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Author Topic: Bailouts
Pyrtolin
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Labor related costs represent about 10% of the expenses of the US car manufacturers.

It represents about 70% of those of the financial industry.

To say that the $700 billion, which has been barely used for its intended purpose and has done little to actually keep anyone in their homes, nevermind reform the excesses of the Financial markets (not that it hasn't done a lot of good, but financing mergers and huge bonuses are not on the basic list of important things and should have been blocked out of the gate), is some how better spent than a handful of loans that the auto industry needs to patch it over rough times cause almost directly by those financial failures while they finish a process of shifting that they were already undertaking is really buying the into the hype from the Southern states here.

It's one thing to be against the bailouts on principle, completely another to support somewhat arbitrary union busting then the measure that you're in support of enables far worse excesses.

10% is labor cuts. If they slash 25% of labor expenses, that's only 2.5% in savings. Meanwhile anyone who can cast themselves as a bank can get a stack of bailout cash. (But not of course people and institutions that have seen most or all of their savings evaporate in the Madoff scam. Helping them get back on their feet is too close to actually putting money in the hands of people that needed it for the TARP fund to touch.) Cut 10% of the labor costs of the financial market and your get nearly triple the proportional savings. Heck- going by the bailout amounts, cutting just 5% of the financial industries labor cost would save more than twice what's being paid to the car companies in total.

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munga
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Has anyone read OSC's column on the bailouts?

It's not that I hate the man, I just get annoyed that someone who doesn't understand finance in the least would try to formulate an opinion of how capital and debt work properly.

OSC's article?

When he's right, it's for the wrong reasons.

When he's wrong, it's for the wrong reasons.

Let that be an indication of how valuable it is.

And last, let me be disgusted that OSC finally expresses his solidarity with Mitt. Apparently it is no longer an advantage to appear to be on opposite sides.

[ December 24, 2008, 09:36 PM: Message edited by: munga ]

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Sakeneko
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Yep, I read it. I agree both that the first bailout (although *annoying*) was necessary to save our economic system, and that a bailout of Detroit that doesn't require them to change how they do business is a bad idea.

Restructuring the labor contracts will save a good deal of money, but not because of cuts in salaries and benefits. As Pyrtolin pointed out, that's a fairly small percentage of savings in itself. The bulk of the savings would come from two things:

* Loosing the humongous pension liability that all three major U.S. automakers have acquired. Unfortunately, *that* will end up costing the taxpayer because we'd have to pick up at least some of the slack for these retirees who won't get what they were promised.

* Loosing the work inefficiencies caused by rigid job definitions in the current Union contracts. It's frankly silly that a specialist has to be used for jobs that any temporarily idle employee could safely do. This change will result in fewer workers doing more work, which is likely to lead to fewer workers being needed to do the same jobs.

This is where I think Card missed something. The issue isn't that Detroit pays its workers more than Tokyo does. The issue is that it pays its workers proportionately more for a particular level and quality of work. For example, if Detroit paid its workers 20% more than Tokyo, but the workers were 20% more productive and did an equal or greater quality of work, the end result would be cars that could compete with Japanese cars in price and quality.

I'd suggest that the auto industry might want to talk to Silicon Valley about how they manage to compete with some *very* smart and productive people in many other parts of the world successfully despite the high salaries and costs of living there. :-)

I didn't support Mitt Romney in the primary and am not a huge fan of his, but on the issue of bailing out the U.S. auto industry, he is making sense. I'm not surprised: he knows business and has a proven record for fixing broken organizations.

The idea that Card was somehow disingeniously hiding support for Romney in the election is outright nonsense. Card is a Democrat whose politics in many respects are significantly left of center, particularly when it comes to economic issues. He is also socially fairly conservative, at least most of the time.

That's the opposite of Romney, who is a strong business-oriented free-market capitalist whose opinions on most social issues were moderate, at least until the last couple of years. I don't know Card personally (met him once at an SF con, that's all), but I doubt that Romney and Card agree often on political issues, even if they do belong to the same church.

I don't think Card votes for anybody just because they're a fellow Mormon. It also looks like he isn't afraid to agree publicly with someone he normally doesn't see eye to eye with when he thinks they're right.

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munga
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sak, I'm not sure we're going to ever be on the same page.

http://www.ornery.org/cgi-bin/ubbcgi/ultimatebb.cgi?ubb=get_topic;f=6;t=012667;p=2&r=nfx#000049

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munga
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Sak,

Please tell me what demonstrates this, in your view:

quote:
The idea that Card was somehow disingeniously hiding support for Romney in the election is outright nonsense. Card is a Democrat whose politics in many respects are significantly left of center, particularly when it comes to economic issues. He is also socially fairly conservative, at least most of the time.

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Sakeneko
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Munga, are you at all familiar with Card's writing? Just asking....
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munga
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absolutely. That's why his positions in politics are indisputably reprehensible. He shows a clear understanding of the difference in civil and moral law in his writings, particularly the Ships of Earth Series.
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Sakeneko
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Since I dispute that his positions are reprehensible, obviously they're not indisputable. (wry grin) You don't seem capable of allowing people to disagree with you on anything you feel strongly about. That makes it hard to talk to you; I don't like quarreling and can't imagine having a civil conversation with someone who called me a bigot. I wouldn't expect Card to either.

But to each their own.

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munga
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No, I'm quite capable. But as I walk and talk with those shysters (in finance, banking, the bail-out question) and they are perfectly aware of their actions and the consequences, you will have to work really hard to convince me against their stated intentions.

On Card, I would have to understand how you compute his own books which suggest that he has a perfect appreciation for the plan of freedom/salvation but he supports restriction and financial and legal persecution against a minority.... and this is not utterly bigoted or hypocritical?

[ January 03, 2009, 05:21 PM: Message edited by: munga ]

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Sakeneko
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Neither Card nor most religious people who oppose homosexual marriage accept that homosexuals are a minority, however -- that's the rub. Nobody (sane) would argue that an African American, or person of Chinese ancestry, chose who their parents were or could control the color of their skin. Nobody (sane) would argue that any of us could choose our gender. (Okay, except for some cases of ambigious biological gender, but let that be for now.)

Most of the arguments I hear among the "yes on Prop 8" crowd come down to one of two things. Some argue that sexual attraction is a matter of choice, and is not innate. :/ (Personally, I think that's nuts, but there you go.) Others think that homosexuality is a disease or disorder, not a normal variation in human sexuality.

The first group doesn't buy that gays and lesbians should be a protected minority because they think they chose to be gay or lesbian. This group usually defines homosexuality as participating in homosexual sex, by the way, not just feeling attraction towards people of the same sex. They wouldn't consider a friend I know, who is a monk, to be gay although from what he told me he has never been sexually attracted to women at all.

The second group doesn't think that indulgence in destructive behavior because of a disease or disorder should be protected by law. In their view, homosexuality is akin to alcoholism or to a congenital tendency to being obese combined with diabetes. The members of this group don't (at least *theoretically*) blame the individual for having the problem, but insist that it's their responsibility to seek a cure rather than indulge the disease.

For someone who sees homosexuality as a perfectly normal human variation that is innate, perhaps genetic or perhaps due to something else, this thinking may sound weird, a bit sad, offensively judgmental, or other things too. But it's real to people who feel this way, and many of them are thoroughly decent human beings. Writing them off as bigots and hatemongers is refusal to face the facts, IMHO.

I freaked my poor mother out when I was eight by asking her why girls had to marry *boys* (glyph of disgusted expression and wrinkled nose) rather than girls. I had a girlfriend at the time I was passionately fond of and wondered why we couldn't get married when we got older. As I grew up, I realized that men were much more interesting than boys, and eventually married one. ;-) I never forgot my mother's horrified expression when I asked this perfectly innocent question, though, and realized later just how uncomfortable she was with the subject and with homosexuality. I wasn't raised in a religious home, either. My parents were non-religious. I found my way to Christianity on my own.

I never have quite figured out what the big issue is with homosexuality. I've never seen how it harms innocent, unconsenting victims. As I understood the legal system in this country, it's supposed to protect people from being harmed without their consent, not try to control individual choices that affect nobody but the individual directly.

As best I can tell, so does Card. He just doesn't believe that homosexuality is harmless to others. There are lots who agree with him. I'm still trying to figure out why they feel as they do.

[ January 03, 2009, 10:56 PM: Message edited by: Sakeneko ]

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munga
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I'm trying to figure out what source of an existing proclivity has to do with equal access to civil contracts.
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munga
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I don't bother to argue with Card. He's a bit of an idiot on the topic of SSM, in that he imagines that he is consistent with himself.

This thread was about whether or not he had any comprehension of finance, and his article proved he was an idiot on that topic as well, never mind that it follows conventional idiocy-- so what if it is common if it is also wrong?

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Sakeneko
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It has nothing to do with equal access to civil contracts, of course. But Prop 8 wasn't just about that; it would have been soundly defeated if the word "marriage" had not been used in it and instead it referred to "civil unions" with all of the same rights and responsibilities as marriage. The problem most people who supported Prop 8 had was with what they felt was the redefinition of the word "marriage" by the Supreme Court.

For some reason I thought this was Card's board here. It's a pity he isn't participating. [Frown]

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munga
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Sak,

Prop 8 was only about access to the domestic civil contract that is called, in the courts of CA, "marriage."

Sorry, if you'd like to find Card, you might want to try Hatrack. They can guide you to finding his regular places if he has any.

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cherrypoptart
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> Sakeneko


> I never have quite figured out what the big issue is with homosexuality. I've never seen how it harms innocent, unconsenting victims.

Do you think it would be possible in a society that is much more tolerant, even encouraging of homosexuality for more people to eventually be homosexual or bisexual who otherwise would have been, in practice if not always in thought, heterosexual?

If that's a possibility, if Kinsey was right about his ideas expressed by the Kinsey Scale that a lot of people aren't strictly heterosexual or homosexual, but can swing both ways, then it only seems logical that the more a society supports homosexuality, the more a greater number of people may "choose" it as a "lifestyle".

How does that hurt anyone?

If someone has kids, this society that encourages homosexuality may make it less likely that they'll have grandkids.

Sure, gay people have biological children too. But playing the odds, it's a losing gamble. Of course, bigots like these don't deserve grandkids anyway, and the Earth is over-populated by humans and their breeders as it is, but those are different topics. We're just talking here about why people might feel threatened, or harmed, by a society that warmly and openly embraces homosexuality.

This is one reason why finding out if homosexuality is more of a choice or is decided at birth is important. If societal, cultural influences have no impact on a child growing up to lead a life as gay, bi, or straight, then it doesn't matter how nice we are to the GLBT community. It won't affect our kids anyway, and the eventual existence of grandchildren and further progeny isn't threatened.

If being gay is determined biologically though, if people are born gay, it makes just as much sense, from an evolutionary point of view, for people to be born bigots, have an ingrained antipathy toward homosexuality.

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DaveS
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quote:
If being gay is determined biologically though, if people are born gay, it makes just as much sense, from an evolutionary point of view, for people to be born bigots, have an ingrained antipathy toward homosexuality.
I think that's true, and it's also true that racial hatred or an urge to harm others has a biological basis. I think you are going a bit further and saying that it must in some sense be ok to hate gays because it is "organic". That suggests that if you eliminate homosexuality or blackness, you have solved the problem. Good luck with that.

If you take the opposite view that homosexuality is not biologically determined, then neither is hatred of gays and both are entirely a matter of choice. You then would be choosing to hate and harm people whose lifestyle you don't approve of by free will, which is about as far away from a moral position as you can get.

I hope you realize that either way, you lose.

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cherrypoptart
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I'm just wondering if there is a middle road which would be fair to gay people while not unnecessarily encouraging people to grow up and be gay when they otherwise might not have, and I think that fair compromise is pretty obvious. Just stop discriminating against single people.
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DaveS
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I think you want some form of "Don't ask, don't tell". They should go about their sorry lives without forcing you to have to see it.
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kenmeer livermaile
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Ornery seems to have developed a faggot obsession of late.
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munga
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quote:
Originally posted by cherrypoptart:
I'm just wondering if there is a middle road which would be fair to gay people while not unnecessarily encouraging people to grow up and be gay when they otherwise might not have, and I think that fair compromise is pretty obvious. Just stop discriminating against single people.

I think gay people, of them all, are most willing to let people grow up to be whatever they feel like being.

Is this considered unacceptable encouragement, to allow people freedom as opposed to prohibiting freedom?

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RickyB
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"while not unnecessarily encouraging people to grow up and be gay when they otherwise might not have."

So you think that if society tones down on the homophobia more people will choose to be gay despite being attracted to women?

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Everard
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Well, I don't think the proposition that more people will act on homosexual tendencies if there is less homophobia is unreasonable. But, children raised by gay parents are overwhelmingly (>90%) straight, so... I think cherry is just exhibiting his own homophobia, since he doesn't want people to grow up to be gay.
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JabberWockey
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How did this degenerate into a SSM thread?

Anyways, does anyone know if there are any strings attached to the bailouts? I realize it is almost impossible to have any with the lobbyists running around, but every time I would read an article on the bailouts the only answer to that question is that Washington is still deciding what conditions to set on the matter.

It would be nice to see someone step up and tell american car manufacturers to overhaul their principal design and engineering of their automobiles, by adding it to a clause of accepting the bailout money. Personally, I would love to see GM or Ford build factories that turn out ceramic engines...

[ January 09, 2009, 02:37 PM: Message edited by: JabberWockey ]

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munga
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The only thing about this "bailout" that helps me cope is that this one, unlike Bush's, doesn't put us into debt in any real way because it isn't stupid enough to borrow the money when we can just print it. The mistake is in giving it to the banks instead of to the consumers.

Damn I hope we get this bugger re-capitalized quickly enough.

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EDemoMan
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I'm incredibly skeptical of "just printing money." When there's more money to go around, that means each dollar is worth less until it's just plain worthless. This is akin to what happened in Germany after WW1, where the Deutschmark was eventually valued at 1USD to 4 trillion marks.

What we need is for people to live within their means instead of getting hopelessly indebted to the credit card company.

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munga
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Alright.

We just make new products. What currency are you proposing to match to the new production.... yours?

And no, what happened in Germany was that the currency was there but the products disappeared. There is an subtle difference in these dynamics.

We need to print the money because we have been producing for 8 years without releasing capital to match that production, causes the nation to spiral because (as no capital was released, or rather it was released.... overseas) the banks obliged and created debt instruments. Of course that was going to crash, as all securities are "fake" until they become real- which is when they must be transacted with actual capital which didn't exist. How do you think to live within your means if there aren't dollars anywhere and you know that production is what you have to make (not being the FOMC youself, able to produce pure liquidity) so, what exactly are you thinking to do--- produce more warehouse for which there is no capital? Or- just not eat, sleep in a house, or drive a car... in order to live within your means?

Of course failing to release liquidity upon the indication of production was dumb, but we had a conservative in the White House, who is dumb as my thumb.

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EDemoMan
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Exactly what I said about Germany; all the currency in the world but nothing you could buy with it. It's only effective if you can trade it, otherwise you might as well burn it for heat.

After WW1, Germany borrowed money from the US until we had no more to give them. They still needed more currency to push things along, so they started printing money. Then, they heated their houses with the stuff. Unless we're careful, we're just arriving at phase two.

Living within your means doesn't mean not eating, sleeping, etc, but most (>50%) of the people who file for bankruptcy have cable TV. Families in India put a dozen people on a moped, whereas families in this country have three cars on lease and a mortgage. What's missing is personal responsibility. People who can't afford a house can rent an apartment, people who can't afford an apartment can live with their parents, people who can't live with their parents should have thought about that sooner. Likewise, people who can't afford a car can ride a bus or (gasp) walk. You don't *need* a car anymore than you *need* cable TV.

The answer is not free money. For every dollar added to the system every other dollar is worth less accordingly. If I understand correctly you are saying that money needs to be added in order to match production; that is with more production there are more things to back up the paper money, but things aren't produced from nowhere. The only thing we get from nowhere is more people (and I don't mean the external kind).

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munga
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Ed,

We have the products and the need, and we only lack the currency.

no, your logic is faulty- for every dollar added to the system that is unmatched by a product, the value of all dollars are diminished (but only in domestic V foreign matters). That was dramatically not the case. We all kept producing and consuming the production, but had to use debt because the dollars were not released, because of idiots saying "if you release dollars for us to match to our products.... something really bad will happen!"

For every dollar created that is matched to production, the "value of the dollar" is stable.

And, as we have learned, when we have production and no dollars are matched to that WHICH WAS THE CASE (a monumental governmental failure for which they owe an Asian apology) "value of the dollar" GETS GROUND TO DUST (even though the agencies won't admit it) because our economy is de-stablized and all America is generally ****ed, which means that who wants a dollar that likely isn't backed by production because all the American companies are going under/ into receivership/ being sold for parts/ being outsourced to less-costly foreign manufacturers?

(but who really cares, "value of the dollar" only matters in domestic V foreign transactions ad we are an import economy, and it is best to pay in weak dollars just as it is best to receive a shipment for sugar and pay 7 skinny cows rather than 7 fat cows... this is elementary). Price of renting capital (aka "debt capital") is an entirely different issue.

[ January 13, 2009, 05:41 PM: Message edited by: munga ]

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munga
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Which really brings around the issue that you aren't talking about "value of dollar" so much because only banks talk about that, who trade overseas (it is their excuse so that they don't have to have a meaningful discussion on the impact of failure to release capital upon the indication of production). "It will decrease the value of the dollar" is the standard cry of those who wish to sound like they have some financial education because they read the treatise put out by a banker or financial consultant but never questioned the motives. It's something I would expect from Card if he ever tried as hard as you did, but he doesn't appear to do that, even.

What you are really talking about is, probably, a fear of inflation, or the rising of prices on products which causes hardship on families.

Inflation is rumored to occur if the government does "print money". When that happens, the people think, the people will know and they will raise the prices on products. Actually, the government for the last 50 years or so has always, knowingly released too little, in part on an effort to "keep a tight ship" and partly because really our national monetary system is run by former bankers who like to encourage debt so that banks can make money (interest) and possibly seize assets (taking the collateral in cure).

Money should be printed just as surely as products (and new people who make new products) are made. A dollar represents the goods and services of Americans. A dollar should not be over-collateralized, any more than you would like a banker to give you a loan to pay for a home, but also secure it with your car. A dollar should represent a dollar's worth of products (like a hamburger) and not a hamburger AND a nugg-let of rare metal (gold). Those who want the gold standard are such idiots I wonder if they are also spies paid by China to assist in America's suicide. Then again, they could just be extremely and supremely stupid.

In order to help you lose your fear of inflation caused by release of capital sufficient for our production, allow me to explain the inflation process:

First of all, "inflation" is a basket that is marked (used as a marker in transaction documents) by all other industries.

Inflation* is a shopping basket, containing certain "raw material" products such as a gallon of gas, a lb of sugar, a MW of electricity. Only these kinds of things are in the basket. And the price on that basket is "tracked" every day. It goes up and down. Mostly, because we have been failing to release the dollars, it has been going up, which means that prices on those products (which help us make all the other products, and which inflation index flows through on all those other product's prices in more way than one) go up for all Americans. =INFLATION.

But how did it happen?

The answer is bank factoring and interest upon the opportunity created by lack of capital for production.

Let's say you and I live in a town of 100 people, and we each make 1 dollar worth of products every day, and we each transact. All is stable. The price of each product is matched by a dollar.

Then, 9 new people are born. In the infinite wisdom of the town fathers, they decide to only let 3 new dollars be created. 109 people are then transacting with 103 dollars. They do this because someone wants to be a banker, and that person needs to have a "lack" of dollars so that the banker can make interest. The banker wants to go into the debt business so it is important that there isn't enough capital, though the banker wants everyone to still believe we live in a "capitalist" society. A capitalist society is one that matches capital to production and allows them to exchange in a free and competitive way, unlike this example in which insufficient capital is released enabling the rising of those with access to capital vs. those without access to capital.

So, the bankers persuade the town government to always mis-release the capital, even though all the newly-born people are making products just like their parents did. A 6% lack compounds. Remember that the other transactions for products (when that is done now for products to be delivered in the future, and it is marked to the market and to the indexes there including inflation* then, all prices begin to rise as they are, indeed, connected by agreement... the contract is called a "derivative contract").

So, removing from that "microscopic view" back up to full-society, inflation occurs when those producing our raw materials must factor their long-term contracts (that means, go into a bank and explain that even though there are A, B, and C lined up to buy the raw material, the manufacturer has been paid in IOUs because no one has any dollars, so please, bank, give us dollars so that we can go buy our raw materials and then sell them and stay in business) for which the bank will receive interest. The raw material's cost then must be 1) the price of the raw material (Cost of Goods Sold) 2) the price of renting the capital so that the manufacturer could purchase what they need.

In other words, the biggest banking in America today is Inflation, which is the bank's piece (the inflated portion of the price) of our production, all facilitated by the government mis-releasing capital and failing to release it to match production.

And yes, it is dumb to give the money away to the producers. Just as it is dumb to give the auto-makers the bail-out. The problem isn't that they "need money" the problem is that Americans don't have money to buy their products. So, the proper injection is beneath the level of the producers, at the Poor. The rich, since Reagan, have been grousing that the injection should be directly into their asses ("reaganomics") but that's just because they can't stand to let anyone else be rich like unto themselves, and further, if they allowed others access to capital then they, the rich, might not be able to thieve the up-and-coming-inventor's next property and continue being richer than you. The rich don't care that if the money were injected at the poor, it would ping around and around all over the poor and through the middle class, inciting economic flurry all over, and then, of course, come to rest in their accounts. The idea is to keep everything to themselves and convince Americans that God likes it that way.

Ben Bernanke once observed that the way to solve this problem would be to helicopter drop cash into the ghettos. He was right, of course, but there isn't a smart contingent of the religious right who would let our economy function properly, so he was ridiculed and called "Helicopter Ben" and we spiralled down to stupidity and self destruction because the "moral majority" insists that we should give everyone a fishing pole and doesn't notice that the fishing hole has been fenced off.

Ben-
ignore the idiots, release the dollars, and save America.

[ January 13, 2009, 06:26 PM: Message edited by: munga ]

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munga
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Is there anything else I can help you with, EDemoMan?
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EDemoMan
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Munga, the value of the dollar I'm talking about is the only one that matters: How much food will it put in my belly? How much roof will it put over my head? Paying 7 skinny cows vs. 7 fat cows only works if you're buying from someone who will accept 7 ones or 7 twenties, whatever is cool. BTW, that only works if he intends to burn the paper (or wipe himself with it).

While what you say sounds wonderful on paper, you offer no proof to back up your statements. Economic "theory" relies on past experience because there is no laboratory in which we can try things out. A number of ideas which sound good on paper, such as communism, have been tried with disasterous results because something important was not foreseen.

Your small scale example is more like a commune than a capitalist society, and the dollars within are effectively the rations. A capitalist society is one where those who have capital rise against those without it. Those without it are free to try and make their own; to work hard to change their situation.

In your full scale example, the maker of raw materials needs to not accept IOU's. So long as he has something someone needs, he will have a buyer, and if he doesn't than he is in the wrong business. The bank is not the bad guy here, the fool who tried to sell without a viable market is.

Until you can tell me what's different between us and 1920's Germany it's the only evidence we have. They borrowed money from the US until we ran out, we borrowed money from China until they ran out. They started printing money and caused runaway inflation, and now you're proposing that we start printing money. They even blamed the bankers for hording the money (they called them Jews). The problem is not everyone else. The problem is us.

[ January 15, 2009, 06:28 PM: Message edited by: EDemoMan ]

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munga
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Ed,

The value of the dollar only matters in comparison to other currency.

The value you are discussing doesn't have anything to do with exchange, correct, so I wouldn't throw around "value of the dollar" stupid-stuff if I were you.

And no, what I am saying is good on paper and good in fact. Injection of currency upon the indicator of production is exactly why China is beating our butts. They do, responsibly, inject upon that indicator which is the reason that it is the number one location to build a facility THERE- the products will not be placed into competitive hardship for currency.

I, in full disclosure, have to expose that fact to investors--- anyone who wants to build a plant can do it here (where we will be guaranteed to be in recession) or over there, where there will be sufficient currency.

I'm not the enemy. But I'm not going to sugar-coat the facts just to keep jobs in America when we are driving them away, and in fact, I'm not going to lie to investors. They don't like losing their assets.

...and I hate hand-cuffs.

Yes, the makers of raw materials absolutely accept IOUs. Apparently, you have no idea what you are talking about.

Until you can show me a shred of proof that you have the smallest, most remote experience with anything that you are talking about, I can't imagine why I would bother explaining anything further.

"started printing money and caused runway inflation" is the part that has no basis in fact, because the matter is truly "started printing insufficient money to be matched to production, which caused runaway inflation due to bank factoring and interest payments." I do not blame the bankers for hording the money as much as I blame the bankers for erecting a ring-fence between Americans and the treasury. Up until the 1930s anyone could approach and provide assets against capital. The ring-fence today, which has just barely seen its first dent as they agreed to our demands to equal access via the determination to allow short term paper and assets to be transacted, has been complete and the stonewalling from the banks has been impenetrable as GLBA has prevented any but banks, brokers (who are combined) and government programs to access it, which meant that banks have been controlling our money supply.

[ January 15, 2009, 06:44 PM: Message edited by: munga ]

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munga
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Ed,

I didn't mean to sound quite so snippy. Sorry for the tone.

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munga
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quote:
Your small scale example is more like a commune than a capitalist society, and the dollars within are effectively the rations. A capitalist society is one where those who have capital rise against those without it. Those without it are free to try and make their own; to work hard to change their situation.

In your full scale example, the maker of raw materials needs to not accept IOU's. So long as he has something someone needs, he will have a buyer, and if he doesn't than he is in the wrong business. The bank is not the bad guy here, the fool who tried to sell without a viable market is.

Ed, you need to sit down and figure out why this isn't correct. Particularly the part where the guy making raw materials needs to find people to buy his (megatherm of natural gas.... whatever raw material you wish to think of) because you missed the Long TERM CONTRACT part of how finance is accomplished between industries. There isn't any advertizing at that level. There is just a QUEUE. And there are no dollars to transact in a society that is deliberately without sufficient currency, which is why they are transacting on securities, which is a fancy word for an IOU.

and I am correct on the small scale example as well. Think through the original example and explain how one person could have "gotten excited" and made more products. Let's say.... made 50 items instead of 1, which all the others are willing to work for in exchange, but all they have are products (inventory) and no dollars themselves.

So... we Americans are currently inventory-rich and capital-bankrupt.

someone send the money.

[ January 15, 2009, 07:58 PM: Message edited by: munga ]

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So

waiting for OSC to supply the next installment of "I think not, but speak much"

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kenmeer livermaile
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More dirty rotten scoundrels
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munga
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someone tell me when the new capital passed to the banks will be available for me, minus the credit check (since they didn't pass theirs)
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Owen Gilmore
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OSC is totally off base here. Once you get into the bailout biz it's all political. You can't pick and choose which bailouts and industries to save - save the banks, save the S&Ls, save Wall Street, Save Detroit. Who's got the most pull? That's what it's about. Who had greater pull with Bush? Detroit or Wall Street? Only one guess!!!! :-)

As for his contention that the first (Wall Street) bailout was "absolutely necessary," that is unproven and unprovable.

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munga
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Folks, I'm kinda excused from heavy lifting these days at work, because I am sporting a fever, sore throat, stinging ears and nose.... and in short I'm a mess. To distract myself, I wrote the article Card should have.

Would any of you like to help me edit it? My not writing all that well, today. Draft- Slouching Toward Mexico in Word.

quote:
Slouching toward Mexico
How to slip from a first world to a third world economy


Sad news, America has stopped working. Not that Americans get to rest, just that the Rags-to-riches Horatio Alger dream of America has been dead for years.

More than two years go, my lead debt investors offered me the use of US dollar-denominated securities, with total value at maturity in 2022 of over $100 Million US Dollars. These were offered as collateral for economic development or clean renewable energy facilities.

Today in America (18 banks) would not finance against US dollar-denominated collateral in a transaction in which there could be no loss because the collateral as security guaranteed repayment of the debt. Despite the clear invitation from the Federal Reserve Bank which posted their margin table on the internet in order to invite secure transactions the banks obstinately refused to conduit economic development in America. GLBA prevented our direct approach. The banks could have conduited the bonds at the Federal Reserve Discount Window and drawn-down cash so that no depositors funds would be involved in my proposed facility, and the banks could earn reasonable interest on the transactions. That however eliminates the chance for politics to enter the picture.

It is tempting to blame all our problems on the commercial banks. Or our legislators. Or our oversight committees. The simple fact is that we are in a capital crisis, which means we have insufficient capital for all the goods and services we can produce. No one but the Federal Reserve prints our money and no one but the FOMC injects that into circulation with the ring dealers (Interbank dealer network). The commercial banks’ refusal to access the REPO process of capital injection at a time when they are perfectly aware of the need, is the subject of this paper. The height and inventiveness of these arbitrary and capricious blockades to open access of capital in more than two years cannot dispel if our commercial banking system is broken as a result of greed, mismanagement, blindly following tradition, or cruel intelligent design. The bankers’ “Blame the consumer” and then restrict greater access to capital or the “belt tightening” approach is not the answer.

Have you ever produced some new product with your bare hands? For me, I made pizzas in college. Whatever product you made, can you recall if there was anyone there -maybe a fellow with a clipboard- to measure your production quota in order to release the proper amount of dollars for goods and services into circulation, so that you could be paid without creating a competitive hardship upon all other production? Does the black economy of tax evasion, drugs, prostitution and vice impact the amount of funds in circulation in the white economy? I’ve done many menial tasks in my life time and they were never monitored or measured by the government which nevertheless asserts control of the volume of M1 or M2 in circulation and does not have to “audit” the goods and services in order to match “growth” with capital infusion. Capitalism is very misunderstood today. Capitalism was supposed to mean the creation of capital (recognized debt securities traded to the fed for dollar bills ie federal reserve notes) which medium of exchange counted on being released by the commercial banks into general circulation upon the indications of over production of goods and services, so that products can compete in a level playing field with a reasonable cost of capital. When you artificially dry up supply it creates demand ….. for the currency. Thus only chronic shortages can keep demand at 24% credit card rates otherwise people beat a path to the door of better terms. Capitalism today means stockpiles of production of goods and services for which there is insufficient currency being released into the system, the commercial bank wants to retain the right to say “no” just as do many civil servants. Producers of goods and services striving for economic development by creating or adapting internal efficiency that call for upgrades, must compete for access to capital in order to continue providing greater productivity. If those consumers lack the supply of capital to buy from the producers who have good credit ratings but cannot access affordable capital with which to buy their raw materials then either condition destabilizes the free market. It is no longer free but subject to artificial constraints (the lack of productivity equals a lack of competitiveness resulting in a soft-default under bank/senior secured debt holder terms) how could the consumers create capital to purchase that increased productivity? This is where the system spirals out of control. The most obvious problem with the auto-bailout is that with no new money in circulation that was provided to consumers who could buy the cars (which is where the auto-makers sales generate their source of revenues) would we have to recognize that “united we stand, divided we fall” applies to economics? Americans work hard. Will tightening the belt make money appear, not hardly a strong dose of myth busting. Did Congress step in and make sure the tax-payers got nothing at all (no cash for title) in the bailout-the-top (sans shoring up the consumers). These same consumers whose wages gush up versus profits that barely trickle down to investors that saw their pensions violently contract?

So WHERE is the means of CAPITAL creation today?

How did this happen?

A good starting point is the old Gold Standard. Let’s say that ancient man began exchanging shoes for baked goods in olden times as manual production took off. As soon as we exited Noah’s Ark, commerce began. The medium of exchange that was first developed were rare metals so that everyone, no matter how dumb, could understand that this was the universal means of exchange for goods and services this medium would not lose value area to area and region to region. But this method had two major draw-backs 1) a medium of exchange needs to be as easily created in lock step with production of goods and services - you cannot have a bottleneck or you’ll have excess buildups of raw materials, labor, finished goods, singers without contracts, gumshoes without clients, no profits for new taxes, everything people want and need gathering dust on the shelves, and storekeepers tapping their feet 2) the medium of exchange instrument must not, in any way, be a rare commodity with less value than the goods and services that it represents. Gold, as we know, is not a strong-American product and so could not be counted on to be in such abundance as to balance out against the new and upcoming production capacity of the industrial revolution.

In the early 1900s our country realized that our currency itself was a bottle-neck. We could not whimsically increase the volumes of rare-earth metals in the vaults around the world that backed our US dollars in circulation since we needed that to match galloping production. GDP was rising baby boom inspired consumption was running rampant, we badly needed legal tender that said, “good for all debts public or private.” We also felt that it was time to stop over-collateralizing our commercial transactions- Why should a dollar represent the goods and services of Americans and a wee bit of gold? That is similar to creating a house mortgage (collateralized by the lot then the house) and backing that transaction with your car and a down payment. That is good for the banker but poor business.

So we wisely went off the Gold Standard, tying our dollars to all the goods and services of Americans and not merely one good, gold. But many people, strict concrete thinkers, squawked. They were unable to ascertain that goods are goods, whether or not there are equal amounts of rare minerals (silver, gold, platinum) on hand to balance. Then we have to factor in are more people being born that expiring so more production of more goods and services. Finally, is 1 dollar worth of hamburger exactly equal to 1 dollar’s worth of gold. The outcry was so fierce that those who regulate the monetary supply couldn’t help themselves. The bankers finally began to ponder, “I realize that Ma and Pa Farmer are the salt of the earth, and I wouldn’t want to hurt a fly, but can you tell me please, just how dumb are they?” The financiers could already see that there was a large deficit of reasonable logic (corn growers knew that they made new corn every year, and yet they inexplicably wanted to match that output to a finite supply of gold….can you blame them from wanting to exploit this?) and being good company men having a fiduciary responsibility to their shareholders, they were ready to exploit this opportunity but at whose peril. Thus, the financial sector understood macroeconomics sufficiently to create a system which encouraged acquisition by receivership, or the gentle tendency for your assets to become theirs, all by manipulation of the amount of currency in circulation in the local economy. Our injections of currency have been far too low for the known production output capacity for over 60 years. We don’t factor in unexpected demand in black economy growth (when is the last time you heard prostitution sales up 40%).

We’ve had roughly a fixed mindset of 9% population growth per year (population equals workers and consumers) and the government has factored in 3% inflation and 6% new currency or M1 + M2 growth. What becomes of those productive surges and black economy withdrawals? How do we factor in surplus inventory and unexpected growth in poverty levels?

How did it happen?

Year one:

You have 100 people in a community. The town fathers authorize the creation of 100 Dollars. The people each make 1 dollar of production per day, and they all require output of 1 dollar worth of products per day. For the whole year the system operates at equilibrium.

Year two:

9 new citizens come to town, and the town fathers have a meeting. They decide that town father (Institution X) would like to become a financier and make money on renting capital, so they authorize only 3 new dollars, knowing that the economy will tend dip into recession. The six percent of humanity then becomes the revenue stream (interest payments) because there is never sufficient currency for the system to balance, they begin to create the poorest class of standards, living on 80 cents per day, and less and less over time. Thus, a flue epidemic and a host of ailments sets in which means a sudden drop in productivity and a rise in the number of citizens consigned to the lower classes.

Repeat those cycles for 60 years.

The majority of the population are in debt up to their ears as there was too little currency to match the surges in productivity and growth and to make matters worse when nobody was ill the normal attrition rate to poverty didn’t happen. Eventually, all production ceases as currency availability grinds to a halt when all raw materials are converted to goods and services are waiting on consumers who have wants and needs but no $$$$. The town fathers, wishing to avoid their comeuppance, indicate that the community must bail out the banks (who by now have all the assets and little if any money) the miser of the town has all 98% of the capital in a sock in the closet because he doesn’t trust the banks. So in order to dump the last non-performing debts upon the community and walk away whole with the inventory of assets the banker forecloses and collects all of the raw materials and finished goods. The consumers are hungry and tired but not sick. How do you kick start this economy? Give tax breaks to the 2% hoarder so that he will employ 10% and leave 90% in poverty? Sell 100% of the goods and services to the same person? Hand the poor a fishing pole and tell them to go catch dinner?

So, how was it all made possible? A powerful myth was created. The myth itself is that “more currency in circulation creates inflation” (the price of a basket of goods that is supposed to react to supply and demand) the demand is there the consumers want to eat, and live in a house, and drive a car, which must be bad for us all. The reason that this a myth is that the Keynesian calculations did not account for expanding asset pools, growth in productivity and loss of currency that paid for ill gotten moral depravity. The only time in which extra currency could possibly produce inflation is when there are few goods and many consumers. When Americans churns out productivity like machines and we have researchers and artists who are aching to make more goods, who are truly starving, this point is no where in sight. The means to inject capital at the bottom in the hands of the consumers feeds the entire system, if that is not so, consider that the miser took his 98% of the capital and left town…. so what then?

In the meantime, we’ve fallen prey to the actual causes of inflation. Recall that inflation is a measurement of an arbitrary basket of goods that are similar to consumer products: in this normal basket you would find oil, sugar, corn, a gallon of gas or milk and a mcf of methane…..and so on. The prices of these “base goods” are measured every day and all other transactions include an inflation index marker or CPI adjustment factor. Prices can inflate because
A) the products truly have run out (lower supply and equal or greater demand --but we have not run out of any of these goods) or
B) because the speculators cornered the supplies and created the appearance of increased demand such as for our supplies of gasoline back in 2008, (market responding to artificial demand) or
C) because of growth in the number of consumers and no growth in the number of workers (supply constant with increased demand) then 20% of the currency leaves town because the hoarder sends it overseas in an investment or for war. What do you expect will happen? When money is scarce these goods and services are paid for with IOUs, not cash (future sales), and when the producers need cash in order to purchase the raw materials that are needed to produce their finished products, goods or services they must go to the financiers (who are perfectly aware that there is insufficient currency in circulation) and beg the bank to provide them with any loan against their future sales contracts that they have from their buyers (this procedure is called “discounting their receivables” or “factoring” or dNPV) so that they can buy their much needed raw materials so that they can pay back the money plus the interest from future profits. Many have stand-by credit facilities or need a co-guarantor and credit enhancement but whatever instruments or deals that are used, interest is accrued and the price of the productivity is increased to account for the banker’s portion or “interest” = “price increases” = “inflation” to offset shortfalls not the supply and demand free market that would normally exist and this is an example of false inflation.

Note that in no way does having too much currency cause inflation when there is adequate means to maintain or improve production. The fact of the matter is that overproduction puts positive pressure on prices to drop (more supply than demand). In fact, having enough currency and having even a little extra production causes deflation, where prices begin to fall- through the pressure of increased efficiency. When the bank is no longer taking a piece of the action (the portion of the raised or artifically “inflated” price) then the price of the goods and services will reach market equilibrium and will stay constant or will begin to fall.

Bankers defend their 24% con game with this line, “If you inject more money, that will devalue the dollar!” even though they are well aware of the fact that if the dollar was balanced by production we are still at equilibrium or advantage to the consumer. The dollar against other currencies is a matter of stimulating imports or exports based on the theory of production price parity. Americans today are inventory rich- having produced themselves to the brink of self-destruction in an attempt to rescue their American dreams, while simultaneously being currency-bankrupt so that we could artificially support a chronic shortage and keep real interest rates at 24%. As far as foreign trade goes- “value of the dollar” means “in relation to other currency” which shouldn’t bother since that comes down to this we pay dollars that are becoming depreciated for goods that are more valuable (cheap labor and quality products). After all, we’re the ones who set to value of everyone else’s exchange rate. And if the value of the dollar fell, would you like to pay for tangible goods with seven fat cows, or seven starved cows? Answer- a strong dollar is wanted only in an export economy, a weak dollars is wanted to support in an import economy. We need to do what is needed, when it is needed.

Knowing all this, in my opinion the financiers hit an all-time low by suggesting that it was the consumers, specifically the poor and the middle class, that were responsible for the housing/banking credit crash. At no time in the last 8 years did the producers of America stop working en masse. Our production has been beyond reproach- with most parents taking on multiple jobs to create a dual income family lifestyle and we are very good consumers. Nobody wants to be poor. In no way is the average Joe responsible for the fact that Bush’s administration injected the already-insufficient annual currency allowances that were transferred over to the middle-east, rather than supplemented and fed into America’s economy as needed with the consumers. Ben Bernanke was right then and still is now- the best and fastest answer to our capital crisis is to drop cash into the ghettos by helicopter. People who live paycheck to paycheck consume away their entire paycheck at the local small business and big business. Cleaners, bakers, and candle stick makers. They pay rent and utilities. But then, the banks sunk lower let the gas hit $4.00 and failed to drop the credit card interest rates and then refuse to make loans. How else does the money appear at a 2 income earning family? Does the manager give the big bonus at the top or at the bottom? The banks saw that America realized that we had a “capital crisis” a liquidity shortage and the top 2% said market aberration not our doing and they invented the mechanisms whereby they could cause those Americans that would be persuaded that they must buy equity in their failing banks or lose all finance viability in America. “Tell the workers and taxpayers to bail us out but expect nothing in return. They bond finance us with tax dollars but we own the profits!” the banks said. The banks did this 1) without owning up to the fact that they had pooled the mortgage tranches and after they were seasoned forgot to inject the liquidity for the consumers because credit card rates was the only surplus money in town……….. how long can 24% money sustain the economy? Something has to give in order to cause them to appear equally performing 2) they did not acknowledge that the failure that caused the eventually contagious condition was in second “vacation” homes with ARMs (repricing interest rates that did not offer interest only options, these were not “risky home loans” to poor people they rent and live paycheck to paycheck, 3) worst of all- the banks were well aware of the fact that they had been rejecting opportunities to inject capital into circulation by refusing to take any collateral to the Fed Window for discount purposes and to effect a draw-down (interest demands exceed capital creation for goods and services minus black money attrition that is rarely factored into the overall equation but everyone knows that is the whole truth). It is always better for bank’s real interest rates not prime rates to reflect perception versus reality. Trying paying your bills with perception.

Ask, yourself, if a mortgage had been successful, what would all the participants have? The equity participant would have a home free and clear, and the bank would have made interest (profit) on their loans. Banks are supposed to be “engaged in lending” in order to earn interest. That means more than houses, boats, and cars. It means small business to big business but admit something will you? If you were a banker would you prefer to loan at 24% credit card money or 9% small business money? Perception versus reality. Does prime at 1 ¼ % equate to reality? However, somehow the pool-product geniuses on wall street forgot to embed an interest-only ARM into their mortgages (allowing the homeowner to pay only interest and extend the term of the note for our period of hardship, due to robust greed) and was that option better than wrecking the housing starts? Does failing to fund economic development start to come into focus when 90% of the liquidity is vented at 24% money and little if any at economic development? Would that be why infrastructure is in such a bad state of affairs that someone point out that feeding 1 segment of the economy does not drive the other segments to performance? Was the trickle down being squandered or diverted or hoarded? Rather than being forced to pay down principal without stimulating liquidity because the banks wanted to seize those asset- equity in cars and homes, what happens when that element dries up? Equity as little a hundred dollars is worth seizing and is all in a good day’s work. Which they did and continue to do with abandon. The primary reason that my facilities weren’t financed was because the banks realized that in a heavily recessed economy, the price of renting capital (loans or credit cards) was vastly increased- (credit cards went from 8% to 30%) with predatory practices (the political assassination of Eliot Spitzer). If there had been adequate sources of liquidity and if currency had been made readily available and circulating by the funding of projects such as ours, then how would the bank be able to seize the assets of Americans by defaulted loans? Receivership Acquisition is the name of that game.

If we were to have a responsible economic policy, where should the currency (which our production justifies) be injected? Reaganesquely at the top, or Obamanautically at the bottom?

Simple thought exercise two: see a room full of 100 rich businessmen, and a room full of 100 food stamp applicants. If you had the mechanism to track the dollars as they circulated, what would be our findings 1 year after a “ceiling drop” of 1 million dollars upon each room? My prediction is that the businessmen, having no need to circulate it at all, would likely put it in their pockets and leave it on their dressers for the year. However, the poor would instantly spend it, and the money would ping one hundred times up through and around all the classes of producers until it finally came to rest, where money does, at the wealthy.

The answer to the question of where should one inject new liquidity is, for the good for all producers, at the lowest level of consumers you can find. This was how Zion was ever dreamed- because in order to balance production there must be liquidity injection, therefore, even the poor will have wherewith to subsist.

Some will counter that the Federal Reserve, our national “central bank,” only distributes money upon an interest rate, however minor. This is true, but can the source of all the money say, “I will loan you 100 cents, and you must pay back 102 cents” without an assumption that the currency can only be returned with some additional in-kind valued assets (is it the Fed Bank that causes ring-fence banks to seek to seize assets?) Is it reasonable that this should be the case?

The question is, “Does America exist to enrich the privately-owned Federal Reserve?” or “Does the Federal Reserve, which has enjoyed a special privilege license to print and release currency into the economy and has demonstrably done so disastrously, deserve to be the only bank producing and injecting dollars or deserve to change Americans an interest rate when the dollars required are only re-balancing what production? May the Fed charge interest when the inflation index indicates that insufficient currency has been released and as such, how many of which solutions are appropriate:

A) Ignore any specific “program requirement” and simply inject liquidity at lowest consumer point in every county and state until inflation balances aka Helicopter Ben idea.

B) using of state banks, issuing recognized and equivalent (on par) currency, for transaction at low interest rates for prospective production or developmental projects.

America has held out the promise it never delivered- it has said, “Come work and you will be rewarded here” but it has never produced sufficient currency to see that the workers could be paid. Today, the promise of America is a lie waiting to be righted.

The conservatives today are assisting in our national suicide by fighting releasing of money as if it had to come from the tax-payers. In a pool of ever-expanding assets (including goods, services and people who immigrate or were born here) how are the comparatively smaller assets (a portion of which becomes taxes) of last year’s production supposed to address the currency needs of this year at higher production? Ridiculous. Further, why would anyone vote get money from the tax-payers (or worse, borrow money from overseas in order to release currency for our OWN production!) when we own the plates to print it and have every reason (quantifiable production starving for currency to match) to print and release in record amounts? But conservatives are dead-set against acknowledging the facts. Every known figurehead is crying foul and urging belt tightening including Mitt Romney, who we must suppose has the tightest pants in business. Instead, they should be demanding an asset-audit and rebalancing of currency and production.

In this last week a California man, overly distraught, killed his wife and five small children because he and his wife had lost their employment at a medical center. At the same time, women are lining up to give birth at home with midwives because they cannot afford to go to a hospital. We have in the same breath those who wish to provide a service and those who want to buy the service, but our government, knowing the calamity that could befall those children, refuses to release the capital into circulation. When our children begin to die because they cannot be born in safety, the culpable burden for this refusal will likely rise to wrongful death.

Our nation is likely to complete the phases of currency starvation:

1. Rampant inflation- caused by lack of capital and the resultant factoring of receivables by manufacturers (bank interest = inflation index)

2. Receivership Acquisition- banks executing cures on secured transactions- taking assets from equity and consolidating the wealthy against the poor. (America yesterday)

3. Production switches to only-foreign consumers as locals have no currency to purchase. (Mexico today w/ America, America tomorrow w/ China).

4. Eventually only the wealthy and the impoverished will exist, prelude to civil war, communist revolution, or other depending on the strength of the variables.

Our current trajectory has us headed toward stage three as the dollars are too scarce and only China and the middle east have a large supply. Tomorrow, when no currency is released and the women begin having babies at home, and the men begin building log cabins and the children stop dreaming of college because there is no money in the country to pay them if they educated themselves, we will need a new kind of Rio Grande to cross. China is much further away but if we all use the ropes from our cars and blow up our rafts, we might be able to string a life-line to China, allowing Americans to migrate the other fateful direction toward the last supply of currency and leave America to the Mexicans. And there a good life is possible: China responsibly injects liquidity upon the indication of production.


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kenmeer livermaile
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"The answer is not free money. For every dollar added to the system every other dollar is worth less accordingly. If I understand correctly you are saying that money needs to be added in order to match production; that is with more production there are more things to back up the paper money, but things aren't produced from nowhere. The only thing we get from nowhere is more people (and I don't mean the external kind)."

The main cause of hyperinflation is a massive and rapid increase in the amount of money, which is not supported by growth in the output of goods and services.

A few concepts, not necessarily in logical sequence:

a) Right now, the globe has run into a wall: the major producing countries (like China) have less buyers than before, so their capitalist industrial response is to lay off employees, lower wages, et cetera.

b) We've had massive inflation for almost two decades. It's called the stock market, the perceived worth of which made millionaires of people and then grossly deflated their stock values.

c) China has pegged its currency to the value of the USA dollar for a long time. The dollar loses value, the yuan loses value. I probably have this wrong via ignorant oversimplification, but if we print more money to buy more stuff from China, they will be happy to sell it to us. If we finance debt via Chinese loans, they will do so with inflated yuan that matches our dollars.

d) We have other forms of inflation in our country we don't acknowledge. Much of our food costs more than we pay because it is subsidized by our taxes. Most of our military operations of the past several century have been about protecting our access to raw materials, especially oil.

I share these more for their ease of understandability than for their accuracy. People like munga speak a different language when they discuss their topic. They can't help it. They are like doctors. Doctors amongst each other speak a foreign tongue. This for example:

"Production switches to only-foreign consumers as locals have no currency to purchase."

I'm not sure what that means. Production is done only by foreigners who also consume most of their produced goods since non-foreigners are out of dough?

Oh well. I seek to learn.

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