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Monetary System Still Undergoing Stress Test - Cheat Sheets Supplied

"collapsed in response to Paul Volcker’s austerity" I'm suspicious of anyone calling Paul Volker austire. He's an idiot. I challenge anyone to dispute it.

"Stephen “There-is-no-exit” Roach" I said it first.

Replace Ben Bernanke with Paul Volcker

You are obviously ignorant of Volckers record as Chairman of the Federal Reserve Board. He is a bad leader and an incompetent economist.

Let's Just Say It: Print More Money

50% of people have an IQ above 100 & 50% have an IQ below 100.

Bernanke's Great Lie: The Gold Standard and the Great Depression

A metallic standard is an impossibility. There is no such thing as "free trade".

Don't Be Fooled - Inflation is Coming

JBP: "The most fundamental monetary aggregate also calculated by Williams is called the adjusted monetary base, which measures very liquid forms of money such as bank notes and bank reserves"

Absolutely wrong. An increase in currency is deflationary unless offset by open market operations of the buying type. The only base for an expansion of total bank credit, and the money supply, is the volume of legal reserves supplied to the member banks by the Fed, in excess of the volume necessary to offset currency outflows from the banking system. The adjusted member bank legal reserve figure is that base.

M3: It is a succulent irony that professional economists, (those who confuse the supply of money with the supply of loan-funds), thus conclude that increases in the old monetary figure “L”, (or M2, or M3), are inflationary.

The conclusion is tantamount to saying, “don’t save money” as savings (which we don’t have enough of) adds to “L” (or M2, M3), and therefore has an inflationary bias, when in fact, savings (a large portion of “L” (or M2, M3) is evidence of money that has already been saved/spent/invested. Savings-investment accounts have been lumped into the Keynesian inspired concept of the money supply (as are MMF funds, etc).

The money supply is unknown & unknowable.
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The trade deficits are inexorably forcing the dollar down in terms of its foreign exchange value—and no consortium of central bankers, treasury secretaries, et al. can stop the process.

Consumers are being subsidized by approximately by the current account deficit . For the people of limited foresight, which apparently includes a substantial majority, debt expansion can be very exhilarating. One’s standard of living can take a quantum leap forward.

We have temporarily concealed the underlying factors that will shortly push down the future standard of living of most people in the U.S.

The “foreign trade deficit” & the “domestic federal deficit” have an insidious, if not an incestuous, relationship. An increase in the demand for loan-funds is reflected in higher interest rates than there would otherwise be. Higher interest rates are significantly responsible for an “over-valued” dollar which is in turn the principal contributor to our burgeoning trade deficits.

The rising cost and diminishing volume of imports will contribute to an increase in inflation, and the expectation of further inflation will also push up interest rates. This spells stagflation.

The U.S. needs to sell higher quaility, and lower cost, goods & services. As it is highly probable that the U.S. will never have a coordinated response to the increased world-wide competition for overall products and services, and that it's manufacturing problems will continue to grow.

That implies that this countries' exchange rate will continue to move irregularly downward, along with the vast majority of American's standard of living and we will live in increasing world wide isolation, and retreat towards totalitarianism.

The FED cannot achieve stability in our exchange rate with other countries by resorting to any type of financial gimmickry (read Currency Swaps). Central bankers are powerless to alter long-term factors that determine the supply of, and the demand for, any particular country’s currency. The chronic and accelerating deficit in our balance of trade is one such factor.

We can help terminate these deficits by (1) the U.S. government drastically reducing its overseas military expenditures – or by transferring most of the cost of maintaining bases and personnel to foreign governments; (2) revitalizing a large segment of U.S. industry so that it will be able to compete in foreign markets; (3) sharply reducing our dependence on foreign energy sources; and, (4) increasing the attractiveness of foreign long-term investment in the U.S.

Dollar and Oil Are Manipulated by ECB and Fed

The power of the FED to manage the exchange value of the dollar is marginal at best. Only insofar as the US reverses the direction of the current account balance will the dollar rebound. But this Herculean task is unachievable in the short-run and the requirements for turning the tide in the long-run will never gain support.

The Gold Standard: Can't Live With It, Can't Live Without It

The Pentagon was soley responsible for the dollar decoupling from gold.
An operating old standard creates, or is associated with, many advantages: 1) stable foreign exchange rates; 2) free multilateral clearing of currencies among nations; 3) the maximization of multilateral foreign trade; and, 4) relatively stable price levels e.g., no chronic inflation. All that is required to achieve this economic utopia is a 1) world free of major wars, depressions and cartels (OPECs); 2) markets with downward price flexibility, that is , true price competition; 3) creditor nations which impose no significant restraints on imports; 4) monetary authorities who abide by the “rules of the game”, i.e., the central banks expand credit (create commercial bank legal reserves) when gold stocks expand, and vice versa; 5) monetary authorities who restrict the expansion and contraction of central bank credit within a very narrow range, thus preventing the commercial banks from creating an unsupportable volume of credit money (transaction deposits); and, finally, 6) a world where the reserve currency countries (those countries whose currency serves as a store and standard of value as well as a transactions currency) never operate with chronic deficits in their balance of payments.

John Lee Responds to Nobel Laureate Stiglitz's Subprime Thesis

"Americans worry about their dependency on imported energy, but the $145,368,000,000 paid to OPEC in 2006 is a small part of the total import bill. Americans imported $602,539,000,000 in industrial supplies and materials; $418,271,000,000 in capital goods; $256,660,000,000 in automotive vehicles, parts and engines; $423,973,000,000 in manufactured consumer goods; and $74,937,000,000 in foods, feeds and beverages." Paul Craig Roberts

John Lee Responds to Nobel Laureate Stiglitz's Subprime Thesis

Some of the craziest shit I've ever read.

"Remove the government as the safety net and return the responsibility back to the people." We already went through that experiment many many times. That's why the Federal Reserve System was established.

"Until then, dollar will continue to lose value and gold and oil will continue to rise in dollar terms." (1) While the prudential reserve E-D market exerts downward pressure on the dollar, it is the current account deficit that that is the principal villian. (2) It is the current account deficit that feeds the E-D market. (3) The U.S. must drastically reduce our dependence on foreign oil, (4) eliminate our foreign multilateral claims on the dollar (our far flung military bases, e.,g., Korea, Germany, etc, and the wars in Afghanistan & Iraq) and (5) sell higher quaility and lower cost goods & services. And I bet these remedies will never be considered let alone take place.

But an even greater impediment to our "free wheeling speculation" is acquiring a technical staff that knows:

A. the difference between the supply of money and the supply of loan funds.

B. the difference between means-of-payment money and liquid assets.

C. the difference between financial intermediaries and money creating institutions.

D. recognize aggregate monetary demand is measured by the monetary flows (MVt) not nominal GDP.

E. recognize that interest rates are the price of loan-funds, not the price of money

F. recognize that the price of money is represented by the price (CPI) level.

G. & realize that inflation is the most important factor determining interest rates, operating as it does through both the demand for and the supply of loan-funds.

The U.S. will of course never understand, nor realize these objectives.

Friday Outlook: On the Brink of Stagflation?

And we will never extract ourselves from an increasing vicious level of stagflation within the confines of a free capitalistic society.

The Fed Rate Cut: Why Now?

Bernanke took office 2/1/06. The FOMC has followed a "tight" money policy for 2 years. The aftermath was a downswing in real-gdp.