A deflationary depression is the direct result of excessive debt. There is no way to avoid it. Here is why in layman terms: When we borrow, we borrow from the future. If we don't pay back, and the future arrives, we find it empty, depleted, consumed.
What was borrowed will be paid back. Since we never paid back in the past (and always postponed every recession with more borrowing), we now have to face a deflationary depression.
Why can it not be postponed again? Because when the debt accumulates, there comes a time when interest burden on existing debt becomes unsustainable. It is like a family who borrows a big mortgage. Rates edge up and poof. Foreclosure. Here is the debt problem:
http://www.tradingstocks.net/html/inflation_deflation_credit_bub.html
Printing money does not prevent the crash. It only changes who pays for it. When money is printed, savers pay. Banks etc get bailed out at other people's expense. Eventually, the value of what was borrowed gets deducted from the economy. Keep in mind, the threat of money printing may cause credit markets to freeze at the beginning, causing deflation (credit deflation) effecting prices of credit dependent items such as housing. This is because if creditors suspect US dollar will loose value, they will stop lending long term in US dollars, or they will demand very high interest rates.
Almost all of our entire money supply is borrowed money. It was created by the banks when we borrowed:
http://www.tradingstocks.net/html/banks_create_money.html
If you add others IOUs, especially social security, medicare etc, then we can assume that the economy is built based on the assumption that 50 to 300 trillion of money supply would some day exist. This money supply needs to have purchasing power. If it is diluted due to printed money, it won't serve it's purpose. For example, if social security paycheck does not buy you lunch, it does not matter that government obligation to pay it was satisfied. In such a scenario, consumer economy will collapse. People will not have money to buy anything other than necessities. Salaries will stagnate, thus it may be stagflation, if not hyperinflation.
Then, since hyperinflation is not the solution and may make things worse, FED may as well settle with a deflationary crash, at least for a while.
Remember that for FED to print more money, things need to get bad so that there is political will to print money. This is why deflation is likely to happen first and inflation may happen later. Here is a report of deflationary forces in 2010:
http://www.tradingstocks.net/html/2010_stock_market_forecast.html
Coming back to the excesses mentioned in the article, here is a chart that shows excessive paper trading which cannot be sustained:
http://www.tradingstocks.net/html/financial_mania_continues.html
Here is why the stock market is a bubble:
http://www.tradingstocks.net/html/near_bottom.html
This is like Tulip mania, South sea bubble. This one is Financial Mania. People who live through it do not notice it because it is so big. It is like walking on Earth and not noticing it is round, because it is so big.
The stock market crash will be visible in 400 year market charts, just like other major crashes.
Friday, February 26, 2010
Thursday, February 25, 2010
Government Intervention Makes It Worse
They say government intervention into the free markets make it impossible to predict the future of the markets:
http://finance.yahoo.com/tech-ticker/govt.-interference-makes-it-%22almost-impossible%22-to-forecast-stocks-strategist-admits-431206.html
Whenever the economy falters, the government intervenes and "fixes" the problem. They created FDIC to prevent bank failures, they created FED to regulate the economy. They created Fannie Mae, Sallie Mae etc to guarantee mortgages. All of these are a failure. Economy fluctuates with violent recessions and depressions since FED was created. ** Mae are the cause of the housing bubble and the mortgage problems. Once they started purchase the mortgages, why would anybody care if a mortgage was wise to give out?
The government intervention for many decades is the reason of the crash. Mistake was to create FDIC, FED and other GSEs. Existence of FDIC relieves the depositors from the duty of making sure their banks do not take excessive risk. Unchecked by depositors, banks feel free to take excessive risk. If FDIC did not exist, banks would fail before they get too big to fail. Only the sensible would survive.
http://www.tradingstocks.net/html/fdic_insurance.html
The FED has made credit easy for many decades and America has borrowed. When we borrow, banks create money, they do not lend existing money:
http://www.tradingstocks.net/html/banks_create_money.html
This is how US dollar was inflated for decades. Inflation did not happen due to printed money. But it happened due to borrowed money. When the debt expansion stops, money supply will deflate because it is all borrowed money. The US dollar supply is not enough to pay outstanding debt. Credit bubble is too big to fix now, and it is FED's mistake to inflate it for many decades. They set us up for a deflationary crash that will unfold now. Here is the debt problem:
http://www.tradingstocks.net/html/inflation_deflation_credit_bub.html
Thus, despite government intervention, or even because of it, it possible to predict the market direction, and it is down!
http://finance.yahoo.com/tech-ticker/govt.-interference-makes-it-%22almost-impossible%22-to-forecast-stocks-strategist-admits-431206.html
Whenever the economy falters, the government intervenes and "fixes" the problem. They created FDIC to prevent bank failures, they created FED to regulate the economy. They created Fannie Mae, Sallie Mae etc to guarantee mortgages. All of these are a failure. Economy fluctuates with violent recessions and depressions since FED was created. ** Mae are the cause of the housing bubble and the mortgage problems. Once they started purchase the mortgages, why would anybody care if a mortgage was wise to give out?
The government intervention for many decades is the reason of the crash. Mistake was to create FDIC, FED and other GSEs. Existence of FDIC relieves the depositors from the duty of making sure their banks do not take excessive risk. Unchecked by depositors, banks feel free to take excessive risk. If FDIC did not exist, banks would fail before they get too big to fail. Only the sensible would survive.
http://www.tradingstocks.net/html/fdic_insurance.html
The FED has made credit easy for many decades and America has borrowed. When we borrow, banks create money, they do not lend existing money:
http://www.tradingstocks.net/html/banks_create_money.html
This is how US dollar was inflated for decades. Inflation did not happen due to printed money. But it happened due to borrowed money. When the debt expansion stops, money supply will deflate because it is all borrowed money. The US dollar supply is not enough to pay outstanding debt. Credit bubble is too big to fix now, and it is FED's mistake to inflate it for many decades. They set us up for a deflationary crash that will unfold now. Here is the debt problem:
http://www.tradingstocks.net/html/inflation_deflation_credit_bub.html
Thus, despite government intervention, or even because of it, it possible to predict the market direction, and it is down!
Wednesday, February 24, 2010
Greatest Bubble in History
Prechter thinks stocks are a bubble and bonds are a bubble that is the greatest ever:
http://finance.yahoo.com/tech-ticker/bullish-a-year-ago-robert-prechter-now-sees-%22the-biggest-bubble-in-history%22-429931.html?tickers=%5EDJI,%5EGSPC,TBT,UUP,SHY,JNK,TLT
A deflationary depression is the direct result of excessive debt. There is no way to avoid it. Here is why in layman terms: When we borrow, we borrow from the future. If we don't pay back, and the future arrives, we find it empty, depleted, consumed.
What was borrowed will be paid back. Since we never paid back in the past (and always postponed every recession with more borrowing), we now have to face a deflationary depression.
Why can it not be postponed again? Because when the debt accumulates, there comes a time when interest burden on existing debt becomes unsustainable. It is like a family who borrows a big mortgage. Rates edge up and poof. Foreclosure. Here is the debt problem:
http://www.tradingstocks.net/html/inflation_deflation_credit_bub.html
Printing money does not prevent the crash. It only changes who pays for it. When money is printed, savers pay. Banks etc get bailed out at other people's expense. Eventually, the value of what was borrowed gets deducted from the economy. Keep in mind, the threat of money printing may cause credit markets to freeze at the beginning, causing deflation (credit deflation) effecting prices of credit dependent items such as housing. This is because if creditors suspect US dollar will loose value, they will stop lending long term in US dollars, or they will demand very high interest rates.
Almost all of our entire money supply is borrowed money. It was created by the banks when we borrowed:
http://www.tradingstocks.net/html/banks_create_money.html
If you add others IOUs, especially social security, medicare etc, then we can assume that the economy is built based on the assumption that 50 to 300 trillion of money supply would some day exist. This money supply needs to have purchasing power. If it is diluted due to printed money, it won't serve it's purpose. For example, if social security paycheck does not buy you lunch, it does not matter that government obligation to pay it was satisfied. In such a scenario, consumer economy will collapse. People will not have money to buy anything other than necessities. Salaries will stagnate, thus it may be stagflation, if not hyperinflation.
Then, since hyperinflation is not the solution and may make things worse, FED may as well settle with a deflationary crash, at least for a while.
Remember that for FED to print more money, things need to get bad so that there is political will to print money. This is why deflation is likely to happen first and inflation may happen later. Here is a report of deflationary forces in 2010:
http://www.tradingstocks.net/html/2010_stock_market_forecast.html
Coming back to the excesses mentioned in the article, here is a chart that shows excessive paper trading which cannot be sustained:
http://www.tradingstocks.net/html/financial_mania_continues.html
Here is why the stock market is a bubble:
http://www.tradingstocks.net/html/near_bottom.html
This is like Tulip mania, South sea bubble. This one is Financial Mania. People who live through it do not notice it because it is so big. It is like walking on Earth and not noticing it is round, because it is so big.
The stock market crash will be visible in 400 year market charts, just like other major crashes. Kondratieff Winter is upon us.
http://finance.yahoo.com/tech-ticker/bullish-a-year-ago-robert-prechter-now-sees-%22the-biggest-bubble-in-history%22-429931.html?tickers=%5EDJI,%5EGSPC,TBT,UUP,SHY,JNK,TLT
A deflationary depression is the direct result of excessive debt. There is no way to avoid it. Here is why in layman terms: When we borrow, we borrow from the future. If we don't pay back, and the future arrives, we find it empty, depleted, consumed.
What was borrowed will be paid back. Since we never paid back in the past (and always postponed every recession with more borrowing), we now have to face a deflationary depression.
Why can it not be postponed again? Because when the debt accumulates, there comes a time when interest burden on existing debt becomes unsustainable. It is like a family who borrows a big mortgage. Rates edge up and poof. Foreclosure. Here is the debt problem:
http://www.tradingstocks.net/html/inflation_deflation_credit_bub.html
Printing money does not prevent the crash. It only changes who pays for it. When money is printed, savers pay. Banks etc get bailed out at other people's expense. Eventually, the value of what was borrowed gets deducted from the economy. Keep in mind, the threat of money printing may cause credit markets to freeze at the beginning, causing deflation (credit deflation) effecting prices of credit dependent items such as housing. This is because if creditors suspect US dollar will loose value, they will stop lending long term in US dollars, or they will demand very high interest rates.
Almost all of our entire money supply is borrowed money. It was created by the banks when we borrowed:
http://www.tradingstocks.net/html/banks_create_money.html
If you add others IOUs, especially social security, medicare etc, then we can assume that the economy is built based on the assumption that 50 to 300 trillion of money supply would some day exist. This money supply needs to have purchasing power. If it is diluted due to printed money, it won't serve it's purpose. For example, if social security paycheck does not buy you lunch, it does not matter that government obligation to pay it was satisfied. In such a scenario, consumer economy will collapse. People will not have money to buy anything other than necessities. Salaries will stagnate, thus it may be stagflation, if not hyperinflation.
Then, since hyperinflation is not the solution and may make things worse, FED may as well settle with a deflationary crash, at least for a while.
Remember that for FED to print more money, things need to get bad so that there is political will to print money. This is why deflation is likely to happen first and inflation may happen later. Here is a report of deflationary forces in 2010:
http://www.tradingstocks.net/html/2010_stock_market_forecast.html
Coming back to the excesses mentioned in the article, here is a chart that shows excessive paper trading which cannot be sustained:
http://www.tradingstocks.net/html/financial_mania_continues.html
Here is why the stock market is a bubble:
http://www.tradingstocks.net/html/near_bottom.html
This is like Tulip mania, South sea bubble. This one is Financial Mania. People who live through it do not notice it because it is so big. It is like walking on Earth and not noticing it is round, because it is so big.
The stock market crash will be visible in 400 year market charts, just like other major crashes. Kondratieff Winter is upon us.
Tuesday, February 23, 2010
Decline in Social Mood?
A troubled person flew his plane into an IRS building. What did this solve? What did this person want to achieve? If you don't like to pay taxes, then work and vote for those who support a small government. This is democracy. Yet we have two parties that are pretty much the same. We need more choices to vote for. Come forward, and we can change the system through democratic means. First and foremost, current system is under the control of capitalist elite due to their power through money.
A true democratic system must allow different opinions to be heard equally, regardless of campaign contributions.
In China communist party rules, in America, the capitalists rule. Only the name and the means are different. But it can be changed by the people. It is our country. Vote in the right direction, and we can change it.
The government should get out of the economy. It is not government's job to find people jobs. It is not the government's job to rescue failing banks. Let the free markets run. It was FED intervention to interest rates for many decades that created the credit bubble. It was government intervention with low rates that created the housing bubble. The crash is the result of these bubbles.
It is not the government's job to allow mortgage interest deduction from income tax which indirectly channels tax payer money into the banks. If the government is going to tax people, it should tax them fairly.
FDIC is the reason why banks are failing. FDIC is the reason why banks took unchecked excessive risk. Had it been a free market at play, depositors would question each and every bank action because their own money would be on the line. But when the government guarantees depositors money, who is watching for tax payer??
All of these can be fixed with a small government, and a free market economy that does not have government intervention. But that is a long way. And we are actually going the opposite way now.
If the government stops messing with the economy, it will find room to shrink itself. It will not need to tax people as much. Then people will work in a free economy to earn their life through competition, innovation, invention and discovery and the sense of freedom will be greater and the rewards will be greater.
Unfortunately, this is how society evolves. According to socionomic theory, socialism will find followers as the social mood decline continues:
http://www.tradingstocks.net/html/socionomics.html
A true democratic system must allow different opinions to be heard equally, regardless of campaign contributions.
In China communist party rules, in America, the capitalists rule. Only the name and the means are different. But it can be changed by the people. It is our country. Vote in the right direction, and we can change it.
The government should get out of the economy. It is not government's job to find people jobs. It is not the government's job to rescue failing banks. Let the free markets run. It was FED intervention to interest rates for many decades that created the credit bubble. It was government intervention with low rates that created the housing bubble. The crash is the result of these bubbles.
It is not the government's job to allow mortgage interest deduction from income tax which indirectly channels tax payer money into the banks. If the government is going to tax people, it should tax them fairly.
FDIC is the reason why banks are failing. FDIC is the reason why banks took unchecked excessive risk. Had it been a free market at play, depositors would question each and every bank action because their own money would be on the line. But when the government guarantees depositors money, who is watching for tax payer??
All of these can be fixed with a small government, and a free market economy that does not have government intervention. But that is a long way. And we are actually going the opposite way now.
If the government stops messing with the economy, it will find room to shrink itself. It will not need to tax people as much. Then people will work in a free economy to earn their life through competition, innovation, invention and discovery and the sense of freedom will be greater and the rewards will be greater.
Unfortunately, this is how society evolves. According to socionomic theory, socialism will find followers as the social mood decline continues:
http://www.tradingstocks.net/html/socionomics.html
Death of Capitalism?
Read and ponder:
Americans are "downbeat about today. Upbeat about tomorrow," says the latest USA Today/Gallup Poll. "Americans feel battered by hard times, record home foreclosures, stubbornly high unemployment rates and war."
And yes, we are "fed up with Washington and convinced more than 3 to 1 that the nation is heading in the wrong direction," yet there's "confidence that there will be better times ahead, that the classic American dream endures and hasn't been extinguished. It's not even at its low ebb." Why? Because we're in denial!
Do Main Street's 95 million investors know something Warren Buffett's long-time partner, Charlie Munger, doesn't know? Munger is warning us "It's Over" for America. Yes, "o-v-e-r," America's in decline, at the end-of-days, coming to "financial ruin," says Munger.
http://finance.yahoo.com/banking-budgeting/article/108901/death-of-american-capitalism-the-10-final-scenes
I think he is right! How did we get here? Greed of bankers who know nothing other than making money using usury.
In the past economy seemed to be doing OK solely due to credit inflation that FED has fostered. FED made it easy to borrow. America borrowed and spent. When we borrow money, banks create new money and give it to us. They do not lend existing money. Here is how banks create money.
http://www.tradingstocks.net/html/banks_create_money.html
Why does it matter? Well, all of our money supply is bank credit. It is borrowed money. It needs to be paid back as principal + interest. The interest portion is not even created yet. Borrowing MUST increase exponentially so that principal+interest amount exists in the economy so that people can earn it and pay back what they owe. What happens when borrowing stops? Deflationary crash occurs. Debt problem:
http://www.tradingstocks.net/html/inflation_deflation_credit_bub.html
FED and the US government are running a ponzi scheme that is about to stop now. There is a limit to how much people can borrow. To make it last what did they do? They allowed people to deduct mortgage interest from income tax. That made mortgage more attractive. So people borrowed more and injected new money into the economy. This new money makes the current administration look good. In fact, they guarantee a future bankruptcy but who cares. As long as they get re-elected...
Government talked about the American Dream and Affordable Housing. Now home prices are becoming affordable, but instead of celebrating, they are scared to death, they are trying to inflate prices again. Why? Now you know why. But it won't work. Home prices are down, sales volume is down. After prime borrowers were exhausted, they changed the rules to allow sub-prime borrowers get big mortgages. Now sub-prime is exhausted and the crash has started. 8K tax credit won't work. Home prices must increase exponentially to sustain a recovery. People must borrow HUGE amounts to provide new money to the economy. Who is gonna do that??? Here is why FED's easy money policy does not work beyond some point:
http://www.tradingstocks.net/html/jaguar_inflation.html
Where does that leave us? It leaves us at the top of the greatest bubble ever! What ever you do, make sure you do not take on more debt! Pay off existing debt! If you have existing savings in cash or cash equivalents such as short term US treasuries you should be fine for a few years. At the bottom of depression you may have to jump out of US dollars if FED freaks out and really prints money!
All of the prices, and salaries you see around you were based on inflated credit that happened over 50 years. It is based on a money supply that is almost entirely bank credit. People borrowed and borrowed and spent. The amount of money borrowed reached sky high. You earned in good times! Now, it is reversing course!
Deflation is here!
http://www.tradingstocks.net/html/latest_opinion.html
There is nothing FED can do about it. Credit inflation happened last 50 years. The bubble is inflated. The cause is in place, the effect will follow. It will deflate. For inflation to happen, all of the following must happen:
1. FED makes credit available. [Yes they do]
2. Banks must lend. [No they don't, because they don't think they will get their money back]
3. Borrowers must borrow. [No they don't, because they don't think they can pay it back]
4. Consumers must spend extravagantly and chase too few products with too much money. [Consumer is a saver now]
http://www.tradingstocks.net/html/financial_crisis.html
The best thing you can do now is to pay off debt and become debt free, because it will get harder and harder to make money in an economy where the total money supply is shrinking at record speed. M1, M2 does not matter. The bulk of the money supply is bank credit! 95% of our money is borrowed money. It has principal + interest to pay back. So, we have the principal since we borrowed it. Where will the interest portion come from so that we can earn it and pay it back??? It does not exist! It is a ponzi scheme. The music has stopped! In a credit based monetary system, we must keep borrowing or the economy will stop. That is what is happening. It is called deflation. The money supply is deflating. When there is 10 times less money in the system, it will be impossible to keep the current prices and salaries at the current levels. Pay off debt now and be debt free. Get ready for days where there is no money to be earned!
Stocks are over valued by wide margin. Prices are based on credit inflation of 50 years. It is like South Sea bubble! Stocks can crash and not come back for 100 years!
http://www.tradingstocks.net/html/near_bottom.html
Americans are "downbeat about today. Upbeat about tomorrow," says the latest USA Today/Gallup Poll. "Americans feel battered by hard times, record home foreclosures, stubbornly high unemployment rates and war."
And yes, we are "fed up with Washington and convinced more than 3 to 1 that the nation is heading in the wrong direction," yet there's "confidence that there will be better times ahead, that the classic American dream endures and hasn't been extinguished. It's not even at its low ebb." Why? Because we're in denial!
Do Main Street's 95 million investors know something Warren Buffett's long-time partner, Charlie Munger, doesn't know? Munger is warning us "It's Over" for America. Yes, "o-v-e-r," America's in decline, at the end-of-days, coming to "financial ruin," says Munger.
http://finance.yahoo.com/banking-budgeting/article/108901/death-of-american-capitalism-the-10-final-scenes
I think he is right! How did we get here? Greed of bankers who know nothing other than making money using usury.
In the past economy seemed to be doing OK solely due to credit inflation that FED has fostered. FED made it easy to borrow. America borrowed and spent. When we borrow money, banks create new money and give it to us. They do not lend existing money. Here is how banks create money.
http://www.tradingstocks.net/html/banks_create_money.html
Why does it matter? Well, all of our money supply is bank credit. It is borrowed money. It needs to be paid back as principal + interest. The interest portion is not even created yet. Borrowing MUST increase exponentially so that principal+interest amount exists in the economy so that people can earn it and pay back what they owe. What happens when borrowing stops? Deflationary crash occurs. Debt problem:
http://www.tradingstocks.net/html/inflation_deflation_credit_bub.html
FED and the US government are running a ponzi scheme that is about to stop now. There is a limit to how much people can borrow. To make it last what did they do? They allowed people to deduct mortgage interest from income tax. That made mortgage more attractive. So people borrowed more and injected new money into the economy. This new money makes the current administration look good. In fact, they guarantee a future bankruptcy but who cares. As long as they get re-elected...
Government talked about the American Dream and Affordable Housing. Now home prices are becoming affordable, but instead of celebrating, they are scared to death, they are trying to inflate prices again. Why? Now you know why. But it won't work. Home prices are down, sales volume is down. After prime borrowers were exhausted, they changed the rules to allow sub-prime borrowers get big mortgages. Now sub-prime is exhausted and the crash has started. 8K tax credit won't work. Home prices must increase exponentially to sustain a recovery. People must borrow HUGE amounts to provide new money to the economy. Who is gonna do that??? Here is why FED's easy money policy does not work beyond some point:
http://www.tradingstocks.net/html/jaguar_inflation.html
Where does that leave us? It leaves us at the top of the greatest bubble ever! What ever you do, make sure you do not take on more debt! Pay off existing debt! If you have existing savings in cash or cash equivalents such as short term US treasuries you should be fine for a few years. At the bottom of depression you may have to jump out of US dollars if FED freaks out and really prints money!
All of the prices, and salaries you see around you were based on inflated credit that happened over 50 years. It is based on a money supply that is almost entirely bank credit. People borrowed and borrowed and spent. The amount of money borrowed reached sky high. You earned in good times! Now, it is reversing course!
Deflation is here!
http://www.tradingstocks.net/html/latest_opinion.html
There is nothing FED can do about it. Credit inflation happened last 50 years. The bubble is inflated. The cause is in place, the effect will follow. It will deflate. For inflation to happen, all of the following must happen:
1. FED makes credit available. [Yes they do]
2. Banks must lend. [No they don't, because they don't think they will get their money back]
3. Borrowers must borrow. [No they don't, because they don't think they can pay it back]
4. Consumers must spend extravagantly and chase too few products with too much money. [Consumer is a saver now]
http://www.tradingstocks.net/html/financial_crisis.html
The best thing you can do now is to pay off debt and become debt free, because it will get harder and harder to make money in an economy where the total money supply is shrinking at record speed. M1, M2 does not matter. The bulk of the money supply is bank credit! 95% of our money is borrowed money. It has principal + interest to pay back. So, we have the principal since we borrowed it. Where will the interest portion come from so that we can earn it and pay it back??? It does not exist! It is a ponzi scheme. The music has stopped! In a credit based monetary system, we must keep borrowing or the economy will stop. That is what is happening. It is called deflation. The money supply is deflating. When there is 10 times less money in the system, it will be impossible to keep the current prices and salaries at the current levels. Pay off debt now and be debt free. Get ready for days where there is no money to be earned!
Stocks are over valued by wide margin. Prices are based on credit inflation of 50 years. It is like South Sea bubble! Stocks can crash and not come back for 100 years!
http://www.tradingstocks.net/html/near_bottom.html
Monday, February 22, 2010
New credit card laws
They talk about double standard about the new credit card laws for the banks:
http://money.cnn.com/2010/02/22/smallbusiness/credit_card_rules_small_business/index.htm
It is sad that people discuss the fees the banks charge tothe customers. But they fail to see the forest for the trees. These banks are robbing you everyday! When you get a loan, they create money out of thin air with the click of a mouse, and they demand interest for it, and you work the hard way and earn it to pay them back, so that they can sustain their lifestyle with usury:
http://www.tradingstocks.net/html/banks_create_money.html
Interest based economy coupled with fractional reserve banking is the cause of the inflationary boom and the deflationary crash. Deflation is built into the monetary system just like inflation is! But when inflation happens, banks run away with their profit. When deflationary crash happens, government tells you bank losses are something YOU have to pay for!!THAT is the double standard!! You and children, and your grand children and their children will pay for the life style of the USERERS for generations to come! Fools.
http://money.cnn.com/2010/02/22/smallbusiness/credit_card_rules_small_business/index.htm
It is sad that people discuss the fees the banks charge tothe customers. But they fail to see the forest for the trees. These banks are robbing you everyday! When you get a loan, they create money out of thin air with the click of a mouse, and they demand interest for it, and you work the hard way and earn it to pay them back, so that they can sustain their lifestyle with usury:
http://www.tradingstocks.net/html/banks_create_money.html
Interest based economy coupled with fractional reserve banking is the cause of the inflationary boom and the deflationary crash. Deflation is built into the monetary system just like inflation is! But when inflation happens, banks run away with their profit. When deflationary crash happens, government tells you bank losses are something YOU have to pay for!!THAT is the double standard!! You and children, and your grand children and their children will pay for the life style of the USERERS for generations to come! Fools.
http://finance.yahoo.com/taxes/article/108885/low-inflation-doctrine-gets-a-rethink-but-shift-is-unlikely?sec=topStories&pos=6&asset=&ccode=
They are saying it would have been better if interest rates were higher to begin with so that if the FED cut rates, it would have had bigger effect, now that FED is stuck at 0% and cannot go -1%.
The truth is the FED should not have messed with rates at all. Let the free markets set them. At boom times rates will go higher, and at recessions, they will go lower as the demand for money dissapears.
They are saying it would have been better if interest rates were higher to begin with so that if the FED cut rates, it would have had bigger effect, now that FED is stuck at 0% and cannot go -1%.
The truth is the FED should not have messed with rates at all. Let the free markets set them. At boom times rates will go higher, and at recessions, they will go lower as the demand for money dissapears.
Sunday, February 21, 2010
Why FEDs Hands are Tied About Deflation
Normally, FED makes borrowing easier by making credit cheap. But it won’t work now because:
1. Banks do not want to lend because they think they may not get the money back.
2. Borrowers do not want to borrow because they think they may not be able to pay it back.
3. For inflation to happen consumer must chase too few products with too much money.
We have the opposite. We have wage reduction. We have unemployment. Consumer is a saver now.
This makes it very hard to expand the bank credit. Here is how banks create money out of thin air to inject into the economy:
http://www.tradingstocks.net/html/banks_create_money.html
FED has been inflating bank credit for the last 50 years. It needs to inflate exponentially, higher and higher compared to the GDP to have the same effect. In other words, to have $1 increase in GDP, it takes more and more debt every year. When debt is not increasing faster, it becomes impossible to have that $1 gain in GDP.
http://www.tradingstocks.net/html/inflation_deflation_credit_bub.html
To encourage borrowing, government has various programs such as mortgage interest deduction from income tax, 8K tax credit for first time home buyer etc. The government does not want Affordable Housing. As home prices are coming down, instead of celebrating, they try to inflate it right back up. Why?
Because when people borrow to buy a home, banks create new money, this new money makes the government look good. Government has been using this to get re-elected all the time. But the population has a borrowing limit. Now the home prices are lover, number of sales are less. The total amount of lending that can be done for the banks will not be sufficient to expand the credit supply to a level that can sustain the GDP growth.
This is why the current stock market and other asset prices are likely to be over priced now. We have not seen the stock market bottom in March 2009:
http://www.tradingstocks.net/html/near_bottom.html
1. Banks do not want to lend because they think they may not get the money back.
2. Borrowers do not want to borrow because they think they may not be able to pay it back.
3. For inflation to happen consumer must chase too few products with too much money.
We have the opposite. We have wage reduction. We have unemployment. Consumer is a saver now.
This makes it very hard to expand the bank credit. Here is how banks create money out of thin air to inject into the economy:
http://www.tradingstocks.net/html/banks_create_money.html
FED has been inflating bank credit for the last 50 years. It needs to inflate exponentially, higher and higher compared to the GDP to have the same effect. In other words, to have $1 increase in GDP, it takes more and more debt every year. When debt is not increasing faster, it becomes impossible to have that $1 gain in GDP.
http://www.tradingstocks.net/html/inflation_deflation_credit_bub.html
To encourage borrowing, government has various programs such as mortgage interest deduction from income tax, 8K tax credit for first time home buyer etc. The government does not want Affordable Housing. As home prices are coming down, instead of celebrating, they try to inflate it right back up. Why?
Because when people borrow to buy a home, banks create new money, this new money makes the government look good. Government has been using this to get re-elected all the time. But the population has a borrowing limit. Now the home prices are lover, number of sales are less. The total amount of lending that can be done for the banks will not be sufficient to expand the credit supply to a level that can sustain the GDP growth.
This is why the current stock market and other asset prices are likely to be over priced now. We have not seen the stock market bottom in March 2009:
http://www.tradingstocks.net/html/near_bottom.html
Why Did Greenspan Keep Interest Rates Low?
If Greenspan did not inflate credit for last few years, then the deflationary crash would have happened sooner. The total debt is too high. It will deflate. Inflation is the only game in town that the government has to make itself look good. When we borrow, banks create money out of thin air and they demand interest for it. They don't give out existing money.
http://www.tradingstocks.net/html/banks_create_money.html
New money makes it easier for people to earn it. People think government is doing a good job. Where as all they do is to borrow from the future. They went through prime borrowers. When there was no one left to borrow, they went through sub-prime. When that ran out the deflationary crash has started. It will be very hard to inflate it again at these debt levels. It will deflate until debt falls back to sustainable multiples of GDP. Here is the debt problem in the United States:
http://www.tradingstocks.net/html/inflation_deflation_credit_bub.html
Much of the western world faces the same debt problem. Every year, to sustain GDP growth we have to borrow more and more. Exponentially more. That has stopped. We need a new housing bubble to increase debt. But home values and sales are down now. Even if we borrow to buy homes now, the new money that will be created will fall short of necessary levels. It is a dead end. FED is trying to make the crash smooth. There is no recovery what so ever. Otherwise they would be hiking the rates and pulling back the mortgage support. But that aint possible anymore. We are toast. Mistake was to inflate credit exponentially for the last 50 years. The cause is in place. Effect will follow:
http://www.tradingstocks.net/html/latest_opinion.html
Great Depression will pale compared to the coming crash.
http://www.tradingstocks.net/html/banks_create_money.html
New money makes it easier for people to earn it. People think government is doing a good job. Where as all they do is to borrow from the future. They went through prime borrowers. When there was no one left to borrow, they went through sub-prime. When that ran out the deflationary crash has started. It will be very hard to inflate it again at these debt levels. It will deflate until debt falls back to sustainable multiples of GDP. Here is the debt problem in the United States:
http://www.tradingstocks.net/html/inflation_deflation_credit_bub.html
Much of the western world faces the same debt problem. Every year, to sustain GDP growth we have to borrow more and more. Exponentially more. That has stopped. We need a new housing bubble to increase debt. But home values and sales are down now. Even if we borrow to buy homes now, the new money that will be created will fall short of necessary levels. It is a dead end. FED is trying to make the crash smooth. There is no recovery what so ever. Otherwise they would be hiking the rates and pulling back the mortgage support. But that aint possible anymore. We are toast. Mistake was to inflate credit exponentially for the last 50 years. The cause is in place. Effect will follow:
http://www.tradingstocks.net/html/latest_opinion.html
Great Depression will pale compared to the coming crash.
Why the Housing Market Must Recover
The so called economic recovery is underway. The government and the FED is trying to help the housing market. In other words they are trying to propell the home prices. Would it not be better if home prices were cheaper? Would it not be better is Americans had "Affordable Housing"? The government does not think so, despite all their Affordable Housing talk. They only like affordable mortgage.
Uncle Sam wants YOU to buy a house! And an expensive one! Seriously. That is the only game in town. Let me explain why.
When we borrow money, banks create brand new money. They do not lend existing money. Here is how banks create money:
http://www.tradingstocks.net/html/banks_create_money.html
This is called credit inflation. FED has been inflating credit for the last 50 years faster than GDP growth. This extra money in the economy makes it easier to earn it. People feel good. They forget that entire money supply is borrowed bank credit that needs to be paid back someday with interest!
This flood of money makes the current administration look good. Remember all the talk about "Affordable Housing"? And right after the government promised American dream come true, they made mortgage easy, and propelled the home prices. That is not really affordable housing.
Now finally the home prices are coming down, and instead of celebrating that home prices are affordable they are trying to propel them up again. This is because uncle sam wants you to borrow money so that banks create money! As simple as that. The more you borrow, the better it is. This is the only tool that the government has to make it look like they are doing good.
The truth is expensive is NOT good. Stocks should be cheap. Why would you want to own something that does not pay a dividend? Homes should be cheap. Why would you want an expensive house? Until these things get cheap, we are NOT going to be wealthy. If people are not able to afford a home, then higher prices are not good. A good life style does not mean you have to pay mortgage to a bank for 30 years.
A good life is when you own your house outright. But the government, the FED do not want you to achieve this dream. They inflated the housing bubble on purpose. They are trying to do it again. Why is that? That is because a big chunk of the population works in financial services. Their job is to create money out of thin air, demand interest for it, and sustain their life based on the efforts of rest of us. And the rest of us pay for their 'services'. We can understand why they exist if finance is like the oil in an engine. It is needed to make it run. But we cannot have a large population work based on commission (interest) because the real economy (production) cannot sustain the interest burden. However, Wall Street and the banks are powerful and they do influence government policy.
This is why government subsidizes mortgages with interest deduction from income. That is a direct wealth transfer from renters / owners to the banks and makes it more attractive to buy expensive homes so that people borrow big, banks create money and inject it into the economy. That is why cash for clunkers. So that you borrow and buy a car. That is why 8K first time home buyer credit. Sounds like a good plan, right? That is why they allowed sub-prime, no 20% down, liar loans... We went through sub-prime borrowers and there was nobody left who could borrow. There is a limit to how much people can borrow. When the entire population reaches it's natural limit, the bust arrives and the same process reverses itself, and it is called credit deflation:
http://www.tradingstocks.net/html/inflation_deflation_credit_bub.html
Uncle Sam wants YOU to buy a house! And an expensive one! Seriously. That is the only game in town. Let me explain why.
When we borrow money, banks create brand new money. They do not lend existing money. Here is how banks create money:
http://www.tradingstocks.net/html/banks_create_money.html
This is called credit inflation. FED has been inflating credit for the last 50 years faster than GDP growth. This extra money in the economy makes it easier to earn it. People feel good. They forget that entire money supply is borrowed bank credit that needs to be paid back someday with interest!
This flood of money makes the current administration look good. Remember all the talk about "Affordable Housing"? And right after the government promised American dream come true, they made mortgage easy, and propelled the home prices. That is not really affordable housing.
Now finally the home prices are coming down, and instead of celebrating that home prices are affordable they are trying to propel them up again. This is because uncle sam wants you to borrow money so that banks create money! As simple as that. The more you borrow, the better it is. This is the only tool that the government has to make it look like they are doing good.
The truth is expensive is NOT good. Stocks should be cheap. Why would you want to own something that does not pay a dividend? Homes should be cheap. Why would you want an expensive house? Until these things get cheap, we are NOT going to be wealthy. If people are not able to afford a home, then higher prices are not good. A good life style does not mean you have to pay mortgage to a bank for 30 years.
A good life is when you own your house outright. But the government, the FED do not want you to achieve this dream. They inflated the housing bubble on purpose. They are trying to do it again. Why is that? That is because a big chunk of the population works in financial services. Their job is to create money out of thin air, demand interest for it, and sustain their life based on the efforts of rest of us. And the rest of us pay for their 'services'. We can understand why they exist if finance is like the oil in an engine. It is needed to make it run. But we cannot have a large population work based on commission (interest) because the real economy (production) cannot sustain the interest burden. However, Wall Street and the banks are powerful and they do influence government policy.
This is why government subsidizes mortgages with interest deduction from income. That is a direct wealth transfer from renters / owners to the banks and makes it more attractive to buy expensive homes so that people borrow big, banks create money and inject it into the economy. That is why cash for clunkers. So that you borrow and buy a car. That is why 8K first time home buyer credit. Sounds like a good plan, right? That is why they allowed sub-prime, no 20% down, liar loans... We went through sub-prime borrowers and there was nobody left who could borrow. There is a limit to how much people can borrow. When the entire population reaches it's natural limit, the bust arrives and the same process reverses itself, and it is called credit deflation:
http://www.tradingstocks.net/html/inflation_deflation_credit_bub.html
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