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

US inches closer to big bank charges

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

Comparing today's recession/depression to the 1980 recession

"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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Content By: The Coming Depression Editorial Staff (dates cited below)
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quantitative easing round two

“By buying government bonds, the Fed aims to keep long-term interest rates low, hoping it will lead consumers to spend and companies to invest more, thus helping to propel the economy forward. Short-term interest rates were slashed close to zero in Dec. 2008, so the Fed no longer has its traditional weapon to boost the economy.”

This quantitative easing magic accounting act will see another half a trillion and change being created out of thin air and frantically shoveled to the banks through auspices of the Fed’s keyboards. It will subsequently disappear from the American economy, only to materialize as off shored investments to the more lucrative profit generating regions of the world such as China and India, anywhere really that better capitalizes on maximizing gains from the largess generated by low labor and environmental overhead. This is what Crony Capitalism at its finest does, as it seeks out the most competitive rate of return come hell or high water. Meanwhile the US taxpayers is once again left holding a bag of their own IOUs for bankster smash and grab artists who have made off with the real loot.

Meanwhile, overseas purchasers of US government debt continue to witness the watering down of their dollar based investments, as well as the flood of fiat currency into their economies, which puts additional upward pressure on domestic currencies and negatively impacts their export driven economies. Essentially, the Fed’s latest gambit will only produce a new round of misery for everyone except the banking cabal who run the joint. When the Chinese push the “sell” button on their US dollar reserves, then we’ll see a show! Unfortunately the average American is too busy watching The View, Dancing With The Stars, American Idol, and UFC to care about the impending cloud of doom coming their way.

Will deflation hit before significant inflation?

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Fed to Buy $600 Billion of Treasurys By LUCA DI LEO And TOM BARKLEY

The Federal Reserve Wednesday unveiled a controversial new plan to buy U.S. Treasurys, hoping to spur growth in a disappointingly slow U.S. economy.

After two days of discussions, Fed officials decided to go ahead with a much anticipated program, saying they will buy $600 billion of U.S. government debt over the next eight months.

The Fed’s policy-setting body said it stands ready to purchase more bonds if the economy’s persistent weakness leads inflation to remain too low and unemployment too high.

The Fed’s first $1.75 trillion bond-buying program, which ran from Dec. 2008 to March 2010, is credited with helping the economy when the U.S. was hit by a financial crisis and a deep recession. The latest move is more controversial because the economy is now growing — albeit slowly — and financial markets are no longer under severe stress.

Fed to Spend $600 Billion More To Help Boost US Economy by Reuters with CNBC.com

In its post-meeting statement, the Fed described the economy as “slow”, and said employers remained reluctant to add to payrolls. It said measures of inflation were “somewhat low.”

“Although the committee anticipates a gradual return to higher levels of research utilization in a context of price stability, progress toward its objectives has been disappointingly slow,” the Fed said. (Click here to read Fed statement.)

What does this all really mean?

Borrowing from the future to spend today was encouraged to excess by artificially low interest rates which fueled asset price rises (housing) which temporarily seemed to justify the borrowing. Artificial interest rates occur because the governments and central banks manipulate the money supply and interest rates rather than letting the market establish the balance between savers and borrowers.

Remember that savings represent the deferred consumption of the saver. If credit is available in excess of real savings, prices of goods and assets get bid up and unsustainable borrowing (especially for consumption) and malinvestment occur. Any spending funded by borrowing comes with a price. If this spending is not for quality investment , for which the debt is self liquidating (indeed, investment must more than pay back the cost of borrowing if it is to be justifiable), then it necessarily means that future spending will be reduced by the magnitude of the spending PLUS the debt service.

Government borrowed spending is largely non-self liquidating and is a net negative. It is equivalent to the young profligate spending his inheritance before he has it, creating some temporary economic activity at the expense of future needs. Governments, corporations and individuals must live within their means. Borrowing by the government to fund stimulus and unemployment programs will only ultimately prolong the correction.

This is all well described by Austrian economics, which predicted the Great Depression as a consequence of the loose credit of the Roaring Twenties.

Related posts:

  1. Brazil, China, World leaders call new US round of quantitative easing ‘clueless’“Brazil’s central bank president, Henrique Meirelles, said “excess liquidity” in the U.S. economy is creating “risks for everyone.” In China, Vice Foreign Minister Cui Tiankai said “many countries are worried...
  2. The coming $600 trillion debt bubble“As interest rates begin to rise worldwide, losses in derivatives may end up bankrupting a wide range of institutions, including municipalities, state governments, major insurance companies, top investment houses, commercial...
  3. Quantitative easing to continue indefinitely?“Asset prices are falling because they were overpriced to begin with—overpriced for the better part of two decades, thanks to the Fed’s easy money policies. When the bubble in asset...
  4. US government budget deficit hits 60 year high of $1.4 trillionThe US budget deficit is expected to hit a record 1.4 trillion dollars in 2009, some 950 billion dollars greater than the shortfall recorded last year, the Congressional Budget Office...
  5. Egypt, Middle east, African riots caused by international bankers, quantitative easing“Inflation has exhausted people. Prices of food, fuel, electricity, sugar are rising. The rich get richer and the poor poorer,” said a Cairo taxi-driver, declining to be named. “God knows...
  6. Canada’s $1-trillion debt babyBy Terence Corcoran of National Post The Tory commitment to ‘eliminate’ Canada’s total net debt by 2021 now looks absurd Debt is good, even for governments. But it depends on...

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