Great Depression

Following Part 1's emergence from the civil war and the age of enlightenment; and Part 2's undertaking of the largest building phase in the country's history. Part 3 of the 4-part History Channel series takes us from the beginning of steel and oil having forever changed the face of America, to JP Morgan arriving on the scene and expedites growth through a magical thing called finance.  From the Civil War to the Great Depression and World War I, for better or worse; for richer or poorer, in ethical and societal sickness or health; these five men - John D. Rockefeller, Cornelius Vanderbilt, Andrew Carnegie, Henry Ford and J.P. Morgan - led the way.

Whenever I endeavor to explain America’s current economic situation to a person who likely receives most of his information from skewed mainstream news sources, I try to use two comparisons; the Great Depression, and Weimar Germany, because what we are experiencing is actually a combination of elements from both events. In the end, the madness of debt spending is going to annihilate this country anyway.  Fiat printing and infinite QE will eventually result in the dumping of our currency as the world reserve, causing devaluation and hyperstagflation.  Stimulus and the monetization of government liabilities are crippling us.  The problem is, this nation is irrevocably dependent on such measures.  Cuts will result in almost similar catastrophe, but on a faster time frame and perhaps a slightly shorter duration (depending on who runs the show in the aftermath).  I’ve been saying it since 2008 – there is no easy way out of this situation.  There is no silver bullet solution.  There will be struggle, and there will be consequence.  It is unavoidable.  All we have to decide now is how we will respond when the inevitable disaster comes.

Waste and Fraud Are the Real Causes of the Deficit

Continuing to look back at what once was. Following Part 1's emergence from the civil war and the age of enlightenment, In Part 2 of the 4 part History Channel series, America continues to recover from the Civil War, undertaking the largest building phase of the country s history. While much of the growth is driven by railroads and oil, it's built using steel. From the Civil War to the Great Depression and World War I, for better or worse; for richer or poorer, in ethical and societal sickness or health; these five men - John D. Rockefeller, Cornelius Vanderbilt, Andrew Carnegie, Henry Ford and J.P. Morgan - led the way.

All Capitalist Systems Have Some Inequality.  We Don’t Want To Prevent All Inequality … Just Economy-Wrecking Levels

It is perhaps time to look back at what once was. In Part 1 of the 4 part History Channel series, a new war begins as out of the turmoil of the Civil War, America enters an age of enlightenment that will change the landscape of the country forever. The growth is driven by five insightful men who will change the world forever. John D. Rockefeller, Cornelius Vanderbilt, Andrew Carnegie, Henry Ford and J.P. Morgan rose from obscurity and in the process built modern America. Their names hang on street signs, are etched into buildings and are a part of the fabric of history. These men created the American Dream and were the engine of capitalism as they transformed everything they touched in building the oil, rail, steel, shipping, automobile and finance industries. Their paths crossed repeatedly as they elected presidents, set economic policies and influenced major events of the 50 most formative years this country has ever known. From the Civil War to the Great Depression and World War I, for better or worse, they led the way.

While the rest of the developed (read trade deficit) world's foray into the currency wars was completely predictable and expected, there was one country that had so far kept very silent on the topic of Japan's attempts to crush its currency: its main export competitor, South Korea. Recall that for this Asian nation exports are everything, and as Yonhap reminds us, "exports of goods and services amounted to 538.5 trillion won (US$506 billion) in the January-September period, or 57.3 percent of the nation's gross domestic product (GDP), according to the data by the Bank of Korea. The reading was higher than 56.2 percent tallied for all of 2011 and the highest since the central bank began compiling related data in 1970, and South Korea's exports accounted for 13.2 percent of its GDP." The reason for South Korea's relative silence is that, as we showed yesterday, in the global race to debase launched with the end of the Bretton Woods, it was the undisputed leader, outdoing even the US. Moments ago South Korea may have just had enough and broke the seal on its code of silence. As Reuters reports, "South Korea said that while the Group of 20 nations at their meeting last weekend did not single out Japan for monetary and fiscal measures that have weakened the yen, the group did not exactly endorse Japan's quantitative easing policy, which in fact stirred controversy."

Jobs! President Obama has set a record. In his speech to Congress on Tuesday, he uttered the word "jobs" more than in any of his previous four State of the Union addresses. His 45 mentions were more than double the references to any of the other policy ambitions encapsulated in his speech by such words as health, education, immigration, guns, deficit, debt, energy, climate, economy, Afghanistan, wage, spend or tax (the runner-up). If only the president's record on unemployment were as good. After four years America remains in a jobs depression as great as the Great Depression.

Curious why nobody at the G-7 or G-20 had the gall to outright accuse Japan of currency manipulation? Simple: because everyone else in the G-7 and G-20 has been doing precisely what Japan only recently started doing a few months ago. As such, it would be outright "glass house" hypocrisy if there was a formal Japanese condemnation by the group of overlevered nations, which moments ago released its draft communique not naming the island nation outright as was widely expected. Of course, that the G-20 did not accuse Japan of engaging in what everyone clearly knows is currency war, does not mean that everyone else is not doing this. To the contrary: they are, and the lack of a stern rebuke of Japan simply means the currency wars will now intensify, devolving into the same protectionism and trade wars as the first Great Depression was so familiar with, which to borrow a parallel from history again, will end with the kind of war that ultimately ended the first Great Depression.

According to dictionary.com, Deflation is “a fall in the general price level or a contraction of credit and available money.” Falling prices. That sounds good, especially if you have set some cash set aside and are thinking about a major purchase. But as some additional research with Google would seem to demonstrate, that would be a naïve and simple-minded conclusion. According to received wisdom, deflation is a serious economic disease - St.Louis Fed: "...discourages spending and investment because consumers, expecting prices to fall further, delay purchases, preferring instead to save and wait for even lower price..." The problem with deflation, then - we are told, is that it feeds on itself, destroying the economy along the way. Deflation is far worse than its counterpart, inflation, because the Fed can fight inflation by raising interest rates. Deflation is nearly impossible to stop once it has started because interest rates can only be cut to zero, no lower. In case you’re not already scared straight, the deflationary doomsday has already happened in America when (according to the New York Times) it caused the Great Depression. I hope that everyone is clear on this. Now that you understand the basics, I have some questions for the people who came up with this stuff.

The problem with “too-big-to-fail” is first and foremost the behavior of our beloved political leaders in Washington

The below article, recreated in its grotesque entirety, is a real, serious Op-Ed written by a supposedly real, non page-view trolling, Nobel-prize winning economist, in a serious paper, the New York Times. It can be classified with one word: jaw-dropping:"We’re not going to resolve our long-run fiscal issues any time soon, which is O.K. — not ideal, but nothing terrible will happen if we don’t fix everything this year. Meanwhile, we face the imminent threat of severe economic damage from short-term spending cuts. So we should avoid that damage by kicking the can down the road. It’s the responsible thing to do."

With Abe picking his new dovish playmate, and Draghi doing his best to jawbone the EUR down without actually saying anything, it is becoming very clear that no matter what level of bullshit histrionics is used by the politicians and bankers in public, the currency wars have begun to gather pace. Japan's more open aggressive policy intervention is the game-changer (and increasingly fascinating how they will talk around it at the upcoming G-20), as if a weaker JPY is an important pillar of the strategy to make this export-oriented economy more competitive again, it brings into the picture something that was missing from earlier interactions among central banks of the advanced economies – competitive depreciation. The last time the world saw a fully fledged currency war was in the early 1930s. Morgan Stanley's Joachim Fels looks at what it was like and what lessons can be drawn for the sequence of events - there are definite winners and losers and a clear first-mover advantage.

The insanity that has gripped policymakers all over the world really is a sight to see. There was a time when central bankers were extremely careful not to do anything that might endanger the currency's value too much – in other words, they were intent on boiling the frog slowly. And why wouldn't they? After all, the amount by which the citizenry is plucked via depreciation of the currency every year is compounding, so that the men behind the curtain extract more than enough over time. The latest example for the growing chutzpa of these snake-oil sellers is provided by Lord Adair Turner in the UK (as it faces its triple-dip recession) - who sees the current policy is evidently failing, so he naturally concludes that there should not only be more of it, but it should become more brazen by veering off into the 'Weimaresque'.

It is not the United States of Europe but the other way around; the Europization of the United States. It is not a new game but a very old game and not played with such fervor in America since Franklin Delano Roosevelt stirred the pot which was done in an attempt to end the consequences of the Great Depression. This bouncing ball is not too tough to follow. The people with money pay higher taxes and then have less money to spend on goods and services. The corporations pay higher taxes and then have less money to spend on acquisitions, dividends or growing their business. The money flows to the people who are not in the middle class but are poorer and it gets spent on the basics of life and not on consumer durables. The rich are poorer, the middle class is poorer, the poor become better off at first and then less well off in the second instance as taxes bleed the entire economy of excess capital.