252 responses to “Ron Paul Reacts to Ben Bernanke as TIME Person of the Year”

  1. Pozycjonowanie-O41

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  2. Joseph Giallombardo

    Forest,

    Robert Rubin. Sorry, I misspelled his name. Clinton's Treasury Secretary.
    Despite your rude behavior, I do know what I am talking about.

    Are you saying the unregulated, secretive derivatives market which has brought the world to a financial meltdown was a good thing?

    The question remains a serious one. And I am looking for a more complete answer.

    What is a more complete response from the AusEco view to which Greenspan religiously clung to, until his admission that he was wrong, before the Congressional hearing on the matter?

    Joseph G.

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  3. Joseph Giallombardo

    Austrian Economics

    How would an advocate respond to the unregulated speculative investments in derivates that happened on the watch (in the late 90s) of Ruben, Greenspan and Geitner?

    It turns out the head of a Govt Agency, attempted to blow the whistle on this secretive, unregulated derivative speculation and was shut down by the "inner circle" of Greenspan, Ruben and Geitner as well as the SEC Chairman at the time, who all said, that NO regulation is needed.

    They went even further, when her agency attempted to blow the whistle, by getting congress to directly restrict her from an investigation, let alone regulation.

    When the WHOLE thing blew, starting with Fred/Fan leading to AIG and other institutions, Greenspan admitted before congressional hearings that he had been "wrong" about free-markets.

    In one aspect you could say, that if their had been NO bailout, then the derivative speculators may have learned their lesson; still, must people learn, too the hard way, that banks are supposedly trustworthy only find out that their homes are worthless or that that have lost or will lose now their life savings when the runaway, hyperinflation comes because of the bailout action.

    So, what's the answer NO regulation, NO oversight, that may have prevented this problem in the first place? Isn't the truth that you have to guard the chicken coop or the fox will get in.

    Answers please!

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    1. Forest

      Hmmmm, 'Credibility FAIL'

      How about a question... Who is this 'Ruben' you continually refer to?

      Since you apparently have no idea what you are actually talking about, unregulated, speculative investments are a good thing! That would be the powerful, yet invisible hand of the free markets working!

      Greenspan wasn't 'wrong' about free markets! They were never actually 'Free' because 'Free' markets don't fail?

      Wait, all this hypocrisy this website has filled me with is starting to get a bit too obviously confusing. :(

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  4. sean

    Ben Bernanke speaks out about the taylor rule and how the federal reserve has not followed this rule of thumb to prevent bubbles and how they will have to in the future.

    http://cspan.org/Watch/Media/2010/01/04/HP/R/27933/Bernanke+Calls+for+Regulation+First+then+Interest+Hikes.aspx

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    1. sean

      Well he actually proves how the housing boom was influenced more by incoming foreign capital rather than monetary policy.

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      1. longshotlouie

        He hardly 'proved' anything except the folly of micro-managing an economy.

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  5. Redfish

    I still can't believe that they'd entrust the banks with trillions in reserves. Hasn't anyone learned yet??!!! The banks can't help themselves. Greed is their psyche, their bread and butter, their be all and our end all. This is a culture of corruption. Who da man? Ron Paul is da man! Out with the old and in with the new. Happy New Year to all and to all a g'nite

    Red

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  6. longshotlouie

    It's time; in fact, we have only one day left to identify the top ten conservatives of the decade.

    http://www.conservapedia.com/Essay:Conservatives_of_the_Decade

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  7. sean

    Nate, either you can’t read charts, or you dont know what the charts represent, and I know you have no clue of whats going on. Again.. Yes the M1 and M2 are growing “according to seasonal change” but the M3 which is the total overall money supply (including M1 and M2) is REDUCING.. Anyways, the M1 money supply only increased by 300 billion, not 2 trillion (or whatever the fed created).. That 300 billion came from the “stimulus package.” The money the fed created is not entering our economy. They purchased assets so banks can lend money, whenever the banks make money they will purchase the assets back. The feds money never will touch the economy. They acted as a middle man to unfreeze the credit.

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    1. Nate Y

      As if 300 billion is a drop in the bucket. Anyway, we'll just have to move on from the money supply charts. You say I'm not reading them right and I say the same of you. I'm content with the information I have provided. So I think it best to just let everyone else decide what arguments are closer to the truth.

      "The feds money never will touch the economy"

      Sure it won't.

      Even if it doesn't, their interventions have already caused plenty of economic dislocations. Firms that should have gone bankrupt have been propped up, credit has been diverted to favored banks, companies, and financial institutions, etc. The result? A fundamentally less sound economy with the politically well connected enriched at the expense of the common person on the street.

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      1. sean

        Nate.. I read all the articles you post on here. You are too stubborn and one sided to even read what I post. Being ignorant about the fact doesn't make you right. Again.. Read this, it will explain exactly what i'm talking about. Its not even a long article. You can read can't you?

        http://www.huffingtonpost.com/hale-stewart/inflation-from-money-crea_b_207126.html

        The point is, there will be no hyperinflation. I'm not defending what the fed did and i'm not supporting their policy. I'm just not being an ignorant paranoid fool about it.

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        1. Nate Y

          I read the article. The author makes a few fundamental mistakes that greatly hamper his analysis. He doesn't know what inflation is. He seems to switch between two different definitions (with neither being very good). At first he seems to think that inflation is just rising prices. Then he states "Keep in mind the most fundamental definition of inflation: Too much money chasing too few goods" but this is not the most fundamental definition of inflation.

          Also, he distorts the M3 line chart. He does indee recognize that the RATE of increase in M3 has contracted. But he acts as if this constitutes a decline in the M3 supply itself. This is just foolish. This is like me saying "It's true I've been borrowing and spending at a steady rate of $1000 a month for the past few years but over the past 2 months I have only borrowed $600. You see? I have decreased my debt burden." But I have done nothing of the sort. I have merely increased my debt burden at a slower rate.

          The author concludes with "Simply put, monetary based inflation isn't a problem right now." This is largely true but the key words are "right now". As Marc Faber aptly puts it "Inflation is a dynamic process", the consequences of inflation make themselves known over time.

          Moving away from the article, I have no idea why you are acting as if I brought up hyperinflation and have been rattling off a pile of posts saying that such an unhappy scenario is inevitable. I didn't bring up hyperinflation in this thread. You did. It's true you thought I implied it but there is absolutely nothing in my December 28, 2009 at 7:54 pm post that could have possibly given you that idea.

          To be honest, I do think a dollar collapse/hyperinflation/very high inflation scenario could happen. But it depends on a great many things that may or may not come to pass. I've hedged my bets with some silver but we'll just have to wait and see what happens.

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          1. sean

            The money supply is contracting. According to those charts in that link you showed me. We were up to almost 15 trillion dollars in the economy and now we are back down to 14 trillion.

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          2. longshotlouie

            Billy Preston comes to mind.
            http://www.youtube.com/watch?v=OYgf7WkrFHw

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        2. Nate Y

          There's a couple problems with this and they are related. First, when we use words like "contracting" or "expanding" we must use them in the context of a particular time period in order for them to have any meaning. Secondly, yes, M3 is seen to be contracting recently. I can look at the chart. There has been a decline in the second half of 2009. By the way, you were plenty generous with your estimation of an almost 1 trillion decline in M3. The highest it got was around 14.7 trillion and it's currently around 14.2 trillion. So you were off by about 500 billion. Certainly not a trivial amount. Anyway, as you are so eager to point out, M3 has declined...in the past few months. The problem with this as it relates to the article/link you posted is that the article was written in late May. M3 was still expanding during that time.

          You're fond of charts. So let's look at shadowstats' seasonally adjusted M3 chart. It runs from early 2007 to the present. In early 2007 M3 was about 10.3 trillion, it peaked at 14.7 trillion in the summer and is now somewhere around 14.2 trillion. So it started at 10.3 Tand is now at 14.2 T. What's the trend? Is it expanding or contracting?

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          1. sean

            Yes, the money supply has expanded since 2007, but i'm talking about what has been done recently since the crisis started. The money supply is shrinking back down to the level before the fed created all of that money.

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  8. Nate Y

    Redfish,

    Bonner and the entire team at Agora are simply awesome. I'm sure you already know but you can check out their daily commentaries at dailyreckoning.com.

    It is true that the dramatic increase in the money supply by central banks hasn't reached the real economy...yet. But that's the key. What happens when yet comes? What happens if/when the money does reach the real economy? There's still a debate between the deflationists and inflationists and this period has been termed a "deflationary inflation". Deflation in private sector and inflation in the public sector. Based on what Bernanke has said, he'll certainly try his best to overwhelm the credit contraction.

    Anyway, I just like Bonner's style. He's been proven precient regarding economics and markets and he delivers his information with a clever wit. It's definitely fun reading his commentaries.

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    1. Redfish

      Thanks for the link Nate to daily reckoning - it's in my favs now! I posted that previous reply in case some that are reading this, like me, didn't understand how the money supply could be contracting when the Fed is smoking the printing presses. I sincerely thought we were inflationary right now. Bubble Ben's recent comments on reserves at the banks being held really related to what you guys are talking about and it's coming together in my mind. I'm of the opinion now that inflation is inevitable but for now we're deflationary. If that knife edge of deflation or inflation happens credit has to loosen first. The Fed has no tools left to force that. So, we're on an edge, like Brando's slug in Apocalypse Now slithering up the length of a razor, unhurt. The banks are holding those reserves and we all know how trustworthy and adverse to risk the banks are {sarcasm}. Bubble Bernacke is going to offer them a CD type instrument to hopefully contain the reserves (by paying them interest on the money they loaned to them - our money and also paying them interest with our money). What a mess. MBS's and CDO's are not going to be bought by the world anymore. I guess they can try to give them a quadruple A Platinum rating (ha ha) but once burnt twice shy. To be honest I know little about the Fed's institution and how it should be changed - except from what I've read here and Jekyll Island readings. Obviously the Fed needs to go and I'm not the one to speculate on how. I leave that to the learned historians here. Just wanted to let you guys know - good thread. It's been like a good mystery novel that's hard to put down.

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  9. Jay Giallombardo

    Redfish:

    Thanks for an informative article.

    If inflation began in 1913...What was different then vs the other times America had a National Bank or Banking Acts (of 1867) when inflation didn't occur?

    Was it the fact that the Federal Reserve was "not" a National Bank in the America Tradition of Hamilton but an invention of the British using "Keynesian" manipulation for the first time?

    This is a hypothesis...but perhaps you'd care to comment?

    Joseph G.

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  10. Jay Giallombardo

    Hi Folks,

    This short documentary provides the rational for a National Mission and great infrastructure projects of a Nation to increase its capacity for increasing productive labor.

    Unlike the British "view" of mankind as depicted in the hateful writings of Thomas Malthus, or in the "environmentalist" view of mankind as destroyers of the "natural world", the case is made by Vladimir Vernadsky that there are three phases of development identified as the Lithosphere (in-organic world creation), the biosphere (organic natural world) and the Noosphere (mankinds willful ability to increase power over nature).

    Here is the link and the short film is concluded with some remarks by Lyndon Larouche about the view of Leibniz, the pursuit of Happiness and aspects of immortality.

    http://www.larouchepac.com/lpactv?nid=11573

    Joseph G

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  11. Jay Giallombardo

    Sudan And Chad call a cease fire!

    Realizing their internal troubles are being fomented by the British Empire, the two governments are now forming a cooperative alliance to remove the rebels from each country and enter a period of diplomatic negotiation for cooperation between nations.

    Interestly, Liu Guijin, special representative of the Chinese government on African affairs was in Sudan, Chad, and Addis Abeba, Ethiopia, the headquarters of the African Union, in June.
    Might China's recent agreements with Russia triggered a similar action here? It would appear so.

    This is a great move in the direction of the 4-Powers Initiative of Lyndon Larouche. As Nations begin to protect their Sovereignty and don't fall for "manipulative" wars that only weaken or destroy their country, economically and morally, another "BLOW" is struck against the British Empire, fomentors of war.

    Other African nations could follow suit using original American Economic principles to build their nations and foster good neighborly relations.

    One excellent future project for a "United Africa" is a continental "Mag-Rail" System, combined with Nuclear power plants and water diversion of the Congo River to the CHAD river basin. Such a development would GREEN the Sahara Desert for Agriculture.

    It is a 25 year project, but could be started as the British Empire continues to lose its dastardly domination of this part of the world.

    Joseph G.

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  12. Jay Giallombardo

    Nate asks: First, by what right does Lyndon Larouche propose to
    "engineer" society?

    Answer: That's what creative minds do. They observe, analyze, hypothesize and test their theories. And they stimulate the thinking of others, like this discussion. One approach is to look at history and see what was done during times of high productivity in a nation. Right now America has productivity falling ...and a monetary expenditure that exceeds financial investment with no actual increase in productivity since 1970. This is time when wealth is being diminished. Therefore this is not a good model to follow.

    There were periods of "vision", appropriate investment and strong physical development of economy in America from 1791-1811, 1816-1836, 1867-1890, 1940-1970, and these were periods when America's agriculture, industry, and manufacturing were seen to grow because we had good policies and great leaders. Therefore we should do things that we did in these periods. And we should elect leaders who demonstrate an understanding of economics, instead of idiots like Obama who are but mouthpieces of the British Empire.

    Nate Asks: Why should he or anyone else have control over the lives and property of others without their consent?

    I don't think Mr. Larouche wants to control the lives of others. There is no economy in that. Leibniz said that happiness is found in the expression of creative insight. Mr. Larouche has indicated the impact of Leibniz in the founding of America, particularly in the writing of the Constitution and Declaration of Independence. Of course in a free country you also have the right to act stupidly if that is your goal. But we hope mostly for simple common sense and a few great thinkers to emerge to help us on our way.

    History has shown that when a national project is uttered, there can be a rise from the accomplished within the nation to accomplish it. The fact remains that if you don't use your brain, other people will control EVERY ASPECT of your life.

    Joseph G.

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    1. sean

      You obviously can engineer an economy. You can control the money supply and the amount of credit that circulates the country. Should the fed have this power, I think not. Nor should any other private industry..

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      1. Jay Giallombardo

        Agreed! The National Government, working from the perspective of the "science of economy", would direct credit toward private enterprise toward "increasing the productive Labor" of the citizens for the wealth and happiness, and to stimulate scientific discovery which is an essential dynamic of wealth creation.

        A National Bank that inflates it's currency with too much credit spend on the wrong things, essentially, will destroy itself.

        1-2% long term low interest rate is sustainable credit in a growing economy. If spent on the right things the wealth of the nation should keep pace with this growth of credit.

        It is the Keynesian manipulation of the FED that causes busts and booms and wreaks havoc on economy.

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    2. longshotlouie

      We are currently enjoying the fruits of economic 'engineering'.

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      1. Jay Giallombardo

        Yes, but be fair. The FED is bent on destroying the dollar and replacing it with a "World Currency"...This is against the national interests of the US which should command its own currency and develop relations with countries through trade treaties of mutual benefit. That is the America Economic model of Hamilton...The FED is gross distortion of that and should be abolished through Bankruptcy.

        Joseph G.

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        1. longshotlouie

          Any attempt at 'central control' is destined to achieve similar results.

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          1. sean

            according to who? Inflation and Deflation are quite the opposite.

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      2. sean

        we are currently enjoying the fruits of economic engineering from a private institution with no authority.. Thats like asking Walmart to run the economy. Thats what would end up happening if we had things nate's way. haha Walmart would end up controlling every aspect of the economy.

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  13. Jay Giallombardo

    Nate:

    Apollo 13 is a good analogy…because the world is at a life or death crisis. The Federal Reserve is printing trillions of dollars to prop of the failing global monetary system. Nothing can save this system no matter how much money is printed. Despite the lies from Washington, the economy of America is not improving and has been slowly collapsing in real growth since 1970. It reached a crisis with the Tech-bubble in 2000, and the real estate market collapse in 2007. Health care is just one of the draconian measures being used to “cut costs” and essential reduce population by denying care. We are heading for a “Dark Age”, if we don’t do something NOW.

    Larouche is the only economist that is suggesting a workable plan to dig out of this global mess.

    Many countries are listening and acting to bolster their sovereignty. Many countries are already adopting the beginning steps of the Larouche plan by focusing on their nation and infrastructure development, before the looting British Empire sucks them dry.

    Look what Bush and Thatcher did to Mexico and later with Ukraine and Germany when the Berlin Wall fell. That is the action of the Global monetarists. Mexico and Ukraine are in shambles. Greece is the next “Dubai”, ready to fall, and Spain is not far behind. These countries are bankrupt as is the USA. US has border issues because there is NO economy in Mexico. Mexico is consumed with debt and the Drug Lords are running rampant. You will find that there are small oligarchies in these countries that are suppressing their own development like good little “brits”…they are bought off and hold power.

    In January the US States will run out of "unemployment" money and there could be riots, or considerable unrest and protest far surpassing any Tea Party that has occurred. Some States have "Recall" laws and you could see many politicians kicked out before 2010 elections on recall.

    The only way to break the “empire” is for the strongest Nations, Russia, China, India, and USA to form a new credit system based on the Hamiltonian model of strong national sovereignty (including a National bank that is under the control of the government to manage credit for business to increase the productivity of labor which is real economic wealth.)

    Joseph G.

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  14. Doug Newman

    One question.
    "The Fed" was called The Federal Reserve Bank to make the people accept it by thinking it was a bracnh or official office of The federal Government.....so SUE "The Fed" and The Federal Government for fraud.
    We may not be able to win a Presidential election but if the main thrust of all of this is to bring the EVIL FED to account and return its duties to The U.S. Treasury then sue them!
    What say you!?!

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    1. Jay Giallombardo

      Congress can act at any time to Abolish the FED...it takes real patriots and knowledgable people to orchestrate action against the FED.

      If Glass-Steagall is re-enacted...the FED could be put through Bankruptcy...you don't have to SUE them...just new legislation.
      America created the FED but gave it too much power. Woodrow Wilson regretted the action, late in life. But, we can undo the FED. It just takes vision and courage. Larouche has pointed the way and does have influence with some Senators and Congressman on how to approach the problem.

      It may start with the audits Ron Paul is calling for. This has virtually unanimous support. But we need more than just that...once it gets started and the secrets are learned, there will be a groundswell against the FED.

      The danger is that we over-react and attempt a "laissez-faire" approach...that would be a huge mistake and play right back into the hands of the enemy. Strong national governments controlling their currency and fixed international rates of exchange should be the policy and intent.

      Still, we have Obama, Summers, Geitner, Bernanke to deal with who are hell bent on destroying America as a nation and bringing it into the global community as yet another serf-nation, like Europe has become. There is no sovereign nation left in Europe they are all under the yoke of the new "Colonialism".

      While Abolish the FED, the IMF needs to go as well. Only the American People are left to RISE in protest: TEA PARTY and Mass Strike to recall the treasonous, re-elect the few patriots who will return us to constitutional values.

      The Environmentalists failed miserably (which is good) in Copenhagen. The Pacific countries stood strong against this tyranny and are now rising in a new economic system based on credit, not montarism.

      If the USA can push the congress to reassert its power, America can break free of the fascist Obama-crowd and join with the other pacific nations. That would be the death-knoll to the British Empire. And then we have a new "Nuremburg" against those traitors that attempted to destroy America. They should pay!

      Joseph G.

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  15. Nate Y

    sean says:
    December 28, 2009 at 11:05 pm

    the dollar is not going to collapse, if that is what you are implying nate.

    Larouche is against fractional reserve banking and is for returning to the gold standard. You have such backwards thinking of some imaginary disconnected society where people don’t travel. We can’t half a million different currencies floating around, nobody would accept anybodies money. And no currency could compete with the dollar. Banks, or money creators only have LIMITED resources. only the government has real wealth, the wealth of the gold. This isn’t medieval times from your video games or books.

    -------------------------------------------------------------

    I'll just let this nonsense speak for itself. Every sentence is a strawman, non sequitur, outright lie, or ad hominem.

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    1. sean

      Is that your response? haha what a wise remark.

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    2. Matt

      Nate Y says:
      December 29, 2009 at 12:34 am

      I’ll just let this nonsense speak for itself. Every sentence is a strawman, non sequitur, outright lie, or ad hominem.

      ____________________________________

      Solid. Well, at least people know when you can't refute an argument, you yourself simply use strawman, non sequitur, outright lie, ad hominem attacks.

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      1. Nate Y

        Apparently you don't know what any of those are.

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    3. longshotlouie

      ' .....only the government has real wealth'.

      ??????

      Sean regains the lead for the coveted 'Dullard of the Year' award.

      GO SEAN !!!!

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      1. sean

        lol 147.3 million oz's of gold is "real wealth." Please show me an individual, or institution that can compare.. Nice try.

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        1. longshotlouie

          If you ignore the hole in your bucket does the bucket hold water anyway?

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          1. sean

            haha, that has nothing to do with what we are talking about.. If a pidgin loses its wings, can it still fly? If a pig grows wings, could it fly? Is louie a long shot away from ever making sense?

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          2. longshotlouie

            It's a beautiful thing when you make my point for me.

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          3. sean

            What point would that be? I thought you were trying to make the point that the government has no real wealth.

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      2. Nate Y

        I dunno dude, this one is pretty awesome too:

        "our savings rate is increasing, but not enough to cause harm".

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        1. sean

          You obviously don't know too much about history or economics. Yes, it is good to have a high savings rate because banks can use that money as capital, but too much savings can cause hyperinflation. "Too much money chasing to few of goods." Germany printed money and gave it to the people for 10 years before they really started to accelerate their consumption rate which caused prices to skyrocket.

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          1. sean

            Look, the fed just released the M1 figures yesterday..

            Show me a dramatic increase in the money supply.

            http://www.federalreserve.gov/releases/h6/Current/

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          2. Nate Y

            You've outdone yourself with this one:

            "too much savings can cause hyperinflation"

            As if savings is just another term for "printing money".

            Keep em coming.

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          3. sean

            i'm sure you know that our money supply has been contracting since the recession started. that's why the government borrows money, it borrows money to offset money that the private sector isn't borrowing.

            http://krugman.blogs.nytimes.com/2009/06/06/wheres-the-money-coming-from/

            This is why we haven't had a dramatic increase or decrease in the money supply, and no major inflation.

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          4. sean

            all money is just printed.. savings are savings whether it be paper dollars or corn nuts. i guess you were trying to save yourself with that one.

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          5. Nate Y

            M1 only includes the funds that are readily accessible for spending. It is not an accurate representation of the total money supply. You gotta look at M2 or M3 (even thought the Fed keeps M3 a secret) for a more accurate picture of the money supply and it's growth. But even M1 should be a concern.

            Here's a couple charts illustrating M1 and its growth:

            http://www.economagic.com/em-cgi/charter.exe/fedstl/m1sl

            http://www.chartingstocks.net/2009/03/chart-of-the-us-money-supply-1917-2009/

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          6. Nate Y

            "all money is just printed.. savings are savings whether it be paper dollars or corn nuts"

            If this was true, we could simply print money and have everlasting prosperity. Unfortunately, it doesn't work that way.

            If we could just print money and have real savings, we would never have a trade deficit. We would never have a problem with debt. Someone call Obama quick! We don't need to run this trillion dollar deficit and add to the already massive national debt. Deficits aren't a problem, debt isn't a problem. In fact, they don't even exist! We can just print the money. We have discovered the source of perpetual savings and surpluses. It's called the printing press.

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          7. sean

            haha what are you talking about? savings come from earnings, whether it be from printed money or not printed money.. I'm talking about earnings that people put aside. Who knows what you are talking about. You are in la la land.

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          8. sean

            lol you don't know what you are talking about.. The M3 has plunged this year.

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          9. sean

            This explains exactly what i'm talking about..

            http://www.huffingtonpost.com/hale-stewart/inflation-from-money-crea_b_207126.html

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          10. Nate Y

            The Fed doesn't release M3 stats anymore. Where are you getting the numbers/charts for M3. Let's consult Shadowstats...

            http://www.shadowstats.com/alternate_data/money-supply-charts

            I'm in la la land? I'm not the one making patently absurd statements to the effect of "savings can hurt the economy" and "savings can come from the printing press". Anyway, keep em coming.

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          11. sean

            hahahahaha okay lets use that chart.. Look how the M3 has plunged... The M1 and M2 are included in M3. That means the money supply is contracting, like i said a few posts ago. Thanks for helping me prove my point.

            What i've been saying makes perfect sense. You obviously don't know what you are talking about.. All money comes from the printing press and is earned and saved. The money that is saved can be turned around to be loaned to someone else. Even Ron Paul talks about savings in the same sense. LOL! you are making absurd remarks. I never said money straight from the printing press can be refered to as savings and yes, an accumulation of savings can hurt an economy or lead to inflation just like it did in Germany and does today in China, India, and Brazil. You should really educate yourself or stop speaking. Go find me some more charts to prove yourself wrong.

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          12. Redfish

            Actually, read the print on that M-3 chart. "Note: A downward slope in this growth curve does not necessarily mean that the money supply is dropping. Only if the curve goes below zero does that show money supply having contracted over a full twelve months." It appears the M's are cumulative and don't really indicate a drop in money supply, just that additions to an already existing money supply "might" be being reduced. Yes? I don't know a lot about this but, it's very interesting. I was under the assumption that we were already in inflation. Teach on :^)

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          13. sean

            Well yes that is true. The total money supply is not contracting, only because it is being propped up. The money supply would be contracting if the fed wasn't pumping money into the economy. That's what happens when credit freezes. As loans + interest are repaid and no additional loans are given out, the interest gets deducted from the overall money supply.. Thats the problem with our debt based system. You have to continue borrowing or else the entire system will come crashing down.

            The point i'm trying to make is that there was no dramatic increase in the money supply even with all that the fed is doing. But as you can see, the M1 was contracting for about a year leading up to the financial crisis.

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          14. sean

            The great depression was just a long drawn out money contraction. What the fed did was prevent that.. They caused the problem and saved it before it got much worse.

            I agree we should just get rid of them, but I have to be realistic and understand that we wont see any hyperinflation or a destruction of the dollar.

            Also... you have to consider the trade deficit. We have to spend 400 billion a year on oil and that is a huge loss. Especially that and all the other goods we import totaling close to a trillion dollars a year. The fed printed two trillion... and we gave away a trillion.

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          15. Nate Y

            I was afraid this would happen. You have to read the Note to the side of the chart. I'll post it here:

            "Note: A downward slope in this growth curve does not necessarily mean that the money supply is dropping. Only if the curve goes below zero does that show money supply having contracted over a full twelve months.

            Also, for money supply changes over periods of less than a year, such need to be viewed on a seasonally-adjusted basis. Unadjusted change over short periods may show changes that are little more than regular seasonal variations. Short-term changes also may run counter to year-to-year change, as seen in the latter part of 2009, for example."

            They then show the "Seasonally Adjusted Chart" below. That is the chart that provides the clearer picture. It's not so pretty.

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          16. Redfish

            Found this and thought it interesting and pertinent to our convo here: This is how Bill Bonner put it in Agora Financial, "The problem with inflation is that there is none. Consumer prices are falling in China, Europe and America. And if we look harder, we find out why. The feds are pumping the money supply as hard as they can. David Rosenberg reports that the monetary base rose at a 141% annual rate over the past four weeks. But the money fails to reach the real economy. The money supply figures that relate to actual cash in people's hands - M1, M2, and MZM - are shrinking, at -28%, - 4.9% and - 6.2% respectively. Why? Because the banks don't lend and consumers don't borrow.

            In short, the feds' money goes into cool bank vaults and hot speculative trades. When it tries to find its way to the consumer, it gets lost. As Rosenberg explains it, the transmission mechanism has broken down. We live in a bust economy, not a boom one. In a bust, consumers cannot borrow. They have nothing to borrow against. Both their wages and their assets are going down. Who would lend to them under those conditions? Not a bank that almost went broke itself 12 months ago.

            And even if consumers had access to credit, they wouldn't take it. Consumers too, almost went broke a few months ago. Instead of saving money during the boom years, they spent it...or gambled with it. Then, when the bust came in '08, they realized that they were 10 years closer to retirement with little money saved. Now they have to make up for that lost decade, by cutting spending and saving as much money as they can".

            AND: On the other hand, in the 1930's they weren't able to create money out of thin air like they can today. Back in the days of FDR there was a pesky thing called a gold standard. In those days the dollar was backed by gold so they couldn't just print more money, there had to be gold in the treasury. Since 1880 the U.S. dollar official gold price had been $20.67 per ounce. But from 1913 through 1920 inflation (as measured by the CPI) had increased by almost 98% (in other words in 7 years prices had almost doubled) but the price of Gold remained flat (by Government decree). Not surprisingly the "Federal Reserve" was created in 1913 and that is when the inflation began.

            But because of the official gold price the government had gold on its books at a much lower price, so the backing was out of sync with the inflated dollars. So in a classic government swindle FDR mandated that citizens turn in their gold at the then current fixed price and then promptly raised the price to the "real" market price of $35 an ounce. Poof instant money, no matter that is was stolen from the American people. In those days though it was a one time trick, FDR couldn't do it again. First of all, gold was no longer undervalued and second of all the people didn't have any more gold to steal.

            http://inflationdata.com/inflation/Deflation_Articles/Deflation_or_inflation.asp

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    4. Jay Giallombardo

      Sean,

      The dollar is very much in danger of collapsing. And Larouche has stated in recent webcasts that a gold standard is not necessary.
      Let's not exaggerate millions of currencies. That is not the case.
      Each nation can have it currency and also would need to work with fixed international rates of exchange. Nations that inflate or devalue excessively would be brought to task with diplomatic "lessons" in economy, embargos, or even military action if they are disruptive enough.

      Brettonwoods was the closest we came, and it failed after 30 years because Keynes was let back in as leading economist by Harry S Truman, the scoundrel. Britain was allowed to devalue its currency and wreaked havoc as the British tend to do when they have been ursurped by a stronger America. FDR didn't fail at Brettonwoods...Truman screwed us all.

      A new Pacific Rim Brettonwoods is now underway...and nations are joining. America should too.

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      1. sean

        The only way the dollar can collapse is from hyperinflation, which initially comes from an accumulation of wealth by the majority of citizens. Yes our savings rate is increasing, but not enough to cause harm.. China has been accumulating our dollars. That is why their inflation has been in double digits, and that is why ours have been relatively low. Even if the fed pumps money into the system, its just going to end up overseas.

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        1. sean

          Brettonwoods failed because we manipulated our currency to pay for oil and other goods. Other countries ended up having more money than we had gold to cover. I think the moral lesson would tell us not to become dependent on other countries resources and labor. With that in mind, we could probably have any currency you could dream of. Without following this moral lesson, we will have retarded economic growth.

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          1. Jay Giallombardo

            Sean,

            I think we are saying the same thing, hence my reference to Keynes. FDR had thoroughly excluded him from Brettonwoods. Truman's ascendancy to the VP-Spot and ultimately President was funded by Wall-Street and the Brits.

            Here is a great documentary on Brettonwoods. (Nate and Louie should take a look as well).

            http://www.larouchepac.com/node/12104

            Joseph G.

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