U.S. TO DEFAULT ON ITS DEBT – SUMMER 2009

[Carl Veritas]

Hoover is wrongheaded.
The Fed pumped money into the banking system in the 20s. The newly created money made its way to stock speculators and I think land speculators in Florida also.
The device is of course the level of interest rates.

In 1929 just as in the dot-com bubble and todays housing bust, The Feds increasing of commercial bank reserves went to the loan market allowing for the boom, and the bust arrives when the Fed reverses its monetary policy and starts raising rates.
The reasons the Fed raised rates differred but the result was the same.
Jobs and businesses that sprouted on the back of the boom are liquidated by the market.
Politicians start calling for the Fed to again prime the loan market and bring on prosperity. Deja vu.
So the boom originates in the business loan market.

The 1929 stock market crash scared depositors and began pulling their money out from banks en masse.
This forced banks to call in loans early causing widespread business failures, and of course job losses.
This is a period where people distrusted whats left of the decimated banking industry. The idea that if only the Fed just pumped enough bank reserves, somehow banks will lend and customers will borrow.
Just read todays headlines to see if that assertion holds water. Is Bernanke and Friedman in this camp?

Falling demand for goods are a natural result of widespread unemployment. Falling demand puts downward pressure on prices. Really?

This is the feared deflation that has been repeated time and again. Now, if people are unemployed what is needed is more production, not less. Hoover in fact believed that low prices is what is causing the depression and not the other way around. He subsidized industries to reduce their production
in an attempt to artificially lift prices. This was one of many wrongheaded polices he instituted that turned a banking panic to a calamity. Had he left things alone, the market would have liquidated unsound investments and the economy would have regained its footing a lot faster—just as it has in previous panics.

Roosevelt only continued Hoovers efforts to increase the size of the government(New Deal 2). He poured billions into make work projects and by the time he left office,
the unemployment figures remained about the same.
The nature of employment simply changed from private to government. Music to socialists ears.

Paul Krugman received the Nobel Prize in economics.
(The prize is awarded by the Swedish Central Bank).
Is this the person?

Quantity Of Money—
In a productive economy where money supply remained relatively constant, the market will adjust the purchasing power of the currency. In other words, money will simply buy more goods.

The opposite–increasing the money supply– produces
rising prices, in other words, money loses it’s purchasing power.

$1.00 in 1913 is the equivalent of $22.10 in 2008 is an example.

[Carl Veritas]

The other deflation aside from falling prices—-
contracting money supply—-during the 1920s depression? Was caused by depositors pulling money out of banks which countered the Feds attempt to increase the money supply. I may be able to pull out some of the money aggregates data from that time, later. But clearly Hoover and other economists of that time thought that again stimulating the loan market will get us out of the depression. The same medicine that got the patient sick was the prescribed cure. To his credit, Treasury secretary Mellon, once the bust arrived, opposed Hoovers interventionist proposals. He knew that the hands-off approach worked in the past.

The difference between that bust and todays?

This bust has everyone from the President, both Presidential candidates, The US Treasury Secretary,
The Federal Reserve Chairman, (almost) the entire US Congress, Wall Street (always) and most Americans agreeing that it is in the nations interest to bail out bad investments(and investors) made during the housing boom. With billions of dollars from future tax collections pledged.

[Carl Veritas]

The other deflation aside from falling prices—-
contracting money supply—-during the 1920s depression? Was caused by depositors pulling money out of banks which countered the Feds attempt to increase the money supply. I may be able to pull out some of the money aggregates data from that time, later. But clearly Hoover and other economists of that time thought that again stimulating the loan market will get us out of the depression. The same medicine that got the patient sick was the prescribed cure. To his credit, Treasury secretary Mellon, once the bust arrived, opposed Hoovers interventionist proposals. He knew that the hands-off approach worked in the past.

The difference between that bust and todays?

This bust has everyone from the President, both Presidential candidates, The US Treasury Secretary,
The Federal Reserve Chairman, (almost) the entire US Congress, Wall Street (always) and most Americans agreeing that it is in the nations interest to bail out bad investments(and investors) made during the housing boom. With billions of dollars from future tax collections pledged.

[Carl Veritas]

The other deflation aside from falling prices—-
contracting money supply—-during the 1920s depression? Was caused by depositors pulling money out of banks which countered the Feds attempt to increase the money supply. I may be able to pull out some of the money aggregates data from that time, later. But clearly Hoover and other economists of that time thought that again stimulating the loan market will get us out of the depression. The same medicine that got the patient sick was the prescribed cure. To his credit, Treasury secretary Mellon, once the bust arrived, opposed Hoovers interventionist proposals. He knew that the hands-off approach worked in the past.

The difference between that bust and todays?

This bust has everyone from the President, both Presidential candidates, The US Treasury Secretary,
The Federal Reserve Chairman, (almost) the entire US Congress, Wall Street (always) and most Americans agreeing that it is in the nations interest to bail out bad investments(and investors) made during the housing boom. With billions of dollars from future tax collections pledged.

[Carl Veritas]

The other deflation aside from falling prices—-
contracting money supply—-during the 1920s depression? Was caused by depositors pulling money out of banks which countered the Feds attempt to increase the money supply. I may be able to pull out some of the money aggregates data from that time, later. But clearly Hoover and other economists of that time thought that again stimulating the loan market will get us out of the depression. The same medicine that got the patient sick was the prescribed cure. To his credit, Treasury secretary Mellon, once the bust arrived, opposed Hoovers interventionist proposals. He knew that the hands-off approach worked in the past.

The difference between that bust and todays?

This bust has everyone from the President, both Presidential candidates, The US Treasury Secretary,
The Federal Reserve Chairman, (almost) the entire US Congress, Wall Street (always) and most Americans agreeing that it is in the nations interest to bail out bad investments(and investors) made during the housing boom. With billions of dollars from future tax collections pledged.

[Carl Veritas]

The other deflation aside from falling prices—-
contracting money supply—-during the 1920s depression? Was caused by depositors pulling money out of banks which countered the Feds attempt to increase the money supply. I may be able to pull out some of the money aggregates data from that time, later. But clearly Hoover and other economists of that time thought that again stimulating the loan market will get us out of the depression. The same medicine that got the patient sick was the prescribed cure. To his credit, Treasury secretary Mellon, once the bust arrived, opposed Hoovers interventionist proposals. He knew that the hands-off approach worked in the past.

The difference between that bust and todays?

This bust has everyone from the President, both Presidential candidates, The US Treasury Secretary,
The Federal Reserve Chairman, (almost) the entire US Congress, Wall Street (always) and most Americans agreeing that it is in the nations interest to bail out bad investments(and investors) made during the housing boom. With billions of dollars from future tax collections pledged.

[partypup]

[quote=kewp]The United States, as well as the United Kingdom, will keep experiencing a significant increase in prices, fed by the rapid growth in money supply and the creation from scratch of large amounts of money.

Everything is collapsing in price; from housing to soybeans. Even oil is dropping like a rock.

BS +2[/quote]

The B.S. seems to be spreading. When CNBC pundits and yahoos on Yahoo! begin to casually discuss the spectre of a U.S. bankruptcy, you know you’re not in Kansas anymore.

Credit default swaps on T-bills are rising fast. The day of reckoning draws ever closer.

The U.S. will eventually lose its AAA rating. After that, game over.

“The U.S. might really have to look at a default or the bankruptcy
reorganization of the present financial system” and the bankruptcy of
the government is not out of the realm of possibility, Hennecke said.

http://www.cnbc.com/id/27641538

http://finance.yahoo.com/tech-ticker/article/126117/Bailout-Price-Tag-3.5T-So-Far-But-%27Real%27-Cost-May-Be-Much-Higher?tickers=AIG,FNM,FRE,XLF,^DJI,^GSPC,C

[partypup]

[quote=kewp]The United States, as well as the United Kingdom, will keep experiencing a significant increase in prices, fed by the rapid growth in money supply and the creation from scratch of large amounts of money.

Everything is collapsing in price; from housing to soybeans. Even oil is dropping like a rock.

BS +2[/quote]

The B.S. seems to be spreading. When CNBC pundits and yahoos on Yahoo! begin to casually discuss the spectre of a U.S. bankruptcy, you know you’re not in Kansas anymore.

Credit default swaps on T-bills are rising fast. The day of reckoning draws ever closer.

The U.S. will eventually lose its AAA rating. After that, game over.

“The U.S. might really have to look at a default or the bankruptcy
reorganization of the present financial system” and the bankruptcy of
the government is not out of the realm of possibility, Hennecke said.

http://www.cnbc.com/id/27641538

http://finance.yahoo.com/tech-ticker/article/126117/Bailout-Price-Tag-3.5T-So-Far-But-%27Real%27-Cost-May-Be-Much-Higher?tickers=AIG,FNM,FRE,XLF,^DJI,^GSPC,C

[partypup]

[quote=kewp]The United States, as well as the United Kingdom, will keep experiencing a significant increase in prices, fed by the rapid growth in money supply and the creation from scratch of large amounts of money.

Everything is collapsing in price; from housing to soybeans. Even oil is dropping like a rock.

BS +2[/quote]

The B.S. seems to be spreading. When CNBC pundits and yahoos on Yahoo! begin to casually discuss the spectre of a U.S. bankruptcy, you know you’re not in Kansas anymore.

Credit default swaps on T-bills are rising fast. The day of reckoning draws ever closer.

The U.S. will eventually lose its AAA rating. After that, game over.

“The U.S. might really have to look at a default or the bankruptcy
reorganization of the present financial system” and the bankruptcy of
the government is not out of the realm of possibility, Hennecke said.

http://www.cnbc.com/id/27641538

http://finance.yahoo.com/tech-ticker/article/126117/Bailout-Price-Tag-3.5T-So-Far-But-%27Real%27-Cost-May-Be-Much-Higher?tickers=AIG,FNM,FRE,XLF,^DJI,^GSPC,C

[partypup]

[quote=kewp]The United States, as well as the United Kingdom, will keep experiencing a significant increase in prices, fed by the rapid growth in money supply and the creation from scratch of large amounts of money.

Everything is collapsing in price; from housing to soybeans. Even oil is dropping like a rock.

BS +2[/quote]

The B.S. seems to be spreading. When CNBC pundits and yahoos on Yahoo! begin to casually discuss the spectre of a U.S. bankruptcy, you know you’re not in Kansas anymore.

Credit default swaps on T-bills are rising fast. The day of reckoning draws ever closer.

The U.S. will eventually lose its AAA rating. After that, game over.

“The U.S. might really have to look at a default or the bankruptcy
reorganization of the present financial system” and the bankruptcy of
the government is not out of the realm of possibility, Hennecke said.

http://www.cnbc.com/id/27641538

http://finance.yahoo.com/tech-ticker/article/126117/Bailout-Price-Tag-3.5T-So-Far-But-%27Real%27-Cost-May-Be-Much-Higher?tickers=AIG,FNM,FRE,XLF,^DJI,^GSPC,C

[partypup]

[quote=kewp]The United States, as well as the United Kingdom, will keep experiencing a significant increase in prices, fed by the rapid growth in money supply and the creation from scratch of large amounts of money.

Everything is collapsing in price; from housing to soybeans. Even oil is dropping like a rock.

BS +2[/quote]

The B.S. seems to be spreading. When CNBC pundits and yahoos on Yahoo! begin to casually discuss the spectre of a U.S. bankruptcy, you know you’re not in Kansas anymore.

Credit default swaps on T-bills are rising fast. The day of reckoning draws ever closer.

The U.S. will eventually lose its AAA rating. After that, game over.

“The U.S. might really have to look at a default or the bankruptcy
reorganization of the present financial system” and the bankruptcy of
the government is not out of the realm of possibility, Hennecke said.

http://www.cnbc.com/id/27641538

http://finance.yahoo.com/tech-ticker/article/126117/Bailout-Price-Tag-3.5T-So-Far-But-%27Real%27-Cost-May-Be-Much-Higher?tickers=AIG,FNM,FRE,XLF,^DJI,^GSPC,C

[Arraya]

And then we have this…

http://news.theage.com.au/business/us-no…

The US dollar can no longer claim to be the sole world currency, French President Nicolas Sarkozy said on Thursday before a weekend summit on the global financial crisis that has its roots in the United States.

“I leave for Washington tomorrow to explain that the dollar, which at the end of World War II was the only world currency, can no longer claim to be the sole world currency,” Sarkozy said.

[Arraya]

And then we have this…

http://news.theage.com.au/business/us-no…

The US dollar can no longer claim to be the sole world currency, French President Nicolas Sarkozy said on Thursday before a weekend summit on the global financial crisis that has its roots in the United States.

“I leave for Washington tomorrow to explain that the dollar, which at the end of World War II was the only world currency, can no longer claim to be the sole world currency,” Sarkozy said.

[Arraya]

And then we have this…

http://news.theage.com.au/business/us-no…

The US dollar can no longer claim to be the sole world currency, French President Nicolas Sarkozy said on Thursday before a weekend summit on the global financial crisis that has its roots in the United States.

“I leave for Washington tomorrow to explain that the dollar, which at the end of World War II was the only world currency, can no longer claim to be the sole world currency,” Sarkozy said.

[Arraya]

And then we have this…

http://news.theage.com.au/business/us-no…

The US dollar can no longer claim to be the sole world currency, French President Nicolas Sarkozy said on Thursday before a weekend summit on the global financial crisis that has its roots in the United States.

“I leave for Washington tomorrow to explain that the dollar, which at the end of World War II was the only world currency, can no longer claim to be the sole world currency,” Sarkozy said.

[Author]

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