"Although a policy of intervening to affect the exchange value of the dollar is nowhere on the horizon today, it's worth noting that there have been times when exchange rate policy has been an effective weapon against deflation.
A striking example from U.S. history is Franklin Roosevelt's 40 percent devaluation of the dollar against gold in 1933-34, enforced by a program of gold purchases and domestic money creation.
The devaluation and the rapid increase in money supply it permitted ended the U.S. deflation remarkably quickly. Indeed, consumer price inflation in the United States, year on year, went from -10.3 percent in 1932 to -5.1 percent in 1933 to 3.4 percent in 1934.
The economy grew strongly, and by the way, 1934 was one of the best years of the century for the stock market.
If nothing else, the episode illustrates that monetary actions can have powerful effects on the economy, even when the nominal interest rate is at or near zero, as was the case at the time of Roosevelt's devaluation."
-Ben Bernanke, telling us exactly what he was going to do, November 2002
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34 comments:
After the inflation fireworks the economy had a relapse.
What ultimately pulled the US out of the recession was WWII. First through massiv military spending followed up by exports once the war ended. Remember, back then the US had the only industrial base that didn't get destroyed by the war. There was no competition, the US was about the only place that had an intact industry.
Back then we weren't restrained by peak everything either. Soon commodities will rise sharply once again cutting the recovery short.
Everybody loves the early stages of inflation as they often get confused with prosperity. It's the later stages that are troublesome. Long term US treasuries are probably the worst place for your money right now.
....and it caused six to eight more years of "depression" until WW 2 pulled the economy out of it.
This may be true in the future but so far the EUR is back to where is was in Dec 08. GBP Oct 08.
Big Deal.
Only the AUD and NZD have run. I do believe in the inflation story and I was a forex trader many moons ago, but these moves are approx 10% on a weighted basket.
It hasnt happened yet.
The World understands America is Dead and realizes who is responsible for killing it.
This man is one Prime Example of incompetence taken to the highest level.
When did he ever make a payroll? When did he ever make anything tangible of value? Answer: NEVER.
These, sheeple are your leaders.
In between his continued, high-handed doublespeak is the fact that America is broke and will not repay its debts anytime in the near (or far) future.
Fuck You, China. Fuck You, Europe. We never really liked you anyway...
Also, America is now run by a socialist regime that would make Stalin blush bent on busting out as many big corporations as posible on its way to a New World Order. The current regime could then become a Kingdom or Dictatorship and a new thousand year reich could be established.
Heil Chairman MaoBama. Seig Heil!
F*ck America. DIE.
I hate that guy.
Why is GM being bailed out again? I thought they were in bankruptcy.
Just let em fail, liquidate. Enough of the crummy cars and the distortion of markets in favor of a rusty automobile company.
Treasuries, today's gold.
BAWAAAHAAAAAAAHAHAHAHAHA!!!!
In early 1934 F.D.R. devalued the US greenback via increasing the price of gold by 69%. Skyrocketing gold from $20.67 to $35.00 oz.
The thing that I can't stand is that
the news media debates what the government does after it already does it . You get the we shouldn't do this or that PR bullshit ,but it doesn't matter because the dirty deed has already been done . I took your money, so now lets debate if that was right or wrong .Isn't this really silly .
When the day comes that the public has a choice in what is done ,than talk to me about any choice that people have any more in what happens to their Country .
Keefer, Sashers..
Underneath all the charts and numbers, is a 'Human' economy.
Of all nations and societies today, America has the most growth oriented culture, plus vast amounts of untapped natural resources.
Remember all the outsourcing the American companies do?
and all the cheap imports America does?
This is biggest source of job and skill creation across the globe.
Betting that another countries fiat currency will do better then the biggest entrepreneurial country and people is a mistake.
Timmy Geithner's Chinese audience responded with laughter when he told them their dollar assets were "safe".
Perhaps they know something he doesn't?
I agree with Keith.
Note to the Chinese People:
America and its sociilaist dictator Chairman MaoBama and his sleazy crew of doomed and laughable 'adviser' are scheming Right Now to Fuck you out of all your money.
Your students were right recently to laugh out loud at that silly flimsy wimp Timmy Geithners remarks about 'your assets in America being safe'. Ho Ho Ho.
Always Remember Geithner was a butt-boy to baldo Paulsen (GoldmanSachs, etc) and they are part of the cause and continue to be complicit in the heist of your money. These clowns may well hauled into the dock soon to atone for their crimes. Geithner may take a new job as a towel boy in a gay bathouse on the outskirts of Cleveland.
DO NOT buy any more American debt instruments and cash in the ones you have now and be Quick about it. Insist on Gold on small arms ammunition. It would be amazing if there was suddenly no longer any
9mm pistol ammo available...
Think about it.
If a nice looking and well spoken black fellow in a shiny blue suit riding into your town in a fancy blue and silver USA plane tries to sell you GM stock, make them pay for their jet fuel and airport charges in Cash or Gold before allowing them to take off again...
Their credit is No Good. No Mas.
That will probably not happen as he is gearing up for the fight of his life in an attempt to get a seemingly unqualified and reportedly stone racist appointed to the US Supreme Court, the Highest in the Land. Viva La Raza. His 'plate is full' so to speak...
The entire US economy has been given to the banking and political classes who can never be trusted. The natives ARE getting restless though as their credit cards will no longer buy cheese doodles and Nascar tickets, plus the Las Vegas oddsmakers are betting on Detroit to be the flashpoint for the next inevitable Summer riots featuring doom and death to begin.
The first broken window theory is about to be tested.
America has a new Attorney General (also black, not to be confused with the new President, merely a coincidence) this one with a swell waxed moustache and not much else. He is rarely seen or heard from in the US land of felons and jailers.
Criminals run free and unabated to work on their orange-colored tans and plot their next moves.
America cannot be trusted anymore.
Ben Franklin was Right. The American bird should not be the eagle but should be The Turkey.
Don't bother wasting any nuclear warheads on the US. Just leave Washington DC alone and it should kill the country finally and completely by the end of the First Term.
I figure you will be able to buy America for about 3 cents on the dollar, politicians for considerably less.
You're Welcome.
Have a Nice Day.
How does a war pull a country out of a depression? I mean how is building a bomb and using it to blow up someone's house beneficial? That's the stupidest thing I ever heard.
My prediction on the recipe for our destruction is still on the table. We are broke and closer to civil war, world war than we have been in a long time. I still think all three are possible at once.
2000 to 2010 have shown to be fucked up. I will bet that 2010 to 2020 will be worse.
Yoski:
"Everybody loves the early stages of inflation as they often get confused with prosperity. "
Never a more true sentence posted here.
Everyone here knows this is a traders 'speculator' market, not a long term investor market. Are you going to put the vast majority of your wealth into a market rallying on a desperate govt debt binge? No, of course not. Has the USA economy fundmentally changed? No, of course not.
Plus, everyone knows this massive inflation bomb is about to go off. And the dollar will be crushed. Yet, the vast majority of posters have assets ONLY in USD.
Even Cramer knows the only free lunch is diversification. I suggest you make your goal over the next 12 months to be moving 33% of your assets out of USD.
D-I-V-E-R-S-I-F-Y ...NOW. Sell whatever you need to into market strength.
How does a war pull a country out of a depression?
It is very simple you send a good portion of your labor force off to fight.
You then have to create many jobs to support said war. This creates jobs that people do.
People with jobs then spend money.
Also providing supplies to allies helps a great deal as well.
Now the problem is we are increasing the labor force by trying to compete with the world labor market. That and we no longer build much we have become a country of middle managers and service people.
Angry Leprechaun said...
"2000 to 2010 have shown to be fucked up. I will bet that 2010 to 2020 will be worse.
June 2, 2009 4:28 PM"
I agree completely. I'll double down/all in on That One.
America is Doomed.
Harg said...
‘How does a war pull a country out of a depression?
It is very simple you send a good portion of your labor force off to fight.’
Then how come you all keep whining about the ‘huge costs’ of the Iraqi war?
.
Whatever happened to Obama's Birth certificate anyway??
.
http://www.cnbc.com/id/31061545
The eastern world, it is exploding
Violence flarin’, bullets loadin’
You’re old enough to kill, but not for votin’
You don’t believe in war, but what’s that gun you’re totin’
And even the Jordan River has bodies floatin’
But you tell me
Over and over and over again, my friend
Ah, you don’t believe
We’re on the eve
of destruction.
Don’t you understand what I’m tryin’ to say
Can’t you feel the fears I’m feelin’ today?
If the button is pushed, there’s no runnin’ away
There’ll be no one to save, with the world in a grave
[Take a look around ya boy, it's bound to scare ya boy]
And you tell me
Over and over and over again, my friend
Ah, you don’t believe
We’re on the eve
of destruction.
Yeah, my blood’s so mad feels like coagulatin’
I’m sitting here just contemplatin’
I can’t twist the truth, it knows no regulation.
Handful of senators don’t pass legislation
And marches alone can’t bring integration
When human respect is disintegratin’
This whole crazy world is just too frustratin’
And you tell me
Over and over and over again, my friend
Ah, you don’t believe
We’re on the eve
of destruction.
Think of all the hate there is in Red China
Then take a look around to Selma, Alabama
You may leave here for 4 days in space
But when you return, it’s the same old place
The poundin’ of the drums, the pride and disgrace
You can bury your dead, but don’t leave a trace
Hate your next-door neighbor, but don’t forget to say grace
And… tell me over and over and over and over again, my friend
You don’t believe
We’re on the eve
Of destruction
Mm, no no, you don’t believe
We’re on the eve
of destruction.
Yoski -
Don't forget that the reason the US was able to win WWII was that we had spent the previous 10 years building up the infrastructure through the Works Project Administration and the Civilian Conservation Corps. My grandfather worked for both those agencies, cutting trees & blasting tunnels, paving roads and stringing wire.
During WWII, those roads and tunnels allowed the US to move tanks and airplane parts. The wire transmitted the power to the converted Presto factory that was churning out artillery shells.
Under Bush, the gov't debt was used to buy $30,000 shower curtains for robber barons, and build bridges to nowhere, rather than to improve the existing bridges and highways (viz: the bridge that collapsed in St.Paul). Maybe we'll do better under Obama. I hope so.
"It is very simple you send a good portion of your labor force off to fight.
You then have to create many jobs to support said war. This creates jobs that people do.
People with jobs then spend money.
Also providing supplies to allies helps a great deal as well."
Wrong! People in WWII were not allowed to spend money. Numerous items were rationed. People were required to buy war bonds. Otherwise, there would have been run-away inflation. The idea that economic growth comes from spending is plain stupid. Economy growth comes from producing things that people really want on their own.
What happened in WWII was draconian statistic rigging: sending people off to slavery (draft) and die overseas was statisticly tallied up as reduction in unemployment. Mass murder industries were tallied up as GDP. All the bombs, tanks and aircrafts were counted as GDP in Keynsian econometrics, despite the fact that none of them improved people's living standards.
"Don't forget that the reason the US was able to win WWII was that we had spent the previous 10 years building up the infrastructure through the Works Project Administration and the Civilian Conservation Corps. "
It's like saying you can get food in the stores only because there is Department of Agriculture. LOL. I'm sure that's the sort of thing that North Korean Kims tell their people: you only have food because the government is distributing food to you.
The free market place would have built the infrasctructure in a much more efficient manner, with much less corruption and political favoritism. It's the easily visible corruption, favoritism and plain waste in building all the roads and autobahn that forced the governments of both the US and Nazi Germany into Keynsian spending on military hardware: waste and corruption on military hardware wasn't as obvious to the public, who had no first hand experience with military hardware and could be hoodwinked by propaganda
The FED is the umbilical between the U.S. taxpayer and the "elite" bankster parasites that suck the ecomonic life blood out of us and our country.
Anonymous Anonymous said...
How does a war pull a country out of a depression? I mean how is building a bomb and using it to blow up someone's house beneficial? That's the stupidest thing I ever heard.
June 2, 2009 4:26 PM
You are correct. That myth; "oh World War 2 and the manufacturing of bombs, tanks, machine guns, etc... pulled us out of the Great Depression" is so fallacious.
Making bombs, machine guns, tanks, etc... can not grow an economy. What grows an economy is capital investments; factories, transportation networks, educational institutions, etc... All of those pay dividends far into the future after they are constructed.
Also, durable goods grow an economy. For example, you build a bomb, it creates a job and then it gets blown up. You build a car, computer, washing machine, etc... and think of all of the jobs it creates? It doesn't just create one job, but many jobs down the road and plus parts in the future need to be replaced.
But that myth of military spending ended the Great Depression is repeated often.
Now Keith is trying to justify his view that government spending alone will pull us out of this deflationary depression we are headed into.
Keith, my friend, you have lost my respect. And please, save me the nonsense that anyone who disagrees with you is a perma bear, always negative, etc.....
I look at this economic situation objectively and so do the 94% of the people on this board and arrived at the same conclusion; this is a suckers rally and the fundamentals do not support it.
It is no so much that deflation is bad, rather it is more about who it is bad for.
"How does a war pull a country out of a depression?"
Ever hear the phrase "to the victor go the spoils?"
You must get the spoils though - whether it be tribute in gold, more taxpaying slaves, the work to rebuild the country you destroyed (at their expense), or just damn cheap oil. But, you have to get the spoils, otherwise it is a waste of money.
Reality:
"People were required to buy war bonds."
Really. Got a link? I can't find anything to support that anywhere. Checked Wikipedia and Googled like crazy. All I have found is that government-issued propaganda encouraged people to buy war bonds out of patriotism.
Sorry for my independence - I like to check things out myself as opposed to bleating and repeating.
The Mogambo Guru
for The Daily Reckoning
“You, with your puny Earthling minds, apparently cannot imagine the inflationary horror that is going to happen to your money and you as a result of such calamitous fiscal excesses by the government, especially when it is paid for by such horrifying monetary excesses by the Federal Reserve, even though your whole stupid Earth history is chock-a-block full of prior examples! Most of them written in blood! Blood!”
Why dont they do something popular and constructive rather than print money they could raise revenue by a one time great deal converting pre-tax retirement accounts to Ross IRAs at a very attractive rate say 10-15%. Given 10 Trillion in these accounts it would raise a quick 1 to 1.5 Trillion which could lessen the deficit and reward savers rather than screw them. Seems like the loss revenues on future taxes would be offset by the immediate stimulus effect and the lowered debt that would otherwise need to be paid by future tax increases or dollar devaluation
Wow, this guy Uncle Benny Printing Press Bernanke is truly the master of double-speak. I've never heard so many self-contradicting statements, well, outside of an Obama speech.
Reality said:
The free market place would have built the infrasctructure in a much more efficient manner, with much less corruption and political favoritism.
Then how come the Great Invisible Hand of the Benevolent, God-like Free Market didn't?
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