stock market in free fall...

[CavsSuperFan]

There are also small investors that see Blue Chips like GE @ $16.00 instead of $60.00…And feel that is a good deal…

[CosmicCowboy]

There are also small investors that see Blue Chips like GE @ $16.00 instead of $60.00…And feel that is a good deal…

I agree but that is SUCH a sucker play. This ain't your daddy's General Electric...They could hardly be called a classic blue chip industrial anymore...they are neck deep in financial derivatives and broadcasting/entertainment as well and doing it very badly.

[Viva Las Espuelas]

There are also small investors that see Blue Chips like GE @ $16.00 instead of $60.00…And feel that is a good deal…


I agree but that is SUCH a sucker play. This ain't your daddy's General Electric...They could hardly be called a classic blue chip industrial anymore...they are neck deep in financial derivatives and broadcasting/entertainment as well and doing it very badly.

did y'all see this?
http://www.spurstalk.com/forums/showthread.php?t=109616

[CavsSuperFan]

Did not see the GE article...http://hotstart.dk/forum/uavatar.aspx?ImageID=18

[CosmicCowboy]

I knew about it but hadn't seen that article. This bailout bullshit really pisses me off.

[Phil E.Buster]

And the jobs just keep getting lost.

Citigroup to cut another 53,000 jobs. (http://news.yahoo.com/s/ap/20081117/ap_on_bi_ge/citigroup_jobs)

NEW YORK – Citigroup Inc. is cutting approximately 53,000 more jobs in the coming quarters as the banking giant struggles to steady itself after suffering massive losses from deteriorating debt.

The plans, posted on the company's Web site, are being discussed by CEO Vikram Pandit at the company's town hall meeting in New York Monday with employees.

The company said total headcount is being reduced by 20 percent from its peak of 375,000 at the end of 2007; the company had already announced in October that it was eliminating about 22,000 jobs from those levels.

The New York-based bank has posted four straight quarterly losses, including a loss of $2.8 billion during the third quarter.

Shortly before the town hall meeting in New York, Citigroup Chairman Win Bischoff said at a business forum in Dubai, United Arab Emirates, that it would be irresponsible for Citi and other companies not to look at staffing in the event of a prolonged economic downturn.

[RandomGuy]

To be fair though, Citigroup will be spinning off a few parts of it's business. (this from a statement released by the CEO) (listened to NPR story on it this morning)

53,000 will not be unemployed, as many will still have their jobs as those divisions are spun off or sold.

BUT

There will be a good chunk of job cuts even so.

[Drachen]

It's funny that both citigroup and GE were mentioned today as both of their CEOs just purchased a very large amount of stock in their respective companies. I personally am having a good day since I have recently (about 2 months ago) discovered CANROYs (canadian oil and gas trusts). They are priced pretty low right now, and in order to keep their trust status (that lets them pay very low to 0 taxes), they must pay 90% of their profits back to investors via dividends. One of my stocks, HTE, jumped 10% today and they pay a 30% dividend (based on my entry point) that was recently confirmed for the next 3 months. Do know that the candian government taxes foreign investors 15% on dividends, though and you do have to watch the exchange rate, but after all that it is still netting me about 23-25% on dividends alone. Check it out if anyone is interested. Just so that no one thinks I am some pumper and dumper, I want to say I am no investing wiz or expert or anything and I do want you to know that Canada's trust taxation policy will change in 2011 which will likely make the dividends fall back down, so invest with caution, or not.

[The sone]

just think of it as a fiesta texas ride....WEEEEEEEEEEEEEEEEEEEEEEEE


then again im poor so...ha!

[marini martini]

just think of it as a fiesta texas ride....WEEEEEEEEEEEEEEEEEEEEEEEE


then again im poor so...ha!

Best post so far in this fkng thread!!!!:toast

[The sone]

Best post so far in this fkng thread!!!!:toast

i try...but then again im poor...so....

[marini martini]

i try...but then again im poor...so....

So who isn't poor, after all this bullshit hits the fan????????? Live each day like it's your last!!! If you wake up the next morning, fck............do it again!!!:toast

Max out every credit card you own!!!!:king

[The sone]

So who isn't poor, after all this bullshit hits the fan????????? Live each day like it's your last!!! If you wake up the next morning, fck............do it again!!!:toast

Max out every credit card you own!!!!:king

Marini we....uh....kindda need to hang out. at least for a bit. :D

[marini martini]

Marini we....uh....kindda need to hang out. at least for a bit. :D

Babe, I've already maxed mine out!!!!:lol Let me make a payment in December, then we'll hang out for lunch in January!!!:lmao

A five martini lunch!!!!:toast


Oh wait, can we get together after my cruise?????????:rollin

[The sone]

Babe, I've already maxed mine out!!!!:lol Let me make a payment in December, then we'll hang out for lunch in January!!!:lmao

A five martini lunch!!!!:toast


Oh wait, can we get together after my cruise?????????:rollin

just so long as i can get out of there only owing a grand or less...i mean...revolution is on the way anyways....yeah?

[marini martini]

just so long as i can get out of there only owing a grand or less...i mean...revolution is on the way anyways....yeah?

Fuck revolution!!!!:ihit Owing a grand or less?????????? WTF?????:rolleyes You need to reach for the stars, stick it to the "man" for gads sake!!! How many credit cards you got????????? 1.....2..??? Start filling out your aplications! They give you $500. credit jump it!! Jump them all for the max!!!:toast We live in America, for god's sake!!! You want a new car, then go fking get one, you want nice clothes, then max out Dillards or Ross. Don't be a lace curtain wimpy ass. Get on your high horse, and reach for the stars, already. Obama or the the Sand Negros are gonna fck us over, before we have a chance to ever see a zero balance!!!!:toast:toast:toast

[mrsmaalox]

Yikes!! Marini strikes again! :lol

[Sportcamper]

Dow below 8,000 - 1st time since '03

[CosmicCowboy]

opened down another 2 1/2%...trying to find a temporary bottom around 7800.

[remingtonbo2001]

Yep.

[BacktoBasics]

Its about to get interesting for a lot of people in the RV, Boat and Motorcycle world. GE who handles roughly 50% of the flooring (inventory) in these industries has just announced that it is suspending any and all financing for inventory until January at the earliest.

Basically thousands of dealerships cannot bring in new inventory (unless they're paying cash) until sometime in January.

There is going to be a massive shift away from this bank and its going to happen quick. We just moved all our flooring to a local bank because it makes no sense to ride it out. I'm hearing a lot of the same at other dealerships. You can't pull the plug on your dealerships and expect them to stick around.

[AlamoSpursFan]

i try...but then again im poor...so....

I never should have sold my '78 Grand Prix with the "I'm Po' but I'm Proud" bumpersticker from Po' Folks...

:lol

[CosmicCowboy]

a little bump back up above 8000 on rumors about some "compromise" to bail out the big three. Congress must have figured out a way to give them money without actually having to vote on anything. No way most congressmen want their name on a "yes" vote unless they are from a rust belt state...

[CosmicCowboy]

Well, the deal blew up and the market is going straight to hell...just blew through 7600 going straight down and still 8 minutes to close.

[ChumpDumper]

:lol They applaud at the closing bell no matter what, eh?

[2centsworth]

how much do kidnappers make?

[CosmicCowboy]

:lol They applaud at the closing bell no matter what, eh?

They were just glad the motherfucker finally rang before the market went COMPLETELY to shit. Guarantee if the market was still open it would still be dropping like a rock. If it doesn't find a bottom around 7200 it's going to the 6's.

[Viva Las Espuelas]

"I'm Po' but I'm Proud" bumpersticker from Po' Folks...

:lol
oh damn, i loved that place! good times. i loved the belly washers there.

[Jimcs50]

Looking for a tall building to jump from.


Just opened my Merrill Lynch monthly report. I have lost 38% of my portfolio since Jan. Almost half a million gone, vanished, pissed away.

:depressed

[CosmicCowboy]

Looking for a tall building to jump from.


Just opened my Merrill Lynch monthly report. I have lost 38% of my portfolio since Jan. Almost half a million gone, vanished, pissed away.

:depressed

That sucks. you should have listened to me when the market was at 10,500 and I was saying to get parked in short term T-Bills.:p:

[2centsworth]

Looking for a tall building to jump from.


Just opened my Merrill Lynch monthly report. I have lost 38% of my portfolio since Jan. Almost half a million gone, vanished, pissed away.

:depressed

november has lost another 20%.

[Mixability]

Looking for a tall building to jump from.


Just opened my Merrill Lynch monthly report. I have lost 38% of my portfolio since Jan. Almost half a million gone, vanished, pissed away.

:depressed

Boo fucking hoo, it's not our fault you gave Duff the login to your account.....

[Jimcs50]

I could have bought a freaking Ferrari for Christmas last year, and I would feel a whole lot better about it.

[Viva Las Espuelas]

Looking for a tall building to jump from.


Just opened my Merrill Lynch monthly report. I have lost 38% of my portfolio since Jan. Almost half a million gone, vanished, pissed away.

:depressed
wow. sorry to hear that, man.

[RandomGuy]

Already broke 10,000 and still headed down. This is gonna get VERY ugly.

This post was slightly over a month ago.

Yikes.

Where it stops, nobody knows, and if they did, they would be immensely wealthy.

[CosmicCowboy]

This post was slightly over a month ago.

Yikes.

Where it stops, nobody knows, and if they did, they would be immensely wealthy.


If it doesn't find a bottom at 7200 it's going to the 6's and after that it's anyone's guess.

After Citibank crashes as everyone defaults on their credit cards because they just got fired because the economy sucks because the banks suck because they bet wrong and the fucking new government says it's OK to default because we "care" about you...

*sigh*

Right martini...time for a beer...*heading for the ice chest*

[marini martini]

If it doesn't find a bottom at 7200 it's going to the 6's and after that it's anyone's guess.

After Citibank crashes as everyone defaults on their credit cards because they just got fired because the economy sucks because the banks suck because they bet wrong and the fucking new government says it's OK to default because we "care" about you...

*sigh*

Right martini...time for a beer...*heading for the ice chest*

I'm wayyyyyyyyyy beyond beer Babe!!!!:toast

BTW, like I said I'm in for the long haul!!!! What I have invested is my kids' inheritance! Boo Fukn hoo!!!:rollin

[CavsSuperFan]

It is a widely held belief that the Oil Companies & Tire Companies are in collusion with the auto makers to keep big gas guzzling cars on the road…Public rails have been eliminated from many big cities in the 1950’s…Higher mileage standards are always fought by the powerful conglomerates…

So if this is even slightly true, why doesn’t GM, Ford & Chrysler ask Exxon, Conoco Phillips, Goodyear or even Saudi Arabia for bail out money…Why should the U.S. Taxpayer be on the hook for all of this?

Thoughts?

[CosmicCowboy]

If I was GM I would LOVE an opportunity to go chapter 11 and completely rebuild my business model and cancel all my current union agreements. GM has some GREAT technology...they just need to be able to utilize it and produce products at competitive price points. Think the Toyota Prius is hot shit? that was 100% GM technology that was licensed to Toyota and GM gets it back this year along with any enhancements that Toyota made to the technology. Want electric cars you can plug in at home? they have it in the pipeline for next year...This would be a great time to just gut this company and start over fresh.

[TDMVPDPOY]

i had $200 in my retirement savings account....lol balance is 0 atm....fukn bs.

[CosmicCowboy]

Markets really trying to find a temporary bottom in the 7500-7600 range. If they can hold off the late afternoon selling could let things calm down a little over the weekend.

[CosmicCowboy]

dang, almost a 500 point bump after the appointment was announced. Crazy shit.

So is Timothy Geithner really all THAT? Markets sure liked it when the Messiah appointed him. He's from the New York fed which means wall street insider..

I'm just not sure how that is supposed to reassure us down here in Texas. LOL Maybe they figure that it will be endless bailouts after they burn through the first few trillion.

[Winehole23]

So if this is even slightly true, why doesn’t GM, Ford & Chrysler ask Exxon, Conoco Phillips, Goodyear or even Saudi Arabia for bail out money…Why should the U.S. Taxpayer be on the hook for all of this?

Thoughts?Actually, we just did:


http://news.yahoo.com/s/afp/20081120/bs_afp/financeeconomyusgulf_081120072928;_ylt=As8HYF6PR0T sbvJOoU6Ff0es0NUE

[BacktoBasics]

Another delightful day in the market. Already down 5% and going straight down with 20 minutes still to close.

Don't think this won't affect you. Credit card companies are next. Those guys live on taking your new debt and packaging it into equities they sell to others so they can keep loaning you more money on your credit card. Oops. Nobody wants that shit paper anymore so the credit card companies aren't gonna have any money. Expect the "limits" on your cards to drop and the monthly minimum payments to rise. The credit card companies are gonna want their money back.I just want to point out that CC made this point awile back and I agreed. Many of you argued against the thought of this happening and

we told you so.

[Extra Stout]

I just want to point out that CC made this point awile back and I agreed. Many of you argued against the thought of this happening and

we told you so.
I found CC's point, but I couldn't find anyone disagreeing with him.

Anyway, apart from his valid points, the CCC's are expecting massive layoffs starting right after the new year and lasting into 1932... oops I mean 2011, so they're heading off any use of credit lines as substitute income by the new Poor.

[BacktoBasics]

I found CC's point, but I couldn't find anyone disagreeing with him.

Anyway, apart from his valid points, the CCC's are expecting massive layoffs starting right after the new year and lasting into 1932... oops I mean 2011, so they're heading off any use of credit lines as substitute income by the new Poor.The topic was discussed further in a thread over in the Political forum.

[CosmicCowboy]

uh oh...gonna get ugly today.

Looks like people are finally figuring out that the economy is well and truly fucked up.

[DarkReign]

uh oh...gonna get ugly today.

Obviously, youve been money on this topic.

What gives you this impression?

[CosmicCowboy]

Obviously, youve been money on this topic.

What gives you this impression?

Jobs report came out. 533,000 jobs cut last month, (most in 34 years) unemployment jumped to 6.7% (worst in 15 years) no end in sight...

mortgage report came out. 10% of the mortgages in the US are approaching foreclosure...up almost another percent in one month. At this point, you can figure that every new job loss is gonna be another foreclosure.

The snowball is getting bigger and still rolling downhill.

[Extra Stout]

Jobs report came out. 533,000 jobs cut last month, (most in 34 years) unemployment jumped to 6.7% (worst in 15 years) no end in sight...

mortgage report came out. 10% of the mortgages in the US are approaching foreclosure...up almost another percent in one month. At this point, you can figure that every new job loss is gonna be another foreclosure.

The snowball is getting bigger and still rolling downhill.
I read an interesting article today contrasting the current crisis with the Great Depression. In the Depression, it is said, Keynesian stimulus could have some lasting impact because the U.S. was the largest creditor nation on Earth.

Now the U.S. is the biggest debtor nation on Earth. While trying to flood the economy on the demand end might stop this deflationary cycle in the short term, the effect if the global economy starts turning around will be hyperinflation of the dollar and collapse of the U.S. economy.

So, if the stimulus does not work, the U.S. will collapse into a lasting depression. If the stimulus does work, the U.S. will collapse into a lasting depression a couple of years later.

Either way, we are at the end of the post-World War II era of American economic prosperity.

[BacktoBasics]

The only logical thing to do at this point is shrink the population and enter into another war.

[DarkReign]

Jobs report came out. 533,000 jobs cut last month, (most in 34 years) unemployment jumped to 6.7% (worst in 15 years) no end in sight...

mortgage report came out. 10% of the mortgages in the US are approaching foreclosure...up almost another percent in one month. At this point, you can figure that every new job loss is gonna be another foreclosure.

The snowball is getting bigger and still rolling downhill.


I read an interesting article today contrasting the current crisis with the Great Depression. In the Depression, it is said, Keynesian stimulus could have some lasting impact because the U.S. was the largest creditor nation on Earth.

Now the U.S. is the biggest debtor nation on Earth. While trying to flood the economy on the demand end might stop this deflationary cycle in the short term, the effect if the global economy starts turning around will be hyperinflation of the dollar and collapse of the U.S. economy.

So, if the stimulus does not work, the U.S. will collapse into a lasting depression. If the stimulus does work, the U.S. will collapse into a lasting depression a couple of years later.

Either way, we are at the end of the post-World War II era of American economic prosperity.

Wheeeeeee!!

So, the better question...

Who to hang? That was rhetorical. I have at least a rudimentary understanding to know how this happens. Politicians, economists and namely the Fed seemed to think we can just grow and grow forever unimpeded. And they did/do everything in their vast power to capitalize and inflate that projected growth, no matter how weak and shoddy the projection is/was.

I remember reading something in the PF about an ancient even called "Jubilation" or "The Jubilee". IIRC, it was a once-every-seven-years event for debt relief. Basically, instead of trying to grow and grow and grow, a responsible economic policy knows that the books can be cooked anyway the beneficiaries like.

With that in mind, you would forcibly have a 7 year market correction by relieving debt en masse. Obviously, your economy takes a hit as does your currency, but it isnt anything catastrophic and you have 7 years to grow out of it.

Its basically an understanding that there will be debt defaults one way or the other, so instead of ignoring history and thinking all debts will be repaid, you might as well adjust your market manually and as "softly" as possible so that your economy doesnt inflate itself to a point of no return.

Which, I believe, we are at right now.

Then again, thats from memory, and mine isnt reliable.

Thanks baby boomers. Youve been wonderful.

[BacktoBasics]

I don't know enough about all this to make the best calls on what should be done but I do know that this economy would be massively better if they'd figure out a way to get the banks back to lending. Even lending in a more responsible matter would make a massive improvement. I do know that if the banks are lending the auto industry has no need for a bailout.

[2centsworth]

I read an interesting article today contrasting the current crisis with the Great Depression. In the Depression, it is said, Keynesian stimulus could have some lasting impact because the U.S. was the largest creditor nation on Earth.

Now the U.S. is the biggest debtor nation on Earth. While trying to flood the economy on the demand end might stop this deflationary cycle in the short term, the effect if the global economy starts turning around will be hyperinflation of the dollar and collapse of the U.S. economy.

So, if the stimulus does not work, the U.S. will collapse into a lasting depression. If the stimulus does work, the U.S. will collapse into a lasting depression a couple of years later.

Either way, we are at the end of the post-World War II era of American economic prosperity.

think it through. I'm all for being a sour puss, but you're taking it to an extreme and IMO irrational level.

*you have just stated that the federal government can control money supply. So when the economy turns around why can't they shrink money supply
* demand/this recovery isn't going to happen overnight. This will be a gradual recovery. But even if it was a bubble recovery, such as the tech boom of the late 90s, monetary policy was shown to be very effective in controlling inflation.
* for the trillions added by the fed, trillions has been lost.

[DarkReign]

think it through. I'm all for being a sour puss, but you're taking it to an extreme and IMO irrational level.

*you have just stated that the federal government can control money supply. So when the economy turns around why can't they shrink money supply
* demand/this recovery isn't going to happen overnight. This will be a gradual recovery. But even if it was a bubble recovery, such as the tech boom of the late 90s, monetary policy was shown to be very effective in controlling inflation.
* for the trillions added by the fed, trillions has been lost.

You seem to be the absolute lone wolf of optimism. Not that I discount your opinion or anything, but tried and true folks, former SoTs and Fed chairmen are saying the "End is nigh."

As in, total collapse of our economic structure. Worse than the Depression.

What makes you so Happy-Harry about this?

[BacktoBasics]

You seem to be the absolute lone wolf of optimism. Not that I discount your opinion or anything, but tried and true folks, former SoTs and Fed chairmen are saying the "End is nigh."

As in, total collapse of our economic structure. Worse than the Depression.

What makes you so Happy-Harry about this?What would define "total collapse of our economic structure"

and in your opinion what happens next? How do you restructure?

[Extra Stout]

think it through. I'm all for being a sour puss, but you're taking it to an extreme and IMO irrational level.

*you have just stated that the federal government can control money supply. So when the economy turns around why can't they shrink money supply
* demand/this recovery isn't going to happen overnight. This will be a gradual recovery. But even if it was a bubble recovery, such as the tech boom of the late 90s, monetary policy was shown to be very effective in controlling inflation.
* for the trillions added by the fed, trillions has been lost.
When the global economy starts to turn around, the U.S. will have to pay the piper for its structural debt. Creditors won't buy up U.S. securities forever, and when they start looking elsewhere for better returns, the U.S. will start monetizing its debt. Or else do you think voters will say, "So you want to default on Social Security and Medicare while raising taxes across the board by 10%? Sounds great!" And if the U.S. can't find buyers for its securities, how is it going to control the money supply?

Once the U.S. starts monetizing its debt, hyperinflation will take hold.

Long-term, I do not expect the United States to turn into Zimbabwe, but I definitely see something like an L-shaped downturn where the economy shrinks 15% and remains stagnant thereafter.

[CosmicCowboy]

And to prove just how fucked up the "professional" money guys are the market jumped 200 points today on the news that 1.6 million people have lost their jobs in the last 6 months and that 10% of the existing mortgages are about to be foreclosed on...remember...all this bailout to date has been to fix the problems caused by the ones that have ALREADY been foreclosed on...

[RandomGuy]

I read an interesting article today contrasting the current crisis with the Great Depression. In the Depression, it is said, Keynesian stimulus could have some lasting impact because the U.S. was the largest creditor nation on Earth.

Now the U.S. is the biggest debtor nation on Earth. While trying to flood the economy on the demand end might stop this deflationary cycle in the short term, the effect if the global economy starts turning around will be hyperinflation of the dollar and collapse of the U.S. economy.

So, if the stimulus does not work, the U.S. will collapse into a lasting depression. If the stimulus does work, the U.S. will collapse into a lasting depression a couple of years later.

Either way, we are at the end of the post-World War II era of American economic prosperity.


I wuz gonna move to Iceland, because they are relatively insulated from energy shocks, but they are in for an even worse time than the US, and may pretty much become a Russian colonia, if Putin decides to bail their dumb asses out.

With all that global warming, my next stop is Greenland baby. A vast unclaimed continent, and all I gotta do is learn Danish.

[RandomGuy]

When the global economy starts to turn around, the U.S. will have to pay the piper for its structural debt. Creditors won't buy up U.S. securities forever, and when they start looking elsewhere for better returns, the U.S. will start monetizing its debt. Or else do you think voters will say, "So you want to default on Social Security and Medicare while raising taxes across the board by 10%? Sounds great!" And if the U.S. can't find buyers for its securities, how is it going to control the money supply?

Once the U.S. starts monetizing its debt, hyperinflation will take hold.

Long-term, I do not expect the United States to turn into Zimbabwe, but I definitely see something like an L-shaped downturn where the economy shrinks 15% and remains stagnant thereafter.

Yup. Scary part is what happens when/if foreigners quit buying US treasuries.

[Viva Las Espuelas]

Yup. Scary part is what happens when/if foreigners quit buying US treasuries.
i've heard when investors start unloading their hedge funds is when the crap will really hit the fan. i can't understand why these hedge funds aren't regulated at all.

[MannyIsGod]

Krugman was worried that we'd still be losing 450k-500k jobs a month and we came out over the high end of that prediction so that shit cannot be good.

[2centsworth]

You seem to be the absolute lone wolf of optimism. Not that I discount your opinion or anything, but tried and true folks, former SoTs and Fed chairmen are saying the "End is nigh."

As in, total collapse of our economic structure. Worse than the Depression.

What makes you so Happy-Harry about this?

I can point to others who also paint a rosier picture, such as Ben Bernanke.

I'm starting to think the deleveraging that we're going through may be the wake-up call we needed.

[DarkReign]

What would define "total collapse of our economic structure"

Honestly, I am no economist and my understanding of such things is rudimentary at best.

With that said, what would I define as economic collapse?

The very path we are walking right now, not to put to fine a point on it. The conglomeration of what seem unrelated events will be the downfall of our way of life.

The Fed printing more money, pumping it into a failing economy hoping to stave off a recession/depression.
The Fed buying foreign held T-Bills.
A failing job market thats about to layoff 1 in 4 working adults.
A government capitulant to the money-men in the Fed.
A government using even more promised, make-believe money to bail out a terminal financial sector.
A deplorable savings rate of American citizens.
A national debt based on even more promised money to an entire generation that isnt even eligibile yet.

These are just a few situations I believe to be increasingly important. I believe what we are seeing is the elimination of the middle class. No more 401k money, savings money, money for education, money for anything.

There will be "haves" and "have nots". I believe no one person in this world truly understands what is happening before their very eyes. You have some who think that everything is going to be fine, just a bad recession. Then you have others who think the sky is falling.

Both sides of the argument have their experts and reputable sources, but the bottom line is...it isnt good. Its all very bad. Our very way of life in America is going to be challenged at best and crushed at worst.


and in your opinion what happens next?

You'll work 60+ hours a week for menial pay that will cover the cost of leasing the property you supposedly own, paying an exorbiant amount for food and heat, owning one car per family with no health insurance or retirement account.

Personally, I feel bad for people having children right now.

If youre already in this situation, get used to it, because it has no end until the day you die.

BTW, what I just wrote is the best case scenario, IMO.


How do you restructure?

You dont. If you use the official national debt number ($10+ trillion) Every family in America right now, rich or poor, owes some number below $250k not including their own debt.

If you use the national debt number others use, that factors in the promised entitlements like SS and Medicare/aid, every American family owes some number less than $1.5 million.

Dont know about you, but I dont have either of those numbers. Nor does our government. We owe. A lot. In less than 10 years, our economy wont even be able to pay the interest on our debt, much less for roads, SS, medicare, military, etc.

There is no "out from under" this. Its a collapse. Maybe anarchy. Maybe revolution. Maybe capitulation. Maybe sovereignty. Maybe anything. This be uncharted territory.

[MannyIsGod]

At this point - I'm mostly worried about how I will be able to go to school over the next few years. I'm not in the same job market as everyone else, so I'm not worried in that regard but everytime I hear news about how credit is retracting I really fear for my ability to finance my education. I am happy we have Obama in office and a Democratic congress because if nothing else I believe they will put forth initiatives to keep people pursing degrees but I do think about it constantly now.

I think with unemployment approaching double digits in the coming year its going to be hard for people to work and go to school since those jobs are some of the hardest hit. I mused a while back about wondering if this would supplant 9/11 as the major event of my lifetime and I believe more and more each day that it might. We live in truly historic times.

[CosmicCowboy]

You can always borrow tuition money from JimCS...

[MannyIsGod]

I can point to others who also paint a rosier picture, such as Ben Bernanke.

I'm starting to think the deleveraging that we're going through may be the wake-up call we needed.

I think this country will have to feel harsh pain on the level of the general public before that wake up call is realized. I know there is going to be a good deal of that next year, but I'm not sure how harsh its going to be and how long it will stick. We've had it to easy, but every bill must be paid in the long run and you bet your ass no one gets a free ride.

[MannyIsGod]

You can always borrow tuition money from JimCS...

LOL

The funny thing is I'll likely be in CS!!!

I could just go to his poker game and have him finance my education in that manner.

[BacktoBasics]

I think this country will have to feel harsh pain on the level of the general public before that wake up call is realized. Well its going to have to get a lot worse for that to happen. I've spent a lot of time talking to my peers in the auto, boating and motorcycle industry and the more I talk to these guys the more confused I am. Its supposed to be bad real bad right now but everyone is singing the same song..."there are no shortages of buyers, no shortage of people who want to buy". Only common denominator in all of it is that the banks flat aren't lending. I hear it every day. "I took ten applications today and not one got approved". So on and so forth. Same kind of apps that would have flown a year ago. They're going to have to lend at some point. Responsibly yes but they can't cut out the meat of their profit and expect to continue on like this.

To feel the "harsh pain" of reality this situation is going to have to grow ten fold because people either don't care or don't have a clue as to whats going on. Most are continuing to live life at the same old beat.

[2centsworth]

When the global economy starts to turn around, the U.S. will have to pay the piper for its structural debt. Creditors won't buy up U.S. securities forever Suppyling your biggest customer credit makes sense to me. China loves them some USA.







, and when they start looking elsewhere for better returns, the U.S. will start monetizing its debt.

Interest payments are still reasonable. looking elsewhere for better returns contradicts your premise of a deteriorating US.




Or else do you think voters will say, "So you want to default on Social Security and Medicare while raising taxes across the board by 10%? Sounds great!" And if the U.S. can't find buyers for its securities, how is it going to control the money supply? we just sucked out trillions of dollars in consumer credit. This economy isn't overheating anytime soon. If you want to talk about the entitlements timebomb as the end, well I'm with you if we don't do something about it first.



Once the U.S. starts monetizing its debt, hyperinflation will take hold. when do you expect that to happen? huge market for our securities and we have had zero problems marketing them that I know of.



Long-term, I do not expect the United States to turn into Zimbabwe, but I definitely see something like an L-shaped downturn where the economy shrinks 15% and remains stagnant thereafter. capitalism can't remain in one stage of the business cycle indefinitely.

[MannyIsGod]

And while I think 2cents was talking about the people in charge more than anything, I simply feel that the public's will and wants will overcome that unless they change fundementally.

[DarkReign]

To feel the "harsh pain" of reality this situation is going to have to grow ten fold because people either don't care or don't have a clue as to whats going on. Most are continuing to live life at the same old beat.


And while I think 2cents was talking about the people in charge more than anything, I simply feel that the public's will and wants will overcome that unless they change fundementally.

Sadly, my faith in other Americans has diminished every year since birth. We are a fat, lazy, entitled people (in general) with no interest in the real world, but have an adept knowledge of celebrity birthdays.

People I know, respect and love absolutely refuse to see this situation as nothing more than a bump in the road.

It may be a bump, maybe theyre right. But I guess with a telescope in space, the Grand Canyon looks like a bump, too.

[BacktoBasics]

Sadly, my faith in other Americans has diminished every year since birth. We are a fat, lazy, entitled people (in general) with no interest in the real world, but have an adept knowledge of celebrity birthdays.

People I know, respect and love absolutely refuse to see this situation as nothing more than a bump in the road.

It may be a bump, maybe theyre right. But I guess with a telescope in space, the Grand Canyon looks like a bump, too.I'll echo that point to the millionth degree. I'm in full blown panic mode and everyone around me is like "chill dude it'll be better after the new year"..."what goes around comes around it'll pick up"..."just an abnormally slow season". I guess for now thats good for me because people are still buying. Otherwise I'd be totally fucked.

I just don't see how or what could right the ship.

[DarkReign]

I just don't see how or what could right the ship.

Nor do I. I mean, I have my ideas. But those dont include our current leadership and would require some temporary suspensions of government.

[BacktoBasics]

Nor do I. I mean, I have my ideas. But those dont include our current leadership and would require some temporary suspensions of government.The scope of the downfall is entirely too big to pinpoint on one thing or even a few things. So much is wrong and so much is unfixable. Its like a women whose had 12 kids...no matter what she does the tennis figure isn't coming back.

I have to believe that fixing the banking sector would be the right place to start.

[DarkReign]

I can point to others who also paint a rosier picture, such as Ben Bernanke.

Is this the same Fed Chairman, Bernanke?

I wouldnt trust that fucking guy with my monopoly money, much less our entire economy. But there he is, with our collective wallet in his hands.

I am strong opponent to the Federal Reserve by very nature and recent research.

When my life and country's well-being is based on the whims of non-government entity, I start to seriously consider the merits of my elected leadership.

Seriously, how the fuck did we get here? Where FedEx controls our money?

[2centsworth]

I'll echo that point to the millionth degree. I'm in full blown panic mode and everyone around me is like "chill dude it'll be better after the new year"..."what goes around comes around it'll pick up"..."just an abnormally slow season". I guess for now thats good for me because people are still buying. Otherwise I'd be totally fucked.

I just don't see how or what could right the ship.

in the midst of the storm it's hard to think that anything good can happen. with the stock market crash of 2000-2002 (btw, 80% loses for a lot of people), 9/11, and the corporate scandals of '02 it was also very hard to see good times ahead.

Right now, because of government intervention and the resilience of our economy, we will get through this in time. In fact, maybe sooner than we all think.

[2centsworth]

Is this the same Fed Chairman, Bernanke?

I wouldnt trust that fucking guy with my monopoly money, much less our entire economy. But there he is, with our collective wallet in his hands.

I am strong opponent to the Federal Reserve by very nature and recent research.

When my life and country's well-being is based on the whims of non-government entity, I start to seriously consider the merits of my elected leadership.

Seriously, how the fuck did we get here? Where FedEx controls our money?

Warren Buffet a better example?

[DarkReign]

The scope of the downfall is entirely too big to pinpoint on one thing or even a few things. So much is wrong and so much is unfixable. Its like a women whose had 12 kids...no matter what she does the tennis figure isn't coming back.

I have to believe that fixing the banking sector would be the right place to start.

IMO, returning the power of coining money and its regulation of weights and standards back to Congress is the first start, thereby abolishing the FedReserve overnight. As in...right now.

Secondly, a new constituional amendment that only allows X% (less than 15%) of GDP per year in deficit spending and to never amass to more than 40% of one-year's GDP in total.

Thirdly, you suspend any and all entitlement programs immediately. You cut the Bush tax cuts and raise taxes across the board 10%. All Congressmen will be working for free. Quit now if you dont like it. No such things as ear marks, they dont exist anymore. Congressional session does not end (repeat: does not end) until the next fiscal budget is balanced. I dont care what you have to cut. It happens....now.

That continues until or national debt in total is less than the new amendment states it to be.

May take 10 years. People will die. It will suck. But with the proper leadership and consitutional amendments, at least we can guarantee our sovereignty and our well-being beyond our generation.

Ahhhhh, Fantasyland...Im glad to be back.

[DarkReign]

Warren Buffet a better example?

I want to be clear, 2cents. I am not attacking you nor am I trying to provoke you in anyway. Just want to be clear on that, sometimes that shit gets lost in translation in a forum.

First off, you have a far better understanding of this based on your insight into subjects I couldnt begin to have a decent opinion on.

But to be clear, it is the Bernanke's of the world who have us in this mess. People who create value out of thin air and sell it to the highest bidder on faith. Creating market conditions that favor the ever-increasing wealth of a nation based on the projections of a what-the-fuck-ever economic model is the trend of the day (Keynesian, I believe). Bankrupting us from a remote island of no accountability and no elected positions.

Do you know how the Fed Chairman is appointed? The POTUS gets a list of names from the Board Members and the President chooses one. He isnt interviewed or anything. Thats FUBAR. Thats criminal. Thats conspiracy.

There is obviously much more to the story than that very narrow view of it, I realize. But it is my opinion this entire fiasco is not a mistake, or at least, it wasnt exactly prevented on purpose.

Whether he is capitulant in the matter is immaterial to me. He represents the fiscal vulnerability of our nation, personified in our willingness to allow a non-governmental agency to control the value our goddamn money.

Saying that aloud makes my headspin. Who in the name of Christ thought that was a good idea?

[2centsworth]

I want to be clear, 2cents. I am not attacking you nor am I trying to provoke you in anyway. Just want to be clear on that, sometimes that shit gets lost in translation in a forum.

First off, you have a far better understanding of this based on your insight into subjects I couldnt begin to have a decent opinion on.

But to be clear, it is the Bernanke's of the world who have us in this mess. People who create value out of thin air and sell it to the highest bidder on faith. Creating market conditions that favor the ever-increasing wealth of a nation based on the projections of a what-the-fuck-ever economic model is the trend of the day (Keynesian, I believe). Bankrupting us from a remote island of no accountability and no elected positions.

Do you know how the Fed Chairman is appointed? The POTUS gets a list of names from the Board Members and the President chooses one. He isnt interviewed or anything. Thats FUBAR. Thats criminal. Thats conspiracy.

There is obviously much more to the story than that very narrow view of it, I realize. But it is my opinion this entire fiasco is not a mistake, or at least, it wasnt exactly prevented on purpose.

Whether he is capitulant in the matter is immaterial to me. He represents the fiscal vulnerability of our nation, personified in our willingness to allow a non-governmental agency to control the value our goddamn money.

Saying that aloud makes my headspin. Who in the name of Christ thought that was a good idea?

Never took it as you attacking me. We alll have the right to be very pissed off right now.

[CosmicCowboy]

What REALLY pisses me off is that they are bailing out the very fuckers that got us in to this mess to start with.

Did you guys catch the article earlier this week about AIG? All the "top" executives are being given bonuses as much a 4 times their annual salary to "stay on" while AIG is restructured...for some of them this is a lump sum payment of MILLIONS of dollars...WTF??? Like...who the fuck is going to hire these fuckers away from AIG? It's not like the financial sector is booming...

[BacktoBasics]

Abolishing the Federal Reserve is basically a pipe dream. I'm not sure what it would actually take to accomplish that but it'd have to be a massive public uprising and lets face it the general public doesn't even know what the FedReserve is.

[CosmicCowboy]

This is a long read, but well worth it if you are interested in whats going on...

Bernanke's Playbook

By: Gary North, Mises on Money

-- Posted Thursday, 4 December 2008 | Digg This ArticleDigg It! | Source: GoldSeek.com

In the National Football League, a marginal player dreads the request that he report to the coach and bring his playbook. He figures he is going to be cut from the team. The coach makes sure the playbook does not leave with the player.


A coach's playbook has a series of self-contained plays. Their importance is not based on their sequence in the book. They are implemented by the coach in specific situations. They may not work in any given game. If they don't, the team loses the game.


Alan Greenspan never had a playbook, as far as we know. His famous Fedspeak was designed, not to conceal the plays from investors, but rather to conceal the fact that he had no playbook.


Ben Bernanke is different from Greenspan. He has a playbook. He has spent his career studying Milton Friedman's now-dominant 1963 interpretation of the failure of Federal Reserve Policy, 1930–33, in not reversing the Great Depression. The FED did not inflate, Friedman said. This was in contrast to Murray Rothbard's 1963 interpretation of the same era. He argued that the FED did inflate, 1924–29, which created the boom that busted in 1929. Had Bernanke studied Murray Rothbard's 1963 book on Federal Reserve policy as the cause of the Great Depression, he might have had a very different career, perhaps teaching in a community college in North Dakota.


He is not fluent in Fedspeak. Who is? So, he has a different strategy. Lay it out in deadly dull Profspeak. Add footnotes. Deliver the speech to the National Economists Club, an association of men and women who have mastered Profspeak. No problem.


But there was a problem. Bernanke stole one of Friedman's analogies. Friedman did not lecture in Profspeak. He was so confident that he was right, all the time, that he spoke in plain English. He dared anyone to challenge him. Few people did. I did it only once. It was always a high-risk procedure.


The analogy Bernanke stole was the analogy of a helicopter dropping paper money. Bernanke said in his speech that this was a famous analogy. But it was not famous outside of academia. Bernanke's speech gave it currency (as punster David Gordon would say). Here is what Bernanke said.

Even if households decided not to increase consumption but instead re-balanced their portfolios by using their extra cash to acquire real and financial assets, the resulting increase in asset values would lower the cost of capital and improve the balance sheet positions of potential borrowers. A money-financed tax cut is essentially equivalent to Milton Friedman's famous "helicopter drop" of money.

Columnists have either never read the speech (likely) or have forgotten the source of the analogy. Helicopter Ben was merely advocating the helicopter designed by Helicopter Milton.


Am I exaggerating? Hardly. Bernanke gave this speech on November 21, 2002. On November 8, he had given a different speech at a conference at the University of Chicago to honor Friedman on his 90th birthday. As always he delivered an academic speech: a long, tedious summary of Friedman's 1963 book, A Monetary History of the United States, which is most famous for its section on the Great Depression. (Poor Milton. What a birthday present!) Here is what Bernanke – along with the entire guild of academic economists – derived from that book.

. . . the central bank of the world's economically most important nation in 1929 was essentially leaderless and lacking in expertise. This situation led to decisions, or nondecisions, which might well not have occurred under either better leadership or a more centralized institutional structure. And associated with these decisions, we observe a massive collapse of money, prices, and output.

What was lacking? Leadership! Also, a more centralized institutional structure. Does this sound like Friedman? You bet it does. On central banking, Friedman was a conventional fiat money economist, a defender of the banking cartel. No gold coin standard for him!

Bernanke ended his speech Happy Birthday with this:

Regarding the Great Depression. You're right, we did it. We're very sorry. But thanks to you, we won't do it again.

You bet they won't!

What can you bet? Your economic future.

Ladies and gentlemen, place your bets!

THE PROPHET BERNANKE

The playbook is buried deep in his November 21 speech, "Deflation: Making Sure 'It' Doesn't Happen Here." The speech began with a statement of fact.

Since World War II, inflation – the apparently inexorable rise in the prices of goods and services – has been the bane of central bankers.

He then lists the explanations for inflation offered by economists. One of them is accurate: "an 'inflation bias' in the policies of central banks." It was hidden in plain sight.


This is always Bernanke's strategy: hide the needle of truth in a haystack of academic qualifications, verbal hedging, and footnotes. He is not fluent in Fedspeak. His strategy works just as well.

He states as fact what clearly is not factual.

. . . during the 1980s and 1990s most industrial-country central banks were able to cage, if not entirely tame, the inflation dragon.

The inflation calculator of the Bureau of Labor Statistics indicates that goods costing $1,000 in 1980 would have cost over $2,000 in 1999. The cage was way too large for my taste.

Although a number of factors converged to make this happy outcome possible, an essential element was the heightened understanding by central bankers and, equally as important, by political leaders and the public at large of the very high costs of allowing the economy to stray too far from price stability.

Over the next four years – maybe longer – these words will come to haunt Dr. Bernanke.


Then he moved from a discussion of inflation (rising prices) to deflation (falling prices).

With inflation rates now quite low in the United States, however, some have expressed concern that we may soon face a new problem – the danger of deflation, or falling prices.

This in retrospect is strange. Who was worrying about deflation in 2002? From the day he became Chairman until the day he left office, Greenspan had warned publicly against inflation. Then the FED inflated. Why this shift? Was Bernanke trying to shift the debate to the opposite issue? No. He was heading it off at the pass.


He began with the definition of inflation common to all schools of economic opinion except the Austrian School: rising prices. Inflation is the opposite of deflation. Here is how he defines deflation.

"Deflation is defined as a general decline in prices, with emphasis on the word "general."

He does not define inflation as a rise in the money supply, with the effect being rising prices. To define it this way would identify the source of rising prices: the central bank and the fractional reserve commercial banking system.


Bernanke then identified unnamed sources. He also pulled off one of the greatest slight-of-tongue routines in academic history.

The sources of deflation are not a mystery. Deflation is in almost all cases a side effect of a collapse of aggregate demand – a drop in spending so severe that producers must cut prices on an ongoing basis in order to find buyers.

Did you spot it? It's here: "side effect." Falling prices are a side effect. A side effect of what? Falling aggregate demand. What causes falling aggregate demand? He never said.


Here is where long, tedious speeches perform public relations miracles. They put listeners to sleep. That is their purpose.

He then moved in near-prophetic fashion to the American economy in late 2008.

However, a deflationary recession may differ in one respect from "normal" recessions in which the inflation rate is at least modestly positive: Deflation of sufficient magnitude may result in the nominal interest rate declining to zero or very close to zero. Once the nominal interest rate is at zero, no further downward adjustment in the rate can occur, since lenders generally will not accept a negative nominal interest rate when it is possible instead to hold cash. At this point, the nominal interest rate is said to have hit the "zero bound."

It is widely believed today that the FED will reduce the federal funds rate to zero within the next few months – maybe sooner. Ever since October 29, it has been 1%, down from 1.5%. So, what happens when the rate is zero bound? Will banks stop lending to each other overnight?


Yes.


Then will they stop lending? No. Banks will not stop lending until they stop taking deposits. Every time a bank takes a deposit, it is announcing: "This deposit will be lent at a higher interest rate than we are paying." Banks are not in the charity business.


The day your local bank stops taking deposits, you should start to worry about the Great Depression 2 we hear so much about. You should start taking currency out of the ATM.

To take what might seem like an extreme example (though in fact it occurred in the United States in the early 1930s), suppose that deflation is proceeding at a clip of 10 percent per year. Then someone who borrows for a year at a nominal interest rate of zero actually faces a 10 percent real cost of funds, as the loan must be repaid in dollars whose purchasing power is 10 percent greater than that of the dollars borrowed originally. In a period of sufficiently severe deflation, the real cost of borrowing becomes prohibitive.

The cost of borrowing became prohibitive. Really? The U.S. government had no trouble in the 1930's getting investors to lend it money at rates well under 1%. So does today's U.S. government. No problem!


Will banks lend to private businesses? Maybe not. That is the real problem we face today: the siphoning off of capital by the U.S. government. Economists call this the crowding-out effect. Most of them deny that it exists. Let's see, if a dollar is invested in T-bills, it is not invested in business. But that's not crowding out. No, no, no. It's something else. What, exactly? They never say, just as Bernanke never says what causes falling aggregate demand.

Although deflation and the zero bound on nominal interest rates create a significant problem for those seeking to borrow, they impose an even greater burden on households and firms that had accumulated substantial debt before the onset of the deflation. This burden arises because, even if debtors are able to refinance their existing obligations at low nominal interest rates, with prices falling they must still repay the principal in dollars of increasing (perhaps rapidly increasing) real value.

What? Dollars increasing in real value? What is this? Americans have seen this only once since 1937: in 1955.

The financial distress of debtors can, in turn, increase the fragility of the nation's financial system – for example, by leading to a rapid increase in the share of bank loans that are delinquent or in default.

This is beginning to sound remarkable prescient. Did Bernanke see what was coming? Did he finally grasp the Austrian School's monetary theory of the business cycle? After all, the FedFunds rate was 1% when he delivered this speech.

Closer to home, massive financial problems, including defaults, bankruptcies, and bank failures, were endemic in America's worst encounter with deflation, in the years 1930–33 – a period in which (as I mentioned) the U.S. price level fell about 10 percent per year.

True. This was why, in 1934, the government created the Federal Deposit Insurance Corporation. This is why banks are not allowed to go bankrupt. Bankrupt banks shrink the money supply. Taken-over banks do not.

Because central banks conventionally conduct monetary policy by manipulating the short-term nominal interest rate, some observers have concluded that when that key rate stands at or near zero, the central bank has "run out of ammunition" – that is, it no longer has the power to expand aggregate demand and hence economic activity.

"Run out of ammunition." Where have I heard that before? There is a familiar ring to it.

It is true that once the policy rate has been driven down to zero, a central bank can no longer use its traditional means of stimulating aggregate demand and thus will be operating in less familiar territory. The central bank's inability to use its traditional methods may complicate the policymaking process and introduce uncertainty in the size and timing of the economy's response to policy actions. Hence I agree that the situation is one to be avoided if possible.

We are now almost there. Two more meetings of the Federal Open Market Committee, and we will be there. Then what?

The playbook tells all.


NON-TRADITIONAL PLAYS

Bernanke's playbook is governed by Friedman's prescription: don't inflate more than 2% to 3% per year unless there is a depression on the horizon, and then inflate without limit until the crisis goes away. Bernanke followed this playbook from his inauguration on Feb. 1, 2006 until the fall of 2008, when events began to look ominously like 1929. He is now using pages from the section on "hail Mary" plays.

However, a principal message of my talk today is that a central bank whose accustomed policy rate has been forced down to zero has most definitely not run out of ammunition. As I will discuss, a central bank, either alone or in cooperation with other parts of the government, retains considerable power to expand aggregate demand and economic activity even when its accustomed policy rate is at zero.

The central bank can take steps to inflate, despite a FedFunds rate of zero.

As I have already emphasized, deflation is generally the result of low and falling aggregate demand. The basic prescription for preventing deflation is therefore straightforward, at least in principle: Use monetary and fiscal policy as needed to support aggregate spending, in a manner as nearly consistent as possible with full utilization of economic resources and low and stable inflation.

This is being done today. The U.S. government has officially increased the debt by $700 billion (plus $150 billion of pork). The FED has increased its balance sheet by a trillion dollars. The government has taken over Fannie Mae and Freddy Mac loans totaling close to $5 trillion. Congress did not vote on this.


There will be plenty of opportunities for the FED to inflate its way out of this. Why must it do this? Because Prof. Irving Fisher said to.

Irving Fisher (1933) was perhaps the first economist to emphasize the potential connections between violent financial crises, which lead to "fire sales" of assets and falling asset prices, with general declines in aggregate demand and the price level. A healthy, well capitalized banking system and smoothly functioning capital markets are an important line of defense against deflationary shocks. The Fed should and does use its regulatory and supervisory powers to ensure that the financial system will remain resilient if financial conditions change rapidly.

Fisher was the first modern macroeconomist. He was the inventor of today's definitions of inflation and deflation. By 1933, he was bankrupt, having run through his own fortune – he had invented the Rolodex – and his wife's sister's fortune. He had announced in September 1929 that the stock market was not going to fall. He was wrong.


Irving Fisher is the patron saint of central bank policy in the same way that John Maynard Keynes is the patron saint of modern deficit fiscal policy. Fisher was wrong in 1911, wrong in 1933, and wrong today. Yet he is the most influential economist of our day . . . still. This is why we are in big trouble.


What is in store for America? Monetary inflation on a scale not seen since World War II.

As I have mentioned, some observers have concluded that when the central bank's policy rate falls to zero – its practical minimum – monetary policy loses its ability to further stimulate aggregate demand and the economy. At a broad conceptual level, and in my view in practice as well, this conclusion is clearly mistaken. Indeed, under a fiat (that is, paper) money system, a government (in practice, the central bank in cooperation with other agencies) should always be able to generate increased nominal spending and inflation, even when the short-term nominal interest rate is at zero. . . .


What has this got to do with monetary policy? Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation.

Then Bernanke gave us two of his key plays from his playbook. Nobody paid any attention. They pay attention now.

To stimulate aggregate spending when short-term interest rates have reached zero, the Fed must expand the scale of its asset purchases or, possibly, expand the menu of assets that it buys. Alternatively, the Fed could find other ways of injecting money into the system – for example, by making low-interest-rate loans to banks or cooperating with the fiscal authorities.

I therefore suggest that you take him seriously.

If we do fall into deflation, however, we can take comfort that the logic of the printing press example must assert itself, and sufficient injections of money will ultimately always reverse a deflation.

He was only halfway through his speech at this point. But you get the idea. He ended with his now-famous words:

A money-financed tax cut is essentially equivalent to Milton Friedman's famous "helicopter drop" of money.

CONCLUSION

He ended his speech with these words: Nevertheless, I hope to have persuaded you that the Federal Reserve and other economic policymakers would be far from helpless in the face of deflation, even should the federal funds rate hit its zero bound.


We are now reaching the point of the helicopter drop. If the FED does not reverse its policy of buying bad debt with new money – high-powered money, as Friedman called it – we will get mass inflation before the next Presidential election.


Bernanke told us what he would do. Over the last six months, the FED has done it.


It will do more. Worse.

[BacktoBasics]

Let me see if I got this right.

When printing money for demand fails just print more money and create the demand on your own?

So in short when printing money fails just print more money.

[DarkReign]

Let me see if I got this right.

When printing money for demand fails just print more money and create the demand on your own?

So in short when printing money fails just print more money.

Long and short of it, yes.

[CavsSuperFan]

I agree but that is SUCH a sucker play. This ain't your daddy's General Electric...They could hardly be called a classic blue chip industrial anymore...they are neck deep in financial derivatives and broadcasting/entertainment as well and doing it very badly.

CC...How do you know all this stuff?


Today's Yahoo Financial blog... (http://finance.yahoo.com/expert/article/stockblogs/147950)

[RuffnReadyOzStyle]

It astounds me that no-one is seeing this for what it is - the failure of capitalism as it is constituted because it concentrates on only one principal, that is return to shareholders. It is time to build a new capitalism which encompasses social responsibility and environmental costs into the equation and encourages corporations to be good citizens, not just money-churners.

Prior to this downturn, corporations were taking massive profits for years, and yet the first thing they have to do in a downturn is lay off staff in order to maintain some sort of dividend flow to shareholders - does that actually make sense to anyone? Wouldn't it be better if corporations were allowed to retain staff during tough times, keeping people in work, in their homes, with food on their tables, by sacrificing some of their returns to shareholders? Right now they CANNOT do that under fiduciary responsibility. That is the sort of thing I'm talking about when I refer to social responsibility.

As for the environment - we have all been living for free off the environment because the economic system takes little or no account of environmental costs - and this century we are going to pay the piper. I am not only talking about climate change, I'm talking about toxic pollution, soil degradation, disappearing groundwater, fishery depletion, etc. The smart way out of this depression would be to invest massively in sustainable energy and water resources, and closed cycle manufacturing - huge, necessary investments for the future of economies and environments - but I don't see anyone even considering that. Sure, there's a lot of rhetoric, but very little proposal for action.

This is a broad-based systemic failure, but where are the proposals for a new, more resilient and rational economic system?

[RuffnReadyOzStyle]

BTW, printing money without any economic expansion = road to economic disaster. All you get is hyper-inflation, aka Mugabe's Zimbabwe. Hell, any idiot knows that - I learned it in 11th grade economics! :lol

[smeagol]

BTW, printing money without any economic expansion = road to economic disaster. All you get is hyper-inflation, aka Mugabe's Zimbabwe. Hell, any idiot knows that - I learned it in 11th grade economics! :lol

. . . or Argentina, circa 1989.

Yes, we not only defaulted on our debt, we also has two hyper-inflations . . . !

[RuffnReadyOzStyle]

. . . or Argentina, circa 1989.

Yes, we not only defaulted on our debt, we also has two hyper-inflations . . . !

...largely because your debt was written in US $, and when the US$ appreciated against your currency you were screwed twice.

Once again, a systemic problem.

[DisgruntledLionFan#54,927]

I blame Schapelle Corby.

[RandomGuy]

It astounds me that no-one is seeing this for what it is - the failure of capitalism as it is constituted because it concentrates on only one principal, that is return to shareholders. It is time to build a new capitalism which encompasses social responsibility and environmental costs into the equation and encourages corporations to be good citizens, not just money-churners.

Prior to this downturn, corporations were taking massive profits for years, and yet the first thing they have to do in a downturn is lay off staff in order to maintain some sort of dividend flow to shareholders - does that actually make sense to anyone? Wouldn't it be better if corporations were allowed to retain staff during tough times, keeping people in work, in their homes, with food on their tables, by sacrificing some of their returns to shareholders? Right now they CANNOT do that under fiduciary responsibility. That is the sort of thing I'm talking about when I refer to social responsibility.

As for the environment - we have all been living for free off the environment because the economic system takes little or no account of environmental costs - and this century we are going to pay the piper. I am not only talking about climate change, I'm talking about toxic pollution, soil degradation, disappearing groundwater, fishery depletion, etc. The smart way out of this depression would be to invest massively in sustainable energy and water resources, and closed cycle manufacturing - huge, necessary investments for the future of economies and environments - but I don't see anyone even considering that. Sure, there's a lot of rhetoric, but very little proposal for action.

This is a broad-based systemic failure, but where are the proposals for a new, more resilient and rational economic system?

Corporations have rather savagely cut back dividends.

I would also remind you that the majority of stocks held in the US are held by retirees or people saving for retirement in the form of pension plans, 401ks, etc.

We *are* the shareholders.

There is nothing wrong with paying return on borrowed/invested capital any more than there is something wrong with paying somebody for their labor.