http://www.minyanville.com/articles/NYX-SPY-GSPC/index/a/23402
Over time people have become confused between money and wealth. This is precisely what central bankers have had to do to convince consumers to borrow and spend recklessly. If any part of the US government/ Federal Reserve/ banking system is operating well, it's their public relations/ advertising/ media division.
At any period, there's a certain amount of wealth in the US economy, yet government has created much more "money" over very short periods to intermediate that wealth. Thus wealth per "dollar" has been diluted vastly.
How have they done this? By lowering the cost of debt both to the lender and the borrower and increasing leverage in the system through the fractional banking system. In our credit-based system, money equals debt: We've been spending credit, not wealth.
Recognizing the fact that economies more and more are influenced by central banks that attempt to stimulate economies (consumption) by creating debt many years ago, I began physically moving my assets around the world, shifting my wealth from time to time to the country I felt would devalue its currency the least: When a central bank creates debt, it essentially creates more of its currency, and thus devalues that currency.
Inflation is the creation of superfluous debt that chases unproductive assets (assets that produce little or no income for the risk undertaken). It devalues currency and drives up prices -- especially
Showing posts with label Mr. Practical. Show all posts
Showing posts with label Mr. Practical. Show all posts
Tuesday, July 7, 2009
Friday, June 19, 2009
Power Writes History
http://www.minyanville.com/articles/C-bac-ms-economy-banks-wfc/index/a/23189/from/home
The government's white paper describing the causes and effects of the financial crises provides the rationale for President Obama's proposals for reform. Conveniently, nowhere does the paper mention the actual primary causes:
1. The Federal Reserve kept real interest rates negative for nearly five years. Negative interest rates are an abomination, a radiation to proper pricing of risk:they encourage if
not force excessive risk-taking.
2. The Federal Reserve kept margin requirements at banks too low for too long.
3. The shoddy monitoring of off-balance sheet leverage and derivatives, both of which accelerated leverage to unparalleled levels.
4. The Congressional creation and support of the GSEs, which guaranteed and bought debt that would otherwise never been made because of its quality.
Of course the banking industry played along. Unfortunately, the private market will always take advantage of shoddy government regulation. But the private market never would have had the fuel or the risky inclinations if not for the above.
But the above wasn't mentioned, because the paper was written by those culpable.
Now we are about to give the very institution, a private bank with its own shareholders and where only half its board members are appointed by the government, undefined powers. Ron Paul has nearly half of Congress willing to support a bill to audit the Fed. It can't come soon enough. We know a lot more about the operations of the CIA than we do about the operations of the Fed, whose operations that always devalue our currency.
We will rue the day that we gave this power to the Fed. The power is undefined; they have carte blanche. We should by now all realize the destruction for which the Fed is already responsible.
Risk is high.
The government's white paper describing the causes and effects of the financial crises provides the rationale for President Obama's proposals for reform. Conveniently, nowhere does the paper mention the actual primary causes:
1. The Federal Reserve kept real interest rates negative for nearly five years. Negative interest rates are an abomination, a radiation to proper pricing of risk:they encourage if
not force excessive risk-taking.
2. The Federal Reserve kept margin requirements at banks too low for too long.
3. The shoddy monitoring of off-balance sheet leverage and derivatives, both of which accelerated leverage to unparalleled levels.
4. The Congressional creation and support of the GSEs, which guaranteed and bought debt that would otherwise never been made because of its quality.
Of course the banking industry played along. Unfortunately, the private market will always take advantage of shoddy government regulation. But the private market never would have had the fuel or the risky inclinations if not for the above.
But the above wasn't mentioned, because the paper was written by those culpable.
Now we are about to give the very institution, a private bank with its own shareholders and where only half its board members are appointed by the government, undefined powers. Ron Paul has nearly half of Congress willing to support a bill to audit the Fed. It can't come soon enough. We know a lot more about the operations of the CIA than we do about the operations of the Fed, whose operations that always devalue our currency.
We will rue the day that we gave this power to the Fed. The power is undefined; they have carte blanche. We should by now all realize the destruction for which the Fed is already responsible.
Risk is high.
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