This "Force Majeure" will occur when the money collected in taxes by the Federal Government does even equal the the amount needed to service the National Debt.  That debt we are talking about is owed to China and Japan.

Write in "Ron Paul!!!"

http://www.youtube.com/watch?v=ge2J2lNusJs&feature=email

Questions:

1. A value decline in anything confuses me. I see prices going up on Main Street. Does this mean we are paying more, a lot more, for items that are actually worth less than before the price hikes?
2. What about the exceptions? Gas has gone down a bit. Like oil-based products are ever valued at their actual worth anyway. Take the housing market as an example. Now I think I understand that. Less value on Wall Street, less value on Main Street?
3. Why can it cost more to purchase less?
4. Where will interest rates go?

The International Monetary Fund, an international organization that oversees the global financial system based on economic policies of its member countries, proclaimed that time is short for consensus on the international financial crisis. The finance members of industrialized nations failed to agree on absolute and unified measures to end the crisis. The IMF expects a systemic meltdown if stability in financial markets is not achieved. While the international body recommends "exceptional vigilance, coordination and readiness to take bold action," the body is leaving the pressure and responsibility on the collective bodies of national Finance Ministers. All this from an international body that claimed in August that there would be no recession in the Eurozone.

Solvency concerns are cited as the chief concern. The reality is that solvency is determined by a set of regulations that can easy be changed, as has happened in the United States. Therefore, the definition of solvency to a reasonable extent is in the hands of Finance Ministers and national leaders. Where such a change is seen as beneficial, such a move buys time when developing a consensus is especially important.

While consensus has been difficult, developing effective means to counteract the global financial crisis has been no less elusive. Panicked Finance Ministers are looking for support from the IMF or other global authorities in a effort to deal with the crisis. Britain has developed an interbank lending guarantee that has other nations stressing to compete.

In general, G-7 and G-20 ideas are essentially the same and somewhat short on creativity. Whether injecting capital into financial institutions and insurance companies, effectively nationalizing them, or buying up worthless mortgage assets, groups of Finance Ministers are chiefly examining the importance of uniform national guarantees to protect individual economies and to avoid creating a currency run. Encouraging monetary liquidity through central banking auctions has become a mainstay in prime economies.

Most telling perhaps is a statement made by the Brazilian Finance Minister, Guido Mangega, "The problems we are facing today in the global economy must be solved by several countries, they can't be addressed by only one country or a single continent." Finance Minsters from the G-20, not wishing to be left out of the loop, want emerging economies to be included within the ranks of G-7 Finance Ministers or by implication, involved as part of a larger authoritarian body.

Even Arab nations, whose prosperity seemed to make them immune from catastrophe are now encountering monetary issues, property value declines and business funding problems that threaten the Arab economic fabric as in much of the world. The Arab nations are largely isolated within the Islamic banking community except from within the burgeoning oil market, which in recent years has fueled inflation rates as high as 25 per cent.

As a result of the growing crisis, the United States is seen on many fronts, notably among Muslim leaders, as having no credibility whatever. Resentment, which is already high in religious circles, is multiplying because of the perception of financial betrayal and lack of wisdom. The push for Islamic banking within Muslim circles will continue despite any devaluation of the dollar experienced.

The issue created by injecting capital into banks dilutes monetary value and ownership of individual banks. While these types of measure can create the appearance of stability, diluting monetary value creates an ongoing increase in national, as well as global inflation. With increases in credit and cash generated for financial rescues, the end result is always inflationary as the devaluation of currency sets in. The only short-term winners are holding the gold and living off the interest for their services: central bankers. Meanwhile, central banking policies are behind the continued growth in inflation because a flawed economic model that mandates liquidity through monetary production. This is currently central banking's best hope for economic stability. ~ E. Manning

 - Economy for real people, p 144-145

John Maynard Keynes described the situation in The Economic Consequences of the Peace: "The inflationism of the currency systems of Europe has proceeded to extraordinary lengths. The various belligerent Governments, unable, or too timid or too short-sighted to secure from loans or taxes the resources they required, have printed notes for the balance."
Source.

The dollar is no longer linked to the gold reserve, and it is now nothing more than the paper it is printed on. Since 1923 the US dollar's value has dropped to only four cents of its relative value since that period. The decline of the US dollar has led to higher gas prices and inflation. The dramatic rise of gold prices after the bailout and the DOW's plunge symbolized the relationship between a weak dollar and inflation. The weakening and spineless dollar paints a grim picture of a banking and economic system without a foundation. Lou Dobbs has become so sickened by the congress's inability to act rationally that he called for its impeachment on his show on CNN. The Congressional committee on monetary policy and fiscal regulation have failed America, but they cannot be solely blamed because America has lost all its transparency.

The Federal Reserve has been prominent in the US economy after its controversial instillation in 1923. Many Americans know very little about how it functions or what the Federal Reserve actually is. For starters, the Federal Reserve is a private organization with no ties to government audits, regulation, and intervention. Essentially it is above the law and above review and criticism. It is run by the world's richest bank owners who are unknown to both the public and the federal government. The president, the supreme court, nor the congress understand the economic undertakings that are calculated by the secret meetings held by the Federal Reserve. Alan Greenspan was a man who prided himself in believing that the US dollar could only be safe as long as it was on the gold standard, but after he was initiated into the Federal Reserve that changed. The Federal Reserve upholds its arrogance and secrecy in our democracy because our elected leaders know very little about how the economy and how it functions. Just as we blindly handed Iraq over to Rumsfield, we have blindly handed over the fate of our economy to the richest men in the world to save Wall Street instead of Main Street. AIG, Leighman Brothers, and other giant banking institutions were saved by Bernanke, the Federal Reserve chairman, and American citizens were sold another lie that if it was not passed we would be in the largest depression of our time. We saved the richest men in the world by printing off 700 billion dollars of inflation, and we dont even know where it is all going. I think there is a problem with that. Senators and Congressman in the Legislative branch of government were bullied and pressured to pass the Bill by lobbyist groups invading both houses from the dark shadows of the Federal Reserve. There is no transparency in our economy or government anymore, and as our dollar begins to unravel so shall our banks and hence our economy. No one can save us from the elite who are sucking the blood right out of America. We have been robbed and our lifestyles will soon be pillaged, as the richest men in the world survive with golden parachutes. We are the slaves of our banking institution, and the power for them to manipulate the world is evident. This is a feudal system with the kings living and dictating on top, and the surfs on the bottom paying taxes and being drained by a system with no escape due to debt.

The government and the elected representatives in all branches have no control over the money being issued in America. They have been bought by special interest groups. Ever wonder why billionaires like Warren Buffet pay less tax than their secretaries? Legislative loopholes are the answer and buying Congressmen and Presidents is the way they do it. Billions of dollars are needed to run for office, and only a man with great connections and loyalties can receive that amount of support from the extremely wealthy. Hence, the process is no longer free and democratic but on the contrary restricted and controlled. The organizations that watch election spending and accounting are superficial and deceptive. Money buys power, and power buys money. The US dollar is no longer an American asset anymore than it is a receipt for our enslavement. We are bond by our debt introduced by a market based on credit, essentially uncle Sam threatens our obedience with a noose around our necks. The IRS is the police state brigade which is allowed to raid our homes and audit our labor without a concrete American law defining its existence. The patriot act allows the government to tap our calls and imprison us without due process or trial. Hello Guantanamo Bay and torture. Elections give Americans a fake taste of freedom by giving us a vote susceptible to the overturn by the electoral college or the supreme court. The Americans voted for Gore but got Bush. This is freedom and democracy? Supreme Court judges are appointed by the President and his beneficiary advisers, and they chose elections, presidents, and liberty. Same goes for the Federal Reserve head Greenspan and Bernanke, we never got to vote or scrutinize them. Presidential candidates like Mike Gravel, Ron Paul, and Dennis Kuccinich who speak out against lobbyist stronghold agendas in Washington and demand America's liberty are ousted by the media, and nudged out of the process. The media jokes about their legitimacy during elections, and ignores them during debates. Front runners are chosen by the media and given insurmountable free air time on the networks, so they essentially chose who America will support. Influential media has the power a month before an election to change the headlines and derail a presidential hopeful's entire campaign by pounding their lives and records. The media uses polls which reflect no truth whatsoever to shift America's political tide. One man once said that there is a damn lie, and then there is statistics. We must wake up and demand our country back from corruption. The reason people have yet to stand up and demand justice is because they have been given a superficial life imposed and bounded by debt. We own nice cars, have decent jobs, and have a great standard of life. However, when this system fails and chaos ensues we will all forget about leisure and just try to survive.

Congressman, Louis T McFadden, Chairman of the House Committee on Banking and Currency from 1920–31, accused the Federal Reserve of deliberately causing the Great Depression.

Mr. Chairman, we have in this country one of the most corrupt institutions the world has ever known. I refer to the Federal Reserve Board and the Federal Reserve Banks. The Federal Reserve Board, a Government board, has cheated the Government of the United States and the people of the United States out of enough money to pay the national debt. These twelve private credit monopolies were deceitfully and disloyally foisted upon this country by the bankers who came here from Europe and repaid us for our hospitality by undermining our American institutions...The people have a valid claim against the Federal Reserve Board and the Federal Reserve banks

We are the modern day surfs, and the false illusion of our leisurely lifestyles is soon coming to an end. We borrowed and spent without thinking of saving. We were handed out huge loans we could not even afford by these gigantic and immune banks to upgrade into lavish homes. Our SUVs were hurting as gasoline prices were soaring while the war against terrorism was only draining our national resources. We were buying new Mercedes and plasma TVs with credit and equity that never even existed during a bubble created by the Federal Reserve. It was a golden age of speculation and leisure. The empire's shining years before collapse. We were believing that America was invincible and the democratic government would save the people if the time ever came. Boy were we all so wrong, Wall Street was saved and Main Street was burned to the ground by our elected representatives.

Some may believe that there is hope and optimism in light of a new presidency and most probably Obama. Unfortunately, the truth is that things will not just change in light of a new president, especially when that new agent of "change" received the largest contribution of money from Freddie and Mae in the election. These men and women seeking office are not strong enough to change the system of the elite. Henry Ford once said that if the American people could understand the American banking system, he was sure that there would be a revolution the very next day. The super rich men raise the politicians to the presidential level, and the amount of money it takes to run for an election should be a true testament to that. The system has been stolen, and the people of America are too blind and ignorant to understand that these times are no longer about Democrat or Republican distractions. Greater powers have emerged in the light of corporate and monetary corruption run rampant by the blind eye of congress in neglect of temporary prosperous and frivolous times. The life we lead is soon about to crumble, and the Congress is already planning on the floor of both houses for the implementation of martial law. The implications are real, and the harbingers are not false alarms. The US currency is just paper floating down to its rapid demise in an economy so bloated and robbed by the forces of great influence and wealth. Brace yourselves for Hell. The joke is over, optimism is dead, and reality is soon about to hit as the world teeters near the greatest depression ever. I now understand that the America of yesterday has been done with, and the America of tomorrow is going to be ugly. I sleep with cynicism, worry, anguish, frustration, and confusion tonight as I fare the world as I knew it goodbye.

.

The next video is amazing, it is all about today, and it is Ron Paul in 1983: "Paper is not money"

.

Ron Paul in 1983 on Power, Morality, Money and Trust. "Paper is not money!"

Since peaking at like $146 per barrel, oil prices are off by a HUGE amount. Friday, it was at $77.70. [Note the graph is GAS prices, not oil.] For those, like me, that went to public school... that is almost HALF.

Falling gas prices are an important positive for the U.S. economy [have you heard that recently from the media?] because less money spent on Exxon's elixir means that more money is saved per household for everyday items including food and other staples. Don't forget the cost of energy affects almost every level of the things we need and buy.

Did you know that consumer spending makes up two-thirds of the economy.

Therefore, falling gas prices may reduce the odds of a forecasted recession. Because Americans are notoriously poor savers, hellooooooo...negative savings rate????.... the extra cash-on-hand is likely to get spent which, in turn, will push the economy forward through the upcoming holiday shopping season. Yeah, it is close... time flies huh?

So, just as inflation [if you remember from a previous post] can bad for Orlando mortgage rates, so can an impending recession... duuhhhhhh. And while recession won't always cause mortgage rates to rise, right now, it's one of the factors driving rates higher in this "new world". Falling gas prices may help keep that scenario ain check.

Chris the Implementer

Orlando Mortgages | Orlando FHA Loans

Orlando Real Estate | Florida Reverse Mortgages

Florida Short Refinance | Mortgage Chili Blog

Written by Chris Brown, an Orlando Loan Officer. For more information about purchase loans or refinances on primary residences or investment properties, please contact me directly @ 407-377-0500 x 210.

Hyperinflation in Germany, 1914–1923 by Hans F. Sennholz

*** begin quote ***

How stupendous! Practically every economic good and service was costing trillions of marks. The American dollar was quoted at 4.2 trillion marks, the American penny at 42 billion marks. How could a European nation that prided itself on its high levels of education and scholarly knowledge suffer such a thorough destruction of its money? Who would inflict on a great nation such evil which had ominous economic, social, and political ramifications not only for Germany but for the whole world? Was it the victors of World War I who, in diabolical revenge, devastated the vanquished country through ruinous financial manipulation and plunder? Every mark was printed by Germans and issued by a central bank that was governed by Germans under a government that was purely German. It was German political parties, such as the Socialists, the Catholic Centre Party, and the Democrats, forming various coalition governments, that were solely responsible for the policies they conducted. Of course, admission of responsibility for any calamity cannot be expected from any political party.

*** end quote ***

If you ever talked to someone who lived thru that era, you could see fear on their faces. Only stuff was valuable. I remember being told by an old lady: "Each day at lunch time, I would go to Papa's law office and take the money he collected for services and go buy something immediately. Anything. Didn't matter what. Things had value; money did not. Papa would do the smae at night when he left the office." I never forgot that conversation.

I had a fantasy as a child. I bet all kids do. At least kids who want more of what they can't have. "What if all monopoly money was real?" I'm sure my Mom thought it was very funny

Then as the nerdy bookworm I was, I was on a quest to learn about money. Digesting a few good "iicky nom icks" books -- can they be any more boring? -- I was a diligent researcher in those days.

I read about the six characteristics of money -- medium of exchange, store of value, unit of account, divisible, fungible, and measurable. Learned about how difficulty in barter lead to money. I could differentiate between Commodity, Representative, Credit, and Fiat money. I could define liquidity, velocity, demand curves, and even derivatives. But my young mind blundered on a realization.

It was all monopoly money!

Yes, dear reader, we've been defrauded by our own gooferment. Today's dollar is not the dollar of our parents or grandparents. And, it won't be the dollar of our posterity.
Fasten your seat belts. The 25% Carter inflation will seem tame after the politicians get finished screwing us.
The only funny thing is that, while every holder of a dollar today is going to be screwed, the biggest holders of dollars is the Chinese Communists. INflation is going to ravage their 5 Trillion Dollars.
# # # # #

This WSJ article describes how the government blew its wad on Bear Stearns, could not respond in the same way to Lehman Brothers, and that this evidence of government impotence freaked the market out.

While there are obvious political reasons Bush and Paulson and Bernanke want to kick the can down the road, government cannot do much to resolve this crisis. Paulson and company's frantic maneuvers, three or four steps behind the market, reveal this in dramatic fashion. Obviously, going forward, some changes to CDS markets, tying the dollar more closely to commodity prices, revisions to executive compensation on Wall Street (more salary and fewer bonuses, as well as clawbacks for failures), reducing incentives to "expand home ownership," and an industrial policy that drives harder bargains with exporters to assist domestic exporters would be sensible. In the meantime, we just have to let all kinds of businesses fail, shrink, reduce sales and salaries, and otherwise adjust.

Loose money bailouts will solve nothing. You cannot patch a leaking dam with more water.

Gold, the Dollar, and the Dollar Index
by Michael S. Rozeff

*** begin quote ***

Since 2001, gold has risen as the dollar index has fallen, but it has risen more sharply because the other currencies have also fallen in terms of gold. This appreciation in gold coincides with a world-wide inflation of paper currencies. Gold caught up to the inflation, so to speak. As long as these central bank currencies continue to be manufactured without solid backing, either gold or tax revenues, gold will continue to have a long-term upward trend. The volatility in gold prices will, in all likelihood, also continue, and that makes it hard to forecast the shorter-term movements with a factor like money supply. Note that the big increases of recent days have not pushed gold to new highs. In the longer run, however, we can be quite sure that gold will move higher if nothing is done to improve the backing of the world’s central bank currencies.

*** end quote ***

Seems obvious to me.

# # # # #

Aren’t we all in this together? Isn’t Western Europe having the same issues as the US? One can’t miss the news and see that Russia closed their markets...eventhough they rebounded almost 25% with last weeks feel good rally.

I assume the US Dollars problem is everyone’s problem.

It is clear the Fed is trying to restore confidence, but it is not rocket science to realize that spending $700 billion dollars on tainted all flavored mortgages and $400 billion on money market funds will boost the national debt even further and put us more into debt.

It is PRINT AND TAX time!

Isn’t or Wasn’t the US Dollar the BASTION of security? Maybe it still is regardless of the fact of all our economic problems. It is extremely unsettling that people who paid their bills ..Saved their money in US Dollars and now stand the potential of losing purchasing parity due to the GREED of Wall Street and the banks.

Where were the regulators restricting banks from lending to speculators who would buy a house with no money down…and look to sell it to potentially other investors?

Ok …let’s say the regulators missed that… which is possible... If someone wants to make a stupid loan… Ok great…that is their issue.. But why should we the tax payer, the hard working saver have to bail the banks out for their GREED?

The dollar fell against 14 of the world's most-traded currencies on Sept. 19 when the FED unveiled their restructuring plan. The feel good rally of the Standard & Poor's 500 Index of 4 percent maybe was just that.

FEEL GOOD!

Confidence building!

But for who?

I will feel good once we have a strong nation again and a responsible govt who supports the US dollar instead of bailout for the most stupid bankers of this century (probably all time).

How many of you realize that this unprecedented government intrusion into the markets will increase the US debt ceiling by 6.6 percent to $11.315 trillion.

Another nice thought in order to protect our money and hoping to get a return of money……not a return on money.. …that just by putting our money in short term US govt interest rate vehicles we are losing money due to inflation and taxes.

Will the Feds plan end the US Dollar rally that began in June and drove the U.S. currency up 10 percent versus the euro, 2 percent against the yen and almost 13 percent compared with Brazil's real? I have no idea…However. I would not be surprised if people start looking at the Brazilian Real which has a higher interest rate and in many ways a self sufficient economy.

Andrew Abraham

My Investors Place

www.myinvestorsplace.com

capitalinvestor1836.blogspot.com

October 10, 2008

More than just a mere liquidity or credit crisis, the current financial storm represents the death throes of the old global economic order, and perhaps the birth pains of a new one. The sun is setting on the borrow and spend culture that has all but defined us for a generation. Our long ride on the global gravy train is finally coming to an end, and once it does nothing will be the same. The sooner we come to grips with this the better.

Despite the myriad of proposals that are coming from Washington and other world capitals, we must understand that this crisis cannot be cured by governments. In the United States, credit is gone because savings are gone. Our shallow pool of savings has been depleted through bad loans, and we can no longer entice foreigners into lending us their available savings. Given that we are already too loaded up on existing debt that we cannot realistically repay, who can blame them for not wanting to lend us more?

As a result, the free market is trying to put an end to our spending spree. Without savings or home equity to fall back on, Americans struggling with rising prices are finally being forced to curtail their spending. This has terrified our leaders and is causing them to dismantle the remaining structure of our free enterprise-based economic system.

The intention of all these daily federal interventions is to keep the credit spigots open so Americans can go even deeper into debt to buy more stuff they can’t actually afford. This should be clear enough to anyone who listens to what our leaders are actually saying. When speaking about the need for an even larger fiscal stimulus package, Barney Frank, chairman of the House Financial Services Committee, said, “We have to prop up consumption.” He has it backwards. The government has been propping up consumption for far too long, and the best thing they can do now is remove the props so spending can be replaced by savings.

The sad reality is that we borrowed and spent our way into this crisis, and we are not going to borrow and spend our way out of it. Legitimate credit can only be supplied if there are genuine savings to finance it. Savings can’t be magically concocted into existence by a printing press, but can only be created by consumers who spend less than they earn. Efforts to fool the market will not work and will ultimately lead to a monetary disaster and runaway inflation.

Were the government to allow market forces to work, Americans would now have to pay cash for their consumption. That would mean no instant credit for new cars, plasma TVs, appliances, consumer electronics, clothing, furniture, etc. Unless buyers actually had the cash in their checking accounts these purchases would have to be deferred. From an economic perspective this is precisely what the doctor ordered. But for an economy based 72 percent on consumer spending, the medicine will go down hard.

Ultimately, a serious reduction in consumer and mortgage credit, combined with an increase in personal savings, would again provide a pool of needed capital for businesses to produce products and provide employment opportunities. However, the danger is that this potential credit could be completely crowded out by massive borrowing by the Federal Government. In addition, prices for such things as houses and college tuition will fall sharply, as the credit artificially propping them up disappears. People would still be able to buy houses and send their kids to college only they would pay much lower prices when they do.

However, if the government keeps creating inflation to artificially sustain consumer borrowing and spending, there will be no savings left to fund anything and prices will be so high that despite massive consumer spending there will be few goods that Americans could actually afford to buy.

For a more in depth analysis of our financial problems and the inherent dangers they pose for the U.S. economy and U.S. dollar denominated investments, read my new book “Crash Proof: How to Profit from the Coming Economic Collapse.”

EDITOR AMBUSHES STEINBRUCK AT G-7 PRESS CONFERENCE

Saturday 11 October 2008 00:03

STEINBRUCK, TAKEN ABACK, ACKNOWLEDGES THAT THE WHITE HOUSE IS RESPONSIBLE
PUBLIC ACKNOWLEDGEMENT OF MAJOR CORRUPTION EXTRACTED FROM G-7 MINISTER

.

"GERMAN FINANCE MINISTER STEINBRUCK INADVERTENTLY LETS THE CAT OUT OF THE BAG"
.

"The United States is bankrupt and is essentially in the hands of its creditors"

.
the financial crisis is not attributable to the widely ballyhooed Subprime Mortgages, but...

.
"HOLDERS OF HIGHEST U.S. OFFICES ARE SPECIFICALLY RESPONSIBLE FOR THIS CRISIS"

.
"Hence...the holders of the highest offices in the Bush 43 Administration were and are specifically and EXCLUSIVELY responsible for the catastrophe that has come about"
http://www.worldreports.org/news/177_german_finance_minister_confirms_settlement_cash

I withdraw $40 from the ubiquitous ATM every three to four days.

And I just spent $28 on a little black dress online.

I used to raise one eyebrow with scorn and disbelief whenever people tell me they record their expenses everyday. (The trouble!) Now I wish I'd done that. I wonder where all my money went.

I know one of the reasons: a handsome amount of my shrinking assets is scattered in the hands of friends who've yet to pay me for birthday presents they chipped in to buy.

But that doesn't properly justify my poverty. Haven't I been frugal enough!!! I was empty-handed while Sheena came home with four bags of shopping that day!

Excuse me while I wring my hands with the worrying prospect of an ascetic (read: non-hedonistic) lifestyle looming ahead.

During his recent trip to the United States with the Prime Minister Dr. Manmohan Singh, the Deputy Chairman of the Planning Commission Dr. Montek Singh Ahluwalia told reporters that inflation rate will return to single digit by the end of current fiscal. Some even believe that a single digit figure will be achieved by the end of December and by March the position would be still better. 

The Secretary, Ministry of Statistics and Programme Implementation, Shri Pronab Sen is of the view that inflation will remain in double digit until January, due to the base effect and higher prices of manufactured products. 

Dr. Ahluwalia however indicated that the government is not in favour of taking excessive harsh measures to check inflation because that will impact the growth of the economy.

The government has already taken a number of measures to increase the domestic supply of goods and services in the country. For this purpose while the import of goods has been liberalised, restrictions have been placed on the exports of certain commodities. For instance, in the case of pulses, customs duty on imports has been reduced to zero, until March 2009. Simultaneously a ban has been imposed on its export up to March end. 

Custom duty on semi-milled or wholly-milled rice too has been completely done away with, till March 2009.   Export of non basmati rice was banned and the minimum export price of basmati rice was raised to $1200 per tonne .  In the case of wheat there will be no import duty till December this year. In order to pave the way for increased supply of edible oils, a commonly used medium of cooking in India, a number of steps have been taken. Customs duties on crude and refined edible oil have been reduced by about 50 percent and now range from 20 to 27.5 percent. Simultaneously, the import of crude edible oil at zero duty and refined oil at 7.5 percent has been allowed. Customs duty on palm oils too was reduced by 10 percentage points. The 4 percent additional countervailing duty on all edible oils was also withdrawn. Export of all edible oils has already been prohibited.

Customs duty on maize imported under Tariff Rate Quota of five lakh metric tonnes was also done away with. Import of Portland cement, other than white cement, was exempted from countervailing duty. At the same time, export of cement was banned. Basic customs duty on various kinds of steel too was either reduced or done away with. On cotton imports the 10 percent customs duty along with 4 percent special additional duty was abolished. Crude oil and petroleum products also received a favourable consideration. In the case of crude oil customs duty was done away with. On petrol and diesel it was reduced from 7.5 to 2.5 percent. On other petroleum products it was halved to just 5 percent. Excise duty on petrol and diesel too was reduced by Rs. 1 per litre.  What is a matter of some consolation is that the international price of crude oil is coming down and has already reached $ 94 a barrel. If the trend continues it will bring down the inflation level in the days ahead.

A series of monetary measures too have been taken to deal with the situation. These include repeated increases in the cash reserve ratio of banks and the Repo, as well as reverse Repo rates. The purpose is to check the flow of liquidity into the open market and thereby reduce the price level.

The problem is that just like any health care medicine, the economic measures mentioned above have a negative aspect too. They can impact the growth rate also if adopted without proper monitoring. 

The real treatment of the problem is to increase the supply position. This is bound to happen as soon as fresh crops come to the market. In the long run, the government needs to draw a strategy to ensure that agriculture produce in the country, which continues to be our mainstay, increases. Since food represents more than half of the expenditure of a vast majority of our poor population,  adequate attention needs to be given to this aspect.

The question now is how far is the meltdown in the US financial market going to affect the Indian economy. Dr. Ahluwalia maintains that its’ direct impact on India has been negligible. There is also a silver lining. The country has ample stock of foreign exchange reserves. So we should be able to deal with the situation that may arise temporarily in the financial markets. But the US financial turmoil is not likely to end anytime soon. Economists believe that this may happen only by the end of the next year. As such India cannot be completely insulated against the economic uncertainties in future. Even the US government believes that the massive bail- out package of $ 700 billion that it has approved may not be enough to stave a financial turmoil in the US. The sub- prime crisis in the United States is a matter of concern since it is exerting pressure on the financial systems and growth implications around the world.

Ultimately it boils down to somehow increasing the supply of goods and services in the market by increasing the imports and reducing or stopping altogether the exports of certain key commodities, reducing money supply in the short run and ensuring proper distribution of whatever stocks are available. That is precisely what the government is doing right now. How soon it can overpower the monster of inflation can be anybody’s guess.  All that we can say right now is that we seem to have crossed the inflation hump.(PIB)

What do I mean?  Well here it is:

1)  The Dow has lost tremendous amounts of value within a week... historic amounts actually.  I have no idea whether it's going to go down further, but I am of the opinion that you're going to see gold and the Dow meet along the way (i.e. Dow - 5000 points, Gold - $5000/ounce).

2)  The US dollar is temporarily rallying at the moment as people run for cover, however they will soon realize that their house is made of straw.  Expect the US dollar to lose half of it's value in the near future... when that happens, it's all over folks for the US.

How do I know this... well when you consider the sheer level of debt in the US right now, $10 trillion, and the levels of private debt which exceed US GDP... and then you add the fact that the US government has now garunteed to insure $5 trillion worth of mortgates when it bailed-out Fannie and Freddie... and then you have the US buying all the mortgage backed securities... and who knows what else they're going to bailout in the future... the levels of debt are astronomical.  Not only are they astronomical, they can NEVER be repayed.  You will need several Americas taxing at 100% to pay it off.  Don't even concern yourself with paying off the debt, what about the interest?

So what will happen then... one of 2 things:

1)  Deflationary depression - similar to the Great Depression... no one has any money, prices drop dramatically but it doesn't matter as no one has any money, unemployment skyrockets... a lot more.  Examples: 1929-1930s.  Conclusion: very bad.

2)  Inflationary depression - to avoid (1), the US government prints huge amounts of money to pay off all the debts list above, which devalues the dollar to extinction where it is literally worthless (toilet paper worthless)... hyperinflation occurs (where stuff costs like $2 billion for a can of coke, but you earn $1 trillion in a day's wage), unemployment skyrockets.  Examples: Argentina, Zimbabwe, Germany (Weimar republic).  Conclusion: Even worse.

The question is now... what can the US avoid either scenario?  I'm afraid the answer is 'no'.  They would be better off if they just do not interfere with the free market... let the market make the corrections.  Will that hurt... most definitely.  But the alternative is what happened in the 1930s when government intervention made a bad situation worse, actually stimulating the depression.

So this is all very... depressing :(  No pun intended.

That's not the end of the story though.... Psalms 112:3 - "Wealth and riches will be in His house, And His righteousness endures forever"

wind tune

Originally uploaded by jamtea

Its kind of wierd that these big things are all over the place in Europe.

i was thinking of all the money that was lost in the last couple of days in the US on wall street. For every dollar of growth in the US, i heard that it cost the US 5 dollars in debt and now all that money that has been loaned out has deflated with the market. Imagine that this money could have gone to making the developing places that are making all the things for the people in the developed places. Now as the economies return to a system where that is linked to something like a gold standard, this might mean that all the manufacturing in these places is going to decrease. These developing places have developed economies that are built (it seems) for the rich. What about the working poor in Bangladesh and Indonesia. With no work in the place to make our shoes and TV's what is going to happen. It seems like these wall street workers that regulate the system according to them have a lot to answer for to those people in those places.

What is left for them, when nothing is left for anyone between the bottom of the top and zero. People need to think of these people first, rather than their own interests, yet it seems so hard.

Its not like it was in the film metropolis, where the people at least could rise up from under the city. These people are on the other side of the world and people only find out about them if some huge natural problem happens. Its all a bit sad. As people stock up on guns, gold, silver and canned food in the US. Give a thought to the people with little. what to do?

i don't claim to be an expert, yet is this the way that it is?

Inflation är inte ett "normalt" fenomen. Inflation beror på att centralbanker ökar penningamängden. Detta är ett grundläggande problem med bankväsendet idag, att riksbanken kan låna ut pengar, trots att riksbanken inte har något värde bakom sitt utlån utan endast baserar det på det faktum att de har ensamrätt på att "trycka pengar". Nåväl, det var inte poängen.

Poängen var att detta är bara en av de första i ordningen av artiklar vi kommer se om hur världen nu skall förändras till att fungera "normalt" igen. Och jag håller med - jag har inget intresse i att se att mina pengar lånas ut till höger och vänster utan säkerheter bakom. Så som läget ser ut nu kommer marknaden att långsamt återgå till vettigare former. Världens alla banker har fått en ordentlig näsbränna, och insett att man bör faktiskt ha pengar för att kunna låna ut dem. Frågan är då, vilka situationer ställs vi inför gällande regeringsvalet 2010?

Låt oss anta, att som de flesta förutspår, att 2009 blir ett ganska svagt år rent utvecklingsmässigt, och att återgången till en långsamt växande ekonomi börjar under 2010 igen. Bankerna kommer långsamt att återgå till normala balansräkningar, och de som räddats av staten (Swedbank? jag skulle dock föredra en lösning där de blir uppköpta av t.ex. Nordea) kommer att kunna börja fungera normalt för att så småningom kunna säljas ut av staten.

Vad händer om socialdemokraterna kommer till makten? Om staten nu äger t.ex. Swedbank, tror ni att de kommer sälja? Knappast, socialdemokraterna tycker om statliga institutioner. Socialdemokraterna var t.ex. emot den utförsäljning som borgerligheten nu har gjort av diverse statliga bolag. SBAB är fortfarande statligt - och vilka tror ni är ansvariga för de (sån tur är någorlunda få) lån som ligger i riskzonen för att inte kunna betalas framöver? SBAB - som ställde upp stora reklampelare att man fick låna upp till 95% på bostadens värde. Varför tror ni att en statlig bank var först med detta påfund? För att vanliga banker vet att det är för hög risk att låna ut pengar upp till 95% av bostäders värde! Men, för att klara konkurrensen gentemot statliga SBAB så följde naturligtvis övriga banker med.

Vill vi ha en situation där vi har statliga bolag som stödjer sig på skattepengar som kan manipulera marknader (som t.ex. Fannie Mae och Freddie Mac i USA), eller vill vi ha en regering som omgående säljer ut dessa bolag, och därmed

1.  Ger tillbaka de skattepengar som slösats på eventuella räddningar av banker, i form av sänkta skatter
2. Garanterar en sund konkurrens på bankmarknaden, där ingen sitter med alla trumf och kan tvinga ned priserna längre än vad som är vettigt

Låt mig även påpeka att förlusterna p.g.a. bankkrisen har redan börjat - vi betalar redan för bankerna genom att centralbanken lånar ut en massa pengar till banker som inte törs låna av varandra. Ökad penningmängd = inflation = dina pengar blir mindre värda. Detta för att ersätta de pengar som nu till synes "gått upp i rök" från övervärderade bolånepapper, och framförallt papper i andra banker som är på ruinens brant.

En borgerlig regering 2010 är bästa möjligheten till att SBAB säljs, och att eventuella pengar som skattebetalarna har förlorat betalas tillbaka i form av sänkta skatter. Den som sitter på mest kapital kommer förlora mest på inflationen - men även få mest tillbaka när skattesänkningarna kommer.