patrick.net

You forgot #5...

Tyler Durden's army plants explosives in the basements of every credit agency and central bank in the world, putting everyone back at "0".

Bernanke probably would not "do a Paul Volker".

Neither would have the fed chief before Volker. Volker was appointed to do what he did. So if Governor Rick Perry becomes president, he can make an appointment like that if he wants to. But in that case be careful what you wished for.

Interesting remark culled from Chinese media by the US Embassy there:

3. CHINA'S GOLD RESERVES

"China increases its gold reserves in order to kill two birds with
one stone"

The China Radio International sponsored newspaper World News Journal
(Shijie Xinwenbao)(04/28): "According to China's National Foreign Exchanges Administration China 's gold reserves have recently increased. Currently, the majority of its gold reserves have been located in the U.S. and European countries. The U.S. and Europe have always suppressed the rising price of gold. They intend to weaken gold's function as an international reserve currency. They don't want to see other countries turning to gold reserves instead of the U.S. dollar or Euro. Therefore, suppressing the price of gold is very beneficial for the U.S. in maintaining the U.S. dollar's role as the international reserve currency. China's increased gold reserves will thus act as a model and lead other countries towards reserving more gold. Large gold reserves are also beneficial in promoting the internationalization of the RMB."

http://cables.mrkva.eu/cable.php?id=204405

Stregnthening the dollar would be a great thing to do, but it wouldn't serve the interests of the oligarchs. There would be pain, but overtime would help to lessen the inequity gap. What's gonna happen is that they are going to continue to delude themselves with the idea that the BRIC middle classes can take up the consumption and the Americans and Western Europens can jump in the lake with their debts shoved in their pockets. They will do everything to support this fiction, but it won't work. BRIC middle classes aren't comfortable with consumption. They still save too much. They won't take on debt. They may eat better, and buy a few gadgets and creature comforts, but they won't go overboard and will be very frugal and deliberate. It takes two generations that grow up in middle class existance to wash away the mindset of poverty. In 20 or 30 years they'll be ready to live irresponsibly; not before. And that will be too long a wait for the global markets. Within a decade the dollar will start to stregthen slowly, until Americans spend again. This will be the final countdown because when the next crash comes, the BRIC middle classes will rise to the challenge.

I am living in Brazil and believe me they will take every bit of credit they can get. They are no different then any other people. Everyone here wants an iPod, big TV, new car and everything else they can get. It has been on the news this past week that Brazilians now have more household debt then ever before. They are so used to credit here that all the stores here list the monthly payment with the total price in small print. I first thought the prices were good until I saw the 10X - 12X. Meaning 10 - 12 monthly payments that has recently become 16 - 20.

I'm sure they all WANT iPods and Big TV's but many will refuse to buy until they can afford it. Also, the size of the middle class matters. I'm sure Brazil is moving towards the middle class life of overconsumption, but how much and how fast.

futuresmc says

Stregnthening the dollar would be a great thing to do, but it wouldn't serve the interests of the oligarchs. There would be pain, but overtime would help to lessen the inequity gap.

How exactly would that work? Because in my mind it is the exact opposite.

tatupu70 says

futuresmc says

Stregnthening the dollar would be a great thing to do, but it wouldn't serve the interests of the oligarchs. There would be pain, but overtime would help to lessen the inequity gap.

How exactly would that work? Because in my mind it is the exact opposite.

Like I said, at first there would be pain, some jobs lost (thankfully most of the jobs that are so fragile have already been lost so what remains is less easy to outsource), debts costing more to repay, but there would again be a secure means of saving for the majority of Americans. Right now, with a weak dollar and extreme market volitility, nobody can save nearly enough to counter inflation. Savings is the key to a strong middle class, which breeds a strong America. Wealth inequity in the United States is creating inflation and reducing wages at the same time its preventing savings or the reduction of household debt. A stronger dollar coupled with a tax and tarrif policy that works to protect the interests of the American middle class would give Americans more purchasing power by permiting them to beat inflation and save. There would need to be some sort of debt forgiveness as well, something to offset the strengthening of the dollar, but until the inequity is resolved, the American economy won't grow which will be a giant anchor on the global economy. If we worked with other developed debtor nations we could turn this around far more quickly. A stronger shock in the short term, but faster recovery within a few years.

Nations need to reassert their power over interational financiers if they are to protect themselves and their people. They need to work in the interests of the majority of their citizens. America needs to lead on this.

futuresmc says

Right now, with a weak dollar and extreme market volitility, nobody can save nearly enough to counter inflation.

You really don't know what the fuck you're talking about here.

People can't "save" because the middle class is being tapped from every direction -- energy, healthcare, cheap imports.

People can't save anyway since for every "saver" their must be a debtor.

The rich are having no problem saving. They've got money flowing to them by the billions.

Everyone else is fucked and this fucking will continue to deepen as the system flies apart.

A stronger dollar coupled with a tax and tarrif policy that works to protect the interests of the American middle class

Vague word salad is not a policy direction.

but until the inequity is resolved, the American economy won't grow

What "inequity" is holding back the economy?

Nations need to reassert their power over interational financiers

International financiers (teh joos?) didn't fuck us over. We did that all on our own, by being absolute idiots financially and doing really stupid things like occupying entire countries without being asked.

America needs to lead on this.

What America needs is to pull its head out of its ass.

Notgonnahappen.

ROTFL, I am in 100% agreement with Bellingham Bob here.

Bellingham Bob says

You really don't know what the fuck you're talking about here.
People can't "save" because the middle class is being tapped from every direction -- energy, healthcare, cheap imports.
People can't save anyway since for every "saver" their must be a debtor.
The rich are having no problem saving. They've got money flowing to them by the billions.

While I agree that the American middle class is being tapped from all sides, a lot of that is due to a a weak dollar and economic policy that doesn't protect most Americans. In trade, we don't tariff, so we have cheap imports. In healthcare, we don't regulate or have a single payer system, so we can be price gouged. Our energy costs are a function of underegulation and subsidy abuse. All are made possible by a government that's controlled by international bankers seeking to maximize profit without any concern for anyone's national interests or the stability of the system.

Bellingham Bob says

Vague word salad is not a policy direction.

You want policy specifics. We need to rip up most of our 'free trade' agreements and renegotiate deals with an eye towards what's best for the majority of Americans, not what's best for the rich. We need to tarrif imports so that neither currency manipulation nor cheap labor undercuts American workers to the point where they can't earn a living wage working full time (this needs to be industry specific, but it needs to be done for every major industry). We need to give job preferences to American workers and only offer visas where the immigrant is exceptionally skilled, so much so that finding an American that can do the job is unlikely. We need to revoke subsidies and tax credits for companies that outsource jobs to other countries. For all of the above, we need to protect whistleblowers and prosecute whenever these new laws are broken.

futuresmc says

What "inequity" is holding back the economy?

The inequity between the wealthy and the rest. The wealthy do not spend, they save, yet they are getting too large a share of income in this country. Large corporations are underegulated, while small business is overegulated, not permitting competition based on the goods and services produced but instead based on tax burdens and regulatory compliance costs. With less income and receding wealth stores, the American middle and working classes can't stimulate the economy and get money flowing. The wealthy can but won't.

Bellingham Bob says

International financiers (teh joos?) didn't fuck us over. We did that all on our own, by being absolute idiots financially and doing really stupid things like occupying entire countries without being asked.

Keep your anti-semetic BS out of it. I'm 1/4 Jewish, so you know. I may dislike your using the F word every other sentence, but racism crosses the line.

I use the term international financiers because bankers is too narrow. What about the IMF, the WTO, and their policies? What about hedge fund managers or those that work in offshore tax havens that aren't technically banks. Financier covers all those parasites, not just bankers. Although the bankers are the worst offenders.

As for the wars, I agree, but look how the majority of Americans are for disengagement, only to find our leaders pushing forward. The American people made a mistake getting into the wars in Iraq and Afghanastan, but the oligarchs that control our elected leaders aren't permitting us to rectify those mistakes. They are still running up the debt in our name, without our consent. America is the victim of identity theft. We shouldn't have to pay for what the oligarchs wrack up on our card, and I think that will be what crashes the system. Americans may be too lazy to march in the streets but we might get just mad enough to not pay our taxes au mass. Our credit is already ruined. Why bother?

austrian_man says

ROTFL, I am in 100% agreement with Bellingham Bob here.

Yeah, me too. Especially this part:
Bellingham Bob says

What America needs is to pull its head out of its ass.

It seems like there is no political will to face our problems, and a great deal of obfuscation and sewing of confusion. The political policy seems to be one of, "we need more head in the ass", and people cheer for it.

leoj707 says

It seems like there is no political will to face our problems, and a great deal of obfuscation and sewing of confusion

It doesn't seem like it. It is exactly that. No political will.

futuresmc says

While I agree that the American middle class is being tapped from all sides, a lot of that is due to a a weak dollar and economic policy that doesn't protect most Americans.

futuresmc, you have some good points. In fact, close to being idealistic I might add. But the political climate does not allow even 0.1% of what you write to be implemented successfully. Which is pretty much the root of the problem.

futuresmc says

a lot of that is due to a a weak dollar

Against which currency is the dollar "weak"???

http://www.census.gov/foreign-trade/top/dst/current/deficit.html

shows we're getting sucked dry with trade from China & Mexico.

Our dollar is too strong against their currencies, not too weak.

You seem to want a "strong dollar" just so we can buy more stuff, especially oil, but that's not how trade works.

We'll have to eventually pay our own way in the world, and running $500B+ annual trade deficit is the core of our financial challenge. Somehow making the dollar stronger (against which currencies???) is the OPPOSITE of addressing this imbalance.

All are made possible by a government that's controlled by international bankers seeking to maximize profit without any concern for anyone's national interests or the stability of the system.

This is just vague agit-prop or demagoguery. Government isn't controlled by "international bankers", the system is ultimately controlled by the people via its government.

And right now government is divided been center-right and far-right.

None of these clowns have the brief that is going to solve things -- higher taxes, tariffs, energy independence (which will probably require developing a new energy infrastructure).

The inequity between the wealthy and the rest.

OK, we agree about that at least. And government probably does get into small business's shit way too much.

Part of our problem probably is our $5T+/yr government itself. At least the far-right is talking about this, and maybe they're on the right track with this.

Keep your anti-semetic BS out of it. I'm 1/4 Jewish, so you know. I may dislike your using the F word every other sentence, but racism crosses the line.

Blaming some vague "other" for causing our problems is just off-base. It's what Hitler developed to make the Germans feel better about losing WW I and the troubles of the Weimar era.

It's not a cabal of bankers screwing us. It's us, we're doing it to ourselves.

Sure, we're being led by the nose to do stupid things -- invade Iraq, cut taxes, run up household borrowing to $14T by 2007 -- but this is just collective stupidity, and there's probably no cure for it.

The Republicans have been captured by the "wealthy" and are defending their own. The Democrats are not a hell of a lot better anymore, but the electorate shows no signs of turning left to give them an incentive to oppose the Republicans -- 2010 was not a good election for the future of this country.

Financier covers all those parasites, not just bankers. Although the bankers are the worst offenders.

yes, FIRE has structured things since the 1980s to rip us off, and they getting back into power in the 1995-2001 period set the stage for the Great Screwing that happened 2002-2006.

But the problem is bigger than FIRE. WSJ, NYT, FNC, WaPo, CNBC, and the TV media are all part of the corporatocracy that is taking control of this country.

They are doing it by establishing a narrative and either disaffecting voters or getting voters to buy into the bullshit.

This has been a very long game, dating back to the Powell Memo, and it also goes back to the 1950s and 60s with the John Birch Society, Reagan's anti-unionism, and Goldwater '64.

The American people made a mistake getting into the wars in Iraq and Afghanastan, but the oligarchs that control our elected leaders aren't permitting us to rectify those mistakes.

No, it's not the "oligarchy" that's holding Obama's hand, it's being afraid of the demagoguery of "losing the war" that is. It's our dumbshit electorate, which was ~50% for going to war in 2001-2002 and was 50% for the war in Afghanistan as recently as a year ago. Now support has fallen to 35%, and the general direction now is disengagement, just like Vietnam policy changed in 1969-70 when the nation finally got tired of that war.

We just went a full month without losing a soldier in Iraq, so apparently that war has been largely wound down.

They are still running up the debt in our name, without our consent.

What debt? The $1T+ national deficit? If the Feds weren't deficit spending then they'd have to cut about 1/3 of the programmed spending.

The national debt is $10T now, $1T more than a year ago. If you want to cut the deficit we've got to either raise taxes or cut spending. We tried raising taxes last year but that was shot down. We tried cutting spending too this year, but that was gutted behind the scenes.

We're spending $900B on Medicare, $900B+ on defense, $500B on social programs ($100B on welfare itself, $130B on unemployment bennies, $240B on other welfare stuff like Section 8 housing).

While much of this money is pretty much being pissed away (with nothing long-term to show for it), this spending is supporting millions of people. Cutting the spending is going to bring this nation into a much meaner place.

Our credit is already ruined. Why bother?

Our credit is fine. People are willing to loan us money for 10 years at 2% now.

http://finance.yahoo.com/q?s=^TNX

The problems are a bit more complex than this.

futuresmc says

You want policy specifics. We need to rip up most of our 'free trade' agreements and renegotiate deals with an eye towards what's best for the majority of Americans, not what's best for the rich. We need to tarrif imports so that neither currency manipulation nor cheap labor undercuts American workers to the point where they can't earn a living wage working full time (this needs to be industry specific, but it needs to be done for every major industry). We need to give job preferences to American workers and only offer visas where the immigrant is exceptionally skilled, so much so that finding an American that can do the job is unlikely. We need to revoke subsidies and tax credits for companies that outsource jobs to other countries. For all of the above, we need to protect whistleblowers and prosecute whenever these new laws are broken.

Tariffs won't bring jobs back. We can make and sell anything in the country but it's just a matter of cost. Taxing other countries products isn't going to make our product cost any cheaper. Half of our trade deficit is energy based. If we want to make more energy then allow more drilling, more leasing for wind farms, put solar arrays on government buildings etc.

Manufacturing is fine but it is largely automated. Factories don't make things by hand.

If we wanted to increase manual labor then simply throw the appliances away, microwave oven..heck running water and do everything manually. Go back to kerosene lamps and ice boxes.

We already manipulated our currency in the past (Bretton Woods). And by pricing oil in dollars it means that if a currency slips against the dollar that they have higher oil prices. During the embargo on Haiti gas there went up to 50 a gallon (I've met plenty from there during that time).

No one forces people to buy anything. Methods of production have dramatically lowered prices of goods so naturally there isn't much of a market left for it. I'm typing this on a laptop that cost me $1,000 back in early '08. That price was a joke in 2000 and today I could probably find one for much less.

As a country develops people obtain various upgrades (power, appliances that reduce the need for manual labor, communications etc) the net benefit of more lowers the value (i.e. its marginal) We're gradually moving into a post consumer society. We don't "need" to shop like crazy anymore.

We also compete with ourselves. I know a mall that is dying. Jewelry stores moved out, best buy moved out, borders is closing, old navy moved out etc. So you think the economy is bad but yet they only moved ONE exit down the highway! The other town had lower rates for rent so an exodus occurred.

mdovell, there is nothing there to respond to. You don't see any problems with our economy even though it is collapsing.

Other than increasing domestic energy production.

But even that won't solve the problems of the economy if energy costs too much. Whether some rich person in Texas pockets the profit or a rich sheikh, the money we pay for energy is leaving the paycheck economy and entering the rentier economy.

Same thing with imported goods vs. domestically-produced goods. If the latter is 100% automated, it doesn't matter if the money is sent to China or just ends up in the factory owner's bank account, again, it is largely money leaving the middle class never to return.

I'm convinced that THIS IS OUR PROBLEM. The middle class is being tapped every which way with flows that are not in balance. Too many OUT flows and not enough IN flows.

In the 2000s we half-assedly patched things with the tax cuts and the housing bubble machine, but that was a very temporary patch.

To fix things requires putting the flows back in balance. And to do that is going to require a lot of taxes on the rentiers and a lot of forced redistribution to the workers.