US Financial Crisis/Bailout, China's Role

Infra_Man99 said:

Not everything in this world makes sense. There is such thing called deflation and inflation, something economists are still struggling to handle and fully understand. The US has been inflating the US dollar for a VERY long time because US banks are allowed to print excess money to back their loans with interest, and the interest has a tendency to further increase the inflation.

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It is the Treasury that actually prints the money not the banks. However, this does not mean banks cannot generate money on their own electronically. Hence a considerable amount of the money supply does not exist in printed paper money per se, but as electronic documents.

Emerging powers join forces for finance reform

8 Nov, 2008, 1731 hrs IST, AGENCIES

SAO PAULO: Emerging economies staked their claim to a bigger role in the world's financial system on Friday, saying the crisis that has hammered rich countries showed it was time for them to take a seat at the big table.

The "BRIC" nations of Brazil, Russia, India and China, meeting ahead of broader talks this weekend, for the first time forged a joint position that called for reform of institutions like the International Monetary Fund to reflect the growing importance of developing economies.

"Emerging countries are ready to shoulder the financial consequences of a bigger participation at the IMF," Brazilian Finance Minister Guido Mantega told a news conference in Sao Paulo. "There is no point in us increasing our participation if the big countries keep their veto powers."

With the United States and Europe reeling from the global financial crisis, faster-growing emerging economies are being asked to play a bigger role in helping the IMF protect small countries from fallout from the credit crunch. In return, new heavyweights like the BRIC nations want more influence at the global financial institutions which have long been the preserve of the 20th Century powers.

"We called for the reform of multilateral institutions in order that they reflect the structural changes in the world economy and the increasingly central role that emerging markets now play," finance ministers from the BRIC countries said in a joint statement after their meeting on Friday.

The statement also said the Financial Stability Forum, which groups the G7 and some other major economies, should be immediately expanded to include big emerging countries. The show of unity came as finance ministers and central bankers began arriving in Sao Paulo for an annual meeting of the G20 group of the world's biggest economies which will be dominated by discussions of how to respond to the crisis. The IMF voting shares of large emerging markets including Brazil, India, China, Mexico and South Korea were increased in March, but many complained it did not go far enough to influence decisions in the global lender.

CALL FOR GREATER REGULATION

Any progress at the G20 gathering and a meeting of the Bank of International Settlements also in Sao Paulo could be taken to a G20 heads of state summit in Washington on Nov. 14-15. The leaders' meeting has been billed as a chance to redesign the global financial architecture although officials from the soon-to-end U.S. administration of President George W. Bush have played down the prospect of major changes.

In Brussels earlier on Friday, after a meeting of European leaders, French President Nicolas Sarkozy said Europe would head to the Washington summit next week united behind a French-inspired plan for revamping the financial system. As chair of the G20 finance officials' meeting, Brazil is under pressure to seize the opportunity to bolster its standing as an up-and-coming global heavyweight and hammer out a consensus for the Washington summit.

Coming off its biggest burst of growth in decades, Brazil has braved the turmoil better than previous crises. But Brazilian officials are frustrated
with the United States for not doing more sooner to contain the financial fallout, which is now putting the brakes on Brazil's economic boom. "There is a need to reorganize the global financial system that was created in Bretton Woods," Mantega said, echoing calls for greater regulation laid out in the BRIC statement.

"Strict rules are lacking that would prevent the abuses that were committed by hedge funds, investment funds. Regulation is lacking." Mantega said Brazil also wants an expansion of the G8 club to include major emerging economies and will urge G20 nations to increase fiscal spending to stimulate global growth.

While Brazil angles to take a leadership role, any coordinated effort to restore a sense of normalcy to global financial markets will hinge on China, which has amassed a war chest of nearly $2 trillion in currency reserves. Economists have said it may be hard for developing countries to sustain a common position on global financial reforms, due to their often differing interests.

China has long taken a low-key approach on international affairs, focusing instead on domestic issues. But some analysts say that given the current climate, Beijing may no longer be able to shun calls for it to shoulder greater responsibility.

crobato said:

It is the Treasury that actually prints the money not the banks. However, this does not mean banks cannot generate money on their own electronically. Hence a considerable amount of the money supply does not exist in printed paper money per se, but as electronic documents.

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I read the Federal Reserve (which is a private institution that works closely with the government) prints money, NOT the Treasury (this is why I said banks are ALLOWED to print excess money). Congress votes yes or no on whether or not to print money. The major banks work closely with the Federal Reserve. Look at the relationship between the Federal Reserve and the recent bail-out of banks and investment firms (which are a type of bank, but with an allegedly superior savings system).

No single bank in America is allowed to generate US money on its own. First, it has to get permission and follow the guidelines from a team consisting of the US government and the Federal Reserve.

China is doing the world a big favour by keeping its own economy running. if China has to divert some of its money to wipe america's *ss,at the expense of its own economy,then everyone loses

Infra_Man99 said:

I read the Federal Reserve (which is a private institution that works closely with the government) prints money, NOT the Treasury (this is why I said banks are ALLOWED to print excess money). Congress votes yes or no on whether or not to print money. The major banks work closely with the Federal Reserve. Look at the relationship between the Federal Reserve and the recent bail-out of banks and investment firms (which are a type of bank, but with an allegedly superior savings system).

No single bank in America is allowed to generate US money on its own. First, it has to get permission and follow the guidelines from a team consisting of the US government and the Federal Reserve.

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No, its the US Treasury that prints the money.



What the Federal Reserve does, I believe though subject to correction, is that it issues a bank note or bond, which is then given to the Treasury which mints the bills and gives it in exchange to the Federal Reserve. The Congress does not vote to print the money, that's all decided by the Federal Reserve, which is run by a chairman like Alan Greenspan.

As for printing "money", what is printed here is only what is now called M0. This means direct currency. Note the direct currency in the United States is actually well under a trillion, keep that in mind of the size of the bailout package, the deficit and other spending like the military budget.



The money supply

Further information: Money supply

Components of US money supply (currency, M1, M2, and M3) since 1959

The most common measures are named M0 (narrowest), M1, M2, and M3. In the United States they are defined by the Federal Reserve as follows:

* M0: The total of all physical currency, plus accounts at the central bank that can be exchanged for physical currency.
* M1: M0 + those portions of M0 held as reserves or vault cash + the amount in demand accounts ("checking" or "current" accounts).
* M2: M1 + most savings accounts, money market accounts, and small denomination time deposits (certificates of deposit of under $100,000).
* M3: M2 + all other CDs, deposits of eurodollars and repurchase agreements.

The Federal Reserve ceased publishing M3 statistics in March 2006, explaining that it cost a lot to collect the data but did not provide significantly useful information.[82] The other three money supply measures continue to be provided in detail.


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Note they quit publishing M3, and yet if you look at the chart, its the M3 that has been ballooning of late. That's what the banks end up producing as ruled in the fractional reserve banking system. Other countries continue to monitor M3.

M3 includes stuff like this:



You can read more here.



One of the problems is the swelling of the M3 which the Feds decided to deal with by using the Ostrich solution (burying your head in the sand and decide not to include it with your statistics).

OK, if you want to get more specific, then I'll do my best without taking up too much time.

As you know, Wikipedia is NOT the best source of information. It has errors like all sources of information.

The Federal Reserve works with the private sector and the government sector in managing the US economy. The Treasury department works with the government sector in managing the economy. Large banking corporations work with the private sector in managing the economy. There is significant overlap in all these three institutions powers and influence, which is expected since they all interface with one another.

The Federal Reserve is the main body that analyzes the US economy for both government and private purposes and persuades the US government and US large banks to increase of decrease the US money supply.

The US Bureau of Engraving and Printing, which is a branch of the US Department of Treasury, prints money. The US Mint (another branch of the US Depart of Treas) coins money.

According to the United States Constitution, the US Congress votes on whether to increase and decrease the US money supply, and the US Congress votes on the US budget. I greatly doubt the Federal Reserve or the Treasury can create or destroy US money without Congressional approval.

The legal world may work differently than the real world, but this is how the legal world is suppose to operate. If you don't believe me that the US Congress has the legal and real world power to vote on increasing or decreasing the US money supply and to vote on US budgets, then read the US Constitution and notice the recent $750 billion bailout.

During the bailout, the Federal Reserve worked with large banking corporations and the US Treasury to analyze America's money supply and economy. The Federal Reserve persuades the US Presidency, the US Treasury, and large banks to accept a $700 billion bailout. This coalition then failed to persuade the US Congress to accept the $700 billion bailout. The US House rejected the bailout. Somehow, Congress figured to increase the bailout to $750 billion with more laws and regulations than before. The US Senate passed the $750 billion bailout. I lack knowledge on how exactly Congress works (it is a very complex topic), but I do believe Congress has the legal power and real world power to vote on money production and budgets based on the US Constitution and real world incidents.

Congress also determines whether the Bush Administration can fund the Iraq war and how the Bush Administration can fund the Iraq war. This is why Bush has been making desperate speeches demanding Congress pass his proposed war budgets every time Congress rejects the Bush Administration's war budget proposals. Once Bush gets the money, he tends to be secretive and uncooperative in telling Congress what he is doing with the money. This is because the division of power in the US is not as clear and perfect as what is written in the US Constitution and other US laws. Things constantly change, too. Look at how Freddie Mac and Fannie Mae have constantly changed between being federal banks to corporate banks and everything in between.

It doesn't change the fact that the Fed has lost control of the money supply. You still have not grasped the difference between M0, M1, M2 and M3 don't you? If you want to grasp what is wrong with the wiki entry, do so, because its not much different from other encylopedic definitions.

As far as the US Constitution, the US Congress, the US Treasury and the US Fed goes, money that is authorized to be made and minted is M0.

The article from one who manages mutual funds tells you what is really happening.



How the Fed Lost Control of Money Supply

Axel Merk, Feb 6th 2007

The world is awash in money. This money has flown into all asset classes, from stocks to bonds, from real estate to commodities. In a world priced for perfection, should we enjoy the boom or prepare for a bust? Let us listen to Wall Street’s adage and “follow the money.”

After the tech bubble burst in 2000, policy makers in the U.S. and Asia set a train in motion they have now lost control over. In an effort to preserve U.S. consumer spending, the Federal Reserve (Fed) lowered interest rates; the Administration lowered taxes; and Asian policymakers kept their currencies artificially weak to subsidize exports to American consumers.

These policies have lead to one of the longest booms in consumer spending ever – U.S. consumer growth has not been negative since the early 1990s. However, it was credit expansion, rather than increased purchasing power, that has fueled the growth. Until about a year ago, consumers took advantage of abnormally low interest rates to print their own money by taking equity out of their homes. This source of money is drying up as home prices no longer rise and sub-prime lenders (those providing loans to financially weak consumers) are facing difficulties. More prudent homeowners have not yet been affected as they buy their home based on longer-term interest rates; until December these interest rates have stayed abnormally low. In recent weeks, these rates have ticked up significantly, and we may see the next and more severe round of pressure being exerted on the housing market. In this phase, we will see monetary contraction: money that has subsidized not only the real estate market, but also consumer spending, stocks, bonds and commodities may dissipate.

Why is it that asset prices have continued to soar despite the stall in home prices? Consumers have not been the only source of money creation. Corporate America is creating its share of money as cash flow positive businesses are piling up cash; but corporate CEOs seem to prefer to invest abroad, providing only limited stimulus to domestic money supply.

A massive source of money supply growth is purely of financial nature, it is volatility, or better: the lack thereof. Volatility in major markets was at or near record lows last year. With volatility low, risk premiums are low; when risk premiums are low, investors have an incentive to employ more leverage and still be within their risk comfort zone. What may seem like an abstract concept has propelled financial markets to the stratosphere.

Two groups that have been most aggressive at taking advantage of this are hedge funds and the issuers of credit derivatives. Take as an example, a report from the Financial Times last December: the paper reported that Citadel Investment Group, a manager of hedge funds, had $5.5 billion in interest expense on assets of only $13 billion. The hedge fund group routinely borrows as much as $100 billion. Note that this is only the leverage visible on the financial reports; the instruments invested in may themselves carry yet further leverage.

The world of credit derivatives has also seen explosive growth. European Central Bank (ECB) president Trichet at the World Economic Forum in Davos warned that the explosion of credit derivatives are a risk to the stability of financial markets. Specifically, he complained that the market under-prices their inherent risks. With risk premiums at record lows, issuers of credit derivatives can borrow money at or near the Fed Funds rate. And that in turn means that we do not need the Fed to print money, anyone can. That is precisely what has been happening; however, the credit created is not without risks; more often than not, credit derivatives contain risks that only the issuer properly understands.

A year ago, the Fed stopped publishing M3, a broad measure of money supply. Just because you lose control of something doesn’t mean you shouldn’t monitor it anymore. Of the major central banks around the world, only the ECB takes an active interest in money supply.

Why is it that the Fed doesn’t intervene and try to stem excesses in the credit industry? We find the answer by circling back to the consumer: if the Fed were to do something about the spiraling credit expansion in the derivatives markets, the imposed tightening would quite likely hurt the consumer. Typically, a recession would not scare the Fed, but globalization has put the fear of deflation on Fed chairman Bernanke’s table. Tight credit could cause a collapse in the housing market and in consumer spending; what has been a great boom would turn into a great bust.

The fear also spills over to the U.S. dollar: as a result of the current account deficit foreigners must purchase in excess of over $2 billion U.S. dollar denominated assets every single day, just to keep the dollar from falling. As the U.S. economy slows, foreigners may be more inclined to invest some of their money elsewhere. The rising price of gold reflects that many investors believe that the Fed rather see a continuation of monetary expansion than allowing a severe contraction. Fed chairman Bernanke has also made it clear in his publications that he favors monetary stimulus at the expense of the dollar to mitigate hardship on the population at large.

Market forces will try to bring this credit expansion to a halt. While a crisis scenario with an imploding hedge fund causing ripple effects through the financial sector is possible and likely, we don’t need a crisis for the party to end. What we need is increased volatility which we have already seen in the commodities and bond markets; the equity and currency markets have also indicated volatility may be on its way back. As volatility increases, speculators are likely to pare down their leverage. In our assessment, the economic slowdown induced merely by an increase in volatility may be sufficient to encourage the Fed to ease monetary policy once again. Any easing in this context will, in our assessment, have negative implications for the dollar.




Billions for the Bankers
Debts For The People



In his essay, "Billions for the Bankers--Debts for the People: An indictment of the Federal Reserve System," the late Pastor Sheldon Emry examines the corruption at the core of the American monetary system.

This essay examines the corruption at the core of the Canadian monetary system. It suggests that Canadians lost control of their money supply in much the same way as the Americans. How can we get it back?

Money Control

In 1867 the Fathers of Confederation gave the federal government (under section 91 of the British North America Act) the right to create Canada’s money supply. However, our federal government has given this right to the private chartered banks. Instead of getting our money supply for the cost of printing, our federal government now borrows the money from the chartered banks and pays huge interest charges. Payment takes a big chunk of the federal budget. This means all business, farmers and individuals also have to borrow our money supply. Because money to pay the interest is never issued, we have to borrow the money to pay the interest. Thus borrowing drives all of us, including our governments, deeper and deeper into debt.

The borrower is the servant of the lender. So most of us, including our governments, are servants of the lender, namely the private banks.

What the present system has done to us:
Interest on the federal debt alone per person
1914 $ 1.64
1939 - 25 YEARS LATER $ 18.36
1964 - 25 YEARS LATER $ 50.52
1986 - 22 YEARS LATER $ 883.00
1988 - 2 YEARS LATER $1,230.00
1990 - 2 YEARS LATER $1,584.00
1991 - 1 YEAR LATER $1,652.00

Impossible you say! We can not afford to pay this amount of interest!
You are so right, so we borrowed the money to pay it. This further increased the debt.

Interest payments on the federal debt alone increased a thousand times in only 77 years. Paying for the interest on the debt means that there will be less and less welfare, health care, pensions, etc., and finally riots in the streets and a tyrant running our government. The total debt on which we pay the interest may never be repaid.You may say it can’t happen here. It is happening in every country of the world where debt and interest can not be paid.

There is only one answer to calamity and that is monetary reform.

If we do not carry out monetary reform we will continue to be run by internationalist financiers. Most of the revenue collected by the Federal government in the form of individual income taxes will go straight to paying the interest on the debt alone. At the rate the debt is increasing, eventually we'll reach a point where, even if the government takes every penny of its citizens' income via taxation, it will still not collect enough to keep up with the interest payments. The government will own nothing, the people will own nothing, and the banks will own everything. The New World Order will foreclose on Canada.

It is only a matter of time before the I.M.F. and their fellow bankers refuse more credit. Canada will then be in the same situation as the third world countries.

There is an answer

Toward a sustainable financial system for Canada by John H. Hotson, professor of economics Waterloo University.

The most thorough going, and beneficial, reform of Canadian banking would be for the bank of Canada to buy back from the Chartered Banks all federal debt they hold, plus sufficient other assets to equal 100% of their demand deposits (M1a) liabilities, and then require them hence forth to maintain 100% reserves against all deposits transferable by check. At one stroke this reform would end our present fractional reserve or “private mints system” by which the banks create 95% of the money we use as they make loans. The bank of Canada, or the Department of Finance, if this were desired, would then become the sole creator of money and the private banks would be reduced to their role of re-lending savings deposited with them without money creation.

The Real Story of Money Control in Canada
Canadians, living in what is called one of the richest nations on earth, seem always to be short of money. It's impossible for many families to make ends meet unless both parents are in the work force. Men and women hope for overtime hours or take part time jobs evenings and weekends; children look for odd jobs for spending money; the family debt climbs higher.

Psychologists say one of the biggest causes of family quarrels and breakups is "arguing over money." Much of this trouble can be traced to our present "debt-money" system.

Too few Canadians realize why the Fathers of Confederation wrote into Section 91, Clause 14 and 15 of the British North America Act:

"that Legislative Authority of Parliament shall have the power to issue “Currency and Coinage” and “Banking Incorporation of Banks, and the issue of paper money”.

They did this, as we will show, in the hope that it would prevent "love of money" from destroying the Federation they had founded.

Have you ever played the game of Monopoly ?
Imagine that one player can print all the money they want.
Before long, that one player will own everything, and everyone else is broke or in debt.

The nation is swimming in debt: about $53 Trillion nation-wide debt (as of the end of year 2007) has never been worse (ever), including as a percentage of the GDP (currently $13.86 Trillion).
The government and Federal Reserve (a quasi-government controlled / privately owned bank system) are printing fiat-funny-money (7please watch the 47 minute video) out of thin air, and then try to lend it to everyone possible, flooding the mail with credit-card applications to everyone (and their pets and children too, literally). Some people will fail to repay their loans and the banks then confiscate real assets, turning paper money printed out of thin air into real assets. The value of the money erodes year after year. A U.S. Dollar from year 1950 is now worth less than 11 cents. Ever heard of compound interest? It's the same for inflation. At only 4.5% inflation, $100 becomes $81.75 in only 5 years. Inflation is another contributing factor to falling median incomes and the shift of most wealth distribution to a mere 1% of the total U.S. population (with 40% of all wealth in the nation; up from 20% in 1976).

YEAR MONTH M3 MONEY Per Year
($Billions)
1950 12 $135.00
1959 12 $299.70 $299.70
1960 12 $315.20 $15.50
1961 12 $340.80 $25.60
1962 12 $371.30 $30.50
1963 12 $405.90 $34.60
1964 12 $442.40 $36.50
1965 12 $482.10 $39.70
1966 12 $505.40 $23.30
1967 12 $557.90 $52.50
1968 12 $607.20 $49.30
1969 12 $615.90 $8.70
1970 12 $677.10 $61.20
1971 12 $776.00 $98.90
1972 12 $885.90 $109.90
1973 12 $985.00 $99.10
1974 12 $1,069.90 $84.90
1975 12 $1,170.20 $100.30
1976 12 $1,309.90 $139.70
1977 12 $1,470.40 $160.50
1978 12 $1,644.50 $174.10
1979 12 $1,808.70 $164.20
1980 12 $1,995.50 $186.80
1981 12 $2,254.50 $259.00
1982 12 $2,460.60 $206.10
1983 12 $2,697.40 $236.80
1984 12 $2,990.60 $293.20
1985 12 $3,208.10 $217.50
1986 12 $3,499.10 $291.00
1987 12 $3,686.50 $187.40
1988 12 $3,928.80 $242.30
1989 12 $4,077.10 $148.30
1990 12 $4,154.70 $77.60
1991 12 $4,210.30 $55.60
1992 12 $4,222.60 $12.30
1993 12 $4,285.60 $63.00
1994 12 $4,369.80 $84.20
1995 12 $4,636.30 $266.50
1996 12 $4,985.50 $349.20
1997 12 $5,460.90 $475.40
1998 12 $6,051.90 $591.00
1999 12 $6,551.50 $499.60
2000 12 $7,117.60 $566.10
2001 12 $8,035.40 $917.80
2002 12 $8,568.00 $532.60
2003 12 $8,872.30 $304.30
2004 12 $9,433.00 $560.70
2005 12 $10,154.00 $721.00

YEAR MONTH M3 MONEY Per Month

2006 (JAN) 1 $10,242.80 $88.80
2006 (FEB) 2 $10,298.70 $55.90
Look at year 2001/2002 (above). M3 Money supply increased by $917 billion in only 1 year !
Between year 1950 and 2005, M3 Money Supply increased from $135 billion to $10.15 trillion.

That's a factor of 75.2 !

But, the nation did not become 75.2 times wealthier in 55 years.
The population grew from 152 million in 1950 to 298 million in year 2005.
That still does not explain the increase of the M3 Money Supply by a factor of 75.2 .
What happened was a whole lot of new money was printed since 1950.

Our money system is a PYRAMID scheme, and all PYRAMID schemes collapse, eventually.

Here's how it works (they don't teach this in any public schools).
The Federal Reserve loans money (with interest) to member banks (which charge more interest).
Up to 90% of each new bank loan is money created out of thin air.
But it gets worse.
For each dollar re-deposited into the fractional (9:1 ratio) bank system (a closed loop monopoly bank system), 9 times more new money can be created out of thin air.
Depending on the size of each loan, that PYRAMID scheme can continue until 90 times more money has been created out of thin air. However, the bank is required to have 10% of their loans in reserves.

For example, let's say the bank has $1111.11 in reserves.
That means the bank can make a loan of 9 times that initial $1111.11, which is $10,000.00 .
90% of each subsequent deposit can then be used for another loan of money created out of thin air . . .

(001) 90% of that $10,000.00 can be loaned again, to create a new loan of $9,000.00
(002) 90% of that $9,000.00 can be loaned again, to create a new loan of $8,100.00
(003) 90% of that $8,100.00 can be loaned again, to create a new loan of $7,290.00
: : : : : :
(088) 90% of that $1.16 can be loaned again, to create a new loan of $1.045
(089) 90% of that $1.045 can be loaned again, to create a new loan of $0.94
: : : : : :
(131) 90% of that $0.013 can be loaned again, to create a new loan of $0.011
(132) 90% of that $0.011 can be loaned again, to create a new loan of $0.01
_______________________
TOTAL SUM = $99,888.89 (of money created out of thin air from initial $1111.11 in reserves).

Thus, from the initial $1111.11 in the bank reserve, $98,888.89 (98.89% of $100,000.00) of more new money could be created out of thin air.

But it still gets worse, because a LOAN = PRINCIPAL + INTEREST.
But the bank creates only the PRINCIPAL for each new loan.
So, where does the INTEREST come from?
One of several things must happen:

1. create more new money to delay the collapse of the PYRAMID (such as the recent government $152 Billion economic stimulus package in FEB-2008). However, this creates more inflation.
2. those with money must spend more money to allow more new money to be created out of thin air.
3. increase productivity.
4. increase products and/or natural resources (e.g. oil, steel, etc.) to sell to other nations to bring money back.
5. the wealthy share their wealth (not likely to any significant extent).
6. increase taxes on the wealthy (however, if the wealthy are taxed too much, they might up and move their wealth and businesses to another country).
7. increase productivity via increased population.
8. increase productivity via illegal immigration (cheap labor).
9. reduce taxes to encourage more spending.
10. reduce interest rates to encourage more spending (but this creates more debt).
11. the government prints up more new money and gives it back to people to stimulate more spending (such as the $152 Billion proposed in FEB-2008).
12. foreclosures.
13. plunder pensions and other systems (e.g. Social Security surpluses).
14. the PYRAMID finally collapses when there is finally too much debt and inflation to delay the inevitable collapse.

It is a PYRAMID scheme, and all pyramid schemes eventually collapse.
As time goes on, this problem can only get bigger and bigger.
The only thing stopping the collapse of this pyramid is a short time-lag by creating more debt and printing more money.
But that time-lag is shrinking every day, as the ability to repay debt becomes more difficult.
Debt will grow larger and larger.
The time it takes to finally collapse fools people.
Printing more money to delay the collapse will make inflation get worse and worse.
It could take decades or centuries, but the inevitable collapse is a mathematical certainty.
Eventually, the debt and inflation will become impossible to deal with.
We will not be able to create more debt to create more money.
We will not be able to spend our way out of the collapse.
We will not be able to print (money) our way out of the collapse (due to inflation).
We will not be able to immigrate our way out of the collapse.
We will not be able to procreate our way out of the collapse.
We will not be able to increase productivity enough to avoid the collapse.
We will not be able to tax (or un-tax) our way out of the collapse.
Look at our current situation and results of this PYRAMID scheme:

* $20 Trillion nation-wide personal debt,
* $9.4 Trillion National Debt,
* plundered pensions (PBGC pensions are $450 Billion in the hole),
* rising foreclosures,
* rising bankruptcies,
* rising unemployment,
* pressure to raise taxes for those that have money (i.e. the wealthy),
* pressures to increase illegal immigration to increase productivity and growth (cheap labor),
* stock market and real-estate bubbles and volatility,
* the M3 Money Supply $135 Billion in year 1950 to $10.15 Trillion by year 2005.
* inflation; a 1950 U.S. Dollar is now worth less than 11 cents,
* the pressure to spend and borrow (i.e. numerous credit card applications in the daily mail),
* bank fees (i.e. to increase reserves for more loans; the banks receive the interest),
* the U.S. Dollar falling against all major international currencies,
* and now, the recently proposed $152 Billion economic stimulus package (proposed FEB-2008) with more created out of thin air, will increase the time-lag to prevent the collapse of the PYRAMID scheme, but it is only a short-term solution and will make things worse, long-term.

For anyone who thinks it is bad now, they haven't seen anything yet.
But this is not taught in public schools (see 47 minute video), and probably not in any universities either.
All of the above are the many manifestations of unchecked greed, and there will eventually be painful consequences for most people when the PYRAMID scheme finally collapses, as all PYRAMID schemes always do.

The SOLUTION - Reform the Monetary System:

1. The federal government controls the monetary system. It shall create the money it needs, interest free. It shall control the money-supply.

2. The federal government shall prohibit usury (interest) by government and member banks (under-cutting anyone else who lends money with interest). If a lot of interest is bad (i.e. usury is immoral), how can a little interest be good? If inflation is bad, how is a little inflation good?

3. This creates a stable money supply with the flexibility for small fluctuations. If inflation is too high, some money in circulation can be removed. If there is deflation, or the population increases, the government can create and spend some money. If they do a bad job of it, the voters know exactly who to hold accountable. Currently, the Federal Reserve is a quasi-government controlled / privately owned bank, and the voters have little (if any) control over it. Why would people borrow from a bank (with interest) when they can borrow from the government, interest free? Thus, there would be little (if any) usury. Usury, predatory lending, and other manifestations of unchecked greed and the other numerous negative side effects would be greatly reduced. If properly managed, without profit and usury as a motive, the U.S. currency would become superior to any other world currency.

4. Theoretically, if managed responsibly, with the central bank in control of the monetary policy (instead of a quasi-government controlled/privately owned bank system), there may be no need for any tax system. That is, inflation and deflation would affect everyone's money an equal percentage. Of course, such a vast change in the monetary and tax systems would require new ways of thinking about money, interest, borrowing, taxation, and monetary policy, and there are many (e.g. politicians and bankers; a.k.a. puppets and puppeteers) that will resist such changes. Since this way of funding the federal government is unlikely any time soon, the least we can do now is to greatly simplify the current, ridiculously complex and regressive tax system (e.g. make it fairer flat 17% income tax on all types of income above the poverty level).

Wikipedia, many American encyclopedias, and many American financial experts predicted in the mid-1990s that China's economy would crash sometime between 2000 and 2010. These "know-it-all" sources also said that the US economy would be very strong from the mid-1990s to 2010. I am not saying I know everything (I am obviously deep inside Plato's cave like most people), but I wasn't born yesterday.

If you are saying that the Federal Reserve owns the US or some non-US-government cabal controls the US money supply because the federal government somehow lost control, then that is crazy a theory espoused by some economists. No real world incidence proves that some non-government entity controls the US money supply. They may influence the US money supply, but they can't control it like the US Congress.

You can make a good and believable argument that China has some control over the US money supply because China has saved an enormous amount of US dollars, but China does not have the fundamental control of deciding when to print or cancel US money. Congress has proved it has the sole, ultimate power of printing or canceling money when Congress many times voted for or against all US budgets I know of.

The US money crisis or inflation right now has more to do with corruption and childish domestic spending from both the federal government, state governments, the Federal Reserve, and major corporations. This is nothing new. Many nations throughout history have stupidly spent more money than they have. Another factor in the US money crisis is how the US convinced the world to use the US dollar as a world currency while failing to accurately track the worldwide supply of the US dollar and while racking up huge debts with other nations, even though the US will struggle to pay back all this debt. Once again, this is due to the US corruption and unrealistic financial actions. Another factor is how the US government and banks give too much money to the wrong people (the unproductive or corrupt) and give too little to the right people (the productive and reliable).

You can say that the US government is in debt to the Federal Reserve, which is technically true as far as I know, but the Federal Reserve knows it prints money out of thin air and it willingly accepts this job, so the Federal Reserve can't really claim eveeryone owes the Federal Reserve all of its money. Even if it openly did, American citizens and the world would effectively reject this claim. This is the difficulty with fiat money. You have to carefully manage it so it does not inflate or deflate too much, everyone who uses the fiat currency trusts the money is a good indicator of wealth, and the controllers of fiat money must be financially intelligent and honorable in passing out the fiat money. I repeat, the US government and closely allied banks lost these 3 traits a long time ago, so now the US financial system is overly inflated or an excessively inaccurate indicator of wealth or value or productivity.

Even China uses fiat currency, but China has recently done a good job of ensuring its money supply accurately reflects its real economic value. Gold and silver is not real money, but element-based fiat money that is hard to inflate unless you hit a record mine or believe in the sorcerer's stone or some myth like that. China avoids using its currency in international trading because China doubts China can control the flow of its currency once it flows around the world. Domestically, China's national bank has done a relatively excellent job of printing money, loaning money to industrious people, and forgiving debts when a borrower has proved his worth or when the borrower has shown he should not be blamed for the failed business.

Muslims have long advocated government control of the money supply with no usury, but this doesn't stop the government from abusing its fiat currency to help the government at the expense of everyone else. Muslims have been known to charge interest, too, but they just game the system so it doesn't look like they charge interest. What they do is increase the cost of something and offer a periodic payment plan, instead of offering a principal cost with interest.

@ Crobato:
I must say, Crobato, you have grown quickly in the past 2 weeks. I'm glad you have come to see the foolishness of your postings before. Truly impressive how quickly you grasped the current reality, I suppose I had misjudged your mental acuity before.

@ InfraMan:
May you remain in your illusion. You're happy, and more importantly, I'm happy as well.