Financial Shock of the Day - This You Must Understand! Economic Depressions Operate In Cycles
Guess what. As you are reading this article our government is spending three billion dollars servicing our national debt. Most people think the 1929 Great Depression was caused by the crash of the stock market. In 1929 there was a run on the banks manipulated by a cabal of individuals seeking to install a central bank. When people went to the banks to get their money out often there was no money to return to the depositors.
The banks did not have their depositors money because that money was invested in stocks, stock offerings, real estate and insurance. Often the stock companies owned the real estate companies, stock companies, insurance companies and the banks. However the deposits of bank customers had been invested in stocks, real estate, and insurance.
Think about the unlimited damage that would have occurred in today's market to Social Security recipients. Had the country adopted the suggestion of politicians to privatize the Social Security program trillions of dollars would have been lost to unskilled investors putting their lifetime earnings in the active stock market.
After the Great Depression dollars bills were altered to remove the legend stating the legal note was redeemable for lawful money at the US Treasury or any branch of the Federal Reserve bank. Gold and silver are lawful money.
Current denominations of currency do not contain the statement that allows the bearer to trade their currency for actual money. Our economic system founded upon gold and silver being actual money. What we have today are dollar bills that are actually IOUs enforced by the government. These IOUs are not money.
Now, getting back the Great Depression and the banks. When the banks began to have all their problems then the stock market crashed. Banks owned stock that was held on margin. The margin calls exceed the ability of the banks to meet obligations. Problems within the banking industry began to spiral, But what is interesting is there was a 50 percent pull back in the stock market. The market bounced up 50 percent after the initial drop.
This was repeated for a total of six times between 1929 and 1933. The bounces down resulted in losses of up to 89 percent of the stock market. Now this is where the reader of this article must, and I repeat, must be diligent.
History Works In Cycles
And why do I say you must be diligent? Simple. History works in cycles. If it happened once, it can surely happen again. In 1930 we had small movements in the economy and stock market to indicate we were on the road to recovery. Our economy is currently appearing to be on the road to repair. The difference is back then we had the gold standard to protect the currency. We no longer have the gold standard.
The gold standard was removed in 1971 by President Richard Nixon. Our country's situation shows similarities to the Weimar Republic of Germany. One of the numerous problems of the Weimar Republic was hyperinflation.
A significant indicator of the recovery of the stock market is based upon the banks showing profit. But are they? During the G20 summit, participants mentioned that we would have to strengthen the rules and regulations of our banking system. Conversely the Treasury Secretary considered suspension of Federal Accounting Standards Board rule 157. The suspension would facilitate banks lending more money. Enforcing the FASB rule compels banks to use fair value and accurate accounting procedures.
Under the concept that some banks were too big to fail, taxpayer funds were used to bailout banks. The expectation was that the money would be lent out. Instead the taxpayer bailout money was used to pay off creditors such as AIG and Goldman Sachs Still major banks have not satisfactorily addressed the systemic issues that caused so many problems.
So we all now have choices to make. Do we want to protect our assets, do we want to make money, or do we want to bury our heads in the sand and hope that doing the same things we did in the past will work for us?
Thank you and have a blessed day.
This is an original article I submitted to ezine articles about seven years ago. However just as back then this information is still relevant. My favorite quote back then and still now, "Never despise a humble beginning."