The assumption of a “cyclical”, “mortgage crisis”, has been premised, essentially, upon a lie, a lie used by the world’s biggest bandits of these times, the investment bankers who had created themselves in the self-image of those predatory Lombard bankers, such as the houses of Bardi and Peruzzi, who created the general financial-economic breakdown-crisis known as the Fourteenth-Century “New Dark Age”.

The truth is, that this crisis had already been, from its outset in 1968-1981, a general, global breakdown-crisis of the present IMF financial-monetary system in progress.

No correction of this continuing, downward trend was ever seriously attempted: with the qualified exception of President Bill Clinton’s interrupted intention to proceed to a much needed reform of his nation’s financial architecture.

That Fourteenth-Century “dark age” wiped out half of the parishes of Europe, and reduced Europe’s population by about one-third, net, during a period of, chiefly, approximately a generation.

A similar effect is to be expected, soon, unless culprits who are looting America’s financial chickencoop are removed from control of financial-monetary policy now.

-RJW

My response was itself a response to Trond and others not featured on this blog who are *seriously* worried about Deflation.

You, deflation, the thing this blog is about.

Within the following context and query:
* if interest rates are near to zero – pushing on a string
* and cash is the safest asset class, and the absence of lending is strangling activity in the economy – including valuable activity
* while other asset classes fall substantially in price – do remember this blog is about debt driven deflation
* then the question is: how to provide the correct incentives for cash to move through the economy again ?

Consumption may be inappropriate resource allocation, however, cash still needs to move otherwise the adjustment process would be horrendous…

One suggestion is negative interest rates.

However, they cannot be applied when cash is removed from an institution.

So, my suggestion of Holding Tax. With a GST infrastructure.

Now, we’ve paid a fortune in taxes (business & personal) over the last decade, and I still fill out the damn BAS form, so I do understand *exactly* about the drudge of day to day business and administration.

However, I’m addressing a specific concern in a specific way, and wondering whether other minds considering the deflation question would implement the “cost on holding cash” imposition that Roubini (someone who links to Keen’s website on rgemonitor.com ) suggests may become necessary in the USA.

So, to answer your query, yes, I am suggesting a tax on saving as a possible solution to a *particular* problem that is yet to arise, and which is currently confounding a few people around, if you read their blogs (calculatedrisk.blogspot; rgemonitor.com; brad setser’s; krugman’s, et al).

Please note I’ve taken other – valid – criticism in the best of possible spirit. I love to learn and I am happy to be wrong within that process. However, in being direct and fair, you’ve not yet added.

Looking forward to some comprehensive and constructive criticism.

Furball

It’s nothing like the slow motion of Japan. Japan had their deflation while the rest of the world were booming along, with help from their liquidity caused by the yen carry trade. Now the global economy is imploding. The Baltic dry index, a leading economic indicator is down 93,8 % from the top set before the Olympics. The world is different in only 5 months.

Japan is at 0,3 %, and the NY FED have hold the interest rates at 0,25 % for weeks

The big question, is, will Japan boom now?
They are the only country with a sound banking system.

Will every country that can support it, push their interest rates to 0 % ? What will happen then? The Japanese created bubbles a lot of places because of their carry trade. End of the bubble era, or is it just getting a new monster bubble started fueled by low interest rates?

That’s the tragedy prudentsaver, and WW2 brought so much justice – no, just horrific injustices, witch hunting and scapegoating smokescreens while the real structural issues remained, as did the real culprits. Most of the boomers though have/are suffering with this also, with as example, lower and middle class wages eroding during the boom and pension funds evaporating.

The WFC is a debt issue, WW2 probably was too, and many have noted the dangers here. You would think with debt sticking out like a well developed melanoma we’d look at what debt really was for answers. But no, let’s look at anything but. Again just a guess, but seems ever since the gold smiths started the (banking) diddling of undermining economic wealth by loaning gold certificates for gold they didn’t have until there was more IOU’s then the economy could afford, we have had these crises. That diddling is now called the money multiplier or more obscurely liquidity. Seems everything else is negotiable but the money multiplier is evolutionary – right, so is the mafia, so are these messes, perhaps we can evolve some more. Again, as the money multiplier actually takes from all our wealth (perhaps what inflation is), profiting from it maybe therefore should be redistributed. Is the problem to looking, too many unwittingly having a finger in the cancer pie?

(As another David has posted on the next topic, I’ve add J)

The WFC is a debt issue, WW2 probably was too, and many have noted the dangers here. You would think with debt sticking out like a well developed melanoma we’d look at what debt really was for answers. But no, let’s look at anything but. Again just a guess, but seems ever since the gold smiths started the (banking) diddling of undermining economic wealth by loaning gold certificates for gold they didn’t have until there was more IOU’s then the economy could afford, we have had these crisis’s. That diddling is now called the money multiplier or more obscurely liquidity. Seems everything else is negotiable but the money multiplier is evolutionary – right, so is the mafia, so are these messes, perhaps we can evolve some more. Again, as the money multiplier actually takes from all our wealth (perhaps what inflation is), maybe profits from it therefore should be redistributed. Is the problem to looking, too many unwittingly having a finger in the cancer pie?

(As another David has just post on the next topic, I’ve add J)

So options again.

1. We emerge fine from this, and have a 2003 like recovery. Then this will be like the panic of 1907, or the 73-74 bear market on extra high margin . That’s my main scenario. Because the central banks in this scenario will have to push extra hard on the “ketchup” bottle, and the US have plenty of stuff to fund, and there are so much cash around on the sidelines, inflation will seriously heat up, interest rates be to low, housing that to me looks like it have bottomed out (the steep part of the decline that matters to the economy), in the nineties inflation was to low for housing to start to rise very fast, but in this environment I think it could happen sooner than most think because housing is a hedge against inflation, creating the stagflation of the seventies. Bernanke were worried about this earlier this year. I think it’s a good thing to worry about.

2. Another option is a repeat of the ninties/twenties. Dot-infrastructure, 0 % lunatic boom, then you should see the time after 2000, only a correction in a bubble that have yet to see it’s full potential. In the eighties the dollar was super strong, but Reagen was really having huge fiscal deficit’s, however the dollar started from a low valuation, and the US economy was perceived to be very strong, creating a very strong dollar, and weaker commodity prices into 1985. The advisor’s of Obama are the strong dollar club.

3. Repeat of the 1930-s, with the US devaluing the dollar, collapse of world trade, protectionism, and increasing tensions between Russia, China and the US. Possible War with Iran, Resource wars between the super powers.