The Fed Is Out of Ammunition (dollar to be discredited)

WSJ ^ | 11/24/08 | CHRISTOPHER WOOD

[TigerLikesRooster]

The Fed Is Out of Ammunition

A discredited dollar is a likely outcome of the current crisis.

By CHRISTOPHER WOOD

With an estimated $4 trillion in housing wealth and $9 trillion in stock-market wealth destroyed so far in the United States, there is little doubt that we are witnessing a classic debt-deflation bust at work, characterized by falling prices, frozen credit markets and plummeting asset values.

Those who want to understand the mechanism might ponder Irving Fisher's comment in 1933: When it comes to booms gone bust, "over-investment and over-speculation are often important; but they would have far less serious results were they not conducted with borrowed money."

The growing risk of falling prices raises a challenge for one of the conventional wisdoms of the modern economics profession, and indeed modern central banking: the belief that it is impossible to have deflation in a fiat paper-money system. Yet U.S. core CPI fell by 0.1% month-on-month in October, the first such decline since December 1982.

[TigerLikesRooster]

Ping!

[ponygirl]

Looks like everyone is running out of ammunition.

[TigerLikesRooster]

The dramatic collapse in securitization over the past 18 months reflects the continuing collapse in velocity as financial engineering goes into reverse.

Velocity of money has been quite stable and nearly constant over several decades. I guess we are watching a rare event: plummeted velocity of money which could more or less stay that way for extended period of time.

[April Lexington]

We are watching Bush/Obama bankrupt the USA. We simply can't create new money like this without a currency collapse. It is all dependent upon foreign borrowing and people rushing to T-bills and bonds. Once the music stops, there won't be anywhere near enough chairs and the dollar becomes toilette paper.

Then... the socialists step in and take us into the “ new global economy.” The USA has become just one of many in the new financial order.

It's over folks. Maybe we should have taken a closer look at that Skull & Bones thing.

[April Lexington]

Looks like everyone is running out of ammunition.

---

Actually, ammunition makes a very good currency! That's why Chuckie Schooooooomer wants to tax the heck out of it.

[Yo-Yo]

When it comes to booms gone bust, "over-investment and over-speculation are often important; but they would have far less serious results were they not conducted with borrowed money."

Were it not for borrowed money, there would be no over-investment and over-speculation.

[mlocher]

There are no easy policy answers to the current credit convulsion and intensifying financial panic -- not as long as politicians and central bankers are determined not to let financial institutions fail, and so prevent the market from correcting the excesses.

There never are easy Monetary answers to problems caused by poor Fiscal policy. While Bernanke and Paulson are in the spotlight as the goats, the real culprits right now are the dems in congress and the CRA.

[ctdonath2]

Such an ironic title, innit?

[Moonman62]

What do you mean by discredited? During deflation, the dollar becomes more valuable.

[lonestar67]

Betting against the dollar is silly.

The world has no place to go but America. Even if things are and in fact because things are catastrophic, they must seek refuge in the dollar.

Which I again find hilarious for all the rampant speculators who were trying to sabotage this nation.

Oil and real estate have crashed.

Now what?

The oil super evil states are getting financial obliteration which they so richly deserve.

There probably could not be a better policy for stopping Iranian prolif.

Its hard to see a bottom for the oil market.

There is not some invisible safe economic alternative to America. Individuals here and abroad were engaged in wild speculation in real estate and oil. They were doing it at the expense of reasonable economic actors. Even the invasion of Georgia was probably designed to inflate oil price for the benefit of Russia.

I am glad to see the entire house of cards collapse. investments will continue to pour into the dollar. This article is silly.

Where can people put there money— Iceland?

[Hacklehead]

Other than “We’re Screwed”, how about an explanation in english??

[wmfights]

So too will the Keynesians who view an aggressive fiscal policy as the best way to counter a deflationary slump. While public-works spending can blunt the downside and provide jobs, it remains the case that FDR's New Deal did not end the Great Depression.

And what is our new fearless leader proposing to create jobs?

It is so frustrating you can see the train wreck coming and can't do anything to stop it.

[Doug TX]

====Secession (derived from the Latin term secessio) is the act of withdrawing from an organization, union, or especially a political entity. It is not to be confused with succession, the act of following in order or sequence.====

[Porterville]

We quadrupedal our income and are looking to increase it another 25% and paying the game- getting our assets in line to pay off- stacking up equity- and these politicians and bankers screw the pooch.

To hell with it. Screw these guys, I'm going home.

[downwdims]

You get out of the way

[Leisler]

We have fiat credit.

Credit inflation.

Weimar debt paper anyone? Bueller?

We'll need a wheelbarrow of credit cards to buy a loaf a bread.

[qwertypie]

The monetary difficulty is temporary and will work itself out. The underlying dysfunctions probably will not: false energy shortage brought on by environuts; perceived land shortage brought on by NIMBYs and environuts; legal and income tax systems which are mystifying labyrinths & which foster a mindset that one can cheat and get away with it.

[wgflyer]

Common sense suggests that when actual wealth is replaced by debt on a broad scale across the economic spectrum the whole system becomes vulnerable to collapse on short notice. One could see this coming for years. The solution is to let it happen, let the fortunes be lost, let politicians be tarred, feathered and jailed along with their corrupt accomplices. And then let us rebuild our economy based upon accumulated wealth, not debt. And to do this we need government out of the picture and taxes on income and accumulation gone or highly reduced.

[Porterville]

“Other than “We’re Screwed”, how about an explanation in english??”

We are FUBARed.... everyone else is talking jibberish.

I was once in a situation of violence where there were 1,000s of people involved. The “heads” were waiting from information from the State Department to get everyone to safety. For a week gibbirish came from above as the situation got worse. We ended up stranded by the US government begging a ride from an International trading company.

That is our national leadership in today’s era.