The Grey Badger wrote:The LEFT is creating credit bubbles? Only if you suppose that the financiers, speculators, etc of both the 1920s and the 1990s were secretly working for the Great Leftie Conspiracy in deep cover. BTW, I find that most conspiracy theories are better explained by greed, stupidity, short-sightedness, etc. Or even the desire to stay out of jail and/or provide for relatives whose fate in a free market would be flipping cheeseburgs.
Not that there aren't mini-conspiracies happening all the time. Adam Smith pointed out their existence in the business world. Most of them are in aid of the lovely qualities above, and most cartels break up when it becomes more profitable for a single member to defect rather than cooperate (except for those enforced at gunpoint, such as The Mob is all its manifestations). IN fact, whenever you get a group of 5 or more, you'll get the occasional mini-conspiracy. In high school they were called 'cliques'. But world-wide financial manipulations? Better folks than the current crop have tried it, and where are they now?
Pat, shaving you with Occam's Razor.
What do you think started this stuff? You think it was unlimited credit as proposed by Karl Marx or Austrian/American economics? Woodrow Wilson created the stage for the 1920's bubble, not Herbert Hoover. Bill Clinton and Robert Rubin, through the actions of the treasury set up the 2000 bubble. Barney Frank and Christopher Dodd set up FNM and FRE to buy junk debt. The heart of this matter is what happened with FNM and FRE. By the time Bush took over, it was clear that FNM and FRE were both scandals, mistated earnings, rigged earnings grotwh and moral hazard. There was really nothing left over the past decade to do but pretend the game could go on, as it had broken down. If you couldn't see this coming 8 to 10 years ago, you really can't comment on this page because you are commenting out of opinion instead of knowledge. I would laugh at the guys on CNBC who picked on the Japanese because they used the wrong tactics to fix their problem and had failed. Seems they used the same techniques we are forced to use and Obama is going to go right down the line of what Japan did. John references Richard Koo, who worked for the US Fed and the Bank of Japan. Koo was instrumental in getting Japan to recapitalize their banks, the last thing they did. Of course, it was one of the first things done here and it is coming under intense heat. Instead the preferred path is to do what Japan did for 10 years with no real impact, which is Keynesian economics.
I believe Koo is also misinformed, despite being one of the worlds top economic officials. Japan continued because there was a huge credit bubble created in the US, not because their government bailed themselves out. Koo talks about the Japanese consumer saving up money during this meltdown, but wasn't the story in the 1980's how much money the Japanese consumer saved? If anyone hasn't noticed, I will inform you that the relative size of the Japanese trade balances has shrunk significantly over the past 20 years, not grown, which would be indicative of a shift in savings. The other great trick in the debt/savings game is that they are equal. Thus there might be a balance of payments surplus, which would demostrate what the actual savings of an economy was, anything in excess of that is equated as debt. It is rare that savings in a modern economy is kept in the matress, but even if it was, the currency itself is called a note and is backed by debt and noting else. In fact, the entire system is based on absurdity in that one pledges their valuable house for an IOU nothing which derives its value because the guy who pledged his house now is faced with owing more IOU nothings than are in circulation. In short, it was Woodrow Wilson who set the table for the Fed and it was FDR who created the IOU nothing when it pertained to the American consumer. It was HST who put us on the Bretton Woods agreement, but this was actually the works of FDR as well.
As usual, when someone brings up the truth, those that try to dispel it bring up the conspiracy theory game. It doesn't matter whether it is a conspiracy theory or not, to throw that rock is to throw rocks rather than recognize the truth. Everyone wants to go back to idiots who say that you own stocks forever and you get even or ahead by significant amounts and they also convince you that $2 put in a jar can have enough babies to pay off infinite interest. When it is brought to the attention of those that don't understand this, they call you names rather than come to grips that 1.03 to the 72nd power is 8 and 1.06 to the 72nd power is 64. To pay 6% on 64, you need 38.4, which out of 64 leaves only 25.6 to do something real.
Now for the guy who thinks you put your money in the bank and they lend it out to someone else, explain how Citicorp arrived at a $400 billion fed funds liability and continued lending money without creating money out of thin air. They were allowed to pretend they had money. No one with Citi is going to jail, while Bernard Madoff pretended he had $50 billion and we know what is going happen to him. Madoff's failure won't be backstopped by the government, but it is clear that Citi's will or we will suffer the consequences. Does anyone have a clue as to what the ramifications would be should the shortfall of bank credit be found to not exist? We have accounts full of money that doesn't exist and never did supporting stock values that really never existed either.
There are a lot of cries going on about what to do about these problems. The best one is to get rid of mark to market. Then we can pretend everything is okay. But, why allow the banks to have something none of the rest of us have? They already have the capacity to invent money in any fashion possible. They send me a $35 bill if my account is marked to market one cent short, yet they operate on balance sheets in sums that cannot be proven to exist or be collectable.
Money doesn't exist inside the bank. If it did, there would be a lot more money in the bank than can be shown. Yet once they create a loan, it flows into the streets. The complaint that they put money in the banks and they aren't lending it is just as invalid as the money they put in, which was created by a bankrupt. A bank has to have a capital reserve to create money and it has to be sufficient to capitalize the money already on the books. Thus banks either have capital reserves or they don't, but they don't in truth have money itself. All the money is already loaned.
Very few people know the Constitution to any degree. There is a takings claus in the Constitution that was upheld then overturned in the Schecter Poultry case, before and after FDR stacked the court. When it was overturned, it was basically done so under the power of 12USC95a, which suspended the constitution under the Act of October 6, 1917 and moved the US into modified emergency martial law. Thus our property could be pledged and liened to support public debt used for socialistic purposes. It is clear the 5th amendment of the Constitution no longer exists because we operate under the same Rules Adolph Hitler operated and have since March 9, 1933. FDR also took the gold that belonged to the people of the US and gave us notes we owe back to the bank. You might note the Federal penalties now enforced against people that withhold evidence, which in the 5th appears to be their right. IN the 4th, you have to now tell them what you have up front, they get your phone records and everything else. There are also prohibitions of Titles of Nobility, which being the sole creator of money, something reserved to the government itself, is clearly a title of nobility. Otherwise, Bernard Madoff would merely write $50 billion in notes and circulate them with the rest of the notes. I am sure he has as much capital as the typical $50 billion bank, so why not?
Pandora's box is now open. We have a string of absurdities coming to the surface at the same time in regard to the worlds largest economy and reserve currency. The absurdities are so absurd that most people believe them to be true and when pointed out, the one who points them out is called a nut. I think this is admiring the emperors new clothes to the extreme, even when the world is watching in full view. How can all the money be insured, when all the money is all that can pay of all the money? How can banks make loans when all the money is loaned out? Money isn't loaned out by banks, but created through loans that they act as surety for. But, who can act as surety when they are broke? All the money issued by the Federal Reserve is also owed for the debts the Fed holds, which means that the only people that can pay the debts are those that hold the cash. Yet, there is some persistent belief that the deficit could be wiped out and the debt paid off. Even Greenspan wondered what would serve as money in our system once the debt was paid off. The entire bunch of inflationary bullshit that transpired in the late 1990's was based on absurdity and would have required the deflation of debt to the point that the entire economy would have collapsed, which it almost did.
Doubt 12USC95a? Look at Bear Stearns? No consultation of Congress. Look at Rubins bailout of Mexico in 1994. Not one peep out of Congress for $40 billion. Over and over and over again. This is 95b in its entirety: The actions, regulations, rules, licenses, orders and proclamations heretofore or hereafter taken, promulgated, made or issued by the President of the United States or the Secretary of the Treasury since March 4, 1933, pursuant to the authority confered by subsection (b) of section 5 of the Act of October 6, 1917, as amended [12 USCS § 95a], are hereby approved and confirmed.
(Mar. 9, 1933, c. 1, Title 1, § 1, 48 Stat. 1). If you were reading about NAZI Germany, it would be clear this was an enabling act of a dictatorship. Here it is merely conspiracy nut nonsense.