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rookie
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 Re:


Paper Skyscrapers
The long road to fiscal responsibility
BY TONY ALLISON

The numbers thrown around during the ongoing credit crisis are so large; they effectively lose their meaning to most of us. I would like to put the millions, billions and trillions in some perspective by referring back to an article I wrote years ago (The Debt Bomb) about our growing debt problems. Unfortunately our debt has only worsened since 2004, and many of the issues are even more relevant today. The example provides some clarity to how large one trillion is, and how long a road we must still travel to become a fiscally responsible nation again.

Warren Buffett For a Day

Most of us hear billions and trillions tossed around and our eye’s glaze over, unable to grasp the enormity of the numbers. However, suppose you were Warren Buffett for a day, and drove to your favorite bank to retrieve one million dollars, in crisp thousand dollar bills. The tightly wound stack would be about 4 1/2 inches high. You could stuff it in a small bag and off you go.

If you decided to withdraw a billion dollars (in thousand dollar bills), it would stack over 365 feet high, roughly the height of a small skyscraper. You would need a large, and well-guarded, truck to haul it home. A trillion dollars is another story, even beyond the reach of Warren Buffett’s savings account. A trillion dollars would stack 69 miles into the blackness of suborbital space, beyond the sight of the human eye, and perhaps the human imagination. A trillion is a ridiculously large number, even in today’s over-inflated, derivative-addled markets.

200 Years to One Trillion

Our federal financial obligation is so big that it is hard to fathom. From the beginning of our nation in the late 18th century until the mid 1970’s, roughly 200 years, our accumulated National Debt was less than one trillion dollars. This takes into account the Revolutionary War, the Civil War, two World Wars, the Great Depression, the Korean War and Vietnam. Today our federal debt is now $9.3 trillion, over half of which has been borrowed in the last dozen years. Today that debt, in thousand dollar bills, would reach well over 655 miles into space. Mount Everest only reaches 5.5 miles into our atmosphere. Mount National Debt is over 119 times higher!

While it took 200 years of American history to reach one trillion dollars in national debt, it took only six years to build our debt from five trillion to six trillion dollars. Incredibly, in less than two years the National Debt soared another trillion dollars, reaching seven trillion in January 2004. By September 2007, the National Debt surpassed nine trillion dollars. Do you detect a frightening trend here? The curve is accelerating as new debt is rapidly created and annual interest payments compound, already exceeding $400 billion. At the current rate, each and every day adds $1.5 billion more, or 1 1/2 new paper skyscrapers to the thousands already inhabiting our National Debt skyline. Printing more dollars appears to be the only way in the short to medium term to keep the ship of state afloat. Looming longer term this century, beyond the current National Debt, are unfunded federal mandates for Social Security and Medicare that exceed $70 trillion. These skyscrapers may one day reach the moon.



Stimulus Life Rafts

As the government debt skyscrapers multiply, so do those of its citizens. Americans owe more than $950 billion in credit card debt, and $1.6 trillion in auto loans and other non-revolving debt. As our nation has evolved into a consumer economy, Americans have evolved into a state of chronic credit addiction. Clever financial engineering and declining interest rates have kept the party going for 25 years, but the lights are dimming and a hangover looms ahead. Rising personal debt service and the bursting of the housing ATM are putting tremendous pressure on the middle class. The weakening dollar, a result of our decades of consuming more than we produce, makes the basic food and energy needs of Americans ever more expensive. The government “stimulus” package will be welcome, but it is a band-aid approach in an election year. Expect more stimulus packages from Washington dropped from the sky as life rafts to its debt-burdened populace.

Debt Compounds on Debt

The debt is not going to magically go away. Debt compounds on debt and just grows faster. And a severe recession will mean less tax revenues, and yes, even more debt. This problem was decades in the making and will not be solved easily, quickly or without pain. Perhaps that’s part of the problem itself. During the credit expansion bubble of the last 25 years the culture seems to have evolved to the point where everyone feels deserving of cars, houses, clothes and travel, right now, without the onerous task of earning or saving the money first.

Politicians, ever diligent to the wind direction, have become terrified of even suggesting belt tightening or self-discipline in any form. They have rapidly expanded government spending without regard to future consequences. “It’s morning in America” they proclaim. We are such a great nation that we no longer have to manufacture anything, or even save for a rainy day. “We are now a consumer economy, so do the patriotic thing and go shopping!” (on borrowed money of course).


Trade Deficit Blues

In addition to the National Debt of $9.3 trillion, there is the chronic trade deficit, totaling $700 billion in 2007, the result of importing much more than we export. That number came down a bit last year as our declining dollar helped boost exports. Unfortunately, as long as we import 70% of our energy needs, the trade deficit will not go away. Our manufacturing base is no longer large enough to export us to “creditor nation” status.

The long term trade deficit is perhaps the most alarming debt skyscraper of all. As the world’s largest debtor nation, we are steadily transferring our nation’s “net worth” abroad. And with our national net worth increasingly owned by foreign sources, our ability to act as an independent, sovereign nation is undermined as well.


Squandersville and Thriftsville

Warren Buffett wrote about this issue in Fortune Magazine back in late 2003. He used the fictional example of two islands, Squandersville and Thriftsville, to illustrate how persistent trade deficits ultimately take a great toll. Even though the US dollar has eroded significantly since Buffett’s article was published, the trade deficit is still roughly 5% of GDP. In the following excerpt, Buffett clearly explains the dilemma in which we now find ourselves.

“Simply put, after World War II and up until the early 1970’s we operated in the industrious Thriftsville style, regularly selling more abroad than we purchased. We concurrently invested our surplus abroad, with the result that our net investment, our holdings of foreign assets less foreign holdings of US investments, increased from $37 billion in 1950 to $68 billion in 1970.

Additionally, because the US was in a net ownership position with respect to the rest of the world, we realized net investment income that, piled on top of our trade surplus, became a second source of investable funds. Our fiscal situation was thus similar to that of an individual who was both saving some of his salary and reinvesting the dividends from his existing nest egg.

In the late 1970’s the trade situation reversed, producing deficits that initially ran about 1% of GDP. That was hardly serious, particularly because net investment income remained positive. Indeed, with the power of compound interest working for us, our net ownership balance hit its high in 1980 at $360 billion.

Since then, however, it’s been all downhill, with the pace of decline rapidly accelerating in the past five years. Our annual trade deficit now exceeds 4% of GDP (5.1% of GDP in 2007). Equally ominous, the rest of the world owns a staggering $2.5 trillion more of the US than we own of other countries. Some of this $2.5 trillion is invested in claim checks, US bonds, both governmental and private, and some in such assets as property and equity securities.

In effect, our country has been behaving like an extraordinarily rich family that possesses an immense farm. In order to consume 4% more than we produce, that’s the trade deficit, we have, day by day, been both selling pieces of the farm and increasing the mortgage on what we still own.

To put the $2.5 trillion of net foreign ownership in perspective, contrast it with the $12 trillion value of publicly owned residential real estate or what I would estimate as a grand total of $50 trillion in national wealth. Those comparisons show that what’s already been transferred abroad is meaningful, in the area of 5% of our national wealth.

More important, however, is that foreign ownership of our assets will grow at about $500 billion per year at the present trade deficit level, which means that the deficit will be adding about one percentage point annually to foreigners’ net ownership of our national wealth. As that ownership grows, so will the annual net investment income flowing out of this country. That will leave us paying ever-increasing dividends and interest to the world rather than being a net receiver of them, as in the past. We have entered the world of negative compounding. Goodbye pleasure, hello pain.”

In the article, Buffett suggests a tariff system of “import certificates” to force a dollar for dollar trade balance between imports and exports. It appears the plan was never acknowledged by the current administration.

It is interesting to note that the US behaved much like Thriftsville until the early 1970’s according to Buffett. In 1971 the US went off the gold standard and the dollar became a fiat currency subject to unlimited Fed printing power. Perhaps this was just a coincidence, perhaps not.



(end of partial article)

How foolish we have been since 1980....

In Christ
Jeff


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Jeff Marshalek

 2008/4/28 21:48Profile
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Joined: 2003/6/3
Posts: 4790


 Re:

Bernanke-Geithner `Rogue Operation' Spurs Further Bailout Calls

By Craig Torres

May 2 (Bloomberg) -- A month after the Federal Reserve rescued Bear Stearns Cos. from bankruptcy, Chairman Ben S. Bernanke got an S.O.S. from Congress.

There is ``a potential crisis in the student-loan market'' requiring ``similar bold action,'' Chairman Christopher Dodd of Connecticut and six other Democrats wrote Bernanke. They want the Fed to swap Treasury notes for bonds backed by student loans. In a separate letter, Pennsylvania Democratic Representative Paul Kanjorski and 31 House members said they want Bernanke to channel money directly to education-finance firms.

Student loans are just the start. Former Fed officials and other Fed-watchers say that Bernanke's actions in saving Bear Stearns will expose the central bank to continuing pressure to use its $889 billion balance sheet to prop up companies or entire industries deemed important by politicians.

``It is appalling where we are right now,'' former St. Louis Fed President William Poole, who retired in March, said in an interview. The Fed has introduced ``a backstop for the entire financial system.''

Critics argue that the result will be to foster greater risk-taking among investors emboldened by the belief that the government will bail them out of bad decisions.

The Fed's loans to Bear Stearns were ``a rogue operation,'' said Anna Schwartz, who co-wrote ``A Monetary History of the United States'' with the late Nobel laureate Milton Friedman.

`No Business'

``To me, it is an open and shut case,'' she said in an interview from her office in New York. ``The Fed had no business intervening there.''

There are already indications that investors perceive the safety net to be widening as a result of the actions by Bernanke, 54, and New York Fed President Timothy Geithner. The Bear Stearns bailout and an emergency facility to loan directly to government bond dealers triggered a decline in measures of credit risk for investment banks and for Fannie Mae, the Washington-based, government-chartered company that is the nation's largest source of funds for home mortgages.

Yield differences between Fannie Mae's five-year debt and five-year U.S. Treasuries have fallen to 0.55 percentage point, from 1.15 percentage points on March 14, the day the Fed's Board of Governors invoked an emergency rule to lend $13 billion to Bear Stearns.

``The market understood that this is the method by which Fannie Mae and Freddie Mac could be bailed out if necessary,'' Poole said.

Wall Street Impact

The cost of default protection on Merrill Lynch & Co. debt fell to 1.4 percentage point by April 30 from 3.3 percentage points on March 14, CMA Datavision's credit-default swaps prices show. The cost of protection on Lehman Brothers Holdings Inc. securities has fallen to 1.5 percentage points from 4.5 percentage points over the same period.

Fed Board spokeswoman Michelle Smith declined to comment, as did New York Fed spokesman Calvin Mitchell.

On March 16, two days after the Fed provided its Bear loan, it agreed to finance $30 billion of the firm's illiquid assets to secure its takeover by JPMorgan Chase & Co.

The Standard & Poor's 500 Financials Index had lost 12 percent in the three weeks prior to March 14; Geithner defended the loans before the Senate Banking Committee on April 3, saying that the Fed needed to offset risks posed to the entire financial system.

A systemic collapse on Wall Street would also mean ``higher borrowing costs for housing, education, and the expenses of everyday life,'' Geithner, 46, said.

While the Fed must by law withdraw its financing backstop for investment banks once the credit crisis passes, investors will probably still bet on its readiness to intervene.

Genie's Out

``There is no way to put the genie back in the bottle,'' Minneapolis Fed President Gary Stern said in an interview with Fox Business Network on April 18. ``What worries me most about where we wind up is that we will have an expansion of the safety net without adequate incentives to contain it.''

Stern noted that he supported the Fed's moves to restore financial stability.

Fed Board officials haven't explained in detail how they plan to curtail moral hazard, the danger of encouraging investors to take on more risk out of confidence in a rescue.

``It is very hard in the middle of a crisis to know where to draw lines,'' said Harvard University professor Kenneth Rogoff, a former research director at the International Monetary Fund. ``They reduced the immediate risk of a crisis, but upped the ante of raising the possibility of a bigger crisis down the road.''

Congressional Debate

Lawmakers plan to debate the management of risk and role of supervisors in coming weeks and months. House Financial Services Committee Chairman Barney Frank said April 23 that new rules are needed to deal with a lack of regulation of risk.

Geithner told Congress April 3 that the direct lending needs to be complemented with ``a stronger set of incentives and requirements for the management of liquidity risk.''

The risk to the Fed is that it is routinely asked to step in and support insolvent companies whose creditors are on the run, economists say.

``Discount-window accommodation to insolvent institutions, whether banks or nonbanks, misallocates resources,'' Schwartz said in a 1992 lecture available on the St. Louis Fed Web site. ``Institutions that have failed the market test of viability should not be supported by the Fed's money issues.''

`Moral-Hazard Problem'

Richmond Fed chief Jeffrey Lacker and policy adviser Marvin Goodfriend wrote in a 1999 paper that central bank lending creates ever-expanding expectations. ``The rate of incidence of financial distress that calls for central bank lending should tend to increase over time,'' they wrote. That ``creates a potentially severe moral-hazard problem.''

Whatever regulations and incentives the Fed tries to put in place now would be evaded by the market's innovation of new types of products, Goodfriend said in an interview. Investors would nonetheless still count on the safety net, he added.

``We have to start now to recognize the strategic instability of the path we are on,'' said Goodfriend, now a professor at Carnegie Mellon University's Tepper School of Business in Pittsburgh. The Fed needs to prepare markets for how it won't intervene, which it didn't do before the Bear Stearns meltdown, he said.

The Fed also influenced market incentives last month when it introduced the so-called Term Securities Lending Facility. The program is designed to lend up to $200 billion of Treasury securities from the Fed's holdings to Wall Street bond dealers in return for commercial and residential mortgage bonds among other collateral. Congress has noticed the program favors mortgage credits, and Dodd has asked the Fed to swap some of its $548 billion in Treasury holdings for bonds backed by student loans.

Back to Congress

Bernanke rejected Dodd's request in an April 25 letter, saying it's up to Congress and the Bush administration to address diminishing profits on the loans. He didn't explain why the Fed is reluctant to swap Treasuries for bonds backed by student loans.

``If there is a public purpose in lending to investment banks, and taking dodgy mortgage securities as collateral, then it is a question of degree about other potential lending,'' Vincent Reinhart, former director of the Fed board's Division of Monetary Affairs, said in an interview. ``That's the consequence of crossing a line that had been well established for three- quarters of a century.''


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Jeff Marshalek

 2008/5/2 12:32Profile
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Joined: 2003/6/3
Posts: 4790


 Re:

Bernanke: Foreclosure woes require action
Price declines have become one of the biggest contributors to high default rates, Fed chief says. Stopping foreclosures is in 'everybody's interest.'
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See all CNNMoney.com RSS FEEDS (close) By Les Christie CNNMoney.com staff writer
Last Updated: May 6, 2008: 6:40 AM EDT


Fed Chairman Ben Bernanke said 'traditional' approaches to current foreclosure crisis may not be good enough.

NEW YORK (CNNMoney.com) -- The wave of foreclosures sweeping the nation are driven in part by a nearly unprecedented decline in home prices and require a concerted government and private-sector response, Ben Bernanke, chairman of the Federal Reserve, said Monday.

"Realistic public- and private-sector policies must take into account the fact that traditional foreclosure avoidance strategies may not always work well in the current environment," Bernanke said in a speech before the Columbia School of Business.

Bernanke's comments come as concern about the housing crisis and debate about how to help homeowners in trouble is growing.

Foreclosure filings of all kinds - delinquency notices, auctions sale notices and bank repossessions - were up 112% during the first three months of 2008 compared with the same period a year ago. Community advocates and policy makers are worried that the problem will worsen as the interest rates on as many as 1.8 million mortgages reset this year.

"High rates of delinquency and foreclosure can have substantial spillover effects on the housing market, the financial markets, and the broader economy," concluded Bernanke. "Doing what we can to avoid preventable foreclosures is not just in the interest of lenders and borrowers. It's in everybody's interest."

In explaining the forces behind the problem, Bernanke cited the "increasing role" of declines in home values. He unveiled a series of "heat maps" that showed delinquency rates, job losses and home price changes.

Unemployment statistics, according to Bernanke, do not explain the increased delinquencies of many areas, including California, Florida and parts of Colorado, where foreclosure filings have increased even when unemployment generally have fallen.

More revealing was the close correlation between declining home prices and high delinquency rates. On the home price decline map, states like California and Florida were drenched in red, indicating the worst losses. On the map revealing the highest foreclosure rates, the same states were also covered in red.

Piggy-back problems
Bernanke pointed to the use of so-called piggy-back loans in helping drive foreclosures. These loans, which required low down payments or none at all, were used with increasing frequency during the bubble years to enable borrowers to purchase homes in high-priced states.

Because of price drops, many of the borrowers are now "upside-down," meaning they owe more than their homes are worth. Many of the owners had counted on the idea that their home values would continue to soar, increasing their home equity, which they could then tap to pay their bills. Now, they can't afford to pay off their mortgages and they have no assets to rely on.

In the past, said Bernanke, lenders and companies that service loans were "used to dealing with mortgage delinquencies related to life events such as unemployment or illness. . . . A widespread decline in home prices, by contrast, is a relatively novel phenomenon, and lenders and servicers will have to develop new and flexible strategies to deal with this issue."

In some cases, such as when the value of a home has fallen below the mortgage balance, a writedown of principal may be the best solution, according to Bernanke, although, he added, to be effective they must be targeted to cases facing the highest risks of foreclosure.

What Washington can do
Bernanke outlined the steps that the Federal Reserve was taking to try to minimize the impact and scope of the foreclosure crisis.

The response includes working with community groups trying to acquire and restore vacant properties; encouraging lenders and mortgage servicers to work with at-risk borrowers; and developing new lending standards to prevent some of the abusive lending practices of the past from continuing.

The Fed, according to Bernanke, has worked closely with the Hope Now alliance - an industry foreclosure-relief effort spurred on by the Bush administration - to support help for troubled borrowers, develop protocols to standardize loss-mitigation approaches and improve reporting standards.

Bernanke also threw his support behind the expanded use of the Federal Housing Administration (FHA) and government-sponsored enterprises such as Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500) to address problems in mortgage markets.

Opening up the lending markets has already helped thousands of at-risk borrowers to refinance into lower cost loans and save their homes, Bernanke said.

But with more than 156,000 families who lost their homes during the first three months of the year and with as many as 1.8 million adjustable rate mortgages scheduled to reset to higher rates this year, there's still much work that needs to be done, he said.

(end of article)

The Federal Reserve is a private institution that represents private banking interests. To the common person, they preach free markets propaganda, yet we find that they are begging for the U.S. tax payer to shoulder the burden for the consequences of their greed.

For those who are willing to see, this economic system is one of the lies that Satan has sown...

Babylon the Great Whore is distilling her wine...

In Christ
Jeff


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Jeff Marshalek

 2008/5/6 8:30Profile
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Joined: 2003/11/23
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 Re:

[i]The nation is certainly experiencing difficult times (in regard to the economy). Is it turning into a "Great Depression?" I think that it is a little premature to make such a conclusion. As bad as it has been over the past year, the economy actually grew. Here is an article from [/i]THE TIMES[i] about the situation...[/i]
- Chris

[b]The Great Depression or The Great [i]Disappointment[/i]?
Steinbeck’s grapes lack wrath this time around[/b]
by Gerard Baker
THE TIMES: ONLINE
May 6, 2008

Whatever happened to the Great Depression? Not the real one from 70 years ago, the lost decade of unimagined misery and Steinbeckian angst, the worst period in the history of modern capitalism. I mean the replay we were promised this year. The one we were told was the inevitable counterpart to the greatest financial crisis since a couple of medieval Italians first sat down on a Florentine bench and invented the word “bank”.

I don’t know about you but I feel a bit cheated. There we all were, led to believe by so many commentators that the sub-prime crisis was going to force the United States into a new era of dust bowls and breadlines, a slump that would call into question the very functioning of the capitalist system in the world’s largest economy. Carried away on the surging wave of their own economically dubious verbosity, the pundits even speculated that this unavoidable calamity might presage some 1930s-style global political cataclysm to match.

Well, it’s early days, to be fair, but so far the Great Depression 2008 is shaping up to be a Great Disappointment. Not so much The Grapes of Wrath as Raisins of Mild Inconvenience. Last week the Commerce Department reported that the US economy – battered by the credit crunch, pummelled by a housing market collapse and generally devastated by the wild stampede of animal spirits – actually grew in the first three months of the year.

The rate of expansion – 0.6 per cent – was weak for sure, and it followed a previous quarter of identically weak growth at the end of 2007, but as Depressions go it was singularly unGreat. In the 1930s, you’ll recall, GDP fell by more than 25 per cent. Even the periodic mild recessions we’ve had in the past 20 years at least resulted in some declines in economic activity.

Lest you object – perhaps fairly – that the GDP data are way too backward-looking to be of any use, last week we also got the news that the labour market, the canary in the coalmine of economic data, is actually improving. The US economy lost 20,000 jobs in April, while the unemployment rate ticked down a little to 5 per cent. You don’t have to compare this performance to the Great Depression to think it looks, as downturns go, really quite uplifting. It is, in fact, the gentlest start to a period of labour market weakness since the 1960s.

For comparison, in the first four months of the 2001 recession (which was, by the way, the mildest one in postwar history) employment fell at an average monthly rate of 105,000. In the first four months of this current downturn, the average monthly job losses have been 62,000.

You won’t need me to remind you that in the other Great Depression unemployment rose to an estimated 30 per cent. Worse still for today’s Steinbeck wannabes, as my colleague Anatole Kaletsky noted yesterday, it is starting to look as though world financial markets might be past the worst of the crisis that started all this.

Financial conditions are cautiously returning to something approaching normal. Barometers of distress have shown a distinct turn for the better. Take, for example, the so-called TED spread, a pretty good proxy for the state of financial anxiety. It represents the difference between three-month Libor interest rates and the yield on three-month US Treasury bills. In other words, it measures how risky banks think lending to each other for relatively short periods is compared with the riskless alternative of lending to the Government.

Last Friday the spread fell to its lowest level since the end of February, shortly before the collapse of Bear Stearns. Now, at about 125 basis points, it is still elevated relative to periods of clear normality: the historic norm is between 25 and 50 points. But it’s way down from where it was in March, December and August, when it exceeded 200 points.

So should we be putting out the bunting, declaring victory over the Depression, offering prayers of thanks that we have avoided another Munich or Dunkirk? Not quite. The depression scenario was always overdone, of course, but it is still not clear that the US will actually escape as lightly as this. The principal challenge remains the health of the American consumer.

House prices are still falling and there is plenty of evidence that many Americans, suddenly scared about the value of their house as a nest egg, are retrenching. Even with the Government’s tax rebate cheques dropping on to doormats, caution seems to be the watchword. That also raises the troubling possibility that a period now of shrinking demand could feed back into renewed weakness in the financial system, just as it is starting to heal.

Still, the picture is starting to look quite encouraging. Even if the US has a recession this year, the chances that it will turn into a full-blown slump are not high. Another disappointment for the hyperactive scribbling masses. But rather welcome news for everybody else.

Click [url=http://business.timesonline.co.uk/tol/business/columnists/article3876863.ece]HERE[/url] to read the full article.


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Christopher

 2008/5/6 14:02Profile
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 Re:

Quote:
The rate of expansion – 0.6 per cent – was weak for sure, and it followed a previous quarter of identically weak growth at the end of 2007, but as Depressions go it was singularly unGreat. In the 1930s, you’ll recall, GDP fell by more than 25 per cent. Even the periodic mild recessions we’ve had in the past 20 years at least resulted in some declines in economic activity.




This growth rate is true only if we believe the government's stated rate of inflation that is below 4 percent. If we were to use a real rate of inflation the 0.6 percent rate of growth would actually be negative. If we were to use the original methods of accessing inflation, the rate is closer to 10 percent...



Quote:
You won’t need me to remind you that in the other Great Depression unemployment rose to an estimated 30 per cent. Worse still for today’s Steinbeck wannabes, as my colleague Anatole Kaletsky noted yesterday, it is starting to look as though world financial markets might be past the worst of the crisis that started all this.



The rate of unemployment was not 30% at the beginning of the Great Depression in October of 1929. Please remember that this financial crisis first came to light just 9 months ago. The Great Depression took many years to resolve.



Quote:
Financial conditions are cautiously returning to something approaching normal. Barometers of distress have shown a distinct turn for the better. Take, for example, the so-called TED spread, a pretty good proxy for the state of financial anxiety. It represents the difference between three-month Libor interest rates and the yield on three-month US Treasury bills. In other words, it measures how risky banks think lending to each other for relatively short periods is compared with the riskless alternative of lending to the Government.



The U.S. just anounced another 75 Billion injection to ease the crisis in the Libor rate. The total money printed so far since August is 435 Billion. There is also suspicion that the central banks are lying about their actual borrowing cost...


Here is a portion of an article written in the Wall Street Journal...

LIBOR FOG
Bankers Cast Doubt On Key Rate Amid Crisis
By CARRICK MOLLENKAMP
April 16, 2008
The Wall Street Journal

LONDON -- One of the most important barometers of the world's financial health could be sending false signals.

In a development that has implications for borrowers everywhere, from Russian oil producers to homeowners in Detroit, bankers and traders are expressing concerns that the London inter-bank offered rate, known as Libor, is becoming unreliable.

Libor plays a crucial role in the global financial system. Calculated every morning in London from information supplied by banks all over the world, it's a measure of the average interest rate at which banks make short-term loans to one another. Libor provides a key indicator of their health, rising when banks are in trouble. Its influence extends far beyond banking: The interest rates on trillions of dollars in corporate debt, home mortgages and financial contracts reset according to Libor.

In recent months, the financial crisis sparked by subprime-mortgage problems has jolted banks and sent Libor sharply upward. The growing suspicions about Libor's veracity suggest that banks' troubles could be worse than they're willing to admit.

The concern: Some banks don't want to report the high rates they're paying for short-term loans because they don't want to tip off the market that they're desperate for cash. The Libor system depends on banks to tell the truth about their borrowing rates. Fibbing by banks could mean that millions of borrowers around the world are paying artificially low rates on their loans. That's good for borrowers, but could be very bad for the banks and other financial institutions that lend to them.

True Borrowing Costs

No specific evidence has emerged that banks have provided false information about borrowing rates, and it's possible that declines in lending volumes are making some Libor averages less reliable. But bankers and other market participants have quietly expressed concerns to the British Bankers' Association, which oversees Libor, about whether banks are reporting rates that reflect their true borrowing costs, according to a person familiar with the matter and to government documents. The BBA is now investigating to identify potential problems, the person says…

In Christ
Jeff


_________________
Jeff Marshalek

 2008/5/6 14:51Profile









 Re:

Quote:

davym wrote:
14And Joseph gathered up all the money that was found in the land of Egypt, and in the land of Canaan, for the corn which they bought: and Joseph brought the money into Pharaoh's house.
15And when money failed in the land of Egypt, and in the land of Canaan, all the Egyptians came unto Joseph, and said, Give us bread: for why should we die in thy presence? for the money faileth.
16And Joseph said, Give your cattle; and I will give you for your cattle, if money fail.

Genesis 47 v14-16



This passage of scripture came into my mind when watching and reading these events. Money can 'fail' i.e. become worthless if the economic system breaks down as is what happened in Joseph's day albeit a result of famine.

I just think we all need to remember that we can't eat money. It's simply a tool which enables us to trade, but has no intrinsic value in and of itself. The current crisis is a result of irresponsible manipulation of 'money'.



.................................................
Good Word. As Krispy said you can see how God feels about money by some of the people he gave much of it to.

Gen 45:1-7 Matt 12:48-13:1 Rom 8:23-27
This passage of scripture came to my mind when I read your post. The life of Joseph is paralleled somewhat to Jesus, in that Joseph, in an earthly sense, Joseph was his families redeemer. He became earthly redeemer in his obedience to God and doing God's his perfect will. One good point in this first passage and you don't want to miss this part. what happened when Joseph called his brothers in for a supper when they arrived for trade. He had all the gentiles leave the room (non-jews) right(rapture)you think. Only Jews were allowed in the room. Joseph's brothers benefited greatly from Joseph's obedience to God. They were not deserving (grace) but they came asking for mercy.
Gen 45:1-7
45:1 Then Joseph could no longer control himself before all his attendants, and he cried out,[u] "Have everyone leave my presence!" So there was no one with Joseph when he made himself known to his brothers.[/u] 2 And he wept so loudly that the Egyptians heard him, and Pharaoh's household heard about it.
3 Joseph said to his brothers, "I am Joseph! Is my father still living?" But his brothers were not able to answer him, because they were terrified at his presence.
4 Then Joseph said to his brothers, "Come close to me." When they had done so, he said, "I am your brother Joseph, the one you sold into Egypt! 5 And now, do not be distressed and do not be angry with yourselves for selling me here, because it was to save lives that God sent me ahead of you. 6 For two years now there has been famine in the land, and for the next five years there will not be plowing and reaping. 7 But God sent me ahead of you to preserve for you a remnant on earth and to save your lives by a great deliverance.

By grace we are saved, through faith, and we have became brothers with Jesus (Jews)by adoption.

Matt 12:48-13:1
48 He replied to him, "Who is my mother, and who are my brothers?" 49 Pointing to his disciples, he said, "Here are my mother and my brothers. 50 For whoever does the will of my Father in heaven is my brother and sister and mother."


Gal 4:3-7
4 But when the time had fully come, God sent his Son, born of a woman, born under law, 5 to redeem those under law, that we might receive the full rights of sons. 6 Because you are sons, God sent the Spirit of his Son into our hearts, the Spirit who calls out, "Abba, Father." 7 So you are no longer a slave, but a son; and since


Rom 8:23-27
23 Not only so, but we ourselves, who have the firstfruits of the Spirit, groan inwardly as we [u]wait eagerly for our adoption as sons, the redemption of our bodies.[/u] 24 For in this hope we were saved. But hope that is seen is no hope at all. Who hopes for what he already has? 25 But if we hope for what we do not yet have, we wait for it patiently.
26 In the same way, the Spirit helps us in our weakness. We do not know what we ought to pray for, but the Spirit himself intercedes for us with groans that words cannot express. 27 And he who searches our hearts knows the mind of the Spirit, because the Spirit intercedes for the saints in accordance with God's will.





 2008/5/6 15:38
ccchhhrrriiisss
Member



Joined: 2003/11/23
Posts: 4489


 Re:

Hi rookie...

Quote:
This growth rate is true only if we believe the government's stated rate of inflation that is below 4 percent. If we were to use a real rate of inflation the 0.6 percent rate of growth would actually be negative. If we were to use the original methods of accessing inflation, the rate is closer to 10 percent...

Really? What are you basing this inflation figure on -- and what makes it different from the figures used in each of the four quarters LAST YEAR?

It seems that the media uses every opportunity to question the government. They constantly report on discrepancies or supposed discrepancies in government data. You would think that they would have caught up on this, wouldn't you?

My point is: There has been quite a bit of talk in Christian circles calling this current economic trend the start of a downward spiral of God's judgment. I'm not saying that this is what you espouse or is the direction by which this thread has taken. I just don't think that it is wise to spread a economic message of doom -- when the doom has little to do with the economy. The world is going to Hell -- but it has very little to do with capitalism or communism.

I fear what can happen when we publicly call the current economic trend something that it just might not be. I remember listening to preachers speak about the judgment of God during the last major recession in the early 1990s. And then, it went away. I never saw any of those same preachers stand up and admit that they missed it. Yet I have often wondered if their credibility was shot simply because they proclaimed something that just happened to have been wrong.

The same thing happened locally following the events of Hurricane Katrina. So many people called it "the beginning of the end." Preachers talked about it signaling the beginning of the judgment of God on America. People began to pay attention to global warming "prophets" who forcast the end of civilization. The very next year went down as one of the quietest on record.

We know that the end is coming. We just don't know just HOW it will come about. Sure, we know certain things -- like the fact that the antichrist will rule from a union of 10 nations. We know that the world's economy will be terrible during that time. But we don't know if that is developing as a result of decisions now...or will be a result of decisions made during the Tribulation.

God's judgment can be incredibly sudden -- and doesn't need years to build up (like the Great Depression of the 1930s). We just need to be careful about our public proclamations. If we are hasty in such utterances, we may find ourselves eating our words. What would happen if the present economic problems are resolved during the next few years? Will we add a disclaimer to our messages in the future?

Of course, I know that this isn't something that you are guilty of. I haven't followed this thread very faithfully, so I don't even know what you have written (if anything). But I just think that it is fair to be extremely diligent in our rhetorical patience. This could be the start of something ominous...or it could just be indicative of a bear market caused by a slumping housing market, high oil prices, inflation reflected by higher gas and food costs (due to higher gas and biofuel demand) and a harsh "bounceback" of the home loan procedures.

That might be about as prophetic as the Savings and Loan crisis of the 1980s, the recession of the early 90s or the DotCom bust of the early 2000s.

Regardless, it is always good information to consider with much prayer and contemplation.

:-)

EDIT:
I've noticed that some people are fast on the blame. Every time there is a bad hurricane, Al Gore blames it on "global warming." Yet when there is a nice summer with few storms, he doesn't say anything. Similarly, I noticed that some people are willing to cry out "JUDGMENT!" when the economy gets rough. Yet they don't say it when the economy is doing well. It is as if they are waiting for the next bad thing to happen to continue their song.

Again, this isn't an indictment of your ideas or the direction of this thread. It is just something to think about when considering this issue as a whole.


_________________
Christopher

 2008/5/6 22:57Profile
Tears_of_joy
Member



Joined: 2003/10/30
Posts: 1554


 Re:

Chris, read these words in trembling:

Jer 4:10 Then said I, Ah, Lord GOD! surely thou hast [u]greatly[/u] [b]deceived this people[/b] and Jerusalem, saying, Ye shall have peace; whereas the sword reacheth unto the soul.


Jer 14:13 Then said I, Ah, Lord GOD! behold, the prophets say unto them, Ye shall not see the sword, [b]neither shall ye have famine;[/b] but I will give you assured peace in this place.

Jer 14:14 Then the LORD said unto me, The prophets prophesy lies in my name: I sent them not, neither have I commanded them, neither spake unto them: they prophesy unto you a [b]false vision and divination, and a thing of nought, [u]and the deceit of their heart[/u]. [/b]

Also:

2Ch 36:16 But they [b]mocked[/b] the [b]messengers of God, and despised his words[/b], and [u]misused[/u] [i]his prophets[/i], until the wrath of the LORD arose against his people, till there was [u]no[/u] remedy.


1Co 10:11 Now [b]all[/b] these things happened unto them [b]for ensamples[/b]: and [i]they are written [b]for our[/b] admonition[/i], [u]upon whom the ends of the world are come. [/u]

 2008/5/7 7:19Profile









 Re:

I would add this one also:

Rev 18:9 "The kings of the earth who committed fornication and lived luxuriously with her will weep and lament for her, when they see the smoke of her burning,
Rev 18:10 standing at a distance for fear of her torment, saying, 'Alas, alas, that great city Babylon, that mighty city! [b]For in one hour your judgment has come[/b].'
Rev 18:11 [b]And the merchants of the earth will weep and mourn over her, [u]for no one buys their merchandise anymore[/u][/b]:
Rev 18:12 merchandise of gold and silver, precious stones and pearls, fine linen and purple, silk and scarlet, every kind of citron wood, every kind of object of ivory, every kind of object of most precious wood, bronze, iron, and marble;
Rev 18:13 and cinnamon and incense, fragrant oil and frankincense, wine and oil, fine flour and wheat, cattle and sheep, horses and chariots, and bodies and souls of men.
Rev 18:14 [b]The fruit that your soul longed for has gone from you, and [u]all the things which are rich and splendid have gone from you[/u], and [u]you shall find them no more[/u] at all[/b].

When the world system of benefit, prosperity, and convenience is shaken to the foundations and tumbles down in one hour, many, who have trusted in it, will weep and wonder how this came to be. They will chew on their useless credentials and drink the gall of their purported blessings. They will curse the God of Heaven for bringing this disaster upon them.

They will then cry out to the Government, perhaps to the UN also, to seek their inalienable rights.

 2008/5/7 8:02
ccchhhrrriiisss
Member



Joined: 2003/11/23
Posts: 4489


 Re:

Hi Tears, NotMe...

I completely agree with those passages. However, they don't rebuff what I was trying to say.

My great-grandmother once told me that during the Great Depression of the 1930s, preachers spoke about it being "the beginning of the end." Ironically, there were some economic depressions and panic before that time. There have been some after that time. However, they were interlaced with times of plenty. Can we now call those messages preached during the 1930s -- that said that things would only get worse -- to be "truth?"

Is there a danger when a preacher stands up and calls Hurricane Katrina the "beginning of God's judgment on America" and loudly proclaims how "things will immediately get worse" when they in fact haven't grown worse in America? What about those who claimed that the current economic cycle is the "beginning of the end?" Of course, the cop out is that people who make such proclamations can say that we have ALWAYS been living in the "beginning of the end" -- at least since the day of Pentecost. But do you think that this is what modern preachers have in mind when they declare such things? Are they trying to use current events to proclaim an immediate explanation -- or just remind us that these are a series of events that would probably take place before the end?

Do you see how such specific "doom and gloom" messages can be just as dangerous as, well, saying that the end will begin by January 1, 2008? While all such messages can serve to remind people that our God is not in this world or its system, it has a very different effect upon nonbelievers (or those who believe during crises). What if a preacher proclaimed that the Great Depression was the judgment of God upon America that would begin the last of the last days? What would unbelievers or haphazard believers think when America went on to "enjoy" several more decades of prosperity?

Of course, I don't think that there is anything wrong with talking about the condition of the US economy. In fact, I feel that it is important to consider such things. However, what if the United States were to recover from this economic slowdown and then continue for another ten years with great strength? Since we do not know the timing of the Lord's return, then what would it profit to continue proclaiming the end?

Of course, I am not saying this about Rookie or anyone else in this thread. I haven't really read through this thread adequately enough to get a gist of what is being said. However, I have been listening to stories about preachers who have begun talking about these things as signs of the end (and even some saying that we are in the Great Tribulation). In my opinion, this is like preaching "88 Reasons that Jesus is Coming Back in 1988" without using a set number of reasons or naming a date.

We should be careful, because we are going to be held accountable for every idle word. Like I said before, none of us are acutely aware of just when the End will happen (except that it is soon [on an Eternal scale] and that it will happen after now). My dad used to remind me that, "It is easy to 'prophesy' something after it has already started." "It is far more difficult," he explained, "to prophesy impending doom during times of prosperity." While a person might be mocked or rejected at the time, they will be acknowledged when the calamity strikes.

But I guess that my fear is that some local preachers have been guilty of fear-mongoring over the current state of world affairs. The problem, as I see it, is that we should already be so detached from this world that we are ready to leave at any moment. If the economy fails and continues to fail, it is still so very temporary. Our message should remain, "[i]Flee from the wrath to come[/i]." But we shouldn't consider an economic condition to be a part of that wrath -- unless we know that it is so. It could very well be a part of an economic cycle. If we proclaim a specific event or condition as part of such "wrath" (and not just a part of the bigger, prophetic picture), would we also be willing to let others know about how we could be wrong? Would we be willing to confess that we were wrong if the economy gets "better" over the next couple of years?

Anyway, I hope that this makes sense -- since it is directed at those who proclaim the current events as part of the "judgment of God." It is not directed at those who view such things in a larger, less specific prophetic scale. There is no need to feel that I am defending this nation, this world system or even prosperity. That is not the case at all. I just feel that we should use care when we preach such things...and make 100% certain that our words are directed by God.

:-)


_________________
Christopher

 2008/5/7 9:38Profile





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