Comment 1: "I think it is very good that there is now a discussion about The Fed and the things that are done. Two or three years ago, it seemed like nobody (other than Peter Schiff) on the news talked about. Now people are beginning to take things seriously."
Answer 1: Before two or three years ago and before Schiff there was Robert Prechter and Ron Paul. For example, Robert Prechter published Conquer the Crash in 2002.
The primary reason people are just now 'beginning to take things seriously' is because it's not what they see on TV but it's actually happening to them: i.e. the value of their homes (stocks, funds, bonds...) collapsing... loosing jobs and not being able to find employment thereafter... realizing that their bank is not so friendly anymore...
Comment 2: "I don't follow Prechter but heard him with same guy last week. He was thoroughly questioned & I was surprised at some core diversions from Misesian monetary logic & a reliance on "knowing" with his "waves" & "socionomics" that deterministically American society would act like his grand cyclical sociological insights prescribe (express their desire for saving exclusively in the US currency unit) overwhelming everything irrespective of Bernanke/defecits/congress/Chi na etc. Prechter is flaky."
Answer 2: Look a Prechter's track record, from 1979 (when he left Merrill Lynch) to today, and you'll change your mind about him:
Using the Elliott Wave Principle ('his "waves") he forecasted a long-term reversal lower in gold (February 1980) and a long-term "super bull market underway" in stocks (October 1982). These forecasts proved correct—especially for the stock indexes.
He won the U.S. Trading Championship in 1984, with a then-record 444% return in a monitored options trading account. He was named "Guru of the Decade" by the Financial News Network (now CNBC) for the 1980s. AND, he forecasted a large-scale bear market, as explained in his book Conquer the Crash (published in 2002), which was his platform to forecast and explain every chapter of today's financial crisis, years before it happened!!
Does that sound flaky to you? So you should listen to what he has to say and follow his lead. Don't listen to or follow Bernanke and Congress. It is they who are flaky.
Comment 3: "I dont think that the deflationist know they are spinning B,S. If we were in a normal economy with low debt we would have deflation. However we dont have that. WE have a debt laden economy. So we will have inflation."
Answer 3: The tide has turned: the exceptional volume of credit, of debt, has reached its limit and the trend has reversed. Thus, the supply of credit, and therefore the supply of money, has shrunk, which are effects of deflation.
Add to this the deceleration in the U.S. economy which has stressed debtors’ abilities to pay and you'll see that it is precisely because 'WE have a debt laden economy' that we have deflation and are going into a deflationary spiral toward depression.
What's scary is that it is just getting started and deflation will continue for years to come. So it is not B.S and there is no spin.
Comment 4: "Dr. Marc Faber - Sept 12, 2009 - I think the deflationists are wrong for the simple reason...the Federal Reserve can print money...you can electronically print money & so the quantity of money goes up. You can transfer any asset from the private sector into the govt...so many mortgages have been transferred to the govt. They will have continuous huge losses. So, I think that deflation is pretty much out of the picture. Deflation would manifest itself in a strong dollar. The dollar is weak."
Answer 4: The Fed's primary function, for more than 90 years, has been to foster the expansion of credit and credit is another matter entirely. Credit is not money and Faber is confusing credit creation with money creation.
U.S. bonds are the reserves of the Fed and U.S. bonds are the source of its power. Therefore, the U.S. government does not want its bonds to attain (official) junk status, because its borrowing power is one of the only two powers over money that it has, the other being taxation.
By flooding the market with money, the Fed would cause a panic among U.S. bond-holders, and their selling would depress the value of the Fed's own reserves. So the ivory-tower theory of unlimited cash creation to combat credit implosion would meet cold, harsh reality resulting in the Fed committing suicide by doing just that.
As Ludwig von Mises said in Human Action (p.572), "There is NO MEANS of avoiding the final collapse of a boom brought about by credit expansion."
