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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
December 10, 2008
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There is another huge economic feature inside the US economy and financial system. It is a vast internal US deflation which has, so far, taken $US 13 TRILLION out of the US system - made up of about a $US 7 TRILLION fall in the US stock markets and about $US 6 TRILLION in US real estate valuations. It is this climbing wave of internal deflation which the Bernanke Fed and the Treasury see rolling towards them. Both are trying to stop it in its tracks by sending a huge $US 8.5 TRILLION of freshly created funding and official guarantees to do battle with it. But their real problem is that only about $US 2.3 TRILLION in new funds and guarantees have been delivered so far, and they have had no effect whatsoever as the further falls in the US stock markets and in real estate demonstrate so clearly. Economically, it is true that a credit expansion can be re-ignited by a lowering of interest rates. But that is true if, and only if, lower rates actually entice more people to adding to their debts, in the process increasing the total volume of credit money in circulation. But if people are NOT willing to increase their debts, no level of interest rates, not even zero, will "work". Worse, for the monetary authorities, if people use the lower rates to repay part of the debts they already owe, in doing so they actually DEFLATE the total quantity of credit money in circulation. That is what is now happening - all over the world. This phenomenon of people refusing to sign up for more debt and actually repaying the debts they do carry is a phenomenon unseen in at least a generation and not understood in the corridors of Washington.

The FINAL Political Borrower And Spender:

If the "people" refuse to borrow and spend, that leaves the US Treasury all alone to step forward and borrow and spend into existence the "money" which the people are extinguishing. This is the "notion" - it does not qualify as either a "policy" or as any form of sane economics - which has given rise to the reports that the US Treasury will borrow and spend up to $US 2.1 TRILLION next year - with an early instalment of this of $US 550 Billion before the year ends.

This is the "notion" which has goaded the Fed into expanding its "balance sheet" by an unprecedented degree - from $US 900 Billion to $US 2.2 TRILLION since August. The Fed's "balance sheet" could grow by another $US 800 Billion, making the Fed into a larger lender than any US commercial bank. The whole thing amounts to the US Treasury saying that if nobody else will borrow and spend then it will, while the Fed says that if the American commercial banks will not lend then the Fed will step into the field and directly do the lending by itself. The final borrower and the final lender, the Treasury and the Fed, are now front and centre. There is

nowhere else to go.

A General Appreciation Of The US Situation:

If, only a year ago, The Privateer had reported on the facts analysed in this and recent past issues, we would not have been believed. Look at what is now being reported on the financial and economic front pages every day. A forecast annual US federal budget deficit of more than $US 2 TRILLION! A Fed balance sheet ballooning from $US 900 Billion to $US 2.2 TRILLION to a forecast $US 3.0 TRILLION!

The Hard To "Credit" US Facts:

Today, there is no act of belief required. These are current US hard facts. An appreciation of these facts is therefore required. Such an appreciation will quickly establish that the Fed and Treasury are doing this because they think that there are no longer any alternatives left to them. They think that not acting will amount to the entire US financial and monetary system sliding backwards into an unstoppable credit money deflation which will, in its turn, take the entire US economy down with it into a depression which will rival and perhaps exceed the one in the 1930s. Congress has signed on to this same idea. This can be seen from the Democrats now cooking up yet another "stimulus package" with numbers around $US 500-700 Billion - all to be borrowed of course by the US Treasury and then spent on "public works".

The general and official US perception that they have no alternative but to borrow and spend lays out two drastic economic alternatives. It assumes that the US economy and financial system would already be in a 1930s situation had the Treasury and the Fed not already acted to the extent they have. It also assumes that the moment they both stop or even slow down all their activities, the same sad end result will follow.

Excluded From US Thought:

Inside that official US context of thought, two alternatives are willfully excluded. The first exclusion is the possibility that the Treasury will go broke in global terms in its attempts to borrow for the purpose of deficit spending. The second exclusion is the possibility that the Fed and its "Federal Reserve Note" (aka US Dollar) will lose its current international standing as even a viable currency. In the first case, the Treasury would lose its international ability to borrow. In the second case, the US Dollar would crash.

Ó 2008 – The Privateer

(reproduced with permission)


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