Tuesday, June 12, 2012

ECONOMIC CRISIS - SOLUTION



Reportedly, the world economic crisis has been caused by five US banks.

(Geithner's 'Dirty Little Secret' by historian F. William Engdahl)

Under President Clinton, it was made easier for banks to 'gamble', using things called 'derivatives'.

Most 'derivatives' are bets on interest rates.

If the bets go badly wrong, the banks are in trouble.

JPMorgan Chase has $88 trillion in derivatives.

Bank of America has $38 trillion in derivatives.

Citibank has $32 trillion.

Goldman Sachs has $30 trillion.

Wells Fargo-Wachovia Bank has $5 trillion. 

Taxpayers' money has been poured into US banks to shore them up.

Website for this image

Dr. Paul Craig Roberts, former Assistant Secretary of the US Treasury, has a solution.


"The US government should simply cancel the $230 trillion in derivative bets, declaring them null and void... 

"No real assets are involved, merely gambling...

"The financial gangsters who want to continue enjoying betting gains while the public underwrites their losses would scream and yell about the sanctity of contracts. 

"However, a government that can murder its own citizens or throw them into dungeons without due process can abolish all the contracts it wants in the name of national security. 

"And most certainly, unlike the war on terror, purging the financial system of the gambling derivatives would vastly improve national security." 

18 comments:

CS said...

I don't think Roberts's collapse scenario is at all compelling.

It seems to me that the US has a perfectly reasonable, if not democratic, economic program. The goal is (a) to drive wages to a point of convergence with those of Third World workers of comparable productivity, i.e., to drive wages sharply lower, and (b) to provide America's corporate sector an opportunity to borrow at negative interest rates while acquiring control of much of the World's resources and industrial capacity.

These objectives will be achieved by allowing the depression to continue for a number of years yet during which wages and expectations generally can be ground down. Under these conditions, interest rates will remain near zero because those burdened by massive debt during the pre-crash era are now desperate to pay down that burden, i.e., there is now massive personal debt deleverage in the US (about $1 trillion a year), and these savings are at the disposal of the big players at less than the rate of inflation.

Roberts analysis is, in fact, so weird, one begins to wonder.

Unknown said...

CS must be a bankster criminal or a mouth piece for the money power controlled White House.

DEMOCRACY???????

"Those who vote decide nothing - those who count the votes decide everything." - Josef Stalin

Al Gore for president anyone? LOL

Anon said...

"The goal is (a) to drive wages to a point of convergence with those of Third World workers of comparable productivity

"(b)to provide America's corporate sector an opportunity to borrow at negative interest rates while acquiring control of much of the World's resources and industrial capacity."

Good points!

- Aangirfan

CS said...

Hey, Anon, thanks for seeing my point -- even if it might be wrong!

Perhaps Unknown is a "bankster criminal or a mouth piece for the money power controlled White House" to use his own words.

In any case, what we see is that Paul Craig Roberts and the Austrian economists such as Ron Paul with whom he seems closely allied, are dead set against the monetary expansion that, according to Maynard Keynes and his latter day followers such as Paul Krugman, will end the current depression.

Ron Paul, as you know, has been heavily backed financially by Peter Thiel, a member of the Bilderberger Group Steering Committee.

Anonymous said...

CanSpeccy CS, to label the economic policy of the USA as "perfectly reasonable" is quite mindless, as it is neither moderate nor fair.
To counter-attack an enraged victim shows heartless weakness.

reasonable (adjective) (Merriam-Webster)
1 a: being in accordance with reason (a reasonable theory)
b: not extreme or excessive
c: moderate, fair (a reasonable chance) (a reasonable price)
d: inexpensive
2 a: having the faculty of reason
b: possessing sound judgment (a reasonable man)

Additionally, to label Roberts' sound reasoning as "weird" shows either lack of intelligence or a heavy bias, see undisclosed agenda; to allude to his mental health a basic shilling tactic.

Anonymous said...

The problem with inflating the money supply is that as long as the economies of the world are depressed prices will stay tame, but should an actual real recovery come into being, then prices will rise dramatically, as a huge amount of dollars will be chasing, yes, an increasing amount of goods & servies, but not enough to offset all the dollars that have been created and flooded into the world economy by the FED.

Unknown said...

Their is nothing wrong with increasing the money supply as long as it's not interest bearing.

Usury is the problem, nothing else.

Governments should print money and put it into circulation just as JFK was planning to do, not thieving criminal banksters.

I will treat CS's comment with the contempt it deserves!

CS said...

"Anonymous Anonymous said...

CanSpeccy CS, to label the economic policy of the USA as "perfectly reasonable" is quite mindless, as it is neither moderate nor fair."

There's nothing mindless about it. I indicate only that US policy is reasonable in view of US objectives, i.e., logically consistent with those objectives as reiterated by Aangirfan in a comment above.

If you think US policy is not logically consistent with US objectives, state why.

CS said...

Anonymous,

You seem to be unaware that just as the Fed can spew dollars by buying Treasuries and other assets from private or sovereign holders, it can suck them up again by selling assets, so no catastrophic inflation should result from current money creation.

And as the Fed sells assets it drives down the price of Treasuries, etc. down, which means it drives interest rates up, which discourages bank lending for mortgages, etc., which is deflationary in effect.

CS said...

Unknown, you contempt leaves me unmoved. But I'd be concerned if you were to refute my argument that:

"By maintaining zero interest rates the US Fed is enabling America's largest corporations to acquire control of much of the World's business, agricultural and real estate assets at zero cost. And if something goes wrong in the process and the dollar collapses in a new gigantic financial crisis, the US will come out of it, as Nazi Germany did after the great inflation, with a vastly more competitive, highly capitalized industrial sector well placed to capture an increased share of World markets."

That, is a statement of what I believe is the objective of US policy, not a statement of what I believe should be done.

CS said...

While I have argued (see the link provided above) that the US Fed's zero interest rate policy does not entail the risk of abrupt dollar collapse as Paul Craig Roberts seems to think, I believe it is a mistaken policy.

The current depression, unlike the depression of the 1930's is not due to insufficient demand, but to the West's lack of competitiveness versus the Rest, which reflects a ten, twenty or thirty to one wage differential.

Thus, as I have argued here, that increasing demand, the Keynesian solution to the depression of the 1930's, is the wrong treatment for the current depression which requires measures to boost western competitiveness and, during a transition period, protect Western workers through wage subsidies or tariffs and an end to mass Third World immigration.

Unknown said...

@ CS What do you mean by the US? Do you even know what The US is?

You cannot compare Nazi Germany with The USA because Hitler had full control of the Reich's Bank. Obama has no control over the FED.

Anonymous said...

CS,

True the Fed can sell assets, but what assets?

Also, inflation had happen quite fast, would the Fed be able to react fast enough, and would they react at all?

Because after this prolonged depression, the temptation would be to wait until the economy was really moving -- by that time it would be too late.

A large part of the created money could not be "sucked up" by the Fed.

I agree interest free money by a government treasury is ultimately the way to go, but that is not what we have right now.

Rigged Monopoly said...

Nation States and their governments are pawns in a game, the FED a tool slated to be replaced by the BIS.

Crisis created to lead to planned solution.

Hyper-Inflation hitting top tier only because the free credit created distributing the fruit of our labour and inventions doesn't trickle down.

Prices for top commodities like oil drugs stocks currencies derivatives credit gold and food rigged and set by the monopoly.

CS said...

"Obama has no control over the FED."

I did not say he did. The Fed has statutory objectives established by the US Congress under the Federal Reserve Act, of 1913. The Act mandates monetary policy to achieve:

maximum employment, stable prices, and moderate long-term interest rates. So the Fed operates under the direction of the US Government, i.e., the legislative branch which can change its Fed mandate anytime it likes.

CS said...

Anonymous,

"True the Fed can sell assets, but what assets?"

The Fed is the largest single holder of US Treasuries, several $trillion of them. If they sold all of those it would take a large enough piece out of the money supply to create a depression, I should think.

"Also, inflation had happen quite fast, would the Fed be able to react fast enough, and would they react at all?"


Good question. Paul Craig Roberts undoubtedly knows a great deal about this and perhaps has good reason to worry that the Fed lacks adequate fine control. However, one would have to assume that Bernanke knows more than Roberts and that he knows what he's doing.

Incidentally, although I believe the Keynesian logic for money printing is ill-founded, money printing sufficient to crash the dollar might do much to alleviate the plight of the unemployed by pricing imports from the third world out of the US market and promoting US exports.

Because after this prolonged depression, the temptation would be to wait until the economy was really moving -- by that time it would be too late.

Rigged Monopoly said...

"So the Fed operates under the direction of the US Government, i.e., the legislative branch which can change its Fed mandate anytime it likes."
"However, one would have to assume that Bernanke knows more than Roberts and that he knows what he's doing."
That's funny :-)
So we can trust them, there is no conspiracy.
The Senators are not corrupt or dead, JFK was not assassinated.

Unknown said...

@ CS And who controls Congress? Answer The Money Power = The Fed which is a franchise of the Bank of England which in turn is a franchise of The Bank of Rome which are all controlled by the BIS in Switzerland the Rothschild/Vatican bank.

Your congress is bought and trussed up like a turkey ready for Christmas and controls jack shit.

 
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