The Great Depression Online

Great Depression Online Archive Issue:

Why Risk It All?

Great Depression Online
Long Beach, CA
November 05, 2010

Inside This Issue You Will Discover…

*** Inflating Debt Away
*** Joe Average Always Gets Chumped
*** Why Risk It All?
*** And More

Inflating Debt Away

What a week.  On Tuesday the faithful citizenry cast their votes for the men and women to lead the nation out of the morass.  On Wednesday an unelected lunatic debauched the nation’s currency under the pretense that it’ll somehow jumpstart the economy.  Here are the particulars…

“The Federal Reserve launched a fresh effort to support a struggling economy on Wednesday,” reported Reuters, “committing to buy $600 billion in government bonds despite concerns the program could do more harm than good.”

“The decision takes the Fed into largely uncharted waters and is aimed at further lowering borrowing costs for consumers and businesses still suffering in the aftermath of the worst recession since the Great Depression.”

~~~~~~Protect Your Family~~~~~~

The $300 Trillion Dollar Crisis

Let's face it. It's really hard to get a straight answer from anyone anymore.

Our leaders keep talking about change and growth, but all around us, people are losing their life's savings to corrupt corporations, losing their careers to unemployment, and losing their lives and families to non-stop work just to make ends meet.

It didn't used to be like this. Just a few decades ago, families had time to spend together, and a high school diploma was sufficient to get you a job that would allow you to live on your own.

So what happened? 


Of course, you know all about the fraud and deceit this involves.  You know that the Federal Reserve doesn’t really have $600 billion in cold-hard-cash on hand to buy Treasuries with.  Yet, through their shenanigans, they’ll create $600 billion from nothing and lend it to the government.

The government will then have to pay that money back – plus interest.  How will they do that? 

They’ll have the taxpayer – that’s you – hump and grub to cover it.  Or they’ll just keep borrowing money into existence, rolling the debt over, and inflating it away.  This should work just great…by the time you retire your life savings will buy you a loaf of bread and a couple cans of tuna fish.

Joe Average Always Gets Chumped

Following the Feds announcement stocks went Richter.  On Thursday the DOW jumped 219 points.

Speculators, of course, love the funny money.  A fresh $600 billion to chase asset prices higher is just want they wanted…and Bernanke gave it to them.  If you feel the itch to speculate with your hard-earned money…go for it.  But for the average investor we offer a word of caution.

We believe this run up in the stock market will burn itself out just when Joe average buys in.  They always do…and Joe average always gets chumped.  Besides, observing with objectivity from the safety of the sidelines is much more fun…especially when the whole notion of the Fed’s money pumping is a fantasy.

You see, inflating debt away doesn’t create wealth, it destroys wealth.  It eviscerates capital.  It cuts the collective savings of individuals off at the knees.  It punishes the judicious for their prudence.  And it rewards the spendthrift for running up debt. 

After a while, why save at all?  Especially when the government’s living it up; and spending the future earnings of the next three generations – or more.  No doubt, the nation’s broke already.  What’s more, the nation’s bankrupt too…

Why Risk It All?

Laurence Kotlikoff, a Boston University economist, recently counted up U.S. government debt and discovered that it’s well above the ‘official’ debt tally of $13.5 trillion.  In fact, it’s 14-fold higher…or $200 trillion.  The Globe and Mail provides the ugly details… 

“Writing in the September issue of Finance and Development, a journal of the International Monetary Fund, Prof. Kotlikoff says the IMF itself has quietly confirmed that the U.S. is in terrible fiscal trouble – far worse than the Washington-based lender of last resort has previously acknowledged.  ‘The U.S. fiscal gap is huge,’ the IMF asserted in a June report.  ‘Closing the fiscal gap requires a permanent annual fiscal adjustment equal to about 14 per cent of U.S. GDP.’

“This sum is equal to all current U.S. federal taxes combined.

“Prof. Kotlikoff says: ‘The IMF is saying that, to close this fiscal gap [by taxation], would require an immediate and permanent doubling of our personal income taxes, our corporate taxes and all other federal taxes.

‘“America’s fiscal gap is enormous – so massive that closing it appears impossible without immediate and radical reforms to its health care, tax and Social Security systems – as well as military and other discretionary spending cuts.”’

We doubt the newly elected congressional leaders will have the guts to tackle this head on.  Just talking about cutting Social Security is political suicide, after all.  Why risk it all when you can just inflate?


M.N. Gordon
Great Depression Online

P.S.  These two reports: “The $300 Trillion Crisis” and “Surviving and Thriving During the Upcoming Crisis” give understandable explanations of the real state of our economy and how to protect yourself from financial ruin in the near future.

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