Capitol Hill Blue Forums Political Issues Finance, the economy & Economics How will the financial crisis develop?

UTTER HYPOCRISY...proof once again that there is no such thing as a free market and there never has been. It's a fantasy.

Ever since the beginning of the financial crisis and quantitative easing, the question has been before us: How can the Federal Reserve maintain zero interest rates for banks and negative real interest rates for savers and bond holders when the US government is adding $1.5 trillion to the national debt every year via its budget deficits? Not long ago the Fed announced that it was going to continue this policy for another 2 or 3 years. Indeed, the Fed is locked into the policy. Without the artificially low interest rates, the debt service on the national debt would be so large that it would raise questions about the US Treasury's credit rating and the viability of the dollar, and the trillions of dollars in Interest Rate Swaps and other derivatives would come unglued....
There is a limit to how many stupid mistakes and corrupt financial policies the rest of the world is willing to accept from the US. When that limit is reached, it is all over for "the world's sole superpower" and for holders of dollar-denominated instruments....
The US government should simply cancel the $230 trillion in derivative bets, declaring them null and void. As no real assets are involved, merely gambling on notional values, the only major effect...would be to take $230 trillion of leveraged risk out of the financial system.

So that is the beginning... Coming, the new world structure and direction in:

Money and Banking
Education
Law and Regulation
Government responsibility to the people
Proactive taxation takes place of Income Tax
Underclass control
Abrogation of international government debt
Cancellation of selective Government Obligations:
--- Healthcare
--- Social Security
--- Federal bonds
Continuation of personal debt obligation

Getting back to the derivative crisis; to resolve it, and to save the worldwide economy, Obama must assume FDR-like powers, something he has seemed reluctant to do so far, despite his mandate to do so. The first thing he should do is to declare all derivatives placed outside of legally regulated markets (90% of them are unverified contracts) null and void....
This is as fair as things can be made given where we are. Right now, this enormous sum is only good for driving companies into bankruptcy and tying up the courts for years while the "winners" of these bets squabble over the crumbs of the bankrupt companies. This is already happening with creditors fighting over the last crumbs of Lehman Brothers. This is a pointless and destructive squabble and the administration must act to prevent years more of these.

If the parties object to the elimination of their derivative bets, they should be reminded of the penalty for fraud.

Already there is evidence of central banks and individuals moving out of dollars into gold and silver bullion and into other currencies of countries that are not hemorrhaging debt and money....The world is abandoning the use of the dollar to settle international accounts, and the demand for dollars is falling as the Federal Reserve increases the supply of dollars....
...the Federal Reserve can create new money with which to purchase the dumped financial instruments, thus maintaining their prices. [b]But the Federal Reserve cannot print gold or foreign currencies with which to buy up the dollars that foreigners are paid for their US stocks and bonds. When the dollars in turn are dumped, the exchange value of the dollar will collapse, and US inflation will explode.

For a number of years I have pointed out that the problem is the loss of US employment, consumer income, GDP, and tax base to offshoring. The solution is to reverse the outward flow of jobs and to bring them back to the US...by taxing corporations according to where they add value to their product. If the value is added abroad, corporations would have a high tax rate. If they add value domestically with US labor, they would face a low tax rate....
The second part to the solution is to end the expensive unfunded wars that have ruined the federal budget for the past 11 years....
No one in the White House and no more than one dozen members of the 535 member US Congress represent the American people. This is the reason that, despite obvious remedies, nothing can be done. America is going to crash big time.
And the rest of the world will be thankful. America along with Israel is the world's most hated country. Don't expect any foreign bailouts of the failed "superpower."

For a number of years I have pointed out that the problem is the loss of US employment, consumer income, GDP, and tax base to offshoring. The solution is to reverse the outward flow of jobs and to bring them back to the US...by taxing corporations according to where they add value to their product. If the value is added abroad, corporations would have a high tax rate. If they add value domestically with US labor, they would face a low tax rate....
The second part to the solution is to end the expensive unfunded wars that have ruined the federal budget for the past 11 years....
No one in the White House and no more than one dozen members of the 535 member US Congress represent the American people. This is the reason that, despite obvious remedies, nothing can be done. America is going to crash big time.
And the rest of the world will be thankful. America along with Israel is the world's most hated country. Don't expect any foreign bailouts of the failed "superpower."

There is something about appealing to people's anxieties about money....