1933 Video "Benefits of Inflation" & Banking Crisis Refuge

Here is a newsreel from 1933 that explains how inflation stimulates demand to get the economy moving again. I believe economist  Dr. Paul Krugman uses this film as one of the prime teaching videos in his macroeconomics classes. If nothing else, this YouTube video is an amazing window into the great economic and social crisis of 80 years ago and probably essentially represents what one major political party still believes is the solution to our economic malaise. It is really a  much more "hip" production than what contemporary people might expect from what we generally consider a "stodgy" era. You can become a time traveller by investing just 10 minutes in this video. Here is the link:  http://www.popmodal.com/video/2066/Vintage-pro-inflation-propaganda         Provided courtesy of TCM

I am also sending a link to a guest post by Ellen Brown on Barry Ritholtz's The Big Picture site on an alleged US-UK plan to take the bank savings deposits of savers (depositors) and use them to recapitalize the banks in the event of a financial crisis so great that it dwarfs the ability of the FDIC to cover insured bank deposits. The NCUA is the insurance entity for credit unions that does what the FDIC does for banks. I am not sure what it's ratio of capital to liabilities is, but it may not be much better than that of the FDIC (which is 5%). The Ellen Brown article has a short educational section on the actual legal staus of bank depositors under the fractional reserve banking system, which is unpleasantly different from what I thought it was. This has made me start thinking about where I could invest a large savings account that would give me the highest priority creditor status. This is an action that would have to be completed ahead of time because bank accounts would be frozen as they have been in Cyprus once such a calamity struck. This kind of event could be worse than the Banking Crisis of 1933 because the US Treasury has a much worse balance sheet than it carried in 1933 and the Federal Reserve has a vastly huger balance sheet (of which vulnerable mortgage-backed securities comprise a large part). In 1933 the US Government had the financial strength and credibility to back up the US banking system. That is quite questionable now. The FDIC has only 5% of the money it would need to pay off all insured depositors (up to $250k per depositor for each account class, that is: regular savings or IRA) if all the banks failed simultaneously. This admittedly is an unlikely event, but not an impossible one. The acquisition of gold/gold coins to keep as real money is so widely discussed at the site http://www.safehaven.com/  that it is unnecessary for me to repeat the extensive arguments made there.
    I am thinking that short term US Treasury notes and bills would be the safest thing to be in because the US Government must redeem these notes in order to be able to keep financing its operations. But the purchaser of Treasury instruments can no longer hold these directly, but must place them in custody of a dealer (like TD Ameritrade) who holds them in electronic custody. That raises the question of whether the Treasury is personally liable to you for your investment if the broker-dealer fails. I think the answer is that the US Treasury must be, or it's creditworthiness would be a sham. But I can't assert that assumption with absolute knowledge so I must research this crucial topic. Anyone else who has knowledge on this subject is invited to comment. I am going to post this letter on my blog at the Unraveller's Spool on Google Blog. This is the link to my blog if you are interested: unravellersspool.blogspot.com. Outlook express wouldn't turn the preceding web address into a clickable link so you will have to copy and paste it into your browser address line if you want to use it. However, what is much more important is that you read the Ellen Brown article at this link: http://www.ritholtz.com/blog/2013/03/bank-confiscation-scheme-for-us-and-uk-depositors/

                                                 The Unraveller

            The Geopolitics of a Reserve Currency

     My conclusion is that it makes no sense to cut one dollar from defense spending or to reduce our nuclear arsenal by one more warhead. In 1973, Nixon persuaded Saudi Arabia to exclusively accept dollars in payment for oil from any and all countries and to agree to buy US bonds with the money they received. In exchange they were to receive US military protection from any regional or global power.  By 1975, a year after the 6 month oil embargo ended, all members of OPEC agreed to do the same, effectively making the US dollar the world's reserve currency. I haven't calculated the numbers, but I wouldn't be surprised if the monetary benefit of being the world's reserve currency has been worth enough to pay for all US military spending since WWII. Whatever the figure is, it is monumental. And this privilege will only remain intact as long as the US possesses overwhelming world military superiority, including control of the seas ( as in "Britannia Rules the Waves").

    Wasn't it you who speculated that the US attacked Iraq in 2003 because Sadam Hussein threatened to stop accepting dollars in payment for oil? You will never see this discussed openly by any Western Government official because it is too explosive of an idea. It makes it clear that the US is a modern Roman Empire or a 19th Century British Empire. Nations never admit their real geopolitical/economic motives but always disguise their actions in lofty moral terms. But Realpolitick drives the world much more than the pursuit of idealism. Conversely, without economic and military power, it is impossible to pursue any altruistic policies and actions even if a nation does desire to do so.

     There is much anguish among various economists and writers that the USA's deficit spending will turn the dollar into a "banana republic" currency unwanted by other nations as a store of value and thus not of value to measure a unit of economic exchange. Of course that is a real danger if "money printing" is carried far enough. 
   But the allies and trading partners of the US know full well how expensive it is to maintain a top-flight military establishment, and they factor this in to their evaluations of our deficit spending. Just consider how empty France's posturing was during it's intervention in Libya. France has some excellent aircraft and military technology, but they couldn't even supply enough ordnance for their planes to last for more than a few bombing runs. The US had to supply them after about the first week or two. This analysis does not imply that I think the intervention in Libya was even a good idea. I believe it was ill-conceived right from the start for many reasons. However, that discussion deserves an article of it's own, which Stratfor.com has probably already written.
   I believe that Obama's desire to reduce our nuclear arsenal reveals a profound strategic incompetence (assuming he does not learn better).The amount of radioactive hazardous waste produced by the process of creating these warheads is a price this country will never be willing to pay again in the future if there appeared to be a necessity for building more warheads again. So the sensible thing is just to store the ones we have, not dismantle them. Even in the thoroughly unlikely eventuality that there is never again a serious threat to the Western world from a dangerous adversary, there are other hazards which may need to be countered by the use of nuclear warheads. The most obvious is the deflection of asteroids from paths that could lead to a collision with earth. In my thinking, this should be the next great priority for a NASA- Air Force project.