the real crash_ america's comin - schiff, peter

[...]... match the supply of money to the demand for money When the economy was expanding and there was more to invest in and spend money on, the Fed would pump in dollars When there was less demand for money, the Fed would take dollars out of the economy The architects of the Fed referred to this as an “elastic money supply.” The Fed would increase the money supply as the economy expanded, and then reduce the. .. here The Fed: The Central Problem You cannot speak intelligently about the root causes of the 2008 crash—or about our current instability—without speaking about the Federal Reserve System of the United States (the Fed) The Fed sets interest rates, it controls the money supply, it is effectively the main lender to the United States Government, and the lender of last resort to the banks, and it is the. .. with another, you eventually run out of suds The government bubble is the final bubble The bedrock of our bubble economy had always been the full faith and credit of the United States government At some point, the lenders of the world begin to lose their faith in us, and that credit dries up Those who lend to the U.S government these days don’t expect that tax revenues will pay them back—they know they... scenarios fabricated by the Bush Administration officials selling the TARP—some of them will become reality this time around, because government will have made us so much more vulnerable Of course, the biggest debtor of us all, the Federal government, has the mother-ofall adjustable-rate mortgages Most of the national debt is financed with short-term paper, much of it maturing in less then one year Rising... merely the overture to a coming crash The collapse of housing prices, the downturn in the stock market, the tightening of credit, and rising unemployment all triggered a government reaction that caused a far worse sickness Why do the politicians do this? I think there are two reasons The first is that they mistake the cures I discussed above—falling prices, rising interest rates—for the disease They... dot-com bubble The Fed replaced that with the housing bubble and the credit bubble Now, the Fed and the administration are replacing those bubbles with the government bubble The Fed is creating money that banks are then lending to the Treasury to pay for ever-expanding government The same artificially low interest rates that made it easy to buy a house in the last decade are making it easy for the government... catastrophe in the United States, with the burst of the housing bubble being the catalyst Once that bubble burst and major banks went to the brink of failure, people began crediting me with “calling the crash.” But what we saw in 2008 and 2009 wasn’t the crash That was the overture Now we have to sit through the opera The economic unpleasantness of those days was definitely part of the real crash, but... thought the problem was simply that all our pre-2008 imaginary “wealth” disappeared Thus, they think it’s their job to re-create the illusion The Troubled Asset Relief Program (TARP), the stimulus, the auto bailouts, and the inflationary actions of the Federal Reserve all treat the symptoms of our 2008– 2009 downturn It’s all superficial Government can slow the fall of housing prices, and so our politicians... if they redeem their bond or cash in their T-bill, the government will pay for it by borrowing again So every dollar with which our government tries to save banks, create jobs, and keep interest rates low comes either through (a) inflation (new dollars that dilute the value of existing dollars) or (b) revolving debt The Government Bubble Throughout the 1990s, we had the stock bubble and the dot-com... process Most costly might be the loss of our role as the issuer of the reserve currency of the world Most people don’t understand the value of the United States being the reserve currency It’s what allows us to buy something without really paying for it Once we lose that status, the free ride ends The dollar will dramatically lose its value vis-à-vis other currencies, and it will become more expensive . readable book that the day will come when the world stops trusting the dollar and the ability of the U.S. government to pay its debts. I agree with him that ‘Then we’ll get the real crash. ’” —Marc. earthquake. The real crash is still coming. Just as the housing bubble delayed the economic collapse for much of the last decade on the strength of imaginary wealth, today twin bubbles in the U.S 2009 wasn’t the crash. That was the overture. Now we have to sit through the opera. The economic unpleasantness of those days was definitely part of the real crash, but only because of the way our