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Avery Goodman

 
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  • Why Our Credit Crunch Mirrors the Weimar Hyperinflation from 1919-1923 [View article]
    Some of you have expressed a preference for "housing" over gold, as your theoretical means of escaping from the stealth tax of heavy inflation. Let me quote from the famous former Fed Chairman, Alan Greenspan who, before being seduced by the "dark side" wrote, in 1966, in a paper, titled "Gold and Economic Freedom":

    "...Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights..."
    Apr 13, 2009. 04:05 AM | 5 Likes Like |Link to Comment
  • Why Our Credit Crunch Mirrors the Weimar Hyperinflation from 1919-1923 [View article]
    On the other hand, a terrorist attack might actually have the opposite effect of prolonging the avoidance of hyperinflation. This is why I have pointed out, in the article, that no two historical events are ever alike. But, there remains a frightening parallel between the credit/debt situation of Wiemar Germany vs. the USA, as well as the behavior of the Reichsbank in 1918 and early 1919, in reaction to the post-war "credit crisis" and the behavior of the Federal Reserve, now, in response to this "credit crisis."
    Apr 13, 2009. 03:33 AM | 2 Likes Like |Link to Comment
  • Why Our Credit Crunch Mirrors the Weimar Hyperinflation from 1919-1923 [View article]
    The Zimbabwean experience has few parallels to the process now happening in the USA, other than the unfunded fighting of a foreign war (which is not insignificant, however). It is presented only to show that neither the German reparations payments, nor the destructive war on Germany's territory, nor a change of government at the initiation of hyperinflation, are necessary prerequisites required for the initiation the phenomenon.

    Because of the policies of the monetary oligarchy, all the elements needed for hyperinflation are already in place, with respect to the USA. By means of example, and not by limitation, all that is now needed is, perhaps, a new terrorist attack, or even just a series of failed treasury auctions to fill in the missing element of a "trigger" event. The same is even more true of the U.K., which is unlucky enough not to be issuing the world's reserve currency.
    Apr 13, 2009. 03:27 AM | 3 Likes Like |Link to Comment
  • Why Our Credit Crunch Mirrors the Weimar Hyperinflation from 1919-1923 [View article]
    Some comments imply that in the absence of the devastation of WW I, and the payment of reparations, hyperinflation is not possible. This is a reflection of the basic humanity of the commentators, and must be understood as such. The first instinct we all have is to deny reality, and say, "No, no...that can't possibly happen. Maybe, it can happen to someone else...but NOT to me!" I went through this phase, during the first part of the time I began to consider the possibility.

    It is human to deny, but it is not always logical or correct. We must often overcome such instincts in order to see the truth. One cannot flee from reality simply because it is very hard to accept. Neither the devastation of a war on a nation's own territory, nor forced reparations are a necessary prerequisite for hyperinflation.

    Up until recently, Zimbabwee was the breadbasket of Africa, one of that continent's richest nations, a net exporter of grain and minerals, and one of the most successful African nations. It has not been involved in a devastating war. It did experience a change of government, in 1980, when blacks took over the government from the minority white government, but heavy inflation didn't start until years after that.

    Inflation rates in Zimbabwee were high, in the 1980s, ranging from 7% to 20%, but, in the early part of that period, prior to the ascent of Paul Volcker to the Fed Chairmanship, inflation was high all over the world, including in America. Extraordinarily high inflation rates, in Zimbabwee, began in the 1990s. It did not begin as a result of any war, but, rather, as a result of economic mismanagement.

    Zimbabwean inflation was made considerably worse, however, when the nation became involved in a war in Congo in 1998. That is when heavy inflation converted itself into hyperinflation. The war was never fought, however, on Zimbabwean territory. There was no bombing of cities or towns, no wrecked homes or industrial parks, no shell-shocked population. Zimbabwee simply intervened in a foreign war, pure and simple. All fighting took place in Congo. Just as George W Bush emptied America's coffers by invading Iraq, Robert Mugabe, the President of Zimbabwee, emptied his country's coffers supporting troops in Congo.

    Since then, the situation has become uncontrollable. Just recently, it was taken out of circulation by the new government, and foreign currencies are now the circulating medium of exchange, with the U.S. dollar, and South African Rand dominant. In short, Zimbabwean hyperinflation was purely the result of economic mismanagement, including economic mismanagement of the budget for a war, and nothing else.

    According to Wikipedia, "The first Zimbabwean dollar was introduced in 1980 and replaced the Rhodesian dollar at par...At the time of its introduction, the Zimbabwean dollar was worth more than the U.S. dollar, with ZWD 1 = USD 1.47...According to Central Statistical Office statistics, annual inflation rate rose to 231 million percent in July 2008." As most people already know, the Zimbabwean currency is now worth next to nothing.

    One would hope that Americans, being more politically active, with a long history of an active republic, with traditions of independence and the rule of law, will eventually cry out so loudly that those in power will no longer be able to ignore them. The monetary oligarchy, otherwise known as the "Federal Reserve", and its constituent banks, will be forced to take notice. Before that happens, however, a devaluation in the range of the single or low double digits is certainly possible, and, dare I say...even likely.

    As I said in the body of the article, my personal estimate for U.S. dollar devaluation does not reach into the millions or trillions. I believe that American devaluation will range somewhere between 1 to 4, or 1 to 10 by the end of the next 4 years. That, however, is still enough to essentially wipe out the savings of the middle class. The wild betters and risk takers will be subsidized, and those who were prudent will be punished.

    That is why such inflation is immoral. That is why it will deeply scar our nation for a generation. It is time for people to begin to make their voices heard, so that the inevitable scarring can be kept as small as possible. Even in countries that do not own the world's exchange currency, the process of currency devaluation takes place over time. This time, the event will be far more protracted than in cases like Weimar Germany or modern Zimbabwee.

    We are Americans, and fortunate enough to have the benefit of forefathers who were much wiser than we. The rest of the world willingly gave them the right to print the world's reserve currency. They did this because they believed in us, our integrity, our honesty, in our strength, in our courage and in our convictions. The monetary oligarchy, however, is in the process of either knowingly, or unknowingly, tearing all of that apart.
    Apr 13, 2009. 01:32 AM | 7 Likes Like |Link to Comment
  • Fed Minutes: We Have Not Yet Even Begun to Print! [View article]
    theman,

    All the central banks are engaging in a race to the bottom. The issue is who can devalue paper money the fastest and furthest. They are all schooled in the same narrow minded Keynesian economic philosophy, so they all think alike. Only Germany stands out, because they have a direct connection to the 1919-23 hyperinflation. But, they will eventually be outvoted by the Club Med countries of Europe (Italy, Spain, Portugal, Greece, Cyprus, Malta) and soon as France swings into the currency debasing camp.

    I think we will have something like a "worldwide Weimar". The currencies that are likely to collapse the most, and first, into heavy inflation and/or hyperinflation, are the U.S. dollar and/or British pound.

    There is no telling what a particular currency will do over a space of a month or even 6 months to a year. Looking at trade flows, I'd say that China and Japan have huge problems. Both are also notorious historical currency debasers. So the yuan and yen are useless (and you can't buy yuan outside of China, anyway)

    The Australians, New Zealanders, and Canadians may not do as much printing as a lot of other countries. Even that, however, is questionable, given recent statements by the Bank of Canada. I suspect that the low on the Aussie is in the mid-$1.50 to the US$ range (for the short term) and it is now near $1.40, so it is overbought, and probably will be cheaper in a few weeks to a month or two. Same with NZ$ and C$. When these currencies fall, as I believe they will, they will be the "place to be" for the longer term, at least with respect to that part of any portfolio that must be in cash.

    Incidentally, over the next few weeks, I think the U.S. $ will rise, because of various things the Fed and Treasury are doing that I don't have time to fully discuss right now. But, over the long term, the dollar will deeply collapse, as predicted in this article.
    Apr 11, 2009. 10:10 AM | Likes Like |Link to Comment
  • Fed Minutes: We Have Not Yet Even Begun to Print! [View article]
    Thank you, Joe Q. I navigated to the site you mentioned, and it is enlightening. I agree with Mr. William K. Black as to the potential culpability, the level of fraud and the need for prosecutions. I think there will eventually be indictments. Do not give up hope! The guilty will eventually be punished.

    Justice is slow and frustrating, but it is sure, from my experience. The first order of business is cutting the tentacles of the international banking institutions that are squeezing the life blood out of Washington DC. We must do this by breaking up banks that have grown so large that they are a danger to the system. Second, we need to massively reform all regulatory institutions, including removal of exclusivity from organizations like CFTC, and empower state law enforcement to take the lead. Third, we need to punish the wrongdoers, in order to instill a sense of personal responsibility.

    Shareholders should not be the ones paying the price for CEO misfeasance, but, in the past, that was almost universally the case. Executives who do evil, should be forced to pay a price for what they have wrought. We haven't even gotten to step 1 yet and that is disheartening I admit.
    Apr 10, 2009. 12:57 PM | 3 Likes Like |Link to Comment
  • Fed Minutes: We Have Not Yet Even Begun to Print! [View article]
    Should read "...I sound like a pessimist..."
    Apr 10, 2009. 09:38 AM | 2 Likes Like |Link to Comment
  • Fed Minutes: We Have Not Yet Even Begun to Print! [View article]
    Jake,

    I agree that it is impossible to know how deep the devaluation is going to be, or when the "critical" mass of money printing will happen such that the "chain reaction" and melt down will occur. But, it really isn't a matter of "if" but rather of "when", and I think we agree on that also.

    I suspect that the devaluation of the U.S. dollar will be many orders of magnitude less than the one in Germany 1919-23, but that is probably because I am fundamentally an optimist. I sound like an optimist in this article, but the pessimism is only because of how very grave the current situation is.

    That being said, even if the devaluation is many orders of magnitude less than Weimar Germany, it could be well beyond anything you and I can now imagine. There is a huge distance between 1/Trillionth and ???, and most of that distance is deeply disturbing.
    Apr 10, 2009. 09:37 AM | 5 Likes Like |Link to Comment
  • Fed Minutes: We Have Not Yet Even Begun to Print! [View article]
    MattZN, I reread my response comment to you, and I was unfair. You genuinely wanted to express your point of view, and I was excessively harsh. Sorry...

    I should have said that I think you are missing the fact that all the money used to reduce mortgage rates, and used to bail out insolvent banks, must come from somewhere. It can be printed, but money derives value from rareness. When you take away the rareness, it has less value. Reducing the value of money is a stealth theft from the current holders of that money who may be locked into CDs, bonds and other fixed income investments.

    Primarily, the money will come from pensioneers, diligent savers and other people who are frugal and, for one reason or another, can no longer take big risks with their money. They have trusted our government, and chosen to keep their money in bank deposits, and bonds, and depend on fixed income. That, of course, means the government is essentially stealing the money from one part of the population to give it to another.

    Redistribution of wealth without the consent of the governed, is wrong. Remember the words "taxation without representation!". It was the rallying cry of our American Revolution. In my view, far more harm is caused by trying to inhibit normal economic cycles than by allowing them to happen. It is not the government's role to declare winners and losers, and to steal from one to give to another, especially when the theft is not in the form of above-board taxation.

    Even Ben Bernanke, and his mentor, Milton Friedman, believe that the Great Depression was caused by the Federal Reserve, which reduced the money supply. The reason for the reduction was that the U.S. was on a quasi-gold standard, having previously exited the "pure gold standard" and, in the 1920s, it printed more dollars than it had gold. When people began flocking to convert dollars, which they had lost faith in, into gold, the government ran out of gold, leading to the infamous gold confiscation order of FDR.

    Some people may benefit from artificially lower interest rates, but it harms the economy overall. It creates imbalances in the allocation of investment resources, and the money must ultimately come from somewhere, whether by honest taxation, or by stealth taxation through inflation and transfer. But, ultimately, the end result is transfer of wealth, decided by the Federal Reserve, with some input from the government, but without the consent of the owners of property. That is also true of bank bailouts, which, since they benefit those clearly at fault for this Crisis, are even more insidious.

    The net effect is to create high levels of moral hazard. You could, potentially, also argue that, from a constitutional law standpoint, that this type of activity violates our Constitutional protection from government seizures of private property.

    The Federal Reserve Transparency Act of 2009, H.R. 1207 already has a lot of sponsors in the House, and has been sent to the House Committee on Financial Services. A similar bill, 604, in the Senate is known as the Federal Reserve Sunshine Act of 2009, and was introduced by Senator Bernie Sanders. This bills, when passed, will go a long way toward reforming the Federal Reserve.

    Hopefully, we will see more Congressional oversight of the Federal Reserve, and some of the more egregious abuses will end. It is unlikely, however, that this will happen fast enough to stop what the Fed is doing now. A deep and fast devaluation of the U.S. dollar is inevitable. How deep and how fast is really anyone's guess.
    Apr 10, 2009. 07:31 AM | 7 Likes Like |Link to Comment
  • Fed Minutes: We Have Not Yet Even Begun to Print! [View article]
    Since I created the earlier response entirely myself, I am gratified
    that you think it good enough for you conclude I must have "snipped it"! Instead of spitting out bile, however, I suggest that you would be better served by reading the book, whose full citation I have already given you.
    Apr 10, 2009. 05:58 AM | 3 Likes Like |Link to Comment
  • Fed Minutes: We Have Not Yet Even Begun to Print! [View article]
    g452ooo

    Since I created the earlier response entirely myself, I am gratified that you think it to good enough for you you conclude I must have "snipped it"! Instead of spitting out bile, however, I suggest that you would be better served by reading the book, whose full citation I have already given you.
    Apr 10, 2009. 05:57 AM | 5 Likes Like |Link to Comment
  • Fed Minutes: We Have Not Yet Even Begun to Print! [View article]
    I am an amateur economist. But, one doesn't need years of schooling to be a better "economist" than Ben Bernanke. One merely need take off the blinders, and release the common sense inside. A broad background in law, economics and history helps, but is not absolutely necessary, but doesn't hurt. It is precisely the narrow education that professional "specialists" get, here in America, that may be blinding people like Bernanke from reality. That is probably why the man has been wrong on virtually all his economic predictions so far.

    That's right...Mr. Bernanke has been wrong about almost all his predictions concerning the course of this crisis since the beginning. Where, then, can anyone obtain confidence that he knows more than we do, now? Should we throw away our common sense, when we have been correct consistently, over the past 4 years, and he has been consistently wrong?

    What confidence can the American people have in this man, or others in Washington, in light of what has happened? What assurance do we have that they know much, when they first failed to regulate, and, then ended up completely wrong on almost all economic projections, one after another?

    I submit that neither Bernanke, nor his comrades, such as Timothy Geithner, know what they are doing. He and the others in that crowd in Washington DC, are convinced that if they throw money around, it will land somewhere, and help things. To this goal, they have now pressed the accounting standards board to legalize what is essentially accounting misrepresentations by removing of "mark to market" accounting. That, of course, was inevitable.

    So, millions of Americans are better economists than Bernanke.
    The mass "throwing of money" has resulted in what will eventually be a stealth transfer of wealth from those who earned it, to those who have political clout. It is the same process that occured in post World War I Germany. It is done through heavy inflation, which is a stealth tax upon the people.

    Indeed, transfers of wealth are the key to understanding why this crisis mirrors the German hyperinflation, and not the Great Depression experienced by 1930s America. To fixate on the Great Depression is to ignore the true problem we face.

    1) Post WW I Germany was the biggest debtor nation in the world, at that time. Debtor nations are dependent upon foreign cash flows. In contrast, in the 1930s, like Japan in 1990, the U.S. was the biggest creditor nation in the world. That is why Germany had hyperinflation when it printed money, while 1990s Japan and 1930's America had deflation as they did the same thing. Because we are the biggest debtor nation in the world, the current money printing will result in hyperinflation, NOT deflation.

    2) Post WW I Germany had just finished fighting a major war on borrowed money, without properly budgeting or taxing. The USA has just fought, and continues to fight, multiple wars on multiple fronts that, while not quite as "big" as WW I, have been extraordinarily costly. We use a professional army, and its pay and equipment add huge costs. We have failed to budget these wars, and have borrowed money, instead, in order to fight them. By contrast, from an economic point of view, late 1920s and early 1930s America was a net "beneficiary" of WW I, which resulted in huge debts being owed to the USA, and the first stage of the rise of the U.S. dollar to replace the British pound as an international medium of exchange.

    3) Post WW I Germany was heavily dependent upon the import of foreign raw materials. Indeed, the USA was one of its biggest creditors. The USA is no longer a creditor. It is now very dependent upon the import of foreign raw materials and finished goods. The temporary improvement in trade figures will disappear as the fake recovery gets under way. By contrast, in the 1930s, the U.S.A. was one of the biggest exporters of raw materials.

    4) Post WW I Germany was heavily dependent upon foreign cash flows to plug holes in its budget after the War was over. Sales of bundesbonds to foreign buyers, including the American financier, J.P. Morgan, were critical. The USA is now even more dependent upon foreign cash flows. Sales of huge numbers of Treasury bills, notes and bonds are critical, especially to China, who, unlike America to Germany in 1918, is currently a strategic competitor.

    5) Germany was not the only nation affected by the post-War depression and the so-called 1918 "credit crunch." All of Europe experienced it. Not all countries, however, followed the same path to ruin. Similarly, the whole world is now experiencing the so-called "credit crunch".

    6) Germany led Europe in the effort to spend its way out of the post-war depression. The USA is now leading the world in an effort to spend its way out of this depression. At first, Germany seemed to "recover" from the depression. Soon, America will seem to "recover" from this depression, in a similar manner. In 1919, many admired the Reichsbank. Employment rose, unemployment fell...economic output exploded -- or seemed to, at first. No doubt, that will be the case, again, this time as America leads the way into a fake recovery. Most of Germany's recovery amounted to irrational production of relatively useless goods and services. The industrial bailouts were improperly allocated and colored by the illicit transfer of wealth that is inherent when a nation chooses to print up new money. The same will be the case now, with America.

    7) Like America, now, in post WW I Germany, money flows continued for quite a while, in spite of the flawed policies of the Reichsbank. American trade interests, for example, supported the German spending on U.S. raw material products, because Germany was one of their biggest markets. The USA played a similar role with respect to the Weimar Republic as China plays now to the USA. It was Germany's biggest creditor. It is quite likely that money flows to America may continue for an even longer time. However, eventually, they will be cut off.

    8) Like the foolish foreigners who now buy U.S. bonds, even the otherwise savvy American financier, J.P. Morgan, were generally convinced by officials of the Reichsbank, that the problems were temporary, and that the mark would regain its value with time, just as buyers of Treasury debt are now convinced that the dollar will retain value. The U.S. has a distinct advantage in this, because it is able to pump up its currency with credit default events that must be settled in dollars. This results in a direct benefit to the dollar in terms of exchange value, and allowed the Fed to obtain foreign currency swap lines. The swap lines were obtained because foreign central banks temporarily needed to supply dollars to financial firms who needed to settle CDS events. So, the temporary party will go on longer in America, until the world's patience is finally exhausted.

    9) The Reichsbank claimed that it could control the events it created, just as the Federal Reserve does now. Questionable statistics were regularly published, just as is now the case in the USA. German authorities believed, just as American authorities now believe, that the perception is more important than economic reality. Eventually, however, when the foreign cash flows dried up, reality reasserted itself, and the German economy entered hyperinflation.

    10) Finally, most tellingly, the German "professional" economists called the 1918 post war depression, prior to the hyperinflation, "the credit crunch", and the prevailing complaint was that banks were hesitant to lend money. Unwittingly, American professional economists, including Mr. Bernanke, have dubbed the present crisis with the same name. A frightening coincidence...

    For more information about the German hyperinflation experience, read the following book. It was written long before the current crisis, and even before the full impact of the Great Depression hit the world, back in the 1930s. Thus, it has no bias. It will be an eye-opener for the "doubting Thomas".

    Turroni-Bresciano, Constantino, The Economics of Inflation – A Study of Currency Depreciation in Post-War Germany (George Allen Unwin 1931)
    Apr 9, 2009. 11:40 PM | 11 Likes Like |Link to Comment
  • Fed Minutes: We Have Not Yet Even Begun to Print! [View article]
    Matt, it is rather clear that you "don't get it". In fact, it is clear that you have no background in economic history. Everything that is being done now has been done before. It did stop the depression back then, but it ended in hyperinflation. The same is going to happen this time around.

    It is unfortunate that our educational system creates persons, like Bernanke, who are so narrowly educated, and focused on only one event. America's economic leadership is narrowly focused on the Great Depression. They do not see what I, and other men with a broader education can clearly see.

    This era has the most in common with 1919 Germany, not the Great Depression era in America. In fact, the name that the American economists, including Bernanke, have given it, is not the name given to the Great Depression era, in the 1930s. American economists are calling our present situation the "Credit Crunch". They are doing this, while being blissfully unaware that German economists called the post WWI depression, in 1918 by the exact same name.
    Apr 9, 2009. 03:46 PM | 18 Likes Like |Link to Comment
  • Did the ECB Save Comex from Gold Default? (Part 2) [View article]
    Kohalakid, the article title starts with "Did the ECB...?", not "The ECB..." did this or that. We do not know, for sure, as I have made clear, that ECB gold was sold to Deutsche Bank, and that is part of the complaint. That being said, any rational person's suspicion level would be raised very high. So, I call for a full investigation. That is all. Not condemnation, nor a finding of "guilt". There is a big difference.

    The piece is not intended to allege that Deutsche Bank or COMEX defaulted. If you got that from it, it was an unintended message. The delivery was made. However it was accomplished, I am happy, because, otherwise, the buyers might have had a lot of anguish. The sudden appearance of 883,300 ounces of gold, however, is circumstantial evidence that the conspiracy theorists, from GATA to Jim Sinclair, are correct, and that is the point of the piece. Nothing more.
    Apr 8, 2009. 12:13 PM | 1 Like Like |Link to Comment
  • Did the ECB Save Comex from Gold Default? (Part 2) [View article]
    Tern, evil can only breed in darkness. If state authorities were empowered to regulate, subpoenas would be issued -- something that never happens now, offices possibly raided with computers seized, etc. which also never happens. All the dirty laundry that is alleged to exist, if it does exist, would be revealed.

    If, indeed the Fed and Treasury Department are involved, then it will show on documents, or in selective document destruction, as it always does. That would be enough to collapse the alleged conspiracy, assuming that there is one.
    Apr 8, 2009. 07:53 AM | 1 Like Like |Link to Comment
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