To me as usual Richard Russell makes the most sense (part I):
November 29, 2003 -- I've always hated steel animal traps. They're a cruel abomination. Some animals, coyotes, wolves, have actually chewed their own legs off to escape from the steel jaws. But these animals did escape, and they lived.
In my opinion, the monetary system of the world is now caught in the cruel steel trap of the central banking system. Before it's all over, the world may have to cut itself free from the current system and return to the sanity of gold. It will happen, and the world will survive. The trap, the system of producing money from "thin air," will not survive. It's immoral, it's a thief that robs us of the fruits of our labor, it's an abomination.
Talking about abominations, money is created under the central reserve system by borrowing. When you, as a consumer, borrow from your bank, your bank lends you the money and thus credit is created and the nation's money supply increases. As the same time, your loan has created a debt.
In 1987, consumer debt was just 70% of consumers' total after-tax income. In 1995 it rose to 80%. Today, consumer debt is at an all-time high -- for the first time in history, consumer debt is greater than US consumers' total after-tax income.
Consumer buying constitutes 70% of the US Gross Domestic Product. This is the reason the Fed is so frantic to keep consumers buying. What's happened is that the Fed has pushed the US economy into a corner or let's call it a trap. With fantastic mountains of debt outstanding in every area of this nation, this nation cannot take deflation. Deflation implies a contraction of the money supply, and that's what the Fed dreads -- consumers cutting back on their spending with an accompanying contraction of the nation's money supply.
To entice consumers to spend, the Fed has flooded the banking system with liquidity while at the same time pushing short rates down to 45-year lows. Every effort has been made to entice and encourage US consumers to keep spending and borrowing, borrowing and spending.
Of course, I've only been talking about consumers. At the same time, the US government has been borrowing big-time. Defense spending has surged to an all-time high, and the wars in Iraq and Afghanistan have added to the spending. All in all, the actual addition to the national debt for the current fiscal year could be as high as $1 trillion.
Then there are the unfunded liabilities of the US, the chiefs of which are Medicare and Social Security. According to an article in the November 24 issue of Fortune magazine ("The 44 Trillion Abyss"), US unfunded liabilities (money that we will owe) are just that -- an unbelievable $44 trillion.
Let me put is this way -- in view of the negative trade balance and the negative budget balance, the Fed will need to continue its policy of creating billions in fiat money while covering the planet earth with paper dollars.
This situation is being largely ignored by the stock market -- although I believe the bond market is beginning to smell the coming trouble.
What trouble? The trouble is that no currency can hold up against the kind of picture that I have presented. The more the production of any item, the greater the pressure on its price, and I don't care whether you're talking about TV sets or cell phones or soybeans or autos -- or dollars.> |
