All

The cycle we are now moving into is deflation, which means that dollars buy more. It is a mystery to me why we still have so many sources promoting the “fear” of “Inflation.” I guess its:“Facts become economically irrelevant if they do not fit comfortably into our existing worldview or paradigm and will generally be misinterpreted or ignored.” In that deflation is a once in a lifetime condition, it is understandable why so many are deceived. The U.S. has had a depression every 70-80 years since and including 1700s. In his auto-biography Benjamin said: “Within one year of prosperity we have depression. The streets of the colonies are filled with the unemployed and the reason for the Revolution was depression” This depression was put into play in 1768 when the British banker Rothschild convinced the King that he should replace the colonial money with British Pounds – the course of action caused depression. If the life of the flesh is in the blood, the life of the economy is in the money. The disappearing of capital occurred first in 1700s then in 1800s, then in 1930s and now. If a cycle has repeated itself so often as not to be a matter of chance it is foolish to think it will not happen again.
When or existing money is taken out of circulation or wealth disappears (debt default, foreclosure, bankruptcy etc.) you have depression. But the intent was best summed up in the comment by Rothschild “You give me control of countries money I care not who makes the laws.” This is one of the major reasons why we are at war in the Middle East. Saddam Hussein cancelled international contracts made in dollars an illegally converted them to the Euro. Guess what will happen with Iran or any country that tries the same?

Refer the comment on: “Did We Already Have a Recession?” Bud Conrad 060907 - please refer to: http://www.mises.org/story/1298


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In particular paragraph three:

“Deflation is usually thought to be a synonym for falling prices. There could be no more serious error in all of economics. Calling falling prices "deflation" results in a profound confusion between prosperity and depression. This is because the leading cause of falling prices is economic progress, whose essential feature is an increasing production and supply of goods and services, which, of course, operates to make prices fall.

Federal Reserve Chairman Bernanke tells us; “The sources of deflation are not a mystery. Deflation is in almost all cases a side effect of a collapse of aggregate demand--a drop in spending so severe that producers must cut prices on an ongoing basis in order to find buyers. Likewise, the economic effects of a deflationary episode, for the most part, are similar to those of any other sharp decline in aggregate spending, government tax receipts etc.--namely, recession, rising unemployment, and financial stress.” - “Citing worries about a possible unwelcome fall in inflation (deflation)…Part of the reason for this is that we do not fully understand how deflations work and whether there is a meaningful distinction between good and bad deflations.” This world wide phenomena is helping to bring deflation to the U.S. because we are able to purchase foreign products and services at below U.S. prices. To make this better these dollars being returned to the U.S. with their purchase of our bonds. The U.S. benefits from their low prices goods and services with the added benefit that we “get all of our money back” and all they have is a piece of paper called a Government Bond.
Concerning the reality of “deflation” the following is the statement by the Chairman of the Governing Board of the SWISS NATIONAL BANK (the Central Bank of Switzerland), and member of Board of Directors of the BANK FOR INTERNATIONAL SETTLEMENTS. “In 1929, at the outset of the worldwide economic downturn that led to the Great Depression, the dominant view in the Swiss government, and certainly in the SNB (the Central Bank of Switzerland), was that depressions were unavoidable. A downturn must run its course until good times returned, as they inevitably would.” http://www.bis.org/review/r061218a.pdf
THE COLLAPSE OF FANNIE MAE WILL TRIGGER A “SYSTEMIC COLLAPSE”
Concerning Fannie Mae, Freddie Mac, Dr. William Poole, President of the Federal Reserve Bank, St Louis, made the following statements over the last several years. “total of GSE direct and guaranteed debt is 40 percent larger than the federal government’s debt... a market crisis could become acute in a matter of days, or even hours...What will happen to the housing market if Fannie and Freddie become unstable?...an implied guarantee of GSE debt should be withdrawn.”
November 9, 2006 Office of Federal Housing Enterprise Oversight (OFHEO) “Fannie Mae and Freddie Mac have created a “systemic” risk where a financial institution unexpectedly experiences severe financial difficulties that disrupt the entire financial sector enough to cause a reduction in economic activity and a depression.” (http://www.ofheo.gov/media/pdf/NYBankers11906.pdf).
August 7, 2006: International Monetary Fund (IMF) Survey page 235 forecast “housing market activity and price appreciation are decelerating in the United States…With smaller capital gains on real-estate assets, a sharp reduction in home equity wealth can be anticipated…a drying up of this source would imply a severe drop in consumption, with serious consequences for GDP (Gross Domestic Product) growth.”
November 2006: Dr. Joseph Stiglitz: Former World Bank Vice President, Chief Economist, Nobel Prize winner and Columbia University Professor - predicted “a global economic crash within 24 months.”
Not being able to influence long term interest rates the Fed is finding they cannot stop deflation. As recent U.S. and Japanese experience shows, central bankers are very adverse to deflation.
Simply, with more companies are moving off shore to reduce costs prices of consumer goods is falling. This together with the inevitable collapse in the price of big ticket items; homes and any consumer goods requiring debt which will become ever more difficult to obtain. – How in Gods earth can we have “inflation?” Inflation cannot happen!

God bless you all and let the eyes of your understanding bring wisdom,

Glenn