Posted on 02/09/2009 7:19:56 PM PST by sickoflibs
(Taken from an interview ) “What we are experiencing now is not the problem. What we are finally experiencing now is the consequences of the problem. The problem has been building for years and years. The roots of problem can be traced back to abandoning the gold standard in 1971. We took the dollar off the gold standard and the world to accept the dollar as the world currency as if it was still backed by gold. That put us in a unique position as a nation where we could pay for our imports by printing money. We didn’t have to pay for our imports with exports or gold. We could just print money. “
“ We began to de- industrialize and move into a service sector economy because we were able to import all the things we didn’t produce by printing money and sending it (printed money) abroad and our creditors were willing to hang on to the money we printed and didn’t actually look to spend it on real stuff. And the economy began to evolve to this consumer based economy. In order to keep growing we had to take of ever increasing debt, which the world was willing to supply us. The housing bubble allowed Americans to borrow money on an unprecedented scale. We raised it to an art form where we borrowed trillions of dollars and were blowing it on massive consumption and our trade deficit went from 12B per month to 60B per month. This was unsustainable. Half of the income from S+P 5000 was being generated by financial services. It was all an illusion. I saw all the risks being taken on Wall Street and all the speculation on Main Street. I knew our whole banking system was a house of cards because the assets were phony, because the assets were mortgages. I knew that the people borrowing money had no way to pay it back..”
If you think both parties in Washington think our money is theirs and you trust them to do the wrong thing, this list is for you.
If you think there is a Santa Claus who is going to get elected in Washington and cut a few taxes and spend a few trillion and jump start the economy, and get our lost money back, this list is not for you.
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Heck, all we would need to do is print more gold.
Psh, what’s this guy talking about? Doesn’t he know that spending got us out of the Great Depression and Capitalism got us in!? We can’t afford to worry about debt right now! Do your patriotic duty America and spend spend spend! /s
We need real wealth creation in this country. We need savings/investment and production.
Bush pro-illegal and I did not understand why until recently(this is a wakeup call to me). He actually thought that his paper asset bubble was real economic growth. He thought our booming housing building industry was a real sustainable industry. It’s wasnt. It was a phony paper foreign debt based bubble requiring high levels of legal immigration (to buy the houses) and illegal immigration (to build the houses.) It was funded by massive public and private foreign debt. But the new immigrants all needed jobs so it could not sustain itself indefinitely. The bailout bails out foreign investors so they continue to loan us money. It was a fake Ponzi scheme that led to Pelosi/Obama our worse nightmare.
Brings back memories.
—
I still remember when Smiling John Connley went across the pond and floated the currency. He came back with an agreement that he said was as historic as Brenton Woods.
My things take a long time to play out.
—
In 1983 R.J. Ringer in his book
“How You Can Find Happiness during the Collapse of Western Civilization”
quoted his friend William Simon (was Sec. Treasury)as having said:
He was 100% certain that the United States is going to experience a “total economic collapse”— that it is now impossible to avoid.
Ringer further in the book stated:
“I am now going to make the following three guarantees about the future (I emphasize that these are not projections, but guarantees)
1. There will be a complete destruction of the currency of the United States, and probably that of every other Western nation.
2. There will be severe shortages of the “necessities” of life.
3. As a result of the first two, there will be civil disorder and violence of a magnitude never before seen in America.”
—
—Now- that sounds fatalistic and 1983 was a long time ago, but it is interesting and frightening to reflect on today.
I swear that John Connoly was the model for Mr. Strickland on "King of the Hill."
The second one is more specific to what happened given it is written later. But both are very good.
I'm trying to do my part, but my savings account is a measly 1/2 of 1%!!!!!!!!! What's the point?
RE “Sigh. Not this gold standard nonsense. “
Not sure about that working but I am hearing more and more about federal reserve creating asset bubbles with negative interest rates instead of contolling inflation. Not just Schiff and Paul saying it now.
sounds about right
good summation
you can say GW was an abject dunce on this but so was half the country. And Wall St took it up with a vengence
I always knew it was BS that not once did any Bush administration guy ever say anything about our trade deficit. This easy money from abroad that allowed us to buy all kinds of cheap stuff, keeping the sheeple happy as they flipped houses and engaged in other money for nothing schemes like welfare and SSI
I dont know where you were but on east coast we saw massive legal immigration, mostly Koreans but Indians and others. We also had mexicans and other new hispanics doing all the construction and the painting, etc. The past 10 years has been a tidal wave of foreigners. And at the same time home building went crazy, houses up everyplace every open plot of open land disappearing moving from east to west. And house prices hear skyrocketing 50% per year increase over doubled in 4 years.(much was government spending)
It was completely insane. You remember 2-3 years ago being told we need high imnigration to feed the growing economy? (including the illegals)
I have concluded GWB thought he had real economic growth in what Schiff calls the “phony service economy”. Ironically 16 years ago democrats used to talk about good paying manufacturing jobs and republicans about good paying service jobs. But that all disappeared.
BINGO. That's why credit is still frozen and why Treasury can't say where much of the first $350 billion with a b went.
I heard an economist, (who struck me as fairly non-partisan) suggest this on radio - Instead of "borrowing" $800 Billion (which is $1.2 Trillion after we pay interest to the foreign investors), why don't we just suspend $800 Billion worth of Federal Income Taxes, then divide the $800 billion by the number of taxpayers and send every one of them a special debit card WHICH MUST BE SPENT WITHIN ONE YEAR. [IMHO - there would still be people saving with "freed-up" money, so why not make it a 50% debit card, meaning if you want to spend $100, you can get $50 from the debit card and you have to provide $50 of your own. (i.e. you have to spend $50 from the money you saved on taxes, PLUS $50 from under your mattress). Comments?
LOL. Because as Obama said “I won!”. So now as president he is claiming his economists are saying that food stamps and unemployment benefits and tax rebate checks to those that pay no taxes stimulate the economy the fastest because those people cant afford to save the money. In fact the CSPAN host just repeated that to a caller this morning while I was driving to work. Sound silly?? There is no real debate on this. It's Obama’s way or the highway but he knows to tell public he really cares what we think. He is pretty good with the weak minded.
It was completely insane. You remember 2-3 years ago being told we need high imnigration to feed the growing economy? (including the illegals)
I have concluded GWB thought he had real economic growth in what Schiff calls the “phony service economy”. Ironically 16 years ago democrats used to talk about good paying manufacturing jobs and republicans about good paying service jobs. But that all disappeared.
The Democrats were right...they believed more in keeping manufacturing at home and you can tell this by the NAFTA vote which was passed by Republicans in Congress and signed by Bill Clinton. All Clinton's economic advisors loved NAFTA and they were also Wall St creatures such as Bob Rubin
I sort of knew it subconsciously....
But your post got it exactly right.
GW thought we had a perfect (beneficial) storm of rising numbers of illegal aliens laboring in a juiced up economy fueled by foreign debt, consumer purchasing at more and more retail outlets and by home building.
What idiocy and Greenspan with his easy money policy was GW's foremost enabler
Manic house building
Mania in writing mortgages and renovating and flipping houses
And worst of all, Wall Street learning how to make billions off this housing boom and making it exponentially worse by securitizing mortgage debt and betting on these securities via credit default swaps
How did NAFTA cause this problem? I agree that we need industry and customers to export to, but the trade barriors will cause even bigger problems. I was thinking more that the GWB tax cuts could have rewarded domestic investment instead of financial companies that speculated. And stop devaluing the dollar to stimulate economy and promote savings again. Maybe we needed some deflation long ago to make us competitive. Maybe the current service/government US standard of living is not sustainable but it is a political loser to tell us so no one does. And maybe Obama is trying to figure a way to tell us that now, and blame it all on Bush.(If only we didnt invade Iraq and tax cuts for rich they say, we could have all lived the good life)
Say what you will about trade barriers but it is a very bad idea to run 500-700 billion dollar trade deficits
I was thinking more that the GWB tax cuts could have rewarded domestic investment instead of financial companies that speculated. And stop devaluing the dollar to stimulate economy and promote savings again. Maybe we needed some deflation long ago to make us competitive. Maybe the current service/government US standard of living is not sustainable but it is a political loser to tell us so no one does.
The service economy is a lie because a service economy is a consumer economy
Consumer economies are lies
You have to be a producer economy
We are the only developed nation that runs such huge trade deficits
Peter Schiff
Archives
March 11, 2005
Today, with the release of January's $58.3 billion dollar trade deficit (the second worst monthly result on record), the enormity of the imbalance was once again overshadowed by the rhetoric immediately following its release. As he has in the past CNBC's Larry Kudlow extolled the virtues of the trade deficit as reflecting America's superior economic growth, while chastising Europe and Japan for not doing their fair share in moving the world's economy forward.
In essence, Mr. Kudlow criticized Europeans and Japanese as being economic slackers (because all they do is save money and manufacture products), while praising Americans, who borrow those savings and consume those products, for doing all the hard work. Give me a break.
When asked if he though the fact that Americans were "living beyond their means was a problem" Kudlow's reply was to deny that they were. Apparently, he believes that one's means are merely a function of how much one can borrow. It reminds me of the old joke about the housewife who was amazed to discover that her checking account was overdrawn as there were still unused checks remaining in her book. Further, when asked if he believed that the debt Americans were accumulating was problematic, he assured the television audience that it was not, because "Americans were putting the money to good use." I'm not exactly sure to what good use he is referring, as American's borrow mainly to consume. Imagine trying to convince a banker to loan you money on the grounds that you would put it to good use by buying a big screen T.V. and taking a vacation.
Mr. Kudlow's rhetoric typifies an ongoing Wall Street, government, and media propaganda effort that would even amaze George Orwell. I have addressed these ridiculous arguments many times in the past, but rather than rehashing them, I offer some of my past commentaries in response to similar statements on this issue made by John Snow and Arthur Laffer.
January 13, 2005
John's Snow Job on the Record Trade Deficit
In reaction to yesterday's release of a record trade deficit, Treasury Secretary John Snow continued with his Rumpelstiltskin routine of characterizing disastrous economic news as if it were just the opposite. Here's a quick look at yesterday's zingers:
Snow attributed the unexpected import surge to wealthy foreigners refusing to buy American products. However, the problem is not that foreigners shun American products, but simply that America is not producing any that are worth buying. After all, if Americans themselves aren't buying American products, how can we expect foreigners to do so? And if wealthy Europeans decided to consumer more, as the Secretary alleges they should, they would most likely do their shopping in China, just like Americans. How would that improve America's trade imbalance?
Furthermore, Snow claims that the growing deficit results in part from the American economy growing faster than that of its trading partners. To anyone even remotely familiar with economic statistics, this assertion is absurd on its face. America's largest and fastest growing trade deficit is with China, a nation experiencing economic growth at a rate nearly three times than that of the U.S.!
Further, Snow confuses consumption with growth. It is not that the American economy is growing faster than many others; it's just that its citizens are accumulating more consumer debt then are their less irresponsible foreign counterparts. Those "slow growth" economies are simply living within their means. Snow also stated that the faster growing U.S. economy creates greater disposable income, enabling Americans to buy imports. However, this misses the point that it is debt, not income that is growing. What really allows Americans to buy imports is foreign lending, not domestic income.
White House spokesman Scott McClellan said President George W. Bush sees the record trade deficit as evidence that "the United States economy is the economic engine for world growth" and that "American prosperity enables us to shop in the global marketplace, buying more goods than citizens of slower growing economies." Talk about putting the cart before the horse. Rather than being the engine for world growth, the U.S. economy is the caboose. American consumption doesn't drive global production, it's the reverse. It's not American prosperity that allows them to shop, but foreign generosity.
Many other Wall Street economists have also weighed in on this subject, with few exhibiting any real understand of the problem, or the ramifications surrounding its ultimate resolution. One economist remarked "U.S. consumers have a huge demand for imported goods and the means to pay for them." The reality is they lack the means to pay for them, (the means being exports) which is why there is a trade deficit in the first place. Foreigners are supplying the means by lending the money.
Another popular explanation of the record deficit is that it is evidence of the "J-curve," an economic model that holds that currency led trade adjustments initially produce larger deficits before the situation ultimately improves. The problem with this explanation is that the dollar has been falling for three years, and the trade deficit just made a new record high. Just how elongated is the "J" supposed to be before it swerves up? If a 30% decline over three years hasn't made a difference, why should we expect anything different in the future?
January 4, 2005
Laffer on the Trade Deficit
In the 1980's Arthur Laffer gained fame by sketching his controversial "Laffer Curve" on a cocktail napkin. In an interview today on CNBC Mr. Laffer lead me to believe that the same napkin could probably provide enough surface area to hold the sum total of his economic wisdom. In a stunning display of economic ignorance and media propaganda, Laffer not only explained why the gargantuan U.S. trade deficit was not a problem, but argued that an even bigger one would be even better. Come again?
In an attempt to explain why such deficits can exist indefinitely, Laffer compared today's current account deficits to those seen during America's first two hundred as a developing nation. This flawed comparison over looks the fact that as a developing nation, America borrowed to invest, resulting in current account deficits that funded the construction of vast infrastructure, such as roads, bridges, ports, and rail roads, as well the formation of capital equipment, farms, and factories, all of which fueled American productivity. Such investments enabled the production of vast quantities of consumer goods, which America sold back to its creditors, to both pay interest and retire principle. In the end, America's creditors got consumer goods, and America became the wealthiest industrial nation the world had ever seen, in the process turning its current account deficits into enormous surpluses.
In a "night and day" contrast, today's current account deficit has the much more limited role of solely financing consumer spending. By squandering borrowed money on consumption, America has no way to repay the principal of its debts, let alone the interest. Borrowing to build a factory is not the economic equivalent of borrowing to buy a television set, and it's amazing that Laffer can't see the difference.
Second, Laffer defends the trade deficits as resulting from the vastly superior investment returns available in America. His argument is that a capital account surplus necessitated a current account deficit. Talk about putting the cart before the horse. According to Lafferese, foreigners sell products to Americans to earn dollars, so that they can "invest" in America to achieve superior returns. This ridiculous logic overlooks the fact that much of these earrings are simply invested in low yielding government and corporate bonds, with a significant portion being purchased by foreign governments. If as Laffer maintains, investment returns in the U.S. really are far superior to those available else where, why are foreign central banks doing so much of the "investing?" Where is all the private capital seeking those alleged superior returns?
Lastly, when asked if a six hundred billion dollar trade deficit was a good thing, wouldn't a one trillion dollar deficit be even better, Laffer's round about response was basically, yes, the bigger the better.
March 11, 2005
Do not wait for pull backs that may never come. Buy gold at current prices and do not look back. I still believe the best way for average investors to participate is though the Perth Mint in Australia. For more information on their unique, safe, private, low-cost program visit www.goldyoucanfold.com.
In addition, as the dollar's value is likely to sink far faster than those of other fiat currencies, investors can learn strategies to protect wealth and preserve purchasing power by downloading my free research report on the coming collapse of the U.S. dollar at www.researchreportone.com and subscribing to my free, on-line investment newsletter at http://www.europac.net/newsletter/newsletter.asp.
Peter Schiff
C.E.O. and Chief Global Strategist
Euro Pacific Capital, Inc.
1 800-727-7922
email: pschiff@europac.net
website: www.europac.net
Archives
I’m sure Schiff would tell you and me how much NAFTA hurt us
Schiff does not recommend tariffs(taxes). He recommends the US compete by becoming less like the UAW. He would say that deflation makes us stronger in the long run and you dont get that from putting the UAW in charge of the country like in 1970s. That is too much like Pelosi view, another form of welfare. Tarrifs is just another government bailout.
Heck, he recommends foreign investments.
But with a 50% match debit card, you could turn a $1000 rebate into $2000 ONLY IF you spent $1000 of your mattress money or current earnings. Even if one spent the $2000, then saved the $1000 from current employment earnings, they still end up putting $1000 into the economy. They have to put money into the economy in order to get the original $1000. You could call that the "Gold Card With 50% Match" for those who pay taxes". You could also have a "Silver Card with No Match" for those that don't pay taxes and don't have earnings to save. The "Gold Card" taxpayer potentially gets more product from his rebate, but that is a REWARD for putting his mattress money into the economy, even if he didn't have to.
If you received a "Gold Card with 50% Match If Spent", how could you not go out and spend it, WITH A MATCH, within the retricted time period?
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