We need to get our banks out of the fee business. If we do I think we would see a lot more liquidity very soon.

Now the situation is quite different and any discussion of a US economic recovery must include the fact that the US imports 2/3 of the crude that it uses.

One aspect of the huge demand for foreign crude in the US: if Bernanke decides to attempt to monetize the debt (and I doubt he can pull it off) then oil in dollars will rise accordingly.

If oil prices rise dramatically in dollars I expect that oil will be denominated in some other currency or basket of curriencies…Then the US will be in for a very difficult if not impossible economic recovery effort.

River

As previously stated, the risks are profoundly deflationary.

As I have warned here for some time and online for months we face an absolute collapse in global demand caused by the absolute and total liquidation of the world’s financial system.

Those who continue to rail against the dangers of imminent inflation only increase the risk of a global depression.

But that is likely unavoidable anyway, bailout or not.

The writing of history goes to the victors.

Matthew Dubuque

Housing was the only thing buffering the American consumer from the effects of ten years of declining wages. With the housing bubble gone, a contraction was inevitable.

But that won’t be the lesson learned. The lesson, instead, will be we need to bail out the big boys with big money on their say-so.

“I have not heard much discussion about this, but I imagine I will as this crisis becomes more acute, is that we have witnessed a COLOSSAL mis-allocation of capital and resources into the building of houses. Houses are an unproductive asset, especially at over-inflated prices. If this country is to pay off its debt, don’t we have to find a more productive means of generating capital?”
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Tell you one more thing that is massively overbuilt – the financial services industry. And $700 billion just isn’t going to fix that. It will only invite an even larger catastrophe down the road a bit. It will also open the door to demands for much larger bailouts, and soon.

The jig is up.

Tate

Would you comment on whether a country that relies on “consumption” can truly “grow”?

It just seems to me that we’ve wasted trillions of dollars propping up a false sense of prosperity over the past 30 years. Now, the bill is coming due. Any economy that relies on its citizens to “consume” their way to prosperity, cannot create meaningful wealth.

I have not heard much discussion about this, but I imagine I will as this crisis becomes more acute, is that we have witnessed a COLOSSAL mis-allocation of capital and resources into the building of houses. Houses are an unproductive asset, especially at over-inflated prices. If this country is to pay off its debt, don’t we have to find a more productive means of generating capital?

Thanks for all your hard work!

Mike