Comments on: Why is the response to economic crisis not more serious? Sat, 03 Jan 2015 16:42:55 +0000 hourly 1 By: urownexperience Tue, 17 Jul 2012 00:06:29 +0000 This August will mark forty-one years Since Richard Nixon took us off the gold standard. And it’s been quite a party – ask any Boomer.

When we became free of the shackles of a gold standard, which required that the Fed cannot print money unless it has an equal amount of gold in its vaults, we got drunk on credit. There were no longer any restraints on credit. If we couldn’t make the payments, we would just borrow more . . . and more . . . and more.

Credit increased from $1 trillion in 1971 to $50 trillion today. That meant that we increased our standard of living accordingly and America became the poster child of affluence.

Although this was all on paper and no more than a huge Ponzi scheme, who cared? The day of reckoning was so far in the future that nobody paid attention.

There were some recessions when we overtightened credit a bit, but we always got out of them by more borrowing and more feeding of our credit monster (and ya’ll know what happens when you create a monster and don’t feed it – it eats you up)!

This easy credit worked pretty well until 2007 when credit went so far over the top that it all hit the fan. It collapsed because we were at the limit of how far we could extend our credit. In 1952 our private (you and me) debt to income ratio was 40%. In 2006 – 126%.

After thirty-six years; our credit card was maxed out. We could not make the payments. Investors threatened to call in their tickets as well, and the financiers didn’t have the hard money.

But we squeaked through again with massive amounts of newly printed money thrown into the system of banking, backed up by nothing more than our promise to pay it back. And the banks recovered – kind of. New limits were put on the banks and they had to rein in their easy money policies, and this added to the great recession.

Thomas Jefferson once said,

‘If the American people ever allow the banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children will wake up homeless. I sincerely believe the banking institutions (having the issuing power of money) are more dangerous to liberty than standing armies. My zeal against these institutions was so warm and open at the establishment of the Bank of the United States (Hamilton’s foreign system), that I was derided as a maniac by the tribe of bank mongers who were seeking to filch from the public.’

But, ignoring Jefferson’s warning, we now had a big headache. Our load of debt, both private and public, had become unsustainable. We could not make our payments. The government needed infusion of capital to keep all its promises, and corporations needed to cut expenses to keep profits agreeable for stockholders. So, we printed more money and gave it to our government, the bankers and Wall Street. Stocks soared and the wealthy were in fat city again.

But just for awhile.

Unlike other recessions, the infusion of money into banks this time did not kick-start the economy. Why? Because we had reached the saturation point of credit and more credit would not help. Nobody could make the payments any longer on the current debt, let alone any future debt. The gold standard’s curse was upon us – we thought we could bypass reality, but in the end, reality bit us in the behind.

So, we carried on printing money and handed it out to the banks as corporations cut expenses, government cut expenses, and workers, the easiest target, got laid off. A downward spiral began as consumers cut back and corporations lost markets.

Then we cranked up the printing presses and infused more QE 1 and QE 2 money into the system and stocks rose, but demand of consumer goods did not. So corporations cut more to satisfy their stockholders.

Since interest rates were now down to literally zero, there were no places to make money except the stock market, so stocks again went up, but Main Street America continued to spiral downward. Nobody was interested in taking on anymore debt with scarce job opportunities.

Now; the way it works is that if credit cannot or will not expand, we have a depression. And that is where we are now; where a lot of the world is now. So we have no choice but to continue to expand our credit forever by printing money.

But the money doesn’t help any more – unless it is given away free. Nobody is interested in taking on anymore debt – it is too costly and stressful to pay back with falling wages. If the government does give printed money away for free, then the money eventually becomes worthless because fake money is chasing real goods. One dollar will quickly become one cent.

So, we are now at a point of no return. Printing money will not help. It can delay the depression for a number of years perhaps, but sooner or later the downward spiral will accelerate, and very likely accellerate suddenly, ushering in a devastating depression that will more than likely destroy our culture. This will make the depression of the ’30s look like a Sunday picnic.

Imagine your workplace closing down, your bank closing its doors and your credit cards cancelled – all within days. No food deliveries to the local supermarket and martial law in effect. That would be the positive spin. The negative spin would involve unprecedented violence, especially in America where everyone has guns.

This is not too farfetched. Keep an eye out for economists who will likely expand on this scenario. The only hope might be a massive spending program (yes, more spending) on either a world war or new technologies to change our world. Why these two? Because they put working men and women to work at good wages. Exactly what forced us out of a depression during WW II.

But since conservatives will effectively stop the new technologies and protect the old established guard, and since the threat of worldwide nuclear war will hopefully thwart militarism, we have no alternatives.

If we try to constrict spending now, the depression will occur immediately. If we kick the can down the road, we can hold it off for a few years, but it will be worse because of the delay. In the end, we will be in for a fifty year depression.

If we’re not lucky, a war will ensue and we’ll all be toast.

If we’re lucky, civilization will change radically for the better. People will become truly spiritual living together happily in small groups.

Oh, and my mode of transportation in 2022? . . . a donkeycart.

By: Checksbalances2 Mon, 16 Jul 2012 20:27:20 +0000 @Gordon2352 (July 13th)6.38

You have absolutely hit the right spot..that is the reasion why 1500 billion dollars of QE have not worked

For those who read German (2006)

German magazin, September 2006:

“Westdeutschland holte eine Zeit lang zwar tuerkische Gastarbeiter ins Land, aber fur sie galten schon nach kurzer Zeit dieselben Regeln wie fuer die Einheimnischen.

Auch zwischen Europa und Amerika wiesen die Arbeitsmarkte keine allzu grossen Unterschiede auf. Die Unternehmer diesseits und jenseits des Atlantiks waren Konkurrenten, nicht Rivalen.

Sie zahlten Loehne und keine Almosen. Kinder waren Kinder und keine Knechte. Die buergerliche Gesellschaft sorgte fuer einen zivilisierten Umgang zwischen Arbeitnehmer und Fabrikant, so dass beide nach all den wusten Jahrzehnten von Ausbeutung und Klassenkampf deutlich naher zueinander rueckten.

Das westliche Kapital hielt sich in grosser Entfernung Zu den Armuts-Galaxien auf. Man kaufte dort ein, aber man liess sich dort nicht nieder, weshalb auch die Arbeitsplaetze nur eme geringe Neigung verspuerten, den Westen zu verlassen.

Dieser Graben zwischen dem Westen und dem Rest der Welt ist mittlerweile zugeschuttet. Die Kapitalisten sturmen abenteuerlustig hinueber, sie machen von der neugewon¬nenen Reisefreiheit reichlich Gebrauch. Breitbeinig stehen sie da, die aufgeschlagene Weltkarte in der Hand.

Sie besichtigen die entlegensten Orte der Erde in der erklaerten Absicht, sich dort niederzulassen. Die Summe aller Direkt-investitionen, also jener Gelder, die von einer Nation ausserhalb der eigenen Landes¬grenze investiert werden, betrug 1980 nur 500 Milliarden Dollar.

Der Kapitalist alter Schule war ein eher haeuslicher Typ. Mittlerweile sind die jahrlichen Direktinvestinonen auf zehn Billionen (- trillion in English) Dollar gestiegen, ein Plus von fast 2000 Prozent in nur 25 Jahren.”

That is what it’s all about, we (the people)are propping up the trade balances of state capitalist countries, because of our merchants making good money in the process of killing our jobs that way.

By: Gordon2352 Sun, 15 Jul 2012 17:58:32 +0000 The proof for what I have said above is in how we conduct our personal and public lives.

No other country on earth is as obsessed with sex (as in puritanical beliefs that don’t match reality, such as birth control and abortion), religious freedom, and racial equality as the US, yet this country has less freedom than most of them, especially the OECD countries.

On the other hand, we see nothing wrong with blithely cheating our elderly citizens out of Social Security (that they paid into themselves as a payroll tax), and wiping out IRAs for the baby boomers to prevent them from accessing their own funds.

There is NO social network at all in this country, unlike ANY of the other OECD countries.

And if a person “falls through the cracks” for ANY reason whatsoever, they would lose literally everything they have and be forced to live on the streets.

Is THAT really what God intends?

We are living EXACTLY the same principles as our Founding Fathers in 1776 — laws protecting race, sex and religion not withstanding — and have not progressed one single bit since then in terms of moral behavior and human rights.

What we fail to understand is who and what we really are — perhaps because the truth in this case is pretty damned ugly — thus the US is perhaps one of the greatest hypocrites on earth, continually preaching morality to other nations, when in fact we have little enough ourselves.

WHY would ANY other country want to model itself as an American “Democracy”?

What we NEED is a good dose of reality, and I think it is coming quite soon.

By: Gordon2352 Sun, 15 Jul 2012 16:58:49 +0000 One final comment on Mr. Kaletsky’s question as to “Why is the response to economic crisis not more serious?”

I posit that the response is not more serious (strictly, in the US) because there is NO crisis.

I posit that the wealthy class do not see this as a crisis, but simply the US economy functioning as it should — except for the faux pas of the shift in government policy, while they were at their weakest during the Great Depression, to include social programs for the American people that NEVER existed before, and they CERTAINLY see no need for now.

THIS is really the crux of the matter that no one speaks about, or probably even recognizes.

And that is the underlying Protestant Work Ethic that the wealthy firmly believe in, which is why they are fundamentally unable to understand the need for social programs such as the European nations adopted decades ago as a matter of human justice and an integral part of society.

The Protestant Work Ethic (per Wikipedia) “is based upon the notion that the Calvinist emphasis on the necessity for hard work as a component of a person’s calling and worldly success is a visible sign or result (not a cause) of personal salvation.”

Notice especially the idea of “worldly success being a visible sign” of God’s approval and their salvation. Thus, those who do NOT prosper — regardless of their personal circumstances of, say, birth, gender or race — are not deemed worthy, because they are obviously damned by God. It is as though God, Himself, was telling them they are acting within the moral good, and to do otherwise is to go against God’s wishes.

Therefore, as I said above, the idea of the moral right of the wealthy class to be above the other classes is God-ordained, and cannot be challenged.

The wealthier they become, the more they begin to believe this, until it is ingrained into their class, and for the most part are not even aware of it, since it is their natural right.

The fact that they are NOT actually God’s ordained people is never questioned, nor the fact that others in society have an equal right to the fruits of their labors, as well.

How does this relate to the issue of this not being a crisis for the wealthy?

First and foremost, the unequal distribution of wealthy of the 1% from the masses is proof of their underlying beliefs.

But underneath that belief, there is the issue of how the US government is supposed to be run, versus how it is really run today.

If you notice, many are calling for a return to the original US Constitution, which was a good deal less liberal than the legal structure we presently live under today.

In truth, except for the relatively recent growth in liberalism, this country is really living according to the precepts of the US Constitution, and thus functioning EXACTLY as our Forefathers envisioned in 1776.

How is that, you ask?

Well, the US Constitution was basically set up to run as a two party system with the wealthy class firmly in control of the country.

And THAT is really what we have today.

This is NOT a Democracy, nor was it EVER intended to be one, and the “rights” laid out in the US Constitution were never intended to be applied to anyone who was not wealthy.

So, the wealthy say, what is your problem?

Everything is working just fine, except we need to get rid of ALL this social legislation that is fouling up what could be a great place to live, with increased personal freedom and less taxes.

THAT, Mr. Kaletsky, is really why the US response to the economic crisis has not been more serious.

I wouldn’t feel bad for not understanding that if I were you, since NONE of the American people really understand it either.

The wealthy class really doesn’t see anything wrong, and the middle class — about to become poor, as God intended — understands vaguely that something isn’t quite right because the rhetoric from the wealthy class doesn’t match what is happening on Main Street, but they haven’t a clue either. The poor already know the system is stacked against them, but I am not sure they understand why either.

Thus, because we do not understand who and what we are today, this nation is about to go over a financial cliff, which is guaranteed to destroy this country and everyone in it.

The irony of it is that we can’t seem to see the “forest for the trees”, so no one understands why it is happening, or what can, or even should be done about it.

By: Gordon2352 Sun, 15 Jul 2012 16:03:36 +0000 @ Kailim —

Thank you for your response. It is a pleasure to hear from someone outside the “system”.

I would like to clarify that I mean no disrespect to China, nor the Chinese people, for whom I have great admiration. China is doing no more or less than we should be doing, but aren’t. China is protecting their national sovereignty.

It is TOTALLY the fault of the US government for the dismal economic circumstances related to trade with China.

By: Kailim Sun, 15 Jul 2012 09:42:11 +0000 I am a designer and have not learnt economics seriously. I think the root of the problem is corruption and cold war mentality occured in the very top level at Washington DC.

I said not just once in the media. It is inconceivable for me as a foreigner that US presidents, state governors and senators etc can openly accept money from rich people for their election campaigns prior to their incumbencies. This should constitute bribery and corruption no matter you call these monies donations or whatever. It is very natural for any normal men to work for or to try to benefit those helping these people to secure a job with financial support. They are just human beings, not saints.

I still believe free trade and globalization can definitely benefit each other. The production advantages in America are long established high tech products and services which are so complete there from ideas and conceptual inception, preliminary design, product design, engineering development until manufacturing. While China has the advantages of providing cheap land and labor costs, relatively stable business environment and a relatively stable government and thus society compare with other developing nations. Therefore the two nations are bound to be good complements to each other. A Chinese minister once said a Boeing aircraft bought by China worths a billion pairs of shoes exported to America.

The chronic trade deficits occured in America is caused by arms embargo or sanctions imposed to China since 1989. Strictly speaking virtually all high tech products are militarily related, from computers, engines to aircrafts etc. The PLA has openly used civilian airliners for airlifting troops recently. Then Americans would have nothing, which they are good at, left for selling to China if they really mind.

China has been forced by this cold war thinking to invest abnormally heavy on speeding up her own development of high tech industries. I figure it will take at least a decade or two for us to catch up. That means Americans still have ample chances in the coming 10 to 20 years. Please take this chance to make some money for easing your trade defitcits, jobs and federal debts. You cannot let the businesses sitting there for 2 decades and keep on waiting until we can make our own.
I was told here in China that she was forced to turn to Europe for high tech products and services due to hardline policy at early stage of Bill Clinton’s term, and consequently China becomes quicker than expected substantial customers of Airbus, Ericson etc.

By the way I am a common Chinese who do not like and care much about communism and any other political doctrines. I am free and enjoy my own living here, and do have some American friends. I hope my opinion may be helpful to you guys.

By: ReutersTruth Sun, 15 Jul 2012 09:04:11 +0000 Add this to recipe above………

Bring about an Ill gotten gains panel, like their ‘end of life planning death panels’…..find the cheats!

Bring on 10% flat tax, across the board, income, inheritance, capital gains, interest.

No pay for elected politicians while the deficit grows.

Break up Big Banks, Big Box Retailers, Big Insurance, Big Pharma,Big Oil,- hit the reset button…………make things small again.

Reinstate Glass-Steagal act.1933

Start reducing ‘entitlement’ programs 10% a year.
Start reducing government 10% a year.

Restart Domestic oil drilling.

Start inserting real gold into the dollar.

English only in government, business and reinstate the draft for disciplining yutes, for public service, and legalise the old fashioned corporal punishment- this alone would INSTANTLY curtail criminal careers down the road.

Convert prisons to self sufficient kibbutz style co-ops.

Reinstate censorship in entertainment and media….
If the entertainment is violent, destructive and negative- it has no redeeming value for sale in a healthy, positive growing society.

Tax imports to parity U.S. valued made goods, why should imports be allowed to harm American Taxpayers who manufacture the same as the imported goods?

Expire paper currency every 12 months.

Make the DEA self financing.
Legalise marijuana.

Allow states control over their own borders.

Criminalise false & deceptive media advertising.

Withdraw military from foreign conflicts-
reserve military only for defense…..
Open bid ‘subcontractors’ for resolving offshore disputes.

Close TSA & homeland security and allow people to carry their own guns in the open. (unloaded).

Give airlines discretions to choose their passengers & manage their own security.

Reduce 50% taxes on all fuels.
Eliminate taxes on home made fuels.

Cut foreign aid to countries 50%

By: ReutersTruth Sun, 15 Jul 2012 08:18:17 +0000 WW3

By: robb1 Sun, 15 Jul 2012 02:18:14 +0000 Simple recipe:

– tax offshore outsourcing
– put up some import tariffs
– cut some corporate loopholes
– lower corporate tax for small business

You will see some good results in 2 years.

By: Gordon2352 Sat, 14 Jul 2012 15:53:44 +0000 @ LEEDAP —

By the way, your underserved, overly-enamored praise about “This insightful and balanced article by Anatole Kaletsky” still misses the point that he is dramatically wrong about “Why is the response to economic crisis not more serious?”.

First of all, lumping the US, the UK and the eurozone into a “one size fits all” is beyond comprehension. Each of these has separate issues that only superficially reflect those of the other two, mainly the result of an out-of-control global banking system, which he does not address at all. In fact, his total lack of understanding of economics is truly astounding.

He is no better than those he criticizes by stating the response to the crisis has resulted in “economic debates among politicians, media commentators and business leaders on issues that are almost totally irrelevant to unemployment and the pace of economic recovery”, since he offers no solution either, simply a rehash of the same problems. How, exactly, does this article contribute to a better understanding of the global financial problems?

Clearly, he does not understand the issues any better than those he castigates.

This article, as with so many others like it, applies the old maxim “if you can’t dazzle ’em with brilliance, baffle ’em with bullshit”.

Frankly, I am sorry that I ever read the article, mainly because it made me so angry that I chose to respond, which as you point out is pointless in this news source, since it caters to the masses and not the truth.

@ mullholland —

Hayek and Friedman are simply two sides of the same coin, except Hayek doesn’t have the requisite education to understand what he is talking about at all, whereas Friedman at least has the credentials, except he is totally wrong.

I have little patience with willful ignorance.

I’ve already wasted far too much of my time on this Quixotic quest, and will not respond to any more who simply refuse to understand the truth.