September 12, 2009
Deflation
Were the bailouts even constitutional?
The Crony Capitalist Bailout Nation
The starting point for all analysis of the ongoing bailout orgy that is currently being used in crony capitalist fashion to transfer wealth from our middle class to the Illuminati and their transnational conglomerates is whether these bailouts are authorized by the US Constitution. The answer is a resounding NO!!!
Nothing in the Constitution could ever be interpreted in any manner that would in any way allow the conversion of our quasi-capitalist republic into a Marxist-fascistic police state, which is the last thing our Founding Fathers had in mind.
How can our government simply hand over fiat money created out of thin air, which in itself totally violates the provisions in our Constitution dealing with the issuance of money, to whoever they deem to be too-big-to-fail?
The very idea of such targeted bailouts violates every precept upon which our nation was founded, and our Constitution in no way allows the bailout of any private person or business entity, especially where this creates special privileges to be given to a chosen few “anointed” entities at the expense of our citizens in general.
Regulation of interstate commerce does not mean doling out crony capitalist bailouts, which amount to nothing short of the implementation of feudalism under the Puppet Master oligarchs of our Shadow Government.
The Height of Stupidity: Sweden Cuts Deposit Rate to NEGATIVE .25%
“…, punishing savers with negative deposit rates is the height of stupidity.”
“It would be fitting if there was an immediate run on deposits. And if that happens what will Sweden do? Halt deposits? Sweden risks (and deserves) a currency collapse and bank runs for this insane effort. Look for capital flight in Sweden.”
There has been a lot of ludicrous recommendations recently to combat deflation by making deposit rates negative. I did not think any central bank would be dumb enough to try it. I thought wrong.
Today, Riksbank, Sweeden’s central bank cut the deposit rate to -0.25% effectively charging savers interest on deposited money.
DATE 2/07/2009
The weak development of the economy requires a somewhat more expansionary monetary policy. The Executive Board of the Riksbank has therefore decided to cut the repo rate by 0.25 of a percentage point to 0.25 per cent.Deep economic downturn
Economic activity abroad is very weak and this hits Sweden hard. Exports have fallen substantially and the situation on the labour market is continuing to deteriorate rapidly. The information received in recent months points to the economic downturn in 2009 being somewhat deeper than the Riksbank forecast in April.
Deposit Rate
The decision on the repo rate will apply with effect from Wednesday, 8 July. The deposit rate is at the same time cut to -0.25 per cent and the lending rate to 0.75 per cent.
Sweden Attempts To Boost Lending
Please consider Sweden cuts rates to new low, offers banks loans.
Sweden’s Riksbank cut interest rates to a fresh record low on Thursday and offered banks 100 billion crowns ($13.2 billion) to boost lending as it strives to reverse the country’s worst recession since the 1940s.
The central bank lowered its key interest rate by 25 basis points to 0.25 percent in a surprise move, putting official rates at their lowest since records began in 1907, and said it expected rates to remain at that level until late 2010.
“It’s a double whammy, or even a triple whammy,” said Roger Josefsson at Danske Markets.
“The deposit rates are actually negative now. In some sense they are creating a money machine for banks. You can lend all you want, but don’t put that back into the central bank.”
Sweden was plunged into recession late last year as the global financial crisis pulled the plug on market demand, leaving firms such as world number two truck firm Volvo scrambling to cut costs and shed jobs.
The central bank forecast the economy will contract 5.4 percent this year and return to tepid growth of 1.4 percent next year.
Read moreThe Height of Stupidity: Sweden Cuts Deposit Rate to NEGATIVE .25%
Marc Faber: Bernanke Is An Economic Criminal And In My Opinion He Is A Madman (06/06/09)
Marc Faber: “There is no deflation at the present time.”
Related article:
Marc Faber: U.S. will go into Hyperinflation, Approaching Zimbabwe Levels (Bloomberg)
1 of 3:
Added: 11. Juni 2009
Read moreMarc Faber: Bernanke Is An Economic Criminal And In My Opinion He Is A Madman (06/06/09)
Europe fetches the monetary helicopters, at long last
“Rejoice?” “Printing money to fend off disaster?”
Related articles:
– The Bank’s £200bn gamble (Independent):
Won’t quantitative easing cause inflation? Yes – and that is the general idea. Warren Buffett, the world’s most successful investor, has warned of “an onslaught of inflation” as a result of current policies.”
– Beware Bank of England’s monetary con trick (Financial Times)
– The dangers of printing money: four lessons from history (Times)
Destroying the value of your money through inflation is the general idea? (!!!)
Quantitative easing = Increasing the money supply (by creating money out of thin air) = Printing money = Inflation
Inflation is a tax and even Bernanke admitted that. The central banksters and the governments are looting the taxpayer. Rejoice, you have just been robbed!
I know I am repeating myself here, but there are so many new readers that need to know this:
“In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. … This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.”
– Alan Greenspan
“By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”
– John Maynard Keynes
But now enjoy Mr. Deflation (Ambrose Evans-Pritchard).
Rejoice. After much pious posturing – and criminal wastage of time – the European Central Bank at last seems ready join the Anglo-Saxons, Japanese, Swiss, and Isrealis in printing money to fend off disaster.
Two key governors tipped us off today that the bank is ready to buy assets outright on the open market, including mortgage debt. This is a huge development, exactly what is required to help restore the animal spirits of global investors.
Until now the ECB has offered unlimited liquidity in exchange for collateral from banks. That is not the same thing at all. It is sterilized stimulus. The bank has adamantly refused to cross the Rubicon by scattering money through the economy in real blast of QE. (quantitative easing)
Read moreEurope fetches the monetary helicopters, at long last
John Williams: Hyperinflation is coming
Source: YouTube
Related article: Federal obligations exceed world GDP
John Williams’ Shadow Government Statistics
Some Biographical & Additional Background Information
Walter J. “John” Williams was born in 1949. He received an A.B. in Economics, cum laude, from Dartmouth College in 1971, and was awarded a M.B.A. from Dartmouth’s Amos Tuck School of Business Administration in 1972, where he was named an Edward Tuck Scholar. During his career as a consulting economist, John has worked with individuals as well as Fortune 500 companies.
Global Economic Crisis Accelerating
– Obama administration considers launch of ‘bad bank’ (Telegraph)
– US Initial Jobless Claims Match Highest Since ’82 (Bloomberg)
– Barack Obama inauguration: this Emperor has no clothes, it will all end in tears (Telegraph)
– Despite billions, banks still teeter on the brink (MSNBC)
– Microsoft to shed 5,000 jobs (Financial Times)
– Intel to Cut at Least 5000 Jobs (New York Times)
– GM Gets $5.4 Billion Loan Installment From Federal Government (CNNMoney)
– US jobless claims surge, housing start tumble (Forbes)
– Housing Starts, Permits in US Slump to Record Low (Bloomberg)
– Banks Foreclose on Builders With Perfect Records (New York Times)
– Jim Rogers: Now it’s time to emigrate, says investment guru (Independent)
– Saudi prince’s firm loses $8.3B in 4Q (AP)
– Investors flee after brutal losses at global markets (Emirates Business)
– Indians Flee Dubai as Dreams Crash – Fall out of Economic Crisis (Daijiworld):
It’s the great escape by Indians who’ve hit the dead-end in Dubai.
– China growth slows, Bank of Japan sees deflation (Forbes):
(Reuters) – China’s economy slowed sharply in the fourth quarter and Japan’s central bank on Thursday predicted two years of deflation as Asia’s largest economies buckle under the strain of the financial crisis.
– Roubini Sees China Recession Despite ‘Massaged’ GDP (Bloomberg)
– Asian economic woe grows as China slows and Japanese exports plunge (Telegraph):
China’s economy may have ground to a halt entirely between the third and fourth quarters of last year and Japanese exports plunged 35pc in December, underlining the scale of the slowdown in Asia.
– ZIMBABWE: Inflation at 6.5 quindecillion novemdecillion percent (IRIN)
– Sony forecasts $2.9bn operating loss (Financial Times)
– Hedge funds’ $400bn withdrawals hit (Financial Times)
– Google income drops 68% on one-time charges (IHT)
– Is Britain facing bankruptcy? (Guardian)
– Manufacturing outlook plummets (Financial Times)
– Car production plummets as pressure for industry bail-out grows (Telegraph)
– London’s Evening Standard sold to ex-KGB agent (Reuters)
– AIG starts $20bn auction of Asian unit (Financial Times):
AIG, the stricken insurance giant, on Wednesday kicked off the sale of its Asian life assurance unit – one of its most prized assets – in the hope of raising up to $20bn to help repay the $60bn US government loan that is keeping the group alive.
– UBS to Cut Securities Jobs, Close More Debt Units (Bloomberg)
– Japanese Housewives Desperate After Currency Scheme Collapses (Bloomberg)
– New age of rebellion and riot stalks Europe (Times Online)
– Increase in burglaries shows effect of recession (Guardian)
– Chinese media issues stinging attack on Barack Obama and George W Bush (Telegraph)
– Barclays may lose control to Gulf investors (Telegraph)
– Cars to be crushed in insurance crackdown (Scotsman)
– Investors say jailed pilot swiped money for years (Washington Post)
– Capital One Reports $1.42 Billion Loss on Charges (Bloomberg)
– Nokia reports sharp fall in profits (Financial Times)
U.S. Treasuries bubble about to blow: Societe Generale
FRANKFURT (Reuters) – U.S. government debt is heading toward bubble territory and investors should prepare to exit, or risk seeing those assets lose up to a fifth in value, French bank Societe Generale (SOGN.PA) said on Tuesday.
U.S. Treasuries — a $5-trillion-plus asset class of which foreign investors, notably major international players such as sovereign wealth funds, own half — could rally further in the near term as headline inflation rates look set to dip into negative territory by March-April.
“That will be good for bonds in the very short term,” Alain Bokobza, head of pan-European equity and cross-asset research at Societe Generale, told a briefing for investors in Frankfurt, Germany’s banking capital.
But Treasuries would suffer down the road from the issuance of bonds required to finance U.S. government spending programs intended to revive the economy, notably President-elect Barack Obama’s approximately $800 billion stimulus package.
“If we look ahead, fiscal policy will once again become a very big driver of government bond markets,” said Michala Marcussen, head of strategy and economic research at Societe Generale Asset Management (SGAM).
“If there’s one place where there is a bubble, it is U.S. Treasuries … At some point I think it will blow,” she said.
In such a scenario, yields, which move in the opposite direction to prices, would rise.
If U.S. 10-year Treasury yields returned to “normal” levels around 4 percent to 4.5 percent, from below 2.5 percent today, investors stand to lose 15 to 20 percent of the value of those bonds, Bokobza said.
Read moreU.S. Treasuries bubble about to blow: Societe Generale
Ron Paul: ‘The Palestinians Are Virtually In Like A Concentration Camp’
Dr. Paul discusses the invasion of Gaza on January 3, 2009 and its implications for America.
Source: YouTube
Japan: Economy on knife-edge
Japan’s economy – the second-largest in the world and a barometer of global consumer demand – was described yesterday as being “on a knife-edge” amid fears that it might plum- met into deflation within months.
The warnings, which come from senior private sector economists and from the Japanese Government, follow a Boxing Day release of dismal industrial, consumer and employment data.
Within hours of passing a record 88 trillion yen (£660 billion) budget, senior government sources told The Times that Japan would “inevitably” be forced to adopt new measures to halt the meltdown. The country’s spiraling economic crisis arises primarily from the sudden halt in American consumption and the acute slowdown in the flow of components and goods throughout Asia. The strong yen has savaged the competitiveness of Japanese goods such as cars and electronics at a critical moment.
A record-breaking fall in industrial output figures for November showed that the country’s huge manufacturing economy is collapsing far more rapidly and painfully than even the bleakest market forecasts believed possible. The 8.1 per cent month-on-month slide – a dramatic collapse from the 3.1 per cent decline logged in October, stunned many economists. Richard Jerram, of Macquarie Securities, said that the pace of collapse had almost gone beyond the point of sensible analysis.
Employment is on track to fall rapidly as companies retrench at a pace not seen even during the worst days of Japan’s “lost decade”. Economists at Nomura said that even though the employment figures suggested a measure of stability, deterioration is “unavoidable” as companies retract job offers and lay off temporary workers.
The rate of consumer price growth dropped at its fastest pace since 1981: as commodity and energy prices nosedive on global markets, food is now the only component of the Japanese consumer price index that is still in positive territory.
World faces “total” financial meltdown: Bank of Spain chief
Remember?!
Fortis Bank Predicts US Financial Market Meltdown Within Weeks (28 Jun 08)
Source: Bye bye dollar, bye bye Treasuries…
Deflation? “Sure!” Just wait and see.
– The Neo-Alchemy of the Federal Reserve by Ron Paul
– Interview: Peter Schiff still grim on future
– Interview with Peter Schiff (12/13/08)
This is ‘the worst financial crisis‘ because every institution is doing its best to make it worse.
Bank of Spain governor Miguel Fernandez Ordonez
MADRID (AFP) – The governor of the Bank of Spain on Sunday issued a bleak assessment of the economic crisis, warning that the world faced a “total” financial meltdown unseen since the Great Depression.
“The lack of confidence is total,” Miguel Angel Fernandez Ordonez said in an interview with Spain’s El Pais daily.
“The inter-bank (lending) market is not functioning and this is generating vicious cycles: consumers are not consuming, businessmen are not taking on workers, investors are not investing and the banks are not lending.
“There is an almost total paralysis from which no-one is escaping,” he said, adding that any recovery — pencilled in by optimists for the end of 2009 and the start of 2010 — could be delayed if confidence is not restored.
Ordonez recognised that falling oil prices and lower taxes could kick-start a faster-than-anticipated recovery, but warned that a deepening cycle of falling consumer demand, rising unemployment and an ongoing lending squeeze could not be ruled out.
“This is the worst financial crisis since the Great Depression” of 1929, he added.
Read moreWorld faces “total” financial meltdown: Bank of Spain chief
Deflation virus is moving the policy test beyond the 1930s extremes
And I still say we will see hyperinflation very soon. The current policies of the Fed are doomed.
Just look who profits the most of these interventions….and suddenly the greater picture suggests that the Fed wants to destroy the dollar and the economy (especially the middle class) intentionally.
Do some research – if you not already have – on who created the Fed and find out the ulterior motive of this monster from Jekyll Island. You may watch Zeitgeist, The Movie, Final Edition especially Part III of the movie which starts at 1:14:30 .
The Fed is creating ‘the worst case scenario’ and it is absolutely correct that “we are beyond the extremes of the 1930s.”
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Debt deflation is tightening its grip over the entire global system. Interest rates are creeping towards zero in Japan, America, and now across most of Europe.
We are beyond the extremes of the 1930s. The frontiers of monetary policy are being pushed to limits that may now test viability of paper currencies and modern central banking.
You cannot drop below zero. So what next if the credit markets refuse to thaw? Yes, Japan visited and survived this policy Hell during its lost decade, but that was a local affair in an otherwise booming global economy. It tells us nothing.
This time we are all going down together. There is no deus ex machina to lift us out. Certainly not China, which is the most vulnerable of all.
As the risk grows, officials at the highest level of the British Government have begun to circulate a six-year-old speech by Ben Bernanke – at the time of its writing, a garrulous kid governor at the US Federal Reserve. Entitled Deflation: Making Sure It Doesn’t Happen Here, it is the manual of guerrilla tactics for defeating slumps by monetary means.
“The US government has a technology, called a printing press, that allows it to produce as many US dollars as it wishes at essentially no cost,” he said.
Critics had great fun with this when Bernanke later became Fed chief. But the speech is best seen as a thought experiment by a Princeton professor thinking aloud during the deflation mini-scare of 2002.
Read moreDeflation virus is moving the policy test beyond the 1930s extremes
Yield on 10-year Treasury debt below 3%
Liquidation, not deflation, is what is happening in the financial markets.
In the near future we will see hyperinflation.
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Financial markets notched up another historic milestone on Wednesday as the yield on 10-year US Treasury debt fell below 3 per cent for the first time in 50 years.
The decline in yields – to a low of 2.98 per cent – comes in response to unconventional policy measures taken by the US Federal Reserve this week aimed at pushing short-term and long-term interest rates lower.
This so-called “quantitative easing” is a strategy central banks use to fight deflation, the dreaded combination of declining growth and falling asset prices.
“It is astonishing [that yields are so low],” said Michael Chang, interest rate strategist at Credit Suisse. “The current environment is not like anything we’ve seen before. The Fed’s being very aggressive in quantitative easing, and the fall in yields is the result.”
OECD warns of worst recession since early 1980s
OECD says developed world could face worst recession since early 1980s; warns of deflation
LONDON (AP) — The financial crisis will likely push the world’s developed countries into their worst recession since the early 1980s, the Organization for Economic Cooperation and Development (OECD) said Tuesday.
In its half-yearly economic outlook, the Paris-based organization said economic output will likely shrink by 0.4 percent in 2009 for the 30 market democracies that make up its membership, against the 1.4 percent growth prediction for 2008. As a result, the OECD said it supported fiscal rescue measures, including tax cuts, provided they were targeted and temporary.
INFLATION VS. DEFLATION… NOPE – STAGFLATION
By Krassimir Petrov, PhD:
Once again the Fed, the mainstream media, and Bubblevision continue to relentlessly propagate the myth that the slowing U.S. and global economy will ease inflationary pressures. In addition, the current Credit Crisis and the ongoing collapse in commodity prices have encouraged deflationists to reiterate their beliefs that deflation is inevitable. These views represent two different approaches of the same myth. Investors should not fall for it.
Given the recent fall in prices in a broad range of commodities, we are assured that inflation is no longer a problem, indeed that the real threat is deflation; inflation is supposedly transitory and inflationary expectations are “well anchored”. We are led to believe that “recessions cure inflations.”
Nothing can be further from the truth. On the contrary, given the current macroeconomic environment, the massive government stimulus of hundreds of billions of dollars in rebate checks and a series of bailouts will most certainly translate in much higher inflation and little or no economic growth. One must prepare for the reality that the government’s “cure”, as Peter Schiff has repeated so often, will be worse than the disease.
In coming years, investors must expect a lot more inflation and adjust their portfolios accordingly – their survival depends on it. Our job here is to outline the importance of the inflation-deflation debate, interpret its meaning, provide some historical evidence, and present the arguments for future economic development with its investment implications.
1. Importance of the Inflation-Deflation Debate
For any investor, the most important issue in today’s macroeconomic environment is the correct forecast of future inflation. Its essence boils down to strategic asset allocation. In a strong deflationary environment, the prices of stocks, commodities, and risky bonds fall; cash, cash equivalents, and safe bonds are the winning investments. On the other hand, in an inflationary environment, cash, cash equivalents, safe bonds, and most stocks rapidly lose value for two reasons – due to rising interest rates and due to loss of purchasing power; commodities, gold, and other tangible assets are the winning investments.