Joe's Investo-Blog

http://www.bloomberg.com/news/2010-08-30/gold-rallying-to-1-500-for-analysts-as-soros-s-bubble-inflates.html

Investors are accumulating enough bullion to fill Switzerland’s vaults twice over as gold’s most- accurate forecasters say the longest rally in at least nine decades has further to go no matter what the economy holds.

Analysts raised their 2011 forecasts more than for any other precious metal the past two months, predicting a 10th annual advance, data compiled by Bloomberg show. The most widely held option on gold futures traded in New York is for $1,500 an ounce by December, or 18 percent more than the record $1,266.50 reached June 21. Holdings through bullion-backed exchange-traded products are already at more than 2,075 metric tons, within 0.1 percent of the all-time high.

“Either a swift economic recovery or further dismal economic performance should bring new buyers into the market,” said Eugen Weinberg, an analyst at Commerzbank AG in Frankfurt who was the most accurate forecaster in the first quarter and expects the metal to rise as high as $1,400 next year. “A stronger economy would create more jewelry demand. If the economy stays weak or gets worse, then investors will be looking for a safe haven.” Read more…

Asset Allocation, Gold, Inflation/Deflation, Markets Asset Allocation, economy, Gold, growth, strategy

by Felix Zulauf

When an economy shows the weakest recovery on record despite of the biggest monetary and fiscal stimuli on record, something is definitely different from previous cycles. In our view, it is debt deleveraging. So far, the US consumer and financial institutions have undertaken steps and decreased leverage to some degree but we are nowhere near the end of this process. At the very best, it will take another 2 years but most likely longer until that process is complete.

In the meantime, household income growth or the lack thereof will become the decisive factor. At present, it does not look very encouraging as it is stagnant in most countries or anemic at best. Moreover, in the US, housing is an important balance sheet item for the average household and those prices continue to erode.

Hence, we do not see a lot of hope for a normal recovery pattern. In Europe, the discussion about retirement age has been launched whereby the proposal is to hike the age limit decisively as mathematically there is no way that these pensions can ever be financed based on demographics and tax revenues in a low growth environment. This blows away many dreams of a relaxed retirement period and forces households to save more . . .”

Economics, Growth, Inflation/Deflation debt, deflation, deleveraging, economy, growth, liquidity trap

The Fed is Prepared to Launch Most Radical Intervention in History

By Mike Whitney

www.globalresearch.ca/index.php?context=va&aid=20801

August 28, 2010

The equities markets are in disarray while the bond markets continue to surge. The avalanche of bad news has started to take its toll on investor sentiment. Barry Ritholtz’s “The Big Picture” reports that the bears have taken the high-ground and bullishness has dropped to its lowest level since March ‘09 when the market did a quick about-face and began a year-long rally. Could it happen again? No one knows, but the mood has definitely darkened along with the data. There’s no talk of green shoots any more, and even the deficit hawks have gone into hibernation. It feels like the calm before the storm, which is why all eyes were on Jackson Hole this morning where Fed chairman Ben Bernanke delivered his verdict on the state of the economy on Friday.

Wall Street was hoping the Fed would “go big” and promise another hefty dose of quantitative easing to push down long-term interest rates and jolt consumers out of their lethargy. But Bernanke provided few details choosing instead this vague commitment:

“The Committee is prepared to provide additional monetary accommodation through unconventional measures if it proves necessary, especially if the outlook were to deteriorate significantly.”

Check. There’s no doubt that Helicopter Ben would be in mid-flight right now tossing bundles of $100 bills into the jet-stream like confetti if he had the option. But Bernanke is Read more…

Bonds, Currencies, Economics, Financial Crises, Inflation/Deflation Banks, congress, Currencies, debt, deflation, economy, fiscal policy, inflation, liquidity trap, monetary policy, quantitative easing, strategy, The Fed, 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.
Read more…

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.
Read more…

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.
Read more…

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 Ambrose Evans-Pritchard
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/7857595/RBS-tells-clients-to-prepare-for-monster-money-printing-by-the-Federal-Reserve.html

Entitled “Deflation: Making Sure It Doesn’t Happen Here”, it is a warfare manual for defeating economic slumps by use of extreme monetary stimulus once interest rates have dropped to zero, and implicitly once governments have spent themselves to near bankruptcy.

The speech is best known for its irreverent one-liner: “The US government has a technology, called a printing press, that allows it to produce as many US dollars as it wishes at essentially no cost.”

Bernanke began putting the script into action after the credit system seized up in 2008, purchasing $1.75 trillion of Treasuries, mortgage securities, and agency bonds to shore up the US credit system. He stopped far short of the $5 trillion balance sheet quietly pencilled in by the Fed Board as the upper limit for quantitative easing (QE).

Investors basking in Wall Street’s V-shaped rally had assumed that this bizarre episode was over. So did the Fed, which has been shutting liquidity spigots one by one. But the latest batch of data is disturbing.
Read more…

Asset Allocation, Economics, Financial Crises, Inflation/Deflation Banks, collapse, debt, Economics, economy, fiscal policy, history, inflation, monetary policy, The Administration, The Fed

By Paul Krugman
http://www.nytimes.com/2010/06/28/opinion/28krugman.html

Recessions are common; depressions are rare. As far as I can tell, there were only two eras in economic history that were widely described as “depressions” at the time: the years of deflation and instability that followed the Panic of 1873 and the years of mass unemployment that followed the financial crisis of 1929-31.

Neither the Long Depression of the 19th century nor the Great Depression of the 20th was an era of nonstop decline — on the contrary, both included periods when the economy grew. But these episodes of improvement were never enough to undo the damage from the initial slump, and were followed by relapses.

We are now, I fear, in the early stages of a third depression. It will probably look more like the Long Depression than the much more severe Great Depression. But the cost — to the world economy and, above all, to the millions of lives blighted by the absence of jobs — will nonetheless be immense.

And this third depression will be primarily a failure of policy. Around the world — most recently at last weekend’s deeply discouraging G-20 meeting — governments are obsessing about inflation when the real threat is deflation, preaching the need for belt-tightening when the real problem is inadequate spending.
Read more…

Asset Allocation, Economics, Financial Crises, Inflation/Deflation, Markets Banks, collapse, congress, debt, deflation, Economics, economy, EU, fiscal policy, history, IMF, monetary policy, strategy, taxes, The Administration, The Fed

There Is No Such Thing as a Sovereign Budget Deficit.

By Mike Whitney

Deficits create demand. Demand generates spending. Spending generates economic activity. Economic activity generates growth. Growth generates jobs, increases government revenues, reduces deficits and ends recessions.

Simple, right?

When consumers have too much debt, they will not spend no matter how low interest rates are. This is not theory, this is fact.

If the government cuts spending at the same time as consumers, then overall spending declines and the economy slips into recession. This is what the deficit hawks want–a return to recession. This is politics, not economics.

KEYNE’S KOAN: Increasing the deficits, lowers the deficits
Read more…

Economics, Financial Crises, Inflation/Deflation, Politics Asset Allocation, collapse, Currencies, debt, deflation, Economics, EU, exchange rates, fiscal policy, history, IMF, inflation, monetary policy, Politics, Regulators, trade

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.
Read more…

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

The E.U.’s Dangerous Game

By MARK WEISBROT
Published: May 12, 2010

The agreement by the European Union and the International Monetary Fund to provide up to $960 billion of support to the Continent’s weaker economies, as well as to financial markets, has appeared to calm investors worldwide, for the moment.

But this does not resolve the underlying problem, even in the short run.

The problem is one of irrational economic policy. The Greek government has reached an agreement with the E.U. authorities (which include the European Commission and the European Central Bank), and the I.M.F. that will make the current economic problems even worse.

This is known to economists, including the ones at the E.U. and I.M.F. who negotiated the agreement. The projections show that if their program “works,” Greece’s debt will rise from 115 percent of gross domestic product today to 149 percent in 2013. This means that in less than three years, and most likely sooner, Greece will be facing the same crisis that it faces today.
Read more…

Asset Allocation, Bonds, Currencies, Economics, Inflation/Deflation, Politics Bonds, collapse, Currencies, debt, Economics, economy, EU, exchange rates, fiscal policy, IMF, monetary policy, Politics

http://www.bloomberg.com/apps/news?pid=20601103&sid=aqpASviGyLQc

April 26 (Bloomberg) — The bond vigilantes who punished governments for profligate spending in past years have gone into hiding.

Sovereign bonds yield an average 2.385 percent, about the same as a year ago and below the average of 3.08 percent in 2008 when the credit market seizure led investors to seek the safety of government debt, according to Bank of America Merrill Lynch index data. The cost to borrow is steady even though the amount of bonds in the index that includes nations from the U.S. to Germany and Japan has grown to $17.4 trillion from $13.4 trillion two years ago.

While the debt helped the global economy recover from its first recession since World War II, yields show bond investors aren’t troubled that the growth will spur inflation. Consumer prices excluding food and energy costs rose 1.5 percent in February from a year earlier in the 30 countries that form the Organization for Economic Cooperation and Development, the smallest gain on record.

“The fact that inflation is very well behaved, that provides the cover for central banks to remain on the sidelines and continue to pursue accommodative policies to help the economy,” said Thomas Girard, a senior money manager who helps oversee $115 billion in fixed-income assets with New York Life Investment Management in New York.
Read more…

Asset Allocation, Bonds, Economics, Inflation/Deflation, Markets Asset Allocation, Bonds, collapse, debt, deflation, Economics, economy, fiscal policy, inflation, monetary policy, Politics, Regulators, strategy, The Fed, US treasury

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.
Read more…

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

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

To My Clients:

Our accounts are up 20.41 % Year-To-Date.
The Dow Jones Average is up 10.66 % Year-To-Date.

Although the stock and bond markets have been quite buoyant over the last several months, it is still quite premature to declare the longest postwar recession, over. There are still considerable risks to the economy. The massive fiscal stimulus together with the central bank’s printing of money is beginning to unnerve central banks around the world that hold huge portfolios of dollars. Consequently, the dollar, which is the world’s reserve currency for trading commodities such as oil, is in decline. This means that it will become more difficult for the government to borrow massive amounts of money from foreign sources, and imports, such as oil, will rise in price. Interest rates will also rise as necessary to attract the needed capital. Likewise, gold has been rising in price and is reaching all time highs. Read more…

Asset Allocation, Bonds, Currencies, Economics, Financial Crises, Gold, Inflation/Deflation, Markets, Stocks Asset Allocation, Banks, Bonds, Currencies, debt, economy, exchange rates, fiscal policy, Gold, inflation, monetary policy, performance, stock market, stock picks, strategy, 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