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September 10, 2001 Last update: July 15, 2006 The truth IS out there.

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A NEXIALIST N+E+W+S FEATURE: Ultimate Outcome

from L. Reichard White

"An unchallenged lie becomes an unquestioned truth." -lrw

"This is the biggest financial challenge facing the world in the last half-century." -Bill Clinton to CFR, 14 Sep 1998 235_clip1

Most of the clips, especially the longer ones, have the most important parts bolded, so theoretically you could skim thru by reading only the short clips and the bolded text. -LRW

QUICK REVIEW:

Mr. [Albert] Friedberg [famed Austrian economist, currency specialist and head of Canada's Friedberg Mercantile Group] points to the monetary policy of the Federal Reserve as the fundamental cause of the currency debacle. He notes that since the early 1990s, the Fed has backed a credit expansion policy that it has exported abroad. He also predicts that "the crisis will widen. It will travel from Asia to Russia, Greece, Brazil. Eventually it will come back to the United States." -TORONTO GLOBE AND MAIL (January 10, 1998) [NEXIALIST N+E+W+S reprise] 235_clip2
"It's certainly the worst international monetary crisis since the founding of the system, the Bretton Woods [paper money] system in 1944. ... And I know that the authorities in Washington are most concerned about this spread, and properly so -- because it seems to be happening." -Roger Altman, EVERCORE PARTNERS CHAIRMAN, former Deputy Secretary of Treasury, CNBC, 14 Aug 1998, ~7:37:21 AM EDT [NEXIALIST N+E+W+S reprise] 235_clip3

TIME FRAME:

"Eventually it will come back to the United States." -Albert Friedberg, January 10, 1998 [from above] 235_clip4
- 3COM (COMS) announces a 15 cent short-fall in quarterly dividends as a result of the Brazilian situation. Some experts suggest that the Brazilian situation is spreading to the rest of Latin America, and then will come to the U.S., and that 3Com's quarterly dividend is one of the first U.S. casualties. But, if so, this effect has traveled much faster than expected. -CNBC, 3 Mar 1999, ~8:34:58 AM EST [NEXIALIST N+E+W+S reprise] 235_clip5
"As I testified before this committee in the midst of the Mexican financial crisis in early 1995, major advances in technology have engendered a highly efficient and increasingly sophisticated international financial system. ...But that same efficient financial system ... has the capability to rapidly transmit the consequences of errors of judgement in private investments and public policies to all corners of the world at historically unprecedented speeds." -Federal Reserve Chairman Alan Greenspan to House Banking Committee, 16 September, 1998 235_clip6

ULTIMATE OUTCOME:

"There is perhaps no empirical regularity among economic phenomena that is based on so much evidence for so wide a range of circumstances as the connection between substantial changes in the quantity of money and in the level of prices." ... "It follows ... that inflation is always and everwhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output." -Economic Nobelist Milton Friedman quoted in Judy Shelton, Money Meltdown (New York: The Free Press 1994), p. 176 & 177 235_clip7
"They [the FED during the 1987 stock market crash] had the legal power to buy up the entire national and private debt, theoretically infusing the system with billions, even trillions, of dollars, more than would ever be necessary to restore liquidity and credit. Of course, the result of that would be Latin American-style inflation. -Bob Woodward, Maestro: Greenspan's Fed and the American Boom (New York: Simon & Schuster 2000) 235_clip8

Does the FED have less power now for "infusing the system with billions, even trillions, of dollars" than it did during the 1987 crash? Dollar inflation today could make the worst Latin American inflation look tame by comparison. No Latin American country sported the world's "reserve currency." We do. That means that in addition to domestic money, all those dollars held overseas [1] could come rushing back home, creating the biggest inflation the world has ever seen. See BIG-Float: The American Damoclese -LRW

Would the FED go that far?

In addition, there was an ambiguous provision in Section 13 of the Federal Reserve Act, the lawyers told Greenspan, that could allow the Fed, with the agreement of five out of seven members of its board, to loan to institutions - brokerage houses and the like - other than banks. Greenspan was prepared to go further over the line. The Fed might loan money, but only if those institutions agreed to do what the Fed wanted them to do. He was prepared to make deals. It wasn't legal, but he was willing to do it, if necessary. There was that much at stake. At that moment, his job was to do almost anything to keep the system righted, even the previously inconceivable." -Bob Woodward, Maestro: Greenspan's Fed and the American Boom (New York: Simon & Schuster 2000) 235_clip9
NEW: ...the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation. -Remarks by Governor Ben S. Bernanke Before the National Economists Club, Washington, D.C. November 21, 2002 235_clip10
"We must [now] address not only a run on a bank or a firm, but also a run on nations." -President William Jefferson Clinton, address to the World Bank and the IMF, October 6, 1998 235_clip11

Notes:

[1] The amount of cash in circulation has risen rapidly in recent decades and much of the increase has been caused by demand from abroad. The Federal Reserve estimates that the majority of the cash in circulation today is outside the United States. -Federal Reserve Bank of New York, How Currency Gets Into Circulation, December 25, 2000 return

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