient and productive economy – let alone a better society.

The best that can be said for 2009 is that it could have been worse, that we pulled back from the precipice on which we seemed to be perched in late 2008, and that 2010 will almost surely be better for most countries around the world. The world has also learned some valuable lessons, though at great cost both to current and future prosperity – costs that were unnecessarily high given that we should already have learned them.

The first lesson is that markets are not self-correcting. Indeed, without adequate regulation, they are prone to excess. In 2009, we again saw why Adam Smith’s invisible hand often appeared invisible: it is not there. The bankers’ pursuit of self-interest (greed) did not lead to the well-being of society; it did not even serve their shareholders and bondholders well. It certainly did not serve homeowners who are losing their homes, workers who have lost their jobs, retirees who have seen their retirement funds vanish, or taxpayers who paid hundreds of billions of dollars to bail out the banks.

Under the threat of a collapse of the entire system, the safety net – intended to help unfortunate individuals meet the exigencies of life – was generously extended to commercial banks, then to investment banks, insurance firms, auto companies, even car-loan companies. Never has so much money been transferred from so many to so few.
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Banks, Economics, Financial Crises, Inflation/Deflation, Markets, Politics Banks, collapse, deflation, Economics, economy, fiscal policy, history, inflation, monetary policy, Politics, taxes, The Fed, US treasury

In today’s Senate hearings to confirm the re-appointment of Federal Reserve Chairman Ben Bernanke, Senator Bunning succinctly lays out the greivous mistakes of the Fed in the years leading up to, during, and in the aftermath of the recent financial meltdown. It is hard to refute his argument that the privately owned Fed did nothing for the taxpayers and everything for it’s stockholders, the member banks of the Federal Reserve System.

Statement of Senator Bunning

Four years ago when you came before the Senate for confirmation to be Chairman of the Federal Reserve, I was the only Senator to vote against you. In fact, I was the only Senator to even raise serious concerns about you. I opposed you because I knew you would continue the legacy of Alan Greenspan, and I was right. But I did not know how right I would be and could not begin to imagine how wrong you would be in the following four years.
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Banks, Economics, Financial Crises, Markets, Politics Banks, collapse, debt, deflation, economy, history, monetary policy, Politics, The Fed, US treasury

During the 1991 recession (if you can call it that) Bill Clinton made a campaign issue of “It’s the economy stupid.” It’s true, it is all about the economy. But it’s also a little more fundamental than that. It’s something that people have known intuitively for centuries. In a good economy, there was always “plenty of money” and in hard times it was “money is scarce”. Things haven’t changed, except that now those responsible for money creation are intentionally clouding the picture with all kinds of economic jawboning (dutifully reported daily by the media) to create a paranoia of both hyperinflation and deflation.
Read more…

Banks, Economics, Financial Crises, Inflation/Deflation Banks, collapse, debt, deflation, Economics, economy, history, inflation, monetary policy, stock market, The Fed

Rep. Frank eyes Fed audit, emergency lending curbs

Saturday August 29, 2009, 10:47 pm EDT
By Tim Ahmann

WASHINGTON (Reuters) – Rep. Barney Frank, the chairman of the U.S. House of Representatives Financial Services Committee, said he plans legislation to restrict the Federal Reserve’s emergency lending powers and subject the central bank to a “complete audit.”

At a recent town hall meeting, Frank said the House would pass a bill to use an audit to crack open the central bank’s books more widely, but in a way that will not encroach on the central bank’s monetary policy independence.

In addition, he said the House would move to rein in the authority that allows the Fed to lend to a wide range of non-bank firms in “unusual and exigent circumstances.”

A bill sponsored by Texas Republican Rep. Ron Paul that would allow the Government Accountability Office, a federal watchdog agency, to audit Fed interest-rate decisions has won the co-sponsorship of more than half of the House.

Fed Chairman Ben Bernanke has warned that the bill would compromise the U.S. central bank’s policy-making independence and could undermine financial markets and the economy.

Frank said he has been working with Paul on compromise language…

Ahem…, but isn’t it incumbent upon the Fed Chairman, arguably the most powerful man in the world, to explain exactly how an audit can compromise policy-making independence? I’m holding my breath on this one.

Banks, Financial Crises, Politics Banks, Currencies, debt, deflation, monetary policy, Politics, The Fed

This is a transcript of Prof. Joseph Peden’s 50-minute lecture “Inflation and the Fall of the Roman Empire” given at the Mises Institute Seminar on Money and Government in Houston, Texas on October 27, 1984. The original audio recording is available courtesy of the Mises Institute.

Two centuries ago, in 1776, there were two books published in England, both of which are read avidly today. One of them was Adam Smith’s The Wealth of Nations and the other was Edward Gibbon’s Decline and Fall of the Roman Empire. Gibbon’s multi-volume work is the tale of a state that survived for twelve centuries in the west and for another thousand years in the east, at Constantinople.

Yet Gibbon in looking at this phenomenon commented that the wonder was not that the Roman Empire had fallen, but rather that it had lasted so long. And scholars since Gibbon have devoted great deal of energy to examining that problem: how was it that the Roman Empire lasted so long,   Read more…

Banks, Currencies, Economics, Financial Crises, Gold, Inflation/Deflation Banks, collapse, Currencies, debt, Economics, economy, exchange rates, fiscal policy, Gold, history, inflation, monetary policy, taxes, The Fed, US treasury, war

The Secrets of China’s Growth: The Government Owns the Banks rather than the Reverse

By Ellen Brown

“The banks — hard to believe in a time when we’re facing a banking crisis that many of the banks created — are still the most powerful lobby on Capitol Hill. They frankly own the place.” — U.S. Senator Dick Durbin, Democratic Party Whip, April 30, 2009

While the U.S. spends trillions of dollars to bail out its banking system, leaving its economy to languish, China is being called a “miracle economy” that has decoupled from the rest of the world. As the rest of the world sinks into the worst recession since the 1930s, China has maintained a phenomenal 8% annual growth rate. Those are the reports, but commentators are dubious. They ask how that growth is possible, when other countries relying heavily on exports have suffered major downturns and remain in the doldrums. Economist Richard Wolff skeptically observes:  Read more…

Banks, Currencies, Economics, Financial Crises, Inflation/Deflation, Markets Banks, collapse, Currencies, debt, Economics, economy, exchange rates, Gold, inflation, monetary policy, strategy, The Fed, US treasury

June 21, 2009
by Gary North

Back in 1973, gold standard advocate John Exter made a phrase famous in hard-money circles: “Pushing on a string.” Exter argued that prices of all assets except gold (he ignored silver) would someday collapse because of the pyramiding of debt. Banks would eventually cease to lend, out of fear of default. That would cause the default.

The FED would inflate the monetary base, he said, but this would not reverse the price decline. The commercial banks would not lend. The FED would therefore push on a string. Its attempt to inflate would fail.

Read more…

Banks, Economics, Financial Crises, Inflation/Deflation Banks, collapse, debt, deflation, Economics, economy, fiscal policy, Gold, inflation, monetary policy, strategy, The Fed, US treasury

How California Could Turn its IOUs into Dollars
By Ellen Brown
Global Research, July 22, 2009

California has over $17 billion on deposit in banks that have refused to honor its IOUs, forcing legislators to accept crippling budget cuts. These austerity measures are unnecessary. If the state were to deposit its money in its own state-owned bank, it could have enough credit to solve its budget crisis with funds to spare.

California could pull its deposits out of those depository banks refusing its IOUs and put them instead in its own state-owned bank, following the lead of North Dakota, which now has the only state-owned bank in the country. Set up in 1919 to escape Wall Street predators, the Bank of North Dakota has been generating low-interest credit for the state and its residents for nearly a century. North Dakota is one of only two states (along with Montana) currently able to meet their budgets.

Read more…

Banks, Economics, Financial Crises Banks, collapse, debt, fiscal policy, The Fed

Goldman Sachs in Talks to Acquire Treasury Department
Sister Entities to Share Employees, Money

From The Borowitz Report

In what some on Wall Street are calling the biggest blockbuster deal in the history of the financial sector, Goldman Sachs confirmed today that it was in talks to acquire the U.S. Department of the Treasury.

According to Goldman spokesperson Jonathan Hestron, the merger between Goldman and the Treasury Department is “a good fit” because “they’re in the business of printing money and so are we.”

The Goldman spokesman said that the merger would create efficiencies for both entities: “We already have so many employees and so much money flowing back and forth, this would just streamline things.”

Mr. Hestron said the only challenge facing Goldman in completing the merger “is trying to figure out which parts of the Treasury Dept. we don’t already own.”

Goldman recently celebrated record earnings by roasting a suckling pig over a bonfire of hundred-dollar bills.

Elsewhere, conspiracy theorists celebrated the 40th anniversary of NASA faking the moon landing.

And in South Carolina, Gov. Mark Sanford gave his wife a new diamond ring, while his wife gave him an electronic ankle bracelet.

Banks, Humor Banks, fraud, US treasury

With the current administration’s economic policies moving solidly ahead, everyone’s a Keynsian now. Right? It was John Maynard Keynes who remarked that the gold standard is a barbarous relic. Well maybe the “gold standard” is, but central banks around the globe clearly think gold itself may be somthing of high value (Europeans excepted).

Much of the region’s Central Bank’s gold that has so far been held in London may soon return to Dubai.

The new vaults of DMCC will be a home to the gold allocated to the Dubai Gold Securities (DGS) Exchange Traded Funds (ETFs). The vault may also become a natural choice for storage of gold reserves by central banks in the regional market, analysts said. Read more…

Asset Allocation, Banks, Currencies, Gold Asset Allocation, Banks, Currencies, Gold, strategy