Article Excerpt and Quotes of the Day

First the quotes:

  • “Bernanke peso” – New nickname for the U.S. dollar.
  • “It may be our dollar, but it’s your problem.” – Former Tres. Sec. John Connelly.
  • “The world’s largest banana republic” – The U.S. under Bernanke/Bush/Greenspan policies.
  • “The central bank is an institution of the most deadly hostility existing against the Principles and form of our Constitution. I am an Enemy to all banks discounting bills or notes for anything but Coin. If the American People allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the People of all their Property until their Children will wake up homeless on the continent their Fathers conquered.” – Thomas Jefferson (3rd President of the United States. 1743-1826)

Now the article excerpt, from MoneyWeek (article by Bill Bonner):

Here at MoneyWeek, we have been critical of the US economy in the past. But today, we rise not to carp and criticise, but to defend it: the US has little in common with a banana republic. It has no bananas. It is not a republic. And its weather is not as good. That said, there are similarities. Real wages for men are lower today than they were 37 years ago. Robert Reich, former Secretary of Labor, writing in the FT, explains that Americans have only been able to increase their standard of living by putting their wives to work, putting in more hours on the job and, finally, going deeply into debt. In the last seven years of the Bush administration, the federal debt increased by two-thirds while US household debt doubled. Despite all this extra spending, median real incomes have continued to go down. Practically all new jobs have been created either by government, or in housing, health care, bars or restaurants. Jobs in manufacturing are now at levels not seen since just after World War II.

“This is the profile of a third world economy,” says former Under Secretary of the Treasury, Paul Craig Roberts.

How does an economy like this keep going? It depends on the kindness of strangers and the stupidity of friends. Who but a fool or a friend would buy a US 30-year Treasury bond at a 4.28% yield? This number is only a few basis points from the number for annual increases in consumer prices, 4.4 %. So, if all goes well, investors can expect to make a return of zero on their investment over the next 30 years. And if all this talk of Zimbabwe economics and banana republic finances turns out to be true, they can expect to suffer another round of losses – measured in the trillions.

And why shouldn’t it be true? The American Empire is a bit like General Motors, says Martin Hutchinson. It has heavy fixed costs, an ageing workforce, wornout equipment, mammoth debts, and it is losing market share. At immense cost, America maintains its legions in more than 100 overseas garrisons. At home, the mobs call for bread. And every candidate for office – save Dr Ron Paul – offers more of it. GM, of course, cannot print money. But as Ben Bernanke himself put it, the US, like Zimbabwe – where inflation is running at 150,000% – “has a technology called the printing press”. What can you expect? We would modestly predict that those 30-year T-bonds, sometime between now and 2048 when they mature, will become worthless.

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