I don’t think Americans own anything like the amounts of gold that they owned in the 30’s. Gold was still very popular then. I doubt American citzens own enough real gold to make it worth the exercise. As for confiscating all gold shares, that might be somthing different altogether.
hi folks just a question from a conspiracy theorist
they suspended the minting of gold coins right?
where does the gold come from?
do they buy it on the uh open market from mines?
do they use the gold out of ft. knox?
which some believe is long gone.
i dont know does anybody out there?
I’ve been attempting to figure out what the future plays look like… So far I haven’t come to many conclusions except a world that looks quite different from where we are today.
Love to hear anyones thoughts on potential outcomes…
I agree, and am led to think that this is all a rehearsed plan!
http://www.trevorgauntlett.com/2008/09/cnbc-says-it-perfectly/
Oh Jesus, when I heard what ZimBenwe has done, I laughed till I was gasping for breath, and couldn’t see for the tears.
A couple of years ago, I forecasted that Weimar Ben would be remembered for expanding the Fed’s balance sheet by – oh, $200 or 300 billion a year, up from a chintzy $50 billion.
But never, in my wildest, psilocybin-fueled, hallucinogenic fantasies, did I imagine that he would CRANK THE BALANCE SHEET BY $300 BILLION IN A SINGLE MORNING.
ah ha ha ha
AH HA HA HA HAAAAAAAA …
BEAM ME UP, BEN! THERE’S NO LIQUIDITY LEFT ON THIS PLANET! 
I’ve just heard on Bloomberg TV that Mr Paulson esquire was able to obtain tax relief on the sale of $500 million worth of Goldman Sachs stock when he went to work for the Fed, this being one of the reliefs available when taking a job at the Fed. I haven’t double checked this, but if it’s true, well done Hank, you’re certainly in touch with the American people (not).
777 points on the Dow, 105 on S & P, and STILL Gold isn’t going up through the roof?
Chris, you’re doing a fantsatic job with this site. As a recent addition to the readership of this site and the Crash Course, I feel it should be required reading by everyone.
hey gautlett enjoy your posts
the long emergency by james howard kuntsler is one opinion of what the future looks like. not for the faint of heart.
i have been having these discussions since the sixties. any scenario for a livable outcome always hinges on the social fabric remaining intact. when we were looking for our land in the 70’s we came across a guy who would only sell for gold and was going to move to alaska ( i think his name was palin–joke) he was going to get off the grid and be so far out no one would find him. gold was $35 an ounce then. i think it always comes back to all wealth comes from our mother and the closer you can get to her the better. i dont think the amish even know anything about what we all have our panties in a wad about.
but in the chess game the king wants us to be serfs, obedient little serfs farming the kings lands mining the kings gold etc. so my assumption is whatever the external trappings we will be serfs
the other scenario is the social fabric unravels… well i dont want to be here or anywhere.
funny thing tho the banker always has more money than the king how come he isnt on the board?
glad to see you are into organic psychedelics. synthetics are so hard on the body
ia m having serious trouble typing this i amlaughing my ass off the tears are oll over the keyboard
i am going to copy and paste this so i can email it to my whole email list. with your permission of course
i have not laughed this hard since i dont know when
i really needed this after my marathon of writing and calling.
one correction tho i think it is nothing but liquid there is not a solid thing left
ahahahahahahahahhahahahhahahahahhahahahahahahahhahahahahhahahahahahhahahaaaaaaaaaaaaaaa
Ben,
I cannot think of a single way that handing over a huge pile of money to banks helps us in the least. Some wax on about the importance of liquid credit markets but I don’t buy it.
Here’s why.
If the goal was to single-mindedly recreate the loose money borrowing conditions of yesterday, then I suppose the bailout plan is your best option although you might as well place all your chips on the green square at Roulette. But even if this had a higher chance of success I am still against it because the last thing we need is to return to our unthinking, overconsuming ways of the past.
Instead we need to immediately (or sooner) recognize our monetary and energy and resource depletion predicaments and set to fixing those. What we need is a crash program of reinvestment.
But first we need a redirection of thinking and this is where any attempts to "fix" things by attempting to return them to where they were before displays an appalling lack of awareness of what our current probelms are or how we got here.
So will a bail out plan "help"? First we have to ask "what needs helping most?" While the bailout plan might help some things it will be the wrong things.
I honestly think the next policy move might involve a deliberate attempt to inflate. Since the Fed controls the currency, they can make this decision without any input from Congress at all. And what the banks want, the Fed provides.
Think about it. A swift dose of a 3 year 10% inflation regime would reflate housing prices (in nominal terms) back up where home prices are no longer underwater. Incomes would increase as well. Everyone could suddenly be able to pay their mortgages. And the psychology of the market would also change. People would work hard to stay in their homes, because they would now be an inflation hedge - a store of value. And it would happen invisibly. Nobody would get a "bailout" or a special deal.
It’s not ideal from the standpoint of the banks, but I’m guessing it beats 50% default rates on batches of mortgage backed securities. And if they know ahead of time (which they would, since they control the Fed) they can probably find some clever way to hedge their interest rate risk at the expense of some other sucker. And perhaps the Fed can continue to keep rates low as they monetize, giving the banks big, fat spreads. It might be easier now that there are only 3 major banks - JPM, Citibank, and BAC.
Of course gold would spike, so would oil, so would interest rates and the deficit, and the buck may well lose its reserve currency status. But who cares, really. You’re a bank, and you want to get out of the jam you’re in.
But how to prevent those depositors from fleeing the banks? You would have to enlist the aid of Congress & the federal regulatory agencies.
You could install some "temporary" capital controls greatly hindering the flow of capital from the country, and prohibit "speculation" (participation by the public) in commodities markets - in the name of controlling the inflation you created. So no more foreign bond mutual funds, and no more commodity funds. And while you’re at it, tax the crap out of anyone having "windfall profits" (i.e. any industry producing real things like oil, food, etc). Limit ownership of foreign bank accounts too, while you’re at it.
Step by step, US citizens would find their money confined to the US. But at least the housing crises would be over.
In case you’re wondering I’m not advocating the solution at all. But I am suggesting it might be the next thing they try.
Dave Fairtex
Hi Dave,
I think that is a good post. I have heard the idea of inflation being used before, to reduce a large amount of debt 
If you have huge debts and access to a printing press, inflation can be a good thing. I think your suggestion of how America will be getting through this is quite likely.
Gary
Hello Dave,
I’m glad to hear that you’re not advocating that solution! If it IS what they try, they obviously haven’t been reading Chris’s expositions on exponential growth! What follows the peak of an exponential growth? We could find out soon.
Personally I’d have no problem with a return to a situation where £1,000 (I’m in England) would be worth the same to my great great grandchildren (as was the case in the US from the late 1600s, as per the Crash Course) rather than the current situation where both of a couple have to work to stand still - or even lose ground - financially. Whether by design or by accident (and in some ways I don’t believe those in power are insightful of what they’re doing - they may have money but do they have wisdom? Some of them may, but certainly not all) I don’t think the current situation is tenable, financially or socially.
Hello Gary/gsti,
I only have one word to say. Hyperinflation.
[quote]Think about it. A swift dose of a 3 year 10% inflation regime would
reflate housing prices (in nominal terms) back up where home prices are
no longer underwater. Incomes would increase as well. Everyone could
suddenly be able to pay their mortgages.[/quote]
Yes, maybe if they had a magical wand that spread out all inflation everywhere equally there might be some truth to this. But reality is far different.
Inflation wouldn’t necessarily reach home prices for 1 month, or even as long as 1-3 years. Inflation isn’t magic, it takes time to propagate completely.
Inflation wouldn’t reach wages instantly either. Meaning we’d see a wave of defaults when expenses raise faster than wages.
It’d destroy the government’s ability to borrow. And therefore, probably cost more in the long term than it would gain.
Even if wages increased, not everyone would be able to pay their mortgages. Don’t forget a large numbers of these monsters are ARMs. Guess what will happen to the interest rates? For that matter, many corporations have to renew their debts. What do you think will happen to their interest rates as well?
It’d penalize savers, and encourage debt driven consumption. Therefore, this would at best just move the calender back.
[quote]And the psychology of the market would also change.
[/quote]
Concerning ones self with market psychology is often silly. If the market is doing something for pure psychological reasons, they you can be sure that there are some smart fellows doing the exact opposite and drooling over the eventual returns. The reality is that psychology must always return to fundamentals. Therefore, the only meaningful way to change market psychology is to change market fundamentals.
[quote]It’s not ideal from the standpoint of the banks, but I’m guessing it
beats 50% default rates on batches of mortgage backed securities.[/quote]
Hardly. Inflation for a debt owner is little different than them being called up and being told they’ll never get all their money back. The government may as well wave its wand of ‘infinite legal power’ and magically make everyone’s debts 10% smaller. It’d have the same effect and probably do less collateral damage.
Besides, the banks can already renegotiate terms with mortgage owners. The reason they don’t, is because if they made these into mortgages that would work, they’d probably become publicly insolvent.
[quote]And if they know ahead of time (which they would, since they control
the Fed) they can probably find some clever way to hedge their interest
rate risk at the expense of some other sucker.[/quote]
And that sucker would probably be the same guy that can’t pay his loan. Oh, how the wheel goes round and we reach the same starting point.
[quote]But how to prevent those depositors from fleeing the banks? You would
have to enlist the aid of Congress & the federal regulatory
agencies.[/quote]
Just freeze withdrawals to X amount per a month, with special exception of ‘most’ direct purchases. Fastest way to stop a bank run. You probably need regulator permission to do it though.
If you are wondering why nobody does this, that’d be because these banks are insolvent and are busy pretending to be alive. Therefore, they cannot risk attention being drawn to themselves. That, and as long as the FDIC stands we are unlikely to see full panic bank runs.
I’d glad you aren’t! =)
–
Steve
Hi DaveC,
Thats some tough talking you are doing there! If you are not a paid up member of the conspiracy theorists camp, and it does not sound like you are, then maybe we can hazard a guess at reasons/solutions.
I think it is getting to a point where it is very difficult for America to control it’s currency. So much of the world has alot of dollars and alot of dollar debt. As several other posters have pointed out, the far east seems less and less pleased with Americas posturing and care free attitued towards the printing press.
Are any of our leaders wise? Probably, some are. I imagine some know full well what is happening and have done for a number of years. but honestly, if Robin Cook (an honourable english politician ) had stood up in the house of commons and told us that unfortunately we were living well beyond our means and drastic measures to cut energy consumption were needed now, pay cuts were required for everyone etc etc, he would have been a backbencher within a week, a national laughing stock and no longer an MP by the next election. Intelligent and solid thinkers from the left have been sidelined and declared crackpots such as Tony Benn and George Galloway for alot less. There haven’t been any on the right for a long time.
There in lies a big problem , its difficult to tell people " you have never had it so good, and it’s got to stop".
The logic of leaders actions now is difficult to comprehend, but, I imagine that they are quite unsure about how to fix this. Even though many learned economists and laymen have put forward what appear to be quite sensible plans, they are unlikely to be privy to alot of information. What deals and understandings have previously been entered into with the chinese government for example, America no longer has a free hand. Looking back, historically, on any major event in history that we now have information about, can we honestly say that the people of the time knew what was happening and all the forces in play? I think that answer is no.
As for money not changing in value, thats a whole different can of worms. 0% inflation is very hard to achieve. Personally I think a free market is unable to produce this, and it could easily be argued that in 16th cent America, 0% infation was not really achieved.
[quote]I cannot think of a single way that handing over a huge pile of money
to banks helps us in the least. Some wax on about the importance of
liquid credit markets but I don’t buy it.[/quote]
Oh, oh, but I can.
There are any number of ways a ‘bailout’ can be beneficial. As long as we don’t strictly think of it as a bailout:
1) It establishes a holding zone for assets. So that the desperate, yet strong, can sell them (and raise money), and so the desperate and not strong can sell them and then die anyway.
(I’d note, if anyone not desperate is selling, then the system is built wrong. The government should be grinning like a shark at each asset it claims. Why, after all, should the government see this as any less a profit opportunity than a company in its place would?)
2) It serves to prevent large percentages of the United States from being owned by foreigners.
3) Any houses foreclosed upon could be sold ultra cheap by the government via Freddie and Fannie. Therefore forcing the housing market to a quick bottom. At which point it’ll be easier to start working off that excess load of houses before maintenance, taxes, etc… essentially destroys huge amounts of capital. (Empty property self destructs with surprising speed!) – we could probably do the same faster by doubling or tripling property taxes on ‘nonresident homes’ (those nobody is living in).
4) It gives the government some place to put the assets of bankrupt companies (or to buy then off, say, the FDIC). Which is double delightful if the government then turns around and goes on a murdering spree of these ‘Zombie Banks’.
5) Nobody can whine when we rewrite the loans however we damn well please.
6) If the government is brutal enough, it could make a shit load of cash and pay down our ridiculously high debt. It’d be like back taxing the wealthiest 1% of all Americans for all of Bush’s tax cuts.
I’d say though, that none of this was what the ‘bailout’ was intended for. =) But there are any number of things we could use something similar to this bill to do, which would hasten a solution by a large amount without harming the people all too much.
None of them, though, involve saving banks.
–
Steve
Regards!
That link is worth listening to.
Dave,
Inflating our way out of debt is likely the Govt’s plan. Bernanke already stated that he would rather inflate than to deflate. It’s also one of the reasons for the fall of the Roman Empire. Debasing the currency as we are doing is the text book recipe to total economic collapse. We have been following this recipe to the letter for the last 20 years. It’s the last 10 years that we kicked the inflation policy in high gear. Now finally the turbo boost is kicking in. When foreign central banks start dumping their dollars (sending them home to us) that’s when the hyper-inflationary shot of Nitrous boost to will destroy us.
Back in 1933 when it was ordered for US citizens to turn in their gold… not everyone did. The dollar stabilized after it was revalued lower with respect to gold, more so than just after gold was confiscated. The dollar stabilized at $35/oz whereas it wasn’t at $20/oz. They know that making gold posession illegal won’t necessarily help the currency.
If the Gov’t is to go after our assets… why take our gold when they can take our 401k’s. What’s the difference. Nothing is safe in crisis mode.
Edit: I mean, trade our 401k for their valuable IOU’s (bonds)
… is probably the better question.
In 1933 they were looking to confiscate people’s main store of exchangable wealth, at the time that was gold. Now things like 401k, bonds, t-bills (if those aren’t in fact the same thing) would probably be a better bet.
In 1933 they wanted to revaule gold so they could print more money, but they couldn’t do that and have their desired effect on the economy unless they got all the gold out of the system. Now that we have an unbacked fiat currency, confiscating all the gold would have a much smaller effect than it did in '33.