US Election 2008

[bluez_aspic]

re: strikingstar - The Federal Reserve is faaaar from independent just by looking at the record. But under a hard monetary system (as it was in the past), inflation of the money supply and government spending is severely restrained. The situation now is that the Fed extends an infinite line of credit to the U.S. government (debt monetization) - so you now have a government racking up far more than US$1 billion in debt every day, while removing the need for accountability to American taxpayers (who are getting screwed all over).

If inflation is a tax, does that make central banks the biggest taxing agents? Heh.

The price of gold would be a good indication of how much the U.S. dollar has been debased - in the late 19th century, an ounce of gold was worth US$20; US$35 in the mid 20th century; today it is hovering at US$900 and will continue to shoot all the way up.

Since the US Dollar happens to be the global reserve currency, other central banks - instead of dumping - have been inflating their own currencies on the back of US Dollars (for various reasons - not necessarily economic).

"Inflation is always and everywhere a monetary phenomenon" - Milton Friedman got this right, but to suggest that a monetary expansion is needed to remedy a problem caused by monetary expansion is like... pouring gasoline on fire. I always found Friedman's analysis of the Great Depression to be unsatisfactory; I later concluded he was totally wrong.

The U.S. are now beyond the point of being technically bankrupt anyway. The speed of their money printing presses are likely to increase, partially because of wrong economic beliefs (Keynesian/Monetarism), but also because of an ongoing war effort and the need to finance their Social Security schemes. When the baby boomers retirement is well and truly at its peak, the average debt per American citizen is estimated to be US$500k.

The way central banks currently operate (e.g. controlling interest rates, focusing on CPI, employment rate, consumer spending, ?open market? operations, determining the amount of ?credit? available, injecting ?liquidity?) is actually a form of CENTRAL PLANNING if you think about it. All these made worse with fractional reserve banking (a.k.a. legalised fraud) which ensures that credit bubbles will continue to pop up.

Capitalism doesn?t breed greed - that people are motivated by greed is simply human nature. People can speculate, entice, trade and behave in their greedy ways, but their choices of behaviour is strictly curtailed under a hard monetary system. In other words, they can be themselves, but they won?t be able to wreck the economy.

What needs to be done is to reinstitute a sound, ?hard? monetary system. You cannot have full economic freedom and a truly free society if the power to control and direct monetary inflation is invested in a few undemocratically elected Keynesian masters.


Some nice articles:

What Has Government Done to Our Money? by Murray Rothbard
http://mises.org/money.asp

Gold and Economic Freedom by Alan Greenspan (the irony)
http://www.321gold.com/fed/greenspan/1966.html

Interview with John Exter (former Citibank VP)
http://the-moneychanger.com/articles...my/exter.phtml

Central Banking in Turbulent Times: Challenge for Central Bankers
http://www.lbo.lk/fullstory.php?nid=1191759006


And a ROFL comment:

"Had I been the professor who had judged his thesis for his PhD, I would not have let him pass. I would have told him actually, 'Mr. Bernanke, I have one condition in which I let you pass, and this is you never join a central bank, because you are a destroyer of money as store-of-value function, of the function of money being a unit of account. The only central bank that I would allow you to go to is the one under Mr. Mugabe in Zimbabwe.' And I tell you Mr Bernanke with his monetary policy, he will destroy the US dollar." (Marc Faber)

[jay3349]

The funny thing with this entire election process is all this Lehmann business and the AIG getting bailed out is hardly the top news. Guess what is. "Oprah refuses to host Sarah Palin".

I mean, considering how bad the US economy is, you'd think the voters primary concern would be to vote for the candidate who could best manage it. Not who opposes abortion or lipsticks on pigs. Makes me think that no matter how much democratic power you give to the masses, they can't stop being petty.

This is especially relevant to Malaysia right now. If we do liberalize our election system, would people vote because they like the policies, or would they vote for the person with the best smile, or the person who likes to talk smack about Israel/S'pore (no matter how good trade with that country would be).

This is why I am extremely impressed with the Swiss style of democracy. Leave every law to the people. And even then, they could think clearly and resoundingly defeat 'The Black Sheep' legislation, which was designed to keep out certain ethnic immigrants. Seriously, with all the fears about terrorism and religious fundamentalists, it would have been reasonable to think such a legislation would pass easily. But no, the Swiss used their heads and kept their democracy alive. Bloody impressive in my view.

[bluez_aspic]

Switzerland is the closest thing to utopia on earth (http://www.isil.org/resources/lit/sw...on-system.html) Smart enough to have resisted joining the European Union (which is evolving into collectivist body). Though these days they are less hardcore capitalist - I'm still not entirely sure why they decided to go off the (semi) gold-standard either.

btw AIG isn't exactly a bailout - rather they are gonna be slowly liquidated over a period of two years, which hopefully would enable them to get a better return on their assets (as opposed to a fire-sale). Had they filed for bankruptcy, a large number of banks and financial institutions would probably have soon followed suit - if you subscribe to the Austrian understanding of business cycles however, the worst is yet to come.

[sAmurAi-X]

We still don't like black people.

[Appolo]

And so it means that racial discrimination is still prevalent in a country that is known for its involvement in democracy.

For Obama, you have racism.
For McCain, you have ageism.

Wonder how the race for voter would be for the coming few weeks.

[strikingstar]

Re: bluez_aspic.

We'll have to agree to disagree then for I am not convinced the US government prints money arbitrarily on a whim.

The US government actually has lots of assets. Where do you think they spring $85 billion from to salvage AIG? From thin air? Do you think they just bloat the money supply like that? Far from that, the US government just sells a ton of their assets - mostly treasury bonds to finance such bailouts. (And increasing taxes too.) As it is, a $700 billion rescue-plan is on the horizon. And that magically appears from thin-air as well?

Of course, the question is if the US government has so much in assets, why don't they try to offset some of their debts? Well, the answer is they don't give a BS about their debts. It can go on accumulating for all they care because there are no signs that it is not sustainable. And even then, what can any other country do against the US if they refuse to pay their debts? Introduce sanctions? Embargos? This is laughable as this would hurt the other country more than it hurts the US. Moreover, the domestic market in the US is so big that they can sustain themselves on autarkic trade save for one minor detail.

At this point in time, it is almost foolish to expect the US government to ever pay off its $10 trillion debt. US Treasury Bonds never default. They have a credit rating of 100%. To pay off Creditor A at time period 1, they borrow by selling bonds to Creditor B. To pay off Creditor B at time period 2, they borrow by selling bonds to Creditor C and so on and so forth. They might not even pay the full sum, but in time, coupons and principles will be paid off in order. As long as government bonds (especially 30 yr) remain as safe storehouses of value, investors will always be attracted to buy them, thus further fuelling government debt.

The only thing that could truly hurt the US at this stage is an energy crisis. US has little oil apart from small reserves in Alaska. Only countries like Saudi Arabia or even Venezuela have enough clout to threaten the US if they don't sell oil to the US. That's why its anticipated that the next big thing after the whole mortgage crisis-credit crunch affair is the energy crisis. And that's why Warren Buffett has recently bought over Constellation Energy Group for $4.9 billion being the genius that he is.

[sAmurAi-X]

Originally Posted by Appolo

Wonder how the race for voter would be for the coming few weeks.

The first vice-presidential debate between Palin and Biden on Oct 2 will say it all.

[bluez_aspic]

re: strikingstar - unfortunately the facts are against you.

Fumbling around for official statistics would show that the U.S. Federal Reserve (a private consortium granted monopoly over the issuance of currency by Congress) has been increasing the money supply by about 10%-20% per year for the past decade (compare this to a 2-3% increase under a gold standard). This, together with the increase in credit money (via the fractional reserve banking mechanism), has resulted in too much credit chasing too few goods, thus driving up prices - inflation in other words, especially real estate and stocks.


On debt monetization:

Treasury bonds are not 'proper assets', but a claim on future tax revenues. Intuitively it should be obvious that to back Federal Reserve notes with treasury bonds is VASTLY DIFFERENT to backing them with gold/silver (or some other commodity). I'll do a cut-and-paste:

Debt monetization is one of the two main ways that national governments pay for their budget deficits.

When the US national government, for example, wants to spend more money in a given year than it has received in taxes, it must borrow the extra money. One way is to go into private capital markets to borrow the money. However, this means that the government is competing with private-sector businesses for a scarce pool of available loan funds. This can result in a "crowding out" effect, as government draws investment capital away from productive private-sector borrowers to pay for its own largely worthless programs.

As an alternative, the government can "monetize its debt" by borrowing from the US Federal Reserve system, which is nominally under private control but is really just another part of the government. In this case, the government sells its bonds to the Federal Reserve, which creates new bank deposits out of thin air and uses them to pay for the bonds. This process creates new money and expands the money supply: hence it is called "monetizing" the government's debt.

The process of debt monetization is too complicated to summarize in a 10-second sound bite on the TV news, so most people don't understand it. However, it's essentially no different from the historic practice of "coin clipping," whereby kings would reduce the amount of gold or silver in a country's coins and keep the extra gold or silver for themselves. When that happened, the coins were worth less, so the people lost purchasing power and it was transferred to the king.

Likewise, when a modern national government monetizes its debt, it reduces the value of the country's money, thereby -- in a sneaky way -- taking money out of the pockets of working people and giving it to government officials in a kind of "hidden tax."

(N.B. it is only fully equivalent to coin clipping if the 'monetized' debt is not paid off- which is the case now)

So debt monetization IS the printing of money out of thin air. You considered treasury bonds to be 'real' economic assets - if that were true, the U.S. government would be the richest entity on Planet Earth since they could technically issue an infinite number of them. But the truth is that the U.S. has long been beyond the point of bankruptcy.


Some nice resources on the monetary and banking system, and business cycles:

Money, Banking and the Federal Reserve
http://www.youtube.com/watch?v=iYZM58dulPE
(transcript at http://mises.org/story/2870)

The Austrian Theory of the Trade/Business Cycle
http://mises.org/tradcycl/austcycl.asp


The current bailouts and economic intervention by the U.S. government and the Fed only postpones the inevitable crash, while prolonging the pain and making it much worse.

Your AIG description is not accurate, but I'll leave it at that.

The US$700 billion 'rescue' proposal (in its current form) should be shot down by all Americans - the $700 billion is only a debt ceiling at any one time, not the maximum that the Treasury may spend; so it essentially is only a balance sheet figure. The real concern however is that it gives the Treasury a huge amount of power with little accountability, in fact, puts them beyond the rule of law. Is this even constitutional?


re: US election - nice quote I came across today:

"(Politicians) will promise every man, woman and child in the country whatever he, she or it wants. They'll all be roving the land looking for chances to make the poor rich, to remedy the irremediable, to succor the unsuccorable, to unscramble the unscrambleable, to dephlogisticate the undephlogisticable. They will all be curing warts by saying words over them, and paying off the national debt with money that no one will have to earn. When one of them demonstrates that twice two is five, another will prove that it is six, six and a half, ten, twenty. In brief, they will divest themselves of their character as sensible, candid and truthful men, and become simply candidates for office, bent only on collaring votes. They will all know by then, even supposing that some of them don't know it now, that votes are collared under democracy, not by talking sense but by talking nonsense, and they will apply themselves to the job with a hearty yo-heave-ho. Most of them, before the uproar is over, will actually convince themselves. The winner will be whoever promises the most with the least probability of delivering anything." (H.L. Mencken)

[bluez_aspic]

Some lucky soul is gonna lose this election!

[Shoblast]

Of course, but do you want someone like this in charge of the economy?

Someone did a parody, and they quoted ALMOST VERBATIM the original script. You know its the end of the human race when parodies fail because their material itself is better for the lulz than the parody.

No wonder the election is called the Erection.

Is America ready?