take me off your list please thanks On 5/21/09, Skinny <theskinnyasise...@yahoo.com> wrote: > > > > > > > > 'The $12.9 billion in bailout funds funneled through AIG to pay Goldman > Sachs for its highly speculative credit default swaps is just one egregious > example. To the extent that the money generated by “quantitative easing” is > being sucked into the black hole of paying off these speculative derivative > bets, we could indeed be on the Weimar road and there is real cause for > alarm. > > > > We have been led to believe that we must prop up a zombie Wall Street > banking behemoth because without it we would have no credit system, but that > is not true. There is another viable alternative, and it may prove to be our > only viable alternative.' > > > > Read ... <http://www.marketoracle.co.uk/Article10759.html> > > *Could the Weimar Hyperinflation Happen Again in America? * > Economics<http://www.marketoracle.co.uk/Topic6.html>/ > HyperInflation <http://www.marketoracle.co.uk/News-catid-191.html> May 19, > 2009 - 08:52 PM > > > By: Global_Research > > [image: Economics] <http://www.marketoracle.co.uk/Topic6.html> > > [image: Best Financial Markets Analysis Article]Ellen Brown writes: “It > was horrible. Horrible! Like lightning it struck. No one was prepared. The > shelves in the grocery stores were empty. You could buy nothing with your > paper money.” – Harvard University law professor Friedrich Kessler on the > Weimar Republic hyperinflation (1993 interview) > > > > <http://www.marketoracle.co.uk/20&linkCode=as2&camp=1789&creative=9325&creativeASIN=0979560829> > > > > > > > > > > > > Some worried commentators are predicting a massive hyperinflation of the > sort suffered by Weimar Germany in 1923, when a wheelbarrow full of paper > money could barely buy a loaf of bread. An April 29 editorial in the San > Francisco Examiner warned: > > “With an unprecedented deficit that’s approaching $2 trillion, [the > President’s 2010] budget proposal is a surefire prescription for > hyperinflation. So every senator and representative who votes for this > monster $3.6 trillion budget will be endorsing a spending spree that could > very well turn America into the next Weimar Republic.”1 > > In an investment newsletter called Money Morning on April 9, Martin > Hutchinson pointed to disturbing parallels between current government > monetary policy and Weimar Germany’s, when 50% of government spending was > being funded by seigniorage – > > merely printing money.2 However, there is something puzzling in his data. > He indicates that the British government is already funding more of its > budget by seigniorage than Weimar Germany did at the height of its massive > hyperinflation; > > yet the pound is still holding its own, under circumstances said to have > caused the complete destruction of the German mark. Something else must have > been responsible for the mark’s collapse besides mere money- > > printing to meet the government’s budget, but what? And are we threatened > by the same risk today? > > Let’s take a closer look at the data. > > > History Repeats Itself – or Does It? > > In his well-researched article, Hutchinson notes that Weimar Germany had > been suffering from inflation ever since World War I; but it was in the two > year period between 1921 and 1923 that the true “Weimar hyperinflation” > occurred. By the time it had ended in November 1923, the mark was worth only > one-trillionth of what it had been worth back in 1914. Hutchinson goes on: > > “The current policy mix reflects those of Germany during the period between > 1919 and 1923. The Weimar government was unwilling to raise taxes to fund > post-war reconstruction and war-reparations payments, and so it ran large > budget deficits. It kept interest rates far below inflation, expanding money > supply rapidly and raising 50% of government spending through seigniorage > (printing money and living off the profits from issuing it). . . . > > “The really chilling parallel is that the United States, Britain and Japan > have now taken to funding their budget deficits through seigniorage. In the > United States, the Fed is buying $300 billion worth of U.S. Treasury bonds > (T-bonds) over a six-month period, a rate of $600 billion per annum, 15% of > federal spending of $4 trillion. In Britain, the Bank of England (BOE) is > buying 75 billion pounds of gilts [the British equivalent of U.S. Treasury > bonds] > > over three months. That’s 300 billion pounds per annum, 65% of British > government spending of 454 billion pounds. Thus, while the United States is > approaching Weimar German policy (50% of spending) quite rapidly, Britain > has already overtaken it!” > > > And that is where the data gets confusing. If Britain is already meeting a > larger percentage of its budget deficit by seigniorage than Germany did at > the height of its hyperinflation, why is the pound now worth about as much > on foreign exchange markets as it was nine years ago, under circumstances > said to have driven the mark to a trillionth of its former value in the same > period, and most of this in only two years? Meanwhile, the U.S. dollar has > actually gotten stronger relative to other currencies since the policy was > begun last year of massive “quantitative easing” (today’s euphemism for > seigniorage). > > 3 Central banks rather than governments are now doing the printing, but the > effect on the money supply should be the same as in the government > money-printing schemes of old. > > The government debt bought by the central banks is never actually paid off > but is just rolled over from year to year; > > and once the new money is in the money supply, it stays there, diluting > the value of the currency. So why haven’t our currencies already collapsed > to a trillionth of their former value, as happened in Weimar Germany? > Indeed, if it were a simple question of supply and demand, a government > would have to print a trillion times its earlier money supply to drop its > currency by a factor of a trillion; and even the German government isn’t > charged with having done that. Something else must have been going on in the > Weimar Republic, but what? > > > > Schacht Lets the Cat Out of the Bag > > Light is thrown on this mystery by the later writings of Hjalmar > Schacht, the currency commissioner for the Weimar Republic. > > The facts are explored at length in The Lost Science of Money by Stephen > Zarlenga, who writes that in Schacht’s 1967 book The Magic of Money, he “let > the cat out of the bag, writing in German, with some truly remarkable > admissions that shatter the ‘accepted wisdom’ the financial community has > promulgated on the German hyperinflation.” What actually drove the wartime > inflation into hyperinflation, said Schacht, was speculation by foreign > investors, who would bet on the mark’s decreasing value by selling it short. > > > Short selling is a technique used by investors to try to profit from an > asset’s falling price. It involves borrowing the asset and selling it, with > the understanding that the asset must later be bought back and returned to > the original owner. The speculator is gambling that the price will have > dropped in the meantime and he can pocket the difference. Short selling of > the German mark was made possible because private banks made massive amounts > of currency available for borrowing, marks that were created on demand and > lent to investors, returning a profitable interest to the banks. > > At first, the speculation was fed by the Reichsbank (the German central > bank), which had recently been privatized. But when the Reichsbank could no > longer keep up with the voracious demand for marks, other private banks were > allowed to create them out of nothing and lend them at interest as well.4 > > > A Story with an Ironic Twist > > If Schacht is to be believed, not only did the government not cause the > hyperinflation but it was the government that got the situation under > control. The Reichsbank was put under strict regulation, and prompt > corrective measures were taken to eliminate foreign speculation by > eliminating easy access to loans of bank-created money. > > More interesting is a little-known sequel to this tale. What allowed > Germany to get back on its feet in the 1930s was the very thing today’s > commentators are blaming for bringing it down in the 1920s – money issued by > seigniorage by the government. > Economist Henry C. K. Liu calls this form of financing “sovereign credit.” > He writes of Germany’s remarkable transformation: > > “The Nazis came to power in Germany in 1933, at a time when its economy was > in total collapse, with ruinous war-reparation obligations and zero > prospects for foreign investment or credit. Yet through an independent > monetary policy of sovereign credit and a full-employment public-works > program, the Third Reich was able to turn a bankrupt Germany, stripped of > overseas colonies it could exploit, into the strongest economy in Europe > within four years, even before armament spending began.”5 > > While Hitler clearly deserves the opprobrium heaped on him for his later > atrocities, he was enormously popular with his own people, at least for a > time. This was evidently because he rescued Germany from the throes of a > worldwide depression – > > and he did it through a plan of public works paid for with currency > generated by the government itself. Projects were first earmarked for > funding, including flood control, repair of public buildings and private > residences, and construction of new buildings, roads, bridges, canals, and > port facilities. The projected cost of the various programs was fixed at one > billion units of the national currency. One billion non-inflationary bills > of exchange called Labor Treasury Certificates were then issued against this > cost. > > Millions of people were put to work on these projects, and the workers were > paid with the Treasury Certificates. The workers then spent the certificates > on goods and services, creating more jobs for more people. These > certificates were not actually debt- > > free but were issued as bonds, and the government paid interest on them to > the bearers. But the certificates circulated as money and were renewable > indefinitely, making them a de facto currency; and they avoided the need to > borrow from international lenders or to pay off international debts.6 The > Treasury Certificates did not trade on foreign currency markets, so they > were beyond the reach of the currency speculators. They could not be sold > short because there was no one to sell them to, so they retained their > value. > > Within two years, Germany’s unemployment problem had been solved and the > country was back on its feet. It had a solid, stable currency, and no > inflation, at a time when millions of people in the United States and other > Western countries were still out of work and living on welfare. Germany even > managed to restore foreign trade, although it was denied foreign credit and > was faced with an economic boycott abroad. It did this by using a barter > system: > > equipment and commodities were exchanged directly with other countries, > circumventing the international banks. This system of direct exchange > occurred without debt and without trade deficits. > > Although Germany’s economic experiment was short-lived, it left some > lasting monuments to its success, including the famous Autobahn, the world’s > first extensive superhighway.7 > > Click to join *CatapultTheNWOPoliceStateDepopulation* agenda > http://groups.yahoo.com/group/CatapultTheNWOPoliceStateDepopulation/join > <http://groups.yahoo.com/group/catapultthenwopolicestatedepopulation/join> > <http://groups.yahoo.com/group/catapultthenwopolicestatedepopulation/join> > [image: Click to join > openmindopencodenews]<http://groups.yahoo.com/group/openmindopencodenews/join>[image: > Click to join > catapultthenwopolicestatedepopulation]<http://groups.yahoo.com/group/catapultthenwopolicestatedepopulation/join> > *Click to join > OpenMindOpenCodeNews*<http://groups.yahoo.com/group/openmindopencodenews/join> > http://groups.yahoo.com/group/*openmindopencodenews*<http://groups.yahoo.com/group/openmindopencodenews/join> > *** With Love, Lifeforce & Overstanding Tall, Denouncing Fed. Gold > Sach-ing Banksters/Fear Mongers & all Enemy's Foreign & Domestic inc. the > Morally Corrupt Menace of the Shadow World Govt Military Occupation Command > Economy & its Order out of Chaos Eugenics PsychopathClass illumiNazi Ritual > Mass Final Solution! * > > > The Lessons of History: Not Always What They Seem Germany’s scheme for > escaping its crippling debt and reinvigorating a moribund economy was > clever, but it was not actually original with the Germans. The notion that a > government could fund itself by printing and delivering paper receipts for > goods and services received was first devised by the American colonists. > Benjamin Franklin credited the remarkable growth and abundance in the > colonies, at a time when English workers were suffering the impoverished > conditions of the Industrial Revolution, to the colonists’ unique system of > government-issued money. In the nineteenth century, Senator Henry Clay > called this the “American system,” distinguishing it from the “British > system” of privately-issued paper banknotes. After the American Revolution, > the American system was replaced in the U.S. with banker-created money; but > government-issued money was revived during the Civil War, when Abraham > Lincoln funded his government with U.S. Notes or “Greenbacks” issued by the > Treasury. > > The dramatic difference in the results of Germany’s two money-printing > experiments was a direct result of the uses to which the money was put. > Price inflation results when “demand” (money) increases more than “supply” > (goods and services), > > driving prices up; and in the experiment of the 1930s, new money was > created for the purpose of funding productivity, so supply and demand > increased together and prices remained stable. Hitler said, “For every mark > issued, we required the equivalent of a mark’s worth of work done, or goods > produced.” In the hyperinflationary disaster of 1923, on the other hand, > money was printed merely to pay off speculators, causing demand to shoot up > while supply remained fixed. The result was not just inflation but > hyperinflation, since the speculation went wild, triggering rampant > tulip-bubble-style mania and panic. > > This was also true in Zimbabwe, a dramatic contemporary example of runaway > inflation. The crisis dated back to 2001, when Zimbabwe defaulted on its > loans and the IMF refused to make the usual accommodations, including > refinancing and loan forgiveness. Apparently, the IMF’s intention was to > punish the country for political policies of which it disapproved, including > land reform measures that involved reclaiming the lands of wealthy > landowners. Zimbabwe’s credit was ruined and it could not get loans > elsewhere, so the government resorted to issuing its own national currency > and using the money to buy U.S. dollars on the foreign- > > exchange market. These dollars were then used to pay the IMF and regain the > country’s credit rating.8 According to a statement by the Zimbabwe central > bank, the hyperinflation was caused by speculators who manipulated the > foreign-exchange market, charging exorbitant rates for U.S. dollars, causing > a drastic devaluation of the Zimbabwe currency. > > The government’s real mistake, however, may have been in playing the IMF’s > game at all. Rather than using its national currency to buy foreign fiat > money to pay foreign lenders, it could have followed the lead of Abraham > Lincoln and the American colonists and issued its own currency to pay for > the production of goods and services for its own people. Inflation would > then have been avoided, because supply would have kept up with demand; > > and the currency would have served the local economy rather than being > siphoned off by speculators. > > > The Real Weimar Threat and How It Can Be Avoided > > > > More- > > > >
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