Federal Reserve Officer Discusses 'Stability'

October 9, 2007

Elaine Meinel Supkis

Well, well, well! The Federal Reserve decides this is time to explain their philosphy: why are they screwing up everything so badly. Of course, the claim they are seeking the most hideous thing investors can imagine: STABILITY. Namely, they are the servants of Safety, the angelic being that wants everyone to be careful and sober. The cute, sweet angel that wants small profits for long term benefits! But the Fed actually works for RISKY. She is the demonic creature of the dark that loves chances, loves instability, loves wild, reckless speculators! And the news backs this up: the recent Fed rate cuts are causing risky stocks to soar and inhibits the purchase of bonds and savings!

Governor Kevin Warsh

At the New York State Economics Association 60th Annual Conference, Loudonville, New York

"Financial Stability and the Federal Reserve":

In my remarks at the School of Business at the University at Albany, I argued that the conditions causing the turmoil in the financial markets were long in the making and that these causes should not be conflated with the particular troubles in the mortgage markets. I also posited that the financial market conditions may have proven to be overly ebullient, masking troubles that may have sown the seeds of financial distress.1 This evening, I will underscore the responsibility of the Federal Reserve during periods of financial market turmoil and offer some perspective on the current state of financial markets.

Liar, liar, pants on fire! The Fed does NOT offer 'perspectives', it gives away low-interest lollipops! It plays Santa Claus, not Sherlock Holmes! The very least these creatures can do is tell us the truth once in a blue moon! If he 'posits' that financial markets are 'embullient' then why didn't he scream bloody murder when Bernake was rushed into endorsing huge interest rate cuts that obviously redoubled this 'emullience' to the point, it bubbled out of all those champagne bottles and the brokers are now swinging from chandeliers while wearing lampshades? The trigger for all this is painfully obvious: its the rate cuts, stupids!

I swear, someone must take these guys and put them over a knee and spank them. Obviously, the speculators playing the Street are overjoyed with the bum's rush Cramer and his gang of bullies pulled. But as I looked at my own bank account today, I was very irritated to see the near-Japanese level of the interest rates being offered for my savings. What a waste of time! How dare any bank ask for my money? And of course, the entire banking system isn't getting 'savings' much anymore, for the last year, the US is in negative savings territory and this has very serious consequences. Which the top bankers in the Federal Reserve NEVER MENTION IN ANY SPEECHES. Call savers 'the Invisible Man and Woman.'

Indeed, our banking leaders like to imagine there is too much world savings and this is causing inflation. This bizarre idea is the basis of their philosophy which is, 'increase lending and speculation and kill savings.'

Warsh:

Several months ago, many large, global commercial and investment banks appeared on pace to post another record year of corporate profits. Underwriting and M&A activities were robust. Sales and trading revenues were bolstered by the acceleration of financial innovation. Principal investing appeared to be an increasingly accepted industry practice alongside traditional advisory business. Private pools of capital were growing strikingly. Public and private pension funds were reportedly increasing capital allocations to alternative investments. And, thanks in part to accommodative credit markets, the golden age of private equity appeared upon us. Finance companies and other nondepository financial institutions were increasingly able to thrive, proving to be formidable competitors for traditional banks and thrifts. In sum, market functioning appeared robust, and risks underlying various assets were seemingly dispersed among a range of sovereignties, financial intermediaries, and investors.

During this period of seemingly benign economic conditions, most market participants appeared more focused on the dynamics of the new financial architecture than on the policy judgments of central bankers. Surely, market participants did not presume that the Federal Reserve was a mere spectator to market developments. Nonetheless, discussions of the Fed and financial stability may have seemed somehow anachronistic with the new paradigm sweeping financial markets.

And pray tell, what was this 'new paradigm'? I would suggest it was very simple: the worse the applicant for loans, the more risky the applicant seeking money, the higher the interest rates that the lenders could charge so preversely, the lenders, NOT NEEDING ANY SAVINGS, could make lots of potential future profits by giving out loans to as many RISKY people as possible! The finance companies thrived because they didn't have to attract much in the way of savings since someone at the Federal Reserve didn't bother with regulating banks at all or paying attention to FX reserves.

This is not a surprise since the Federal Reserve itself ignored reserves. The US held in reserve virtually nothing, according to the IMF, the US is below #20 when it comes to nations holding reserves to back up their currencies or to destroy the value of their currency...a dual process little understood by the US but comprehended clearly by China and Japan. The US FX reserves are only $1.330 trillion less than China's! And Japan's is $380 billion lower than China's. The US funds are 1/20th the size of China's reserves. This just is too astonishing. One would think the Federal Reserve which is in charge of the FOREX reserves would discuss this issue and perhaps, venture to figure out the painfully obvious.

Just yesterday, the Europeans announced they would jawbone China into strengthening the yuan since the Chinese and of course, no one says a thing about this, the Japanese, hold a lot of euros and are using them to strengthen the euro against the yuan and the yen as well as the dollar.

From the IHT:

Mounting concern over the euro's strength against the dollar failed to translate into a common European strategy Monday, as finance ministers disagreed over how much to press Washington before a meeting of the Group of 7 industrialized countries next week.

French calls for central bank intervention to cut the costs borne by European exports failed to sway Germany's finance minister, Peer Steinbrück, who insisted publicly Monday that he loved "a strong euro."

The European union can't play the same currency games as the Chinese or the Japanese much less, even Russia who has collected over $500 billion and rising, in euros and dollars. Europe's FX money is all broken up and run by individual countries who hate each other's guts even more than most states in the US hate each other and that is pretty nasty. The Federal Reserve is broken into regional banks so it, too, is decentralized and thus, weak. And this is why they can only vote to do very limited things. One of which is, to decide the interest rates. And the chief thing they worry about is, will their friends make more money or will they suffer?

This is why we see rate drops like the ones this last month: aimed squarely at boosting Wall Street and wild speculative ventures, not stopping inflation or bringing any sense of stability or sobriety to the US markets. The euro is strong against the dollar because the Fed dropped interest rates. This is making it impossible for southern Europe to export to the US. But Germany doesn't care, they sell high-value exports so the weak dollar barely makes a scratch while it makes oil and energy purchases from Russia and the Middle East infinitely cheaper. So the Germans preserve their profit margins even if their exports drop. They certainly sell more the Saudi Arabia compared to the amount of oil they buy, than the US which runs a trade deficit with Saudi Arabia, unlike Germany who runs a profit.

Back to the Fed speech:

The roles and responsibilities of other public agents, domestic and abroad, and private market participants are particularly critical during times of financial turmoil. We are, after all, central bankers, not central planners.

The US and Europe are playing Monetary Poker with Asia who are playing Skeet Shoot the Western Bankers. So we throw down cards and they pepper us with bird shot. We keep doing this, yelling, 'OUCH! That HURTS!' And then we deal more cards while they reload with more lead balls. Instead of rising up in alarm and changing our systems to enable us to go toe to toe with Asia, we are marching around like the Seven Dwarves in Snow White singing, 'Hi ho, hi ho, it's time for China to raise the value of the yuan we go!'

According the the bank in Singapore, the DMS bank, China's FOREX reserves will be over $1.7 trillion in just one more year. This should scare us. It will be like playing skeet shooting using a cannon. When they nuke the world FOREX markets, will we then say, 'Damn! We should have saved more money'? The idea that no one in the US, not the banks nor the government or Federal Reserve should save anything has spread like wildfire. Instead of understanding we are in a new game with new rules, not even understanding we should follow the post-Great Depression rules, the US embarked in this bizarre and deadly venture of letting lenders run riot and letting speculators create all sorts of financial games that were forbidden after the Great Depression! Talk about insane.

The Federal Reserve:

So what is the role of a central bank like the Federal Reserve in fostering financial stability?2 Historically, episodes of financial instability and the sharp economic downturns that sometimes ensued were a driving force in the creation of the Federal Reserve itself. After earlier, sporadic, and ultimately less-than-successful attempts to create a central bank of the United States, the U.S. financial system found itself lacking an effective means to address the periodic financial crises that occurred in the second half of the nineteenth and in the early twentieth century. Against this backdrop, the Congress authored the Federal Reserve Act in 1913, creating the Federal Reserve System. It is worth emphasizing that the Federal Reserve's concern with financial stability stems largely from the adverse implications of financial instability for overall economic performance. The Fed's interest in promoting financial stability is thus intimately connected with its macroeconomic objectives: maximum sustainable employment and price stability.

From the founding of the Federal Reserve to the present, a key question confronts policymakers and market participants alike: What is financial stability? Perhaps it is better to address what it is not. In my view, financial stability does not demand a state of lessened financial market movements, a state of muted volatility. More often than not, financial markets process new information efficiently: If some unexpected news arrives, markets adjust, sometimes even sharply, and they should. These types of movements are healthy, even necessary. They serve to quickly bring prices in line with underlying fundamentals. And markets that move quickly and adroitly do not necessarily produce unstable financial conditions. Nor should those who take up the cause of ensuring financial stability protect individual investors or financial institutions from substantial losses or insolvency. To the contrary, a healthy and well-functioning financial system will tend to reward well-managed risk-taking and punish imprudence.

I am inclined to interpret the Federal Reserve's interest in promoting financial stability as a desire to foster conditions that favor sustainable growth and stable prices.

Pass Mr. Warsh another straight Bourbon shot glass! Boy, talk about drunken rambling. He wants stability but stability is boring. Risky is always much more interesting than Safety. Risky is a demon who comes from the dark caverns where money is created while Safety is an angel who believes in taking care of loved ones and not gambling, oh no! But she makes for 'muted volitility. No one can make an extra 500 basis points over if the loans are not risky enough! So the sober person who is careful with money is no good. There has to be risks. So when unexpected news arrises such as the news came on July 17th that the yen, instead of dropping to 130 to the dollar in October, was now rising in value, this caused markets to move real quick. But this was too fast for the Fed! Or Europe's central banks! They were not adroit but did a left footed stumble because of course, everyone was playing a very, very risky game based on the gamble that the yen would continuously drop against both the dollar and the euro.

So imprudence was punished and the response of the Fed and the Central Bankers in Europe was to save all the imprudent little imps who were playing with Risky while ignoring Safety. and Safety was ordered to live without a proper return on her savings. And off skipped Risky with her drunken buddies who are celebrating today.

From Bloomberg:

Wace, co-founder of the $17 billion hedge-fund manager Marshall Wace LLP, expects an ``absolute explosion'' in share prices globally as company profits increase.

Stocks ``offer phenomenal value,'' Wace said today at a conference in Milan. As some central banks lower interest rates, that will also help lift stocks, he said. Shares of the largest companies will benefit most, said the manager, whose MW Tops Fund Ltd. has returned about 18 percent a year since it started on Dec. 31, 2004, according to data compiled by Bloomberg.

There will be a ``massive splurge in major, liquid, large caps,'' Wace, 44, said. The money manager, whose firm bets on equities by compiling analyst research from 253 brokers worldwide, didn't say how much he expects markets to rise.

ARREST BERNANKE! ARREST ALL THE GUYS WHO VOTED FOR THESE RATE CUTS! They are accomplices in this bank robbery. If they can't figure out they made a very bad mistake, they now have proof. I predicted this! I also knew stocks would not fall this month because of the rash actions of the Federal Reserve that IGNORES the important things going on in Russia, Japan and China and instead, imagines all they must do is make stocks soar even if this means economic suicide. The pretense that they are also worried about inflation is fake.

We have had lots and lots of inflation thanks to the Federal Reserve. Only Volker tried to kill inflation and when he succeeded, the Federal Government went on a wild spending spree under Reagan. Just like when Clinton finally balanced the budget, Bush ran off and ran up record deficits with his irresponsible tax cuts.

From Breitbart:

Qatar's energy minister said crude oil prices, which have surged recently to record levels above 80 dollars a barrel, should be more than 100 dollars.

"If we take into account inflation from 1972 to the present day, the real and fair price for oil should be more than 100 dollars," Abdullah bin Hamad Al-Attiyah said in remarks aired by Al-Jazeera television on Tuesday.

When oil was only $8 dollars a barrel the dollar actually was a dollar more or less. During the 1960's, the Treasury and the Federal Reserve debased the currency. For 150 years, the governnment coins were real metals that were worth something. When I went to Europe in the sixties, I was astonished at the base metals used to represent smaller coins. In America, we used real copper, real silver, real nickel. Well, we still use nickel and copper but both are worth more, melted, than their face value. A reader sent me a story about someone winning a case whereby he could only be taxed according to the face value of his coins and not their true metal value.

The Federal Reserve's battle against inflation has been won by Inflation. In a mere 35 years, the price of oil should jump over 10X in order to keep up with inflation means inflation has been raging. And I know it has been raging. What an upper class $35,000 income bought in 1965 compares today to poverty-level living is astonishing, to say the least. If you live in NYC and make less than $100,000 a year, you live in the slums or struggle to pay your bills. And forget having children. A huge factor in the Alt-A housing collapse is how so many Americans, dual incomes, still couldn't buy houses within reasonable commuting to the cities. So many went way out on the limb to buy houses they could not afford

Back to the Fed speech:

Although these positive signs are acknowledged, financial conditions were clearly stressed in recent months. When markets do not clear and some large financial institutions withdraw from risk-taking, it is prudent for a central bank to take account of the impaired nature of market functioning. The specter of financial instability is heightened, and the prospect of harm to the overall economy is difficult to dismiss. The Federal Reserve responded to these developments by providing reserves to the banking system; it announced a cut in the discount rate of 50 basis points and adjustments to discount window practices to facilitate the provision of term funding. In the current episode, the disruptions in the structured finance, mortgage, leveraged loan, commercial paper, and interbank term funding markets made credit considerably less available for many households and businesses and thus, ultimately, represented a risk to the performance of our macroeconomy. As a result, the Federal Reserve took action to help forestall this risk, including the 50 basis points cut in the target federal funds rate on September 18.

As I keep saying, since fighing inflation is an utter failure, why bother? Why have interest rates? Japan doesn't have much of any! The simply don't hand out consumer loans! And this is how they run their little 'depression' there. The loans are strictly for big business and for the 'carry trade' that keeps the yen very weak. Why the Fed doesn't send out emissaries to figure out this little nasty riddle baffles me. I consider the 12 year run of sub-1% interest rates in Japan to be a historic first, a true 'incredible event' and one worthy of considerable interest.

And again, Mr. Warsh is lying. The 50 basis point drop didn't help homeowners. Most of them that have those stupid 'teaser' rates are paying only 2% or so! They certainly aren't going to be able to refinance at 2% if the Fed is offering loans at 3.75%, for example! The mess is already there. Adding to it by allowing more people to sign up for short-turn, low rate loans as mortgages is insanity. And then there is the Macroeconomy.

Pray tell, how has our Macroeconomy done in this last 35 years of inflationary instability? Why, our budget deficit grew from $1 trillion to $9 trillion. Our national state of indebtedness has gone from 60% to 110%. Our trade deficit has mushroomed, in the red every one of these years without any exceptions. And running at over $700 billion each year the last 5 years. It is what, over all? $12+ trillion? I don't know. It is huge. And worse, the Federal Reserve as well as the Treasury won't talk about this. In this dumb speech, the dumb banking officer doesn't mention any of this. He calls upon the idea of the 'macroeconomy' but doesn't hit his head and yell, 'Oh my god! It stinks! Everything is in the red!'

When I run through various banking figures that are international, ONLY the US is continuously in the red. The numbers mount and all of them have a minus in front. This is intolerable. This is disgusting. And it is treason to ignore this obvious fact. If the Fed exists to save our macroeconomy, then they should all be arrested and put into prison, not Ed and Elaine Brown, arrested for defying the courts concerning the paying of taxes. Ed and Elaine Brown don't have any responsiblity over creating inflation, creating speculative bubbles or controlling the macroeconomy.

The Federal Reseve:

On the basis of our most recent data, it seems that the runoff in outstanding commercial paper may be slowing. Similarly, there are some signs of stabilization in the leveraged loan market. Banks have been able to sell substantial parts of large deals to investors in recent weeks, and some collateralized loan obligations are coming to market. Issuance of speculative-grade bonds resumed somewhat of late. Still, the functioning of several markets continues to be strained, a condition which I would expect to continue for awhile. Consequently, my colleagues and I on the FOMC will continue to assess the effects that these and other developments could have on the prospects for the economy. We will rely not only upon economic modeling, but also real-time, forward-looking indicators to help inform our policy judgments.

OH GOODY GUM DROPS! Speculative CDOs are selling again! I can't wait to buy a bunch. And banks are no longer sitting on a huge nest of loans they foolishly granted to corporate raiders. Whoopee. And ain't the Fed happy as a drunk on shore leave now that good old 'speculative-grade bonds' are now selling like hot cakes again? And notice they are now happy and looking at forward-looking indicators to see if this confirms the wisdom of giving away more free money to speculators and cheats! Wow.

And you can bet, they will claim, when more jobs are outsourced, 'Look, there is no inflation!' And this is what passes for macroeconomic analysis at the Fed.

From Bloomberg:

Britain's Labour government may have difficulty maintaining its own limits on spending as the party seeks to improve poll ratings after Prime Minister Gordon Brown abandoned plans for an election this year, economists said.

``Calling off the election reinforces the idea that the government is very sensitive to polls,'' said Michael Saunders, chief western European economist at Citigroup Inc. in London. ``We are becoming more doubtful that the government will deliver the wider aim of establishing a politically sustainable route to fiscal virtue.''

The British empire can't help but be bankrupt. They have run up epic debts and are living beyond their means. And they will do more of this. For the wild-eyed spenders in the West to talk about 'fiscal virtue' is like a bunch of old whores discussing the state of their hymens. In a cheap London hotel.

From the Financial Times:

Investors will withdraw $500bn (£245bn, €355bn) – a quarter of the asset base – from hedge funds in the next year, leading to the collapse of a "large number" of hedge funds.

So spredicts Giles Conway-Gordon, managing partner of Cogo Wolf, a San Francisco-based fund of hedge funds, who believes investors are increasingly dissatisfied with industry performance, and that computer-driven quantitative hedge funds now simply run too much money to make healthy returns.

"I don't think it [the hedge fund industry] can support $2,000bn of assets. I think we are going to see large numbers of hedge funds go out of business, and rightly so," he says. "Hedge funds are supposed to avoid losses when things are bad, but there are very few that can break even then. I think a lot of them are not earning their keep.

Hedge funds hedged nothing. They all ended up doing similar things and these things were all very risky because they lost their original function which was to be quiet and safe and not bring big returns BUT when things go bad, they kick in and make profits so one could always have a money flow, more or less. But since investors always want money flows, they had to be just like other funds and generate huge profits in good times as well as bad so they were nothing but mirrors of the risky systems that only work in up markets not down markets.

Now they are falling apart. The free money might save them but at a very high cost: lots of inflation and financial instablity shoved further in the the future and a continuation of a mass of irritable investors seeking to make maximum profits betting on risky things. They are migrating heavily into the FOREX markets whereby the value of money itself relative to each other, is a chief investment for trillions of dollars.

And this is extremely destabilizing and risky especially when Asian giants like Japan and China are holding most of the FX cards in the form of giant FOREX reserves! Since China is in a gambling mood, I expect them to pretty much run the FX gambling casino which was their plan long ago, anyway. This will be amusing. And a sharp lesson to the US which simply plops more chips on the table while letting China and Japan deal the deck.

From the Bangkok Post:

Thailand's exports in the fourth quarter are expected to show the slowest growth in 22 quarters due to lower purchase orders in key markets and a strong baht, the Thai Chamber of Commerce believes.

See? Poor little Tailand has a strong currency. Powerful China and Japan don't. How obvious is this? India is madly playing catch up right now, building its own FOREX reserves but the rupee has gone up and up and up against the yen. China and Japan are shoving our inflation onto all other currencies of the world and this is creating a FX bubble that will pop like all such things. And destroy the world banking system. Note how it nearly was destroyed when China began to force the yen up in value. I warned the G7 dwarves, if they attack China yet again about the yuan while leaving the yen alone, they will get their little balls squeezed again. And the Fed dropping rates won't fix that baby, no, not at all.

So, after next week, it will be time for more predictions. The prenuptials for this pretty little meeting already feature lots of dragon bashing. But China isn't ready to retaliate, not yet. After the Olympics! So we get one more year of fun. If we don't irritate China too much.

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Comments

[mark1147]

I well remember the dollar debasement of 1965 -- the year the silver in U.S. quarters and half dollars was reduced from 90 percent to about 40 percent. (The silver content in coins was reduced yet again in the early 1970s, and for the same reason -- to up the seignorage [the difference between a coin's melt and face values, which appears as a credit on govt. books] and help finance the Vietnam war without having to raise taxes much in the short term.)

It wasn't enough -- eventually LBJ had to call for a 10 percent income tax surcharge in 1968, which Congress did approve. Even that wasn't enough -- war spending fed inflation so much that Nixon had to impose wage and price controls for years, and then abandon the $35/oz. gold price.

The 1965 debasement caused elderly folks, who'd seen a thing or two in their day, to start hoarding the 1964 and earlier coins.
And sure enough these older coins disappeared from circulation in quantities sufficient to cause a coin shortage by 1967-68!

I remember older friends of my parents, who were about 20 years older than them (and thus in their prime workforce years during the Depression), being very worried by the 1965 debasement and immediately beginning a substantial hoard. (If they were as savvy as I think they were, they sold it in the mid-1970s when the Hunt brothers, those Texas cronies of the Bushes, Perot, and the rest of the military-industrial-oil crowd, tried to corner the silver market and pushed that commodity's price to previously unseen levels.)

[Elaine Meinel Supkis]

Mark, you are right. We hoarded all silver, too. There was even a penny shortage for a while. And yes, people melted coins (obviously) which is why there are laws against this. Like all laws written so a government can cheat people, the law is dead wrong. This is why I warn people holding gold coins to beware: they can get jerked around by the law in a heartbeat and they will be jerked around brutally if the Fed needs to do this to stay afloat.

[JSMith]

"I was very irritated to see the near-Japanese level of the interest rates being offered for my savings."

Interest reflects risk. Your savings aren't at risk, hence the squat-diddly interest rate.

Back in the days before the Great Debacle in the 1980s, S&Ls were managed by the "3-6-3 Rule": pay 3% on deposits, charge 6% on loans, and be on the first tee at 3PM.

[Neuro Artist]

That is not unlikely at all. After all it did happen before that gold was confiscated. Here is an interesting scenario: the short sellers are unable to physically deliver the gold they have sold on the exchange (after going bankrupt following a steep rise in the gold price), the gold price plumets on the exchange (since the buyers don't know if they are going to get delivery), the physical gold sellers will not know what price to charge, since there is no functioning gold market price setter any longer. The goverment decides to 'help' the physical holders off their gold by offering the last bid price on the 'market', which they just print some new notes for, and they make it illegal to privately hold and trade gold (not so difficult since there is no functioning gold market anyway, they can use that excuse anyway).

[Elaine Meinel Supkis]

Smith, do you deliberately do stupid or is this sincerely the result of some strokes or other brain damage?

If my money in savings is LOSING PURCHASE VALUE, I am being robbed.

Thank you.

Neuro Artist: you are correct. If I wanted to make lots of money here, all I have to do is have a solution that is fake and the gold solution is just that: utterly hopeless in the end.

It is much worse than mere money games: whoever is holding physical gold and I emphatically include in the mouth like I have a gold bridge that was put in just before the price of gold shot up. It is worth several thousand dollars. Heh.

The Nazis yanked out this gold! The Khamer Rouge bashed this gold out of people's mouths with rocks! I mean, people with guns and power will steal gold literally from one's mouth. So hanging on to gold when things go bad works only if you have your own militia. Ask the Iraqis about this!

[JSmith]

Elaine, do you deliberately do stupid or is this sincerely the result of some strokes or other brain damage you incurred back in the fun-filled Sixties? If your money in savings is losing purchasing value you need to find a HIGHER-PAYING INVESTMENT than a savings account.

(I'm surprised I have to tell you this.)

[DeVaul]

So, how many of those CDO's paying a higher rate of interest do you own, Smith? None? No doubt you have figured out how to beat the 10 to 12% inflation raging across America with your better investments.

I personally do not believe there are any safe investments in the current situation. They all have serious flaws, even the gold coin ones, which will be yanked from the poor at gunpoint.

This is why I keep as little money in the bank as possible. On my income, it is not too difficult, I admit. But still, if I did have more money, I would spend it. Quickly.

[Not Student]

it seemed that the People is in a bind.

If you put money in the bank, you get robbed by the low interest rates. If you seek higher returns on risky financial schemes, you risks losing all your savings. If you don't trust in saving nor investment, you spend, thus playing right into the hands of the elites who want Americans to be the ultra consumers (Think force fed livestock before they are slaughtered).

In all cases, the Elites (Certain Sachman to be certain) wins and the people lost. I can see no way out.

Ain't a pretty sight.

I agree with Elaine that the only FAIR thing to do now is to increase interest rates, but that will cause a serious meltdown in other financial instruments like all your beloved CDOs and Wall Streets. So it's hard to tell which is the greater evil.

Actually the SANE thing to do is for the American consumers to reduce their consumption rates to global PPP average, but that will likely cause global depression and might destroy USA as a viable economy model. It might be better in a LONG run, but I doubt many people can stomach that.

[Not Student]

of course I forgot to mention the obvious: Increase the income tax for the riches! Those CEOs that rake in millions a year should be taxed exponentially higher that the poor who get by with less than 50,000 a year.

But since they control the government, it is not going to happen. And there will be further tax cut for THEM. So you have a upside down system over there.

[Elaine Meinel Supkis]

And close down all those British Crown tax havens and arrest Bush and Cheney and Halliburton executives, etc. Terminate their rule!

Note my next article is all about tax havens and how both the Repubs and Dems protect them, alas.

[JSMith]

">So, how many of those CDO's paying a higher rate of interest do you own, Smith? None?"

Correct. There are other investments besides CDOs.

"This is why I keep as little money in the bank as possible."

So where do you keep it then - in a coffee can under the tool shed?

"They all have serious flaws, even the gold coin ones, which will be yanked from the poor at gunpoint."

We're not paranoid or anything, are we?

"...the poor who get by with less than 50,000 a year."

"Poor" is "getting by" on less than $50K/year? Yep - that's just scraping by, all right...

[DeVaul]

Well, in my case, "spend" means food, housebills, and debt payments with the occasional gift or whatnot thrown in.

My coffee can is not hidden, but it does not contain much in the way of higher denominations.

As for paranoid, being humiliated in a court of law is a great way to find out just how powerful the government is and to what extent it will go to get its way.

[Elaine Meinel Supkis]

Smith must live in one of those poor, depressed red states.

Smith, $50,000 a year in NYC buys a small closet and eating hot dogs from street carts.