Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
The S&P 500 appears ready to correct, and that is a good thing - 18th Sep 20
It’s Go Time for Gold Price! Next Stop $2,250 - 18th Sep 20
Forget AMD RDNA2 and Buy Nvidia RTX 3080 FE GPU's NOW Before Price - 18th Sep 20
Best Back to School / University Black Face Masks Quick and Easy from Amazon - 18th Sep 20
3 Types of Loans to Buy an Existing Business - 18th Sep 20
How to tell Budgie Gender, Male or Female Sex for Young and Mature Parakeets - 18th Sep 20
Fasten Your Seatbelts Stock Market Make Or Break – Big Trends Ahead - 17th Sep 20
Peak Financialism And Post-Capitalist Economics - 17th Sep 20
Challenges of Working from Home - 17th Sep 20
Sheffield Heading for Coronavirus Lockdown as Covid Deaths Pass 432 - 17th Sep 20
What Does this Valuable Gold Miners Indicator Say Now? - 16th Sep 20
President Trump and Crimes Against Humanity - 16th Sep 20
Slow Economic Recovery from CoronaVirus Unlikely to Impede Strong Demand for Metals - 16th Sep 20
Why the Knives Are Out for Trump’s Fed Critic Judy Shelton - 16th Sep 20
Operation Moonshot: Get Ready for Millions of New COVAIDS Positives in the UK! - 16th Sep 20
Stock Market Approaching Correction Objective - 15th Sep 20
Look at This Big Reminder of Stock Market Mania - 15th Sep 20
Three Key Principles for Successful Disruption Investors - 15th Sep 20
Billionaire Hedge Fund Manager Warns of 10% Inflation - 15th Sep 20
Gold Price Reaches $2,000 Amid Dollar Depreciation - 15th Sep 20
GLD, IAU Big Gold ETF Buying MIA - 14th Sep 20
Why Bill Gates Is Betting Millions on Synthetic Biology - 14th Sep 20
Stock Market SPY Expectations For The Rest Of September - 14th Sep 20
Gold Price Gann Angle Update - 14th Sep 20
Stock Market Recovery from the Sharp Correction Goes On - 14th Sep 20
Is this the End of Capitalism? - 13th Sep 20
The Silver Big Prize - 13th Sep 20
U.S. Shares Plunged. Is Gold Next? - 13th Sep 20
Why Are 7,500 Oil Barrels Floating on this London Lake? - 13th Sep 20
Sheffield 432 Covid-19 Deaths, Last City Centre Shop Before Next Lockdown - 13th Sep 20
Biden or Trump Will Keep The Money Spigots Open - 13th Sep 20
Gold And Silver Up, Down, Sideways, Up - 13th Sep 20
Does the Stock Market Really "See" the Future? - 12th Sept 20
Basel III and Gold, Silver and Platinum - 12th Sept 20
Tech Stocks FANG Index Nearing Critical Support – Could Breakout At Any Moment - 12th Sept 20
The Tech Stocks Quantum AI EXPLOSION is Coming! - 12th Sept 20
AMD Zen 3 Ryzen 4000 Questions Answered on Cores, Prices, Benchmarks and Threadripper Launch - 12th Sept 20
The Inflation Mega-trend is Going Hyper! - 11th Sep 20
Gold / Silver Ratio: Slowly I Toined… - 11th Sep 20
Stock Market Correction or Reversal? The Jury Isn't Out! - 11th Sep 20
Crude Oil – The Bearish Outlook Remains - 11th Sep 20
Crude Oil Breaks Lower – Sparking Fears Of Another Sub $30 Price Collapse - 11th Sep 20
Inflation by Fiat - 10th Sep 20
Unemployment Rate Drops. Will It Drag Gold Down? - 10th Sep 20
How Does The Global Economy Recover After This Global Pandemic? - 10th Sep 20
The Best Mobile Casino - 10th Sep 20
QE4EVER! - 9th Sep 20
AMD Ryzen Zen 3 4800x 10 Core 5ghz CPU, Cinebench Benchmark Scores (Est.) - 9th Sep 20
Stock Traders’ Dreams Come True – Big Technical Price Swings Pending on SP500 - 9th Sep 20
Should You Be Concerned About The Stock Market Big Downside Rotation? - 9th Sep 20
Options Traders Keep "Opting" for Even Higher Stock Market Prices - 8th Sep 20
Gold Stocks in Correction Mode - 8th Sep 20
The law of long-term time preference and Gold ownership - 8th Sep 20
Gold Bull Markets: History and Prospects Ahead - 8th Sep 20
Sheffield City Centre Coronavirus Shopping Opera Ahead of Second Covid-19 Peak - 8th Sep 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Socialist Republican Corruption of Capitalist Free Market Mechanisms

Politics / Credit Crisis Bailouts Sep 27, 2008 - 02:43 PM GMT

By: Money_and_Markets


Diamond Rated - Best Financial Markets Analysis ArticleJack Crooks writes: You can't possibly have hidden yourself from the news of the $700-billion planned bailout that's working through Congress this week. And I won't mince words — I consider it a big slap in the face for the free market system.

Henry Paulson repeated over and over again exactly how agitated, disgusted, annoyed, infuriated, angered, embarrassed, and irritated he felt about asking for this amount of money, or any money at all. Sounds sincere if you stop it right there.

But apparently those feelings weren't enough to reinvigorate his free-market spirit, abolish potential bailout plans, do away with unnecessary regulation and let those who deserve to suffer, suffer.

How Free Markets Are SUPPOSED to Work ...

Availability of credit allows money to flow between savers and borrowers.

Resources and funds are allocated to various projects or investments during a boom phase.

Eventually borrowing becomes excessive and leads to malinvestment, thanks to the suppression of the real rate of interest by our illustrious Federal Reserve Banking system.

At this stage, adherence to free market theory would allow for an efficient cleansing period and a healthy recovery period. How? Irresponsible and unprofitable businesses fail. Bad debts get liquidated. Excess resources go on sale, flow into more stable ventures and pool together with more profitable resources controlled by healthy corporations or entities.

Sure, pain is felt by certain parties who can't keep things going. But the moving parts become more efficient and stronger. Healthier, more efficient businesses emerge.

As the Austrian School of economists says, the bigger the boom generated by manipulation of money and credit, the bigger the ultimate bust.

That's important, because thanks to the massive manufacturing and sale of derivatives, there has never been a boom supported to such a large degree by thin air. And since the laws of gravity haven't been outlawed yet, what goes up must come down.

How Our "Free" Markets Are Being Handled Right Now ...

Unfortunately, self-proclaimed free enterprisers — President George W. Bush is one among many — are either ignoring or are unable to accept the fact that some people must suffer as the purging process runs its course.

Often their vision is blurred by their quest for a tighter grip on the private sector. They call it "compassion" ... but I call it "zeal for power." Worse yet, they use other people's money — namely, ours!

In its infinite wisdom and undying compassion for the public, our government does all it can to hamper the market's cleansing tools — recessions and deflation.

Instead of one swift painful smack in the head by the invisible hand, their very visible hand "helps" ensure that economy will grow much less efficiently AND remain much more vulnerable to future shocks to the system.

That's not compassion ... it's nonsense!

In fact, on a historical basis, many parts of the U.S. economy are in awfully good shape. We're told to believe otherwise since doom and gloom dominates what the mainstream media consistently reports.

One of the biggest fear indicators they use: Employment numbers. After all, Americans don't want to lose their jobs.

But look at the current employment situation on a historical basis: While U.S. job losses are on the upswing, they are fairly modest ... and should be expected in a self-cleansing market.

Civilian Unemployment Rate: Percent: SA

As my chart shows, taking into account only the last 40 years, today's unemployment rate sits relatively low compared to 1975, 1983, and 1993.

If we play our cards right we could see the current rise in unemployment top out around the same levels as it did roughly five years ago. That would be nothing to panic over.

Let's look at inflation another economic boogeyman ...

Current CPI in the U.S. sits just north of 5%. That's easily less than the roughly 6% to 7% back in 1991. And in 1980, for example, inflation reached almost 15%.

Countries, particularly emerging markets, would kill to have inflation as LOW as 5%!

More to the point, Americans can afford necessary food items as easily as ever. Here's a snippet from an article put together by the Federal Reserve Bank of Dallas last month:

Based on the average U.S. pay rate, it takes less than two hours of work to pay for 12 basic food items — tomatoes, eggs, sugar, bacon, milk, ground beef, oranges, coffee, lettuce, beans, bread, and onions.

That figure is nearly as low as it's ever been.

Consumption may finally be taking a breather, as it should, but discretionary items like computers, DVD players, cellphones, digital cameras and color TVs have become far more affordable. And that even includes those families considered "poor."

Now, Here Are My Thoughts on the U.S. Dollar ...

Sure, the greenback lost a lot of value as its bear market dragged on. That's normal and healthy. And one thing the dollar DIDN'T lose was its status as world reserve currency.

So many analysts and economists are hastily calling for the end of the U.S. dollar as we know it. But the U.S. is far from being a banana republic, as I often phrase it.

Plus, circulation and availability of a world reserve currency is critical for the entire global financial system to function efficiently. And now that we all understand just how fragile this system really is, it's easy to see why it's in no one's best interest to see the dollar in the dirt.

I think this is one of the reasons that our government's implicit weak dollar policy has ended. And that has been signaled to the other big players around the globe.

Confidence in the system — and the world's money (the dollar) — is step one in the healing process that will likely carry on for many months or even years.

This is why we have not seen, and may not see, another cut in the Fed Funds rate.

Moreover, unless we start seeing other countries begin to abandon our capital markets — and I am talking about Treasury and Agency paper, primarily — the dollar could continue to surprise the skeptics.

As odd as this may sound, my examination of past banking crises shows that a nation's currency bottoms before or with the crisis.

The U.S. dollar index bottomed on the day the Fed and Treasury stepped in to save Bear Stearns, and has been acting very well in a very bad news-driven environment ever since.

Moreover, despite my view that the U.S. government is dipping its hand way too deeply into the markets, making them increasingly less free, it's all a relative game.

Many other countries around the world are either officially in, or about to slip into, recession.

And on a relative basis, because their governments are much more entrenched in the market than Uncle Sam is in ours, their ability to recover is hampered even more.

Why is this an important part of the dollar equation? Because it means that, despite all our warts, it's quite possible the U.S. might still win the global economic beauty contest by getting judged the least ugly.

Stay tuned!

Best wishes,


This investment news is brought to you by Money and Markets . Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit .

Money and Markets Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Matt C.
28 Sep 08, 18:46
Inflation = CPI ? You've obviously Ben to the Bernanke School of Economics

So you think that the terms inflation and CPI are the same? It's obvious you do by the way you use these terms to describe the same thing... consumer prices..

Your wrong!

Here's some education... Inflation means an increase in the money supply, induced by an increase of money creation, caused by increased lending, which creates more money/credit. The CPI is only the consumer price index, or the prices of goods and services. They are very different. from 01 to 06 we had massive inflation, but it wasn't reflected in prices...for various reasons. Usually CPI does go up in inflationary periods, and in hyper-inflationary periods the CPI and the rate of inflation correspond. This fact leads many to feel that they are one and the same. Bernanke would only raise interest rates if the CPI went up, regardless of the true rate of inflation. hense...the current mess.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules