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Here is the simple math. Printing money devalues the currency. if you have 100,000 in circulation and you add another 100,000 you just devalued your currency by 50% because you now have twice the money chasing the same goods and services so prices always rise to adjust to the amount of currency in circulation its a law of economics. So if you have 1000 in the bank it will now only buy half the goods and services it previously bought before more currency was added to the economy.
Ok here's what most people do not understand. Printing money is not the main way our system adds currency to the economy. Printing federal reserve notes is just the petty cash of the system. The main way currency is added is by making loans. When you take out a loan a promissory note is created and considered an asset and is traded and sold on the market it is currency. Then you have fractional reserve. So if your note is for 10,000 they can now loan another 90,000 based on the note. Where did all this money come from that they are loaning? Answer from thin air based on your signature! Can you now begin to see how they blew up the real estate bubble so huge? They do not even need to print it it is just book entry money on a computer screen.
Why has it not completely collapsed yet? Couple things. The real estate market is deflating which was the crash of 2008 this takes currency out of the system. However it has not finished deflating because those derivatives are still out their floating around and soon they will all come home to roost and then it will finish collapsing. Right now the federal reserve is inflating more by buying 60% of their own bonds because no one else will. And by the way bonds work just like promissory notes and are essentially the same thing money from nothing. Here is the rub though when our government wants money it does not print it for the most part it buys bonds from the federal reserve at interest. So we have the banking cabal creating money from nothing loaning it to government at interest which interest was never even created this further devalues the currency and adds to the national debt which they cannot pay so they borrow more money to pay the interest only. It is fiscal insanity. That would be like you borrowing money just to pay the minimum payment on your credit card perpetually you can never pay it off and you just keep racking up more and more debt. Amplify that by a thousand time and you can see why the government is trillions in debt and growing exponentially. How long do you think that can last?
So essentially government is living off a seemingly unlimited credit card. But everyone knows that credit is not unlimited. China Japan and Saudi Arabia are our major bond buyers providing the credit for our national credit card so to speak but they are cutting way back which is why the fed is buying it now. Soon though no one will buy and the credit will be cut off and it will all come crashing down and then you will see hyperinflation in essential goods and services as they try and print their way out and deflation in non essentials etc.
There is no other way it can go you cannot continue to create loans/money from nothing for ever and debase your currency it is a mathematical certainty that it sill crash. Every fiat system in history like ours has ended badly. We are at the end of the cycle. The economy is so much larger now then in the 30s and is globally connected so it takes longer for the cancer to work through the entire global system but Iceland and Greece are the first to go eventually England and America will go and the rest of the planet with us!
Those that say the banking system can't collapse and the fed reserve master know what they are doing should study some history they are delusional and buying the coolaid.
Currency valuation is relative, not quantitative. The actual quantity would have to be grotesquely out of line with your relative value before it would have a major effect.
Federal Reserve is the only institution (in the US) that can 'create' currency. And their notes are not the petty cash (they don't create cash), it is the entirety of the US currency. Currency comes in many forms, cash being one of the minor ones. As for fractionals and derivatives (I have excluded the next paragraph as they are essentially the same), they are not creations. They are futures spent today. A very distinct difference.
Market is not currency driven. Market is production driven. It will crash when production stops.
The 3 examples of US debt holders account for approx 20% of US debt (3T of 15T). The primary debt owner of US debt is US citizens. If Japan and China (SA is not even worth mentioning, they hold less than 1% when combined with OPEC) liquidated all US debt holdings, you would expect to see a movement equal to their debt holdings...about 20% all other things equal. In fact, the drop in internal consumer confidence, if such event did occur, would account for a bigger valuation movement.
The fact that the economy is global has increased the speed at which the markets respond. It takes far less time today, than it ever did for 'cancers' to spread. As for continuing to create loans...as long as there is a continuation of production, loans can be issued. I would personally never do it, due to the repayment time frames exceeding my lifetime (many times over), but countries do not have to worry about that issue.
Originally posted by Tardacus
reply to post by fnpmitchreturns
The government is just flat out lying about inflation to make things look rosey. The government exempts food and energy from it`s inflation calculations.food and energy are a major part of everyones monthly budget so why are they excluded?
a quick internet search will show you what the real inflation rate is. In the last 5 years the cost of most foods doubled and even tripled in price thats a 200%- 300% inflation rate on many food products, has your pay check increased by 200%-300% in the last 5 years?
in the last 4 years my electric bill has more than doubled even though i use less electric now than i did 4 years ago.
The government official inflation rate is all smoke, mirrors and lies designed to maintain the peoples confidence in the economy and prevent an economic collapse.edit on 28-5-2012 by Tardacus because: (no reason given)edit on 28-5-2012 by Tardacus because: (no reason given)
Originally posted by hawkiye
reply to post by gorgi
If you think the government is putting out true numbers you are about as naive as it gets...