US, world headed for 25 year depression: Jim Rickards

US, world headed for 25 year depression: Jim Rickards

“When I use the phrase 25 year depression, it sounds extreme but it’s not. We had a 30 year depression in the United States from about 1870 to 1900…The Great Depression lasted from about 1929 to 1940. The U.S. is in a depression today.” Well, it's been in the works for

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Canadian banking haven myth exposed

Canadian banking haven myth exposed

"One of the reasons that Canadians (and international commentators, other finance ministers and global financial institutions) buy this Canadian banking fairy tale is the way the government accounts for the money borrowed to support the banks." The sorry spectacle of Conservat

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Get rid of your mortgage, loans, because interest rates set to rise

Get rid of your mortgage, loans, because interest rates set to rise

Get rid of your loans, guys and gals, because we are going into a high interest rate period. Very high. It will be the equivalent of going into the double digit interest rates we had in the 80s where many people threw their house keys at the bank and we had record numbers of ba

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E-cigarettes save lives, money

E-cigarettes save lives, money

"We know that cigarettes have thousands of chemicals in them and we know that they are killing us. They have been for over a hundred years. So now, the e-cig industry comes along with only one or two chemicals in their mixture and people are freaking out over these as well. Whe

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US inches closer to big bank charges

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Federal prosecutors are nearing criminal charges against some of the world’s biggest banks, according to lawyers briefed on the matter, a development that could produce the first guilty plea from a major bank in more than two decades. In doing so, prosecutors are confronting

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Canada’s home sales top predictions; why a real estate crash is inevitable

Canada’s home sales top predictions; why a real estate crash is inevitable

“The assurance of relatively low borrowing costs has likely given home buyers confidence while rising home values have kept new listings at a healthy level. Stable employment has provided some assurance to owners and buyers alike.” Our website is back after many months of

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Comparing today’s recession/depression to the 1980 recession

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"Much like today, Americans were concerned not only with high unemployment but increasing budget deficits in the early 1980s. A September 1983 Gallup poll found that three-fourths of the public agreed that the federal government's budget deficit was a great threat (42%) or some

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Why savers are getting screwed

Why savers are getting screwed

"Without the intervention of economic policymakers, interest rates would be naturally higher. That would increase the cost of borrowing for businesses and consumers, but there would be some offsetting economic benefits. Savers are getting screwed by the current monetary policy

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Geithner admits USA bankrupt to US Senate

Geithner admits USA bankrupt to US Senate

"Never in our history has Congress failed to increase the debt limit when necessary. Failure to raise the limit would precipitate a default by the United States. Default would effectively impose a significant and long-lasting tax on all Americans and all American businesses

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World economies on verge of currency revaluations to deal with debt

World economies on verge of currency revaluations to deal with debt

"It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning." -- Henry Ford Basically what the world central banks are doing is increasing their money by devaluin

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Is Obama the next Mugabe of Zimbabwe?

Is Obama the next Mugabe of Zimbabwe?

"America, Britain, Japan, Germany, France, Sweden, Holland, Norway, Canada and Australia make up the Fishmongers Group and their meeting on Tuesday will deliberate on the state of the inclusive government, debt relief, public finance administration and the controversial economi

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US raiding foreign countries with dollars, not soldiers

US raiding foreign countries with dollars, not soldiers

""The United States is going to China and saying: we want you to commit economic suicide, just like Japan did. We want you to follow the same thing: we want you to revalue your currency, we want you to squeeze your companies, we want you to go bankrupt,” says Michael Hudson,

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cash toilet

“The Monetary Theory of the Great Depression is incorrect, however. Consequently, the Fed’s Quantitative Easing policy is more likely to exacerbate than resolve the global crisis,” Duncan argued in an article. “The Great Depression was caused by the inability of the private sector to repay the debt it incurred during the Roaring Twenties, just as the economic crisis that began in 2008 was caused by the inability of the private sector to repay the debt it incurred between 1995 and 2008,” he said.

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Federal Reserve Chairman Ben Bernanke’s approach to stopping the financial crisis by printing money is wrong, as the private sector is still unable to pay its debts, Richard Duncan, the author of ‘The Dollar Crisis: Causes, Consequences, Cures’ wrote Friday. (1)

“Bernanke believes in the Monetary Theory of the Great Depression, which holds that the Federal Reserve could have prevented the Great Depression by stopping the US money supply from contracting during the early 1930s,” Duncan wrote on his Web site.

Printing money and trying to prevent a contraction of the money supply does not change the fact that the private sector cannot repay its debts, said Duncan, who believes when an economic upturn begins it follows a path that eventually leads to excessive investment gluts and falling product prices, while overly inflated asset prices become unaffordable and begin to fall.

“Falling product prices and falling asset prices lead to business distress and insolvencies; and business failures lead to bank failures and, hence, to the destruction of deposits. Credit contracts and the economy enters recession,” he explained.

Not the whole story

In 2011, any nation that has a weak currency has a very significant competitive advantage in global trade. A weak currency means that the products and services produced by that nation will be less expensive for other nations. Therefore other nations will buy more of those products and services. When exports go up, employment goes up and more wealth flows into the country. Alternatively, when the value of a national currency declines, exports do down, unemployment increases and less wealth flows into the country.

Therefore, dozens of exporting nations around the globe have become increasingly determined to keep their national currencies very weak in an attempt to maintain a competitive advantage in the global marketplace. Essentially what we have is a race to the bottom among global currencies. Whenever any nation wants to gain a little bit more of an edge in global trade they push the value of their currency down just a little bit more. So who is the winner in all of this? Well, that is easy. Gold, silver and other precious metals will continue to be the winners as fiat currencies all over the globe continue to decline in value.

With millions upon millions of Americans out of work, and with millions of homes being foreclosed, and with poverty statistics soaring into uncharted territory, it is very tempting for our politicians in Washington to borrow even more paper money and to pump it into the economy in an attempt to get things going again, but right now an election is coming up and the Tea Party has raised such a ruckus about government debt that there isn’t much appetite for more “stimulus packages” right now. Of course the truth is that “stimulus packages” never solve any of our long-term problems anyways.

As usual, the jobless number doesn’t tell the whole story. Here’s a better picture of the situation:

Year 2000: 4% of Americans were unemployed. Of those, 10% were defined as long-term unemployed (looking for work for longer than 27 weeks)

Year 2010: 9.4% of Americans are unemployed. Of these, 40% are long-term unemployed.

This is alarming. The nature of joblessness has changed in ten years. It has become chronic and prolonged. So much so that the Bureau of Labor Statistics is thinking of sub-dividing its “unemployed more than 99 weeks” category (as high as it currently goes) so it can more closely monitor those still looking for work after three,four, or even five years.

Imagine, tracking an unemployed person through five long years. How sad. Yet, BLS does not monkey with its data lightly. The terrible possibility of millions of long-term unemployed seems to be something it is preparing for, and if that’s what American workers face, maybe they SHOULD have let the banks go down. Would the consequences have been any worse?

References:

Bernanke is Wrong on Quantitative Easing: author

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This entry was posted on Monday, January 24th, 2011 at 5:32 pm and is filed under Bankruptcy. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

2 Comments

  1. January 24, 2011 @ 8:05 pm


    Can anyone World Wide explain in a simple language the long-term benefit of “printing money”?

    Can a careful fiscal policy exist in economies were people’s expectations are full employment and increased salaries above the inflation rate?

    What is the risk in 2011 onwards of Hyperinflation?

    The uncertainties of “financial markets and the tools” are upsetting the collector market by driving people to invest, how can we reverse this position?

    SwK

    Posted by SwK
  2. February 27, 2011 @ 3:53 am


    We live in a Fiat Inflationary Bubble Boom-Burst Top-Down Money-out-of-thin-Air Pyramid Predatory War Economy. It is Dangerous to Human Rights, Justice and Civilization as we know it.

    It keeps the Poor, Poor. It makes the Rich Richer. It allows the dominance of Predators, Parasites and Dictators by Stealth, Cunning and insidiousness like Cancer. It demoralizes the Hard Working. It catches the naive unprepared. It diminishes the Importance of Family. It is a Mockery to Capitalism and Democracy. It is an insult to the Intelligence of Thinking Men and Women all over the World.

    Money Printing is just Part of the whole Rogue Economy Created By Modern Man and it must be disassembled before it destroys everyone.

    Posted by David Jeremiah

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