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Politics : Welcome to Slider's Dugout -- Ignore unavailable to you. Want to Upgrade?

To: roguedolphin who wrote (7525)	1/3/2008 12:14:03 AM
From: pogohere	Respond to of 50502

"As we have said ad nauseum since 2001: governments inflate their way out of debt deflation trouble. Always have, always will. The one (count 'em: one) exception was the 1930s asset price and commodity price deflation in the US. It was nearly instantly ended in 1933 when FDR took the US off the gold standard and the dollar money supply was inflated by the Fed (see the image to the left that we extracted from a Fed working presentation). The rapid inflation was created even though thousands of banks had failed. So much for the idea that central banks can't create inflation when the banking system is broken. They can. What they can't do is create money and have it go where they want it to go, nor can a central bank guarantee the foreign purchasing power of a deflated currency. As long as a central bank is not constrained by the gold standard, it can increase its balance sheet more or less infinitely." governments inflate their way out of debt deflation trouble. Except when they don't feel like it: "Emmanuel Goldenweiser, director of research for the Federal Reserve Board [since 1920 and at the time this book was written], says: 'In the summer of 1936, banks had excess reserves. The Federal Reserve Board decided to use its newly acquired power to raise reserve requirements in order to immobilize these excess reserves. The Board repeated this action in the spring of 1937, thus ushering in the serious reaction of 1937-38.' Immobilizing reserves was the equivalent to extinguishing them, insofar as the available supply of money and credit was concerned, and, as far as [Federal Reserve] Governor Eccles had testified, extinguishing reserves meant wiping out a basis for issuing money and credit, tightening up the money market, and ushering in a business depression." Eustace Mullins, "The Federal Reserve Conspiracy," 1954,p122 So there we were, just beginning to come out of the worst depression in the country's history, and the Fed was raising reserve requirements, plunging the economy back into the abyss. I hear over and over that the Fed will do anything to avoid deflation. The record of its actions proves otherwise. Think the unthinkable. It's the mission of privately held central banks to create credit--wars are good for this-- collect on it, and then wipe it out when the debtors are insolvent, so the game can begin again. Lacking a good war, a depression does just as well. Consolidators of industries are financed, then busted and the shares swept up for pennies. The Fed is not a committee of suits that sits down and uses ordinary logic, the kind of logic ordinary people use, to address the economic issues that concern its controllers. Its object is to protect the assets of the very small group it represents at the highest level of international finance. If we have deflation, it won't be the 1930s variety, it will be our own brand that reflects current circumstances. And the Fed will have its hand on that "hammer" ("At some point central banks are going to have to put the hammer down.")