We’ve got some explaining to do, since some readers evidently took yesterday’s commentary – “A Cautious Bernanke Finally Gets It Right” — as a paean to the Fed chairman. In fact, we feel quite strongly that America and the rest of the world would be much better off if he’d renounce his role as a policymaker and return to Princeton, there to pursue the harmless, bumbling life of a tenured professor. We’ll come back to Mr. Bernanke in a moment, but let us first mention pianist Joanne Brackeen and Breath of Brazil, a brilliant jazz album released in 1991 that ranks right up there with Bill Evans’ best ensemble work.
We first heard Brackeen on a album she did with Toots Thielemans, the peerless harmonica virtuoso. We mentioned her here a couple of weeks ago, but we do so again to drive home the point that she is simply incredible. In the album she did with Toots, her style was a little agitated on some of the tracks but amazingly inventive. In Breath of Brazil, she shows a beautifully relaxed, lyrical style, but with a rhythmic intensity that marks her as one of the foremost interpreters of Brazilian music outside of Brazil. To those readers who enjoy piano jazz, we cannot recommend this album highly enough. It features standards from Jobim, Sergio Mendes, Ivan Lins and other greats. Joanne Brackeen is not particularly well known, but she deserves the widest possible audience. Although Breath of Brazil is out of print, the digital tracks are available at Amazon and elsewhere on the web. You can sample them by clicking on the link above, or here.
No ‘Cure’ for Deflation
Returning to Mr. Bernanke, when we wrote here yesterday that he had “finally gotten it right,” we didn’t mean to imply that he had found a cure for an economy caught in the vortex of deflation. Indeed, there is no cure, save hyperinflation — and that would be like curing cancer with a fatal dose of radiation. We’d only intended to call attention to the fact that the Fed chairman had succeeded at making a major policy speech without upsetting Wall Street. This seemed worth mentioning – seemed extraordinary, really, given the stock market’s wild gyrations of late. But even if investors were briefly becalmed by Mr. Bernanke’s plan to tighten ever-so-gently, they will still have to reckon with the ongoing and inexorable collapse of a debt pyramid amounting to hundreds of trillions of dollars.
Since debts of such magnitude can never be repaid, it would appear inevitable, even to hard-core deflationists such as ourselves, that a hyperinflation lies somewhere down the road. However, with regard to the inflation-versus-deflation debate, the most urgent concern is when this will happen, not if. Many inflationists seem not to understand the implications thereof. “Are you [deflationists] going to pretend that [all this debt] won’t be monetized?” asked “Myron” in the Rick’s Picks forum. No, we deflationists won’t pretend anything, Myron — least of all that a hyperinflation is not coming. But we shall continue to insist that inflationists address the question of when, in the sequence of catastrophic events yet to unfold, this will occur. For if hyperinflation does not come in time to bail out 80 million homeowners who are, or who at some point will be, drowning in mortgage debt, then it can only imply that the lenders will eventually own us all. On the other hand, if hyperinflation is effected in a way that pushes real estate values to the moon, effectively reducing current mortgage burdens to insignificance, it will necessarily destroy the rentiers who supposedly control our economic lives. You can’t have it both ways, and that is why we demand that you inflationists say exactly when, in the grand scheme of events, hyper-monetization will occur in the U.S.
(If you’d like to have Rick’s Picks commentary delivered free each day to your e-mail box, click here.)
The current economic environment is tough, with the total debts of the US economy amounting to 60 trillion dollars (both private and public) the interest payments alone of 3 trillion a year prove to be a massive drag on economic activity.
Generating inflation is now on the highmark of the agenda of the Wall Street elite, yet doing it in a deflationary environment is difficult. To find out how inflation can be brought into the world and the implications for geopolitics please read
http://financialmarkets2007.blogspot.com/
I look forward to hearing from you