It appears that in the masters of the universe first experience in applying disaster capitalism to an economy this large, they may find that they have inadvertantly entered into a suicide pact that they didn't bargain for. They are about to discover what should have been clear from the beginning. If you kill the world's largest market, you kill the purveyors to that market. There are no alternatives to turn to that won't be joining us on the downward slide.

When the economic disaster hits and takes down the mighty with the modest, it will be inarguable that unfettered free markets are no more than government assisted economic suicide. The universal repudiation of the free trade notion may, indeed be the best thing to come out it.

The horrible cost of learning that lesson will be very expensive tuition to pay for knowledge that is self evident. Its a shame that Milton Friedman won't be here to appreciate it and to bask in as much of his reward as we can sentence him to.

by John Sanchez Jr. (9 articles, 0 quicklinks, 25 diaries, 1791 comments [148 recommended, 3 rejected]) on Sunday, Jan 13, 2008 at 10:21:34 AM

  (0+)

"Will Americans see the signs and vote for a leader who will lead towards a path to higher ground?" Are you serious? That likelihood is slim in my estimation. First off the MSM will not give much airtime, or print, to anything such a leader has to offer. The American public really doesn't want to see that the United States is sliding rapidly into Third World status. The majority of them are way too busy spending money they do not have in order to show how well off they are. So long as our nation  bases the economy on War we'll continue to slide down, down, down. We'll continue being jingoistic and see enemies behind every tree. As someone in her sixth decade I find it appalling how far we have fallen. 

by paz love (0 articles, 0 quicklinks, 0 diaries, 71 comments) on Sunday, Jan 13, 2008 at 10:42:12 AM

  (0+)

QUIT LYING! Lies lead to theft; theft leads to murder. Robbing a man of his savings forces a slow death due to being unable to purchase food, clothing and shelter. A slow death is still murder, although acceptable under our laws. "Hey, I didn't do anything illegal!" they say.

QUIT LYING. Simple, but complicated. Subprime loan officers accepted the lies of their applicants. Then lied when they sold the loans. Then the bankers repackaged the loans and lied to the buyers. The hedge funds took billions off the top, and left their holders with more paper lies. Like having a tenth mortgage based on a subprime note. When the subprime borrower stopped paying, all the other lies became exposed. Pure fraud, but again, acceptable under our laws. This is the price we pay for accepting lies. 

Even OpEdNews suffers, because as readers finally understand, they have little left to pay the messenger for the wonderful education.

by Edward Ulysses Cate (0 articles, 0 quicklinks, 0 diaries, 232 comments [9 recommended, 0 rejected]) on Sunday, Jan 13, 2008 at 10:46:55 AM

  (0+)

Only Dennis Kucinich economic policies can save America from becoming a third world country.

by Ty (0 articles, 0 quicklinks, 0 diaries, 888 comments [2 recommended, 0 rejected]) on Sunday, Jan 13, 2008 at 11:12:35 AM

  (0+)

don't be so sad when you write such an oped...............you know as well as I do it (the economy, more wars, maybe another 9/11) has to get much, much worse before the delusioned becomes disillusioned..................they've got to experience personal bankruptcy, become shattered, embittered, have all their savings dwindled, be endebted to the hilt and become destitute before you can pry the stupid bastards off their couch potato asses and impeach the Satan that runs this country........................................can you believe the recent news................GWB is peddling a War on Iran with the allies............reminds me of cheap shoe salesman...........

No disrespect intended............

by Ernest (0 articles, 8 quicklinks, 0 diaries, 221 comments [40 recommended, 0 rejected]) on Sunday, Jan 13, 2008 at 11:12:57 AM

  (0+)

by Robert Sargent (10 articles, 0 quicklinks, 26 diaries, 318 comments) on Sunday, Jan 13, 2008 at 11:21:08 AM

  (0+)

of the great depression. Mom wore a dress made from flour sacks and walked to school barefoot. She had no pencil or paper or crayons. My grandma would take a few seeds of corn and walking past the neighbors farm would drop a trail of corn kernels all the way home, and leave the door open. The neighbors chicken would follow the trail all the way into the house, gramma would slam the door shut and kill dinner. My dads family were a little better of. They would pick cow peas to eat. They owned a cow which was the only way to afford milk. A good Christmas back then was to recieve an orange or a small bag of peanuts.

The good book has foretold "a time of trouble" the likes of which the world has never known. The concentration of our population in urban centers eliminates the ability to garden or have livestock, which I believe will prove to heighten the acute shortages of food staples. The probability of civil unrest will be higher and the destruction more intense.  I believe it was Marx that warned to spread the people out to avoid these concentrations thereby minimizing the possibility of the spread of disease, drug abuse and the clashes between classes and racial groups .  Of course we dont take advice, we give it.

The next depression promises to be a real mess. Get ready for food , fuel and power rationing. Make your move out of the country or at least out of the urban areas now, before lockdown.

by john riggs (0 articles, 0 quicklinks, 0 diaries, 463 comments [24 recommended, 0 rejected]) on Sunday, Jan 13, 2008 at 11:26:45 AM

  (0+)

than leadership, it's the entire system. The U.S. lives, eats and breathes growth. A full 62% of all U.S. jobs are dependent on consumer spending.

Our underlying ecomomic basis is that of exponential growth and consumption in a finite world; a mathematical impossiblity. We hit zenith in that respect some 30 years ago. The national debt has risen by 1000% since 1980. 

The housing debacle is NOT the problem, its a symptom of a failed system. Fixing all the loans or even giving the people the houses for free, would have no impact what so ever on the problem. 

I wrote a book on this very subject, "The Biggest Lie Ever Believed." Read a chapter for free at kingofsimple.com.

We cannot borrow and consume our way to prosperity.  

by Mike Folkerth (120 articles, 0 quicklinks, 2 diaries, 566 comments [1 recommended, 0 rejected]) on Sunday, Jan 13, 2008 at 11:56:17 AM

  (0+)

I get so many review copies, Mike. When she finds one she likes, I'm usually happy to let her have it until she's done reading it.

She has good taste, BTW, and last time I checked she was almost done it. 

by Rob Kall (952 articles, 4177 quicklinks, 374 diaries, 2087 comments [45 recommended, 3 rejected]) on Sunday, Jan 13, 2008 at 3:00:16 PM

  (0+)

unlimited growth is very possible in the  neo-con world view by......reducing the demand .....by wars that eliminate the unnecessary population who have outlived their usefulness. I feel their goal is a world reduction of maybe half the people alive today and explains why there is no moral problem for them to engage in arms trafficking.

by tjb (0 articles, 0 quicklinks, 0 diaries, 255 comments [9 recommended, 0 rejected]) on Sunday, Jan 13, 2008 at 10:02:14 PM

  (0+)

No one asked America if it wanted to be consumerized. It happened because it was profitable, glitzy and easy to promote. The consumerization of America finally found its way down to the people who had nothing and the top found a way to turn the bottom into profit-centers as well.

Hundreds of thousands of Main Street businesses gone to put 11 Waltons on the top of the billionaires list. That's not an angry statement, but a fact.

Tens of thousands of wonderful restaurants in small town America swept under by clusters of fast-food joints out at the Interstate.

Banking turned into the same bait-and-switch the used car salesman finds profitable.

University grads turning away from the humanities and liberal arts, desperate to be picked up by an 'Investment Bank'

The previous writer talks about life during the depression--when people cared for one another and the system was changed because it was finally, desperately, vulnerable to change. 

I don't have a problem with that. But I have a problem with readers who think there is some 'fix' that an Obama or a Giuliani can manage. I would far prefer the fifteen years of luring chickens home to eat, rather than a lifetime spent watching us eat each other. 

by Jim Freeman (108 articles, 53 quicklinks, 227 diaries, 386 comments) on Sunday, Jan 13, 2008 at 12:36:31 PM

  (0+)

Excellent article, Rob.

What is most troubling, is that this corporately owned media now has the American people so fixated on this sham they're calling a 2008 presidential primary, when in-fact they and our feckless Congress ought to be focusing their attention entirely on this potentially devastating economic disaster you've spoken of. It is imperative Washington begin to address these lopsided trade and budget deficits immediately!

by Munich (1 articles, 86 quicklinks, 14 diaries, 1125 comments [86 recommended, 1 rejected]) on Sunday, Jan 13, 2008 at 1:17:55 PM

  (0+)

Bring on the chickens, and I don't mean Colonel Sander's style. A complete breakdown and the associated pain is the only thing that will change this bizarre belief that Americans are somehow entitled and have a "right" to wealth and privilege some 10 times greater than most humans on earth.

Live simple, live well, live long.

by Mike Folkerth (120 articles, 0 quicklinks, 2 diaries, 566 comments [1 recommended, 0 rejected]) on Sunday, Jan 13, 2008 at 1:22:10 PM

  (0+)

http://www.youtube.com/watch?v=Kz689NHcAKo

by Jeanette Doney (0 articles, 0 quicklinks, 6 diaries, 307 comments [1 recommended, 0 rejected]) on Sunday, Jan 13, 2008 at 2:30:00 PM

  (0+)

Paul's Laisse Faire philosophy is very similar to the University of Chicago School of Economics model that got us here.

Paul has some good ideas and great positions, but dealing with this crisis? I don't think so.

OTOH, his radical approaches might not make the economy any worse. THousands might die of starvation, but what the hell, everyone for themselves. That's the libertarian model, right? 

by Rob Kall (952 articles, 4177 quicklinks, 374 diaries, 2087 comments [45 recommended, 3 rejected]) on Sunday, Jan 13, 2008 at 3:07:22 PM

  (0+)

Hey Rob,

I am thinking that you misunderstand the implementation of Ron Paul's positions and have caused your conclusion a predisposed fallacy of viewing through the Libertarian Pigeonhole.  Labels are misleading.

Ron Paul is about phasing in the positions he stands by.

Your words: 

"Paul's Laisse Faire philosophy is very similar to the University of Chicago School of Economics model that got us here."

This shows that you are not looking at what is different in Ron Paul's suggested Economic Policy.  the biggest of all the differences is Money that can not be created out of thin air just because someone says so.  Another is of competing curencies.  The fact that neither of these two premises has been in the system for quite some time shows that in fact our current system does not well resemble what Ron Paul Proposes.

 Your Words:

"OTOH, his radical approaches might not make the economy any worse. Thousands might die of starvation, but what the hell, everyone for themselves. That's the libertarian model, right?"

Again you use The Label Spectacles to skew your view.  Without some form of return to sound money this cycle will continue to reoccur.  Due to foolish "Laisse Faire philosophy" in the creation of money brought about by our current system, where government and Central banks create money "when they deem necessary", we are set to experience catastrophe like none other in history.

His policies will not make things worse than they will already be.  NO one can stop what is already in motion.  Yes things will be bad; they will be bad again if the system is not changed Fundamentally.

I do not see how you can think that a sound money system would be bad.  I am sure that the fiat system will continue in some form as it is "Crack Cocaine" to the financial industry.  Sound money may be able to insulate the general populous from their boom and bust cycles.

I would rather risk what may come by electing President Ron Paul, rather than electing someone else that may pull an FDR and extend our misery.

Things are dire as you well know.  What is done this election cycle will determine the fate of America.  Will we return to responsible reality or continue fanciful fantasy.

I vote for virtue; I vote for Ron Paul. 

by Brad Evans (0 articles, 0 quicklinks, 0 diaries, 221 comments [11 recommended, 2 rejected]) on Sunday, Jan 13, 2008 at 4:53:43 PM

  (0+)

Rob,

If we continue down the path of confiscating wealth and killing off productivity, we will not be able to avoid the Tsunami you write of.

The choice is as simple now as in all of history -- freedom or enslavement.  Shall we throw away the key to our shackles, or ask for more?

Please correct me if I'm wrong.  Debt-currency, economic stagnation, and heavy-handed government will lead to financial collpapse.  When people turn to the government for help, and there is not enough to redistribute, the government will resort to forcing people to produce and distributing basic necessities.  That is not stable economics either.  It's what Stalin did, and he starved enough people this way to make Hitler look like a beginner.

Let people alone, let them keep what they earn, and let them trade with currency that has value -- and we get an improvement in the human condition undreampt of throughout history.  Eat away at that, and we will end up as miserable slaves, barely able to survive at a subsistence level.  I think history shows that this is not an exaggeration.

Thomas Jefferson warned us of this day. 

by John Danforth (1 articles, 0 quicklinks, 4 diaries, 98 comments) on Monday, Jan 14, 2008 at 7:47:05 AM

  (0+)

the ship hit the iceberg.

As far as elections go, I think '04 was the last chance to change course. The '08 election is already largely over. It can only be a Republican in the mold of Bush, or a so-called "Democrat" who will continue most of what Bush started. The best that progressives can hope for is John Edwards, and he's A) already a "long shot", & B) not really all that great anyway. He's being marginalized by the media -- his punishment for trying to speak somewhat truthfully about excessive corporate power.

The passengers on the Titanic had a few hours to think philosophically before the great ship went down. We have a bit longer than than, but articles like today's NYT story will soon become commonplace.

Above, Mike Folkerth pointed to a simple mathematical impossibility underlying the American mode of economic organization. Namely, our economy requires ever-increasing growth & consumption -- something you can't have in a finite world.

Another simple mathematical argument underlies the futility of our political organization. Namely, capitalism tends to concentrate wealth into fewer & fewer hands. As this process goes forward, society's important decisions increasingly conform to the interests & desires of the richest top half-percent of the population. This dynamic is flatly incompatible with meaningful democracy, & incapable of serving the needs of 80-90% of the population.

by Richard Mynick (2 articles, 4 quicklinks, 1 diaries, 1552 comments [255 recommended, 5 rejected]) on Sunday, Jan 13, 2008 at 4:20:00 PM

  (0+)

Those who are on fixed incomes are the people that were impacted first, and it's of tidal wave proportions to millions of Americans, but it's especially impacting the elderly and poor. To emphasize the phenomena properly, I can even use myself as an example, and it's being replayed all over the country - and I honestly don't know how people are dealing with it.

The housing market is shot, and all of those homes that are in foreclosure are vacant, or soon to be, and won't be back on the market until they are finally auctioned-off. Rental rates are still climbing, and after you factor in gas and food, budgets no longer stretch far enough to even pay the basic bills. We are looking for lower rent ourselves and will have to move further away from the city - and important medical care (my mom has cancer) will require longer drives and thus more gas.) Every move is another backward step, and we don't know when that last home won't be available.

I heard today that a well-known liberal/progressive author is also experiencing some of these same difficulties, and as the world begins tumbling-in, it affects the quality of your writing and makes it easier to express the frustration and anguish others are feeling because it's becoming SOP rather than isolated in nature. This is a financial downturn that could take decades to recover from, and money equates to lives, it always does - so there will be a huge death count that will one day be directly associated with Bush destroying our economy. 

This will be interesting to witness; other societies who have also experienced financial collapse didn't have the ability to point their fingers directly at those whom caused the collapse. The Internet has brought truth and facts to millions of people, so when it happens, the anger and anguish will be leveled at "compassionate conservatism", the Neo-cons, and all of the "good" it has brought to citizens of our country. 

When the economy finally finishes crashing, I believe that corporate America will suffer too, and a large part of their discomfort will come from the demands and demonstrations by the people when they wake-up and understand that Bush and corporate greed are the Grinch’s that stole prosperity from America.

William Cormier 

by William Cormier (152 articles, 11 quicklinks, 21 diaries, 418 comments [9 recommended, 0 rejected]) on Sunday, Jan 13, 2008 at 4:48:54 PM

  (0+)

 Hey Bill, good post, stands out cause it doesn't repeat the self serving stuff that many of the others do here.

So America is finaly reaping what it's sown over the years for other Nationalities ? Hmmmm, now I wonder why the World finds it difficult to dredge up a little sympathy ?

All my working life I've heard the mantra that "WE" must bow to the IMF and the World Bank, we have policy after policy shoved down our throats by these bodies, polcies that claim to benefit us all, yet I have yet to witness just one such benefit to myself or family.

What I have seen, is longer working hours, less time for families, increased costs, income higher, but STILL nowhere neccessary to keep above growth levels, degradation of infrastructure, familes having to work more then one job, to sustain their lives, and the rich get richer.

I've witnessed one after the other, public assets given away via such policies, assets built with taxpayers money over the years,and supposedly to serve the taxpayer, we are told we will reap rewards in the long run via cheaper costs, again all I see is the degradation of such assets and when run into the ground the profiteers cannot be seen for the dust and the destroyed asset is simply discarded, and the taxpayer left to fend for themselves as best as they can.

Dare I say, the CENTRE from whence these policies emanate is the good old U.S.A. and the profits from these raped assets can also be found there, I don't recall EVER, hearing Americans speak out against such policies, in fact I've heard a hell of a lot from Americans FOR them, irreguardless of the damage they will cause.

It would seem, Americans have a problem identifying the damage these policies have caused many countries over the last 50 years, very little sympathy has ever been shown for their plight, a plight that was easily forseen by the alert, and now the pigeons have finaly come home to roost, and the pain others have endured, is finaly beginning to strike home from whence it was born.

I see many comments seem to lay the blame at the current administration and the leadership that administration is renown for, (should I say lack of) however, in all fairness, these policies did NOT emanate with THIS administration, they have been the staple diet of previous administrations throughout my adult life, taken years to mature and then bear fruit, therefore to lay the blame at the feet of THIS administration, is laughable and ignoring the FACTS.

Clearly, Americans are unable to see the wood for the trees, this is evidanced by their unwillingless/inability to see the ramifications of their policies being FORCED upon other countries, until they can identify these, and accept they are the architects of their demise, they will simply continue the rot, and NO amount of musical chairs within your Govt is going to change anything.

by Eddy Schmid (0 articles, 0 quicklinks, 0 diaries, 234 comments [17 recommended, 0 rejected]) on Monday, Jan 14, 2008 at 5:21:39 AM

  (0+)

Even though depressions are tragic and can inflict severe hardship on many people it has a way of cleansing the country. People stop competing to accumulate the most conspicuous material items and resort to helping on another. People who place greed as their primary source for existence often commit suicide when they find they no longer have a fortune.

The sad truth about the benefits of an economic depression is that when people have no money to spend they deal a much deserved blow to the greedy multinationals who have hijacked our democracy. One might view it as a rebellion against the evil forces of corporatism.  Maybe the Amish are much smarter than most people think, self sufficiency is a very important quality to posses, Our elected leaders should think about the U.S. losings its self sufficiency in its rotten free trade agreements. By now everyone knows that Milton Friedman is a dumbass and the private sector is just as incompetent as our government.

by Gary Denson (2 articles, 0 quicklinks, 1 diaries, 283 comments) on Sunday, Jan 13, 2008 at 4:49:38 PM

  (0+)

Ron Paul has been warning about this scenario for most of his career.

I think it would be wise to elect someone that had enough understanding as to predict what would happen. Events in the financial system move as if on the Geological time line; very slow.  He saw what was happening; raised the alarm; and no one seemed to care.  I think that ALL will be caring shortly.  Ron Paul's Economic Stand will be Vindicated in 2008.  Too bad we all have to suffer for vindication. 

I Vote For Virtue; I Vote For Ron Paul !!! 

by Brad Evans (0 articles, 0 quicklinks, 0 diaries, 221 comments [11 recommended, 2 rejected]) on Sunday, Jan 13, 2008 at 5:00:51 PM

  (0+)

To get through the coming hard times we need to rediscover our moral roots and remember that community is the only thing that is important. Community starts with our families and extends out into our local neighborhood. Beyond that, if we wish to remain the United States of America, community extends all the way to the national level based on the ideals we share as a people. A recent episode of 20/20 on ABC showed how a sense of community is important to happiness.

Denmark: The Happiest Place on Earth
[ http://abcnews.go.com/2020/story?id=4086092&page=1 ]

We need much less emphasis on economics as the measure of our lives. Not to say that economics is not an important topic to everybody, it certainly is. In our interconnected world we are dependent on the economy for the basic necessities of survival. But, is it really necessary for our vehicles and houses to grow without bound? Is bigger always better?

Beware in the coming days the siren song of factionalism, the ugly relative of community. There is not much that causes me greater sadness in the face of these trying times than to hear the cynical pitch of the libertarian or neo-con. The explicit message I've heard emphasizes the evil of mankind. It emphasizes the myth of rugged individualism in a totally intertwined and shared world that grows smaller by the day, where cooperation is no longer optional. No amount of sloganeering and rationalization can hide the ugly message of negativity and hatred I've seen spewed in the name of extremist ideology. This darkness may not be endemic to these ideologies, but oh, how it comes through loud and clear. How can one carry on in the world with such a dark view of human nature? Ideology closes the mind, limits creative ideas and hardens the heart. Cast off the chains of the label, unshackle the mind, become an individual in the true sense.

Factionalism is what keeps us all from being free. Horrible crimes have been committed under our watch, yet we fail to demand a moral accounting. As the situation deteriorates, we fall back into our camps of choice and begin to circle the wagons, when we should be building bridges to enlarge our community until it is large enough to encompass all of America and all of the world. We don't need a New World Order, we need a New World Community. Until we address the crimes that we have been complicit in, we will be left with only our paranoid, cynical and angry factions. Impeachment is our responsibility to ourselves, our nation and the world.

by all owners (1 articles, 58 quicklinks, 4 diaries, 144 comments) on Sunday, Jan 13, 2008 at 6:20:05 PM

  (0+)

Sorry to tell you but the delusional seeing the light is not going to happen anytime soon. I got an email from my sister today telling me to be thankful that w is trying so hard to protect us from terrorists. And just remember the little tax cuts he gave us. If we hadn't waisted so much money on this war the government could fix this mess. Why did the republicans sell the idiots a man who has been a looser all his life. Everything the man has ever touched has turned to sh*t. I am afraid that we will get another republican president even if her name is Hillary. Myself I don't think we will have any elections.

by beccy (0 articles, 0 quicklinks, 0 diaries, 87 comments) on Sunday, Jan 13, 2008 at 6:35:55 PM

  (0+)

You got me so wound up with this, I wrote another article.

by Paul Rye (7 articles, 2 quicklinks, 22 diaries, 500 comments [44 recommended, 1 rejected]) on Sunday, Jan 13, 2008 at 8:27:41 PM

  (0+)

How serious is this situation? Dr. Laurence Kotlikoff is on record that, unless citizens' true tax costs are made visible by virtue of enacting the FairTax, politicians will continue to pit rich against poor, individuals against corporations, while they spend us into ruin.

Will the FairTax movement succeed in changing this tax slave / victim psychology? Do we, as individuals, have the ability to influence Congress to relinquish the power they've usurped from We, The People, freeholders engaged in free-enterprise?

First, let's understand how passage of the FairTax (HR 25) would actually affect us: Prices after FairTax passage would look similar to current prices - not "30% higher" as critics contend; the increased-competitive, tax-free business environment would see to it. So, the FairTax rate (figured as an income-tax-rate-non-comparative, sales tax) on new items would be 29.85% (on the new, reduced cost of items because business isn't taxed under FairTax - thus lowering retail prices by 20% to 30%), or 23% of the "tax inclusive" price tag - this is the way INCOME TAX is figured (parts of the total dollar).

The effective tax rate percentages, that different income groups would pay under the progressive FairTax consumption tax, are calculated by crediting the monthly "prebate" (advance rebate of projected tax on necessities) against total monthly spending of citizen families (1 member and greater, Dept. of Commerce poverty-level data; a single person receiving ~$200/mo, a family of four, ~$500/mo, in addition to working earners receiving paychecks with no Federal deductions) Prof.'s Kotlikoff and Rapson (10/06) concluded,

"...the FairTax imposes much lower average taxes on working-age households than does the current system. The FairTax broadens the tax base from what is now primarily a system of labor income taxation to a system that taxes, albeit indirectly, both labor income and existing wealth. By including existing wealth in the effective tax base, much of which is owned by rich and middle-class elderly households, the FairTax is able to tax labor income at a lower effective rate and, thereby, lower the average lifetime tax rates facing working-age Americans.

"Consider, as an example, a single household age 30 earning $50,000. The household's average tax rate under the current system is 21.1 percent. It's 13.5 percent under the FairTax. Since the FairTax would preserve the purchasing power of Social Security benefits and also provide a tax rebate, older low-income workers who will live primarily or exclusively on Social Security would be better off. As an example, the average remaining lifetime tax rate for an age 60 married couple with $20,000 of earnings falls from its current value of 7.2 percent to -11.0 percent under the FairTax. As another example, compare the current 24.0 percent remaining lifetime average tax rate of a married age 45 couple with $100,000 in earnings to the 14.7 percent rate that arises under the FairTax."

"...once one moves to generations postdating the baby boomers there are positive welfare gains for all income groups in each cohort. Under a 23 percent FairTax policy, the poorest members of the generation born in 1990 enjoy a 13.5 percent welfare gain. Their middle-class and rich contemporaries experience 5 and 2 percent welfare gains, respectively. The welfare gains are largest for future generations. Take the cohort born in 2030. The poorest members of this cohort enjoy a huge 26 percent improvement in their well-being. For middle class members of this birth group, there's a 12 percent welfare gain. And for the richest members of the group, the gain is 5 percent."

by Ian (0 articles, 0 quicklinks, 0 diaries, 9 comments) on Sunday, Jan 13, 2008 at 8:43:03 PM

  (0+)

a regressive tax. As such, I could never support it.

by John Sanchez Jr. (9 articles, 0 quicklinks, 25 diaries, 1791 comments [148 recommended, 3 rejected]) on Monday, Jan 14, 2008 at 8:29:03 AM

  (0+)

Am I mistaking or have 20 Million illegals entered, obtained housing, obtained work and remain in the U.S. today? And W. is going to protect us from terrorists? Get a life.

Rudy is going to protect us from terrorists? Hill and Bill are going to? What a sham and the American public believes that bull roar.

by Mike Folkerth (120 articles, 0 quicklinks, 2 diaries, 566 comments [1 recommended, 0 rejected]) on Sunday, Jan 13, 2008 at 8:46:04 PM

  (0+)

that their strategy is to engage in such complete self destruction that the "terrorists" feel that anything they could add would be redundant. In doing so, our "leaders" become the real terrorists, and we have yet to determine who will save us from them.

by John Sanchez Jr. (9 articles, 0 quicklinks, 25 diaries, 1791 comments [148 recommended, 3 rejected]) on Monday, Jan 14, 2008 at 8:34:49 AM

  (0+)

   These economic problems depict the basic paradox of capitalism, under which you have empoyers who want to sell the products their employees produce but they can't because people don't have the money to buy them because their employers can't pay them wages because they can't sell the products their employees produce to the people who can't get hired by employers who don't have the money...

   We will have to step out of this disfunctional system and mutually agree that those who produce will continue to produce for those who consume who in turn will continue to produce so that those who consume...

   In other words, the only way out is socialism.  It will work if society is democratically governed and democracy is extended from the political to the economic realm so that the productive units are run by democratic cooperatives.  It could not work in the old Soviet bloc countries in which a totalitarian distatorship attempted to coordinate the multitudinous parts of the economy from the center.  But if people are free to buy what they want instead of what the rulers set before them and the productive units are free to respond to what people want to buy, this system of demand and response by the productive units can substitute for the coordinating mechanism that the market performed so unsatisfactorly under capitalism.

   Capitalism will have left us with resource problems such as peak oil.  But free from the domination of the interest of private profit seekers, a socialist economy could start a crash program to develop alternative energy sources.  For example, there is a documentary about how an electric car that could be plugged into an electrical outlet for refueling was developed.  This car could only be used for short, in-city trips.  But the people the auto companies selected to try out the electric cars clamored for a way to purchase them when these same companies recalled them.  It is impossible to produce enough corn ethanol to replace all the oil we use even if all the available land was used to grow the corn.  But hemp produces far more biomass for acre of land and can grow on soil unsuited to corn.  The National Organization for Reform of Marijuana Laws has toured the country with a demonstration model of an automobile that runs on hemp fuel.  The wind and the sunlight falling on the dry southwestern desert of the country can produce more than our annual consumption of power and a socialist society could develop these energy sources.

Robert Halfhill   rhalfhill@juno.com

by rhalfhill (3 articles, 0 quicklinks, 0 diaries, 325 comments) on Sunday, Jan 13, 2008 at 9:07:59 PM

  (0+)

Great article Rob.  Thank-you.

All further interest rate cuts are inflationary and will continue to waterboard the dollar.

by csnet (0 articles, 2 quicklinks, 2 diaries, 112 comments [10 recommended, 0 rejected]) on Sunday, Jan 13, 2008 at 10:44:12 PM

  (0+)

Dear Mr. Ben Bernake,

The way to fix the problem especially for home mortgages is to forget the one loan that is always given to home buyers.

What is needed is to give two mortgages to the home owners. Just like we need two arms, two legs, two ears, and really two brains to think in this world; we need two loans. One loan is for buying the house. The other loan is used to make payments on both loans.

This way no one ever faces default. Sooner or later the money runs out, but it is enough time to prove a worthy credit history, then another loan is taken to replace it. This can go on indefinitely because banks will always be in the loan business.

Home values should not be based on equity accumulation. It needs to be based on credit worthiness. Home values are also found according to regional services that have impact on a stablized economy, with a predetermined depreciation index.

Banks will not have to worry about losses because investors will look to bank profits from a dual interest accumulation from a 2 loan Mortgage policy.

In other words it will not be so much the value of the home that is the consideration, but the value of the banks who sevice the loans. In fact the more loans a bank has with flowing capitol the more value that bank acquires.

Really it is everyones fault because we buy a house hoping to build equity so we can have the security to use the money for something else, such as buying a new home, or using it as a basis to have better credit to pay for other things, be it education, medical bills, a new car, or whatever.

We should not continually think it's the governments fault. I knew this would happen even before 911 happened. It's our fault, because many have low equity accumulation and hope when we buy we can inflate the house value under a false assumption the market will support it, and we end up losing. People always expect a profit from Real Estate, instead of thinking homes are something we intend to keep forever. We set the market values, and now we see what is happening. We are building Default City USA.

Banks are in the business for giving out loans. People want credit, so it is not about equity we build. It is about credit worthiness in making payments and never thinking about defaults. If banks adopted the 2 Loan Policy for mortgages, we would never have these issues. People would not be worrying about how to pay their loan, because the bank offers help in how they can do it. This makes the bank more secure, and it makes the housing market more secure and stable.

People won't have to worry about being layed off from work, since most people are on fixed incomes. As long as payments are made, and the banks obligations are met, then banking and home buying will go on indefinitely.

Their plans now to tighten the banking loans because of questionable risk is more of a disaster than the present, because it causes shut downs, and deep despair in communities. Presently Banks create the risk, because they don't provide a means to cover the risk. Banks can't blame the public. Banks need to step up and do their best to create a system that can not default or fail.

If banks don't do their job as I suggest housing markets will never recover, and the same old problem will remain. We need to get banks to loosen up and enact a 2 loan Mortgage Policy so home mortgages remain stable. This plan is not like taking a 2nd mortgage on a loan. It is the idea that one loan covers the house, while the other loan makes payments on it and itself, until the money runs out, but then you will have a solid history of repayment qualifying the person to take out a new loan again to keep making the payments.

Everyone is happy.

In today's world we do it with credit cards all the time. Paying ones installment with the other. Borrow from Peter to pay Paul is a strategy that saves the markets, and saves creditors their credit ratings. So open up the loan system and provide a two loan policy, instead of tightening it up as they are doing now. This will establish a new banking regulatory called The 2 Loan Mortgage Statue Stability Act.

Sincerely,

Mr. Dominic E. Jermano

by Dom Jermano (20 articles, 0 quicklinks, 40 diaries, 930 comments) on Sunday, Jan 13, 2008 at 11:24:37 PM

  (0+)

Dominic,

Wouldn't it be simpler if we just allowed everyone to borrow new money into existence the same way the Federal Reserve Bank does?

Then we would never have to run out of money! 

by John Danforth (1 articles, 0 quicklinks, 4 diaries, 98 comments) on Monday, Jan 14, 2008 at 7:32:44 AM

  (0+)

No, because then it is not about only homes and mortgages. When we can assure that we have a home, then we can work on things that will give us wealth, give us education, give us a purpose for living. 

The banks are in as much a mess as the home owners, and I am sure  they are trying to figure out what to do. Certainly your suggestion is too open ended and gives cause for alarm because limits are not recognized. Do you build a house with walls that never end or connect? Heck no. But that is your suggestion.

The 2 loan policy allows Americans do things in whatever that may be. Your interests can be pursued. If people are against American Corporatism, then we can work on figuring out how to change that, figure out how else we may do things, and express our values in pursuing a new cultural diachotomy.

The idea is not just throwing money at it. The idea is placing our valued wanted traditions toward it. That is what creates markets, stability, and a growing demand for longevity. The present system strangles itself before it has a chance to even get started. It's an umbilical cord wrapped aroung the babies neck. We need to be good Banking Physicians and save the baby. You need 2 loans or arms to do that operation.

by Dom Jermano (20 articles, 0 quicklinks, 40 diaries, 930 comments) on Monday, Jan 14, 2008 at 6:25:11 PM

  (0+)

"The USA is in for bad times and that may mean the rest of the world will take the ride down the economic roller coaster with us."

No, not really. Detailed analysis by experts show that while main trading partners of US will take a hit, they will be able to adjust to the lost trade without too much damage. Non-major trading partners will not take a hit and indeed will benefit as materials not consumed by the US will be diverted to them at a lower cost. Just about all major trading partners of US have long expected US consumism and financial excesses to crash and have taken steps.

"We need big, visionary thinking that is out of the box."

Sort of. That "big, visionary thinking" is actually quite old and boring. It's called making things people all over wants to buy, invest in real things of value, create new useful knowledge, and live relatively within one's means. But doing this has been very difficult for Americans due to a dramatic shift of cultural values. Also, since America has shifted into a more service-oriented economy, it found out something that should be obvious - you can't export service.

An example: Next time you dropped by a camera store, pick up a top-line Nikon or Canon digital SLR. The design and technolgy are totally amazing. They're sold for thousands of dollar and delivers stunning picture quality, not to mention darn good profits. Now ask: how did the Japanese managed to have such a sustainable high-end economy without oil and other resources, survive and prosper from the emergence of China, and be the creator of thousands of the most amazing and sophisticated consumer and industrial products. Answer: see above. Also, ask if the Japanese believe in unfettered free trade. (They won't answer you but they will smile politely.)

"Naomi Klein has written about disaster capitalism, in her book, The Shock Doctrine."

I read this fine book. Prof. Friedman, inventor of fundamentalist 'unfettered' capitalism, saw the only way to implement his ideology in full is by using total economic shock. It has been applied all over the world, but not to the US due to the existence of democracy. This doctrine was supported the the US government, using US multinational corporations as the 2x4 to hit the unfortunate country over the head. Despite its very limited success, it formed the economic foundation of neo-con ideology. Recently, corporate control of Congress, Administration, along with a culturally brainwashed population finally permits the application of the shock to the US itself. We now have a population hopelessly hooked on uncontrollable consumsion and have debts to the eyeballs. They are ready to do whatever TV popular programs and commercials ask.

This large segment of the population, which I call the Zombie generation, now face an economic tsunami. (As a comparision, the shock doctrine cannot be applied to Canada despite similarity in economics and political system - Canadians refused to be brainwashed and are more down-to-earth.) As the US economy plunges, it is a perfect time to apply the Amerian shock doctrine to its logical conclusion.

What is that conclusion? Read another book, The Fourth Turning, to find out. (www.fourthturning.com) The force of history will propel the US into the era of Crisis by 2010, which will last at least a decade. Like the previous Crisis of Civil War and the depression after it, the Great Depression of 1930 and WW2, the upcoming era of Crisis is unavoidable. It will happen no matter what is done. The first of the 21th century Crisis will wipe out excesses but unfortunately will also produce an excess of death and destruction. The shock doctrine itself will fail, only to serve as a facilitator to the actual national Crisis.

By 2025, the US will emerged cleansed of deep excesses and start over. Painful lessions learned. Ready to be challenged by a new superpower - China. It is finally China's turn, because it too have learned a very deep lession during the 20th century.

by TomK (0 articles, 0 quicklinks, 0 diaries, 330 comments [22 recommended, 0 rejected]) on Sunday, Jan 13, 2008 at 11:58:35 PM

  (0+)

"but not to the US due to the existence of democracy"

What was 9/11?  Immediately following the new Pearl Harbor in the United States - we experienced the biggest about face on our own economic policies.

George W was a lame duck President until the attacks on 9/11.

Those attacks transformed the United States from a representative democracy to flag waving, country willing to give up it's civil liberties and fund the most expensive war in World History.  Which by the way has made private war profiteers billionaires.

We have been shocked and awed.

The resulting ballooning debt is the real bubble - when that pop's - by China or Saudi Arabia dumping dollars - our currency will be worthless.   

Yep, the Tsunami is coming - and most people out there are still sleep walking...  hard to watch. 

by August Adams (11 articles, 0 quicklinks, 1 diaries, 583 comments [11 recommended, 0 rejected]) on Monday, Jan 14, 2008 at 10:08:59 PM

  (0+)

You are dreaming because Saudi Arabia will never do that. In fact Bush is selling them 20 billion worth of new weapontry. China won't do it either, because America has been such an open market to their goods, and helping the chinese economy bloom. They will not be cashing in anything, but will keep doing trade. China is not a vendetta nation, wishing any people to collapse and have trouble. They go out of their way to help, even if Western culture perceives some of the things they do as infringements.

There is no crash coming. The only crash we had is 911 and the criminals in Washington who orchestrated it. We need impeachment hearings to begin, and to end the Iraq occupation.

We should be selling weapons to North Korea, Iran, and Palestinians, to encourage them not to fight with us... if that is any indication in what we do  to encourage and promote peace! Just keep chemical weapons and WMD out of the equation. Really we should be deescalating tensions by seeking the reduction of arms, but people don't always believe that.

We should be making efforts to make peace with the Taliban and with AlQaida, so they will stop terror, and the US can stop terror. We can both work together in our common interests and strengths.

The war needs to come to an end.

by Dom Jermano (20 articles, 0 quicklinks, 40 diaries, 930 comments) on Monday, Jan 14, 2008 at 10:43:34 PM

  (0+)

I've heard many calling Bush an incompetent, and that is largely obvious, but he is not the instigator of all this, the think tank neocons and others are. And perhaps what is happening is right on track for their plans. It is the Chicago disaster politics but on a much bigger scale than ever before attempted, maybe. New Orleans is one small example of what happens, a disaster gives them the opportunity to impose things that otherwise would not be possible. Bulldozing all the social housing in an area of New Orleans to put up expensive condos would never have been possible without the destruction from Katrina and the evacuation of most of the population.

I said maybe, above because I do not know to what extent the Chicago Philosophy has been implemented but I do know that it was used in Argentina with Pinoche, and that's a whole country subject to this incredibly inhuman policy, and there are probably others - the Philipines come to mind.

What disturbs me is that not only do the sheeple not even know about this kind of thing but that the progressives on these blogs do not even seem to consider this scenario, and therefore have no idea what to do about it, 'the neocons dastardly plan' should this be the case. They have managed to destroy Iraq and to a lesser extent, Afghanistan, which was already broken from years and years of war, and no one seems to think that this was not planned, just incompetence. But follow the money. Who benefits from a divided and uneffective Iraq? Who goaded the US of A to spend its wealth and soldiers lives in attacking and occupying Iraq? And who is goading the US of A into attacking, and probably nuking Iran? Who benefits?

I would have written an article about this if I had all the facts at my fingertips, but I don't. Perhaps some more competent writer will take this up?

by ibrahim turner (26 articles, 32 quicklinks, 5 diaries, 184 comments [2 recommended, 0 rejected]) on Monday, Jan 14, 2008 at 12:05:37 AM

  (0+)

What we have today is the result of the great depression but as we can all see, it's not working and history will repeat itself. We can rant, rave, write, discuss until our jaws drop off. None of this will change or improve the situation. We're headed for a fall.

Assuming the above is true, all that is left for us to do is to plan for the upcoming depression ....how to survive and come out of it alive.

A few have mentioned socialism as the better way to go. Capitolism as we know it is certainly the wrong way to go. A social Democracy would be a vast improvement but it's a difficult balance between the other two systems. Not to mention, Big Money won't allow us to go that way. But will Big Money exist after a greater depression ?

The key to survival does indeed lie within our communities. It is there that we must begin. Ask yourself just how independent your community currently is.

Again, face the facts. The waterfall is coming. Brace yourselves and focus on survival. Chances are, you may have to learn to negotiate better and learn how to survive in a Rex84 / FEMA camp. You may choose to leave the country but let me warn you...when the sh*t hits the fan, it will be a global fan and the sh*t will be slewn all over the globe. There is no safe haven except maybe, in China.

by Tony Forest (7 articles, 18 quicklinks, 166 diaries, 1429 comments [5 recommended, 0 rejected]) on Monday, Jan 14, 2008 at 1:04:56 AM

  (0+)

Admitted, it's kind of hard to "prepare" for being sent to a concentration camp without knowing which one you're being sent to. It's even more difficult to learn all there is to learn about each and every camp in advance. Nonetheless, here's a little info on known camps.

No laughing matter...but if you wish to laugh it off, and if it helps you get through your day, have a good laugh but also remember the boyscout motto : be prepared ! Our Govt. is prepared.

by Tony Forest (7 articles, 18 quicklinks, 166 diaries, 1429 comments [5 recommended, 0 rejected]) on Monday, Jan 14, 2008 at 3:43:27 AM

  (0+)

As long as you have the Federal Reserve System operating with a monopoly on the creation of debt-based money out of thin air, a few things are inevitable:

1. The system requires continued growth in order to remain viable, ever increasing as interest on the fake money is compounded. When the Fed says their aim is 'price stability', that means they will inflate the currency at the same rate as economic growth. This means that they rob the population of all increases in productivity, because prices should fall when productivity rises, not stay 'stable'. But stable prices are impossible when all currency is borrowed into existence because the interest to repay it must be borrowed, too, and mathematically you will reach a point where the interest and borrowing must accelerate out of control.

2. When, through socialist regulation and taxation, the producers are killed off below a certain point, that growth falls below the minimum.

3. The system can continue on inertia alone, by pumping more fake money into it, until foreign creditors begin to lose faith in the dollar.

4. The system has to inflate the currency, or it collapses. The only tool the Fed has is to inflate slower or faster. When it inflates faster, economic activity increases (bubble) but prices rise as the dollar falls in value (collapse). As the debt increases, it takes exponentially larger infusions of cash to get any increase in production, leading eventually to hyperinflation. When the Fed inflates slower, economic activity slows down.

5. When production of real goods has been choked off below a certain point, the Fed has to resort to faster inflation in order to temporarily keep the commercial banks from failing. A sudden increase in rates will pull the rug out from under the house of cards, same as in 1929. That is why the Fed is panic - lowering rates even as the dollar tanks and gold sets record prices.

6. The mathematical end of the debt-based fiat currency is upon us. We are probably in for a Depression worse than the 1930's. The end result of a debt-based fiat currency system is that the lender of last resort, the Federal Reserve Bank, ends up with all the currency, title to most of the real estate and other assets, and control of the government.

Conclusion:

A parallel to this is the idea that it matters not who votes, but who counts the votes. Under a monetary system like this, the bankers need not worry what kind of government system is in place, who robs what from whom, or what they call it. They profit when the nation profits, and they end up with the property when it doesn't. The government pays them if it is honest and leaves people alone, and it pays them much more if it is dishonest, redistributes wealth, kills off industry, and hobbles itself with regulations from whatever loony group claims the most attention. It just doesn't matter! The one and only thing that threatens their system is a currency that stands on its own, that doesn't have to be borrowed into existence.

Quibble about socialism or unfettered corporatism (while calling it capitalism, which it most emphatically is not) all you want. Either way you buy into the paradigm which continues their ownership of your labor and of the entire system, and prepares you for the final solution that will be put into effect when the currency fails.

Are you ready? Is your retirement in some mutual fund? Or in the non-existent Social Security Trust Fund? Who will you turn to when you have no job, you can't pay your mortgage, and your children are starving?

I'll tell you where you will turn to -- the government. People will demand that the government feed them, house them, and clothe them, whatever it takes. Pragamatism got them here, and principles matter little now, when real privation is upon them. Capitalism was tried and it failed, they will say. Force people to produce, and give it to us, they will cry. The last of your freedom will be gone, and you will never realize what robbed it from you, because you never realized that money should be a store of value, not just a symbol of it. You should own it, instead of it owning you by consisting of a promise to tax you more later. It should be actual value, not debt. Money that has actual value frees the owner of it, money that is debt enslaves everyone except the creator of it.

Wealth is created and consumed. It is actual material grown or dug up out of the ground that has human thought and effort applied to it to make it useful to other humans. Division of labor increases productivity and makes trade necessary, while leaving a surplus above subsistence level. Money facilitates fair trade and makes wealth portable and durable enough to save. Money that has no value and must be borrowed into existence is a tool for the enslavement of man. It slowly robs value out of the economy until the day when industry is choked off below the level where it can sustain the load.  The tool is put into effect, and your enslavement is complete, only by your ignorance of this simple truth.

Will you open your eyes in time? I doubt it.

I see the U.S. going from being a nation of beggars, liars, and thieves to a nation of miserable slaves. Have a beer and vote for a republocrat, maybe it'll never happen.

by John Danforth (1 articles, 0 quicklinks, 4 diaries, 98 comments) on Monday, Jan 14, 2008 at 6:47:05 AM

  (0+)

Of all the candidates from both parties, Ron Paul stands out for his knowledge of Economics, and history, and what is broken in America, and how to fix it. Go to ronpaul2008.com.

by ronheri (0 articles, 0 quicklinks, 0 diaries, 256 comments [45 recommended, 0 rejected]) on Monday, Jan 14, 2008 at 6:55:37 AM

  (0+)

I rounded out my thoughts on the submission above and published it as a public diary.

Come on over and leave a comment. Please prove me wrong!

by John Danforth (1 articles, 0 quicklinks, 4 diaries, 98 comments) on Monday, Jan 14, 2008 at 7:20:39 AM

  (0+)

John you are wrong, because it is faith that moves things, not the idea that you expect real money is to base everything on the gold standard. In fact value is mans idea, whether created out of thin air as you suggest or based upon nuggets of gold. We place that value on it, nothing else does.

It is far more easier to have value created out of air, because the skies the limit right? It is gold the finite, that you are basing your argument on verses the abundance of infinity. And your idea was a tried and tested value that actually contributed to the Great Depression.

I think infinity wins by a grand slam.  We will not have another depression, because Americans are too aware of that, and besides we are smarter than those days.  The industrial age wasn't even in 1/4 drive yet when the depression hit. Most people blame it on the fallout of agriculture.

Check out the below link and go back and see the depression. It tells you a lot about why using Gold was no good for Europe, when they were recovering from WWI.

Now I don't see a depression coming because we don't have a crazy stock market, or overvalued stocks, we don't have a lagging economic outlook, since alternative energy ideas and car conveyance is replacing the old Ford Motor Company economic miracle that was the US's job engine then. The US does not have trade barriers to other countries, something they did have during the great Depression, and with such tremendous profits to be made in the stock market nobody wanted to make low interest loans. And it is just the opposite in which we have an abundance of loans on the market, and stable stock profit margins.

The problem is our management of banking the loans has been without thought to protecting the banks, when during a War economy when less than half the people are for war and 3/4 are not.  This means domestic goods are not concentrated and more concentration is on military risks. Therefore most families are on the domestic side, and that slow down has caused job losses, and dragging activity which causes people to be unable to meet their payments. Along with medical bills, and rising fuel prices, people would rather forego the house, because they need the money for the gas, car, insurance and paying for medical bills.

That is why if the banks offered a 2 loan Mortgage Policy for home owners, they would be able to stablize themselves, especially during this War influenced infrastructured Homeland Security Corporate Economy.

The Republicans follow everything against what caused those Depression days and the fact that America was so far in the black with hardly any debt is the reason depression hits. If America is a debtor nation, so goes the thinking that Depression will ever occur again. And they are probably right.

Where they are wrong is creating that debt through war, and military spending. We won't get a depression because of the debt, but what we will get is higher inflation. This is seen in the over exuberance in the Real Estate Market which has defaulting mortgages, promulgating really 90% more real home sales to secure defaulted loans,  and a possible hit on retirement futures because a lot of retirement plans are tied to the Real Estate venture.

My advice is to enact the 2 loan Mortgage policy as stated in my above comment addressed to FED RESERVE CHAIRMAN Bernake, and to start selling more Life Insurance Policies so those revenues will produce investment plans for the industry. Insurance is a good safety net. Especially when we consider  if we use our tax dollars collected for the government and use them to pay insurance premiums; to insure the government debt from ever defaulting, would send strong signals across the globe that America will never face an economic downturn, and is without the capacity to ever have a depression. We would be insured against the inevitable. It would be a national achievement.

So lighten up everyone.... Just listen to what I say... I am telling the truth here.

http://www.geocities.com/CapitolHill/Senate/6854/greatdep.html

by Dom Jermano (20 articles, 0 quicklinks, 40 diaries, 930 comments) on Monday, Jan 14, 2008 at 9:17:28 AM

  (0+)

Inflation is reflected in higher prices.  Inflation is creation of money without earning it first, just as a counterfeiter does.  Inflation robs wealth from people and deposits the wealth into the hands of those who create it.

The depression was caused by a long period of artificially low interest rates and easy credit (inflation), followed by a sudden increase in interest rates, by Federal Reserve policy.  The sudden interest rate increases stopped  creation of new money, cash dried up, and people defaulted on loans.  We are nearing the end of artificially low interest rates now, the Fed must suddenly and sharply increase interest rates as soon as the banks are rescued from insolvency by the subprime crisis in order to prevent a total collapse of the dollar.  We are marching in the same footsteps that led to the first great depression.  There was gold convertability, but not a gold standard in effect at the time.

Roosevelt's response was to deepen and prolong the Depression with a bunch of welfare state programs (more inflationary spending).  And he actually outlawed gold ownership via executive order, blaming the depression on hoarding of gold.  Thus real wealth was confiscated from America, replaced with paper that inexorably decreased in value. 

Paper money always falls to the value of the paper it's printed on.  And it always robs the citizenry of its wealth. 

by John Danforth (1 articles, 0 quicklinks, 4 diaries, 98 comments) on Monday, Jan 14, 2008 at 4:10:16 PM

  (0+)

Yes John that was part of the problem as my thread points out, but it was not the only issue that brought about Depression.

the thread....One obvious solution to the problem of the vast majority of the population not having enough money to satisfy all their needs was to let those who wanted goods buy products on credit. The concept of buying now and paying later caught on quickly. By the end of the 1920's 60% of cars and 80% of radios were bought on installment credit. Between 1925 and 1929 the total amount of outstanding installment credit more than doubled from $1.38 billion to around $3 billion. Installment credit allowed one to "telescope the future into the present", as the President's Committee on Social Trends noted. This strategy created artificial demand for products which people could not ordinarily afford. It put off the day of reckoning, but it made the downfall worse when it came. By telescoping the future into the present, when "the future" arrived, there was little to buy that hadn't already been bought. In addition, people could no longer use their regular wages to purchase whatever items they didn't have yet, because so much of the wages went to paying back past purchases.

Here is what you left out, that we don't have today, meaning the agriculture fallout.

Maldistribution of wealth within our nation was not limited to only socioeconomic classes, but to entire industries. In 1929 a mere 200 corporations controlled approximately half of all corporate wealth. While the automotive industry was thriving in the 1920's, some industries, agriculture in particular, were declining steadily. In 1921, the same year that Ford Motor Company reported record assets of more than $345 million, farm prices plummeted, and the price of food fell nearly 72% due to a huge surplus. While the average per capita income in 1929 was $750 a year for all Americans, the average annual income for someone working in agriculture was only $273. The prosperity of the 1920's was simply not shared among industries evenly. In fact, most of the industries that were prospering in the 1920's were in some way linked to the automotive industry or to the radio industry.

The U.S. abruptly stopped its policies to help farmers. During the war the United States government had paid an unheard of $2 a bushel for wheat, but by 1920 wheat prices had fallen to as low as 67 cents a bushel. Farmers fell into debt; farm prices and food prices tumbled. Although modest attempts to help farmers were made in 1923 with the Agricultural Credits Act, farmers were generally left out in the cold by the government.

 When the automotive and radio industries went down all their dependents, essentially all of American industry, fell. Because it had been ignored, agriculture, which was still a fairly large segment of the economy, was already in ruin when American industry fell.

A last major instability of the American economy had to do with large-scale international wealth distribution problems. While America was prospering in the 1920's, European nations were struggling to rebuild themselves after the damage of war. During World War I the U.S. government lent its European allies $7 billion, and then another $3.3 billion by 1920. By the Dawes Plan of 1924 the U.S. started lending to Axis Germany. American foreign lending continued in the 1920's climbing to $900 million in 1924, and $1.25 billion in 1927 and 1928. Of these funds, more than 90% were used by the European allies to purchase U.S. goods. The nations the U.S. had lent money to (Britain, Italy, France, Belgium, Russia, Yugoslavia, Estonia, Poland, and others) were in no position to pay off the debts. Their gold had flowed into the U.S. during and immediately after the war in great quantity; they couldn't send more gold without completely ruining their currencies.

Equally important to causing the disparate distribution of wealth was tariff policy of the United States. The United States had traditionally placed tariffs on imports from foreign countries in order to protect American business. However these tariffs reached an all-time high in the 1920's and early 1930's. Starting with the Fordney-McCumber Act of 1922 and ending with the Hawley-Smoot Tariff of 1930, the United States increased many tariffs by 100% or more. The effect of these tariffs was that Europeans were unable to sell their own goods in the United States in reasonable quantities.

In the 1920's the United States was trying "to be the world's banker, food producer, and manufacturer, but to buy as little as possible from the world in return." This attempt to have a constantly favorable trade balance could not succeed for long. The United States maintained high trade barriers so as to protect American business, but if the United States would not buy from our European counterparts, then there was no way for them to buy from the Americans, or even to pay interest on U.S. loans. The weakness of the international economy certainly contributed to the Great Depression. Europe was reliant upon U.S. loans to buy U.S. goods, and the U.S. needed Europe to buy these goods to prosper. By 1929 10% of American gross national product went into exports. When the foreign countries became no longer able to buy U.S. goods, U.S. exports fell 30% immediately. That $1.5 billion of foreign sales lost between 1929 to 1933 was fully one eighth of all lost American sales in the early years of the depression.

Mass speculation went on throughout the late 1920's. In 1929 alone, a record volume of 1,124,800,410 shares were traded on the New York Stock Exchange. From early 1928 to September 1929 the Dow Jones Industrial Average rose from 191 to 381. This sort of profit was irresistible to investors. Company earnings became of little interest; as long as stock prices continued to rise huge profits could be made.

And John you are wrong about the low interest rates: Per: Interest rates for brokers loans were reaching the sky, going as high as 20% in March 1929. The speculative boom in the stock market was based upon confidence. In the same way, the huge market crashes of 1929 were based on fear.

Also they didn't have computers like we have now that could have averted the crash....per..Then, on Monday October 21 prices started to fall quickly. The volume was so great that the ticker fell behind. Investors became fearful. Knowing that prices were falling, but not by how much, they started selling quickly.

Finally the proof you are wrong is.....The rich stopped spending on luxury items, and slowed investments. The middle-class and poor stopped buying things with installment credit for fear of loosing their jobs, and not being able to pay the interest. As a result industrial production fell by more than 9% between the market crashes in October and December 1929. As a result jobs were lost, and soon people starting defaulting on their interest payment. Radios and cars bought with installment credit had to be returned. All of the sudden warehouses were piling up with inventory. The thriving industries that had been connected with the automobile and radio industries started falling apart. Without a car people did not need fuel or tires; without a radio people had less need for electricity. On the international scene, the rich had practically stopped lending money to foreign countries. With such tremendous profits to be made in the stock market nobody wanted to make low interest loans. To protect the nation's businesses the U.S. imposed higher trade barriers (Hawley-Smoot Tariff of 1930). Foreigners stopped buying American products. More jobs were lost, more stores were closed, more banks went under, and more factories closed. Unemployment grew to five million in 1930, and up to thirteen million in 1932. The country spiraled quickly into catastrophe. The Great Depression had begun.

Our Financial practices today are quite removed from the last Depression, and your idea we are headed for disaster is ridiculous. Granted we have some troubles with housing, and out of control defense spending is something we need to address and get under control. But we are not headed to the gutter. Your ideas of inflation and mine are different.

Inflation to me is the increase of Oil prices, because of the increase to military spending. Certainly diplomatic efforts that steer away from military expansionism, builds industry and produces oil resources. Militaries produce terrorism, not stopping it. 

People who inflate home prices to just subjectly sell for profit is inflation, because they change the idea of home ownership from simply being a home to using it for profit and using it as an economic tooling hedge. This type of inflation is unnecessary and creates false projections, and false worth to home values, and is why we are in this mortgage jam.

I certainly do not see your doomsday scenario....it simply does not exist.

by Dom Jermano (20 articles, 0 quicklinks, 40 diaries, 930 comments) on Monday, Jan 14, 2008 at 7:33:12 PM

  (0+)

All of your examples point to government meddling in markets.

 Boom and bust are inevitable with debt-based paper currency.

And inflation is, literally, creation of money in excess of growth in production. 

Events of the last few days have not been encouraging .....

Fewer people working, more people taking money from the government .... add it up.  Is there no limit? 

In Michigan alone:

Another 2,000 manufacturing jobs lost last quarter.  Nobody is investing in manufacturing capacity.   Many of these jobs were 'replaced' by 'service sector' jobs.  Who and what will they service when nobody is making anything any more?

Unemployment up.

Another historic tax raise.

More regulations, rules, fines, permits, and other obstacles to business.

Sorry, we don't need redistribution of wealth.  We don't need more taxes.  We don't need more inflation because of the idiotic government and the evil Federal Reserve Bank creating money by borrowing it into existence at insane rates and causing higher prices for everything so that the poor get hit hardest and would-be employers hunker down for survival.  Enough! 

by John Danforth (1 articles, 0 quicklinks, 4 diaries, 98 comments) on Wednesday, Jan 16, 2008 at 7:05:34 PM

  (0+)

I'm posting this email Mary Ann Gould, Co-founder of Coalition for Voting Integrity, sent me:

by Rob Kall (952 articles, 4177 quicklinks, 374 diaries, 2087 comments [45 recommended, 3 rejected]) on Monday, Jan 14, 2008 at 7:31:48 AM

  (0+)

Susan Givens emailed me this response (capitalization is hers):

by Rob Kall (952 articles, 4177 quicklinks, 374 diaries, 2087 comments [45 recommended, 3 rejected]) on Monday, Jan 14, 2008 at 7:46:44 AM

  (0+)

"EVERYTHING IS WRONG IN U.S."

Well, not everything. We have Rob Kall and we have each other. But we also have a lot of kool-aid chuggers.

I wish I were wrong on this, I sincerely do. Rob, folks.....once you come to the realisation that we're headed for a fall *no matter what*, how does this effect the way you look at politics and the elections ?

by Tony Forest (7 articles, 18 quicklinks, 166 diaries, 1429 comments [5 recommended, 0 rejected]) on Monday, Jan 14, 2008 at 8:36:37 AM

  (0+)

Well you are wrong.

by Dom Jermano (20 articles, 0 quicklinks, 40 diaries, 930 comments) on Monday, Jan 14, 2008 at 9:28:11 AM

  (0+)

TaxSlave:

Your analysis is correct of course. The top rung of the financial elite knows the dangers of the fiat money system and the fractional reserve banking system well. They know the donwside of financial engineering and complex derivatives, now leveraged to the tune of a reported 450 trillion dollars. They know America is a society gone mad with debt, a result of feeding the population with endless cheap credit. The elites know this very well. But instead of properly managing it they accelerated the runaway 'free lunch' culture.

When a high level Treasury dept official was asked some 2 years ago about this, he said "That which cannot be sustained won't." I guess he meant the 'magic' of the market will take care of things. Be assured that the elites, who benefited tremendously from profits of massive debt money (money which they created out of thin air by the way) have long converted their own money to other rising currencies and parked them in offshore safe havens. When the sh** hit the fan, their first class air tickets and private jets are ready. On the way to the airport they wave: "So long suckers."

by TomK (0 articles, 0 quicklinks, 0 diaries, 330 comments [22 recommended, 0 rejected]) on Monday, Jan 14, 2008 at 7:41:49 PM

  (0+)

Oh the sky is falling, the sky is falling. What are we going to do? You dooms people have no faith. Think positive for a change, and we can see a better tomorrow. People are not getting on jets flying away. Although I did and had no money for other reasons, and that was to go out in the world to spread the good news that all Americans are not like Bush, and all Americans are no war mongers in killing people.

I now have lived in China now over 6 years. And I have found an entirely different view than what was fed me when I lived in the States when it came to China. It simply is not true. With so many people, the jobs for English Teachers are very abundant. Yet there are only a handful of Native English Teachers in China. They don't come because of the fear factor.

Let me say this: if anyone wants to invest in China, or has a notion to come to check it out, I invite you to my home. You can stay here free until you do the things you want to do. I will introduce you to friends I have known for sometime now. Real Estate is very good here in China to invest, along with really great Life Insurance plans. Their plans are quite different than in the USA, in which they have combined Life and Medical Insurance plans, in which when you turn 65 you get all your premium money returned, while still being covered for both. It is quite impressive. I won't charge you rent. You only need buy your own food..and it is cheap and plentiful here. There is no winter weather. Just let me know...and I will help you out.

by Dom Jermano (20 articles, 0 quicklinks, 40 diaries, 930 comments) on Monday, Jan 14, 2008 at 11:16:27 PM

  (0+)