The resemblence of Germany pre-hyperinflation to the current US crisis

1) Post WW I Germany was the biggest debtor nation in the world, at that time. Debtor nations are dependent upon foreign cash flows. In contrast, in the 1930s, like Japan in 1990, the U.S. was the biggest creditor nation in the world. That is why Germany had hyperinflation when it printed money, while 1990s Japan and 1930s America had deflation as they did the same thing. Because we are the biggest debtor nation in the world, the current money printing will result in hyperinflation, NOT deflation.

2) Post WW I Germany had just finished fighting a major war on borrowed money, without properly budgeting or taxing. The USA has just fought, and continues to fight, multiple wars on multiple fronts that, while not quite as "big" as WW I, have been extraordinarily costly. We use a professional army, and its pay and equipment add huge costs. We have failed to budget these wars, and have borrowed money instead in order to fight them. By contrast, from an economic point of view, late 1920s and early 1930s America was a net "beneficiary" of WW I, which resulted in huge debts being owed to the USA, and the first stage of the rise of the U.S. dollar to replace the British pound as an international medium of exchange.

3) Post WW I Germany was heavily dependent upon the import of foreign raw materials. Indeed, the USA was one of its biggest creditors. The USA is no longer a creditor. It is now very dependent upon the import of foreign raw materials and finished goods. The temporary improvement in trade figures will disappear as the fake recovery gets under way. By contrast, in the 1930s, the U.S.A. was one of the biggest exporters of raw materials.

4) Post WW I Germany was heavily dependent upon foreign cash flows to plug holes in its budget after the War. Sales of bundesbonds to foreign buyers, including the American financier, J.P. Morgan, were critical. The USA is now even more dependent than post-war Germany once was, upon foreign cash flows. Sales of huge numbers of Treasury bills, notes and bonds are critical, and a lot of those sales are to China, who, unlike America to Germany in 1918, is currently our strategic competitor, and that makes our situation somewhat worse.

5) It is important to point out that Germany was not the only nation affected by the post-War depression and the so-called 1918 "credit crunch." All of Europe experienced it. Not all countries, however, followed the same path to ruin. Similarly, the whole world is now experiencing the so-called "credit crunch". Hopefully, not all nations will follow the path to ruin being forced by the United States, although the tendency to do so is greater, given the leadership position of this nation in the world compared to Germany then.

6) So, Germany led Europe in the effort to spend its way out of the post-war depression, while the rest of Europe, with the exception of the former Hapsburg possessions (the former Austro-Hungarian Empire) did NOT follow Germany's lead. The former Hapsburg possession did follow the German lead, although with less gusto, and ended up with hyperinflation, at a somewhat lower level. Similarly, the USA leads the world in an effort to spend its way out of this depression, and the U.K. is basically following in our footsteps. In 1919, many admired the Reichsbank. Employment rose, unemployment fell...economic output exploded -- or seemed to, at first. No doubt, that will be the case, again, this time as America leads the way into a fake recovery. Most of Germany's recovery amounted to irrational production. The industrial bailouts were improperly allocated and colored by the illicit transfer of wealth that is inherent when a nation chooses to print up new money. The same will be the case with America.

7) Like America, now, the post WW I German money flows, into that nation, continued for quite a while, in spite of the flawed policies of the Reichsbank. American trade interests, for example, supported German spending on U.S. raw material products, because Germany was one of their biggest markets. The USA played a similar role with respect to the Weimar Republic as China plays now to the USA. It was Germany's biggest creditor. It is quite likely that money flows to America may continue for an even longer time. However, eventually, they will be cut off. It is important, once again, to point out that China is our strategic competitor, whereas a large part of the U.S. population has German ancestry that made us a natural friend to Germany.

8) Like the foolish foreigners who now buy U.S. bonds, even otherwise savvy American financiers, like J.P. Morgan, were convinced by officials of the Reichsbank, that the problems were temporary, and that the mark would regain value, just as buyers of Treasury debt are now convinced that the dollar will retain value. The U.S. has a distinct advantage, because it is able to pump the exchange value of its currency with credit default events that must be settled in dollars. This results in a direct benefit to the dollar in terms of exchange value, and allowed the Fed to obtain foreign currency swap lines. The swap lines were obtained because foreign central banks temporarily needed to supply dollars to financial firms who needed to settle CDS events. In addition, most of the U.S. debt is denominated in dollars. So, the temporary party will go on longer in America, until the world's patience is finally exhausted, and the devaluation of the dollar will not be in the trillions, but, rather likely, it will be in the high single digits, or low double digits. My personal estimate is from a 4 to 10 to 1 devaluation, although anything is possible.

9) The Reichsbank claimed that it could control the events it created, just as the Federal Reserve does now. Questionable statistics were regularly published, just as is now the case in the USA. German authorities believed, just as American authorities now believe, that the perception is more important than economic reality. Eventually, however, when the foreign cash flows dried up, reality did reassert itself, as it always does, and the German economy entered hyperinflation.

10) Finally, most tellingly, the German "professional" economists called the 1918 post war depression, prior to the hyperinflation, "the credit crisis", or "the credit crunch", and the prevailing complaint was that banks were hesitant to lend money. Unwittingly, American professional economists, including Mr. Bernanke, have dubbed the present crisis with the same names, and the complaint is exactly the same. Notoriously, the prescribed remedy is also exactly the same, even though, from all the speeches given by Federal Reserve officials, rather than overtly intending to copy the Reichsbank, they seem to be blissfully unaware of the entire German event. Frightening...

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Nearly 700 apply for Ohio custodian job

PERRY TWP., Ohio —

Plant closed. Laid off.

Lack of work.

How hungry are people for work in today’s sinking economy?

Nearly 700 people have applied for a single job as a school custodian.

Perry Local Schools have an open position — full time with benefits — at Edison Junior High School after its afternoon janitor retired. It pays $15 to $16 an hour.

The job opened last Saturday, and district officials say the stack of applications continues to expand daily. So much so, the deadline to apply for the position was moved to 3:30 p.m. Monday to give potential hires more time.

Many of those who have applied say they lost their previous job due to budget cutbacks by their former employer.

“A lot of people have their stories when they come in. It’s heart-wrenching,” said Superintendent John Richard.

Hope?

Dane Steed, 51, forged blades at Heinemann Saw Co. in Canton for nearly four years until last month.

He and several co-workers were let go because of a lack of work available. He put his name in the mix for the custodian post.

“Times are bad,” the Plain Township man said.

Steed said he has previous custodial experience at a school district and hopes he can retire at Edison.

“I don’t want to be doing this again,” Steed said.

Donna Croston, 49, of Plain Township, spent nine years on the assembly line at the Hoover Co. in North Canton before it closed last winter.

Prior to Hoover, she lost another factory job because the plant shut down.

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FDIC chief warns fund could dry up

Federal Deposit Insurance Corp. Chairwoman Sheila Bair said the fund it uses to protect customer deposits at U.S. banks could dry up amid a surge in bank failures, as she responded to an industry outcry against new fees approved by the agency.

"Without these assessments, the deposit insurance fund could become insolvent this year," Bair wrote in a March 2 letter to the industry.

U.S. community banks plan to flood the FDIC with about 5,000 letters in protest of the fees, according to a trade group.

"A large number" of bank failures may occur through 2010 because of "rapidly deteriorating economic conditions," Bair said in the letter. "Without substantial amounts of additional assessment revenue in the near future, current projections indicate that the fund balance will approach zero or even become negative."

The FDIC last week approved a one-time "emergency" fee and other assessment increases on the industry to rebuild a fund to repay customers for deposits of as much as $250,000 when a bank fails. The fees, opposed by the industry, may generate $27 billion this year after the fund fell to $18.9 billion in the fourth quarter from $34.6 billion in the previous period, the FDIC said.

The fund, which lost $33.5 billion in 2008, was drained by 25 bank failures last year. Sixteen banks have failed so far this year, further straining the fund.

Smaller banks are outraged over the one-time fee, which could wipe out 50 percent to 100 percent of a bank's 2009 earnings, Camden Fine, president of the Independent Community Bankers of America, said Tuesday in a telephone interview.

Greeks shut airports, services to protest economy

ATHENS, Feb 25 (Reuters) - Greeks disgruntled by their country's economic woes ramped up protests against the government on Wednesday, shutting down airports and disrupting many public services.

Public schools and tax offices shut down, and services at ministries and public offices were suspended, as hundreds of workers marched to parliament with banners reading "No to pension reforms, privatisations and job cuts".

"Government policy ... only burdens workers, the unemployed and the poor," public sector umbrella union ADEDY, which represents 500,000 members, said in a statement.

The strikes are the latest in a wave of protests that have put pressure on Greece's conservative government, shaken by the worst riots in decades in December and struggling with a sharp economic downturn.

After years of 4 percent growth, Greece is seeing its economy sharply slowing down due to the global financial crisis. Workers accuse the conservative government, clinging to a one-seat majority in parliament, of only helping the rich.

"We will continue and intensify our struggle, until our demands are satisfied," ADEDY, which called the 24-hour strike, said.

National carrier Olympic airlines [OLY.UL] said 68 of its domestic and international flights were cancelled and four were rescheduled, while private rival Aegean Airlines (AGNr.AT) said 36 flights were grounded and 23 others disrupted.

The government, struggling with a huge public debt and fiscal deficits, has launched a 28-billion-euro ($36-billion) bank support plan, saying it meant to pour money into the slowing economy.

The strike was the latest in a series of public protests to hit the ruling conservatives. December riots were prompted by the police shooting of a teenager but fuelled by discontent over the economy and high youth unemployment.

In January, thousands of farmers protesting low product prices blocked border crossings, causing 11 days of travel chaos across Greece and hurting commercial transport. They ended the protest after securing a 500-million-euro aid package.

Truckers went on strike last week, demanding a crackdown on unlicensed transport companies and illegal economic immigrants, who they said were destroying goods and fighting drivers in their effort to stow away on board.

On Wednesday, they ended the five-day strike and blockades at the borders with Bulgaria and Greek ports, after transport ministry officials promised to start talks.

"Our strike is over, but only for now," said the president of Greek truck drivers federation, Apostolos Kenanides.

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Up to 120,000 people march in national protest

Up to 120,000 people have marched in Dublin in protest at how the Government is handling the economic crisis. The march, which was organised by the Irish Congress of Trade Unions (Ictu), took nearly one and a half hours to make its way from Parnell Square to Merrion Square.

Ictu maintained that the protest today was the first step in a campaign in support of a fairer way to achieve economic recovery.

Addressing the demonstration Ictu general secretary David Begg said that “a business elite” had destroyed the economy and had not yet been held to account for it in any respect.

Mr Begg called on the Government to talk to the trade union movement on its alternative ten-point plan for economic recovery.

He said that Ictu’s ten-point plan was not perfect but that it was the best offer that it would get “and if you are sensible you will engage with us and talk to us about it.”

He said that no balance had been put forward by the Government in its solutions for dealing with the current economic crisis. He said that there was no sense of a sharing of the burden right across the economy "not alone that it should be shared by the people who were best able to bear it and who had done best in the Celtic tiger years”.

The president of Ictu, Patricia McKeown, said that the Government wanted workers who built the economy to make the sacrifices while it protected those who wrecked it.

“We are not prepared to live in that society,” she said.

Ms McKeown said that the time had come for Irish workers to demonstrate to the Government the power they really held.

“That power is today on the streets of Dublin, it is in industrial action but most significantly it is at the ballot box.

“If our Government and the elected politicians are not prepared here and now to pledge that they will act now and act on our behalf and act on the proposals we have placed before them then you must be prepared to deny them even a single vote and to send that message out loud and clear,” she said.

Mr Begg said that the reputation of the country had been almost irreparably damaged by what had been done so far.

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Soros: Economic Turbulance Worse Than Great Depression

NEW YORK (Reuters) - Renowned investor George Soros said on Friday the world financial system has effectively disintegrated, adding that there is yet no prospect of a near-term resolution to the crisis.

Soros said the turbulence is actually more severe than during the Great Depression, comparing the current situation to the demise of the Soviet Union.

He said the bankruptcy of Lehman Brothers in September marked a turning point in the functioning of the market system.

"We witnessed the collapse of the financial system," Soros said at a Columbia University dinner. "It was placed on life support, and it's still on life support. There's no sign that we are anywhere near a bottom."

His comments echoed those made earlier at the same conference by Paul Volcker, a former Federal Reserve chairman who is now a top adviser to President Barack Obama.

Volcker said industrial production around the world was declining even more rapidly than in the United States, which is itself under severe strain.

"I don't remember any time, maybe even in the Great Depression, when things went down quite so fast, quite so uniformly around the world," Volcker said.

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Latvia's Government Collapses

Latvia's center-right coalition government collapsed Friday, a victim of the country's growing economic and political turmoil and the second European government, after Iceland, to disintegrate because of the international financial crisis.

The government in Riga, faced with forecasts of a severe drop in the economy this year, was the first in Eastern Europe to succumb to turmoil caused by the crisis. Its collapse rounded out a week that saw worries about feeble investment, banks and output in Central and Eastern Europe coursing through international markets.

Latvia has had a history of revolving-door politics and complex coalitions since pulling free of the Soviet Union in 1991. Prime Minister Ivars Godmanis, who presented his resignation to President Valdis Zatlers on Friday, had been in power only since December 2007. But the precipitous plunge of Latvia's economy, which helped provoke the worst riot since 1991 last month, played a major part in the government's downfall.

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Racial Warfare erupts on French Caribbean island on economy

Britons are among thousands of tourists fleeing Guadeloupe after full scale urban warfare erupted on the French Caribbean island.

Trouble broke out on the island earlier last month after protesters began rioting over high prices and low wages.

But the situation escalated this week after protesters began turning on rich white families as they demanded an end to colonial control of the economy.

The troubles come at the height of the holiday season, with thousands of mainly British, French and American tourists on the paradise tropical island.

Guadeloupe descends into full-scale urban warfare after demonstrators riot over low wages and white control of the island's economy

Violence has escalated on the Caribbean island as protesters turn their attention to rich white families who they blame for their poor standard of living

Protesters were now targeting 'all white people', with the media in mainland France describing the situation as virtual civil war'.

Guadeloupe is a French overseas department ruled directly from Paris, and authorities in France have sent 300 extra riot police to the island in a bid to quell the violence.

Meanwhile, hundreds of protesters are roaming the streets of the capital Point-a-Pitre, looting shops and restaurants, burning cars and vandalising public buildings.

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Volcker: Crisis May be Even Worse than Depression

The global economy may be deteriorating even faster than it did during the Great Depression, Paul Volcker, a top adviser to President Barack Obama, said on Friday.

Volcker noted that industrial production around the world was declining even more rapidly than in the United States, which is itself under severe strain.

"I don't remember any time, maybe even in the Great Depression, when things went down quite so fast, quite so uniformly around the world,'' Volcker told a luncheon of economists and investors at Columbia University.

Given the extent of the damage, financial regulations must be improved and enhanced to prevent future debacles, although policy-makers must be cautious not disrupt things further while the turmoil is ongoing.

Volcker, a former chairman of the Federal Reserve famed for breaking the back of inflation in the early 1980s, mocked the argument that "financial innovation,'' a code word for risky securities, brought any great benefits to society. For most people, he said, the advent of the ATM machine was more crucial than any asset-backed bond.

"There is little correlation between sophistication of a banking system and productivity growth,'' he said.

He stressed the importance of preventing financial institutions large enough to pose a threat to the entire system from engaging in risky behavior such as running hedge funds or trading for its own accounts.

The current crisis had its beginning in global imbalances like a lack of savings in the United States, but policy-makers around the world were too reticent to take action until it was too late, Volcker said.

Now that the crisis had erupted, it was important to take decisive actions, including a more effective regulatory structure and some movement toward uniform accounting systems, Volcker said.

He said all financial institutions that are deemed too large to fail should be subject to increased scrutiny, echoing the findings of the Group of 30, a panel of policy-makers and influential economists, which he leads.

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US fraud claim sparks bank panic

Hundreds of investors in Latin America and the Caribbean have rushed to withdraw money from banks linked to US billionaire Allen Stanford after he was charged over an alleged $8bn fraud.

Customers in the Caribbean island of Antigua, Venezuela, Colombia, Ecuador and other nations besieged Stanford banks to try to withdraw money.

On Tuesday US officials raided Stanford's main offices in Houston, Texas as the US Securities and Exchange Commission (SEC) announced charges against Stanford and two of his executives for "massive fraud".

The SEC also froze Stanford's assets and those of three of his companies, Stanford International Bank, based in Antigua, and Stanford Group and Stanford Capital Management, both based in Houston.

Stanford is accused of lying about the safety of investments he sold as "certificates of deposit" (CDs) and promising unrealistically high rates of return.

Regulators also allege he forged historical data about other investments which he then used to lure in more investors for his products.

The whereabouts of Stanford, a wealthy billionaire from Texas, remain unknown, the SEC has said.

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UK "could experience a crash similar to Iceland"

The global financial crisis could be entering a 'new and more treacherous phase', which could push international countries to the brink of failure and further hinder the global economic recovery, according to Hennessee Group.

Charles Gradante, co-founder of the Hennessee Group, points out that Iceland had one of the highest standards of living in the world just a few months ago, but after experiencing the fastest economic collapse in history, it is suffering from soaring unemployment as well as double digit interest rates and inflation.

Hennessee Group says there are other countries that share some of the same characteristics as Iceland, particularly with regards to its debt to economic output, and could be vulnerable to the same devastating effects of the financial crisis.

It believes it is imperative that world leaders pursue the appropriate policies to stimulate trade and promote worldwide growth so it does not enter a global economic crisis similar to that of the 1930's.

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China Urges U.S., Europe to Protect Value of Debt in Reserves

Feb. 18 (Bloomberg) -- China, whose $1.95 trillion in currency reserves are the world’s largest, called on the U.S. and Europe to protect the value of its overseas investments and said it plans to spend more foreign exchange on imports and acquisitions.

“We hope countries whose currencies are the main holdings in our international reserves will take effective measures to cope with the financial crisis,” Fang Shangpu, deputy director at the State Administration for Foreign Exchange, told a press conference in Beijing today. “They should work to maintain economic and financial stability, and protect the interests and confidence of investors.”

China increased its purchases of U.S. Treasuries last year by 46 percent to $696.2 billion, data released by the U.S. Treasury Department yesterday showed. Premier Wen Jiabao said on Feb. 2 his government’s Treasury strategy would be aimed at maintaining the “value” of its foreign reserves.

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China considering Gold instead of US treasury bonds

Feb. 13 (Bloomberg) -- China Banking Regulatory Commission official Luo Ping said holding U.S. government bonds is not the only option for investing reserves, clarifying comments made a day earlier, the China News Service reported.

U.S. debt is one option in addition to gold and other government debt, Luo, head of the training center at the banking regulator, was quoted as saying in an interview with the news agency late yesterday. If the U.S. government issues too much debt in its efforts to revive the economy, all Treasury holders will suffer losses, he added, the Chinese-language report said.

Dow Jones on Feb. 11 cited Luo as saying that there are few real alternatives to holding U.S. Treasury securities. CBRC said late yesterday in a statement that Luo’s comments don’t represent the view of the regulator.

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One more Madoff investor kills self

LONDON - A former British soldier killed himself after losing his life savings in an alleged $50 billion fraud run by Wall Street financier Bernard Madoff, the dead man's son said.

William Foxton, 65, who had served in the British Army and more recently worked as a defense contractor in Afghanistan, died from a single bullet wound to the head in the southern English port city of Southampton on Tuesday, police said.

"A pistol was recovered at the scene. Police do not believe the death to be suspicious," a police statement said.

His son Willard said his father had returned from Afghanistan and revealed his life savings had been lost. He did not say how much had gone, but news reports said it was close to 1 million pounds ($1.45 million).

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Donald Trump Quits Trump Entertainment, Bankruptcy Possible

Feb. 13 (Bloomberg) -- Donald Trump resigned from the board of Trump Entertainment Resorts Inc., the debt-laden casino company he founded, ahead of a possible involuntary bankruptcy filing next week.

“I’m not managing it, it’s not me that’s responsible for managing,” Trump, who was chairman, said in a telephone interview today. “Unless we’re going to be responsible for management it’s just not something that’s worthwhile.”

Trump’s departure comes ahead of a Feb. 17 deadline to make a $53 million bond payment originally due on Dec. 1. The Atlantic City, New Jersey-based casino operator said at the time it needed to conserve cash and hold debt-restructuring talks with lenders. Since an initial grace period ended on Dec. 31, Trump Entertainment’s deadline has been extended four times.

The 62-year-old real estate entrepreneur has “no idea” whether there will be a bankruptcy filing, he said. Trump is “not thrilled” the company may continue to use his name.

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Revolt is in the air: Countries across Europe in turmoil

The worst economic crisis since the Great Depression is throwing countries across Europe into turmoil--and spurring struggles unseen in years.

The financial turmoil that began in the summer of 2007 in the U.S. is spreading around the globe with frightening speed and devastating consequences for working people.

The bursting of the bubble in the U.S. housing market in the summer of 2007 was the catalyst for full-blown economic crisis in country after country in Europe.

Now, the economic disaster is sparking mass protest and revolt on a scale not seen in two decades. Britain's Guardian newspaper described the new political reality in a January 31 article titled "Governments across Europe tremble as angry people take to the streets." It begins:

France paralyzed by a wave of strike action, the boulevards of Paris resembling a debris-strewn battlefield. The Hungarian currency sinks to its lowest level ever against the euro, as the unemployment figure rises. Greek farmers block the road into Bulgaria in protest at low prices for their produce. New figures from the biggest bank in the Baltic show that the three post-Soviet states there face the biggest recessions in Europe.

It's a snapshot of a single day [January 30] in a Europe sinking into the bleakest of times. But while the outlook may be dark in the big wealthy democracies of Western Europe, it is in the young, poor, vulnerable states of Central and Eastern Europe that the trauma of crash, slump and meltdown looks graver.

Exactly 20 years ago, in serial revolutionary rejoicing, they ditched communism to put their faith in a capitalism now in crisis and by which they feel betrayed. The result has been the biggest protests across the former communist bloc since the days of people power.

Europe's time of troubles is gathering depth and scale. Governments are trembling. Revolt is in the air.

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China Needs U.S. Guarantees for Treasuries

China should seek guarantees that its $682 billion holdings of U.S. government debt won’t be eroded by “reckless policies,” said Yu Yongding, a former adviser to the central bank.

The U.S. “should make the Chinese feel confident that the value of the assets at least will not be eroded in a significant way,” Yu, who now heads the World Economics and Politics Institute at the Chinese Academy of Social Sciences, said in response to e-mailed questions yesterday from Beijing. He declined to elaborate on the assurances needed by China, the biggest foreign holder of U.S. government debt.

Benchmark 10-year Treasury yields climbed above 3 percent this week on speculation the government will increase borrowing as President Barack Obama pushes his $838 billion stimulus package through Congress. Premier Wen Jiabao said last month his government’s strategy for investing would focus on safeguarding the value of China’s $1.95 trillion foreign reserves.

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Unsold car lots from around the world