Some thoughts on the subprime/banking crises

[Champion Victoria]

I read that in the newspaper eating breakfast. I was like wtf lol? Wait...what? Isn't this like a serious issue? Why the hell would you randomly pick a big number?

Reminds me of the simpsons movie. "I was elected to lead not to read"
._. I don't do politics and stuff but I can't see how randomly picking big numbers can help the international economy?

They choose a large figure so that they don't have to repeatedly make budget appropriations. Once a certain amount is set, the funds can be allocated as necessary. Even though the bill stipulates that $700bn can be used, the federal government is only starting with $250bn. It will use more of the seven hundred billion if/when it is necessary.

Ultimately that depends on several things, including whether or not the first outlay actually proves to be helpful and whether or not the banks are actually using the funds to provide more credit.

 

[Guest123_x1]

market update and monetary policy history

As for "moral crisis", that's not even the term to use. The correct term is "moral hazard"

After a .5% "emergency" rate cut (as if lower interest rates will solve anything) with yet more cuts certainly to come, multiple global financial "summits" and conferences, and a few days of multi-hundred point rallies on the DJIA (only after dropping 1,500+ points), maybe the bailout is working?
It is all but certain that the total bailout will run more than $5 TRILLION!

A rally will be held called "End the FED" on November 22.
www.endthefed.us

Coincidentally-45 years before this-President John F. Kennedy was assassinated.
On June 4, 1963, JFK signed Executive Order 11110 which reauthorized Silver Certificates by the form of "United States Notes". Approximately $4 billion worth of United States Notes were printed to carry out this order, all backed by silver reserves held by the Treasury.
Upon Kennedy's assassination, the silver-backed U.S. Notes were withdrawn from circulation, and no succeeding president to date has enforced EO 11110-even though it has not been nullified in its entirety by a successive EO.
The ultimate intent of this EO was to put an end to the Federal Reserve by returning the power to issue currency to the Treasury directly without going through the Federal Reserve central banking system.

1963 Federal Reserve Note

1963 United States Note, as prescribed by Exec. Order 11110

http://www.thetruthseeker.co.uk/article.asp?ID=7867
http://www.rense.com/general44/exec.htm

Now the Fed and Democratic leaders in Congress are pushing through YET ANOTHER "stimulus" package – this one totaling more than $300 BILLION-will also involve spending on "infrastructure improvements" in order to "create new jobs".

I am so sick of the claims that recessions are caused by "lack of" consumer spending and fiat liquidity and the like that the mainstream media peddles on a constant basis. (In fact, this Keynesian economic* propaganda has been pitched over and over since the Herbert Hoover administration).
Don't we already have enough credit and debt? Why do we have to have EVEN MORE credit and debt and put much more of our purchases on credit when excessive credit and debt is what caused this mess in the first place?

Just when is saving and thrift a cause of recession? Just when is not spending so much and overextending your debt a cause of recession?
Just how will savings and not overspending into debt make recessions "worse" or even "terminal"?
What's so bad about SAVING money and paying everything with cash? What's so bad about not rushing out and buying Chinese-made junk at Wal-Mart at every opportunity and putting it all on credit?

I'll probably never understand why consumer spending is so important. Why is it always "doom and gloom" when consumer spending falls? What is wrong with thrift and saving money?

Do these idiot "leaders" in Congress, the White House, and the Fed NOT know that gas and food prices shot sky-high because of the last wave of these phony "stimulus" checks? Prices will only continue to go up even more rapidly with this latest wave of "stimulus" checks!

As for claims that "we're not in a recession yet", we've been in a recession for quite a while if you don't believe the government's Arthur Andersen-style book cooking.

In March of this year I made a PowerPoint presentation analyzing the wave of "stimulus" checks proposed and passed in January.
http://miikun.110mb.com/misc/stimulus

Here are some LewRockwell.com (LRC) articles about consumer spending, fiat currency, and the stock markets.
Our Duty To Spend? (Don Mathews, December 8, 2001)
Americans Live In A Fantasy World (Gary North, March 6, 2004)
What Goes Up Must… Stay Up? (Gary North, February 21, 2007)

On another note, also see Professor Michael S. Rozeff's "Terminate Fannie Mae and Freddie Mac" for why bailing out the two mortgage GSEs is a bad idea.

Also, with the amount of fake "liquidity" the FED is pumping into equity markets, it makes me wonder if they're trying to reproduce results similar to what's shown in the chart below?:

http://mises.org/story/2532

Prior to the Federal Reserve's establishment in December 1913, the U.S. had two previous central banks (Bank of the United States). Both those banks were relatively short-lived, compared to the FED. (the first Bank of the United States existed from 1791 to 1811, the Second Bank operated from 1816-1836)
By 1832, President Andrew Jackson had shown a thorough dislike for the Second central Bank for its corruption and fraud. The Second Bank's charter was up for a vote by Congress at this time, though the federal charter was due to expire in 1836, it was passed by Congress, but vetoed by President Jackson.
Here is a quote from Jackson when the Bank's renewal bill was being discussed:

"Gentlemen, I have been watching you for a long time and I am convinced that you have used the funds of the Central Bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, but when you lost, you charged it to the people.

You tell me that if I take the deposits from the bank and annul its charter, I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves and I intend to rout you out."

This is a video that highlights the history of the U.S. Dollar and monetary policy
For part 2:
http://www.youtube.com/watch?v=FbyQB8e-rQg

Oh and BTW, there's a proposal to lighten Fannie and Freddie regulations EVEN FURTHER! It's supported by the same Democrats who want to regulate virtually every other aspect of the economy! (it's to increase loan limits)
http://www.google.com/search?q=deregulate+fannie+freddie

What we absolutely need is NOT further corporate welfare "deregulation" schemes or to reward unscrupulous lenders for their poor practices, but instead to take stringent, punitive measures AGAINST them-especially those who offered products like "JUMBO Mortgages-Million Dollars-Borrow Up to 110% the cost of the house-No Docs!". Also the FED especially needs to be held accountable for their excessively easy credit policy which contributed to this bubble in the first place.


On the other hand, NYMEX light-sweet** crude oil has fallen to around $70/barrel (dipping as low as $66-67 on a few occasions-lows not seen since early summer 2007), which will require OPEC to cut production (the OPEC Reference Basket index dipped to as low as $60.82/barrel yesterday). http://www.opec.org/home/basket.aspx
(This situation is somewhat similar to the oil glut that resulted in a price collapse from nearly $28/barrel to $10/barrel in the first three months of 1986.)
Copper on the COMEX division fell below $2/pound-lows not seen since late 2005. (under $4,000/ton on the London Metals Exchange).
Due to the heavy demand and shortages of gold and silver, there are accusations of downward price manipulation of these two precious metals contracts on COMEX and London Metals Exchange. (Reportedly gold bullion on "off-exchange" physical markets is selling for $300+/oz ABOVE the COMEX paper "spot" price figures.)
http://www.google.com/search?q=comex+manipulation

*"Keynesian economics" refers to theories of British economist John Maynard Keynes (1883-1946)

**The terms "light" and "sweet" are used to "grade" crude oil. "Light" and "heavy" refer to "specific gravity" or the ease of flow. The terms "sweet" and "sour" refer to the sulfur content-'sweet" having little sulfur, while "sour" contains high-sulfur content.