Memes of the Week

1. "Too big to fail" got bigger.

J.P. Morgan Chase, an amalgam of some of Wall Street's most storied institutions, now holds more than $1 of every $10 on deposit in this country. So does Bank of America, scarred by its acquisition of Merrill Lynch and partly government-owned as a result of the crisis, as does Wells Fargo, the biggest West Coast bank. Those three banks, plus government-rescued and -owned Citigroup, now issue one of every two mortgages and about two of every three credit cards, federal data show.

2. Currency crisis with deflation—Project Mayhem lays out the argument for an international currency devaluation coupled with credit deflation. I've made similar arguments of effect when I wrote that interest rates and oil prices driven by inflation expectations, rather than actual inflation, will be deflationary. The method of increase in this case, however, is a devaluation of the U.S. dollar.

Deflation and currency crisis are not mutually exclusive. This is precisely what happened in 2008 in Iceland. While the banking sector in Iceland was in tatters, resulting in bank runs, bankruptcies on a massive scale etc, the Icelandic Krona decreased by more than 50% against the U.S. dollar.

The issuance of any significant amount of credit in yuan, yen, or in PetroState currency is a key source of a possible death blow to the U.S. dollar.

Also came with a cool pic: Read the whole thing.

3. 9/12—Big protest in Washington, D.C. on September 12. FOFOA discusses this picture in No Free Lunch:

You see, the truth of the matter is that there is no free lunch. Yet the US federal government is now funding its fantastical folly at the rate of TRILLIONS per year through the Federal Reserve's printing press, nicknamed POMO. If the dollar doesn't collapse in purchasing power, this could go on FO-EVAH!! Free lunches for everyone (in the United States)!!! We can all work for the government!! Be a G-man! A nation of G-men!! How cool would that be? Look, they make more DOLLARS too...

There is only one way this madness stops. It is not going to stop by Ben Bernanke telling Obama "no more!" It is not going to stop by Congress suddenly slashing its pork-laden budget to sustainable levels. It is not going to stop by the real economy suddenly rising to the occasion. Yet it WILL stop soon. This insanity is sucking the very air out of the global economy like a pyromaniac's fire that extinguishes itself in an airtight space once the air is gone.

It is a truth about inflation and hyperinflation that only the VERY FIRST entity to use the newly created money profits from the exercise while everyone else suffers. This is because newly created money draws in real economic goods and services to the printer at the same rate as they were offered in the open market before that new money was created. And the printer receives this SUBSTANTIAL PORTION of the real economy at precisely ZERO cost when that new money comes via Ben's mouse named POMO. This 'first spender' effect can be seen both in the BOOM TOWN that Washington DC has become in the middle of a damn depression, and in the LAVISH lifestyles lived by Gideon Gono, Robert Mugabe and all of Mugabe's cronies and friends.

Read the whole thing.