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"Inflation Seen As Nation's Salvation" Redux; How Keynes Grew To Hate 'Keynesianism' And Love The Monetary Bomb

Tyler Durden's picture





 

There are few things as entertaining as watching US propaganda movies from the 1930s. Case in point, this documentary from the depths of the great recession (1933), when America was struggling with a deflationary wave nearly as bad as the one today, and when the only salvation was the spinning of Keynesian politics to the point where even Keynes himself had to send a letter to FDR to warn him that how the US was was interpreting his fledgling economic religion (it hadn't quite made cult status yet), was wrong. Of course, nobody cared then, and nobody will care now: after all there are cans to be kicked, mid-term elections to prepare for, and votes to be bought with ridiculous unemployment benefit extensions upon extensions. And while even back then Keynes disagreed with FDR's wholesale economic approach which compounded failure upon failure, only to be saved by the "fluke" that was WWII, one wonders just how quickly he is spinning in his grave today, when, as Rick Santelli pointed out, we no longer have deflation, but deleveraging to the tunes of tens of trillions of dollars, and no longer a cyclical recession, but a structural shift in the way credit is apportioned, and disappearing, in the economy. We expect to soon see a comparable shift in the Fed's and the ECB's subliminal cartoon messages, which just like the recent 180 from Barton Biggs, will soon begin highlighting all those "previously undiscovered silver linings" in the great satan of inflation.

Hilarious video below:

And as PopModal points out, before America listens to the Krugmanites threaten mass extinction events in case America does not continue to spend, spend, SPEND, read the following observations based on an open letter from Keynes to Roosevelt:

"Now there are indications that two technical fallacies may have
affected the policy of your administration. The first relates to the
part played in recovery by rising prices. Rising prices are to be
welcomed because they are usually a symptom of rising output and
employment. When more purchasing power is spent, one expects rising
output at rising prices. Since there cannot be rising output without
rising prices, it is essential to ensure that the recovery shall not be
held back by the insufficiency of the supply of money to support the
increased monetary turn-over. But there is much less to be said in
favour of rising prices, if they are brought about at the expense of
rising output. Some debtors may be helped, but the national recovery as a
whole will be retarded. Thus rising prices caused by deliberately
increasing prime costs or by restricting output have a vastly inferior
value to rising prices which are the natural result of an increase in
the nation's purchasing power."

"I do not mean to impugn the social justice and social expediency of the
redistribution of incomes aimed at by N.I.R.A. and by the various
schemes for agricultural restriction. The latter, in particular, I
should strongly support in principle. But too much emphasis on the
remedial value of a higher price-level as an object in itself may lead
to serious misapprehension as to the part which prices can play in the
technique of recovery. The stimulation of output by increasing aggregate
purchasing power is the right way to get prices up; and not the other
way round.
"

Of course, when the nation has no purchasing power, the government steps in to both restrict output and to borrow from future consumption to be the purchasing power of last resort.

As for Bernanke's insane monetary printing experiment, Keynes had a thing or two to say about that as well:

"The other set of fallacies, of which I fear the influence, arises out
of a crude economic doctrine commonly known as the Quantity Theory of
Money. Rising output and rising incomes will suffer a set-back sooner or
later if the quantity of money is rigidly fixed.
Some people seem to
infer from this that output and income can be raised by increasing the
quantity of money. But this is like trying to get fat by buying a larger
belt. In the United States to-day your belt is plenty big enough for
your belly. It is a most misleading thing to stress the quantity of
money, which is only a limiting factor, rather than the volume of
expenditure, which is the operative factor.
"

So before all those who are dead set on spending America to oblivion and printing trillions and quadrillions more, perhaps they should realize that even Keynes not only did not endorse such irresponsible behaviour, but in fact criticized the US president way back in the day for taking the message of
Keynesianism and turning it over on its head.

Full letter from JM Keynes in the December 31, 1933 NYT issue.

Keynes NYT Dec 31, 1933

h/t Ian

 


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Sun, 07/04/2010 - 14:04 | Link to Comment Mitchman
Mitchman's picture

I think I liked Reefer Madness better...

Sun, 07/04/2010 - 14:08 | Link to Comment Kali
Kali's picture

Si, mas mota por favor!

Sun, 07/04/2010 - 14:28 | Link to Comment Mitchman
Mitchman's picture

Con mucho gusto!

Sun, 07/04/2010 - 16:43 | Link to Comment buster bucani
buster bucani's picture

TYLER DURDEN;

I have been reading a lot of (very widely sourced) data detailing massive insider selling and bank selling (including GS) of BP stock in the weeks before the rig explosion on 4/20. Banks had shorted transocean stock in the days before. GS placed a big short on the gulf of Mexico on 4/19 a day before. The fabrice tourre email bragging about this is not a spoof, it transpires.

Just a small selection of posts;

http://www.huffingtonpost.com/andy-borowitz/goldman-sachs-reveals-it_b_5...

http://rawstory.com/rs/2010/0602/month-oil-spill-goldman-sachs-sold-250-...

http://www.prisonplanet.com/evidence-points-to-bp-oil-spill-false-flag.html

Add to this ownership and speculation of nalco, the company that manufactures the poisonous corexit 9500........

BIIIIG story hoss, and ZH should be on it like white on rice!

 

Sun, 07/04/2010 - 16:50 | Link to Comment Cheeky Bastard
Cheeky Bastard's picture

It has been discussed ad nauseam here before; go to the post archives and read post and comments. Its been said before. 

Sun, 07/04/2010 - 16:59 | Link to Comment buster bucani
buster bucani's picture

thanks CB, I read ZH several times daily but completely missed those posts! must have a big blindspot I guess. I will check the archives though..........time for an update perhaps?

Sun, 07/04/2010 - 17:05 | Link to Comment Cheeky Bastard
Cheeky Bastard's picture

I have no idea who brought that fact to the table; but I know it was under one of the later BP related articles. Basically; no one concluded anything that could be classified as "insider trading" [although it most probably was]. Read the posts that were posted somewhere in mid-May to mid-June; its under quite a lot of them. Also; me thinks Tyler wrote a piece on that; not sure. But its always good to be reminded about the shit that went on shortly before and at the start of this BP fiasco.

Sun, 07/04/2010 - 17:21 | Link to Comment New_Meat
New_Meat's picture

Thanks, Cheeky. - Ned

Sun, 07/04/2010 - 17:30 | Link to Comment buster bucani
buster bucani's picture

thanks TD/CB. keep up the good work. hope Matt Taibbi can do a job on this subject.

Matt, are you there? What about it?

Mon, 07/05/2010 - 17:50 | Link to Comment robobbob
robobbob's picture

Between Dec 2009 and March 2010, Soros parted with 20K shares (75% of holdings) of Anadarko (APC), BP's Gulf drilling partner. source Guru Focus

Mon, 07/05/2010 - 17:50 | Link to Comment robobbob
robobbob's picture

.

Sun, 07/04/2010 - 23:57 | Link to Comment Johnny Dangereaux
Johnny Dangereaux's picture

Coupled with Hemp For Victory from '42

http://www.archive.org/details/Hemp_for_victory_1942

Sun, 07/04/2010 - 14:11 | Link to Comment ZackAttack
ZackAttack's picture

The only reason they choose inflation is that they think this is a problem they understand and can address.

Sun, 07/04/2010 - 14:47 | Link to Comment FrankIvy
FrankIvy's picture

IMO they choose inflation because they know this:

During deflation, people  slow spending, worsening the deflation, and the result can be long and painful.

During inflation, people spend more readily.

Now is different only because we've reached the end of the credit road, not because they were wrong about their basic inflation concept.

Sun, 07/04/2010 - 16:58 | Link to Comment Dr. Sandi
Dr. Sandi's picture

To me, it's even simpler than that.

People LOVE more money, and they don't think about the consequences.

 

Sun, 07/04/2010 - 18:19 | Link to Comment bull-market_3.0
bull-market_3.0's picture

Honestly, I want the party to continue. I'm way too young to have the party End before I got to enjoy the party. I feel like the guy who gets to the front of the door right as the cops shut down the party...

 

Common 15 trillion$ stimulus...I need to buy a new house, lease a fast car, and get a "good job" so I can live like the rappers on BET do

Sun, 07/04/2010 - 20:30 | Link to Comment Problem Is
Problem Is's picture

Sorry bull... The Party 's Over
And you get the baby boomer's bill...

1. Baby Boomers got all the cheap college education...
...and left scorched earth.
2. Baby Boomers got
all the cheap houses... swapped up and swapped up...
...and left scorched earth.
3. Baby Boomers got
all the home equity and HELCO... 
...and left scorched earth.
4. Baby Boomers got all the easy jobs in government... and all the benefits and public retirements...
...and will leave scorched earth...
5. Baby Boomers got all the jobs on Wall Street... all the easy scams on mutual and pension funds... all the big bonuses....
...and left scorched earth.
6. Baby Boomers will suck down all the Social Security...
...and will leave scorched earth.
7. Baby Boomers will suck down all the Health Care...
...and will leave scorched earth.

Just the Facts, Ma'am: This Will Be the Boomers Epitaph
The most narcissistic, self involved generation of all time. We should have known this since Vietnam was about moral conscious and outrage for the victims (Read: Baby Boomers were getting drafted)... but not a peep of moral outrage or protest over the last decade of civilian slaughter, war crimes and a thousand My Lia's....

Baby Boomers were too worried about their home prices and 401k's to complain... and since it was volunteers in body bags... It was not their kids but some poor kid in it...

From all of us to all of you, Thanks:
Jamie, Lloyd, Clinton, DeLay, Bush, "Dick" Cheney, Dodd, Gore, Milken, Bernanke, "Dick" Fuld, Cox, Summers, Paulson, H., Paulson, J.,... and too many more to mention.

Note: Baby Boomer... Draft age during the Vietnam War to qualify. It defines them...

Sun, 07/04/2010 - 20:43 | Link to Comment Dr. Sandi
Dr. Sandi's picture

Thanks for the wild generalization.

But you forgot to mention all the fucking assholes with GREEN EYES. Those are the real bastards who destroyed everything.

 

Sun, 07/04/2010 - 20:55 | Link to Comment Problem Is
Problem Is's picture

It Is Not "Wild"
These are facts backed up by economic statistical analysis and research. Historians will judge whether my conclusions are wild or accurate.

Right now the US political class is dominated by baby boomers.

Care to defend them with some facts?
Of the 70 million... the probability is I am more on target than off...

There are always outliers and rare events. Maybe you are one of them...

Do you want to defend any named on the list?
Are you unhappy to be born between say... 1946 and 1956?

Do you want to guess what a semester at UC cost in 1964 to 1974 as opposed to today?

 What a house cost? What jobs were/are available? What real wages were then are now?

What it's going to cost to keep 70 million baby boomers in Medicare and Depends?

Sun, 07/04/2010 - 21:23 | Link to Comment Things that go bump
Things that go bump's picture

Come now, you're overwrought.  Nobody actually believes we're going to keep 70 million baby boomers in Medicare, with the possible exception of the baby boomers, of course.   

Sun, 07/04/2010 - 20:57 | Link to Comment FrankIvy
FrankIvy's picture

Dr. Sandi wrote: Thanks for the wild generalization.

Well, it was a generalization, to be sure, but hardly a wild one.  The Boomers happen to coincide with the heart of the oil-based consumption boom in the U.S..  Many people are angry with them.

If it's any consolation, most Boomers haven't saved enough for retirement and will be working until they're old and gray and frail.  Fuck 'em.  They'll be in the greatest shock of all.  No more yearly trips to the Loser Magnet in Nevada.

But, really, why should we be mad at them?

You want the horribly introspective question?  Ok. 

Would we have behaved, as a group, any differently if we were presented with the reality with which they were presented while having the same antecedent experience?

Of course not.

We're just the last hyenas to the kill, pissed that the Boomers ate most of the ----ing wildebeest.

 

Sun, 07/04/2010 - 21:08 | Link to Comment Problem Is
Problem Is's picture

No More Club Med?

Your response looks logically valid and insightful from both sides.

It is not anger... it is honest assessment and disgust. I am a little younger than they are... and personally... I have behaved quite differently....

Amerikan materialism, celebrity culture and mind numbing teevee drones have annoyed me these many years...

Sun, 07/04/2010 - 23:11 | Link to Comment Cathartes Aura
Cathartes Aura's picture

lol, had my "reply" screen open with a conversation on the side Problem Is - missed your latest post:

It is not anger... it is honest assessment and disgust. I am a little younger than they are... and personally... I have behaved quite differently....

Amerikan materialism, celebrity culture and mind numbing teevee drones have annoyed me these many years...

no, it IS anger, there's no "honest assessment" going on - you pick a huge group to stereotype with a media manufactured label, it's not YOURS, you absorbed it - along with all the other nonsense you're typing. . .

so you behave "quite differently" - so did everyone I know, of all ages - I don't know any "boomers" of your description - what to do with THAT information? and the "celebrity culture" and TV drones - that's all and only "boomers"? - no one else is "materialistic"??

seriously, I'd advise you to travel - leave amrka and go to many other non-euro nationstates. . . take a long time, and a long look at the world. . .

your point of view is not unique, nor are you special.

Sun, 07/04/2010 - 21:43 | Link to Comment Sancho Ponzi
Sancho Ponzi's picture

A couple years back I was cruising down a crowded interstate when I ran up on a couple of boomers driving an RV 20 mph under the speed limit in the fast lane. After a lengthy wait I was able to change lanes and pass the AARP members, then got back in the fast lane, and gestured nicely at the pair, pointing my hand toward the right-hand lane. Ma Boomer promptly proceeded to flip me the bird. I laughed so hard it brought tears to my eyes. 

So they probably spent their working lives contributing little to the SSI and Medicare ponzi schemes, then retire, sell their home and purchase an RV to avoid paying property taxes. It's likely their estate will leave little or nothing to their kids or favorite charities, as everything will go toward RV payments, park fees and crazy gasoline expenses. And if you ask them to be a smidge more considerate, they promptly tell you to f#ck off. 

 

 

Sun, 07/04/2010 - 22:25 | Link to Comment Nostradumbass
Nostradumbass's picture

Hey, if we didn't get to the party first someone else would have! Timing is EVERYTHING!

Sun, 07/04/2010 - 22:30 | Link to Comment Nostradumbass
Nostradumbass's picture

I have worked hard, contributed, attempted to not harm Earth, raised children, given to charity, eschewed personal aggrandizement(?) and in general, tried to be a decent hu-man be-ing. I wish us all the best. Tough, TOUGH days ahead mates.

Sun, 07/04/2010 - 22:45 | Link to Comment Nostradumbass
Nostradumbass's picture

Too many margaritas... this by Jim Willie is what I came here to post:

 

?$$$ FORCED CONVERSION OF I.R.A. AND 401K PERSONAL RETIREMENT ACCOUNTS INTO USTREASURYS IS BEING CONSIDERED. THE PROGRAM IS PROMOTED BY THE USDEPT TREASURY AND USDEPT LABOR, WITH HEAVY SUPPORT BY THE ROCKEFELLER WING OF THE SYNDICATE. LEW ROCKWELL REPORTS. $$$

An important initiative is gaining ground slowly and quietly to force 401k and IRA accounts into a USGovt nationalization. In past reports, my sources indicated that bank Certificates of Deposit would be forced into USTreasurys, by means of the FDIC insurance pressure. The precursor might be the retirement accounts. The angle is similar, with favorable tax treatment. The Lew Rockwell Institute is stout and intrepid in their reporting. The USDept Treasury and USDept Labor will request for public comment on ways to promote the conversion of 401k savings and Individual Retirement Accounts into annuities or other steady payment streams. The initiative is spearheaded by Asst Labor Secretary Phyllis Borzi and Deputy Asst Treasury Secretary Mark Iwry. The goal is to induce people to invest their 401k and IRA funds into designed annuities, or else basic USTreasury Bonds. Never lose sight of the fact that USTBonds are the biggest overvalued bubble in world history, after the global housing and mortgage bubble. The USGovt must sell $2 trillion in bonds this year alone, and foreign demand has almost vanished.China does not want them. Pension funds do not either. So the American citizenry will be coerced into investing their pensions in subprime sovereign bonds, the USTreasurys.

The White House and a powerful network of Congressional activists are behind the initiative, which parallels the Japanese Govt requirement to put all their federal and postal worker pension funds into JGBonds. Also, the highly influential Ford and Rockefeller Foundations are pushing the reckless initiative that betrays the working class. They are engineering a new regulatory and tax incentive to pave the way for passage. Their goal and vile purpose is to herd and ultimately force Americans to convert their 40lk's and IRAs into government directed retirement accounts, obviously USTBonds. The de-privatization plan, also called individual retirement fund nationalization, is the brainchild of Teresa Ghilarducci from the Schwartz Center for Economic Policy Analysis (SCEPA), which is funded by the Rockefeller Foundation. Heavy handed tactics are being used that copy those used to ram nationalized health care down the country's throat, despite loud significant public objection. Business Week has noted that new federal regulations designed to promote the conversion of individual pension funds into annuities are essential to direct cash into government controlled entities such as American International Group (AIG), whose cost to date has totaled $182.3 billion. The public could not invest in a worse cause, nor sink money into a more acidic cesspool. Students of history note that such nationalization of the people's savings took place in Argentina two decades ago, once a powerful wealthy nation in the last century.

 

Mon, 07/05/2010 - 10:01 | Link to Comment primefool
primefool's picture

I really hope this is rubbish. Because if they touch that IRA - you'll find hospitals with no doctors and no gas at the gas stations. Hope those remaining have a cousin or uncle who had the smarts to go to med school. Good luck.

Mon, 07/05/2010 - 20:01 | Link to Comment unununium
unununium's picture

Does the Dow sinking below 6700 qualify as "touching IRA's"?

How about the ensuing pillage of money market funds and Treasuries, via inflation?

 

Tue, 07/06/2010 - 05:33 | Link to Comment KevinB
KevinB's picture

China does not want them. Pension funds do not either.

Oh, really? Is that why we've seen a massive move UP in UST's over the last few weeks? Somebody's buying them.

Sun, 07/04/2010 - 22:45 | Link to Comment Dr. Sandi
Dr. Sandi's picture

Let's try this from a different angle.

Defining tens of millions of people by an artificial demographic has minimal validity. It's a convenient way of drawing another stupid "us vs. them" division. However, otherwise it makes more sense to blame the green eyed bastards. And you KNOW who you are.

Just because you didn't get invited to our BB meetings where we divided stuff up and made sure nobody got any other than us, doesn't mean there WERE any meetings.

Sure, Baby Boomers inherited a perfect world, then went on to fuck it up. I only wish we'd had the wisdom to kill our parents and take what was rightfully ours when we were younger and wiser.

The poor, stupid Boomers are easy pickings for the intelligent, well organized youngsters who can see exactly what's wrong and take action to fix it.

Since the enemy has now been defined as Baby Boomers, it should be quite simple to just jump in and repair everything.

So go ahead.

But I've observed one important thing at the BB World Domination Meetings. The people who talk about stuff aren't the ones who get anything done. When the brain is attached to the speech centers, it's too busy to do much else. Much like driving and using the phone at the same time.

So get out there an fix all the crap that we scheming Boomers have created, or whine about it on the Internet.

A lot of Boomers whined about what was wrong and who was doing it. Too many Boomers expected SOMEBODY ELSE to fix all the crap and corruption because it's the right thing to do. Naturally, it wasn't OUR job. But SOMEBODY would fix it because somebody always does.

I don't think it's working, but it looks like the next generations are going to follow the same course.

Good luck with that. Maybe it'll work better this time if your indignation about the "other" is righteous enough.

Or perhaps it's just human nature worldwide and through the ages to blame somebody else for the crap we're too scared, inexperienced or lazy to tackle on our own.

We certainly all need another bogus group to aim our hatred at. If we do things right, we should be able to divide the country up into about 330 million splinter groups that everybody else hates.

And that's a lot better than finding common needs and trying to create something useful in these dire times of imminent collapse.

But hate is always so much more fun than cooperation.

 

 

Sun, 07/04/2010 - 22:48 | Link to Comment Nostradumbass
Nostradumbass's picture

Word!

Mon, 07/05/2010 - 05:14 | Link to Comment wyosteven
wyosteven's picture

Yeah, boomers are hot s**t, with all the answers.

What I want to know is when is everyone going to stop pointing fingers and start to help dig this bus out of the mud instead of just talk, or speculate about it.

I'm as unhappy as the next that we're stuck, but now is time to push.

Mon, 07/05/2010 - 06:01 | Link to Comment jesusonline
jesusonline's picture

"Naturally, it wasn't OUR job. But SOMEBODY would fix it because somebody always does"

That's the problem with you and it's not "a different angle". You've built up your entitlements like US would always be on an indefinite growth path. Amerikan "apres nous le deluge", sort of.

Sun, 07/04/2010 - 22:54 | Link to Comment Cathartes Aura
Cathartes Aura's picture

"Boomer" = socially constructed meme to describe someone of a certain age, usually that isn't yours (you have a tag too, trust me).

if you want to make a HUGE ASS generalisation to include everyone of a certain age in a great sweeping "othered" group to hate, be my guest. . . but consider this, it's a form of divide 'n' rule created  just. for. you.

and yes, some "boomers" did make shitloads of monies and bought lots of stuffs with it - but there are quite a few under 40's in the "financial" market, hedge funds, traders for banks, etc. etc. - the list of people to hate is pretty much endless, if you want to go that route. . .

 

Mon, 07/05/2010 - 12:05 | Link to Comment subqtaneous
subqtaneous's picture

Normally I wouldn't bother, but just for such concise eloquence, make that one anti-junk.

 

Sun, 07/04/2010 - 23:31 | Link to Comment antidisestablis...
antidisestablishmentarianismishness's picture

Holy shit, I can see it now.  An army of pitchfork-wielding youths, pants dragging around their ankles, screaming for Boomer blood in the few free moments when they're able to drag themselves away from their pitiful electronic device connection with life.

Mon, 07/05/2010 - 03:31 | Link to Comment wyosteven
wyosteven's picture

The joke is on you - boomers would never see it coming, just like they have failed to see anything else.     

Your "vision" might lead one to question whether or not you are on drugs.

Mon, 07/05/2010 - 12:58 | Link to Comment ElvisDog
ElvisDog's picture

Gotta agree with you. 90% of the under-20 crowd I observe never take their eyes off the tiny screen they're tapping into long enough to know what's going on around them let alone take any positive action.

Mon, 07/05/2010 - 18:08 | Link to Comment nmewn
nmewn's picture

"An army of pitchfork-wielding youths, pants dragging around their ankles, screaming for Boomer blood in the few free moments when they're able to drag themselves away from their pitiful electronic device connection with life."

LOL...+ a billion.

Mon, 07/05/2010 - 19:00 | Link to Comment Diogenes
Diogenes's picture

Where's all my stuff? I was born in 1951 and I want my stuff dammit! Where's my free college degree, cheap house, 10 cylinder SUV, beautiful trophy wife, easy job, free and easy credit, king size beach house, skiing weekends, lush pension, and big 401K full of cheap stock! Some dirty bastard got all my stuff!

Sun, 07/04/2010 - 18:30 | Link to Comment The Alarmist
The Alarmist's picture

The Generals always fight the next war using the strategies and tactics they used to win the last war.  That assumes, of course, that the last war was actually won.  So what happens when the other war was merely sidetracked by a bigger war? The current Depression is being fought by people who think the New Deal ended the Great Depression.  Let's hope they don't now decide, after failing on the monetary side, that the only way out of this one is to start up yet another world war.

 

Sun, 07/04/2010 - 14:13 | Link to Comment three chord sloth
three chord sloth's picture

Heh. Keynes reaches out from the grave to bitch-slap Krugman and Bernanke.

Sun, 07/04/2010 - 18:00 | Link to Comment CPL
CPL's picture

I'm trading everything I have for cows. The presentation was solid.

Sun, 07/04/2010 - 22:21 | Link to Comment MayIMommaDogFac...
MayIMommaDogFace2theBananaPatch's picture

Well, you can't eat...Oh, wait, you CAN EAT cows.

Sun, 07/04/2010 - 23:40 | Link to Comment dnarby
dnarby's picture

I'll trade you a pre '64 quarter for a pound of hamburger.

Sun, 07/04/2010 - 14:15 | Link to Comment Bam_Man
Bam_Man's picture

Agriculture represented a much bigger % of US employment and GDP back in the early 1930's, and the depression-induced collapse in commodity prices was devastating to farmers.

If you were a farmer, or anyone that did business with farmers in the early 1930's, you were literally praying for inflation.

Today it is a very different story with mainly the banksters and their upside down mortgagees doing the praying.

Sun, 07/04/2010 - 17:02 | Link to Comment hbjork1
hbjork1's picture

There was also a drought that reduced crop production in the plains states that compounded the problems.  Economical long distance transport was not available so if you didn't grow it your neighborhood, you didn't have it. 

 

Sun, 07/04/2010 - 22:47 | Link to Comment Rusty Shorts
Rusty Shorts's picture

One of the greatest disasters during the depression, was the American Chestnut Tree blight, Chestnuts were used as a sustenance/currency in many areas of the Eastern U.S., not to mention the premium lumber it produced.

http://www.google.com/imgres?imgurl=http://confluenceculture.files.wordpress.com/2009/09/aep-tnp26.jpg&imgrefurl=http://confluenceculture.wordpress.com/2009/09/28/3-5-billion-trees-missing/&usg=__HxYZ_GdgZ90y7ueJjztawV0hg98=&h=874&w=638&sz=183&hl=en&start=220&sig2=Grhcnr2SZx1U4cS9oMacuA&um=1&itbs=1&tbnid=CGeHo9UI4--4IM:&tbnh=146&tbnw=107&prev=/images%3Fq%3DAmerican%2Bchestnut%2Btree%2Bblight%26start%3D216%26um%3D1%26hl%3Den%26sa%3DN%26ndsp%3D18%26tbs%3Disch:1&ei=E0cxTLntAYX7lwfpzsVA

Chestnut Trees were called the "Redwoods" of the east, for good reason.

http://barkshingle.org/images/004-1950.jpg

 

 

(Quotes)

 

Memories of the Chestnut loom large for many elderly residents of Appalachia; the nuts became a memory recalled with fondness, a memory of extraordinary abundance. The great forest had passed in less than fifty years. For generations the seasonal bounty of Chestnuts provided food for natives and settlers alike...the loss of the Chestnut ended a way of life for many. - Unknown -

 

"The Chestnut blight has a special place in the history of the American forest. Older folk still recall the period of massive Chestnut kills in the late 1920's. The dead and dying trees would stand gray white in the pale moonlight and result in creating a massive depressive condition...the hills of their youth were dying before their eyes, and much of this occurred during the Great Depression." -Phyllis Windle-

 

"I passed through a scene impressive in its aspect of desolation. This section must at one time have been a pure Chestnut Grove. Now every tree is dead. All the trees had been uprooted and lay on the ground. The rains and snow had washed away the dead bark and bleached the trunks a grayish white. These Chestnuts were of tremendous size, now a graveyard of giant trees...the area was easily two square miles."
(Fishers Gap, Virginia 1926)

 

"they also grew behind my house, and one large tree, which almost covered it, was, when in flower, a bouquet which scented the whole neighborhood, but the squirrels and jays got most of it's fruit; the last coming in flocks early in the morning and picking the nuts out of the burs before they fell. I relinquished these trees to them and visited the more distant woods composed wholly of Chestnut" ... Henry David Thoreau, Walden, 1854.

 

"the mountains looked as if their crest were once more covered with snow, waving with white Chestnut blossoms in the crowns of the ancient trees, great domes of flowers arches above the lane, so as that it looks like a sea" - Unknown -

Sun, 07/04/2010 - 17:33 | Link to Comment New_Meat
New_Meat's picture

Bam_Man (gotta love a guy with _ in his handle ;-) -- % US employment, Check.  % GDP, Check.  Amount of food being produced?  WAAAAAY more food now.  I'd call that situation "virtuous deflation."

And the LaFollette "Progressive" machine was dumping milk in the road while people were starving.  Yep, the New Deal made a lot of scientific sense.  Housewives on buyer's strike for a nickel increase in meat prices. (guess a nickel went a long way back then).

Brought us Lillienthal and TVA, Bonneville Power Authority, among others.

(all the nuclear weapons types, brought us Alcoa, TN, Oak Ridge, and Hanford).

- Ned

Sun, 07/04/2010 - 18:33 | Link to Comment The Alarmist
The Alarmist's picture

You can thank Heaven that the EPA is on top of its game ... they have declared that Milk contains so much oil that it cannot simply be dumped or allowed to spill without adequate safeguards in place to keep it from contaminating its environment. That perhaps is a more elegant way to put up the price of milk than simply dumping it, no?

 

Sun, 07/04/2010 - 14:24 | Link to Comment Internet Tough Guy
Internet Tough Guy's picture

People had no idea about the horror of inflation because they hadn't seen it. Reminds me of those later newsreels 'what to do if you see the flash of an atomic bomb'.

Sun, 07/04/2010 - 16:14 | Link to Comment knukles
knukles's picture

Go blind.

Sun, 07/04/2010 - 16:59 | Link to Comment Dr. Sandi
Dr. Sandi's picture

Become a "flash print."

 

Sun, 07/04/2010 - 14:26 | Link to Comment SofaPapa
SofaPapa's picture

Since Keynes used his "belt" analogy, I'll try one too.  The US is fat, and we need to lose weight.  There are two ways: one change diet and start exercising, i.e. a lifestyle change.  But that sounds hard!  No fun at all!  So in classic American fashion, we have chosen option two.  Keep eating and have surgery to remove the excess fat.  Sure we'll be fat again in a month or two, but don't we look great now?  Ain't it a bitch that surgeries always come with complications?

Sun, 07/04/2010 - 14:45 | Link to Comment FrankIvy
FrankIvy's picture

I have a belt analogy as well.  We're being choked to death with a belt while being flogged with a belt while having a small belt tightened around our nut sacks.

Sun, 07/04/2010 - 15:27 | Link to Comment Quinvarius
Quinvarius's picture

Is that you David Carradine?

Sun, 07/04/2010 - 15:44 | Link to Comment Cheeky Bastard
Cheeky Bastard's picture

^Pure WIN!!

Sun, 07/04/2010 - 17:51 | Link to Comment ColonelCooper
ColonelCooper's picture

Post of the freakin' week.  Bourbon swallowed down the wrong pipe.  Kick ass.

Sun, 07/04/2010 - 20:43 | Link to Comment Problem Is
Problem Is's picture

"Is that you David Carradine?"

I was watching an episode of the X-Files, circa 1995...

Peter Boyle played a Life Insurance salesman that could see how people were going to die...

He turns to David Duchovny ... the now recovering sex addict... and says:

"There are not many more undignified ways to end up than auto erotic asphyxiation..."

And gave him a dead pan look...

I rolled on the floor laughing...

Sun, 07/04/2010 - 22:28 | Link to Comment MayIMommaDogFac...
MayIMommaDogFace2theBananaPatch's picture

You guys rode that wave for all it was worth.  Noice!

Sun, 07/04/2010 - 15:51 | Link to Comment Gold...Bitches
Gold...Bitches's picture

So in classic American fashion, we have chosen option two.

Actually, in classic american fashion we are 'super sizing' option two.

Sun, 07/04/2010 - 17:31 | Link to Comment CashCowEquity
CashCowEquity's picture

+999999999999999999999999999999999999999999999999999999

Sun, 07/04/2010 - 14:33 | Link to Comment Stepney
Stepney's picture

The Fast Show had a good take on this: http://www.youtube.com/watch?v=egQ4NsVO_3M

Sun, 07/04/2010 - 14:49 | Link to Comment HellZero
HellZero's picture

v good ... INFLAYTION!!

Sun, 07/04/2010 - 14:33 | Link to Comment bugs_
bugs_'s picture

New belts!

Sun, 07/04/2010 - 14:46 | Link to Comment CD
CD's picture

@ 1:15 "You didn't understand it then, and you probably don't understand it now." ROTFLMAO

@ 1:50 "Today we have paper money, silver money, and gold money. At least SOME people have..."

@6:00 "This one hasn't eaten regularly in years. Recently, he fricassed a wolf at his door."

@9:10 "Old kid Depression had us groggy for a spell, but we've socked him right on the button with inflation." 

How eerily prescient, appropriate, unintentionally true at the same time. A gem of a find.

Sun, 07/04/2010 - 14:42 | Link to Comment EscapeKey
EscapeKey's picture

Well, I'm sold. We need us some more of this inflation thing. And farmer's daughters. Lots of those too.

Sun, 07/04/2010 - 14:58 | Link to Comment WaterWings
WaterWings's picture

Post your eulogy next time.

Sun, 07/04/2010 - 17:22 | Link to Comment WaterWings
WaterWings's picture

Holy deleted-post-disjointed-comments Batman!

Sun, 07/04/2010 - 15:35 | Link to Comment papaswamp
papaswamp's picture

Holy soup sandwich dude! Way too long for a weekend comment....or copy/paste. No idea what your point is.

Sun, 07/04/2010 - 15:45 | Link to Comment Cheeky Bastard
Cheeky Bastard's picture

TL;DR

Sun, 07/04/2010 - 14:51 | Link to Comment FranSix
FranSix's picture

Inflationary policy since the bottom of the market in 2002 caused the bubble in derivatives, the stock market, housing, commodities, certain currencies, and debt defaults following hard on the crash.

Now inflationary policy is likely to lead to currency collapse, and at the very least has already led to currency collapse in Argentina, Iceland, Russia, Hungary and possibly will continue in isolated countries. 

Sun, 07/04/2010 - 16:53 | Link to Comment New_Meat
New_Meat's picture

Fran6, how come it didn't affect Poland?  Been wondering about that outlier and how we can learn there.  Even got German school districts with CDS PoSs.

- Ned

Sun, 07/04/2010 - 21:20 | Link to Comment FranSix
FranSix's picture

It looks like Poland had the crisis early on, just after Nasdaq.  We never heard about it, because Enron and Worldcom dominated the news.

 

http://www.tradingeconomics.com/Economics/Government-Bond-Yield.aspx?Sym...

Sun, 07/04/2010 - 21:21 | Link to Comment FranSix
FranSix's picture

duplicate

Sun, 07/04/2010 - 15:07 | Link to Comment macroeconomist
macroeconomist's picture

Simply excellent, thank you very much Tyler, Keynes put in the right place in the end..I have commented several times that Keynes had never advocated what the FED and the government have been doing (particularly that there's nothing like Keynesian monetarism), and he must be spinning in his grave now. Maybe this will put an end to the unfair bashing of Keynes every time the government or the FED starts printing and spending madly..

Sun, 07/04/2010 - 15:08 | Link to Comment arnoldsimage
arnoldsimage's picture

no... this is not related to the topic at hand, but when the crap really starts to hit the fan, and it will, this is a great channel to get some basics under your belt. his topics cover everything from weapon systems to first aid. i highly recommend it. http://www.youtube.com/watch?v=uqy3pcpqJMo

Sun, 07/04/2010 - 22:27 | Link to Comment Rusty_Shackleford
Rusty_Shackleford's picture

Agreed.  Nutnfancy is a treasure chest. (and a nice guy to boot)

Sun, 07/04/2010 - 15:10 | Link to Comment Dreamwalker420
Dreamwalker420's picture

What a pile of garbage.  This video is exactly the kind of economic theory that beats at the heart of the current economic pulse.  Speaking to a consituency that has become entirely dependent upon the government for their subsistence, economists are able to promote theories that only benefit their economic interests.  Will that ever change?

I hear politician after politician repleate with promises of stability.  A fear of economic self-sufficiency motivates the sheeple to support policies that destroy their ability to enjoy the blessings of opportunity.  They sell their birthright for a scrap of meat today.

If you can't beat them ... join them.  While I don't advocate the filthy lucre of vain profit seeking corporations, I certainly respect their outright dominance on American society.  As corporations only seek their own self-interests, I suggest you do the same in response to their gerrymandering of the political system in their favor.

"Too big to fail" codified the expectations that large financial instutions were not subject to the Rule of Law.  It has become ever increasingly evident, that through fraudulent means, megabanks have been raping the American landscape.  Bankruptcy and failure are key components to capitalism.  Fairness is what drove most of us to work the past two decades ... a fairness that has been replaced by a facist state.

In the wake of the financial collapse, I began to study the broader economy in hopes of understanding what had happened.  As I tried to discuss the situation and reasonable options of policy I heard one thing over and over again, "have you seen this video on youtube ..."  Not just apathy.  A complete disillusionment from the reality of the moment.  Income is largely divided among three primary groups: 1) People who don't work (Unemployment, CASH assistance, college financial aid, wealthy parents, SSI benefits, insurance payout,living at home); 2) People who work and 3)Self-employed (Business owners).

In 1930, those "business owners" were farmers.  While the products and services we offer have become highly specialized, the fundamental basics of individual farm ownership has not.  My small business is a farm.  Our cash crop is a product that has little to no value on the economy outside of the purposes of entertainment.  People need to have fun.  I provide a service, a "good experience" much the same as a restaurant does.

My business is subject to the conditions of the economy.  But unfortunately, the economy has been replaced with a behemoth called the Federal Reserve System.  A cartel that cannot go bankrupt because it controls the printing of money and loans it only to privilidged institutions (Primary Dealers).

How does one maintain hope in this new world order?

Sun, 07/04/2010 - 15:57 | Link to Comment Cathartes Aura
Cathartes Aura's picture

If you can't beat them ... join them.  While I don't advocate the filthy lucre of vain profit seeking corporations, I certainly respect their outright dominance on American society.  As corporations only seek their own self-interests, I suggest you do the same in response to their gerrymandering of the political system in their favor.

Dreamwalker420, while I can understand, and empathise with, your current dis-illusionment with all that appears to be the "American Dream" dis-appearing, perhaps you might reconsider your "respect" for something (corporations, gov't. policy) that has zero respect for you or anyone you care about.

I hear your "voice" echo'd around me, many are angry and feel it's okay to "get theirs" now that the theft is so blatant. . . align yourself with that mind-set if you must, but realise that you become no better than those you loathe (or is it "respect"? there IS a difference. . .)

if you are pre-disposed towards a spinning moral compass, you'll see where that takes you. . . from your moniker and your description of your "small farm business" I'll take a wild guess that you're in california, and seeing the competition rise, profits fall, yes?  maybe take some of your land and begin to grow food. . . if you don't feel up to the task, find someone who will exchange their labour for a space to grow / live - be creative!   you're in a position to begin to take care of yourself, which is more than many.

"hope in this new world order" is all about continually adapting to survive.

Sun, 07/04/2010 - 15:12 | Link to Comment pigpen
pigpen's picture

Cognitive D, how is this propaganda film compared to something like Triumph of the Will?

Is this as good as German propaganda? I am fascinated by the subject.

Cheers,
Pigpen

Sun, 07/04/2010 - 15:37 | Link to Comment FranSix
FranSix's picture

Now, about gold.  Sure they went off the gold standard, but they also devalued their currency against gold.  They could have stayed on the gold standard and devalued by 10X if they wanted to achieve those ends.

Sun, 07/04/2010 - 17:36 | Link to Comment nuinut
Sun, 07/04/2010 - 15:37 | Link to Comment Rusty_Shackleford
Rusty_Shackleford's picture

"The study of history is a powerful antidote to contemporary arrogance. It is humbling to discover how many of our glib assumptions, which seem to us novel and plausible, have been tested before, not once but many times and in innumerable guises; and discovered to be, at great human cost, wholly false."  -- Paul Johnson

Sun, 07/04/2010 - 16:06 | Link to Comment Gordon_Gekko
Gordon_Gekko's picture

Ultimately, Rusty, ONLY those of us who are aware of human history will survive the coming storm. Period.

Sun, 07/04/2010 - 17:04 | Link to Comment Dr. Sandi
Dr. Sandi's picture

I Googled "history" so I could become aware. They said history is written by the winners. Are we the winners?

I'm confused. I'm just going back to bed with my teddy until it's safe to come out.

 

Sun, 07/04/2010 - 18:57 | Link to Comment Rusty_Shackleford
Rusty_Shackleford's picture

Good point. 

Too many people confuse what they memorized from their state-approved 6th grade "Social Studies" textbook with actual history.

When you control the programming of children you control everything.

 

"Who controls the past controls the future: who controls the present controls the past."

Sun, 07/04/2010 - 19:51 | Link to Comment Amish Hacker
Amish Hacker's picture

"The rich have got their channels in the bedrooms of the poor."

                                                                         L. Cohen

Sun, 07/04/2010 - 18:42 | Link to Comment Caviar Emptor
Caviar Emptor's picture

Wise words. But like a toddler, we must rediscover the world for ourselves. And as adults we will assume our mistakes will benefit future generations because they'll learn from us. But they won't.

Sun, 07/04/2010 - 15:39 | Link to Comment arthur darrell
arthur darrell's picture

Santilli is wrong. Deflation is here and wont stand a chance of departing unless banks are penalized for leveraging ( rather than deleveraging ) treasuries. Remember we all get 10x margin but banks borrow at .25 and don't pay margin interest ( unlike you and me ). Credit destruction ( Deflation ) is here and every repaym,ent of a Mastercard, Visa or principal on a mortgage heads toward auction treasuries enabling Uncle Same to pay the interest to China, Russia et al. Santilli is likeable and smart but Prechter had this whole scenario pegged a decade ago and wrote of it clearly in Conquer The Crash. Among today's goats I'ld like the opportunity to welcome Elliot (NY cums 1st ) Spitzer Alan Greenspan and I'm ashamed to be Jewish with the likes of Helicopter (no duh no deflation in my time Ben Bernanke. .02 Happy 4th, we'll not have another this good in our lifetimes.

Sun, 07/04/2010 - 17:42 | Link to Comment Noah Vail
Noah Vail's picture

The shadow banking system is now larger than commercial banking, but the SBS is basically bond-for-dollar swapping. Toxic sewer-bass bonds. That system collapsed in 08 and it will collapse again. When those tens of trillions of bonds loose their value, what happens to money? How many dollars are there compared to the mountain of bonds - 100:1, 1,000:1? The Fed will not be able to create dollars fast enough once the great ass-ette sell-off begins.

 

As "just in time" delivery reduces inventories of goods, shadow banking reduces the necessary supply of dollars. There are no more dollars sitting in bank accounts, now a mere $1o trillion. Not nearly enough. What we will experience is hyper-deflation.

Mon, 07/05/2010 - 13:22 | Link to Comment Almost Solvent
Almost Solvent's picture

Bingo!

That is interest rates can never increase and mark to market can never return.

Game over if either occurs.

Sun, 07/04/2010 - 15:41 | Link to Comment traderjoe
traderjoe's picture

You're not a PhD Economist, and since this stuff is really hard, "I can speak freely":

I'm going to intentionally lower the confidence in the value of money in order to address all of the other structural problems in the economy by taking money from the savers to bail out the borrowers (including me). And I'm so smart (x2) that I don't realize any of the long-term issues associated with this path, including the death of incentives to save, invest, etc. 

Sun, 07/04/2010 - 17:49 | Link to Comment Noah Vail
Noah Vail's picture

A huge devaluation is their only possible hope of dealing with deflation and debt defaults.

Sun, 07/04/2010 - 15:44 | Link to Comment Carl Marks
Carl Marks's picture

"The crisis [the Great Depression] discovered a great man in Franklin Roosevelt...None too soon he has carried America forward to the second stage of democratic realization. His New Deal involves such collective controls of the national business that it would be absurd to call it anything but socialism, were it not for a prejudice lingering on from the old individualist days against that word...Both Roosevelt and Stalin were attempting to produce a huge, modern, scientifically organized, socialist state, the one out of a warning crisis and the other out of a chaos..." H.G. Wells The Fate of Man 1939

Sun, 07/04/2010 - 15:54 | Link to Comment papaswamp
papaswamp's picture

Hurricane again Bitches!

AL962010 is beginning to organize and pressures are dropping in the area. It still must traverse an area of upper level shear to it's NW. Basically going to follow the same path of Alex unless something changes.

 

http://www.skeetobiteweather.com/picservice.asp?t=m&m=96&a=2

Sun, 07/04/2010 - 16:04 | Link to Comment Gordon_Gekko
Gordon_Gekko's picture

It is a most misleading thing to stress the quantity of money, which is only a limiting factor...

This only reaffirms the fact that Keynes was an idiot. Money supply is NEVER a limiting factor for economic growth. And it is purely one dimensional thinking to believe that "rising prices are symptom of rising output and employment". Total bullcrap.

Sun, 07/04/2010 - 16:13 | Link to Comment Paul E. Math
Paul E. Math's picture

The powers that be want inflation because it preserves the status quo power structure.  Deflation destroys those that our current inflationary system has made rich and powerful and it returns prominence to the working man or woman.

Deflation is the reset button that so many of us have been searching for.

Example: auto industry.  In deflation, consumers can't get loans to buy new cars and many auto-makers collapse under the weight of their debt.  Many union wage-slaves, many of whom are in other countries, become unemployed.

However, consumers attempt to extend the lives of their existing cars and spend money on the skilled efforts of their local mechanic who are mostly small business owners.

Deflation is a dagger to the heart of the debt-ridden corporate leviathan.  It is guillotine to the firm that has borrowed cheap money to buy machinery to replace its workers.

As everything but money becomes cheap, businesses that are labor-intensive flourish where their capital-intensive competitors failed.  Employment rises, particularly for those with skills, as in the auto industry.

Do you see the radical shift here, why the powerful are so shit-scared of deflation?

Sun, 07/04/2010 - 16:36 | Link to Comment godfader
godfader's picture

"The powers that be want inflation because it preserves the status quo power structure.  Deflation destroys those that our current inflationary system has made rich and powerful and it returns prominence to the working man or woman."

 

How did the US working class fare in the 1930s? Or the Japanese "salarymen" counterpart in the 1990s? Both were utterly destroyed.

Yes, the rich do suffer, but they go from ultra rich to just rich. Their lifestyle doesn't change much when they go from $250m net worth to "just" $75m. The working class however takes it on the chin as they lose their house, their job and their health care.

Deflation is bad for the rich as you outlined, but it's far worse for the working class that has debt to pay back and little savings to keep them above water when the unemployment benefits run out.

 

I don't understand how the current working class benefits in a deflationary collapse, especially considering record household debt/GDP levels.

Sun, 07/04/2010 - 17:00 | Link to Comment Crummy
Crummy's picture

No one currently working for debt will benefit, but the next generation will have have a lot less debt to pay back since a deflationary crash would not only wipe out these debts that are based on false projections of future production, but it would stop the ultra rich from gaining more ownership over real assets by default so that when the economy does inevitably show itself unable to lift its bootstraps to Alpha-Centauri and comes crashing back down to Earth less of the working class would have had to sign its life away for liquidity.

In any event, any class dependent on centralization suffers when the central plan fails.

Sun, 07/04/2010 - 17:05 | Link to Comment New_Meat
New_Meat's picture

godfader: +1

"How did the US working class fare in the 1930s?"

In general, working class destroyed, came back a bit with war work.  But the Union workers? +20% or so from 1930 to pre-war.  So unions, even today, are supporting the administration and have no clue ...no, that is unfair... the bosses acknoledge not that the SEIU has this "international" word in its name.  So the "protectionist" union opinion is paying for the "internationalist" policy.

I used to know the words to "L'Internationale" and the music (can't sing to save my life).

http://www.uv.es/pla/red.net/intaoter.html

- Ned

Sun, 07/04/2010 - 17:32 | Link to Comment Paul E. Math
Paul E. Math's picture

Good question, I understand your skepticism.  Wage slaves working on assembly-lines for corporations would most certainly be laid off - this is the proverbial sword of damocles that big business holds over our heads.

However, consider that there is a constant business choice between investment in capital equipment or hiring of workers.  You can make 1M widgets with 1 machine or with 100 workers.  The cheaper that money is to borrow the more favorable becomes the decision to purchase the machine.  we've been in such a cheap money environment since Greenspan took control of the Fed.

But in deflation money is scarce and it is labor that becomes cheap.

Employment would increase if wages and prices are allowed to fall to their natural level and if interest rates are not maintained artificially low by the central bank.

Counter-intuitive, yes.  But nonetheless true.

Sun, 07/04/2010 - 16:18 | Link to Comment DoctoRx
DoctoRx's picture

The FDR admins's slaughter of the baby animals was disgusting.  So was the plowing under of viable crops at a time of widespread hunger. 

America had, I believe, never had chronic unemployment until Robert Shiller's presidential heroes Hoover and FDR began both deficit spending and specific policies to for the first time persuade and prohibit businesses from lowering wages in econ downturns.  Perhaps once they were forced to keep wages constant in nominal terms (thus raising them in the only terms economists know, namely "real" terms), they sensibly concluded:  fire them!  Thus the famous Morgenthau note to himself in 1939 that all the debt spending had failed.

Victory in WWII and then victory in the Cold War allowed this debt scheme to supersize.  At this point we can't even invoke Keynes, at least I can't w/o being a Keynes scholar, as we're in uncharted waters with lots of ways for the ship to be sunk.

Sun, 07/04/2010 - 16:19 | Link to Comment papaswamp
papaswamp's picture

In other news...but somewhat related....as reported by FT via Forexlive...Greece has been very quietly restructuring it's debt. 19% haircut rumors are floating around.

http://www.forexlive.com/116938/all/ft-greece-has-already-begun-restuctu...

 

Sun, 07/04/2010 - 17:17 | Link to Comment Muir
Muir's picture

Thanks

_

FT

Look at the site for the Hellenic Association of Pharmaceutical Companies (www.sfee.gr), and you will find a link to a joint press release by the Greek Ministry of Health and Social Welfare and the Ministry of Finance. On June 9, unnoticed by most in the financial world, they stated: “The [Greek state hospital system] debts of 2007, 2008, 2009 amounting to €5.36bn [£4.4bn, $6.7bn] will be settled with zero coupon bonds.” The hospital debts lingering from 2007 will be paid with two-year zeros, 2008 with three-year zeros, and 2009 with four-year zeros.

There is some, actually a lot, of detail missing from the one page release, which presumably will be filled in by the legislation that will be introduced, and probably passed, to implement the restructuring. The release does say: “It is certain that the banks co-operating with the suppliers will show interest in prepaying these bonds, transforming the corporate risk undertaken on behalf of their customers – hospital suppliers – in credit risk against the Greek state, in the form of a bond which can be financed through ECB.” And, according to the release: “In case suppliers settle these bonds by January 2, 2011 . . . the above ‘discounts’ corresponds to a total percentage of about 19 per cent.”

Get that? That 19 per cent haircut is based on the Greek state’s own calculation of the present value of these obligations of its hospital system. Others would probably use a higher discount rate. This kind of reduction in principal value, which paid for a critical import, is not, I believe, incorporated in the much touted “stress test” for European banks. The bank regulators and the European Central Bank seem to think any more than a small haircut in euro area state debt would be just too politically sensitive to consider. Yet here is the Greek state telling you their old paper isn’t worth what it was when they incurred the obligation.

And while the release says the debts “will be settled”, major suppliers have not yet agreed to the hospital debt bloodletting. According to a London dealer in edgier emerging market paper, some of the suppliers have already been around to get a bid. Unsuccessfully, sad to say, even though the suppliers’ banks have that promise of “ECB” repo availability. He sniffs: “You won’t get a bid at 50 [per cent of face]. My guessing is that it is more like 30. We were appalled at the very low quality of the documentation.”

As you see, we are deep into emerging market frontier-land, even though EU citizens can walk through the fast track at Greek customs and immigration. Before emerging market trade claims would wind up at that London dealer, they would be presented to an even edgier specialist, the sort who is familiar with central African landing strips and Cypriot “spare parts” traders. The one I spoke to a few days ago isn’t interested . . . yet.

“This all happened in the Soviet Union,” he recalls in the flat voice of someone who has seen this before, many times. “It’s too early for us to get involved. Generally the debtors allege waste and fraud in the hospital system, or say the suppliers are blackmailing them. What the pharmas do [when payment stops or slows] is supply only the basics like penicillin or insulin. At the end they stop doing even that. If you are an exporter you are not prepared to sit on an old debt; you sell it, since the accountants will require provisioning.”

Eventually, though, the bills get paid. The trade creditors will lose the initial discount and the realistic value of their waiting time. Some of that is captured by the dealers or specialists who don’t mind sitting on hard plastic chairs in hot, unpleasant, waiting rooms. The suppliers then attempt to catch up through their pricing on future sales.

Since the hospital debts do not yet have the artificial support of ECB market operations, perhaps any indicated bid side for this paper should be considered as a useful data point. That is, the price people would pay for what will soon be Greek state bonds, if they were investing their own money.

Sun, 07/04/2010 - 16:22 | Link to Comment nuinut
nuinut's picture

There were very interesting developments that birthed propaganda in the early 1900's, which are most relevant right now. This manipulation birthed consumerism, and not by accident, giving the necessary fuel to enable the continual expansion of the credit ponzi.

This documentary, The Century Of The Self, is a must see for anyone with an interest in how the ponzi was foisted upon the masses, and the reasons as to why they bought into it with such enthusiasm.

If you are reading this, know that this has been foisted upon you.

It may be in your best interests to know both how and why.

 

Zero Hedge covers a lot of ground, very important ground, every single day. Instead of discussing the symptoms, take a look at some of the fundamental causes.

As far as I am concerned, this is must see stuff.

 

Sun, 07/04/2010 - 17:11 | Link to Comment Dr. Sandi
Dr. Sandi's picture

The single fundamental problem is always the same.

Wealth is created by the productive labor of humans. Put too many humans out of work, productivity ends. Go long enough without productivity and we all starve, naked, out in the open.

The rest is just figuring out who gets to benefit from said productive labor.

We're nearing the end of maximum theft of labor from productive humans, and now we all pay. Naturally, those who have stolen the most from the rest of us have more resources than those who did most of the work.

This whole financial collapse fiasco is simply the time we all get to find out who won and who lost.

Big winners get to keep most of what's left.

Big losers get to die in a ditch.

 

Sun, 07/04/2010 - 17:34 | Link to Comment nuinut
nuinut's picture

You didn't watch the video I linked, so why attach your irrelevant comment to it, Dr. Sandi?

I see your point, but you haven't attempted to see mine.

Sun, 07/04/2010 - 18:09 | Link to Comment Dr. Sandi
Dr. Sandi's picture

There was no attempt to attach my irrelevant comment to your video. It's just what came to mind.

I skimmed through the video. It's pretty basic stuff and I've been there too many times.

Synopsis... This is how we created a race of sheeple.

Yeah, understood. I know how it works and have used it to my benefit. But I don't like the fact that it's so effective. And just exposing it doesn't change anything, unfortunately.

My comment is more basic. Without people working, all of this "feel good" public relations propaganda bullshit eventually becomes irrelevant as we slowly starve to death with a wad of useless cash in each pocket.

We've been "had" and most of us like it that way. So what are we going to do about it?

I wasn't trying to throw snowballs at your fort. Just reacting, as I am often wont to do.

 

 

Mon, 07/05/2010 - 05:18 | Link to Comment nuinut
nuinut's picture

I skimmed through the video. It's pretty basic stuff and I've been there too many times.

Fine, but what about the thousands of others who read ZH who haven't?

Synopsis... This is how we created a race of sheeple.

Yes. But for everyone else who doesn't know how this was achieved, the synopsis tells them nothing. The video will tell them many, many facts which may be completely unknown to them currently.

 And just exposing it doesn't change anything, unfortunately.

Rubbish. Exposing it is the first, and most necessary, step to change. How will it change if it is never exposed? A lot slower, I'd say.

I wasn't trying to throw snowballs at your fort.

I don't mind if you do; I'm confident in the structural integrity of my 'fort', and should that confidence prove ill founded, well you have then done me a big favor, no? 

Sun, 07/04/2010 - 18:04 | Link to Comment Noah Vail
Noah Vail's picture

Dr. Sandi misses the point that we can all be productive playing markets that are essentially based on nothing, thereby overturning the law of physics that says you can't get something from nothing.

Sun, 07/04/2010 - 18:10 | Link to Comment Dr. Sandi
Dr. Sandi's picture

And it would work too, if we could just convince the last guy out of the room not to come out of the room.

 

Mon, 07/05/2010 - 03:15 | Link to Comment zhandax
zhandax's picture

Thanks for the link.

Sun, 07/04/2010 - 17:12 | Link to Comment maui73
maui73's picture

very good interview . Krugman vs Niall Ferguson

http://edition.cnn.com/video/#/video/podcasts/fareedzakaria/site/2010/07...

Sun, 07/04/2010 - 20:36 | Link to Comment Fred Hayek
Fred Hayek's picture

Thank you.  I find Ferguson to be a consistently interesting speaker.  I think he would destroy Krugman if they had debated one on one instead of having been interviewed separately.  Krugman acts as though you just have another massive stimulus and everyone who buys the treasuries you use to pay for it will just bake them into pies or something and that the bill never comes due.

Sun, 07/04/2010 - 17:25 | Link to Comment hbjork1
hbjork1's picture

"Tyler Durden",

Thanks for the post.  IMO, You have responded to the challenges of the times stimulating in the blog, and delivering, a pretty good body of scholarship.

I have said it before but it bears repeating; "The Republic certainly appears to be in good hands.

Happy 4th of July to all! 

It appears that

Sun, 07/04/2010 - 17:32 | Link to Comment Fix It Again Timmy
Fix It Again Timmy's picture

When you add humanity, the four fundamental interactions of nature increase by one to five - the fifth being sustainability - venture too far from this, things can get ugly... Breaktime!!:

http://www.youtube.com/watch?v=j4rgdf45H50&feature=related

 

Sun, 07/04/2010 - 18:07 | Link to Comment proLiberty
proLiberty's picture

Keynes' theory leads people to confuse money with wealth.  Government can expand credit, print money, or allow financial institutions to create credit by changing reserve requirements.  All have the effect of expanding the number of dollars without changing the amount of wealth those dollars "monetize".   This is like trying to feed a growing horde of party crashers by slicing the pizza into more slices.

 

But more to the essential point: to the extent that money is merely a medium of exchange, that is for exchanging wealth between the various participants in the economy, government has the same exact duties as a trustee for a minor orphan who inherits an estate.  The trustee has a fiduciary responsibility to deliver the same as he received to hold in trust.  While governments will hold private trustees liable for theft or conversion of funds, it does the exact opposite with the money it prints: it uses its monopoly power and legal tender laws to force citizens to store their wealth in its instruments and then proceeds to diminish their value by deliberate dilution through inflation.

For those who are Biblically inclined, it is a violation of Leviticus 6:1-6.

The only way to stop it, as Alan Greenspan noted in his famous article, Gold and Economic Freedom, was for people to hold their wealth in gold as much as possible.

 

Sun, 07/04/2010 - 22:17 | Link to Comment Rollerball
Rollerball's picture

Excellent point(s).  But there are betters ways to stop it; like localizing a medium of exchange (i.e. barter).  Greenspan is a surgeon who implants tumors to stay in business.

Sun, 07/04/2010 - 23:02 | Link to Comment MayIMommaDogFac...
MayIMommaDogFace2theBananaPatch's picture

This is like trying to feed a growing horde of party crashers by slicing the pizza into more slices.

Think Christ -- Sermon on the Mount with a fish pizza. 

For those who are biblically and comically inclined.

Sun, 07/04/2010 - 18:16 | Link to Comment DosZap
DosZap's picture

http://www.bloomberg.com/news/2010-07-04/roubini-says-german-u-s-debt-to-be-havens-in-face-of-economic-fragility-.html

Dig this, Roubini,see's the U.S.,Germany, and Canada as safe havens during the next few months, due to our relatively moderate Debt to GDP?.

What's he smoking..Canada,Germany, yeah...us??.

Kick back,toke the rope Nour Babeeeeeeeeee..........

THIS does give one perspective on just HOW BAD(INSANE) this has gotten,,,,,,,,,,,the Mkt's going down, like bad...........how's that gonna be good?.

LOL

 

 

Sun, 07/04/2010 - 18:43 | Link to Comment The Alarmist
The Alarmist's picture

You know, I see places like the FT and CNBC calculate US Debt to GDP at something like 65% to 75%, but then I run the numbers myself and see something on the order of 85% to 90%.  What gives?

 

Sun, 07/04/2010 - 18:14 | Link to Comment Dr. Sandi
Dr. Sandi's picture

The only way to stop it, as Alan Greenspan noted in his famous article, Gold and Economic Freedom, was for people to hold their wealth in gold as much as possible.

Let's all lay up a supply of Gold... Gold Bond Medicated Powder. It'll sooth you right where Keynesian Economics has chafed you.

 

Sun, 07/04/2010 - 18:33 | Link to Comment Mark Beck
Mark Beck's picture

As I have said before, FED actions during the Bank insolvency over-leveraged crisis, has nothing to do with economic theory, other than a plausible cover story. The Treasury and FED's actions had one goal, save insolvent member banks of the Federal Reserve system, and if they could not be saved directly, grant them status as Bank Holding Companies so they could.

FED economics is something to dangle, in vague phrases of credit towards this or that, to mesmerize the politicians until they nod in unison.

Mark Beck

Sun, 07/04/2010 - 20:01 | Link to Comment Thomas Magnum
Thomas Magnum's picture

*You know, I see places like the FT and CNBC calculate US Debt to GDP at something like 65% to 75%, but then I run the numbers myself and see something on the order of 85% to 90%.  What gives?*

 

CNBS is nothing more than a veiled (lol) platform for GE. Their numbers are somewhat akin to the laughable 9.5% unemployment rate, which probably stands in excess of 18-20%. I believe all government data anymore is just  "what can we say this week to keep them spending" garbage.

Sun, 07/04/2010 - 20:29 | Link to Comment Chartist
Chartist's picture

When they write the Grapes of Wrath II, will the shanty town be in your front yard Tyler?  Were you alive when they burned Watts and Detroit in 1968?  This shit isn't going to get better when two weeks ago, Whirlpool wrecked a town in Indiana when it closed a mill and sent 1100 manufacturing jobs to Mexico....Why doesn't the president just come out and make it official, that the new normal is half of the US citizenry is going to have to get by on the average mexican annual wage?

Sun, 07/04/2010 - 20:52 | Link to Comment Dr. Sandi
Dr. Sandi's picture

It kinda seems that Globalization isn't quite such a good deal when it's YOUR country that's working for slave wages while somebody else gets the goodies.

Globalization is the program that is going to flip America's Bozo bit.

Better lay in a supply of white and red make-up, honkey red rubber noses and shoes that are just too big, because "We're all Bozos on this bus."

Welcome aboard, America. Next stop, Downtown Clowntown.

 

Sun, 07/04/2010 - 20:57 | Link to Comment PeterSchump
PeterSchump's picture

The system is designed to bankrupt not the banks, but the people.  The banks always get bailed out.  Bad bet on CMO's or CDS's? No problem, we have TARP for you.  Small business with an idea and want a loan? No, banks can make too much borrowing @ 0 and lending to the gov for .1 - 4 %. They have leverage that you can't have. Prudent homeowner that did not use the house as an ATM and put 20% down? FU, we will get you with property taxes and declining values, after we made a butt load helping the bubble by securitising turds..  Solidly funded your 401(k) for decades? FU2, we sold you a bunch of overpriced crap.  So what does the average American do? We all go to cash.  Now for the future FU.  They will inflate the sh!t out of the dollar (much beyond what history has already shown).  Bottom line, middle class gets it in the arse again.

This is the only way they can win, they know it, and they are doing it.  A prosperous middle class does not need a nanny state, farcist oligarchy, so they will destroy it.  Anyone know any unemployed bankers?  I don't, and I don't mean the back office types.  Unemployed government workers?  Ha!  Really, with all of the economic pain out there, how many upper managers are out of a job?  Historically speaking, very few.  No one was allowed to fail, except those in the middle.  It started in the the 1930's, took a while, but I am confident that in 10 years, we will make the USSR look like it was run by Ghandi.

But who the hell cares, isn't there an America Idol repeat on tonight? Keynes?  Not even he envisioned a perversion as sick as this. 

I disagree with his theories for many reasons, but what we have seen governments do in the name of Keynesianism is the best reason to avoid its implementation.

Sun, 07/04/2010 - 22:11 | Link to Comment THE DORK OF CORK
THE DORK OF CORK's picture

I listened David Tice and Bill Laggner on King world news and what struck me was the extreme mediocrity of their views.

They seem to believe in the collapse rebirth model or at least hope to profit from stupidity.

As for Rick Santelli he is just a show boater - they have nothing I repeat nothing of substance between the lot of them.

They have skin in the game of collapse and foolishly hope to profit from this.

I am sceptical of anybody who follows a rigid belief system wether they are Austrian,  Monetarist,  Keynesian or Dorkesian - there is no God out there baby - there is just nuclear waste,some of which is capable of intelligent thought but sadly most of the material of the universe is either dumb or inert. 

Mon, 07/05/2010 - 21:48 | Link to Comment Diogenes
Diogenes's picture

Very interesting video and letter. They spark a couple of thoughts.

I have been saying for years that according to contemporary sources, the depression was over by 1934. This video was apparently made in late 1933 or early 1934 and confirms that view, in other words people AT THE TIME thought the depression was over by 34.

Keynes' statement that a war is the traditional way to end a depression. Not true. In England in the 18th and 19th century the conventional way to relieve unemployment and "hard times" was through public works, usually the construction of roads, canals, harbors and public buildings using public funds in other words, government spending on infrastructure. There were also emergency food handouts in areas of actual starvation but the construction projects were seen as the best solution to unemployment.

 

 

Sun, 07/04/2010 - 22:49 | Link to Comment Diogenes
Diogenes's picture

What the US has today is neutron bomb economics. Destroys the people but leaves the buildings standing, especially the banks.

Mon, 07/05/2010 - 02:27 | Link to Comment GoldmanSux
GoldmanSux's picture

What a great video find. In fact, it is chilling. Was this before or after FDR took private gold off the market? Not knowing, I would guess just before. The propaganda method seems simple but was quite advanced at the time. One could argue the populace is stupider today.

Mon, 07/05/2010 - 19:28 | Link to Comment Diogenes
Diogenes's picture

If you watch carefully around minute 9 they start describing how the economy took off after Roosevelt's inflation bill was signed April 17 1933. He signed the order nationalizing gold on April 3 1933.

From this it appears the movie was made in late 1933. On all the charts 1933 is the last year shown.

Mon, 07/05/2010 - 09:50 | Link to Comment Treeplanter
Treeplanter's picture

Y'all are scaring me.  I already have half my savings in gold and silver real money.  Now I'm worried I ought to cash out my mining shares and go all metal.  Taking the fun out of the great economic collapse.  What about the FAZ?  Isn't that also manipulated by the banks?

Mon, 07/05/2010 - 10:47 | Link to Comment bigdumbnugly
bigdumbnugly's picture

Tree

This is a confusing time to be in mining stocks.  i am in them as well.  With the economy deflating and no clear indication of when - or even if - QE2 will be announced and implemented, it appears to be a risky place to be (read: bad).  I knew the mining stocks would initially follow the market lower if it tanked, but was expecting them to turn it around fairly quickly.  I now have second thoughts that they will be able to do so anytime soon without A) gov't stimulus, or B) decoupling of physical from paper.

My thought is that it will be a rough ride until one of these two things occur.

But I am hoping others with a far better insight than I will weigh in here, as I am willing to hear other opinions.

Mon, 07/05/2010 - 11:21 | Link to Comment Tartarus
Tartarus's picture

It is nice to see Zero Hedge finally acknowledging that this is not Keynesian economics. The best way to describe it is drunken sailor extend-and-pretend bailout economics, because there is no serious economic theory that proposes such insanity.

Fri, 08/20/2010 - 10:38 | Link to Comment herry
herry's picture

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Sat, 08/21/2010 - 10:49 | Link to Comment herry
herry's picture

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