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Jim Cook



Every once in a while I switch the TV channel from Fox to CNBC to see what the liberals are saying.  After listening awhile I get a deep sense of hopelessness and foreboding for our country.  The most important thing for the left is giving money to people.  They are happy to see the growth of food stamps, disability payments, housing subsidies, free healthcare and all the other welfare benefits.  They utterly fail to see the damage it is doing to the recipients.  Whole cities that once flourished have deteriorated into rotting eyesores populated with shambling hulks of chemically dependent drones.  These people are no longer employable.  They have become incompetent and helpless and the liberals can’t see that it’s their doing.

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The Best of Jim Cook Archive

Best of Bill Buckler
July 8, 2008
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The BIS Speaks - LOUDLY:

The Swiss-based institution (also known as the central bankers' bank) issued an alert in its annual report released on June 30. The Bank for International Settlements has warned that many may have underestimated the scale of the coming global economic downturn. We quote the BIS:

"The eventual global slowdown could prove to be much greater and longer lasting than would be required to keep inflation under control. This could potentially even lead to Deflation which would evidently be less welcome."

With this statement, the central bankers' bank, the BIS, has renewed fears of a second great depression. The Privateer cordially agrees with the BIS. Hard on the heels of the BIS came Barclays Capital which advised clients to batten down the hatches for a worldwide financial storm, warning that the US Fed has allowed the world inflation genie out of the bottle and has let its credibility fall "below zero".

Living In Absurd Economic Times:

At present, and for a while yet, millions of people all around the world are the unwilling participants in a dual and intertwined global economic event. They are seeing the prices they have to pay for everyday things storm upwards while their own earnings are falling further and further behind. In sum, their real living standards are falling. Today, with all commodity markets showing ballistic price moves and many of them taking the next step and going parabolic, a much larger event is in the process of rolling up from behind. This event is a global DEFLATION.

Plain Inflation And Deflation:

This threat is what the BIS is now talking about - as seen in its June 30 report - and what The Privateer has warned about in many past issues. Deflation, like inflation, is a monetary event. Inflation is an increase in the quantity of money, deflation is a decrease in same. Plain inflation is where more paper money is printed and swung into general circulation. With a lag in time, prices paid across a wide sector of economic goods start climbing, reflecting the increased quantity of money in circulation. Plain deflation is where the quantity of money in circulation is decreased and with a lag in time, prices paid for economic goods start falling, reflecting the smaller money quantity in use.

CREDIT Inflation And CREDIT Deflation:

A credit expansion is a version of inflation in which an increase in the amount of money LENT into circulation has taken place. This is normally caused by artificially holding the interest for loans below the natural market rate which comes into being - only in FREE economies - from voluntary savings.

A credit contraction is a version of deflation in which the amount of money having been LENT into circulation starts to decrease. It is totally immaterial where the cause of this decrease comes from. It can be nervous bankers and other lenders cutting back on their loan issuance or these same lenders being forced to cut back because their own issued loans are failing at an accelerating rate. This failure of issued loans is what the BIS has raised grave warnings about. Failed loans come right out of the capital of the commercial banks. When enough loans fail, the capital can become exhausted and then the banks fail. The banks function on a fractional reserve basis with any bank holding, for example, 10 percent in capital behind its loan issuance. Should that 10 percent of capital be exhausted by failed loans, it leaves 90 percent of loans still on the books with no visible means of support! Those 90 percent of depositors left behind can't get their money out because the failed bank doesn't have it! They go broke.

This is why Fed Chief Ben Bernanke has pounded an enormous amount of new "liquidity" into the US banking and financial system. He is petrified at the ever growing prospect of bank failures.

Ó 2008 – The Privateer

(reproduced with permission)


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