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  • From: bob ford <bobford79 AT yahoo.com>
  • To: cayadopi AT yahoo.com, homestead AT lists.ibiblio.org
  • Subject: Re: [Homestead] Depression first?
  • Date: Sun, 7 Dec 2008 15:54:14 -0800 (PST)

Leslie, post 'your' commentary on what all of that means, 'your' conclusion,
if you please.....................

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--- On Sun, 12/7/08, Leslie <cayadopi AT yahoo.com> wrote:

> From: Leslie <cayadopi AT yahoo.com>
> Subject: [Homestead] Depression first?
> To: homestead AT lists.ibiblio.org
> Date: Sunday, December 7, 2008, 4:51 PM
> Whoa nellie........... and here I thought it would be
> hyper-inflation first...
>  
> The below are excerpts from the first 1/3 of the 3rd hour
> radio show dated
> 12/6/2008 at financialsense.com
>  
> Puplava/Loeffler discuss:  Big differences between
> recession & depression.
>  
>  
> NORMAL RECESSION CYCLE
> ·         Recession is a contraction in GDP,
> ·         Recession – the contraction in GDP is
> brought about due to raising interest rates and a slowdown
> in the economy, then the Fed comes in a cuts interest, it
> reduces debt burdons, re-fi becomes easier, and as credit
> becomes more available, the economy is stimulated, and
> stimulates buying.
> ·         This buying brings the recession to a
> halt and the economy bounces up again
>  
> DEPRESSION
> ·         Key point to understand is that a
> depression is all about excess debt and a de-leveraging
> process that results.  (How many times have we heard
> “deleveraging in the past year?  This is exactly what is
> going on.)
> ·         As people de-leverage, they sell assets
> that were purchased with debt.  As they sell those assets,
> the asset values decline.
> ·         The more asset values decline – credit
> become tighter.
> ·         As credit becomes tighter, you get an
> economic contraction.
> ·         However, in a depression the traditional
> monetary responses used in a recession cease to work and
> more and more asset comes in to play, more de-leveraging,
> more margins calls and it becomes a self feeding cycle. 
>  
>  
> The current events of the past year are more reminiscent of
> a depression than a recession because the typical remedies
> that have been used by central bankers over the past 50-60
> years clearly are not working.
>  
> Recession v Depression isn’t just about the level of
> economic growth, but a shift in the actual environment where
> the rules are all changing.
>  
>  
> LOOKING AT A DEPRESSION
>
> It is a de-leveraging process
> Wealth destruction
> Economy declines
> All prices falling together
> Assets fall and debt becomes worth more (a greater % of
> asset). Servicing debt becomes more expensive, and
> stimulates more selling.
>
>  
>  
> The first part to get hit was the financial sector, Feb
> 2007, then again Aug 2007.
>  
> 3 parts to the economy:
>  
> Manufacturing
> Service
> Financial
>  
> Up until recently, approx this summer, most of the
> contraction was hitting the financial section:  real
> estate, mortgage, banking system, Wall Street, insurance
> companies.
>  
> Underlying difference between recession and depression is
> debt levels and the magnitude of de-leveraging.
>  
>  
>  
> Typical response to recession stops working.
>  
> We’ve had a series of unconventional moves that shows
> that the Fed’s traditional methods of combating a
> recession have failed, and that they have move to depression
> battle mode:
>  
>
> Term Auction Facility
> Asset Swaps
> Loans to Securities Dealers
> Shotgun mergers of brokerage firms
> Swap lines to European Banks
> Fed back-stop commercial paper market
> Fed back-stop money market funds
> Fed nationalization of FNM and FRE
> Projected to see the Fed nationalize part of the banking
> system, similar to Swedish model.
>  
>  
> Now all kinds of consumers and companies lining up for a
> hand-out also.
>
> Hints of the Fed buying up consumer debt
> Auto makers lining up
> etc
>  
> This is giant amounts of money .  Where is all this money
> going to come from?
> Out of thin air. 
>  
> How much money?  So far?
>  
> Rescue Fnds:  8.5 Trillion committed so far, they’ve
> actually issued and spent 3.2 Trillion so far.
>  
> The size and magnitude of this monetization is illustrated
> here, which will eventually show up as inflation (a day of
> reckoning).  Article on Friday that thoughts of deflation
> might be coming to an end given the size and magnitude of
> monetization going on.
>  
> This is what the Fed has committed (the taxpayers) to as of
> 11/30/08:
>  
>
>  1.8 Trillion - Commercial Paper
> 900 Billion - Term Auction Facility
> 606 Billion – Other Assets
> 600 Billion - Finance Company Debt Purchases
> 540 Billion - Money Market Facilities
> 291 Billion - Citigroup Bailout
> 250 Billion - Term Security Lending
> 200 Billion - Term Asset Backed Loan Facilities.
> 123 Billion - Loans to AIG
>   92 Billion - Discount Window Borrowings
>  62 Billion - Commercial Program #2
>  50 Billion - Discount Window Program #2
>  29 Billion - Bear Stearns Bailout
>  10 Billion -Overnight Loans
> 118 Billion -Secondary Credit
>  
> Total so far 5.5 Trillion so far of which 2.1 Trillion has
> been used.
>  
>
> 1.4 Trillion - FDIC commitment / loan guarantees
> 139 Billion - Guarantees on GE Capital
>  10 Billion – another infusion to Citigroup
> 700 Billion - TARP  - Troubled Asset Relief Program
> 168 Billion - Stimulus Package earlier this year
>  50 Billion - Exchange Stabilization Fund
>  29 Billion - Tax Breaks for Banks
> 300 Billion - Hope for Homeowners July 08
>  
> 8.5 Trillion…. And this doesn’t include next year’s
> stimulus program…. 500-700 Billion.
>  
>  
> Citizens are getting more and more torqued about Wall
> Street getting a free ride.
>  
> Congress now talking about buying down mortgages.
> Driving down interest rates for home purchases down to
> 4.5%.
>  
> These things were all predicted, “When Money Dies”.
>  
> The size and scope of the programs tell you this is NOT an
> ordinary recession.  It is more like a depression.
>  
> ’29 Depression versus now.
>  
> Then the government tried to get the depression to end via
> intervention.
>
> FDR came in, declared a bank holiday, came back with the
> FDIC.
> FDR severed the dollar from gold, which allowed step 3
> FDR started the monetization process
>  
> Today, we have similar events that further hint that we are
> in a depression:
>
> The Fed came in and raised the FDIC limits from 100K to
> 250K insurance.
> The Fed is artificially suppressing the price of gold.
> The Fed is printing money like crazy and down the road…
> “The Nuclear Option” coming at some point, will be
> devaluation of the dollar.
>
>
>
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