Perspectives on the global economic meltdown- (Nov 28 2010)

pgbhat · Post by **pgbhat** » 15 Mar 2012 01:16

^

If you were an alien from Mars and sat in on one of these meetings, you would believe that a client’s success or progress was not part of the thought process at all.

The guy is super pissed.

Theo_Fidel · Post by **Theo_Fidel** » 15 Mar 2012 02:10

I find this odd. It's not like the 'clients' don't know all this. They are there because of greed not any trust in GS. Wall street is all about confiscating money not creating wealth in anyway.

ramana · Post by **ramana** » 15 Mar 2012 05:14

VikramS, Gold is dropping. Is this the begining of the deflation cycle that was talked about in 2008?

Suraj · Post by **Suraj** » 15 Mar 2012 05:32

I don't think so. It's still above the Oct 2011 and Dec 2011 bottoms, and there's still too much fiat money creation happening on both sides of the Atlantic in the form of stealth QE3 and LTRO. A lot of money exited treasuries and gold in favor of stocks recently. But VikramS would have a better answer.

VikramS · Post by **VikramS** » 15 Mar 2012 06:05

The market behavior has changed over the past 2-3 months, in the sense that the risk-on/risk-off correlations are no longer as pronounced and different asset classes are doing their thing. In a way this is good since it is reflecting a mood among investors to go beyond the macro issues.

That being said, the run in gold last year was driven by the fear of European sovereign issue blowing up. Thanks to the LTRO etc. the can has been kicked down the road.

Further, the economic data from the US is being massaged up with a warm winter/seasonal adjustment/birth-death model etc, which has resulted in this massive run in equities. Unlike the past where a rise in equities was correlated with a fall in the US dollar, which also lead to an increase in the price of gold, right now the dollar is rising with equities; however the rising dollar is putting a downward pressure on precious metals. Ben did not talk about QE3 so the dollar continues to rise, and precious metals fall.

Since we are also approaching the end of the quarter, and many portfolio managers have been left behind with too much cash, expect the trend to persist at least till the last week of March as everyone pays catch up. Liquidity will chase whatever is performing the best, and right now it is US equities and not Precious Metals.

Traditionally the seasonal trend for gold is down for the first quarter with a blip up in the end of March (Harvest season in India?) and then flat chop till the fall when the Indian buying season starts. But with China becoming a big buyer of gold the seasonal patterns may also change; I think the Chinese New year is also a big seasonal gold buying time so it will rise leading up to it.

Gold will be back in favor once the equity rally stalls, or the dollar starts falling (which might be triggered by another round of QE). There is also some talk of a lack of Chinese buying due to a falling Yuan.
http://investinginchinesestocks.blogspo ... ammer.html

Another factor to keep in mind is that AEP article from Guardian talking about falling global money supply (deflationary); traditionally precious metals have a strong correlation with money supply.

The premium service offered here http://www.smartmoneytracker.blogspot.com/ is worth the money for US based investors. As is the one offered here http://www.thedocument.com/.

Since both gold and silver formed parabolas which crashed, there is a strong chance that we will chop around for some time more to let go off the excess in sentiment. That 1525 bottom may not hold this time, leading to an exodus as the last weak hand sells, before the next true leg up starts.

ramana sir: What drives gold is not deflation but the monetary reaction to the deflationary threat, money printing. There is also the fear element. Right now both seem to be on hold.

Singha · Post by **Singha** » 15 Mar 2012 07:20

btw goldman is holding its annual board meeting in India this month to show its 'commitment' to the market
http://blogs.wsj.com/deals/2012/03/12/g ... d-meeting/

look for a spate of sponsored news in papers and TV shows featuring the goldman elites.

ramana · Post by **ramana** » 15 Mar 2012 09:04

Thanks VikramS.

Even good investment advisers wont give the insight you have given. Keep up the good work. And always keep thinking!

abhishek_sharma · Post by **abhishek_sharma** » 16 Mar 2012 08:50

Ben Bernanke: The Villain

Christopher Sidor · Post by **Christopher Sidor** » 17 Mar 2012 19:22

IMF Staff Sees Potential Need for More European Aid to Greece --- Bloomberg dated 16-March-2012

I hope what is printed in this article does not happen. Greece already has gone through enough.

“In the event of slower progress in policy implementation, or failure of the economy to respond rapidly enough to reforms, completion of reviews may require additional support from Greece’s European partners on yet more concessional terms than currently envisaged, and-or another restructuring of bonded debt,” according to the report.

So it is becoming clear that after this debt restructuring and the gut wrenching austerity, the economy of Greece has to respond and start growing. Otherwise we will be back to where we were. Further is there stomach in Euro-zone countries for further bailout of Greece? This question has to be asked as it is becoming increasing clear that IMF might not come or be in a position to ride to the rescue of Greece.

[IMF] has reduced its share in the second Greek bailout as it sees its exposure to the euro region posing what the staff called “unprecedented financial risks” to its finances. It has also pushed European governments to boost their own bailout fund in an effort to protect Spain and Italy from contagion.
....
....
“If the program goes off track, Greece’s capacity to meet its obligations to the fund would hinge critically on the willingness of European partners to continue to backstop Greece’s payments capacity and the Eurosystem’s capacity to backstop bank liquidity while further efforts are put in place to stabilize the Greek economy,” IMF staff warned.

It is assumed that Greece has got EURO 130 billion rescue package. But that is not the case. Greece has been promised 130 billion Euro, out of which part of the money has been given to Greece. The rest of the money is dependent on Greece carrying out the terms of its bailout package

The Greek government must continue to meet the conditions set by its international creditors to receive aid payments at three-monthly intervals.

The IMF report said the new program was “subject to exceptional risks,” including upcoming elections that create uncertainty over whether the measures will implemented.
“The materialization of these risks would most likely require additional debt relief by the official sector and, short of that, lead to a sovereign default,” it wrote. “In the absence of continued official support and access to” refinancing by the European Central Bank, “a disorderly euro exit would be unavoidable.”

And for those interested in reading the full IMF report, it can be found over here.

vishvak · Post by **vishvak** » 17 Mar 2012 22:11

NRI who is busting Wall Street

The accompanying narrative on the Ferozepur, Punjab born attorney talks of the “man who is bringing mob squad justice to Wall Street”
...
Bharara announced mortgage fraud charges in New York on three former highlevel employees of Credit Suisse accusing them of overstating the value of bundled housing loans by $540 million and contributing to an eventual $2.65 billion write-down by the bank.
..
when he came to the job in 2009, he found that “there was a creeping culture of corruption in our politics and also in Wall Street and in business generally”, a complaint echoed by the US president.

Insider trading, he says, was a practice which “tells everybody at precisely the wrong time that everything is rigged and only people who have a billion dollars and have access to and are best friends with people who are on boards of directors of major companies, they’re the only ones who can make a true buck” .

How to make rich richer and poor poorer -first world style?

I am guessing here that it is the taxpayers who were burdened with the billion dollar write-down.

ramana · Post by **ramana** » 18 Mar 2012 05:01

Neel Kashkari saved the banking system in the 2008 crisis. Now Bharara is cleaning up some of the rascals.

Again saved by the Injuns!

Yogi_G · Post by **Yogi_G** » 18 Mar 2012 06:27

Any data on how much of Indian savings money was used to bail out Greece?

Hari Seldon · Post by **Hari Seldon** » 18 Mar 2012 06:51

Preet Bharara should be careful lest he get 'Spitzered' only.

abhishek_sharma · Post by **abhishek_sharma** » 19 Mar 2012 01:24

Obama and the Anxieties of the Financial Meritocracy

Bliss if someone posts the New Republic article.

Neshant · Post by **Neshant** » 19 Mar 2012 04:49

With absolutely zero coverage by the "mainsteam" corporate media, President Obama Friday night signed the national defence resources preparedness executive order, outlining the federal governments plans for 100% control of private resources, labor, and assets in the event of an emergency.

This coming on the heels of NDAA (National Defence Authorization Act) which can have people arrested as terorrists/trouble maker without proof, put in jail and even killed.

Surely something is coming down the pike which is why these draconian laws are being put in place to control people who find out they've been ripped off.

I wonder if the above could be used to seize people's savings, pensions even wages in a time of economic turmoil. Certainly if you can be jailed without habeus corpus, its no big deal for banking crooks in collaboration with govt to steal of the fruits of a person's labor.

Its looking more & more murky by the day. Get at least some of your money out of the country and into something tangible that is beyond the reach of government taxation, confiscation..etc.

Neshant · Post by **Neshant** » 19 Mar 2012 04:53

interesting

[youtube]ZnY_yXVrWiU#![/youtube]

ankur_np · Post by **ankur_np** » 21 Mar 2012 06:54

Ben Bernanke lectures at GWU:

The Federal Reserve and the Financial Crisis Part 1

This is the first of an ongoing four part lecture series. An interesting counter-view to the gold bugs.

ramana · Post by **ramana** » 21 Mar 2012 22:06

US taxpayers. ~50 % pay taxes.

Graphic

Tax rates for top income filers have fallen to 18%

Graphic 2

yogi · Post by **yogi** » 22 Mar 2012 10:42

Neshant wrote:With absolutely zero coverage by the "mainsteam" corporate media, President Obama Friday night signed the national defence resources preparedness executive order, outlining the federal governments plans for 100% control of private resources, labor, and assets in the event of an emergency.

This coming on the heels of NDAA (National Defence Authorization Act) which can have people arrested as terorrists/trouble maker without proof, put in jail and even killed.

Surely something is coming down the pike which is why these draconian laws are being put in place to control people who find out they've been ripped off.

I wonder if the above could be used to seize people's savings, pensions even wages in a time of economic turmoil. Certainly if you can be jailed without habeus corpus, its no big deal for banking crooks in collaboration with govt to steal of the fruits of a person's labor.

Its looking more & more murky by the day. Get at least some of your money out of the country and into something tangible that is beyond the reach of government taxation, confiscation..etc.

As always, once again you are just propagating false rumors and CTs. Do you even bother to counter-check what you are reading from shady blogs, before running to post in BR?

http://www.snopes.com/politics/obama/ndrp.asp

Not only the reaction to this [Executive Order] wildly over the top in some corners, but the Executive Order itself is nothing more than a restatement of policy that has been in place in decades and grants no authority to the President or the Cabinet that they don’t already have under existing law. The Defense Production Act has been in effect since the Truman Administration, and authorizes the President to direct private business to allocate resources to national defense as needed in a time of national emergency.

Austin · Post by **Austin** » 22 Mar 2012 11:07

Oil prices get 'fear premium' spike

A growing ‘oil bubble’ is becoming more serious a threat to the global economy than European weakness, according to head of the IMF. And these are market speculators who are enlarging the bubble, even though there is no threat of an oil shortage.

“It’s obvious that Europe is no longer in the focus of everybody’s attention,” Christine Lagarde says.

Today the prices for oil are spinning upwards, with Brent Crude now being traded at $124.5/bbl and WTI standing at about $106.6/bbl.

Geopolitical factors have become a major player in the oil market, Sergey Vakhromeev, a senior analyst at Metropol, told Business RT. The fears over disruptions of oil deliveries from Iran, as well as political unrest in the Middle East, make investors bid higher.

Today “around $20 to $25 in the current oil price is a “fear premium,” Vakhromeev specified.

Meantime, there’s enough oil for everybody in the world, as Saudi Arabia, for example, could easily compensate for the possible loss of Iranian oil, the Metropol expert said.

Also experts don't expect Iran to close the Strait of Hormuz anytime soon. "Iran is still tightened to the world of trade despite US measures there are still countries that buy its crude. Right now I don’t think they will attempt to close the Strait", Jorge Montepeque is Platts' Global Director of Markets Reporting told RT.

He stressed: "Of course closing it isn’t an easy thing to do. We have been there 20 years ago during Iran-Iraqi war and the Strait was never fully shut down."

Last week the country tried to “scare prices lower” – to a more sustainable level of $100/bbl for Brent -, saying it was ready to ramp up production. Saudi Arabia wanted to stress that “the market is actually currently oversupplied and that inventories are rising,” said Chris Weafer, a chief strategist at Troika Dialog.

“The country fears the price is being pushed higher by speculators playing the expanding risk premium, and that the higher the price rose the greater the risk of a 2008-style collapse,” Weafer specified.

In July 2008, the price of oil hit a record high of over $147 a barrel and then nosedived.

Neshant · Post by **Neshant** » 22 Mar 2012 19:33

Speech: Bernanke Fails at Transparency, Rails at Gold Standard
Written by Bob Adelmann
Wednesday, 21 March 2012 17:21

When Federal Reserve Chairman Ben Bernanke donned his professorial cap and addressed 30 undergraduate students at George Washington University on Tuesday, he claimed it was all in the interest of transparency. According to the New York Times, “The Fed is concerned that it is neither loved nor understood by many Americans, and that public anger could lead to constraints on its powers.”

A close look at his actual presentation, augmented by slides, confirms his attempt to direct the students’ attention away from the Fed’s obvious dangers, faults, and failures and instead concentrate on its alleged virtues.

For example, his attack on the gold standard was filled with falsehoods and half-truths that failed to convince, only to confuse:

The gold standard as an alternative to a central bank: The gold standard sets the money supply and [the] price level generally with limited central bank intervention.

What the professor fails to state is that there is the gold standard and there is a paper standard that can only be enforced when a central bank is given a monopoly over what citizens may use as money. He fails to make clear that it’s the quantity of gold that “sets the money supply” and from that is derived the value of each piece, which is reflected in its purchasing power in the marketplace. It’s the citizen, freely accepting, using and exchanging gold for goods and services in the marketplace, who sets the price level. Buried in the comment “with limited central bank intervention” is the core of the problem: Bernanke doesn’t want people making those choices and decisions for themselves. Those decisions must be left to experts like himself to tell the citizens what is allowed to be used as money and what is not. It’s that beautiful limitation that the gold standard places on banks that Bernanke doesn’t like.

Another example:

Problems with the gold standard: The strength of the gold standard is its greatest weakness too: Because the money supply is determined by the supply of gold, it cannot be adjusted in response to changing economic conditions.

Here in full flower is the consummate arrogance of a central banker: “Because the money supply is determined by the supply of gold” and not by experts gathered around a mahogany table in a building in downtown Manhattan, it is therefore a bad thing. He admits that the supply of money “cannot be adjusted in response to changing economic conditions,” which is of course another expression of the necessity of a banker to do the adjusting. Of course, the free market adjusts the supply of everything when it is left alone to do so, even the monetary unit itself. That’s why, when the country was enjoying its greatest and grandest economic explosion in the late 19th century the country was on (or, to be fair, close to) the gold standard, the price level declined, reflecting that explosion and resulting in a rapidly rising standard of living because each piece of money bought more. Put another way, savers were rewarded knowing that their savings would purchase more goods and services in the future. Banks were simply another piece of the economy, providing banking and loan services for a fee and protection for savers with their vaults.

One more of his slides will be enough to make the point that the good professor was unsuccessfully trying to cover up the failures of the Fed:

Problems with the gold standard:

Although the gold standard promoted price stability over the very long run, over the medium run it sometimes caused periods of inflation and deflation.

Really, the professor should know better. Booms and busts under the gold standard were largely and predictably the result of banks and bankers lending beyond their deposits through fractional-reserve mechanisms. When depositors wanted their gold back, the banks were unable to honor those requests. The money supply shrank, the banks went bust, and the depositors learned valuable lessons.

Over the long run, since the beginning of the republic until approximately 1910, the price level remained constant. Put another way, a piece of gold money retained its purchasing power for nearly 150 years without a central bank. But once central banks got involved, the stability vanished. And when the last vestige of the gold exchange system disappeared in 1971, the inflation inherent in a paper standard exploded. One dollar today is worth only 18 cents in 1971 money. A dime is worth two cents. A nickel is worth a penny. A penny — is essentially worthless. All thanks to the Fed.

Why didn’t the good professor, in the interest of transparency, tell the truth, the whole truth?

The Fed is a cartel, created in secret, to protect banks against their own foolish behaviors.

•The Fed is the mechanism used by government to finance the expansion of its power far beyond what taxpayers would otherwise have allowed.
•The Great Depression resulted from the Fed’s huge increase in the supply of money during the Roaring Twenties. What made them "Roaring"? Easy money, thanks to the Fed.
•Bubbles? What about the biggest bubble, funded with easy money that fed the housing boom? The same housing bubble that the good professor himself missed entirely until it was falling all over him and his mahogany table experts.
Why didn’t the professor tell the truth — the dirty little secret that former Fed chairman Alan Greenspan exposed in his article “Gold and Economic Freedom” published in Capitalism: The Unknown Ideal? Here's what Greenspan had to say:

This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the “hidden” confiscation of wealth

Gold stands in the way of this insidious process. It stands as a protector of property rights

If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.

The comforting things, the reassuring thinga, the exciting things about professor Bernanke’s attempts at transparency are first, that he thinks they are needed as the public’s awareness of the Fed’s faults and failings are becoming ever more obvious, and second, that the more he rails against the gold standard and the free market, the more he exposes those faults and failings of the Fed for all to see. The battle between freedom and statism is unfolding right before his students’ eyes. May they have the eyes to see.

svinayak · Post by **svinayak** » 23 Mar 2012 02:41

Trump Warns ‘Massive Inflation’ Coming, Prepare
Monday, 05 Mar 2012 12:39 PM
By Newsmax Wires
http://www.moneynews.com/StreetTalk/Tru ... ODE=E67B-1

Billionaire Donald Trump says the U.S. economy is poised for “massive inflation” and is warning investors to take steps now to protect themselves.

In the gripping CNBC interview, Trump also told investors they should not trust official government statistics.

He even questioned the “official unemployment” numbers. “It’s over 20 percent. It’s not 8.3 percent,” Trump said.

Trump also thinks skyrocketing oil prices will cripple the U.S. economy. “Right now, [oil] is at an all-time record for this time of the year, in the summer they predict $5 gasoline, maybe $6.”

But Trump isn’t the only expert warning the U.S. economy may go off the cliff. Robert Wiedemer, author of the New York Times best-selling book Aftershock, stated in a recent interview, “The data is clear, 50% unemployment, a 90% stock market drop, and 100% annual inflation . . . starting in 2012.”

Editor’s Note: See the disturbing interview with Wiedemer.

When the host questioned such wild claims, Wiedemer unapologetically displayed shocking charts backing up his allegations, and then ended his argument with, “You see, the medicine will become the poison.”

This gripping, no-nonsense interview is quickly becoming a financial beacon in an economic tsunami with over 30 million people from around the world listening in.

But it’s not just the grim predictions that are causing the sensation; rather, it’s the comprehensive blueprint for economic survival that’s really commanding global attention.

In 2006, he and his team of economists accurately predicted the four-bubble meltdown in the housing, stock, private debt, and consumer-spending markets that almost sank America.

Regardless of his warnings and survival advice, Bernanke and Greenspan were not about to support Wiedemer publicly, nor were the mainstream media.

Read more: Massive Inflation Coming, Warns Donald Trump

ramana · Post by **ramana** » 23 Mar 2012 04:36

Well the US SD keeps talking up the oil price relentlessly chasing phantom nukes in ME.

There are nukes in ME. They are with Israel, KSA, TSP and PRC
PRC has them in escrow to be released as needed to 'rogues'.

Theo_Fidel · Post by **Theo_Fidel** » 23 Mar 2012 04:56

In 2006, he and his team of economists accurately predicted the four-bubble meltdown in the housing, stock, private debt, and consumer-spending markets that almost sank America.

Yup! and dealt with it by declaring his 4th Bankruptcy.What an empty headed blow hard.
--------------------------------------------

Meanwhile very quietly Ireland is slowly circling the drain.

http://www.economist.com/node/21551066

That schedule is punishing. The government is on the hook for €3.1 billion every year until 2023, with smaller annual outlays due until 2031. This year’s sum, due on March 31st, represents around 2% of GDP. From next year interest payments on the debt are due to be counted against the budget balance. To meet its deficit targets the government will have to make further cuts. Hence rising pressure in Dublin for a deal to restructure the payments.

svinayak · Post by **svinayak** » 23 Mar 2012 05:59

http://theeconomiccollapseblog.com/arch ... -is-coming

Wal-Mart Says “Serious” Inflation Is Coming

Thank you Ben Bernanke for all the money printing.

Now those price increases are starting to filter down to the retail level. During a recent meeting with USA TODAY's editorial board, Wal-Mart CEO Bill Simon said that rising inflation in the United States is "going to be serious" and that Wal-Mart is "seeing cost increases starting to come through at a pretty rapid rate." For many years Wal-Mart has been famous for their "low prices", so for the head of Wal-Mart to publicly warn that much higher prices are coming is more than a little alarming. There are millions of American families that are already drowning in debt, that can barely pay their mortgages and that are struggling to put food on the table for their families. So what is going to happen to the U.S. economy when prices start rising substantially at places such as Wal-Mart?

But Wal-Mart is not the only major corporation that says that inflation is coming. Hershey has just announced price increases of about 10 percent on their entire line of products.

So if you like chocolate you better start stocking up now.

Cocoa production is being seriously threatened by the political unrest in Africa right now. The recent chaos in the Ivory Coast is certainly not good news for Hershey, but the truth is that all of the long-term trends indicate that prices for commodities such as cocoa, coffee and sugar are going to move up anyway.

In fact, Aaron Smith, the managing director of Superfund Financial, believes that coffee, sugar and cocoa will all be five to ten times more expensive by 2014 than they are today.

So if you are addicted to coffee or to sugar you might want to start making your plans accordingly.

But the truth is that inflation is not limited to just a few commodities. Virtually every major agricultural commodity has soared in price over the past 6 months to a year.

So what is causing all of this?

Well, there are several factors which are major contributors.

First of all, overall global demand continues to increase. The population of the world continues to grow, and as the economies of nations such as China and India develop, millions more people want to enjoy luxury items such as chocolate and coffee just like Americans do.

Secondly, all over the world central banks have been recklessly printing money in an attempt to stimulate their economies, but this is also going to end up causing tremendous inflation.

So how does that work?

Well, it is actually very simple.

For example, in the United States when there are more dollars chasing the same number of goods and services, what is going to happen?

Prices are going to rise of course.

And we are seeing this happen all over the world right now.

Thirdly, as the price of oil continues to rise, it is going to increase the cost of everything else. The era of massive amounts of cheap food being transported around the world using massive quantities of cheap oil is rapidly coming to an end.

The following chart if from the Federal Reserve. It shows that the price of oil is rapidly moving back to the level it was at prior to the financial crisis of 2008. In fact, this chart is slightly out of date. At last check, the price of oil was over $107 a barrel. So what is it going to mean for our economy if we soon surpass the record that was set back in 2008?....

Fourthly, global instability is also going to cause prices to continue to rise. Over the past year we have had really bizarre weather all over the globe, we have seen revolutions erupt all over Africa and the Middle East and the third largest economy in the world (Japan) just experienced the worst disaster that they have been through since World War 2 ended.

When things are unstable, economies don't work as efficiently. That means that less goods and services are produced.

But when there are less goods and services being chased by an increasing amount of money that tends to push prices up.

The truth is that inflation is here, and if the CEO of Wal-Mart is right, it is not going to go away any time soon.

In fact, many believe that the world is on the verge of another major economic crisis.

If you stop and think about it, every major region of the world is dealing with very serious problems right now.

Right now, the European debt crisis is worse than it ever has been before. Did you notice that Standard & Poor's just downgraded Portugal's debt for the second time in a week? Now Portuguese debt is rated BBB-, which is only one level above junk status.

That is a very alarming sign.

Asia is dealing with the Japanese crisis, nearly all of the countries in the Middle East are dealing with protests or full-blown revolutions, Africa is dealing with the war in Libya and quite a few revolutions of their own, and the U.S. is still deeply struggling with a whole host of economic problems.

Most Americans don't realize just how precarious things are at the moment for the global economy. The financial crash of 2008 did a lot of lasting damage, and the next wave of the financial crisis could potentially be even worse. Unfortunately, the global financial system is more vulnerable than ever right now.

So what are the Federal Reserve and other central banks going to do the next time a major financial crisis happens?

They are going to print even larger quantities of money and they are going to give even larger bailouts to their friends of course.

The dollars that you have today are never going to be more valuable than they are right now. Don't wait too long to use them. If you have a huge pile of dollars sitting in the bank your wealth is slowly but surely rotting away.

Very hard economic times are coming. The inflation that the CEO of Wal-Mart is warning about is only the beginning. Eventually we are going to see inflation in this country that is going to be absolutely mind blowing.

But don't wait until the storm hits to start preparing. We all have time now to prepare, so let us be wise and make the most of it.

Neshant · Post by **Neshant** » 23 Mar 2012 08:00

Trump Warns ‘Massive Inflation’ Coming, Prepare

The guy was holding huge seminars in 2006 advising people to invest in residential real estate as a safe bet at the height of the propety bubble.

Perhaps the guy is trying to sell his over-priced real estate investments as its starting to collect dust.

akashganga · Post by **akashganga** » 24 Mar 2012 02:20

Neshant wrote:
Trump Warns ‘Massive Inflation’ Coming, Prepare
The guy was holding huge seminars in 2006 advising people to invest in residential real estate as a safe bet at the height of the propety bubble.

Perhaps the guy is trying to sell his over-priced real estate investments as its starting to collect dust.

I agree. He is trying to boost the value of his under water real estate. He is a republican nut case. Remember the president obama birther issue he raised.

Neshant · Post by **Neshant** » 26 Mar 2012 11:08

Ben Bernanke: The Saint of Economic Hubris
By Charles Hugh Smith

Ben Bernanke and his Fed mates' secret letterhead: "destroying capitalism from within."

After four years of disastrously wrong policies, let's declare stubborn, hubris-soaked wrongheadedness a virtue and saint Ben Bernanke and his Federal Reserve mates. If we had to distill down the Fed Chairman and the Federal Reserve's policies since the wheels came off the Fed's "shadow banking" system of fraud, collusion, embezzlement and free-floating leverage, we'd have to start with a systems-analysis perspective.

Any system which separates risk from results (gain/loss) is doomed to implode, as the lack of feedback from the real world (also known as consequences) enables the self-reinforcing feedback known as "moral hazard": losses by those who took the risk to reap a gain are made good by those who did not take the risk and who do not stand to gain from the risk they are covering.

In this case, the mortgage origination and packaging "industry" and the investment banks' origination and marketing of fraudulent-from-inception derivatives "industry" took the risks to reap outsized gains from the financialization of mortgages and other debt instruments via leverage, commodifying debt and arcane derivatives, all of which were sold as "low-risk."

Capitalism's primary characteristic is that capital is put at risk for a gain/loss. If risk is off-loaded onto the Fed's bottomless balance sheet and the taxpayer via government-funded bailouts and guarantees, then capital is not actually at risk. Thus what we have isn't capitalism, but cartel crony-capitalism, a phony version of the real thing which guarantees private banking profits and socializes banking losses.

The Fed was recently revealed as having arranged billions in private gain via secretly backstopping the banks with $7.7 trillion. This highlights Bernanke and his buds' second catastrophically wrong policy, that of systemic opacity.

The acme of open markets is transparency. Without transparency, markets are not free or open, they are manipulated-- both to hide those who are benefitting from the destruction of transparency (monopolies, cartels, fiefdoms, kleptocracies, oligarchies, etc.) and to manipulate the market as part of a permanent propaganda campaign to "manage perceptions:" the market's up, everything's dandy.

Bernanke and his faithful banking-sector lackeys have destroyed transparency at every turn, refusing an audit (an audit smacks of--sniff--democracy--how distasteful), masking the $7.7 trillion in backstopping, and hiding the toxicity of the Fed balance sheet, which is loaded with over $1 trillion in distressed mortgage securities that the Fed lovingly took off the bankrupt balance sheets of its craven masters, the banks.

In other words, the Fed has massively rewarded the reckless and rescued the incompetent from the consequences of their actions. If that isn't the perfection of wrongheadedness, what is?

Then there's the disastrously destructive ZIRP--zero interest rate policy. The Fed's idea here is childishly simple, and childishly ignorant: if we lower interest rates to zero, then everyone who is over-leveraged and over-indebted will be able to borrow more, but for less interest, and that will buy the system time to magically heal itself.

The Fed cannot dare grasp that "healing" in capitalism means writing off uncollectable debt and sending insolvent lenders and debtors to bankruptcy court. Capitalism would quickly dispense with their cronies in the banking sector, and so capitalism must be destroyed. That is the Fed's raison-d'etre: destroying capitalism from within. Lenin would be envious.

ZIRP has myriad pernicious consequences. Let's say you have some capital that you want to apply such that it earns a fair return. If interest rates are near-zero, then a fair return has been rendered impossible by Fed policy.

The Fed leaves you only two choices: either put your capital into "risk-on" assets that are inherently risk-laden, or loan the capital out at low rates in an opaque market and hope you'll actually get the principal back.

Imagine being in charge of issuing mortgages which weren't guaranteed by the Federal government agencies of Fannie Mae, Freddie Mac and FHA--that is, imagine you actually lived and worked in a capitalist system, instead of a kleptocratic crony-capital haven.

You might hesitate to loan out large sums of money (jumbo mortgages) in a market where the risk of a decline in the asset (real estate) is obvious but official manipulation means you can only receive a very paltry return on the capital you're putting at risk.

Since the market isn't able to price real estate, risk or credit transparently, then prudent investors would be forced to shun the market: how can you invest wisely when assets, debt and risk can't be priced by the market?

Prudent lenders would withdraw from such a rigged, risky market, which is precisely what has happened. Literally 99% of the mortgage market is now guaranteed by the Federal fiefdoms, all of which are losing tens of billions of dollars and require monumental taxpayer bailouts to keep underwriting the banking sectors' private profits.

Private mortgage lending has simply vanished, and no wonder: if you can't price assets, risk or debt, then only the reckless would enter the market, and even they would only do so if the Fed guaranteed the profits would be theirs to keep but losses could be transferred to the Fed or taxpayers.

The only way to restore trust and clear the market of uncollectable debt is to let the market transparently price, risk and credit--precisely what the Fed's policies are designed to stop. The Fed's knees are chafed from kow-towing to their banker masters, and worshipping the "magic" of their Keynesian Cargo Cult and Lenin ("destroying capitalism from within" should be stenciled on the Fed letterhead).

Separate risk from gain, obliterate transparency and choke the market with zero interest rates, and you've not only destroyed capitalism, you've also destroyed the economy by rewarding the most venal, corrupt, fraudulent and capital-destroying players while stranding the prudent on an island of opacity where the true price of assets, credit and risk cannot be discovered.

http://www.financialsense.com/contribut ... mic-hubris

ramana · Post by **ramana** » 27 Mar 2012 22:56

US Govt uses collectors to collect student loans

~$67B already in default.

I think the student loan fiasco is going to kill of the younger ones graduating from colleges.

Will require a bill akin to Mortgage Debt Forgiveness Relief Act for student loans. The total loans are greater than credit card debt ~ $850B. Ain't gonna have a recovery unless this burden is not lifted.

....
Debt collectors are the subject of more complaints to the Federal Trade Commission than any other industry -- almost 181,000 last year. Within the past 17 months, three companies working for the Education Department -- including one that is majority owned by JPMorgan Chase & Co. (JPM)'s private-equity arm -- settled federal or state allegations of abusive debt collections. The companies didn't acknowledge wrongdoing, and Chase declined to comment. The Education Department said the government investigations didn't involve the companies' work for the agency.

The U.S. Consumer Financial Protection Bureau, created in 2010 in the wake of the credit crisis, has proposed supervising the largest debt collectors to ensure they are complying with laws such as the Fair Debt Collection Practices Act. About 5 million federal education-loan borrowers are in default, generally meaning they have failed to make payments for 270 days or more.

"With student-loan defaults rising, we want to make sure borrowers clearly understand their loan-repayment options and debt collectors are following the law," Rohit Chopra, the agency's student-loan ombudsman, said in an e-mail.

'Reasonable and Affordable'

Federal-aid law requires collectors to offer "reasonable and affordable" payments, so debtors can "rehabilitate" their loans, repairing their credit and making good on what they owe taxpayers.

The law mandates no minimum payment for a borrower to enter a rehabilitation program, and collection companies may take borrowers' finances into account. The fair debt act forbids collectors from making "any false, deceptive or misleading representation."

Insisting that cash-strapped borrowers make minimum payments and then failing to disclose lower-cost options violates both federal-aid and fair debt-collection laws, according to Deanne Loonin, an attorney with the Boston-based National Consumer Law Center.

Debt collectors said they follow federal laws and use all available tools to recover money for taxpayers. The companies are helping to make sure that future college students have access to financial aid, said Mark Schiffman, spokesman for ACA International, a Minneapolis-based industry trade association.

$1 Billion Commissions

Debt-collection companies helped the Education Department recover $11.3 billion in defaulted loans during the year ended Sept. 30. The agency projects it will collect 85 cents on every dollar that defaults, factoring in collection costs and the time-value of money.

The debt collectors made out well, too. Based on a review of government contracts and Education Department data, the private companies -- working directly for the government and through state agencies -- received commissions of about $1 billion in the year through September.

Sallie Mae and the Education Department declined to answer questions about Campos's comments. The company cited privacy rules and the terms of its government contracts. Newark, Delaware-based Sallie Mae said it works with borrowers in financial difficulty and offers lower payments when appropriate.

"We have helped thousands of student-loan customers in default get back on track to fulfill their obligations, giving consumers the opportunity to improve their credit and providing cost savings for the American taxpayer," Patricia Nash Christel, a Sallie Mae spokeswoman, said in an e-mail.

New Rules?

The Education Department this week will hold meetings with industry, government and consumer representatives to consider requiring that debt collectors automatically offer payments based on income to defaulted borrowers who qualify. If approved, the rules could take effect in July 2013.

"We want to make sure we are striking the right balance between helping borrowers who have hit hard times and honoring our responsibility to be good stewards of taxpayer dollars," Justin Hamilton, an Education Department spokesman, said in a phone interview.

To protect customers, the department randomly monitors tape recordings of student-loan debt-collection calls, Hamilton said. The department is also considering changing the commission structure in its debt-collection contracts, he said.

The agency encourages students to file reports if they feel mistreated, Hamilton said. In the year ended in September, the department received 1,406 complaints against the debt collectors it hires, up 41 percent from the year before.

Collectors' Power

Under U.S. law, student loans can rarely be discharged, even in bankruptcy, making them more difficult to shake than credit cards or past-due mortgages. The government can also confiscate tax refunds and Social Security payments, as well as paychecks.

"Student-loan debt collectors have power that would make a mobster envious," Harvard Law Professor Elizabeth Warren, who helped establish the Consumer Financial Protection Bureau and is now running for a U.S. Senate seat from Massachusetts, said in 2005.

Under Education Department contracts, collection companies "rehabilitate" a defaulted loan by getting a borrower to make nine payments in 10 months. If they succeed, they reap a jackpot: a commission equal to as much as 16 percent of the entire loan amount, or $3,200 on a $20,000 loan.

Incentive Pressure

These companies receive that fee only if borrowers make a minimum payment of 0.75 percent to 1.25 percent of the loan each month, depending on its size. For example, a $20,000 loan would require payments of about $200 a month. If the payment falls below that figure, the collector receives an administrative fee of $150.

That differential provides an incentive for collectors to insist on the minimum payment and fail to reveal when borrowers are eligible for a more affordable schedule, according to Loonin, the attorney at the National Consumer Law Center, which is representing borrowers in the Washington talks with the Education Department

Customers benefit from successfully rehabilitating a loan, because they repair their credit, and the government removes thousands of dollars in fees and collection costs, the Education Department and Sallie Mae said. Taxpayers, rather than borrowers, pay the rehabilitation commission, according to the agency. Students who immediately sign up for income-based plans, through a program called consolidation, don't get those benefits, Sallie Mae and the Education Department said.

Automatic Dialers

Debt collectors are under pressure to extract as much money as they can up front, or lose their jobs, said J.C. Cournan, who worked for Pioneer Credit Recovery from 2004 through 2007.

Collectors, then paid about minimum wage, could earn thousands of dollars a month in bonuses, based on the money that borrowers repaid, said Cournan, who took the upstate New York job out of high school. Pioneer set monthly goals for wage garnishments and loan rehabilitations, he said.

Using automatic dialers to track down borrowers, Cournan would figure out where they worked, then contact their employers. He would tell borrowers that he was going to seize part of their wages if they didn't make the payments. Using a company loan calculator, Cournan would insist on the minimum payment, he said.

"When wou're making 8 bucks an hour, it's all about the bonuses. You're starving," said Cournan, 26, now an auto mechanic.

Gift Cards, TVs

Pioneer maintained a "boiler room" environment, with high turnover among those who didn't perform, said Joshua Kehoe, a former collector. Kehoe worked in Batavia, New York, from July 2006 through October 2008 after managing a pizza stand at a theme park.

Pioneer rewarded collectors with $100 restaurant gift cards, a $500 mahogany jewelry box, televisions and a trip to the Dominican Republic, according to Kehoe, who said he earned $9.60 an hour before the incentives.

It would be "a cold day in Hades" before collectors would tell borrowers about options with lower payments, according to Kehoe, who said "rehab cash was king." The company pushed collectors to sign borrowers up for the rehabilitation plans, which often required payments equal to 1.25 percent of their loan amount monthly, he said.

Heavy Heart

"It was hard on my mind -- it was hard on my heart," said Kehoe, 25, who now works as a welder in Akron, New York. "There was the guy with one leg or the single mom with five children."

Under pressure to meet collection goals, Kehoe falsified documents for verifying the employment of borrowers who were subject to wage garnishment, he said. Pioneer discovered the violation and dismissed him, Kehoe said.

Sallie Mae declined to discuss the former employees' comments. The company uses a mix of hourly pay "substantially above minimum wage" and performance-based incentives, said Sallie Mae's Christel.

Like other debt collectors, "we design a compensation system that pays for good performance," Christel said. "We take compliance seriously and design our policies and practices to meet all applicable fair debt collections laws and federal government service contract requirements."

The Internal Revenue Service in 2009 stopped using private debt collectors, saying its own employees were more cost effective and flexible for taxpayers facing economic hardship.

'IRS Was Better'

The IRS let Campos, the Boston student-loan debtor, set up a payment plan he could afford when he fell behind on his taxes, he said.

"The IRS was better," Campos said. "They bent over backwards to help you."

The Education Department will "definitely want to take a look" at IRS collections to see "what their experience has been," Hamilton, the Education Department spokesman, said.

Twenty-three collection companies work directly for the Education Department. Most of the same outfits have contracts with state guarantee agencies that also chase student-loan borrowers on the government's behalf.

In the past 17 months, three companies have run afoul of federal and state investigators, though the Education Department said their inquiries didn't involve their government student- loan business.

Wrong Numbers

During this period, Minneapolis-based Allied Interstate Inc. and Atlanta-based West Asset Management Inc. paid $1.75 million and $2.8 million, respectively, to settle lawsuits alleging abusive debt collection filed by the Federal Trade Commission. The companies admitted no wrongdoing. In February, to resolve an investigation by 19 state attorneys general, NCO Group, majority-owned by JPMorgan Chase, agreed to pay $575,000 and provide up to $50,000 per state for consumers who can show wrongful collections. The companies admitted no wrongdoing.

Allied has taken steps to correct mistakes -- primarily repeated phone calls to wrong numbers -- and complaints have fallen, Robert Burke, vice president for marketing of iQor Inc., the company's parent, said in an e-mail.

West disagreed with the FTC's findings, Deputy General Counsel Greg Hogenmiller said in an e-mail. Consumers haven't made claims to NCO since the attorneys general settlement, and no wrongdoing was found, Ronald Rittenmeyer, chief executive officer of Horsham, Pennsylvania-based NCO, said in an e-mail.

Defaults Surge

The collection business is booming as defaults more than doubled since 2003, along with outstanding federal student loans, which totaled $848 billion as of Sept. 30, surpassing credit-card debt.

The U.S. loan program was born in 1965 as a "Great Society" initiative for lower-income students under President Lyndon Johnson. Today, with tuition soaring, two-thirds of college seniors graduate with loans, which average $25,000, according to the Institute for College Access & Success, an Oakland, California, nonprofit education and advocacy group.

Obama -- supported by Congress -- has pledged to give borrowers a break and make college more affordable.

In 2009, Congress expanded a program that lets lower-income students tie payments to their incomes. It's a sliding scale, based on their debt, salaries and family obligations. Married borrowers with two children, $30,000 in income and $30,000 in student loans wouldn't have to make any payments, according to a government loan calculator. If circumstances don't improve, the loans can be canceled after 25 years.

In October, Obama proposed making payments even lower and forgiving loans after two decades for some borrowers, as soon as this year.

Disabled Mom

Kimberly Noland could have used that kind of help.

Noland, 44, lives in Fayetteville, Arkansas, with her husband, a laid-off factory worker now employed at a Wal-Mart store, and their seven-year-old daughter.

Noland injured her leg while working in a day-care center. She started collecting $828 a month in Social Security disability payments in 2010.

Shortly after she qualified, Collection Technology Inc., an Education Department debt collector, called about Noland's roughly $30,000 in defaulted student loans from attending the University of Arkansas.

A collector told her she had to pay $325 a month, almost as much as her rent, Noland said in a phone interview. She couldn't afford it on her family's $20,000 annual income, she said.

"I have a child," Noland remembered telling the collector. "I can't give you every bit of money in my house."

'Final Number'

"This is our final number," the collector replied, saying her boss wanted even more, according to Noland. The phone conversation lasted more than an hour, she said. She was given three days to decide, or Collection Technology would seize part of her disability check "forever," and she would never have another chance to rehabilitate her loan, Noland said.

She bought a prepaid debit card at Wal-Mart, authorizing Collection Technology to make the $325 monthly withdrawals. She visited churches to collect free bread and canned goods.

"I didn't know why it had to be such a high dollar amount," Noland said. "They have the power, I guess. You do what you have to do to make them happy."

Chris Van Dellen, CEO of Collection Technology in Monterey Park, California, referred questions about Noland's comments to the Education Department, which declined to discuss her case.

In October, Noland and her husband filed for bankruptcy. Last year, she qualified for the Education Department's income- based plan. Her monthly student-loan payment: zero.

To contact the reporter on this story: John Hechinger in Boston at jhechinger@bloomberg.net

To contact the editor responsible for this story: Lisa Wolfson at lwolfson@bloomberg.net;

Neshant · Post by **Neshant** » 27 Mar 2012 23:37

Everyone wants to run up a load of debt and have someone else pay for it.

Loan forgiveness means the debt is offloaded as taxes and money printing onto some sucker who never ran up the tab in the first place.

ramana · Post by **ramana** » 28 Mar 2012 03:17

Hari Seldon for you:

http://www.fooledbyrandomness.com/notebook.htm

Taleb's Notebook

Hari Seldon · Post by **Hari Seldon** » 28 Mar 2012 20:54

ramana wrote:Hari Seldon for you:

http://www.fooledbyrandomness.com/notebook.htm

Taleb's Notebook

Nice. Thanks.

svinayak · Post by **svinayak** » 31 Mar 2012 01:09

Good one. THis is really what will connect the world.
See the absence of Indian quotes/philosophy and books in this.

ramana · Post by **ramana** » 31 Mar 2012 02:09

Hari, I used arguments in #142 recently in a situation.

Christopher Sidor · Post by **Christopher Sidor** » 31 Mar 2012 09:25

Neshant wrote:Speech: Bernanke Fails at Transparency, Rails at Gold Standard
Written by Bob Adelmann
Wednesday, 21 March 2012 17:21

For example, his attack on the gold standard was filled with falsehoods and half-truths that failed to convince, only to confuse:

The gold standard as an alternative to a central bank: The gold standard sets the money supply and [the] price level generally with limited central bank intervention.

He fails to make clear that it’s the quantity of gold that “sets the money supply” and from that is derived the value of each piece, which is reflected in its purchasing power in the marketplace.

That is precisely the problem with Gold standard. It limits the amount of currency and trade that can happen.

Buried in the comment “with limited central bank intervention” is the core of the problem: Bernanke doesn’t want people making those choices and decisions for themselves. Those decisions must be left to experts like himself to tell the citizens what is allowed to be used as money and what is not. It’s that beautiful limitation that the gold standard places on banks that Bernanke doesn’t like.

Central Bank does not place any limitation on the money that citizens use or can use. They simply say that the legal tender for their transactions is going to be X or Y. In many countries with central banks people do exercise their choice and carry out transactions in currency other than one which is issued by central bank. So in no way does central bank compel anyone, least of all citizens, to use X or Y. Free will or Choice is still in the hands of people.
And there is nothing beautiful about the so called "limitation" that the gold standard places on banks and consequently governments. It is a straight jacket which prevents room for maneuver.

Another example:

Problems with the gold standard: The strength of the gold standard is its greatest weakness too: Because the money supply is determined by the supply of gold, it cannot be adjusted in response to changing economic conditions.

Absolutely true. What the gold standard does is limit the amount of money supply to the amount of gold that can be dug out from the ground and placed again underground in some vault. And this is not the problem alone with gold standard. This is a problem with all the metal-based currency system, like silver. Hell in the past opium was used predominantly in East Asia as a substitute.

Here in full flower is the consummate arrogance of a central banker: “Because the money supply is determined by the supply of gold” and not by experts gathered around a mahogany table in a building in downtown Manhattan, it is therefore a bad thing. He admits that the supply of money “cannot be adjusted in response to changing economic conditions,” which is of course another expression of the necessity of a banker to do the adjusting. Of course, the free market adjusts the supply of everything when it is left alone to do so, even the monetary unit itself. That’s why, when the country was enjoying its greatest and grandest economic explosion in the late 19th century the country was on (or, to be fair, close to) the gold standard, the price level declined, reflecting that explosion and resulting in a rapidly rising standard of living because each piece of money bought more.

When the so called country[let us for example say US] was enjoying its so called "greatest and grandest economic explosion", it was also going through the gut wrenching recessions and depression. One of the chief causes of great depression was the thrall that people had of the gold standard. France and US accumulated so much gold and refused to let it circulate that Germany went kaput and Britain was forced to go off the gold standard. In fact had the gold standard had been abandoned much earlier it would have been possible to avoid the rise of the nut-case, hare-brained, single-testicle Hitler. And probably we would have avoided the carnage that followed.

Put another way, savers were rewarded knowing that their savings would purchase more goods and services in the future.

False. What gold standard did was keep inflation in check. It did not assure that a person would be able to purchase more goods and services in the future. And the funny part is gold standard did not eliminate inflation.

Banks were simply another piece of the economy, providing banking and loan services for a fee and protection for savers with their vaults.

True, but this has nothing to do with Gold Standard. The current situation, where trading for the heck of trading without any real correlation to the real economy has to do with the economic shifts that are ongoing.

Problems with the gold standard:

Although the gold standard promoted price stability over the very long run, over the medium run it sometimes caused periods of inflation and deflation.

Really, the professor should know better. Booms and busts under the gold standard were largely and predictably the result of banks and bankers lending beyond their deposits through fractional-reserve mechanisms. When depositors wanted their gold back, the banks were unable to honor those requests. The money supply shrank, the banks went bust, and the depositors learned valuable lessons.

So gold standard does nothing to avoid the so-called booms and busts. Thanks a lot for accepting this. So what is the utility of this gold standard, when booms and busts cannot be eliminated? And dont forget the biggest and worst boom and bust happened under gold standard, the Great depression. This is provided we ignore the depression of 1890s or worse the depression of 1870s.

And here is a secret. There has not been any great depression like event, ever since we went of the gold standard. There has not been a repeat of 1930s or worse 1870s. And oh one more thing, the best economic growth in US history happened not under gold standard but after the world went away from gold standard. Immediately after WWII and in 1990s. US never had a growth as secular and as robust as it witnessed during these two decades.

Over the long run, since the beginning of the republic until approximately 1910, the price level remained constant. Put another way, a piece of gold money retained its purchasing power for nearly 150 years without a central bank. But once central banks got involved, the stability vanished. And when the last vestige of the gold exchange system disappeared in 1971, the inflation inherent in a paper standard exploded. One dollar today is worth only 18 cents in 1971 money. A dime is worth two cents. A nickel is worth a penny. A penny — is essentially worthless. All thanks to the Fed.

So if I had a 10-gram gold in 1800, I would be able to buy the same amount of goods say in 1880s that I was able to buy in 1800? Is this author nuts or smoking something potent?

Why didn’t the good professor, in the interest of transparency, tell the truth, the whole truth?

The good professor told the truth. But the author could not comprehend the truth. The author lives under the fallacy that what was good in 1800s is good enough 100 years later in 2000s. There is a concept called as "disconfirmation bias". What this implies is that to disprove a belief, the standard of evidence required is higher than what is required to prove the belief. It seems to me, IMHO, the author suffers from this.

The Fed is a cartel, created in secret, to protect banks against their own foolish behaviors.

Absolutely true. It was meant to prevent bank runs and preventing cascading collapses of banking financial entities. It has stayed true to its mandate, even in case of horrific consequences. But Fed was not created in secret. It was an act of US Congress, where they sat down and debated most of the aspects.

•The Fed is the mechanism used by government to finance the expansion of its power far beyond what taxpayers would otherwise have allowed.

False. The only thing that bothers the taxpayer is whether he is better off than he was yesterday or not.

•The Great Depression resulted from the Fed’s huge increase in the supply of money during the Roaring Twenties. What made them "Roaring"? Easy money, thanks to the Fed.

Easy money did not cause the great depression. What caused the great depression is the misallocation of funds to unproductive uses. For example the boom in Germany during 1920s which resulted in many cities and provinces building prestigious projects like opera houses, etc which had little or no economic use.

•Bubbles? What about the biggest bubble, funded with easy money that fed the housing boom? The same housing bubble that the good professor himself missed entirely until it was falling all over him and his mahogany table experts.

And what of the biggest bubble of 1920s? And guess what there was no Fed in 1800s and yet we saw the biggest economic difficulties in 1800s.

Why didn’t the professor tell the truth — the dirty little secret that former Fed chairman Alan Greenspan exposed in his article “Gold and Economic Freedom” published in Capitalism: The Unknown Ideal? Here's what Greenspan had to say:

This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the “hidden” confiscation of wealth

Gold stands in the way of this insidious process. It stands as a protector of property rights

Gold Standard does something worse. It puts power into hands of people who can dig it out of their soil. Not in hands of people who can create iPads or a beetle or Walkman or Ferrari or Sukhio fighter jets or carry out the green revolution in India. If we had followed the gold standard, we would be in place of somalia, as we dont have any gold-ore to speak of. Rather the world super power would be south Africa.

Gold standard had to go for one reason, the prosperity of a man or men had to come out of his own fruits of labor, his imagination and his capability and not on how much gold a person can dig up. Gold standard was a creation of feudal ruling class, which wanted to preserve their wealth and power. They successfully did that in 1800s. I dont wish to return to that feudal society of 1800s.

abhishek_sharma · Post by **abhishek_sharma** » 31 Mar 2012 09:57

2 hour video

Panel Discussion with 2 Nobel Prize winners, George Soros and Jeff Sachs

Neshant · Post by **Neshant** » 31 Mar 2012 13:17

Christopher Sidor wrote:So in no way does central bank compel anyone, least of all citizens, to use X or Y. Free will or Choice is still in the hands of people.

I afraid you are ignorant about the scam that is central banking.

If central banks are not forcing people to use their worthless paper as claimed, they should have no problem with competing currencies with legal tender status being introduced into the economy. A competing currency should not be subject to capital gains taxation, sales tax or numerous other taxes to prevent people from acquiring/trading with it. After all, when capital gains are levied against gold, its not the case that gold has increased in value but that paper money has lost value. Why pay a tax for having preserved wealth?

In fact if central banks allowed competing currencies, nobody would be holding their worthless paper. The only way they can get people to accept worthless paper is by force and that force is government.

And there is nothing beautiful about the so called "limitation" that the gold standard places on banks and consequently governments. It is a straight jacket which prevents room for maneuver.

You mean room for counterfeiting money. Its a straight jacket for banking crooks looking for bailouts & bonuses. Its a life jacket for anyone doing a real job in the productive economy.

Absolutely true. What the gold standard does is limit the amount of money supply to the amount of gold that can be dug out from the ground and placed again underground in some vault.

Which is good. Money has to be limited in quantity in order to have value. There is always enough gold and everything else to be had in the market - just a question of price.

One of the chief causes of great depression was the thrall that people had of the gold standard.

Lie. The chief cause of the great depression was fractional reserve banking aka counterfeiiting by banks. They lend out more than they had and imploded. The chief cause of every economic disaster is counterfeiting including the current one. The solution to a counterfeiting problem is not more counterfeiting.

So gold standard does nothing to avoid the so-called booms and busts.

Nobody said it prevents booms or busts. However the gamblers are the ones who take the loss under a gold standard - not the savers. The worthless paper money standard offloads the gambling losses of banking crooks onto the backs of suckers by contrast.

And oh one more thing, the best economic growth in US history happened not under gold standard but after the world went away from gold standard.

Wrong, fastest US economic growth occured under the gold standard in the late 1800s.

Absolutely true. It was meant to prevent bank runs and preventing cascading collapses of banking financial entities. It has stayed true to its mandate, even in case of horrific consequences. But Fed was not created in secret. It was an act of US Congress, where they sat down and debated most of the aspects.

You are ignorant of how the Federal Reserve came about.

Gold Standard does something worse. It puts power into hands of people who can dig it out of their soil. Not in hands of people who can create iPads or a beetle or Walkman or Ferrari or Sukhio fighter jets or carry out the green revolution in India.

I'm afraid the idea of some guy counterfeiting worthless paper and offloading gambling losses of his cronies onto suckers has been tried & failed not once but many times over. There have been 60,000 or so paper currencies in existance for all of modern history and almost all have ended up being worthless.

Worthless paper is all about taking from the people who create & work. Worse yet, the taking is done by con artists who toss around financial jargon but who really are cluelss as fu&k. They pretend to know what ails the economy and how to control supply & demand by fiddling around with interest rates and money printing when really they are filling their pockets & that of their cronies. The co-opting of govt into confiscating wealth from the productive economy using increasingly draconian means to sustain a few crooks at the top eventually wrecks the entire fabric of the country. The biggest problem I have with worthless paper money is it transfers wealth from people who earned it to people who counterfeited it.

I'm for a system of privately issued competing currencies with legal tender status. That is true capitalism because it is the market (people who earn the money) get to select the money. Not some corruptable fool at the top who thinks he's wiser than the free market. Central banking is a fraud of a profession.

Now here's a question : The worthless paper money system is all about printing aka counterfeiting money. Now if counterfeiting money is good, shouldn't we all be doing it? I'd like to print up a few $100 bills on my laser printer and stimulate the economy.

johneeG · Post by **johneeG** » 31 Mar 2012 19:32

Neshant,
I understand that you are supporting gold standard. But, wouldn't the people who own/control gold mines become powerful instead of common people?
I am noob in financial matters, so don't be harsh and please explain how gold standard will give power to people and not owners of gold-mines.

Christopher Sidor · Post by **Christopher Sidor** » 31 Mar 2012 22:32

Neshant wrote:
Christopher Sidor wrote:So in no way does central bank compel anyone, least of all citizens, to use X or Y. Free will or Choice is still in the hands of people.
I afraid you are ignorant about the scam that is central banking.

If central banks are not forcing people to use their worthless paper as claimed, they should have no problem with competing currencies with legal tender status being introduced into the economy. A competing currency should not be subject to capital gains taxation, sales tax or numerous other taxes to prevent people from acquiring/trading with it. After all, when capital gains are levied against gold, its not the case that gold has increased in value but that paper money has lost value. Why pay a tax for having preserved wealth?

Like I said RBI has no authority to enforce the rule that only INR will have to be used within the boundaries of India. If I want to use USD or Kuwati Dinar or Yen within India, I have freedom to use it. The issue is the counter-party, or the person on the other end of the transaction must be willing to accept the currency in which I want to transact. In fact in Afghanistan this happens, in spite of there being an afghani currency. In certain other countries, they don't have their own currency but depend on currency of some other nation. In certain other currencies, there are two legal tenders, for example in Nepal and to some extent in Bhutan.

Neshant wrote: In fact if central banks allowed competing currencies, nobody would be holding their worthless paper. The only way they can get people to accept worthless paper is by force and that force is government.

Misguided notions.

Neshant wrote:
Christopher Sidor wrote:And there is nothing beautiful about the so called "limitation" that the gold standard places on banks and consequently governments. It is a straight jacket which prevents room for maneuver.
You mean room for counterfeiting money. Its a straight jacket for banking crooks looking for bailouts & bonuses. Its a life jacket for anyone doing a real job in the productive economy.

It is a straight jacket for the monetary policy. In times of panic money flees the economy. In these time, it is necessary to keep the financial system adequately supplied by money. In case of Gold standard this cannot be done. In fact the reverse happens, the money supply gets contracted and thus fueling the panic. This aggravates a already bad situation, making it worse.

Neshant wrote:
Christopher Sidor wrote:Absolutely true. What the gold standard does is limit the amount of money supply to the amount of gold that can be dug out from the ground and placed again underground in some vault.
Which is good. Money has to be limited in quantity in order to have value. There is always enough gold and everything else to be had in the market - just a question of price.

There is not enough gold available in the world which can sustain the current level of trade and development. Moreover people tend to hoard gold, thus reducing the amount in circulation, thus contracting economic activity even more.

Neshant wrote:
Christopher Sidor wrote: One of the chief causes of great depression was the thrall that people had of the gold standard.
Lie. The chief cause of the great depression was fractional reserve banking aka counterfeiiting by banks. They lend out more than they had and imploded. The chief cause of every economic disaster is counterfeiting including the current one. The solution to a counterfeiting problem is not more counterfeiting.

No. The chief cause was not the loose money policies of the fed but when the contraction came, it was the gold standard which did not permit the money supply to grow to meet the demand. This resulted in banks collapsing. For those banks which survived, it meant that the banks shrunk their balance sheets, thus contracting the economy and industrial production. It is estimated that industrial production fell by 25% or even more in some cases.

Neshant wrote:
Christopher Sidor wrote: So gold standard does nothing to avoid the so-called booms and busts.
Nobody said it prevents booms or busts. However the gamblers are the ones who take the loss under a gold standard - not the savers. The worthless paper money standard offloads the gambling losses of banking crooks onto the backs of suckers by contrast.

So gold standard utility is even worse.

Neshant wrote:
Christopher Sidor wrote: And oh one more thing, the best economic growth in US history happened not under gold standard but after the world went away from gold standard.
Wrong, fastest US economic growth occured under the gold standard in the late 1800s.

I said the best and not the fastest. Best economic growth means that the unemployment reaching a low of 2%. The income distribution becoming more even. In fact the heydays of gold standards also coincided with the heydays of people known as robber barons.

Neshant wrote:
Christopher Sidor wrote: Absolutely true. It was meant to prevent bank runs and preventing cascading collapses of banking financial entities. It has stayed true to its mandate, even in case of horrific consequences. But Fed was not created in secret. It was an act of US Congress, where they sat down and debated most of the aspects.
You are ignorant of how the Federal Reserve came about.

Enlighten us.

Neshant wrote:
Christopher Sidor wrote: Gold Standard does something worse. It puts power into hands of people who can dig it out of their soil. Not in hands of people who can create iPads or a beetle or Walkman or Ferrari or Sukhio fighter jets or carry out the green revolution in India.
I'm afraid the idea of some guy counterfeiting worthless paper and offloading gambling losses of his cronies onto suckers has been tried & failed not once but many times over. There have been 60,000 or so paper currencies in existance for all of modern history and almost all have ended up being worthless.

Worthless paper is all about taking from the people who create & work. Worse yet, the taking is done by con artists who toss around financial jargon but who really are cluelss as fu&k. They pretend to know what ails the economy and how to control supply & demand by fiddling around with interest rates and money printing when really they are filling their pockets & that of their cronies. The co-opting of govt into confiscating wealth from the productive economy using increasingly draconian means to sustain a few crooks at the top eventually wrecks the entire fabric of the country. The biggest problem I have with worthless paper money is it transfers wealth from people who earned it to people who counterfeited it.

Even more worse is the wealth of the person being determined on what he can dig up from inside the ground, rather than when he or she can productively do. Only non-democratic government confisticate wealth from the so called productive economy to sustain a few crooks at the top. Consider the size of US economy, now consider the total amount of money which was given to US finanical firms in the financial panic of 2008. Now consider that this was not done in 1930s. See where our grand parents landed and where we are currently.

Neshant wrote: I'm for a system of privately issued competing currencies with legal tender status. That is true capitalism because it is the market (people who earn the money) get to select the money. Not some corruptable fool at the top who thinks he's wiser than the free market. Central banking is a fraud of a profession.

Now here's a question : The worthless paper money system is all about printing aka counterfeiting money. Now if counterfeiting money is good, shouldn't we all be doing it? I'd like to print up a few $100 bills on my laser printer and stimulate the economy.

It seems that you are opposed to government bailing out banks and other financial institutions. Your gripe is against government putting taxpayers on hook for bets made by private parties. It does appear that you dont want to privatize the profits and socialize the losses. Fair enough. But the solution is not to bring back a "barbarous relic of the past", i.e gold standard.
Yes you can print USD 100 bills or Rs 1000 notes and stimulate the economy, but in this case you as an individual will be standing behind the currency and not Fed or RBI.
If you print a Rs 1000 note of RBI and give it to X, then you are basically telling a lie to X, who is accepting the note. X who is accepting the note, will believe that the Rs 1000 note of RBI has been printed by RBI and not by you. That is why it is called a fraud. On the other hand if you print a Rs 1000 note and tell X that it has been printed by you, i.e. not by RBI, and X accepts it then it fine. You are free to print as many notes as you want, as long you do not pass them off as RBI issued notes. In fact if you wish you may use any currency note to pay for your groceries, provided the grocer accepts those currency note.

Satya_anveshi · Post by **Satya_anveshi** » 01 Apr 2012 06:40

Christopher Sidor wrote:Like I said RBI has no authority to enforce the rule that only INR will have to be used within the boundaries of India. If I want to use USD or Kuwati Dinar or Yen within India, I have freedom to use it.

Christopher Sidor Ji,

Are you sure about the above part? Check out Foreign Exchange Management Act (FEMA). Unlike other laws where everything is permitted unless specifically prohibited, under this act everything was prohibited unless specifically permitted. Activities around foreign currency /exchange in India or dealing with India/Indians should be done with extreme caution and with good legal cover.

FEMA permits only authorised person to deal in foreign exchange or foreign security. Such an authorised person, under the Act, means authorised dealer,money changer, off-shore banking unit or any other person for the time being authorised by Reserve Bank. The Act thus prohibits any person who:-

[*]Deal in or transfer any foreign exchange or foreign security to any person not being an authorized person