View Full Version : Banana Republic Cometh
Kathianne
03-22-2009, 08:36 AM
They are devaluing the dollar. We're in the best of hands, just relax and wait for the epiphany.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aNdu22y30zwc&refer=worldwide
Dollar Declines Most Since 1985 Plaza Accord on Fed Bond Buying
By Ye Xie
March 21 (Bloomberg) -- The dollar dropped the most against the currencies of six major U.S. trading partners since the Plaza Accord almost a quarter-century ago as the Federal Reserve’s plan to purchase Treasuries spurred speculation that it’s debasing the greenback.
“What it introduces is the problem of the currency to the extent that the Fed is buying what isn’t desired by foreign holders,” said Bill Gross, co-chief investment officer of Pacific Investment Management Co., in an interview on Bloomberg Television on March 19. “The Fed can keep interest rates where they want to keep them, at least for a 6- to 12- to 18-month period of time, but it will have consequences down the road.”...
Kathianne
03-22-2009, 09:11 AM
It's feeling more and more like the time between the wars. I was discussing with someone else, history doesn't 'repeat' but it does show the parameters that coalesce to bring shifts in political behavior. Here's some more warnings:
http://www.geldpress.com/2009/03/fed-monetizes-debt/
March 20th, 2009Fed Monetized Debt When Foreign Debt Holders Stop Buying
Posted by geldpress in Economics
The department of the treasury has the foreign bond holder information updated through January. There is a disturbing negative trend in the numbers, as shown below. I first wrote about the risks of decreasing purchases from foreign bond holders last month, and now it is apparent that those risks have materialized.
...What is a highly indebted nation to do when faced with the difficult task of managing over $11 trillion in “reported” debt, while at the same time finding new foreign buyers for an expected $2 trillion yearly deficit? The answer has been discussed at length in the news over the last week, but you may have missed it. Craig Steiner (Common Sense American Conservatism blog) correctly predicted the answer when he said “the Federal Reserve will borrow the money they can borrow… and print the rest”
The current $11 trillion dollar national debt was financed by selling bonds. But as that debt burden grows to unsustainable levels, investors get nervous about the sanity of additional purchases. When that happens, the alternative is to MONETIZE THE DEBT. AllExperts.com sums up monetization of debt as follows:
The government can “monetize its debt” by borrowing from the US Federal Reserve system, which is nominally under private control but is really just another part of the government. In this case, the government sells its bonds to the Federal Reserve, which creates new bank deposits out of thin air and uses them to pay for the bonds. This process creates new money and expands the money supply: hence it is called “monetizing” the government’s debt.
For a clue to how debt monetization ends, look to Germany after World War I. Left with a deteriorating economy, and a huge repatriation bill, their defense was to simply print more and more money. The German Mark ratio to the U.S. dollar was 4 to 1 near the end of the war. It was 8 to 1 in 1919, 250 to 1 in 1921, and 2000 to 1 in 1923. (Source: Encyclopedia Britanica) The situation got even worse, with newspapers selling for $100 billion marks!...
Abbey Marie
03-22-2009, 09:55 AM
As I hear about our TOTUS bowling, traveling to LA to go on Leno, and having the press in to watch him pick brackets, I can't help but think of the phrase, "Obama bowled while Washington burned".
Kathianne
03-22-2009, 09:55 AM
As I hear about our TOTUS bowling, traveling to LA to go on Leno, and having the press in to watch him pick brackets, I can't help but think of the phrase, "Obama bowled while Washington burned".
That is classic! Can't rep you now.
5stringJeff
03-23-2009, 07:57 PM
I expect inflation to start rising in the late 3Q, early 4Q. By mid-2010, it should be up around 8-9%. Thanks, Ben Bernanke! :fu:
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