This is going to be a bit short on math. I haven't taken the time to generate a lot of graphs, and this is my own idea, no economist of note is backing me up on this. But this still makes sense three days after I wrote it, so I'm posting it to see if it makes sense to anybody else.
This will be a long blog post, perhaps more of a mini-pamphlet or book. As I write this, the United States, indeed the world, stands at the brink of the Depression of 2008. Governments around the world are activating mechanisms invented 80 years ago in an effort to halt the slide. Banks are failing, depositor’s insurance is being activated, huge buyouts are happening every single day.
"An increase in the supply of money will lead to an exactly proportionate increase in the price level. Thus, money supply expansions only cause price inflation."
- John Locke's Quantitative Theory of Money
You just got a lot poorer this month. Did you notice? You will.
The amount that you got poorer can be shown very simply in this graph.
If you wanted to see what the dollar will look like in about 6 months, all you need to do is to take this chart and flip it upside down.
Update3:: Bill Attached appears to be the latest draft but there are now reports that a new draft will be released this evening. The version of this draft is AYO08B94. From some internal Network Drive somewhere in D.C.: O:\AYO\AYO08B94.xml
The claim by the Fed and Treasury that spending $700 billion of public money is the best way to recapitalize banks has absolutely no factual basis or justification. - Nouriel aka Dr. Doom Roubini
I woke up this morning to see the blog buzz word of the day is Nationalization as Economics bloggers hunt for thesolution to the financial crisis.
The Long Demise of Glass-Steagall chronicles the assault on the United States banking system regulations that were put into place as a result of the suspected market speculation by banks in the 1920's. Many believed this caused 20% of all banks to fail.
Frontline has the entire documentary online make it seem like it is online but after trying to get it to stream and it doesn't, you will realize they removed it, cheesy bastards, for viewing renting at your library.
Remember Spitzer? Well ignore his various sins and realize this documentary was made to document the Enron, WorldCom Scandals and is from 2003.
In other words, we've been here before, three times now actually in less than 10 years.
Just over a week ago the SEC took an "emergency action" and banned all short selling on 799 financial companies.
Short sellers borrow stock with the aim of selling it, then buy it back at a lower price, hoping to pocket the difference. The commission said short sellers add liquidity to the markets during normal conditions, but recent unbridled short-selling has contributed to the recent tailspin in the stock market.
What the SEC didn't bother to consider was that short-selling also adds liquidity during the tailspin as well.
The SEC has made things worse, not better.
While I disagree with the characterization of Paulson not disclosing that the current crisis is about derivatives, this blog post has some interesting plans as well as statistics on asset to derivatives ratios.
While Nancy Pelosi and Barney Frank hold Press Conferences claiming the Republicans won't modify the bad bankruptcy bill to enable renegotiation of bad primary residence mortgages.... and Barney Frank claims the Paulson plan is the only plan that can pass in some modified form....
Other economists are writing up their own alternative plans and posting them online.
It's Friday Night! Party Time! Time to relax, put your feet up on the couch, lay back, and watch some detailed videos on economic policy!
Recent comments