>> ^chilaxe:
When Asian countries send us products, we give them currency that has a known conversion rate to other currencies. Currency represents labor. There's nothing special about it.


What kind of labor is it backed by? A haircut for another American? A consultation session for the government? An insurance policy? How many service jobs are we going to create before the world demands more basic things like soap, cars, televisions, fuel, food, and washing machines. They're not going to be able to meet future demand of these things if they keep throwing their products and legitimate money into our economy in exchange for our services and illegitimate money.

We aren't legitimately competing with the Yuan either, the Yuan is linked to the dollar. That means other countries inflate in sync with us to artificially suppress the value of their currency. They do so because they follow the Keynesian myth that a weak currency is good for exports. But why would you want to export something you make instead of consume it yourself, unless you felt you were getting something more valuable? Why would you INTENTIONALLY devalue your own currency to obtain a currency whose value wouldn't be high against it unless you did so? It's a paradox, but one that Chinese people were willing to make as wall street convinced them that tech stocks and home growth were legitimate. Now they've been burned twice by demand bubbles that they helped fuel by loaning towards consumption. That's why they're suffering now, not because their economy is unsound, but because they took the money we paid them with and recycled it into ours.

If they ever flooded the world with their 2 trillion dollar reserves, it's game over for the dollar. We don't have 2 trillion worth of their currency sitting in a vault to counteract it. Our labor services would become dirt cheap for us and others, but foreign imports would skyrocket in dollar terms. Domestic products would all get exported to richer countries, our standard of living would disappear overnight.


One of the reasons the US economy maintains the highest GDP per capita PPP in the world for nations above 5 million people is because it has a highly skilled workforce. Denigrating that workforce as "non-factory-working" or "paper" is meaningless as long as the rest of the world needs skilled labor.


GDP numbers are worthless, they're adjusted for the CPI. If the government lies about how much inflation they're creating, which I've already explained to you, they can remarkably overstate GDP. That's how despite this horrific mess last year, you still had dumbass economists coming on tv saying that we're not in a recession because GDP was still above 0%. But if inflation was calculated more honestly like it was 30 years ago, we'd have negative GDP every quarter. Instead, we claim to be growing a fraction of a percent despite being the epicenter of the problem.

If you think that we can deficit spend 100x more on military than anyone else, 50x more on entitlements than anyone else, and perpetually convince foreign savers to finance it in exchange for a negative inflation-adjusted yield, then you are sadly mistaken. Unless the Fed hyperinflates, we are going to have to set interest rates higher than they've ever been, possibly 30%, to lure in foreign buyers. Interest rates that high would make the correction of excesses unfold quicker, but hyperinflation is worse because we never recover from that. It looks like we're going that route, and that's what has Peter concerned. Foreigners have stopped buying bonds at these low interest rates, so the Fed has to buy them with pure inflation, new illegitimate dollars unbacked by labor. This is what's called "monetizing the debt," and it fails in every country that tries it. That picture in the video of the lady stuffing her oven with paper money worth less than firewood is from Weimar Republic Germany, a hyperinflationary episode in the 1920s that made people desperate and willing to follow Hitler.

isn't it lack of government oversight that got us into this mess in the first place???

Were the riots of the 60s a result of government failing to enforce Jim Crow laws? Rather than put law enforcement under a single umbrella, you need to understand the difference between a good law and a bad law. Before you even make the jump to regulation, ask yourself if the regulators are being regulated by the constitution? Nope. Sort that one out first, there's your problem. "Regulation" is an extremely general term used by politicians to great effect to blame others for problems and changes in market behavior that they create. We have a central bank in this country that price fixes interest rates since 1913. This is a socialist idea that was passed on the basis of its objective rather than its result. It turns out that letting a pseudo-government agency set interest rates results in an artificial lowering to delay politically inconvenient recessions. This artificial price fix results in the wrong kind of investment decisions and incentives, leading to phony bubbles that carry with them the seeds of their own destruction. I'll explain below.

In order for credit to exist, savings must exist. That's what credit is, someone else loaning their money out to someone at interest rather than spending it. Everyone wants a low rate of interest as a borrower. Everyone wants a high rate of interest as a saver. By definition, savings is underconsumption. Someone, somewhere, has to be saving rather than spending money in order for real credit to exist. These two forces are at odds with each other, to find the happiest medium between savings and production. That's completely perverted by a price fixing system where the government is dictating the interest rate for political purposes. Too easy dictation in the 90s caused the tech stock bubble, worthless tech stocks were trading at hundreds time earnings. When that "growth" came crashing down in 2000, Bush didn't want to have the recession occurring under his first term or he wouldn't get re-elected. So he and Greenspan lowered interest rates to 1% for a whole year to keep businesses borrowing and consumers consuming. The problem is, where is the savings coming from to allow both to happen at once? Overseas. We are the world's largest debtor nation now, borrowing from everyone to consume products that they make. They accumulate our paper money. We get their products. 70 billion a month trade deficit and still going. That's our economy the last twenty years. We abuse a reserve currency of the world status gained under the gold standard to export our now inflationary currency all over the world. That's coming to and end at some point. The Fed is increasing its balance sheet like there's no tomorrow, trying to replace the credit no longer being loaned to us with a printing press. It won't work. It didn't work in Weimar, it didn't work in Argentina, it didn't work in Zimbabwe, and it won't work here. The inflation is in the pipeline, it will hit during Obama's term. Obama and McCain are both socialists, the pork filled bailout bill they voted on ought to be evidence of that. Neither one understands that the recession needs to happen like the druggie needs withdrawal, and the more you try to stop the failures and painful reallocations with more drugs, the longer you're going to be in rehab.

So where did all that money from tech stocks filter into? With such low rates of interest and a removal of houses from the government's own inflation calculations, inflation shifted from tech stocks into real estate rather than being purged in a recession. So nobody but a few libertarian economists who learned a type of economics that isn't taught here could see the problem, one of them being Ron Paul's economic advisor Peter Schiff. In that mania, lending standards were abandoned to take advantage of the artificial demand created by the dictated low interest.

In other words, the market got drunk, but it was the FED THAT SPIKED THE PUNCHBOWL.

http://www.youtube.com/watch?v=LfascZSTU4o

http://www.youtube.com/watch?v=ucDkoqwflF4

You can see the austrian view (Schiff) directly in conflict with the pro-government keynesian/monetarist view that is predominantly taught in this country (Laffer/Swonk). That's why none of the so-called "harvard educated, brilliant, phd holding" managers of a these banks and investment firms were not only oblivious to what was going to happen, but regularly confuse weaknesses for strengths. It's that ass-backwards, we teach the economic equivalent of astrology. Why? Because who has the most to gain from a sexy interventionist theory that says inflation is necessary to prevent hoarding and politicians spending its citizens' money for them can stimulate economic growth? Why, it's the benefactors of inflation!

I'll address Necrodancer later, I gotta go. He seems awfully confused on what socialism is and how socialist we are.

>> ^jwray:
You presume that the price of food isn't going to go through the roof when the shit hits the fan. An average house could easily hold 20 cubic meters of grain, or other foodstuffs. In the worst case scenario, nearly everyone's top priority would be acquiring essential housing and food. Everything else is just a luxury.


No, I'm pretty sure he's accounting for that. When the dollar unit gets inflated and made less scarce, the price measured in those dollar units goes up by that debasement, including gold. That gold/oil chart I showed you earlier should have convinced you of that. The value of oil relative to gold never changed much, but both went up relative to dollars because that was what was being debased. Gold CAN'T be debased. You can't print 1 billion ounces of gold in a back room at the drop of a hat. You can do that with a fiat monetary unit. You can't do it with an inherently rare physical product which has to be mined from the Earth.

You're also not understanding what a depression is. It isn't armageddon in a vacuum. People are still employing each other and needing to pay each other, and trading with each other for a variety of products and services. Barter is ridiculously inefficient and cannot lead you back to the modern economy you once knew and stay there, you have to have money, a common means of exchange. In the Weimar hyperinflation of the 20s, many people were using cigarettes as money. Lastly, I tried to point out to you that food spoils, livestock requires upkeep and can die (lol, how'd you like to have your life savings in chickens wiped out by foxes, or a tornado, or disease), both are difficult to transport and have very high weight to value ratios, and frankly you can't hide them very well. If you hadn't paid someone to store it (provided you had what they wanted), someone could easily see you had craploads of wheat in your house (provided you had one) and raid it, killing you and your family. It is, after all, a depression full of desperate poor people. Not a smart idea. Or hey, what if there was a fire? Gold would survive it. Paper wouldn't, food wouldn't, oil wouldn't.

And imstellar, I appreciate your response and I generally think you have a good argument, but I think we need to focus on getting rid of the obvious first. It's a bit early to argue for voluntary taxation when we can't get rid of inflation and mandatory social programs for what should be market services. I find them unpalatable and dishonest relative to taxes.

ahhhhhh mammon-you know you want some!! if we run low,-print some mo!!!!!


Frustration, devastation, tribulation,indignation, hyperinflation,recession,depression, globillization, ere me now!
A take dem lesson from all dem 'istory,
dem old Reichsmark in dem Weimar dem free;
i and i wheelbarrow for a loaf of dem bread,
den dem look back on us ah say dem fill with d'dread
cause dem money fi dem flow when dem battle begin, and d'nex big war, start them all over agin', say-

Frustration, devastation, tribulation,indignation, hyperinflation,recession,depression, globillization, united nations

dem a president know when dem locust begin, cause dem close affiliation with dem power of ten-
dey dat meet in secret places choose d'affairs of men, dem a tell you when to sit, dem a tell dem when to stand, dem a tell the people how inna every land, and dem rule from b'ind the veil of a peaceful plan, BUT DEM REAL FASCINATION IS CONTROLLING I-MAN!!!

Babylon , babies....it's what for dinner!!!

>> ^bamdrew:
If you're concerned about the safety of our country, educate yourself, your friends and your family on the local, state, and federal election candidates (their voting records, their funding base, their previous employment, etc.). A well informed, highly participatory citizen is a patriotic citizen; an anti-government militia member, in this day and age, is typically just a misguided person with an agenda.


To be fair, nearly every totalitarian state that has emerged in the Western world in the 20th century came from a democracy where the citizenry was overwhelmingly "well informed, highly participatory", from Spain pre-Franco to Weimar Germany. They were not, however, well-armed.

And to whomever made the comment about the unlikely nature of a slightly armed, poorly trained populace resisting a modern military... Chechnya? Bosnia? Uh... Iraq?

The voice of the "Plutocratic Kleptocracy" known as the US government. You are kidding yourself if you think the USA is a Democracy. No matter what party is in charge.

>>> Actually, the USA is a Republic w/ a representative democracy. BTW nice work with the 2-dollar words. Usually the beret-wearers say "plutocratic oligarchy."

QM you're talking that polarised shit again.

>>> PolariZed? Why? Because I choose a side and have values? The answer is Yes. I wonder if you'll ever do the same. If you're a bloody "--ist" of any kind, just say so.

By the way, how is that Bush/Cheney small government going?

>>> Hey I'm still for small government as are all real conservatives. Bush pissed off a lot of conservatives with his liberal spending and immigration stances. We have to win the Iraq war almost singlehandedly cause Europe is too busy kissing the asses of Muslims, so yeah, we've had to hit the ATM more than we'd like. You'd think American liberals would be joyous Bush spends like one of them, but they're never joyous about anything, they thrive on misery.

What next QM? Weimar backstab after the war in Iraq cascades to shit?

>>> What are YOU going to do when we WIN the Iraq war? We're winning it now, why do you think your uh, "non-liberal" media is so silent?

These motherfuckers at Faux News should be thrown into jail for the rest of their lives... and they deserve worse than that for what they do on a daily basis.

>>> More of that liberal "free speech for all" I see. Thank God you guys are out of power, even with a majority in Congress, you're hated.

This is nothing short of ideological sabotage on a national level. The end result is people like QM- blithely ignorant, totally convinced that they are right and that their worldview is the only one which is acceptable (EVERYTHING else is just "libs").

>>> The "need to be right" is a deadly human disease. I would never claim to be right ALL the time, only 98%. I think the left, for all its moral relativism and nihilistic fervor, doesn't stand for jack shit and has no spine, and that's why they can't bear to hear anyone with a point of view.

Qauntum Mushroom - do you even realize how moronic your statement is? Was it sincere? Or do you know its bullshit, and say it anyways?

>>> Do you even realize how to spell?

Thats the question I've always wondered about dumbass neocons - do they know they are evil, or do they somehow think they are in the right on this?

>>> No need for insults, mamaluke. And how can you call anything or anyone evil? According to the left there IS no evil! Everything is relative! See, how can we tell a cannibal his culinary choices are wrong? That would be judgmental!

now let's compare the two ideologies' media footprint:

Conservative bias...FOX News and talk radio (which is not news but mere commentary.

Mainstream Liberal Bias...New York Slimes, St. Petersburg Slimes, Washington Compost, San Fran Carbuncle, MS-DNC, CNN (Crescent News Network), ABC, CBS, PBS, NPR, USA Hippie, Slime, Newsweak magazine, BankruptAir Amerikkka and 99% of Hollywood dreck.

The drive-by media no longer hide that they're a fifth column liberal propaganda machine, working and walking in lockstep for the 'Crats.

Libs had 50 years of unopposed 3-network bullshit. The party's over. ha ha ha ha.

Ohh mink! Don't talk about those excellent protectors of sound fiscal police and minimal government intervention!

What next QM? Weimar backstab after the war in Iraq cascades to shit?

Over the last few years there were reports that showed the US military dropping recruitment requirements and offering waivers in exchange for military service.

Reports of the Army unable to supply sufficiently armored vehicles and other equipment against IED threats, pre and post surge. Soldiers are now familiarizing combat driving techniques using simulators because there is a shortage of M-1114s.

America does possess formidable military forces, but we are talking about soldiers on the ground currently not total combined forces; which would take into account navy and air.

Extended tours (from 12 to 15 months), with multiple returns are common, fatigue is taking it's toll. A secondary surge has already taken place to bolster troop numbers, by sending more combat brigades and extending tours for troops already in Iraq.

Troop levels would thus increase to around 200,000 by the end of this year, a record since the start of OIF. These numbers of course do not include the large number of private military contractors in Iraq, also surging in numbers, paid for by US taxpayers under contract from the DOD. Meanwhile the Army is shedding officers at an alarming rate, 44% left, the highest loss rate in 3 decades.

With regards to the Al Anbar success stories, one must remember that is only occurring because previous Sunni insurgents have turned against Al Qaeda, making US forces the most convenient allies in driving out foreign radical Islamic terrorists. The relationship is tenacious, it also means the US forces now have to bolster previous Sunni insurgents and make them components of the Iraqi government, which is filled with Shia militias who do not want minority Sunni influence.

"To bolster that case, Bush made his own surprise visit to a U.S. military base in Anbar province on Sept. 3 to tout growing cooperation between Sunni tribal leaders and American forces.

But the sheiks didn't seek out U.S. help because an additional 30,000 U.S. troops had been shipped to Iraq. Rather, the sheiks had found themselves caught between al-Qaeda extremists on one side and Shiite-dominated government forces on the other.

The Americans became the enemy and erstwhile friend, respectively, of my enemies – and thus an ally of convenience for the Sunni sheiks.

Indeed, the Anbar situation could be viewed as evidence that the political and ethnic divisions of Iraq continue to deepen – with Sunni traditionalists growing only more desperate. But these shifting sands of allegiances have become the foundation upon which Bush is building his case for open-ended U.S. military involvement in Iraq."

- How VIPs get 'Brainwashed' on Iraq by Robert Parry.

The important thing to consider is; will such success be replicated in other provinces? Will the forces join into the Shia dominated government which opposes Sunni influence? Thus how long will this commitment last. All questions to which officers within the armed forces cannot answer, because the situation is that fragile.

After posing gamely with the troops at the Al-Asad base, Bush celebrated the return of Sunni areas to the control of U.S.-armed militias-composed largely of former insurgents who have at least temporarily decided that their Shiite rivals, currently in control of the central government, are a more pressing enemy than the American occupiers. Speaking of one such group of Sunnis trained by the Americans and dubbed the “Volunteers” by their instructors, a U.S. soldier told The Washington Post, “I think there is some risk of them being Volunteers by day and terrorists by night.”

The National Intelligence Estimate reported that Iraqi goverment is precarious, violence remains high, a decrease in Baghdad violence due to sectarian cleansing. The Government Accountability Report, a congressionally mandated report, showed that the Iraqi goverment met 3, partially 4, and did not meet 11 of its 18 benchmarks. The NIE was tweaked favorably by Gen. David Petraeus, the GAO was attacked by the White House as being 'inadmissible', 'harsh' and 'locked into failure'.

With regards to your comments about losing Iraq on principle, it was never a war for us to win in any sense, it was a systematic fear mongering campaign driven by PowerPoint presentations with aerial photographs about WMDs that got us into Iraq.

After 4 years of being constantly lied to about hostilities ending, turning the corner, mission accomplished, and witnessing the daily ineptness of the way the current administration has and is handling the war we are again on the brink of giving this administration another pass on the war up to 2009 since the current surge will remain up to and until April 2008. To have President Bush then compare the Iraq war to Vietnam; As Andrew Sullivan put it:

His speech yesterday actually managed to shock. You might think that, in wartime, a president would acknowledge what no one denies is a terribly grim decision in front of us - whether to pursue a clearly unwinnable war in order to govern a clearly ungovernable country - or withdraw and redeploy in ways that will doubtless lead to even more bloodshed. But no. There is no gray here; no awful decision for the least worst option; not acknowledgment of his own moral culpability for such a disaster. There is instead an accusation that those who reach a different judgment about the course of the war are, in fact, enemies of the troops:

Our troops are seeing this progress that is being made on the ground. And as they take the initiative from the enemy, they have a question: Will their elected leaders in Washington pull the rug out from under them just as they're gaining momentum and changing the dynamic on the ground in Iraq? Here's my answer is clear: We'll support our troops, we'll support our commanders, and we will give them everything they need to succeed.

To place all the troops into the position of favoring one strategy ahead of us rather than another, and to accuse political opponents of trying to "pull the rug out from under them," is a, yes, fascistic tactic designed to corral political debate into only one possible patriotic course. It's beneath a president to adopt this role, beneath him to coopt the armed services for partisan purposes. It should be possible for a president to make an impassioned case for continuing his own policy in Iraq, without accusing his critics of wanting to attack and betray the troops. But that would require class and confidence. The president has neither.

For more I would refer you to an excellent post - Thirteen Ways not to think about the Iraq war.

"why is it that the Fed is able to manipulate the money supply such that the dollars you and I work for are cleaved of their real value and inflated at their discretion, with no Congressional oversight?"

Congress must never have a hand in managing the money supply. The whole point of the Fed is its impartiality. If you had guys afraid to put the brakes on the economy just because it's an election year, that's quite the conflict of interest.

The Fed's job is to protect the value of money, above all. This may mean encouraging lending, this may mean engineering recession, but in the end it's just to keep money worth money.

Forget about your bank collapsing, the Fed is there to keep the money itself from collapsing. It's terribly scary to have that power anywhere, so a suggestion to automate the process against inflation, take some or all human error out, that I can understand. But managing the money supply can't be a democratic process, whereby we all get representation in what we want: we'll all say we like money, we want more, ignorant of the intricacies of how money is valued, and to what extent this disbursment is damaging the value of the money. Sometimes recession is the only way to maintain the value of money, to manage inflation; and we would never choose recession, we could never endure such a thing by choice, because it's more tangible than suffering inflation.

The ramifications of a failing currency, like clockwork, are unspeakable violence in the streets, sometimes marked by counter-revolutions into war-mongering barbarism. It's a pretty basic human instinct: if what we have is worth nothing, let's go take what they have.

It's for the latter reason that people are reluctant to start pulling blocks out of the Jenga tower that is the Fed. It's been a long time since worldwide economic hardship precipitated an Italian invasion of Ethiopia, a Japanese invasion of China, and a Weimar Germany in which beer cost 4 million marks per glass (France needed those reparations, because it too was hungry).

This video is crazy. "Do you want your money gaining value every year, or losing value every year?" Well, shucks! Didn't realize it was THAT simple! I WANT MORE MONEY, DOG!

Interesting. The Edit Your Post page is not allowing me to add it to a collective (Spanning Time or Arts? Arts or Spanning Time? Anyone have a Weimar Republic and Beyond collective yet?).

I think this is because the 'Bot did not technically kill it. Or Lucky quietly and efficiently closed the loop.

btw, thank you for the save. It is one of my favorites. So long as james robert roe doesn't realize his sinister dream of raising the level to 15 votes, then this one should haunt me at 9-10 votes for the next four days.