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Money, money, money…

I think it’s safe to say that the recent subprime mortgage debacle took everyone by surprise, although I do recall Greenspan warning of a “housing bubble burst” back in 2002.

Still, no one knows how far-reaching the effects of the current crises will be. And, while I respect the motor and creativity of the U.S. producers, I fear government deficit spending and easy lending policies may have gone too far. Recessions and inflation are the inevitable evils of deficit spending and of a currency no longer tied to anything.

Via Amit Ghate’s Thrutch, I found John Mauldin’s letter, which explains a lot.

And, as always, George Resiman is a quiet voice of reason, courageously saying what no one else dares:

Another outcome will almost certainly be the enactment of still more laws and regulations concerning financial activity. Oblivious to the essential role of credit expansion and of the government’s role in the existence of credit expansion, the politicians and the media are already attempting to blame the present debacle on whatever aspects of economic and financial activity still remain free of the government’s control.

It probably is the case that at this point the only thing that can prevent the emergence of a full-blown major depression is the creation of yet still more money. But that new and additional money does not necessarily have to be in the form of paper and checkbook money. An alternative would be to declare gold and silver coin and bullion legal tender for the payment of debts denominated in paper dollars. There is no limit to the amount of debt-paying power in terms of paper dollars that gold and silver can have. It depends only on the number of dollars per ounce.

To be sure, this is an extremely radical suggestion, but something along these lines will someday be necessary if the world is ever to get off the paper-money merry-go-round of the unending ups and downs of boom and bust, accompanied since 1933 by the continuing loss of the buying power of money.

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