In defense of the bailout and the Federal Reserve

mexiblunt · Nov 22, 2008

Lost a chevy dealership in the town next to me yesterday, as of 12.00 noon it closed it's doors. That's in a brand new city with the largest fastest growth rate for a few hundred miles. In Canada! Alot of my friends are out of work already from a well known usually profitable RV dealership. Already 50% layoffs! That's a few hundred jobs in just the last 3-4 weeks.

TheBrutalTruth · Nov 22, 2008

misshestermoffitt said:
So when they go and print this extra money, how does it end up in circulatiuon? Who is getting the free money handed to them?

Some things that don't make sense about the big 3 bailout, if they are in trouble because people aren't buying cars so their sales are down, how is keeping them in business to make cars that people can't buy going to help anything?

Another thing, the CEO's and management sucked of the teat named "profits" for how many years? Whatever happened to saving some cash back for a rainy day? Seems to me like it's raining like a motherfucker and they have no umbrella to open. Let's say they get the bailout, things roll along well for 5 to 10 years, they start sucking all the profits back into their personal bank accounts and suddenly we are right back here again.

Let the people in charge of these companies sell off their own possessions and re-invest into their business. That's what capitolism is about, you dine high on the hog during good years, you sell the damn hog during bad years. If you or I had a business that was in danger of failing, Washington and the big 3 wouldn't give a flying fuck.

It keeps things from getting worse, as long as those people are still employed doing useless busy work then they are still patronizing small businesses that rely on their patronage to continue to be in business.

It's not a vacuum Misshestermoffitt, its all interconnected. Besides, I really don't want to see the United States reduced to being on par with Mexico, and not having its own Auto Industry.

In some regards trickle down economics does work, the problem is getting it distributed across enough of the top so it does trickle down. In this case it means making sure that the upper middle class, middle class, and working class represented by the Big 3 and their suppliers have enough money to continue paying their employees. So their employees continue to have enough money to visit the restaurants, retailers and other service providers that they visit. So those places can stay in business, and continue to pay their employees. So those employees can continue to repeat the process.

The problem of course, is that if the money stops moving around then the economy will collapse regardless of what the government does to try solving the problem.

The movement of money is what defines an economy, and if money is not moving around an economy will collapse, because one sector is not getting money, and thus it leads to another sector, or sectors not getting money, to other sectors not getting money.

Nice big interconnected system, unfortunately, because of the mergers and acquisitions of the Big 3 they are too big to let fail. Though ideally they would be allowed to just fail, and the pieces sold off. The problem there of course is that a lot of retirees would get hurt, and the wealth distributed amongst the shareholders of those companies would vanish. More than likely the divisions that got sold off would end up in the hands of foreigners, which does us absolutely no good, or in the hands of private companies, which again does us absolutely no good, because it leads to a concentration of wealth in too few hands.

Of course, I'm not advocating taxing the wealthy, the moral and ethical problems I see with taxation prevent such a thing. Besides, the top 50% already pays the vast majority of the taxes anyway.

The Tax Foundation - Summary of Latest Federal Individual Income Tax Data

That's just Federal Income taxes, if those people are business owners they also pay unemployment taxes, their half of FICA, workers comp taxes, state income taxes, federal and state corporate income taxes, fees to register, and maintain the registration of their business. In the case of corporations they pay franchise taxes (fees to incorporate or file articles of organization (LLCs). Registration on their vehicles. Property Taxes.

For a few, licensing fees for Alcohol Sales, and so on and so forth.

No, I think the biggest groups that need to be looked at for failing to pay their fair share of taxes are NGOs that have massive amounts of cash and cash equivalents.

And immigrants that send their money back home, taking it out of the local economies.

medicineman · Nov 22, 2008

Three years ago I had a $300k note against my $425k home. Today, my home is worth $180-$200k and am negative equity of around $120k. That's how much damage this crisis has done to me. Sorry to hear about your $5k loss.
Sorry to hear about your dillema, but be assured you're not alone. A friend of mine, found himself upside down by about 100K, paid 280K for a house that is now worth 150-180K. He went out and shopped a 450K house that is worth 200K and bought it before his credit went south, and then bailed on his first home, which fucked his credit, but he got a much larger home with a swimming pool in a much nicer neighborhood, for less than his current house payments. Might be something to consider. I've got my house paid down below the owed money by a considerable margin, thank my lucky stars, but still, if I were to try and sell it, after expenses, I'd walk with very little. At one time I had 250K in equity

medicineman · Nov 22, 2008

Another thing, economists like Suzie Ohrman are telling their viewers to not spend this christmas. That will put a lot of retail stores out of business, cost a lot of jobs and deepen the recession. She is suggesting everyone put their credit cards in the safe and don't use them, pay down their debt and hunker down. Good advice for the individual, horrible for the retail economy. What say you guys?

Doctor Pot · Nov 22, 2008

ilkhan said:
This is only the begining of the hurting. Its not getting better anytime soon. Your equity loss on your house, sorry about that. But it is only a symptom of the problem. This is the Boom bust cycle that the central banks "Control" by lossening and constricting the money supply. Its supply and demand. There is no demand for 425 thousand dollar homes. The housing prices were artifisaly inflated. Next will be a dollar crisis. The dollar will start to lose value prices will go up and then yes people will be starving in the streets.

You're saying that the banks are doing this on purpose? Why, so they can fail like Lehman Brothers and Bear Stearns? And the dollar is actually going UP in value, which is what it does during a recession. Everyone lost money in the housing collapse, ergo, there is less money, ergo, money is worth more.

And yes we have been saying this same song and dance sence the 50's and before that. People like Jefferson and Adams and many of the Framers wanted to stay way from central banks. They knew well the dangers of Fiat Currency. I trust them a hell of a lot more then anything any modern economist will say.

The world was a far different place back then. The US wasn't even a major world power. And you forget that the framers were divided between whether or not to have a central bank, which they eventually did until Andrew Jackson got rid of it. And what makes you think that Jefferson and Adams would understand our economy better than economists today? That's just ridiculous.

Ecomomists who believe in central banking are the same ones who lauphed a Peter Schiff and Ron Paul when they predicted this economic collapes. Lauphed at them on TV God that would have pissed me off. Whos lauphin' Now boneheads. Andrew Jacksons headstone says "I killed The Bank" why do you think he would have that on his headstone?? Fiat Currency is a sure and almost inevetable way to destroy your economy.

A bunch of economists have been predicting doom and gloom forever. But even a blind squirrel finds a nut once and a while. Eventually something bad was bound to happen. And you keep saying that a central bank is a sure and inevitable way to destroy your currency, but don't say how or why. You just insist that it will and whenever anything bad happens, you point to that as proof.

The longest period of growth in our economy was between 1865 and 1913 the dollar rose in value almost every year prices slowly came down almost every year on a (Gold/Silver Standard). After that the Fed came into power and it almost immediatly reversed. And got worse and worse until breton woods and an end to the gold standard destroyed the value of the dollar. The Chickens are coming home to roost.

I don't know how to respond to this. Almost none of it is actually true. The economy has grown since the Great Depression, with occasional and usually mild recessions. The value of the dollar was fairly constant between 1865 and 1913, but there were three major financial crises during that time that were the whole reason the Federal Reserve was created in the first place. You know when the value of the dollar went up the most? Between 1929 and 1933. The dollar going up in value is not usually a good thing, as it can lead to a deflationary spiral. Of course, during that time the dollar was still backed with gold so they couldn't generate money as a means to reverse deflation.

This Is when the real rich get really really rich you can bet the real rich are well positioned (In Gold probably) to reap the rewards of all this Fiat currency growth Doc's so proud of. The price of money will sink the housing prices will go down the stock market will go down ferther and these people will buy everything up for pennys on the dollar. Then they will own REAL ASSETS not worthless green paper.

Nah. Rich people know that when there's a financial crisis people metaphorically show up at their doors with torches and pitchforks and call for blood. Rich people do the best when everyone else is doing good too. Any evidence that this is true?

Thats what this is really about does Gold have real value?? Yes! Does Little sheets of green paper have Real value?? No!

Interesting point. What gives gold value? Is it how shiny it is? Is it its yellow color? Is it how rare it is? Palladium is more useful than gold and significantly rarer, and yet it's cheaper. How would you explain this?

misshestermoffitt said:
So when they go and print this extra money, how does it end up in circulatiuon? Who is getting the free money handed to them?

The Federal Government gets it. And apparently the auto industry and certain banks get some too, although there are many strings attached.

Some things that don't make sense about the big 3 bailout, if they are in trouble because people aren't buying cars so their sales are down, how is keeping them in business to make cars that people can't buy going to help anything?

It's not that no one is buying cars, but fewer people are. Sales are down what? 10%? But they're still selling 90% of what they would in a decent year.

Another thing, the CEO's and management sucked of the teat named "profits" for how many years? Whatever happened to saving some cash back for a rainy day? Seems to me like it's raining like a motherfucker and they have no umbrella to open. Let's say they get the bailout, things roll along well for 5 to 10 years, they start sucking all the profits back into their personal bank accounts and suddenly we are right back here again.

I don't really like the idea of a bailout either, but it's the best of a bunch of bad options. And CEOs have made it a point to lower their salaries a lot in order to get the UAW to agree to do so as well. They've cut most of the more extravagant stuff.

Let the people in charge of these companies sell off their own possessions and re-invest into their business. That's what capitolism is about, you dine high on the hog during good years, you sell the damn hog during bad years. If you or I had a business that was in danger of failing, Washington and the big 3 wouldn't give a flying fuck.

Like I said, the management staff has lowered their salaries quite a lot in order to get the UAW to agree to salary cuts. So in essence, they already did. And if you or I had a business that would result in 5 million lost jobs if it went under, Washington would probably care.

FLoJo · Nov 22, 2008

Well Dr. Pot you make some valid points but the whole system is flawed.

the problem is that not only is our economy based on this fiat currency, but it is also based on leveraged fiat currency which is even more dangerous.

for example, wall street and major franchises and such are based on an expansion model. meaning that their stocks will rise and fall in value, in relation to but not exclusive to their profits and most notably thier expansion. any company can increase profits but expansion is what increases the profits exponentially. if you have one store in one area making 10 percent, ten stores in ten locations will make 100 percent.

so these corporations that continually expand (more dealerships, outlets, restaurants etc.) show positive growth and positive profits on paper. these are not real growth figures because 99 percent of these companies are expanding on credit, that is the faith that they will continue to prosper and to expand even more, giving them a larger credit base, thus being able to expand more quickly.

take starbucks for example, it expanded at an alarming rate, had through the roof sales, and expansion, now is closing down stores left and right and has announced a 90 percent decline in profits (presumably because it is considered a luxury good and is one of the first cut off when people go into crunch time.)

now when those people at starbucks get laid off, there is more unemployment and they have less money to spend at other outlets. this is important because america is the global consumer and over 75 percent of our economy is based on consumer goods and services.

the housing bubble was just the tip of the iceburg, that was people who got basically screwed by the banks because they were giving loans and ARM to people who obviouslly would not be able to afford them in the long haul. because of that, the rest of the housing market lost value. now we have this huge crunch where people are buckling down and holding on to their money.

this is where it gets important in a leveraged economy such as ours.

now we have all of these companies who are based on expansion and consumption. when people are not spending money, these companies no longer make a profit in which they can turn over to cover operating costs. once they stop being able to make these payments, they have to downsize their labor and property. as people continue to not spend money more and more, these companies are going to start defaulting and going bankrupt similar to what is happening in the auto industry.

this will create a similar situation to the housing market, but in the business sector because now there will be a lot of commercial properties which nobody will want or be able to afford.the people who worked at these places now have less money to spend and can no longer be able to fuel the expansion economy. it is like a domino effect, and it starts with the cracks in the foundation before the whole building falls. this may be a bandaid for the situation but i like to think of it like this..

if you have a bad cut that needs stitches, and decide to just wrap it with a towel, sure you can continue to wrap it with towels so that you dont see the blood, but eventually if you do not get stitches, you will bleed to death. that is what is happening to our country right now. ESPECIALLY since we do not have any real industry to fall back on, we have outsorced it all and just have our asses to fall on.

here is where the inflation becomes important.

now you say that the value of the dollar is going up correct? do you base this on the fact that the prices of goods are going up or down? see when you are dealing with fiat currency it is not dependant on who has it that makes its value, it is just like any other resource and it valued in relation to its scarcity. if it is scarce then it is more valuble, if it is abundant it is less valuable. now there are fluctuations and ways to cover this by comparing to the scarcity and/or availability of other goods making it seem more or less valuable.

but if you watch the news they will like to make the arguement that oh, well prices on everything are going down, this means that the dollar is becoming more valuble right? no, because in a recession matierials for consumer goods go down because there is less of a demand for them. on the flip side of the coin they like to say well prices on everything are going up because demand is high, when in reality they are looking at the same situation and giving two different explanations, the truth is, not all prices rise across the board because of demand, it is because the buying power of the dollar is decreased, thus the prices go up.

now back to what i was saying, once the companies and consumer sector starts to suffer, that means spending is cut across the board and everyone has less money to spend. now this does not make our dollars more valuable, because in the end, when the inflation settles in, we are left holding the bag because now what we have been sittin on is worht less. its pretty easy to understand when you consider what a dolalr will buy today, was worth a few penneis when the federal reserve was enacted.

so with this bailout and the printing of all this money, it will cause inflation no doubt about it, and it is another form of TAX on the american people, we are paying a higher cost for goods, because more money is printed to bail out these companies. we wont see it today or tomorrow, but the buying power will be drastically reduced once it sets in.

now i know i rambled off a lot of info and i probably didnt cover my bases but will adress the issues as they come back, but for now im going bowling!! LOL

FLo

hom36rown · Nov 22, 2008

FLoJo said:
Well Dr. Pot you make some valid points but the whole system is flawed.

the problem is that not only is our economy based on this fiat currency, but it is also based on leveraged fiat currency which is even more dangerous.

for example, wall street and major franchises and such are based on an expansion model. meaning that their stocks will rise and fall in value, in relation to but not exclusive to their profits and most notably thier expansion. any company can increase profits but expansion is what increases the profits exponentially. if you have one store in one area making 10 percent, ten stores in ten locations will make 100 percent.

so these corporations that continually expand (more dealerships, outlets, restaurants etc.) show positive growth and positive profits on paper. these are not real growth figures because 99 percent of these companies are expanding on credit, that is the faith that they will continue to prosper and to expand even more, giving them a larger credit base, thus being able to expand more quickly.

take starbucks for example, it expanded at an alarming rate, had through the roof sales, and expansion, now is closing down stores left and right and has announced a 90 percent decline in profits (presumably because it is considered a luxury good and is one of the first cut off when people go into crunch time.)

now when those people at starbucks get laid off, there is more unemployment and they have less money to spend at other outlets. this is important because america is the global consumer and over 75 percent of our economy is based on consumer goods and services.

the housing bubble was just the tip of the iceburg, that was people who got basically screwed by the banks because they were giving loans and ARM to people who obviouslly would not be able to afford them in the long haul. because of that, the rest of the housing market lost value. now we have this huge crunch where people are buckling down and holding on to their money.

this is where it gets important in a leveraged economy such as ours.

now we have all of these companies who are based on expansion and consumption. when people are not spending money, these companies no longer make a profit in which they can turn over to cover operating costs. once they stop being able to make these payments, they have to downsize their labor and property. as people continue to not spend money more and more, these companies are going to start defaulting and going bankrupt similar to what is happening in the auto industry.

this will create a similar situation to the housing market, but in the business sector because now there will be a lot of commercial properties which nobody will want or be able to afford.the people who worked at these places now have less money to spend and can no longer be able to fuel the expansion economy. it is like a domino effect, and it starts with the cracks in the foundation before the whole building falls. this may be a bandaid for the situation but i like to think of it like this..

if you have a bad cut that needs stitches, and decide to just wrap it with a towel, sure you can continue to wrap it with towels so that you dont see the blood, but eventually if you do not get stitches, you will bleed to death. that is what is happening to our country right now. ESPECIALLY since we do not have any real industry to fall back on, we have outsorced it all and just have our asses to fall on.

here is where the inflation becomes important.

now you say that the value of the dollar is going up correct? do you base this on the fact that the prices of goods are going up or down? see when you are dealing with fiat currency it is not dependant on who has it that makes its value, it is just like any other resource and it valued in relation to its scarcity. if it is scarce then it is more valuble, if it is abundant it is less valuable. now there are fluctuations and ways to cover this by comparing to the scarcity and/or availability of other goods making it seem more or less valuable.

but if you watch the news they will like to make the arguement that oh, well prices on everything are going down, this means that the dollar is becoming more valuble right? no, because in a recession matierials for consumer goods go down because there is less of a demand for them. on the flip side of the coin they like to say well prices on everything are going up because demand is high, when in reality they are looking at the same situation and giving two different explanations, the truth is, not all prices rise across the board because of demand, it is because the buying power of the dollar is decreased, thus the prices go up.

now back to what i was saying, once the companies and consumer sector starts to suffer, that means spending is cut across the board and everyone has less money to spend. now this does not make our dollars more valuable, because in the end, when the inflation settles in, we are left holding the bag because now what we have been sittin on is worht less. its pretty easy to understand when you consider what a dolalr will buy today, was worth a few penneis when the federal reserve was enacted.

so with this bailout and the printing of all this money, it will cause inflation no doubt about it, and it is another form of TAX on the american people, we are paying a higher cost for goods, because more money is printed to bail out these companies. we wont see it today or tomorrow, but the buying power will be drastically reduced once it sets in.

now i know i rambled off a lot of info and i probably didnt cover my bases but will adress the issues as they come back, but for now im going bowling!! LOL

FLo

someone who gets it

hom36rown · Nov 22, 2008

Doctor Pot said:
Now, sure, a lot of people are doing worse than they were a few years ago, this is true. But people aren't starving in the streets. You still have a computer, and enough free time to use the internet. We all do. Think about how much damage this crisis has done to you. For me, I lost $5000. That sucks. But I still have a roof over my head. I still have most of my money. And I still have my sweet grow room. Count your blessings, dude.

Things are going to get a lot worse. The hyperinflation hasn't even set in. You haven't seen anything yet.

Doctor Pot · Nov 22, 2008

hom36rown said:
Things are going to get a lot worse. The hyperinflation hasn't even set in. You haven't seen anything yet.

Why do you think there will be hyperinflation? There wasn't any inflation during the Great Depression. Of course the government shouldn't just mint all the money they want, that would be foolish. They have to figure out how much they can use without destabilizing the dollar.

Remember Y2K? Did you think that was going to be a huge problem too? Just curious.

FloJo - you make some very good points, however a new roof has necessitated moving all my plants temporarily and I'm rather busy. I'll respond when I get a chance.

misshestermoffitt · Nov 22, 2008

Things are closing near me. Circuit city, closed, Steve and Barry's, closed. I'm just waiting to see what closes next.

offgridgrower · Nov 22, 2008

if you really think that the FED isnt out to make money, or is a pawn to the New World Order , and that "they" arent out to control the world then y is all this fucked up shit happening when we have scientist that CAN fix our problems but arent allowed to? we can fix our problems but those powers keep us from doing so because once we fix them they no longer have an empire to rule, no matter how behind the scenes they do so. every grower here keep growing, its one more thing we can do to affect the powers that look to keep us all slaves to their system! when the money isnt worth shit anymore, my bud will be!! when they cut my electricity, I still have the sun, dont think for a minute that its even close to over, fight now to have something in the future!!

ilkhan · Nov 22, 2008

The Framers knew well the toll Central banks could take printing Fiat currency. This modern system is not all that modern its been going on a while now, off and on. It always ends up bad. We've only been off the Gold standard for about 38 years now. and in that time the dollar has lost considerable value. But thats Ok they will just print more money to offset it. Thats what will end up happening but it will happen in a shorter time span. Value will end up droping when they over print and the countrys that own our debt dump it. If we are are lucky (sort of) we will only end up with a deflationary resesion prices will come down (and I can afford a good lighting system) and people will be out of work. If we are unlucky we will get hyperinflation.

Your logic (about the blind squirril) doc is a great way to avoid the fact that they were right and that all the people who have warned about Fiat curracy were right all along.

I think the best thing to do (If Obama is Brave and Smart) is for Obama to begin issuing US notes (Like JFK did) backed in a basket of commodaties. A basket would help to stablize the gold fluctuations Doc so frets about. And allow people to choose wether they want to recive payment in federal reserve notes or a commodaties backed US note. I know what I would choose. Lets let the Market decide. Because we could debate this till we are blue in the face (better men then we have tried). Not to mention we don't know what will happen it could even get better for a time.

Yep Pot is a commodaty that will never loses its appeal

! We should make our own money backed in Pot we could call it the GreenBack yo! Wonder if you could press Bud into paper without killing your THC??

FLoJo · Nov 22, 2008

Doctor Pot said:
Why do you think there will be hyperinflation? There wasn't any inflation during the Great Depression. Of course the government shouldn't just mint all the money they want, that would be foolish. They have to figure out how much they can use without destabilizing the dollar.

Remember Y2K? Did you think that was going to be a huge problem too? Just curious.

FloJo - you make some very good points, however a new roof has necessitated moving all my plants temporarily and I'm rather busy. I'll respond when I get a chance.

comparing our situation to the great depression is not fair, because that was a global issue related to production and finance, whereas our current situation is caused by our country and its debt.

also comparing it to Y2k is completely irrelevant because it had to do with dating of documents and accounts, and had nothing to do with debt and inflation.

that being said, there are several reasons that are going to contribute to the hyperinflation that we are about to see.

first and most foremost is because of the bailouts. they advertise 700 billion but in fact the obligations of the bailout come out to about 5 trillion dollars. when bush took office 8 years ago our deficit was about 5.5 trillion dollars. when he went into his second term i believe it was about 7 trillion. now at the end of his presidency it is at 10.6 trillion dollars. now you throw in the added 5 trillion which means our debt is about to soar to 15 trillion dollars.

this is not to mention that our national debt only counts debt secured, not financial obligations like the trillions to social security payouts, government pensions, welfare, and other social programs.

next you have the fact that because we have been the world consumers for the last half century, our currency has been looked at as "the gold standard" for currency investments. one of the main reasons that our currency has not seen the amount of inflation that it should by reasonable economics is because countries and foreign banks continue to buy up our securities when they come to maturity. if they do not renew the securities this means in essence that currency or debt will come back to america, causing a surplus, and thus devaluing the currency.

again our dollar is only a debt, not a real value because it is not backed by anything except "the faith blah blah of the federal gov".. horseshit

now i like to look at it like a person in credit card debt. if you have a bunch of credit cards, and continue to make the payments on time, your debt allowance will continue to increase. they will give you as much credit as you can pay. eventually if you keep running up the bill, there will be a tipping point where you will no longer be able to make those minimum payments on your debt. once this happens you declare bankruptcy, and quit paying out your financial obligations. this is essentially what is happening to our gov.

there is an old saying that says, those who do not learn history are doomed to repeat it... now granted i am only 22, and not a history major, but i have read, and seen many similarities to the depression and hyperinflation in nazi germany post war.

now before the war germany was an economic powerhouse, with the strongest economy in europe. they produced most of europes steel and coal, produced an enourmous amount of electricty, and had a strong agricultural backing. (i think they produced like a third of the potatoes in the world) the point is they had a backbone in industry and their currency was also backed by gold. they were the superpower overseas.

now when they went into the war they financed it by taking loans from foreign banks, planning to pay it back after their victory in the war. when that ran out the german gov. started to print currency without the backing of gold. when the war ended, and the debts came in, their coffers were emptied of gold, had to give up all kinds of industry and resources. they also suffered a economic collapse, and with the devaluation of the currency, with continued printing of the money, saw severe hyperinflation.

before the war (1914) 1 dollar=4 german marks
after the war (1919) 1 dollar= 19 german marks
july 1922 = 490 marks
august 1922= 1000 marks
december 1922= 7000 marks
january 1923 =17000 marks.

july 1923= 353,000 marks
september 1923 =99 million marks
december 1923= 4.2 trillion marks for 1 dollar

see so even though the majority of printing of money came during the war between 1914-1919, the economic impact was not seen until years later when the currency actually started cirulating in the consumer sector.

people were burning money as firewood because firewood cost more than the paper!!! people were getting paychecks in wheelbarrows!!

in the end the german central bank got rid of the currency and issued in the new currency which was again backed by gold, it then stabilized a few years later..

this is EXACTLY what is happening to us, once the impact of the new money being printed along with the default of securites and bonds because nobody trusts in the american currency anymore, we could see inflation just as bad as germany saw.. believe it or not.

this is not some scare or bs, this has been happening for 70 years and it is about time to pay the piper, our currency is being devalued and is about to be history after inflation, but what will happen is the gov. will let it get bad enough to where the people are begging for a solution, and thats when they will issue in the north american union and change our currency to the amero.. world banks/currency is all in the news we are about to go through some shit.. believe that

FLo

ilkhan · Nov 22, 2008

Yep what FLo said yep yep!

FLoJo · Nov 22, 2008

offgridgrower said:
if you really think that the FED isnt out to make money, or is a pawn to the New World Order , and that "they" arent out to control the world then y is all this fucked up shit happening when we have scientist that CAN fix our problems but arent allowed to? we can fix our problems but those powers keep us from doing so because once we fix them they no longer have an empire to rule, no matter how behind the scenes they do so. every grower here keep growing, its one more thing we can do to affect the powers that look to keep us all slaves to their system! when the money isnt worth shit anymore, my bud will be!! when they cut my electricity, I still have the sun, dont think for a minute that its even close to over, fight now to have something in the future!!

bingo.. just like big pharma, the money is in the treatment, not the cure

Doctor Pot · Nov 22, 2008

offgridgrower said:
if you really think that the FED isnt out to make money, or is a pawn to the New World Order , and that "they" arent out to control the world then y is all this fucked up shit happening when we have scientist that CAN fix our problems but arent allowed to? we can fix our problems but those powers keep us from doing so because once we fix them they no longer have an empire to rule, no matter how behind the scenes they do so. every grower here keep growing, its one more thing we can do to affect the powers that look to keep us all slaves to their system! when the money isnt worth shit anymore, my bud will be!! when they cut my electricity, I still have the sun, dont think for a minute that its even close to over, fight now to have something in the future!!

What scientists can fix our problems but aren't allowed to?

FLoJo said:
comparing our situation to the great depression is not fair, because that was a global issue related to production and finance, whereas our current situation is caused by our country and its debt.

The Great Depression had a whole bunch of causes; you can't pin it on only one. The main problem was all the bank runs though, which the Fed and FDIC are now equipped to stave off.

also comparing it to Y2k is completely irrelevant because it had to do with dating of documents and accounts, and had nothing to do with debt and inflation.

I was just trying to see if he was as much of an alarmist about Y2K as he apparently is about this crisis.

that being said, there are several reasons that are going to contribute to the hyperinflation that we are about to see.

first and most foremost is because of the bailouts. they advertise 700 billion but in fact the obligations of the bailout come out to about 5 trillion dollars. (Where did this number come from? - Dr. Pot)when bush took office 8 years ago our deficit was about 5.5 trillion dollars. when he went into his second term i believe it was about 7 trillion. now at the end of his presidency it is at 10.6 trillion dollars. now you throw in the added 5 trillion which means our debt is about to soar to 15 trillion dollars.

this is not to mention that our national debt only counts debt secured, not financial obligations like the trillions to social security payouts, government pensions, welfare, and other social programs.

next you have the fact that because we have been the world consumers for the last half century, our currency has been looked at as "the gold standard" for currency investments. one of the main reasons that our currency has not seen the amount of inflation that it should by reasonable economics is because countries and foreign banks continue to buy up our securities when they come to maturity. if they do not renew the securities this means in essence that currency or debt will come back to america, causing a surplus, and thus devaluing the currency.

again our dollar is only a debt, not a real value because it is not backed by anything except "the faith blah blah of the federal gov".. horseshit

now i like to look at it like a person in credit card debt. if you have a bunch of credit cards, and continue to make the payments on time, your debt allowance will continue to increase. they will give you as much credit as you can pay. eventually if you keep running up the bill, there will be a tipping point where you will no longer be able to make those minimum payments on your debt. once this happens you declare bankruptcy, and quit paying out your financial obligations. this is essentially what is happening to our gov.

there is an old saying that says, those who do not learn history are doomed to repeat it... now granted i am only 22, and not a history major, but i have read, and seen many similarities to the depression and hyperinflation in nazi germany post war.

now before the war germany was an economic powerhouse, with the strongest economy in europe. they produced most of europes steel and coal, produced an enourmous amount of electricty, and had a strong agricultural backing. (i think they produced like a third of the potatoes in the world) the point is they had a backbone in industry and their currency was also backed by gold. they were the superpower overseas.

now when they went into the war they financed it by taking loans from foreign banks, planning to pay it back after their victory in the war. when that ran out the german gov. started to print currency without the backing of gold. when the war ended, and the debts came in, their coffers were emptied of gold, had to give up all kinds of industry and resources. they also suffered a economic collapse, and with the devaluation of the currency, with continued printing of the money, saw severe hyperinflation.

before the war (1914) 1 dollar=4 german marks
after the war (1919) 1 dollar= 19 german marks
july 1922 = 490 marks
august 1922= 1000 marks
december 1922= 7000 marks
january 1923 =17000 marks.

july 1923= 353,000 marks
september 1923 =99 million marks
december 1923= 4.2 trillion marks for 1 dollar

see so even though the majority of printing of money came during the war between 1914-1919, the economic impact was not seen until years later when the currency actually started cirulating in the consumer sector.

people were burning money as firewood because firewood cost more than the paper!!! people were getting paychecks in wheelbarrows!!

in the end the german central bank got rid of the currency and issued in the new currency which was again backed by gold, it then stabilized a few years later..

this is EXACTLY what is happening to us, once the impact of the new money being printed along with the default of securites and bonds because nobody trusts in the american currency anymore, we could see inflation just as bad as germany saw.. believe it or not.

this is not some scare or bs, this has been happening for 70 years and it is about time to pay the piper, our currency is being devalued and is about to be history after inflation, but what will happen is the gov. will let it get bad enough to where the people are begging for a solution, and thats when they will issue in the north american union and change our currency to the amero.. world banks/currency is all in the news we are about to go through some shit.. believe that

FLo

You make the assumption that the government is going nuts with printing money like Germany did. It isn't. We're in a period of deflation, and can afford to have some inflation. Like I said earlier, everyone lost money in the housing collapse, so there is less total money circulating. This is causing deflation. Generating more money causes inflation, which counteracts deflation. Also like I said earlier, a lot of this is counterintuitive. For instance, we think of money as a zero-sum deal, but it's a lot more flexible than that.

Still, no one has answered my question, why is gold more valuable than palladium, despite being way more rare and significantly more useful?

FLoJo · Nov 22, 2008

well actually the gov. has been printing money like crazy like germany the only difference is that germany didnt have foreign investors to buy up some of the debt.. if they could they would have just seen inflation, not hyperinflation.. but when countries lose faith in the dollar, they will not continue to buy securities such as tbills and bonds, and will cause a surplus just like germany. we didnt get in a 10.5 trillion dollar deficit by not printing money.

and we have had plenty of inflation, we may have some trends of deflation, but i would call it a recession or depression before deflation..

and yes people lost money in the housing collapse, but that money lost was in equity which is not a tangible asset, it is merely a financial insturment or an illusion of wealth.. there is not any less money circulating, there is less credit cirulating, there is a big difference. less money circulating creates deflation, whereas less credit circulating creates a depression and contraction of the economy.. especially a socialist/capitalist/facist economy like ours.

and here is a short read on the handouts i mean bailouts that have been done so far.. waaaay beyond the scope of the 700 billion
Washington's $5 Trillion Tab - Forbes.com

also to answer your question why is gold more valuable than palladium? first of all i would not consider it significantly more useful.. there may be some applications in the future but palladium is not used nearly as much as gold in industry.

also gold has been used for centuries as a wealth tool which is one reason i think it is still so popular.. it can be compared back to ancient times and their goods. (ie the gold coin/suit analogy) also i believe that it is not as valuable because it is not as easily identified when compared with white gold or silver, unless you know what you are looking at/for and from a commodoties standpoint that is pretty important. again this is speculation on my part but seems to make sense

FLo

Doctor Pot · Nov 22, 2008

FLoJo said:
well actually the gov. has been printing money like crazy like germany the only difference is that germany didnt have foreign investors to buy up some of the debt.. if they could they would have just seen inflation, not hyperinflation.. but when countries lose faith in the dollar, they will not continue to buy securities such as tbills and bonds, and will cause a surplus just like germany. we didnt get in a 10.5 trillion dollar deficit by not printing money.

Oh, by no means am I saying we should run up the deficit as high as it will go. On the contrary, I think the only times we should run a high deficit is during bad recessions. To run a high deficit during a strong economic period like Bush did was a boneheaded move. And I actually agree that a run on the dollar would be very bad for the US, but that will only happen if we have massive inflation.

and we have had plenty of inflation, we may have some trends of deflation, but i would call it a recession or depression before deflation..

It's both at once! Deflation is a symptom of recessions and depressions. We've had inflation in the past, but right now we're seeing deflation.

and yes people lost money in the housing collapse, but that money lost was in equity which is not a tangible asset, it is merely a financial insturment or an illusion of wealth.. there is not any less money circulating, there is less credit cirulating, there is a big difference. less money circulating creates deflation, whereas less credit circulating creates a depression and contraction of the economy.. especially a socialist/capitalist/facist economy like ours.

Economically, money and credit are the same thing. Counterintuitive, I know, but if you don't understand this, then you don't understand modern economics.

and here is a short read on the handouts i mean bailouts that have been done so far.. waaaay beyond the scope of the 700 billion
Washington's $5 Trillion Tab - Forbes.com

From the article: "It should be noted that a portion of the funds lent in these programs has been repaid and that the totals represent what has been made available." This is just the gross amount of loans made by the Fed, and isn't a cost at all, it's a loan that will be paid back as long as these banks don't go under.

also to answer your question why is gold more valuable than palladium? first of all i would not consider it significantly more useful.. there may be some applications in the future but palladium is not used nearly as much as gold in industry.

also gold has been used for centuries as a wealth tool which is one reason i think it is still so popular.. it can be compared back to ancient times and their goods. (ie the gold coin/suit analogy) also i believe that it is not as valuable because it is not as easily identified when compared with white gold or silver, unless you know what you are looking at/for and from a commodoties standpoint that is pretty important. again this is speculation on my part but seems to make sense

FLo

Gold is used in industry more because we have large stockpiles of it that hedge against sudden price changes. Palladium is usable in many industrial applications that use gold, but the price has been known to fluctuate drastically. So industry uses gold, which is more predictable. But the main point I was trying to make is this: gold's inherent value comes primarily from the fact that people value it, and it is scarce. Even though money is made out of nothing more than paper, people value it, and it is scarce, so it has value. The fact that its value can be manipulated by the Fed doesn't change that, as long as the Fed manipulates its value responsibly.

hom36rown · Nov 22, 2008

Our whole economy is a farce. We spend more than we save and consume more than we produce, and people actually think we can go on forever this way. We have gone from the worlds largest creditor to the worlds biggest debtor. We went from manufacturing our way to becoming the largest economy in the world, to consuming our way to bankruptcy. Our trading partners are quite free to invest elsewhere, and that’s just what they’ll do when they realize the United States, with 10 trillion in funded debt ($50 trillion including unfunded obligations) and budget deficits that add to that figure annually, is no longer creditworthy. The truth is we havent been creditworthy for a while, and a sortve bureacratic momentum has been the only thing keeping cental banks investing in our treasury securities for quite a few years now...but this whole crisis will be the catalyst in bringing that to a halt, as investors begin to realize that we are insolvent.

FLoJo · Nov 23, 2008

Doctor Pot said:
Oh, by no means am I saying we should run up the deficit as high as it will go. On the contrary, I think the only times we should run a high deficit is during bad recessions. To run a high deficit during a strong economic period like Bush did was a boneheaded move. And I actually agree that a run on the dollar would be very bad for the US, but that will only happen if we have massive inflation.

runs on the bank will happen, and we are in the midst of inflation, heading towards hyperinflation.

Doctor Pot said:
It's both at once! Deflation is a symptom of recessions and depressions. We've had inflation in the past, but right now we're seeing deflation.

right now we are seeing stagflation, which is the worst of both worlds.

Doctor Pot said:
Economically, money and credit are the same thing. Counterintuitive, I know, but if you don't understand this, then you don't understand modern economics.

i do understand modern economics, and money and credit are not the same thing. they are similar, but money, although worthless, is still a tangible asset. if you have 10,000 dollars, you will always have 10,000 dollars, the value may go up or down but you still have something tangible. if you have 10,000 dollars in credit, it may have the same value, but if the credit gets cut off you have zero assets.

it is just like a company that uses internal profits to grow as opposed to credit.. if it comes to bad times, it can still sell off assets to continue operating, whereas a company built on credit can liquidate assets, but to pay creditors and will have a shorter lifespan.. it may grow at a faster rate, but is not as solid.

Doctor Pot said:
From the article: "It should be noted that a portion of the funds lent in these programs has been repaid and that the totals represent what has been made available." This is just the gross amount of loans made by the Fed, and isn't a cost at all, it's a loan that will be paid back as long as these banks don't go under.

yes, thats to make you feel better, all of the so called loans, even the billions allocated for the bailout is a debt that is expected to be paid back to the fed, that is the nature of the fed reserve system. making distinctions between the debt is not a fair comparison. i mean hell the fed already wont say where 2 trillion of it has gone, and has no intention of doing so, because greenspan himself says that the fed has no oversight and can do whatever they want.

Doctor Pot said:
Gold is used in industry more because we have large stockpiles of it that hedge against sudden price changes. Palladium is usable in many industrial applications that use gold, but the price has been known to fluctuate drastically. So industry uses gold, which is more predictable. But the main point I was trying to make is this: gold's inherent value comes primarily from the fact that people value it, and it is scarce. Even though money is made out of nothing more than paper, people value it, and it is scarce, so it has value. The fact that its value can be manipulated by the Fed doesn't change that, as long as the Fed manipulates its value responsibly.

yes thats basically what i was saying, it is a more widely accepted form of protection, which is readily distinguishable from other metals. the problem with paper money is that everyone has to accept it as valuable and a valid form of payment otherwise it is worthless.. we are coming to a point where america is losing its credibility and the faith in the dollar, so when this happens taxpayers will be left holding the bag. and the fed is the source of the problem, and has not been manipulating the value favorably for the consumers, but for the gov. and the corporations. they have continually decreased the value by increasing supply, and it will have to end somewhere.. the question is where will it end and what will the ramifications be.

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