Re: #OT# PMI, smoke and and the taxpayer's sphincter

On Fri, 06 Mar 2009 19:50:53 -0600, cavelamb
<cavelamb@xxxxxxxxxxxxx> wrote:

Unka George, Et al...

I'm certaintly not able to verify or deny this - so I'm just asking...

Is this possible? Is it accurate?
Or is it doom and gloom spin?

http://www.youtube.com/watch?v=EMljWDEWABM


I remember the discussions on the gold standard.
Synopsis - there wasn't enough gold on earth to cover our economy.

But was that was referring to the bubbled up economy?
Or the true value?


Was there ever a pea under any of the shells???

Richard

==========
Remember that Glen Beck is a talk show host, with no particular
insight or knowledge into international economics, history,
sociology, psychology, etc.

While it does appear true that the FED is pumping enormous
amounts of money [mostly computer 1s & 0s, not much if any paper]
into the American/global economy, in many senses they haven't put
enough in to offset the very large drop in the "money" supply
because of the stock/bond/commodity market bubble contractions.

While no one knows for sure, I have seen estimates of over 10
trillion to 20 trillion dollars of "capital" lost due to the
market contractions, and from the graph it looked like less that
2 trillion has been injected.

The Treasury/FRB is walking a very tight rope here. On one hand,
they need to avoid inflation, but on the other hand, deflation is
the real killer, and a condition that is much more difficult to
treat. Japan has been trying for generation with minimal
success, and the last deflation here [in the US] was the "great
depression" that took over 10 years and a world war to overcome.
Everything considered, even significant inflation is better than
deflation in a modern debt based economy.

Mr. Beck indicates that it is difficult to remove "money" once it
has been injected into the economy. It is easy to do
mechanically, but difficult politically, in that all that is
required is to significantly raise tax rates and use the money to
retire existing governmental securities. This has much more
effect that you might suppose because the governmental securities
are frequently used as bank "loan reserves" so a 1$ reduction in
the securities in circulation reduces the amount of money
available for lending by 10X [or more for highly leveraged
banks]. A second option is to put the prime back up to 22%.
[Where's Paul Volker when we need him?]

While there may well indeed be some sort of
socio-economic/fiscal/financial collapse in the coming months, it
is highly doubtful that it will be a result of the FRB's
"quantitive easing," which is bankspeak for printing more money,
as this appears to be far below what is actually required. [by
about 4X to 10X] to replace the financial losses]

A prime candidate for an actual disaster is the collapse of
international trading, which is already resulting in massive food
shortfalls in many of the LDC countries that were seduced by the
IMF song of "comparative advantage" of exporting specialty crops
such as flowers and strawberries, while importing bulk commodity
food items such as rice, flour, processed pasta, etc. These
countries are now screwed in that their export markets have
disappeared, and the infrastructure to grow/process their own
subsistence crops [e.g. rice mills, flour mills] no longer exist
or have been allowed to decay.

In the US, IMNSHO, the major danger is the discovery of yet more,
bigger and better "bezzles," [as in "embezzles" as per J K
Galbraith] which would lead to total distrust of all financial
data and a catastrophic fall in the value of securities. Who
wants to buy [or hold] a "pig in a poke?"

The "state secret" status of the identity of the AIG derivative
counterparties, and the terms/conditions of these derivatives,
[now estimated at 450 billion for one company] combined with the
same sort of secrecy about Citigroup, Chase and BoA, combined
with the looming chapter 7 bankruptcy of GM, Chrysler, Delphi,
Vestion, GMAC, etc. etc. may well be such an "tipping point." It
seems appropriate that the GM/Chrysler bankruptcies could well
announced on April Fool's day [1 April]

As far as having adequate quantities of gold. This is another
"red herring." The supply of gold is what it is. The value of
the gold may well zoom to unprecedented heights, as in a new
Cadillac being priced at 2 gold eagles, but it could well be
done. What can't be done is to replace the debased paper
currency with gold, dollar for dollar at the current valuation.

It is unclear that this would offer any benefit, and indeed the
effort to retain the fixed gold exchange rates in 1928/29 is
widely held to be 'a,' if not *THE* trigger and amplification
mechanism than turned a US stock market "break" into global
deflation and the great depression.


Unka' George [George McDuffee]
-------------------------------------------
He that will not apply new remedies,
must expect new evils:
for Time is the greatest innovator: and
if Time, of course, alter things to the worse,
and wisdom and counsel shall not alter them to the better,
what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman.
Essays, "Of Innovations" (1597-1625).
.

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