Get A Load of this Koskinen Drivel!!!!

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Now I'm getting REALLY pissed-off at the Powers-That-Be for the amount of abject irresponsibility in calming the herd to complacency.

Check out this idiotic comment from Koskinen:

Link: http://enquirer.com/editions/1999/02/14/fin_lights_out_... As for the money supply, banks are the most heavily regulated industry in the country, said John Koskinen, chairman of the President's Council on Year 2000 Conversion in Washington, D.C. They get ratings of 97 percent to 98 percent compliance in every survey he's seen.

I joke with bankers that it's a testimony to the joys of federal regulation, Mr.Koskinen said.

The Federal Reserve is prepared to put $50 billion more into circulation just in case people want a couple of dollars. We can print more bills faster than they can take them out.

Can you believe this guy?? What recklessness!!! Of course the American people will shrug and say to themselves "See? No problem."

Hey Koskinen - Have you ever heard of HYPER-Inflation pal???

You do what you just said, and a loaf of bread will cost $5 you IDIOT!!!!

Not only does he show no knowlege of the problem, he obviously flunked Economics 101.

God save us all.

-- INVAR (gundark@aol.com), February 17, 1999

Answers

But KoSkin'Em got an "A" in prop-a-uganda.

-- Leska (allaha@earthlink.net), February 17, 1999.

Idi Amin would be proud.

-- INVAR (gundark@aol.com), February 17, 1999.

Have to disagree about the hyperinflation. Making more cash available so that people can have their money as cash rather than as electronic money in their bank accounts doesn't increase the money supply, hence should not be inflationary.

-- Ned (entaylor@cloudnet.com), February 17, 1999.

Did Koskinen also advise people to stockpile wheelbarrows to carry away the bills when we cash our paychecks? Shades of the Daily Show, with the movie gross receipts info given in billions of lira!

-- Old Git (anon@spamproblems.com), February 17, 1999.

Uh, hey Ned.

We aren't on the gold standard anymore pal. Printing money out of thin air to meet currency demand floods the market and makes paper currency worthless.

Nations that historically spit out large gobs of currency start hyper inflation, not to mention interest rate increases. The death knell of our current economic climate.

Go back to Economics 101.

-- INVAR (gundark@aol.com), February 17, 1999.



I've got to finally say something here. Printing cash DOES NOT cause inflation. The demand deposits in the bank are already counted as cash (that's why they're called demand deposits). Granted, many people will move beyond the M1 money supply ... but the printing of cash hardly causes inflation.

When they say "printing money" causes inflation in the enconomy, they mean increasing the money supply, i.e. making it easier to borrowing funds (fiat dollars) --- that's where they increase the "invisible" money supply and cause inflated prices. Too many dollars chasing too few goods. It has nothing to do with the printing of cash that is being talked about here.

Please be more careful about entrys on this forum. And for the rest of us, let's all read entrys a little more intelligently.

Tim

-- tim daniels (tim@inhouse.com), February 17, 1999.


Two things: 1.. most of this "printed money is the lack retirement of the old currency and finds its way into vault cash not necessarily the public. 2. M1 is defined as the currency in circulation and demand deposits and travelers checks, M1 has been in the top of its band or out of he band for a long time now. Monetarism is functionally dead and this worry about the abundance of currency is misplaced. I trust Alan Greenspan more than any other public figure at this point. His track record has been exceptional, inflation is the lowest in modern history.

-- Ty Campbell (tcampbel@otfs.state.ga.us), February 17, 1999.

Mr. Daniels, your wasting your time on loonies like Invar explaining things. Research is not his strong point because then he might find something that disagrees with his end of the world obsession. He's like a mad dog and you dont reason with a mad dog, you just say Go away you stupid dog.

-- Cashman (Cashman@money.org), February 17, 1999.

tim,

While I generally agree with your point, here's how injecting additional currency into the banking system CAN cause inflation.

In our fractional reserve system, bank's make loans based on excess cash reserves they hold. So if currency is substituted for electronic "money," the amount of excess cash increases in banks (at least until this currency is buried in the backyard by a Y2K-aware individual:-).

This cash increase also increases the amount a bank can loan. Since banks make most of their income from interest charges on loans, there is a big incentive for them to loan against these increased reserves.

Therefore, the practical effect is that more money is created through lending, and that's how the money supply would be increased. Whether this scenario will hold true in the coming Y2K-induced bank runs, I doubt. But theoretically, increased cash supply can cause inflation through the above process.

-- Nabi Davidson (nabi7@yahoo.com), February 17, 1999.


Making funds easier to borrow has been done recently through interest rate cuts, making them more accessible and affordable borrowing vehicles. We don't see hyper inflation now. Quite the opposite, we are seeing Deflation. Too many goods chasing too little cash. Printing vast sums of cash to meet demand deposits to avert a bank panic could very well reverse this current climate. A tight cash supply or a flooded currency market will restrict banks from lending money.

With all due respect Tim, can you say:Ruble??? Printing tons of cash, even in a Demand Deposit system will strain the economy on many fronts. I think you used the phrase: Too many dollars chasing too few goods.

In the Y2K context of Koskinen's remarks - - THAT's EXACTLY what will happen.

Can we really go from a fractional reserve system to a cash economy in less than a year, simply to make cash deposits available for Y2K??

-- INVAR (gundark@aol.com), February 17, 1999.



No, no, no!

Banks can lend based on the money they have on deposit, not cash on hand. If people take money out of the banks and keep it in cash, the bank's deposits will fall and with it their ability to loan money. So this would actually be deflationary, not inflationary.

-- Ned (entaylor@cloudnet.com), February 17, 1999.


I appologize if this remark is too off-subject.

But, somebody said "you dont reason with a mad dog, you just say Go away you stupid dog. "

That has GOT to be one of the funniest (and at the same time saddest) things I've seen to date on this board.

Have you ever SEEN a real mad-dog?

Thanks for the entertainment. Hope like hell your kids stay in the house.

-- Greybear, "go away, you stupid ninja..." (stop it. I can't take any more)

-- Greybear (greybear@home.com), February 17, 1999.


Rarely do I return to a forum, and now I see why.

Since I would rather take my children out to lunch in the next few moments ... I ask again that everyone please be careful about what they assume another person says. For example, interjecting "hyper- inflation" into the reply entry. My entry never dealt with hyper- inflation at all, just that your understanding of what causes inflation is a weak argument at best. In fact, hyper-inflation ... that is merely your paranoia friend. And whoever said we had to go from a fractional reserve system to a cash enconomy in less than a year. Who set take time-line in stone.

Your comments make so many assumptions and generalizations without substantiations ... it is no wonder these forums are looked upon as highly suspect by normal, common sense folks (not the mysterious "powers that be").

I'm outta here!

Blake

-- tim daniels (tim@inhouse.com), February 17, 1999.


Hello Greybear. It was rude of you to speak to me before your boyfriend Invar introduced you. Invar, speak boy, come on speak. Thats a good boy.

-- Cashman (Cashman@money.org), February 17, 1999.

Yo Blake. Come on back so we can have some intelligent input on financial matters for a change. Nothing sensible ever comes from Invar except sometimes he has a cute little bark.

Anybody got a spare five dollars so we can buy Invar a new leash on life.

-- Cashman (Cashman@money.org), February 17, 1999.



Another reason why taking cash out of the bank is deflationary:

People who are taking cash out to hide under their mattress or in a safety deposit box somewhere are not taking it out to spend it - they're taking it out to sock it away. Since that money is effectively out of circulation (it isn't chasing goods) the effect is to decrease the money supply.

-- Ned (entaylor@cloudnet.com), February 17, 1999.


Cashman,

I'm breaking my own rule here and replying to a troll.

Hey, ol son, get in line. You're just the latest of a *long* line of silly bastards I've been RUDE to. You comment clearly shows you don't have a clue to what RUDE means. Me thinks you will come to understand the word in the near future.

Try to remember this new phrase "seen the elephant". I hope you get enough time to think on it. I'm trully sorry for the experience you will (and others) have to endure.

No hard feeling here. Your entire existance doesn't matter enough to even appear on my radar scope.

-- Greybear, must be the stress gettin to me. I know, I know - stop feeding the trolls.

-- Greybear (greybear@home.com), February 17, 1999.


Amen Greybear.

Just another incarnation of Jimmy Bagga. Seen it before.

Got Raid?

-- INVAR (gundark@aol.com), February 17, 1999.


INVAR,

Ned and Tim's logic is correct. The supply of paper money, even if it were increased by one-third as Britain is planning to do...

http://www.sunday- times.co.uk/news/pages/sti/99/02/14/stinwenws01035.html?2466332

...would still only be a tiny fraction of total money in circulation. Almost all of the nation's money supply is electronic, and would still be electronic in December 1999.

It's the amount of electronic money you should be concerned about if you have inflation concerns.

The real significance of Koskinen's comments is that he unwittingly gave us justification to take as much of our money out of banks as we see fit. He was trying to imply there was no reason to take our money out of the bank, since there would always be enough cash available to to take care of any Y2K demand.

In other words, he was unwittingly saying that cash withdrawals can't cause bank runs, even though he said what he did to *prevent* bank runs. A copy of the article with Koskinen's comments would be handy to show to any banker, or family member, who says that what we might do could lead to others to do the same thing.

Here's a hot link to this "stay-calm" article:

http://enquirer.com/editions/1999/02/14/fin_lights_out_y2k.html

Here's a link to the monthly currency component of money stock:

http://www.stls.frb.org/fred/data/monetary/currns

-- Kevin (mixesmusic@worldnet.att.net), February 17, 1999.


I'm not Mr. Economics, but I think Ned hit it on the head.

We will probably be seeing massive deflation, not inflation... as in 1929-1930.

Actually, we are already seeing big deflation in most commodity markets. Check out a recent graph on soybean futures or crude oil. Beans have dropped below support level (from what I've seen), and wheat should follow soon.

-- Delete (del@dos.com), February 17, 1999.


Hey, Economics was never my strong point.

What would be the effect of massive deflation in real world terms? Too many goods and services chasing not enough money? Does this mean prices would come down?

Gary North recommends holding large stores of cash - cash is king. Any comments?

Gold - now just under $300 and manipulated constantly to keep it at this figure - will there come a time in the next year when the cat gets out of the bag and Gold skyrockets?

Will there be a flight to quality of foreign currency into the US Dollar (where else are they (the rest of the economically troubled world) going to put their money, other than perhaps gold and silver?

What are the likelyhoods of hyper-inlation as oppsed to hyper- deflation (if there is such a word?)

Can any Genius out there put all this together and give us a couple of scenarios???

Thanks for the links, as ever, Kevin!

Andy

-- Andy (2000EOD@prodigy.net), February 17, 1999.


Thanks for the clarifications Kevin. I stand corrected.

Electronic cash and fractional reserve banking is an ongoing education.

Historically, nations that have printed paper money at whim to stave off financial collapse have actually compounded the problem. Russia is a good example (according to CNN analysts last December). typically this has resulted in hyper-inflation as pointed out.

Hyper-Deflation is a good term. I think we see that already in agriculture and Asian electronics markets. How long can that last until workers are let go to keep profits up? How long before mfr's. go belly-up due to inability to compete? Then how long before the products they made become short in supply, thus causing prices to increase?

Economics post Y2K might become another animal altogether. I lean towards a barter system as was the case in Europe during WWII.

My point was that Koskinen's efforts to glibly state "We will just print more money, faster than they can take it out" was irresponsible.

If that is truly the case as he says, what's all the worry over bank- runs and monetary collapse if paper money can be printed at whim to match deposits??

-- INVAR (gundark@aol.com), February 17, 1999.


Here's my .02$ worth. Invar is correct in that the FED creates this cash out of thin air, paying only for the cost of printing the bills. We have already documented that in the Federal Reserve thread. Now how is this cash distributed to your local bank? Stop and think about this for a moment, any additional cash reserves your bank aquires must be accumulated by tightening credit and collecting on it's outstanding loans, or it must be borrowed, or deposits must be increased along with a change in ratio of deposits held in reserve. It is too late in the game for a tightening of credit to build meningful reserves, especially as more people are withdrawing their funds in anticipation of bank failures. This same fact also eliminates the likelihood of increased deposits. What is left is borrowing. That is the only way the FED can put this extra cash into circulation domestically, that is to loan it to State and independent banks and credit unions. The act of loaning any independent bank massive amounts of cash will require that the bank mortgage itself and it's assets (Your Home) to the Fed. I would submit that most of the newly printed cash will be gobbled up directly by offshore interest via the money changers while they have at least a marginal exchange rate. The money which is actually left to be loaned to independent and State banks will be nowhere near enough to keep them solvent in the face of runs and y2k-deppression induced defaults on outstanding loans. All this extra cash is going to accomplish is to present a red herring for the bankers to grasp at in desparation as they go under, and in the act of reaching transfe their real assets to the Fed (A private corporation) in exchange once again for money created out of thin air. Just another scam.

-- Nikoli Krushev (doomsday@y2000.com), February 17, 1999.

Don't you just love intelligence?

Thanks Nikoli.

I knew the printing of cash at whim smelled funny.

-- INVAR (gundark@aol.com), February 17, 1999.


Nikoli said:

"All this extra cash is going to accomplish is to present a red herring for the bankers to grasp at in desparation as they go under, and in the act of reaching transfe their real assets to the Fed (A private corporation) in exchange once again for money created out of thin air."

That would be true, if withdrawal limits were not put in effect around May of this year, as I predicted here:

Hypothetical 1999 Timeline

-- a (a@a.a), February 17, 1999.


I know I don't belong on this thread, I still count on my fingers. But I just must make a comment after what a. said.

I'm trying to connect the dots, and so after the threads discussion on what the feds are about with Martial law, military excersices etc., it just sorta falls into place for me that the economy is being manipulated (read us sheeples) and that a. could very well be right. Limits on withdrawals, Know Your Custumer's law, etc. etc. Kosniken is not irresponsible, he's doing what he was hired to do. Spin, calm the herd. He's not on -our- side, he was hired by the gov., so why expecting -our- kind of responsibility from him?

(INVAR, btw, I know how it feels to be proved wrong and I admire your recovery. Only the trolls on this forum are always right and never make mistakes.)

-- Chris (catsy@pond.com), February 17, 1999.


aaaa, I also expect withdrawal limits to be imposed at some point, but personally I would think more along the lines of late November or December. The very act of imposing these limits is going to escalate panic by at least a magnitude. A much more likely scenario is that the banks suffer through the cash crunch in silence, progressively borowing more and more money from the Fed. while simuletaneously tightening credit at their local banks. The really small local banks will probably begin to be swallowed by Regional banks, which in turn will be swallowed by the Big boys. Whatever the other effects of Y2K the structure of our banking system, if it survives, will be radically different on the far side.

-- Nikoli Krushev (doomsday@y2000.com), February 17, 1999.

OK, let's see if I got all this clear.

If I have $1000 in a checking account and withdraw it in cash, from an individual perspective the money supply hasn't changed at all - $1000 of it has changed from electronic to paper, but this is only a change in form, not a change in supply.

From an economic perspective, two important things have happened: First, the bank can no longer loan that $1000, and the multiplier effect from that $1000 won't happen. Second, I'm not spending that money, so it's removed from circulation. These results are both deflationary.

It would appear that Koskinen is trying to reassure us that there's no need to withdraw cash for fear we'll lose it if we don't, since they're printing a lot of it. This sounds perfectly good if we assume that the economy will stay healthy and the banking system will stay functional. If these assumptions are false, any cash you withdraw might be the only money you have for some unknown period of time. And if deflation does happen, those bills may appreciate quite a bit.

So assuming no real economic impact from y2k (for the sake of discussion only, of course) the real danger of widescale withdrawals is economic contraction. To combat this in Japan, the interest rate has been reduced until it's effectively negative. And not working that well either. There seems to be a limit to how much money the government can create.

-- Flint (flintc@mindspring.com), February 17, 1999.


actually I owe koskinen a debt of gratitude for such blatantly obvious lies - both this statement and his previous statement concerning 'no major problems with the grid'. Using documented information previously gleaned from news sources it appears that haby the Grace of God, some of the movers and shakers at church are FINALLY convinced that the government really is lying and that there are really going to be substantive problems... finally, finally, finally!!!

They're still only up to about a 5, and what they think would be a 10 is actually more like a 7, but hey! it's a start! And on Ash Wednesday no less!

Arlin

-- Arlin H. Adams (ahadams@ix.netcom.com), February 17, 1999.


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