Great Depression Online Archive Issue:

Going the Way of the World

Great Depression Online
Long Beach, CA
January 14, 2011

Inside This Issue You Will Discover…

*** Signs of Funny Money
*** When Promise Rings Hollow
*** Going the Way of the World
*** And More

Signs of Funny Money

“I think we have reached our limit.  I would be wary of further expanding our balance sheet,” remarked Richard Fisher, President of the Dallas Federal Reserve Bank, on Wednesday to the Manhattan Institute for Policy Research.

Someone should promote this guy to Federal Reserve Chairman…really, they should.  For the man currently chairing the U.S. central bank, Ben Bernanke, is a complete lunatic.  He’s expanding the Feds balance sheet by $100 billion each month.  And wouldn’t you know it; there are, like, consequences for such madness.

Signs of Bernanke’s funny money are showing up all around.  On Wednesday Brent crude hit a 2-year high of nearly $99 per barrel.  The S&P500 and the DOW both closed at two year highs on Wednesday too.  Yesterday, it was reported that the Producer Price Index (PPI) rose 1.1-percent in December…the biggest increase in 11 months.

~~~~~~Food Crisis Survival~~~~~~

How to Survive the Coming Food Crisis

What would happen if a natural, civil or economic disaster prevented us from growing, transporting and importing food?

Food prices would rise and supermarket shelves would go empty.  Within three days there’d be no food left in most people’s homes.  Chaos and anarchy would break out.  Thousands (if not millions) would starve.

Are you prepared for such a situation? 

~~~~~~~~~~~~~~~~~~~~~~~~~

Then there’s agriculture…where the double whammy of supply limitations and inflation are driving up prices.  In fact, on Wednesday, the U.S. Department of Agriculture reported that weather conditions contributed to declines in corn, soybean, wheat, and grain production on 2010.  Of course, agricultural prices on the futures market jumped, “reaching their highest points since the financial crisis of 2008 caused a collapse in global demand for food and fuel,” reported AP.

We’re hardly 2-weeks into the new year and our predictions appear to be coming true.  In a nut shell, we said it would be like 2008…only worse.  Seems we are embarking on another speculative misadventure.

So if expanding the balance sheet’s contributing to massive commodity price increases, then why’s Bernanke doing it?  What follows are some thoughts on the subject…

When Promise Rings Hollow

Increasing the quantity of dollars reduces the purchasing power of each dollar in circulation.  It’s a pretty simple concept, and it doesn’t take much brain power to grasp, yet that’s the intent of current monetary policy…to reduce the value of your dollars.

But why?

Devaluing the dollar, by increasing the number of dollars in circulation, we’re told by the monetary authorities, will lower unemployment.  More dollars will increase demand for goods and services and, thus, businesses will hire workers.  Pretty soon we’ll have full employment.

A weaker dollar, we’re also told, will make exports cheaper abroad.  Other countries will buy more of our goods, and businesses will employ more workers to meet the increased demand.  With enough money there will be jobs for everyone.  So the theory goes, at least. 

But in practice the theory’s promise rings hollows.  Recent experience proves this…

The increased number of dollars has resulted in a decreased number of high paying manufacturing jobs.  To the chagrin of the central planners the increased number of dollars increased the demand for foreign made goods.  In other words, monetary stimulation did not stimulate the U.S. economy; rather, it stimulated Asian economies.

Going the Way of the World

Unfortunately, more money does not equal more wealth.  If it did, we’d all be loaded by now.  To the contrary, the more that money is borrowed into existence by the central bank, the more it destroys real wealth.

It erodes capital by diluting the accumulated savings of the nation’s citizens.  It also sends false signals to investors.  They misallocate their capital to enterprises that are merely riding a rising tide of paper money.  Before you know it, there’s a speculative frenzy. 

Investors pay $200 a share for dot com stocks with no earnings and no business plan.  They spend half-million dollars for a track home in Southern California’s Inland Empire…because housing prices always go up.  They trade their properties for tulip bulbs.  Why stop to think about it when you’re getting rich?

No doubt, when the bottom falls out the destruction remains until the next frenzy appears.

Overtime, through policies of inflation, a nation becomes indebted to bankers and approaches a collective default.  However, a good central bank will always try to inflate the debts away.  But while no nation has ever inflated its way to prosperity, the prospect of getting something for nothing…of buying now and paying later with a cheapened currency…is too hypnotic to resist.

And so it goes the way of the world.

Sincerely,

M.N. Gordon
Great Depression Online

P.S.  Through the monetary policy of a madman the stage has been set for an epic inflationary blow off followed by an equally epic financial crash.  If you thought 2008 was bad – when oil prices spiked over $140 per barrel and wheat prices rose 130 percent just before the whole financial system blew apart – prepare yourself for an epic blow off.  Yet in the middle of it all a food crisis will occur.

Access Free Food Bubble eBook Here

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