Inflation // Current

Peter Schiff on Glenn Beck Discussing Inflation & Martial Law

Schiff points out that civil unrest is coming if the government continues to focus on the symptoms of inflation and not the solution.

unitedliberty
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Zimbabwe inflation reaches 516 quintillion per cent: second worst in history

With goods unavailable and official statistics distrusted, Steve Hanke, of the Cato Institute in Washington, has developed his own... more

DonkeyPong
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Zimbabwe issues $1,000,000 bills

Zimbabwe will release a $1 million note this week to ease the efffects of hyperinflation. In August, the country had $100 billion... more

nazbags
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Ron Paul: The Peoples Champion

Dr. Ron Paul, the Champion of the Constitution & currently the world's most prominent representative of Liberty talks on... more

stopnoise
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Wall Street investors retreating to Zimbabwe?

The title might be funny, but the reality is: the Zimbabwe benchmark Industrial Index soared 257 percent Tuesday, besting a... more

tjanssen
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Europe and China clash on global financial crisis.

China is today resisting calls from European leaders to take a lead role in efforts to combat the credit crisis that threatens to... more

urlspotter
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Fed: New rate cut likely, with record low within sight

Ben Bernanke & Co. are likely to cut interest rates again on Oct. 29. And some experts think rates could soon fall below 1%... more

Hawkmang
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A View from Iran

When America invaded Iraq in 2003, residents of border countries like Iran wondered what would happen to them if the US ever... more

Kouross
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900 million face starvation worldwide

Food prices continue to rise, putting 900 million people worlwide at risk of starvation, according to an Oxfam report issued... more

abbym0308
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Can Obama win in Canton, Ohio?

The Real News Network travels to Ohio and talks to people hit by economic crisis. Stark County, Ohio is feeling the pressure of... more

Vierotchka
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Kucinich: Bailout opened 'financial whirlpool of insatiable greed'

Dennis Kucinich opposed the $700 billion Wall Street bailout that went into effect Monday, and now that the stock market continues to fall he's warning that the attempt to rescue the economy missed its mark.

The Ohio Democrat says any government efforts need to focus primarily on putting more money into the pockets of middle- and lower-income Americans struggling to keep their homes and jobs, not to Wall Street institutions.

“If Wall Street does come back for another bailout, we must be prepared in advance to say NO,” Kucinich said in a press release Monday. “The bailouts of Wall Street must stop. It will never be enough. When the Federal Government gets involved in picking winners and losers on Wall Street, we open up a financial whirlpool of insatiable greed."

As the government began enacting its financial rescue program Monday, the Dow Jones Industrial Average fell as much as 800 points during the day before settling down around 350 points at closing. The Dow dipped below 10,000 for the first time since 2004.

“The fundamental problem that led to the credit crisis is that millions of homeowners are in jeopardy, and millions of people are out of work. Congress rushed to bail out Wall Street but sits on its hands when millions of homeowners are at risk,” he continued. “The only way to prevent another bailout is to take action which will directly impact the market stress at its root - - the millions of homeowners who face default on their mortgages. This is the path toward market stabilization.”

Kucinich says he is preparing a bill to "prime the pump of the economy" by giving the government controlling interest in mortgage backed securities to allow homeowners to renegotiate the payments, interest and principle loans they are unable to pay.

“We are now facing the perfect financial storm. The elements are the deficit spending for the war ... the lack of serious investment in our country and now $700 billion to Wall Street. We are being hollowed out," he said. "We are going to see more unemployment and more people losing there homes. ... Now we must invest in homeowners to prevent any additional bailout.”

Dennis Kucinich opposed the $700 billion Wall Street bailout that went into effect Monday, and now that the stock market continues... more

bansheewail
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4 responses

1 month ago

The next burden: inflation

It is now clear that every government in the west is going to try their best to ensure that no savers lose any of their deposits. The Federal Reserve is lending directly to companies, and here in the UK, the government is going to start buying shares in UK banks. There is no escaping the severity of the crisis. Monetary authorities around the world are now focused on trying to ensure that we avoid the fate of the United States in the Great Depression of the 1930s, when output fell by over 30%. Instead, their hope is that the recession to come is more like the early 1970s, when western economies shrank by 5% to 10%. Painful but not catastrophic.

What we cannot escape is the fact that the amount of money in the banking sector far outweighs the value of the assets that it was lent against. This is how it works. You want to buy a house, and you need to borrow £100,000. You go to a bank and they create the loan, and at the same time deposit £100,000 in your bank account. This money did not exist before: it is new money. You buy your house, and at the other end of the chain, the sellers deposit the £100,000 back into the banking system. The amount of money in circulation has risen by £100,000 and is represented by the seller's bank "savings". But those savings are a reflection of the value of the house. If the price of the house doubled while they owned it, then £50,000 of those savings is a result of inflation caused by the banking sector creating money.

Supposing the housing market crashes. There is now more money in the banking system than the value of housing stock. The value of that the money has to fall as well. During the Asian crisis 10 years ago, this is exactly what happened. Many banks went insolvent, many savers lost their deposits, and the value of money in the economy fell so as to reflect the new and lower value of assets in the economy. This was exactly what happened in Thailand, but unlike us, their government was simply too poor to bail out savers who happened to have their deposits in the wrong bank.

In the west, we are rich enough to be able to ensure that banks do not collapse, wiping out individual savers. (Indeed, why should some savers be OK just because they were lucky enough to put their deposit in the right bank?) However, what we cannot escape from is the fact that the value of money in circulation now has to shrink to match the falling value of property against which the money was lent. However little we like it, the value of our savings has to fall.

It is now clear that every government in the west is going to try their best to ensure that no savers lose any of their deposits.... more