Global Financial collapse

[sikeston34m]

Originally Posted by Finnster

When politicians start talking about "end the Fed" and gold standard and not printing money, this is what it looks like in the present economic situation. Bad idea.

What is the source of inflation? Where does inflation come from?

The Government creates inflation through their so-called "Quantitative Easements".

It's strange how if I print money, I get locked up because it's a crime, but it's ok for the Government to print money out of thin air?

NO!! It's not ok to do that.

The more money they print out of thin air, the more they de-value the dollar. They are stealing from us, the tax payers, without even reaching into our pockets.

They print money, then "loan" it to us as low interest rate loans in order to bale out the housing industry. And we pay the government back for what? Because they have a printer?

But that's still not enough to feed the insatiable hunger of too much government!

As far as the bail outs go, they never should have been done.

It's time for some evolution to take it's course Gentlemen.

If you have wealth, put it somewhere solid or you're going to lose.

I do support the "END THE FED" movement. What they are doing is illegal.

It is unconstitutional and is something our founding fathers sought to prevent.

THAT is why they came up with the Gold Standard in the first place.

You can't get out of debt by printing more money, spending more money, or borrowing more money.

The ONLY way to turn debt around, is live within your means, cut spending, and then pay the debt off!

[JERRY2KONE]

This is very true. If you have financial problems and seek out any financial planner to help ease your pains they will sit you down and tell you just that. First you have to re-evaluate your way of life and total expenditures. Cutting your overall spending is the first step in any financial planning. The second step is to pay off yor debt one by one until you are fee from it in order to stop the bleeding. The third step is to setup contingency plans for future growth and retirement savings. Once all of this is done you can begin to look at the long term plan and make arrangements for safety and security with emergency funds and financial control from within. Doin this as an individual is hard enough. Imagine trying to do this as a nation? There is no short cut for any of this. Its difficult, dirty, and seems impossible to defeat.

All of the financial problems of our global community are driven by greed. Even from the simplest homefront we desire the latest technologies and strive to keep up with the rest of the world. This will never end, because its in our nature to be competitive and do what ever it takes to be better than the other guy. The biggest problem is that too many people have found ways to shortcut and avoid the hard work aspect of this scinario(or so they think). The only way this can be successful is to rip off others stealing their hard earned dollars, but it all has a trickle down effect that wil effect all of us. It has gotten to the point that nothing is safe anymore. The only way to protect your nest egg is to hold it as close as possible and hope that no one will steal it from you or trick you out of it. The worst is still yet to come before the results of this greed is fully seen and understood. The worlds economy will continue to dose dive until we all hit bottom. Just remember one thing. "What does a drowning man do"? He will do whatever it takes not to drown including grabbing anyone within reach and taking them with.

[JERRY2KONE]

After writing my last post I could not stop thinking about how all of this keeps going up and down as the Gov's around the world try to calm its people telling them that everything is going to be alright, Really? So how? So let me ask this. Is there anyone of you who truly believes that this is all going to be OK? I mean really, what is it that you think is going to change to make all of this get better? I fail to see any political party, or person for that matter that has anything in mind except how to make more money for themselves. Not a one of them cares about the people regardless of what they say to your face through TV or in person. Please just one person share with us with all of the political tap dancing, side stepping, so called wisdom, and lies what aspect of our govermental systems is moving in the right direction that shows even a glimmer of hope for the financial well being of the general population. I dare anyone to come up with and share an idea that is going to permanently resolve the global financial problems. There is only one way in my mind that this is going to go, and that is deep, and biblical depression and recession. We are in for a real Earth shaking experience worldwide and no one is safe from the effects or the outcome of it all. All of the bailouts, spending cuts, and realigning in the world is not going to save us from whats coming. Humanity has tapped all of its financial resources to the point of self destruction through the enormous debt that it has created, and there is no way out of it. There is no magical currency printer that can make enough fake money to avoid the inevitable. Dig in and get ready for the fall out. The riots and demonstrations we have seen up to now are merely a glimps of what we are capable of. People are begining to get desperate just trying to get by. Soon it will become more serious as they try only to survive. This is not going to be centered on just the USA, Africa, Greece, Port of Prince, or any other nation economy. This is becoming a worldwide issue that is going to take down every economic organization around the globe.

[Finnster]

As far inflation goes, inflation can come from printing money. But there is a bigger story.

The question here is what is the root problem, and what are the consequences of different actions? Is there at least a "least bad" option?

The financial crises and the gov't & central bank's responses we've had on the two sides of the Atlantic have been a very interesting experiment of the two different schools of thought on how to deal with a credit crisis and recession.

The USA had followed a school of thought that has favored interventionist philosophies by the gov't and central bank. On the gov't side, by tax cuts and spending increases to try and grow out of the recession and lower unemployment. On the central bank side, willinginess to expand the money supply to maintain liquidity to keep credit markets functioning and borrowing costs low, as well as ease unemployment. The Fed has a dual mandate of price stability and low employment.
Recessions are seen as a malfunction/short circuiting of the market, and intervention can restore order and more quickly restore growth.

The EU has taken a non-interventionist model, following the "Austrian model" of economics, primarily driven by the Germans. (FWIW, Ron Paul is a self-desribed Austrian.) An overriding idea that recessions are neccessary destructive acts, and intervention distrupts this process and leaves the work "undone." Maintaining market confidence and heathly balance sheets are seen as the priority. This translates to tax increases, spending cuts, wage cuts and public layoff policies. Ie "Austerity Packages." This self-inflicted pain is expected to be rewarded with market confidence due to their demonstrated dicipline.
The ECB only has price stability as a mandate. It is not charged to regard employment consequences in its policy decisions.


So, how have the two different systems faired? We both had a large housing bubble that burst, and are now dealing with large private sector and public debt. Both are well delevoped economies of similar scale. The EU is a little bigger, but is not as integrated as the US. Both systems are suffering from intense political quabbling and indecision.

By all measures, the US as a whole is much better off than the EU (everything is relative here.) Overall unemployment is lower. GDP growth is higher (we are weakly growing (+3% for Q4,) and EU is facing likely recession.) US credit markets are functioning better. While we have weak wage growth, many parts of the EU are seeing wages fall.

Regarding the current crisis: US borrowing costs are far lower than everywhere in the EU that's not Germany, and even then still less than Germany. Where is their "Virtue" being rewarded?
10 year bonds for the US are ~2.0%, Ger ~2.25%, ITA boomed to over 7% (+5.5% over benchmark German bonds.) Look at the rates over the last year. ITA spiked, and so has France , and so has Spain.

This spike is what is screwing ITA, FRA, SPA, etc. Some EU states have better balance sheets than the US, but bond markets freaked out over perceptions of risk. The US rates are low as we can never, ever default, as we have the Fed who can always print money to pay investors, and are willing to do so. There are consequences for inflation, but that is not the pressing concern. In fact, inflation has been well below historical avg, despite the FED tripling their balance sheet in since 2008. Ask Ron Paul to explain that.
=> Printing does not always lead to inflation! Its context that matters!

Italy can afford its debt, but because Germany (the EU's main creditor) has been reluctant to intervene, and the ECB has a hands off policy, AND because Italy is on the Euro (a defacto gold std), they do carry a risk premium of default. In dealing with Greece, the EU looks incompetant. Risk premiums push up bonds everywhere. Higher rates make default more likely, so rates go up higher. Now rates are above which Italy can afford, looks insolvent and is threatening default. Nothing has really changed fundamentally in their economies, just their (in)actions have changed perceptions. ===> Self-fulfilling crisis.

Worrying about potential future elevated inflation while your currency is on the verge of collapse is like having your house on fire but refusing to turn on the sprinklers because you don't want the drapes to get wet. Considering the heart of the crisis is to much debt, higher inflation is actually not a bad thing (whole other long-ass post tho.)


Luckily the ECB is pulling its head out of its ass and buying up Italian and Spanish bonds today. They have to be lender of last resort or game over for the Euro. They don't even have to buy a lot of debt, they just need to show they willing to act, and the perception of risk (and bond rates) will begin to fall. Italy is solvent as long as Germany doesn't F it up for them.

[Finnster]

@Sik:

Why can't you print money? Because its not your currency. You have no authority. The $ is legal tender of the Federal Reserve. You have no more right to print $ than you do Euros, pesos, pounds, rand, rubles, or rupies etc. Printing any of those is fraud, to state the obvious.

You can print money all you want. You just have to do it in YOUR currency. There is nothing stopping you from creating Monster Dollars or whatever you want. Bitpim is a wholly invented internet currency. The US used to be a patchwork of different currencies before there was a central bank and consolidation under the dollar. Private banks even had their own notes, as well as individual states.
The trick is getting people to have confidence in the currency.

If the FED allowed people to just issue their own notes, then there would be no integrity of the currency, and it is just paper then.

[JERRY2KONE]

I have been sort of cut off from any real good quality English speaking news living in Prague, but what we have heard about as far as bailing Greece out is this. The Czech Republic was one of the "hold outs" for saying no to Greece. The main reasoning is this. The Czeh Republic is relitively new as a country let alone to the EU. They have suffered operssion and depression on many levels before gaining their own soverenty. They have ome a long way in a very short time, but they have a very long way to go before catching up to most of the other Eu countries. Here in the Czech Republic when they retire there is a Gov retirement system of sorts that pays out something in the neighborhood of $200 to $400 a month in retirement benefits. Comapre this to what Greece does, which is $1000 to $1200 a month in retirement funds for each retiree. So of coures the concenses on this end is F*&^ that. Instead of looking for a hand out from countries that live at a much lower standard of living what Greece needs to do is lower its own standard of retirement benefits. I am not a huge market person so I am not real sure of what the rest of the EU are receving for retirement benefits. I am sure that there is not a whole lot of equality between the EU countries as there are between the states in the USA. So dealing with bailouts in the Eu are going to be quite different. Like you stated Finnster there is going to be alot of growing pains for EU before any sort of equal ground is found for them to work with. As long as you have unequal sides there is going to be no long term reolution. Just like the USA if one state falls there is likely to be a domino effect. This is a risk for the EU as well. If one country falls there will be others, and once this starts just how far will it reach is the only question that cannot be answered. Germany, France, Brittain, and a few of the other giants will survive, but the devistation will be far reaching.

[Finnster]

Yeah thanks Jerry. Don't get me wrong tho, I'm not making an endorsement of the horrible financial pratices of the Greeks. Its more of what you do with them, and then everyone else.

Its easy to be pissed and cut off your nose to spite your face.

Reforms must be made, but forcing too much too fast can backfire too.

[sikeston34m]

"@Sik:

Why can't you print money? Because its not your currency. You have no authority. The $ is legal tender of the Federal Reserve. You have no more right to print $ than you do Euros, pesos, pounds, rand, rubles, or rupies etc. Printing any of those is fraud, to state the obvious."

NO SH!!!T

But we don't EVEN know what the FED has been doing. We only have a rough idea and it isn't good. To power up the printer and control people's lives. That seems to be what our glorious government is doing.



"You can print money all you want. You just have to do it in YOUR currency.
If the FED allowed people to just issue their own notes, then there would be no integrity of the currency, and it is just paper then."

I think ALOT of the problem IS our Money is becoming only just paper.

Whatever happened to the days when a Man could make a living for his family on his income?

Meanwhile, back at home, there was alot more time to spend being a parent, by the wife?

In this Scenario, the average "Soccer Mom" can't afford the Soccer Ball or the Gas to go to the games.

Where does this leave our Children?

I see this Government as being self serving to the Rich and the special interests, and themselves!

We have laws upon top of laws, and new ones are created all the time. Ignorance of the law is no excuse! They are laws and we are to follow them!

We also have regulations that I believe are created to be self-serving to the Governent. Why? Because they don't have enough money? I think not.

When it comes down to a society that operates and functions with Greed and Corruption being more than tolerated, we dip into an era where it's going to catch up to us. This is where we are now.

Just remember, the Constitution was written with "We the People of the United States" in mind. Our founding Fathers had a vision I believe to be God inspired.

When we trample on the Constitution, we WILL pay!

[Finnster]

One of the points I wanted to make was that the govt spending and then the responce by the central bank are two different issues. I think that its easy to lump the central banks in with Congress or Parliment or whatever local gang of idiots a country has passing the laws, and just want to flush the whole system away.

Has everyone performed brilliantly? Obviously not, but you just want to be careful how you respond as you can just make things worse by doing what seems to be common sense responses.

Everyone's pissed at the Greeks, so want to punish them and their lazy lifestyle. Retire early, don't bother to pay taxes, public corruption and poor private sector business base.
Should they have been let in the Euro? Maybe not. But they are there now, so you got to deal with the problem in a managable way.

[Finnster]

Originally Posted by sikeston34m

"@Sik:

Why can't you print money? Because its not your currency. You have no authority. The $ is legal tender of the Federal Reserve. You have no more right to print $ than you do Euros, pesos, pounds, rand, rubles, or rupies etc. Printing any of those is fraud, to state the obvious."

NO SH!!!T

But we don't EVEN know what the FED has been doing. We only have a rough idea and it isn't good. To power up the printer and control people's lives. That seems to be what our glorious government is doing.



"You can print money all you want. You just have to do it in YOUR currency.
If the FED allowed people to just issue their own notes, then there would be no integrity of the currency, and it is just paper then."

I think ALOT of the problem IS our Money is becoming only just paper.

Whatever happened to the days when a Man could make a living for his family on his income?

Meanwhile, back at home, there was alot more time to spend being a parent, by the wife?

In this Scenario, the average "Soccer Mom" can't afford the Soccer Ball or the Gas to go to the games.

Where does this leave our Children?

I see this Government as being self serving to the Rich and the special interests, and themselves!

We have laws upon top of laws, and new ones are created all the time. Ignorance of the law is no excuse! They are laws and we are to follow them!

We also have regulations that I believe are created to be self-serving to the Governent. Why? Because they don't have enough money? I think not.

When it comes down to a society that operates and functions with Greed and Corruption being more than tolerated, we dip into an era where it's going to catch up to us. This is where we are now.

Just remember, the Constitution was written with "We the People of the United States" in mind. Our founding Fathers had a vision I believe to be God inspired.

When we trample on the Constitution, we WILL pay!

Sorry man, that wasn't meant to be said in a snarky way. Just a statement of the obvious to a retorical Q.

I agree with most of what you said. Life has changed dramatically. I'm 34, and its a very different America than the one my parents raised me in.

Compared to my M&D, my wife and I have to work way more hours (ie two jobs) after having to go to school much longer for way more money, we will likely pay higher taxes, see lower retirement benefits to pay off all the debt that was racking up before we really even started working.
Our house is smaller and more expensive and is falling in value, medical costs are rapidly growing, oil prices are much higher (no muscle cars for us..) and our generations wages as a whole are stagnating. That's if you are lucky to still have your job.


Its a right mess, and most of it was set-up before we even had a chance to really start voting on it, and it seems like it wouldn't have mattered anyway.

I just differ in what to do all about it. I don't want to go to the European-style system as its working even worse. I think the core of what we have works well, but has managed to get hijacked and forgotten who's interest they are working in.

As far as the Fed goes, I see alot of what they are doing as a last resort to save the economy as Congress is completely disfunctional and unable to solve even the most simple of problems. They are fairly poorly equipped to do so, but they are the only ones even trying. The idiots in Congress just barely managed to not actually default on the debt they already spent and send the country into a depression. Its sad when a "win" in Congress is only having your credit rating downgraded.