An Epistle to the good savers of America

America sleeps during the largest theft in history of the world takes place.  But a few people see and report about these great events.  Jim Walker is one of these, one of the top Asian strategisists of our time.

“An Epistle to the Good”, Jim Walker, Asianomics, 19 December 2008 — Excerpt:

Dear saver, in the Great Depression the government of the United States repudiated its promise to pay the owners of gold deposits (it was on the Gold Standard at the time) in the physical metal. Yes, it is only 70-odd years ago that the US behaved in a way that is now only associated with the worst of tinpot regimes – Argentina being the classic example in the last decade when it confiscated its savers’ US dollar deposits.

Today the Federal Reserve, and its cohorts around the world, is stealing your money in an equally insidious way. With its move to a zero interest rate policy the Federal Reserve, like the Bank of Japan before it, is trying to starve you – the lifeblood of every economy.

While Motown CEOs bleat and beg in front of Congress; while failed regulators, politicians and economists stamp their feet and scream for ‘More!, More!, More!’; and while high-rolling bankers worry about a smaller bonus this year – no-one speaks for, cares about or is interested in you – the savers of America that did nothing wrong but are now being penalised like criminals.

Think about it. You are a retired previously self-employed tradesman. You worked hard all your life and accumulated a nest egg for old age. You didn’t work for the government (so no bloated public sector pension at age 50) and you didn’t have a union pulling for you (so no pension at 65 either). You worked, you saved and then you retired. You didn’t buy into Bernie Madoff’s hedge fund, you didn’t speculate on CDOs and you didn’t risk your money in high-flying investment bank equity. You just put it in the bank and lived quietly off the interest. Until Ben Bernanke decided to take your money away. Until Ben Bernanke decided to drive you into penury. Until Ben Bernanke decided that YOU are the problem because you don’t borrow enough or spend enough. What a sick, disgusting world you and I live in.

What Ben Bernanke is intent on doing is taking away the only thing that might now save you – oh poor, interestless saver – and that is deflation. At least with deflation your real wealth would be rising and you could eat a little into your capital without lowering your net worth. But even that crumb of comfort is to be denied you. The Mad Hatter has decreed that inflation must reign. His message, and the message of all economists that support the grandest larceny ever, is that we savers are the scum of the earth. We deserve nothing – literally.

It is going to be a bleak Christmas for many former investment bankers, construction workers and real estate agents. But they all had a chance to make hay when times were good. For you savers of the world, the people that finance investment and ultimately make all the wheels of commerce turn, there will be no Christmas cheer, no return for your frugality and prudence. Just the prospect of an idiot from Princeton driving us all to ruin.


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To read other articles about these things, see the FM reference page on the right side menu bar.  Of esp relevance to this topic:

Post on the FM site about forecasts and warnings of this crisis:

  1. A brief note on the US Dollar. Is this like August 1914?, 8 November 2007 — How the current situation is as unstable financially as was Europe geopolitically in early 1914.
  2. We have been warned. Death of the post-WWII geopolitical regime, Chapter II, 28 November 2007 — A long list of the warnings we have ignored, from individual experts and major financial institutions.
  3. Geopolitical implications of the current economic downturn, 24 January 2008 – How will this recession end?  With re-balancing of the global economy — and a decline of the US dollar so that the US goods and services are again competitive.  No more trade deficit, and we can pay our debts.
  4. What will America look like after this recession?, 18 March 2008  — The recession will change many things, from the distribution of wealth within the US to the ranking of global powers.
  5. Making us dumber, chanting “Dude, where’s my recession?”, 3 June 2008 — Economic columnists do a disservice to their readers by ignoring the data showing a weakening economy.
  6. Another warning from our leaders, which we will ignore, 4 June 2008 — An extraordinarily clear warning from a senior officer of the Federal Reserve.
  7. When did “Dude” predict a recession? How severe?, 6 June 2008 — Why accurate economic forecasting is difficult, what we know about current conditions, and warnings from a top economist.
  8. Consequences of a long, deep recession – part I, 18 June 2008
  9. Consequences of a serious US recession – part II, 19 June 2008
  10. Consequences of a long, deep recession – part III, 20 June 2008
  11. A look at one page of what lies ahead in America’s history, 7 August 2008 — Death of an American industry.
  12. “The Coming US Consumption Bust”, by Nouriel Roubini, 6 September 2008
  13. The most important news of the month. Perhaps the year., 29 September 2008 — Warnings from our foreign creditors.
  14. Forecasting the results of this financial crisis – part I, about politics, 13 October 2008
  15. Forecasting the results of this financial crisis – part II, a new economy for America, 14 October 2008
  16. Miscelaneous news and thoughts about the financial crisis, 16 October 2008
  17. The Coming Global Stag-Deflation (Stagnation/Recession plus Deflation), 28 October 2008
  18. A look at the next phase of the crisis, as it hits the real economy, 31 October 2008
  19. A look at out future, 2009 – 2010 … and beyond, 9 November 2008

5 thoughts on “An Epistle to the good savers of America”

  1. Sorry, Chairman Ben S. Bernanke, But Quantitative Easing Won’t Work.

    In a Liquidity Trap although Saving (S) is abnormally high investment (I) is next to 0. Hence, the Keynesian paradigm I = S is not verified. The purpose of Quantitative Easing being to lower the yield on long-term savings and increase liquidity it doesn’t create $1 of investment.

    In a Liquidity Trap the last thing the Market needs is liquidity. Quantitative Easing does diminish the yield on long-term US Treasury debt but lowers marginally, if at all, the asked yield on long-term savings. Those purchases maintain the demand for long-term asset in an unstable equilibrium.

    When this desequilibrium resolves the Market turns chaotic. This and other issues are explored in my tract: A Specific Application of Employment, Interest and Money Plea for a New World Economic Order. Abstract:

    This tract makes a critical analysis of credit based, free market economy, Capitalism, and proves that its dysfunctions are the result of the existence of credit. It shows that income/ wealth disparity, cause and consequence of credit and of the level of long-term interest-rates, is the first order hidden variable, possibly the only one, of economic development.

    It solves most of the puzzles of macro economy: among which Unemployment, Business Cycles, Under Development, Trade Deficits, International Division of Labour, Stagflation, Greenspan Conundrum, Deflation and Keynes’ Liquidity Trap…

    It shows that no fiscal or monetary policy, including the barbaric Quantitative Easing will get us out of depression.

    A Credit Free, Free Market Economy will correct all of those dysfunctions.

    The alternative would be, on the long run, to wait for the physical destruction (through war or rust) of most of our productive assets. It will be at a cost none of us can afford to pay.

    A Specific Application of Employment, Interest and Money

    Press release of my open letter to Chairman Ben S. Bernanke: Sorry, Chairman Ben S. Bernanke, But Quantitative Easing Won’t Work.

    Shalom P. Hamou, Chief Economist & Master Conductor, 1776 – Annuit Cœptis.

  2. Yes, it is an unfortunate fact of life that the fiscal and monetary authorities around the world believe that the solution to the financial crisis is to revive the US consumer. See my comment at Giving inflation a chance. The most likely scenario is an inflationary cycle for the next 3-5 years, followed by a deflationary episode, when the world really pays the piper.

  3. This is one of those “the government wants to take away your freedoms” arguments. It confuses the effects of a policy with the purposes of it. The author doesn’t mention a single reason why the Fed might be following these easy money policies, although there is at least one logical one, the desire to make our staggering national debt easier to pay off.

    But I dont think the government has yet resorted to that third-world strategy. I think it is honestly if futilely trying, following past models, to revive the economy by borrowing money it expects to pay back from future revenues. One can argue that nothing it has done so far is likely to have that result, but that’s an argument about choices.

    On the merely emotional level of this piece, instead of saying the “government wants to steal your money”, you could say “the government wants to bankrupt itself so that it no longer has to pay for any social programs at all.” That at least is a project that’s been publically rumored, from Reagan’s time forward.
    Fabius Maximus replies: There is no such “confusion.” You overlook two important things.

    (1) As indicated, this is a brief excerpt from a larger article.

    (2) The author is an intellegent person, and of course knows that there are reasons. This excerpt describes effects (one subset of them), which is after all the important thing.

  4. The only long term solution to our problems is to become competitive again, and to start to make things that other people want to buy.
    I work for a Television company, about two weeks ago we found out the hard way that a similar company in India can produce our product to the same standard for less than a tenth of the cost we would charge. We don’t make plastic toys or razor blades, we are a high end graphic design and Television production company. In the face of that kind of competition, if it becomes the norm, we are doomed as a company. I felt like those 19th century Indian weavers when they saw there first bale of Manchester Cotton down the market.

    The world is staring down the barrel, 3 4 years hence of a large dumping of US dollar assets. The Currency is over valued, and the country faces massive long term debts and obligations, the bottom line is the dollar is poor value for money, does anyone really believe this will continue for much longer? Get out of the dollar, and start now. Once this stimulus plan wears off there will be nothing left to hold it up.

    The only thing the savers can do, and they still can, and I count myself as one of them, is to get out now, while we are able.
    Fabius Maximus replies: As you note, US industry’s lack of competitiveness is largely the result of an overvalued dollar. Hence I said in “Geopolitical implications of the current economic downturn” (24 January 2008):

    How will this recession end? My guess: with re-balancing of the global economy and a decline of the US dollar so that the our goods and services are again competitive. No more trade deficit, we can pay our debts, and there will be no serious outflow of jobs.

  5. A weakening dollar will of course induce political pressure for wage price controls in the form of minimum wage laws and stronger union laws which will undo much of the benefits of dollar decline. This happened in the Great Depression and some argue this greatly prolonged the cycle.

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