[threadbear]

What if the US let's it's currency fall to the point that it actually makes sense to retain all trade and financial transactions within Nafta boundaries? North America will likely cut itself adrift, by instituting protectionist measures.

Canadians shouldn't get too excited about BC's potential as the Gateway to the Pacific Rim, because it's likely not going to happen. Americans will ALWAYS have first dibs on our resources. It has become a matter of survival.

The problem is, how on earth will the US manage without a country like China underwriting it's economy through it's purchase of treasuries?

[Aimrehtopyh]

I've read and halfway understood most of this thread. Like the previous poster, I feel my crystal ball is only useful as a paperweight.

My gut response upon first reading the title of this thread still stands.

How do you survive a bank run?

Run First

[mattduke]

"But for many bankers the most shattering revelation from the turmoil of the past six months is the extent to which risks that had supposedly been transferred to other investors have come flooding back on to banks' balance sheets. Far from dispersing the risks they had underwritten, banks are being shown to have stashed loans in complex structures that ultimately required their support."

"The result is that a banking industry that a year ago looked robust and well-capitalised has turned out to be supporting a much larger asset base than most investors had thought. To make matters worse, the previously hidden assets are often those whose value is the most suspect. The subsequent correction is likely to have far-reaching consequences for how much capital banks need, how they are regulated and how they make money in the future."

"The financial system has become leveraged to a greater extent than one could have guessed from looking at the balance sheets of regulated banking institutions alone," Malcolm Knight, general manager of the Basel-based Bank for International Settlements, the central banks' bank, said in a recent speech. "The deleveraging process that is now taking place in the system is, to put it mildly, unlikely to be totally smooth."

"There is going to have to be more capital injected into the system, to support the greater level of obligations, whether they are contingent or actual," says the chairman of one of the world's largest banks. Quite how much capital the banks will need is, however, a subject of intense debate. The amount will depend partly on the size of their losses related to subprime mortgages and on the extent to which the current squeeze triggers a broader economic slowdown, leading to higher defaults on other types of loans."

FT via Yahoo

[Twilight]

Good points, and the proverbial crystal ball is cloudy on those too. How much can a government afford to bail out before it risks economic suicide? How much can a government lower its currency, especially a reserve currency, before it risks a sell-off and plunge? We haven't a clue. Any misjudgement would be a disaster. We can only speculate, MrBill is the only real expert but I think he is away.

If there is a repeat of Japan / 1930s US conditions, we may indeed see the return of public works. Now remember, this is a peak oil site. Unless you are of the survivalist mentality or have absolute faith in the ingenuity of the free market, you probably believe that peak oil mitigation requires some form of public works. Let's talk the book. If you believe peak oil will be addressed that way, what solution to this economic crisis plays into it? It's not hyperinflation. People may be similarly desperate to work for soup, but what sense does it make to produce anything when the value of the profit or utility is constantly destroyed? Yet once you get a deflationary collapse out of the way, you have less of a problem.

This shapes my thinking on the political side of this, and in large part that is the direction from which I approach this subject. If you are a government, why choose a path that hinders your ability to deal with future crises when there in an option that creates an opening, complete with compliant labour pool? The future calls for new infrastructure and large armies, not investment banks. Hyperinflation is not the way to get it.

I have to say I hope the people upstairs surprise us with some new thinking along these lines, because the old "monetization of debt" approach on modern scales is going to suck.

[I_Like_Plants]

One thing I see going on internally in the US is the development of two economies, one for the rich, the haves, the owners, the top say 5% or so, and one for everyone else. At the bottom there's a huge number of people living on $600 a month or so. There's a developing barter economy, and as this progresses and more of us are calling a Hooverville home, I'd expect local currencies to be initiated.

I know the gov't would like to inflate, but no matter how hard they try, the money's being destroyed faster than they can create it.

On the bottom, where there are far more people than in the small Owning class, $600 a month is enough to live on, they've had to develop the ability to live on that. If that isn't deflation, I don't know what is.

[mattduke]

Inflation transfers wealth from those who receive the new money later to those who receive the new money earlier. Those living paycheck to paycheck have no means to protect themselves from inflation become poorer; those with savings can profit from inflation if they understand it. The Fed transfers wealth from the poor to the rich.

[SchroedingersCat]

$this->bbcode_second_pass_quote('Aimrehtopyh', 'I')'ve read and halfway understood most of this thread. Like the previous poster, I feel my crystal ball is only useful as a paperweight.

My gut response upon first reading the title of this thread still stands.

How do you survive a bank run?

Run First

[Twilight]

Those first in line will not have to wait weeks for the slow cogs of bureaucracy to turn, correct.

[Iaato]

$this->bbcode_second_pass_quote('Twilight', ' ')If you believe peak oil will be addressed that way, what solution to this economic crisis plays into it? It's not hyperinflation. People may be similarly desperate to work for soup, but what sense does it make to produce anything when the value of the profit or utility is constantly destroyed? Yet once you get a deflationary collapse out of the way, you have less of a problem.

This shapes my thinking on the political side of this, and in large part that is the direction from which I approach this subject. If you are a government, why choose a path that hinders your ability to deal with future crises when there in an option that creates an opening, complete with compliant labour pool? The future calls for new infrastructure and large armies, not investment banks. Hyperinflation is not the way to get it.

I have to say I hope the people upstairs surprise us with some new thinking along these lines, because the old "monetization of debt" approach on modern scales is going to suck.

[roccman]

There is no means of avoiding the final collapse of a boom brought about by credit (debt) expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit (debt) expansion, or later as a final and total catastrophe of the currency system involved.

~ Ludwig Von Mises

[Iaato]

So apropos and so accurate. I wish this country had learned how to read. Also Thomas Jefferson:

If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around them (around the banks), will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered.

I believe that banking institutions are more dangerous to our liberties than standing armies. Already they have raised up a moneyed aristocracy that has set the Government at defiance. The issuing power should be taken from the banks and restored to the people to whom it properly belongs.

I think our governments will remain virtuous for many centuries as long as they are chiefly agricultural; and this will be as long as there shall be vacant lands in any part of America. When they get piled upon one another in large cities as in Europe, they will become corrupt as in Europe

We must not let our rulers load us with perpetual debt. We must make our election between economy and liberty or profusion and servitude. If we run into such debt, as that we must be taxed in our meat and in our drink, in our necessaries and our comforts, in our labors and our amusements, for our calling and our creeds...[we will] have no time to think, no means of calling our miss-managers to account but be glad to obtain subsistence by hiring ourselves to rivet their chains on the necks of our fellow-sufferers... And this is the tendency of all human governments. A departure from principle in one instance becomes a precedent for[ another]... till the bulk of society is reduced to be mere automatons of misery... And the fore-horse of this frightful team is public debt. Taxation follows that, and in its train wretchedness and oppression.

[patience]

I have no doubt that the banks are crumbling at this moment, and there is no saving it. I just wonder what we can do for ourselves. We have done all we know to this point.

My timing sucks. I'm usually too early. In 1973 I worked at GM's Delco Radio plant in Kokomo, IN. OPEC did their thing, and unemployment hit 24.6% in that county the next summer. Out of 10k employees there, I watched 2,200 file out one Friday, never to return. I figured GM wouldn't last very long. 35 years later, they finally managed to fritter away the rest of their money and are about ready to tank.

Our family has been working on self reliance since then, which is it's own reward. Not hoping for trouble here! Having already pretty much cashed out, I'm wondering how much inflation do I have to eat before prices drop again in a general way.

Our machine shop also retails a little steel, which is more or less flat in price. Can't understand that since most of it comes from Canada. Not planning to stock up on steel unless I see a clear move up. Alloy steels have dropped about 10% here, but the wholesaler added a fuel surcharge for delivery last year, along with UPS rates also up. Truckers, farmers, loggers, and delivery people are all hurt from increased fuel costs they can't pass on. From where I sit, the winding down has started in some areas. Anybody else got a "boots on the ground" take on the economy?

[roccman]

Jekyll Island, Georgia, USA

And more quotes from the past:

Meyer Amschel Rothschild died on September 19, 1812.

His will spelled out specific guidelines that were to be maintained by his descendants:

$this->bbcode_second_pass_quote('', '1')) All important posts were to be held by only family members, and only male members were to be involved on the business end. The oldest son of the oldest son was to be the head of the family, unless otherwise agreed upon by the rest of the family, as was the case in 1812, when Nathan was appointed as the patriarch.

2) The family was to intermarry with their own first and second cousins, so their fortune could be kept in the family, and to maintain the appearance of a united financial empire. For example, his son James (Jacob) Mayer married the daughter of another son, Salomon Mayer. This rule became less important in later generations as they refocused family goals and married into other fortunes.

3) Rothschild ordered that there was never to be "any public inventory made by the courts, or otherwise, of my estate...Also I forbid any legal action and any publication of the value of the inheritance."

[threadbear]

$this->bbcode_second_pass_quote('I_Like_Plants', '
')
On the bottom, where there are far more people than in the small Owning class, $600 a month is enough to live on, they've had to develop the ability to live on that. If that isn't deflation, I don't know what is.

[Tyler_JC]

Here's another thing to consider.

Most of the money in banks these days is not in the form of dollars in checking or savings accounts.

Most of a bank's cash is tied up in financial products like CDs and treasury bills.

People can't instantly cash out of those things without incurring expensive penalities so it seems unlikely that anyone would be willing to do so.

So when you look at the total amount of money available in accounts that can be instantly liquidated, the cash available to pay the people asking to take out their money is greater than the previously quoted 1.2% figure.

[cube]

$this->bbcode_second_pass_quote('threadbear', 'I') think people confuse asset price collapse or extreme downturn, as a sure sign of deflation--as in the dirty thirties.

[cube]

$this->bbcode_second_pass_quote('Twilight', '.')........
cube - see my response to threadbear. Defaults on debt and reduction of lending mean a decreasing money supply. The US government's actions are limited compared to the impending carnage in the private sector.

[FoolYap]

$this->bbcode_second_pass_quote('Tyler_JC', 'M')ost of a bank's cash is tied up in financial products like CDs and treasury bills.

People can't instantly cash out of those things without incurring expensive penalities so it seems unlikely that anyone would be willing to do so.

[Twilight]

$this->bbcode_second_pass_quote('cube', 'T')hat still does not count as deflation. Deflation is a "contraction" of the money supply (currently not happening right now).

[threadbear]

$this->bbcode_second_pass_quote('Twilight', '')$this->bbcode_second_pass_quote('cube', 'T')hat still does not count as deflation. Deflation is a "contraction" of the money supply (currently not happening right now).