The Great Depression Online




Great Depression Online Archive Issue:

"Where is All the Money Coming From?"

Bonus 1

Inside Bonus 1 You Will Discover…

*** Where is All the Money Coming From?
*** ‘The Law of Unintended Consequences’ and a Mammoth Trade Deficit
*** The Intrinsic Stupidity of the U.S. Congress
*** And More!

“Where is All the Money Coming From?”

Over the last several years have you ever looked around you and asked the simple question…

“Where is all the money coming from?” 

Maybe you watched in suspicious amazement as homes in your neighborhood more than doubled in price.  Or maybe you were secretly leery when your annoying coworker showed you his brand-new SUV -- that he ‘paid in full with cash’. 

Whatever the case, the material consumption that has occurred over the last few years is enough to make any honest and curious individual a little skeptical.  And with good reason… 

Following the collapse of the U.S. Stock Market in 2000 to 2002 and 9/11, wasn’t the U.S. supposed to be emerging from an economic recession?  Such a scenario does not seem to support the pervasive consumption that occurred. 

What gives?

In short, in an effort to stave off the economic recession the Greenspan led Federal Reserve flooded the market with easy money in the form of low interest lending rates.  The easy money was meant to encourage capital investment and job creation.  But by the ‘law of unintended consequences’ this easy money resulted in a credit induced consumption spree and a massive trade deficit -- which are the primary factors contributing to the current economic imbalances.

In Day 2 we learned that in March 2007 Americans spent $2 billion more per day than they made on a global basis.  And that the difference was made up with debt, as American’s refinanced their homes and used the inflated asset based debt to buy plastic doodads and fabricated gewgaws by the boat load; most notably from China.  This represents the largest transfer of wealth ever in world history.  It also represents the financing and acceleration of globalization.

Because the dollar is a fiat currency, the Federal Reserve just keeps borrowing more of them into existence.  Up till now, other countries have been willing to accept in return for their stuff.  So rather than going broke, the U.S. perpetually goes further and further into debt.  And it seems the debt financed consumption could go on forever as long as foreign central banks continue to use their dollar surpluses to purchase U.S. Treasury Bonds.

But you can never underestimate the intrinsic stupidity of the U.S. Congress.  After months of threatening to place tariffs on Chinese exports, in an effort to score political points with their constituents on “the outsourcing issue”, China had heard enough.

As reported in the August 8, 2007 edition of the UK Telegraph…

“’China threatens “nuclear option” of dollar sales’ By Ambrose Evans-Pritchard.

“’The Chinese government has begun a concerted campaign of economic threats against the United States, hinting that it may liquidate its vast holding of U.S. Treasuries if Washington imposes trade sanctions to force a yuan revaluation.

“’Two officials at leading Communist Party bodies have given interviews in recent days warning -- for the first time -- that Beijing may use its $1.33 trillion of foreign reserves as a political weapon to counter pressure from the U.S. Congress.  Shifts in Chinese policy are often announced through key think tanks and academies.

“’Described as China’s “nuclear option’ in the state media, such action could trigger a dollar crash at a time when the U.S. currency is already breaking down through historic support levels.

“’It would also cause a spike in US bond yields, hammering the US housing market and perhaps tipping the economy into recession.’

In short, overnight the dollar would lose significant value -- everything would cost more – as inflation would go through the roof.

The resulting hyperinflation would wreak havoc upon the United States.  We believe that the best way for you to prepare for the mayhem is through discovering the lessons of the French experience with hyperinflation during the French Revolution.

To find out how to survive the coming hyperinflationary depression go to: www.thenextgreatdepression.com.

Sincerely,

M.N. Gordon
Great Depression Online

P.S.  Surviving The Next Great Depression -- Unknown Secrets from The French Revolution (www.thenextgreatdepression.com) is published by Direct Expressions LLC.  To learn more about the many exciting publications we offer, please visit our website at www.directexpressions.com.

 

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