http://www.freedomsphoenix.com/Uploa...d-purchase.jpg
What disgusts me about this so much is that voluntary investment activity leads to exponential growth of wealth and enables an exponential growth in technology. Had the government not borrowed so much, subsidized by the Fed's interest rates, and then squandered the money in ways that actually damage the economy, we'd have a much greater ability to command resources and the private sector probably would have colonized Mars by now. Think about if we could have all this modern technology and productivity, with the massive deflation of the 19th century!
Thanks Bobby. I have been looking for something like this to further explain the need for Auditing the Fed. I have posted this picture on one of the TeaParty blogs
Roma--Glad I can help a fellow forum member who lives only 15 miles from me. We will have to meet in person one dayQuote:
Originally Posted by romacox
Once the Fed pulls off The Great Credit Contraction of 2010 and makes money scarce, which will wipe everybody out, it will start printing paper again like it did in 1934. I would compare where we are now to 1930-31, before things got really bad. Notice how in 1934 the dollar began a decline?
I bet the Fed's favorite song was "Pennies From Heaven". During the Great Depression bankers bought up everything a penny on the dollar.
It's unfortunate that the chart doesn't go back further and show the previous 100 years. As it stands, the chart's starting point makes it look like runaway currency devaluation always happens, even in the absence of a central bank...but the purchasing power of the dollar was pretty much the same in 1813 and 1913.
I prefer this one because it shows how the dollar actually GAINED value in the 1800's
http://img690.imageshack.us/img690/8...ueovertime.gif
Nice-thanksQuote:
Originally Posted by TheState
Although the logarithmic scale is slightly deceptive, that chart is far more informative, and it's pretty effective at getting the point across IMO. :) It'd be even better if it showed recent years though, and especially if it priced the value of a dollar at the date of the Fed's inception (rather than 1940).Quote:
Originally Posted by TheState
We're not sure how much stock to put into correlations such as this one -- especially since LOTS of charts have this dual-hump pattern over the last several years -- but this is still some interesting commentary from Gluskin-Sheff's David Rosenberg on the connection between monetary velocity and the stock market.Quote:
Originally Posted by YumYum
------------
Chart 1 maps out the S&P 500 with money velocity (GDP/M1 ratio). There is a
90% correlation between the two. It is one thing to have the Fed pump liquidity
into the system but it is quite another for the liquidity to be re-leveraged into credit
and recycled into the economy.
The Fed’s easing program is over two years old and the rampant Fed balance
sheet expansion 15 months old, and still to this day, what the commercial banks
have done (to Obama’s wrath) with all that liquidity is to keep it as cash on their
balance sheet to the tune of $1.2 trillion. We’re not sure why Obama is as rankled
as he is because the banks are in fact lending out a good chunk of that Fed-
induced liquidity — right back to Uncle Sam (the banks now own a record $1.3
trillion of government securities).
http://static.businessinsider.com/~~...X=363&maxY=260
Back to the chart — there is obviously a close connection between money turnover
and the stock market. But we can get periodic divergences as we did in the first
leg of the rally in 2003. But the carry-through from 2004 to 2007 hinged critically
on that multi-year acceleration in money velocity. If we don’t see the banks begin
to extend credit in 2010, it is hard to see the 2009 bounce from oversold lows as
being sustained in the coming year.
http://www.businessinsider.com/rosen...-toast-2009-12
The problem is that this time, the dollar is the world reserve currency, and totally fiat. If credit is contracted, foreigners who see that the Fed is following the plan you outlined will dump their dollars while they are strong due to credit contraction, giving a net positive inflation rate (a HIGH rate).Quote:
Originally Posted by YumYum
Everyone sees that the Fed wants to print and is printing. If credit is tightened, it will be seen by most everyone as the last chance to get out of Dodge. That act will destroy the currency (as we have already sewn the seeds of this crisis with 40 years of fiat reserve status), though I'm sure the Feds will hyperinflate to get whatever the foreigners left (from anyone still willing to accept dolars--they will find few takers at that point).