[Responses to this commentary have been so illuminating and provocative that I am going to let the discussion run for another day. If you read them all, you may come away believing, as I now do, that neither the hyperinflationists nor the deflationists can claim to know for certain how things will play out. That said, I consider FOFOA's hyperinflation arguments to be the best offered by either camp. RA]
So, it looks like I’m a hyperinflationist after all. Reminds me of the joke about the cowboy who chats up a woman at a bar – a lesbian, as it turns out. She tells him she spends her days thinking about nothing but women. “As soon as I get up in the morning, I think about women,” she says. “When I shower, I think about women. When I watch TV, I think about women. I even think about women when I eat. It seems that everything makes me think of women.” The cowboy goes home that night thinking that maybe he’s a lesbian too. Another tavern, another night: A stock broker strikes up a conversation with a stranger who seems obsessed with the idea that hyperinflation is about to wreck the economy. “From the moment I open my eyes in the morning, my head is filled with worries about how the financial system and the world’s currencies are hurtling toward disaster. Watching the stock market rise relentlessly, I grow more certain each day that it can only end badly. I think the real estate disaster has barely begun and that, for tens of millions of us, the American Dream is about to turn into a nightmare.” “Hmmm,” says the stockbroker. “I guess that makes me a hyperinflationist too.”
And so it goes. A conversation between a hardcore inflationist and an equally hardcore deflationist might meander for hours without generating much argumentative heat. That’s because both see the financial system in smoldering ruin after the smoke has cleared; it is only on the matter of how the disaster will unfold that they disagree. I’d thought until yesterday that deflation was far more likely to do us in, turning an endless Great Recession into a Second Great Depression. My scenario called for falling prices and wages, imploding asset values and an economy drowning in bankruptcies. Hyperinflationists are expecting a quite different endgame — one in which prices soar relative to fiat money, debtors pay off loans with confetti, creditors and savers are wiped out, and hoarders of bullion live like kings. I am now convinced, after stridently arguing the case for deflation since the late 1970s, that the hyperinflationists will be right.
Stunning Insights
Why have I changed my mind? For the answer, you’ll need to read FOFOA blogspot‘s latest essay, Deflation or Hyperinflation? Nothing I had read before it even came close to making the case for hyperinflation, since the arguments seldom went beyond nebulous theories and shoot-from-the-hip speculation. This one does, though – and brilliantly: first by deconstructing my strongest arguments with great care and refuting them one by one; then by explaining how human nature itself, impelled by self-interest, will push our debt-addled financial system toward a hyperinflationary dénouement. There are some stunning insights along the way, the moreso because FOFOA is able to bring them to readers by making some heavy ideas go down like a soufflé. One of them, debated endlessly, questions whether the Powers That Be would “allow” a hyperinflation to occur, since that would render their financial assets worthless. FOFOA prepares us for his counterintuitive answer by recalling the joke about how, if you want to survive, you don’t actually need to outrun the bear that is chasing you and your friend. This could be said of the Masters of the Universe: They won’t have to outrun hyperinflation — only to outrun the madding hoards who will be as eager as they to unload dollars in exchange for real things.
FOFOA’s logic has extremely bullish implications for gold. I’ve always been bullish on the stuff myself regardless of whether it is hyperinflation or deflation that gets us. But I was never entirely comfortable with my own arguments, since deflation in theory would render hard cash more valuable than other assets, including bullion. Reading FOFOA’s essay, however, I had an epiphany when he cited a 2002 quote from inflationist Gary North: “I remember in 1975 hearing C. V. Myers tell attendees at a gold conference, ‘If you get this one wrong, you’ll lose everything.’ He was predicting deflation. He got it wrong. He didn’t lose everything.” The reason Myers didn’t lose everything was that he owned gold up the wazoo, even after it peaked at $850 in 1980. I know this because Myers wrote about it in his newsletter, but also because when I interviewed him at his Spokane home for a freelance article I’d pitched to Barron’s, he let me fondle the largest solid-gold nugget I’ve ever seen outside of the Smithsonian. It was sitting on his desk, along with rolls of gold coins that today would be worth as much as a house.
C.C. Myers’ Dictum
Some of you will know Vern Myers as one of my guiding lights. It was his 1977 book The Coming Deflation, with a logic that seemed immutable, that made me a deflationist. He argued, simply, that “Ultimately every penny of every debt must be paid – if not by the borrower, then by the lender.” This implied, for one, that if debtors walked away from their mortgages, it would reduce the wealth of their creditors by exactly the amount that had been owed. Deflationists would logically infer from this that a nearly quadrillion-dollar derivatives bubble that has yet to implode will shrink the world’s wealth by that amount when the collapse finally comes. However, FOFOA (whose identity apparently is a well-guarded secret) explains how all of the hyper-leveraged paper underlying the bubble is likely to be redeemed at face value. That would be hyperinflationary, of course, but those who are able to get their hands on the money first -i.e., the Masters of the Universe – will have a chance to spend it before it becomes completely worthless. This has implications for the mortgage debt that I have always insisted the Masters would not forsake by promoting a hyperinflation. More likely, explains FOFOA, is that home prices will go “hyper,” and that if you are prepared to swap gold for dollars at the perfect moment, you may be able to pay off your mortgage with proceeds from the sale of just a handful of gold coins. (To access timely and precise forecasts for gold, silver and other investment vehicles, click here for a free trial subscription to Rick’s Picks.)
This essays deserves to be read by the widest possible audience, since it explains so clearly why we must hold gold in preparation for the dollar’s collapse. As far as I am concerned, a more compelling argument for hyperinflation has yet to be made.
(If you’d like to have Rick’s Picks commentary delivered free each day to your e-mail box, click here.)
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Two weeks ago I explained why Rick’s arguments for deflation’s inevitability were wrong, but as I also explained, I see two possible ways that the bankers may not get their way; where deflation may still happen; one good way and one bad way.
I also addressed the issue that Cam brought up today about the lack of demand for goods and the excess of inventories thwarting hyper-inflation:
“Remember: the lenders are just middle men; they are also responsible for paying back/retiring these loans. If it was only their money on the line, they wouldn’t be facing the extinction that would be inevitable in the event of deflation.
Also: this notion that wage inflation is required for price inflation ignores the other avenues of price inflation:
1) When wages rise, people may save more, invest in productive enterprises or pay down debts, but Q.E. is always spent completely, wastefully and, worst of all, in a counterproductive manner. It’s far more inflationary than rising wages.
2) We live in a world economy, where prices aren’t necessarily correlated with domestic economic conditions like employment or wages.
3) While lack of demand may cause prices to drop dramatically as inventories of goods are sold off below cost, new goods will not be produced until the subsequent shortages cause prices to rise to a level where they’re profitable to produce once more.
It’s my opinion that there are only two paths for deflation to take hold:
1) The Tea Party crowd wrests control of the federal government.
2) A successful plot by the fascist-left to destroy the financial system, creating a “national emergency” as an excuse to nationalize it.”
Mark,
#2 has already happened.
If there wasn’t a plot, there might just as well have been.
We’ve become the old Soviet Union, complete with oligarchs and a massive State Security Sevice that views it’s citizens as the enemy/terrorists.
@ Mark “. . .Also: this notion that wage inflation is required for price inflation ignores the other avenues of price inflation:. . .”
The debate is hyper-inflation, not stagnation where prices for goods goes up because of speculators in the top 10% driving oil and other necessary earth produced products. There are two things that can drive hyper-inflation based in too much money chasing too few goods:
#1 Savings (the U.S. corporate enfranchisee doesn’t have any)
#2 Radical wage increases on a daily basis chasing too few goods exterior of the “base” oil/earth items.
We could throw ‘credit’ in there, but; again there isn’t any real U.S. individual ‘credit’ when each resident is saddled with forced loans “credit for the banksters” that are in essence given to the top 10% by monetary policy. The greatest fear in Bernanke and the central bankers is “. . .wage inflation. . .” which is the only thing these goons label inflation in their vocabulary. Matterial/goods inflation is not hyper-inflation, and the fed has no problem in allowing inflation in goods without wage inflation. No one can argue that the cost of goods is going up. But, there is no shortage of goods, and there is no wage pressure on those goods. If anything there are fewer and fewer notes chasing way too much product all at the expense of more debt via Social Security non-payment. (go figure out stopping money flowing into SS when SSA needs money because of the Boomers) One must examine the reason for material price increases and discover what is causing that. Is it speculation by the top 10% seeking to suck every last bit of Liberty out of those who may have some savings ? You tell me what is driving up prices because it is not increased wages, and it is not a lack of product as Cam so correctly explained earlier. People do not understand the game because they do not understand the rules and the end run of the game. We are all running upon theory with no basis in fact because of dual monetary systems, dual citizenship systems, and a G7/G20 mentality that no one even understands. What is the END GAME? Is it more Freedom/Liberty for the People, or is the end game control in the hands of the few? Inflation/hyper-inflation; we cannot have a discussion if one is talking about true hyper-inflation when in fact the evidence establishes the reality of STAGFLATION.
What have the People lost this past 70 years? If one cannot address what has been lost, then in fact; one cannot understand what the end game is.
Everywhere I look there is a loss of the “Rule of Law” whether in Libya, or in the banks. Everywhere I look certain persons only want someone else to provide them with security. This is a basic reality, as persons have given up Right and Wrong to seek what makes them feel good in the moment, whether that be Joe drunk in front of a TV so he doesn’t feel anything, or the coward who will not stand for what is Right by the Immutable Law.
It appears Chief Justice John Marshall was correct; ‘If one does not believe in an Immutable Law he will change the rules and change the rules until we all shall loose.’ There is an answer, and it is not about hyper-inflation, or deflation, or stagflation. The American People have lost to debt, and putting their security in the hands of government goons who use monetary policy to accomplish their goals.
I cannot argue against the fact that the American People have given away their inheritance and it may well be the Chinese who buy it up from the federal reserve bank who owns the soul and hearts of a onced proud Nation. The piper wants to be paid, and there is no credit available as material prices increase, and wages go down. Imagine yourself working 16 hours a day in a Chinese owned factory sweeping the floors because the good jobs are in the hands of the Chinese worker. That is a possible reality and outcome.
We are just getting poorer, and the ones who know how to squeeze the last drop of blood are squeezing harder. What have we lost this last 70 years ?
JohnJay: “We’ve become the old Soviet Union, complete with oligarchs and a massive State Security Sevice that views it’s citizens as the enemy/terrorists.”
-But, isn’t this GOOD news?
Did the Oligarchs in Rome win?
Did the French Oligarchs win?
Did the Oligarchs in The British Empire win?
Did the Oligarchs in the Soviet empire win?
Will the Oligarchs in the US Empire win?
Will the “Shadow” Global Oligarchs (NWO, Illuminati, Bilderbergers, Trilateral Commision… just pick your favorite ” organized enemy of the people” )
I ask you – will they win?
Photoradarscan:
True enough, at 10k, the difference between 1K basis or $35, is marginal, BUT:
If you believe the main point of the argument made by the original post, then $10,000/oz
IS the then current REAL value of the ounce, hence a ZERO profit.
If you then pay the collectibles gain tax on the so-called, but of course not actual, profit, you will lose over 40% of that.
So you still will have left a nominal:
$6014 ($35 basis at 40%) or $6400 ($1000 basis at 40%), better than paper currency, but still bitter.
So, bottom line, due to the taxes on a phantom nominal gain, your “investment” in gold lost 40% of its real value. Theft, that’s all.
BTW, in a cleptocracy state like NJ, it would be much worse, closer to 50%, if you add the just-about 10% tax take by the state on top of the top federal rate.
My point was, that nothing new needs to be implemented at all by the government in order to implement this theft, its already on the books and settled law.
And, Steve, you may be right about all that being illegal, against common law, or the constitution, but when they come with THEIR guns, yours will be outmatched, and the only possible outcome is giving in or going down fighting (but not winning).
A federal reserve note is “valueless” – Call the Federal Reserve. Silver has “value” under the Rule/Law of the People in the Coinage Acts. Gold is valued in silver. One will only be lost in theory when one has no constant. These discussions are in varible theory allowing nothing to be discovered.
@ Chris T. “. . .And, Steve, you may be right about all that being illegal, against common law, or the constitution, but when they come with THEIR guns, yours will be outmatched, and the only possible outcome is giving in or going down fighting (but not winning). . .”
And this is exactly why they will win Chris T. First one has to be willing to LIVE what one believes even if that costs one their . . .(what was it the signatories of the Declaration said ?)
James Madison said in the Federalist Papers that there was no reason to fear a strong central government, for at any moment the People would bring forth 500,000 armed Men to put down tyranny in government. There are 90 million armed Men and Women in these united States. Notice that I said WOULD, not could ! ! ! ! There is no wood in the backbone that will confront tyranny. Start with “use” of fiat fraud, please, as something absolutely WRONG.
The problem is in the mentality of those people who only look to self, not to Nation. The military is not filled with mindless trained boys and girls Chris T bent on wrongdoing. The they is not as big as the fear expressed by those who have never taken fire. Maybe we all should find some Patrick Henry, and say that nothing gets accomplished unless someone believes and acts. Defeat is in the heart, not in the blood spilled, or life lost for Liberty for the Nation.
I will speak to the constitution. There are at least (2) federal constititions. One the Original endorsed by only a few men in A.D. 1787. The other is a corporate charter, 28 U.S.C. 3002(15) foreign corporation created about A.D. 1872 because of legislative rebellion endorsed by every 14th amendment . . .subject. . . resident corporate enfrancisee. It is ignorance that is killing us.
Chris T @ (but not winning). . .” We have seen the enemy, and it is me. I believe this mind set avoids living life in Right, in the Law, and; if that means sprinkling the Tree of Liberty, then I am honored. I want to live for Liberty Christ T because I have been too close to dying; it hurts. Each individual is already dead when they fall into Wrong and fiat fraud justified because someone else does this, or that. It is either Right or it is Wrong. Fiat government, fiat money, fiat voting, fiat subject citizenship, fiat law is all wrong. Success does not exist in doing what is wrong and expecting a Right/good outcome. Thanks for your thoughts Christ T. as your thoughts allow me to sharpen my mind and my own thought process.
Gary L:
“…even before the debt debacle the talk was about how true inflation was masked by the government. I don’t buy the conspiracy argument.”
There is NO conspiracy here.
What the MSM loves to call conspiracy, is really just public domain information, that is not know by the average ignorant Joe.
Thus, because of the general apathy, ignorance you name it, people generally buy into the notion of a conspiracy.
THIS was done out in the open in full-view, best example:
hedonic price adjustment.
You surely can not be ignorant of John Williams’ Shadowstats!
He simply calculates CPI, and other major metrics the way they officially done in the past, prior to the implementation of the trickery.
The only way for you to claim that Williams is wrong is by accepting the validity of the trickery, and accepting the notion that the old way of measuring was flawed.
But there is no conspiracy in the conventional sense.
If one believes, then one believes in the conspiracy against Good/Righteousness, and existence of mind-less agents like O’bamer who have no idea what they do for whom. If one believes in the theory of goo, then; one believes whatever their own self is able to produce in the mind. Hard to have a discussion between two individuals with different g-d views. Great arguments, but; rarely a discussion. Got Immutable?
There can be no “standard” for money.
We are a social species, with the moment of adaptation currently occurring between social entities called nation states.
What binds any social aggregate together is the group return-on-coordination. That return scales beyond anything an individual can achieve alone.
Even in small groups, diverse data patterns fluidly combine to produce real-time fluctuations in affinity. With scale, diverse value propositions fluidly combine to set the perceived value of a public currency monopoly – but those valuations always must be fluid.
The only “standardization” that offers survival value is convergence to recognize the primacy of return-on-coordination.
All fluid definitions of the “value” of commodities, money or currency are simply tools to be artfully used in group strategies and policies.
Don’t forget that, and we’ll be fine.
There can be no “standard”, only anarchy in the moment ?
> There can be no “standard”, only anarchy in the moment ?
Absolutely. You wan’t inability for anything to change, be a rock, not a human. We’re here to surf dynamic contexts. Surfing is fun. Rocks are boring.
And there we have it. An anarchist by admission. Change is the Freedom to do as one wishes, not what roger wants to force on me. Same ole’ Marxism stuck in a rock trying to accomplish that which has already failed. I just cannot help sticking my hand into the tar.
What FOFOA is really talking about is monetization AFTER the credit collapse and Rick has bought into this idea. Here is what is relevant. The debt balloon has sprung a leak and credit/debt is SHRINKING. The Fed is pumping furiously i.e. monetizing bad debt. But that is just a TINY FRACTION of the collapsed credit. That collapse has already occurred. The Feds monetization has NOT increased property values, or raised employment. They CANNOT print wealth. Once the debt balloon has a leak, no amount of pumping can bring it to its original size. The economy will NEVER be the same as in the days of easy credit. The balloon must DEFLATE COMPLETELY and repaired before any pumping (expansion) to take hold. That means a CASH AND CARRY MARKET.
Cash in circulation $3 trillion? debt balloon size $150 trillion? By suggesting HYPERINFLATION, are proponents are saying the FED will print $150 trillion? The collapse in CREDIT will drown any pickup in the pace of monetization and the FED’s ability to print. Remember that CREDIT AVAILABILITY was the key ingredient in price INFLATION. Once CREDIT collapses (and it has already started) every available credit source will DRY up AND CASH and CARRY will rule.
Our economy is largely credit based and it is only AFTER credit collapses, that the FED can selectively monetize debt to its favored interests. The game has not yet played out. After credit collapses in a big way, the financial landscape will be vastly different than today. Rules for GOVT AND THE FED will change. People run the bastards out of town.
> People run the bastards out of town.
Exactly. The whole in any projected policy presumption is that policy won’t change. It’s always a political decision – and the masses can always just make a political decision to run any/all re-labeled out of town.
As many keep saying here, any response, including deflation or inflation, is always a political decision.
Same ole democracy, will of the masses to overcome the Right of the Individual.
mean to say “the hole in any projected policy presumption”;
every context is shaped by infinite options for indirect tuning; there is NO simply presumption that can be projected
we’re dealing with tracking a unpredictable, meandering survival path, not any collection of linear tangents to that path;
the one thing you can rely upon is constant tuning, and our ability to do exactly that;
we have no predictive power, but infinite adaptive power
@Roger and Tictawk. I agree. Steve Keen lays out the same dilution math. Credit collapse is equivalent to money leaving the economy. The fed is trying to countervail over this and losing the battle. Soon they will face this defeat and the Fisher debt deflation process will be revealed to have never stopped. It was hidden by sovereign debt expansion which will now slow. The forecast is a hard rain that’s gonna fall like the song says.
I am posting the following, which I received in the form of an e-mail, in behalf of its sender, Ted Solley:
The FOFOA blog makes some great points, and I can see why you were swayed by it. But you should have stood your ground, or at least continued the debate.
In my opinion, FOFOA makes a simple and crucial mistake: even though he acknowledges the history of class warfare between the debtors and the savers, with each side taking turns in power, he blindly assumes that today’s elite (the debtors) will remain in power long enough to hyperinflate, which of course they prefer to deflation. (This is where I disagree with Charles Hugh Smith, and agree with FOFOA.)
FOFOA further notes “we are at the end of one of the longest-running ‘easy money camp’ regimes. And these things usually swing back to the other side. But history has taught the world that while easy money regimes end in financial collapse, hard money regimes usually end in bloodshed. ”
I think this is correct, but the financial collapse of easy money regime will be identified as deflation.
Hyperinflation is a political, not monetary, event. Today, where is the political will to carry through on this plan? Witness the Tea Party’s “unforeseeable” rise in the 2010 elections (after a 2008 consensus that democrats would control congress indefinitely). Witness Obama acknowledging that we must live within our means (not because he believes it but because constituents want to hear it). Get ready to witness the fights over the debt ceiling and budget. All the political elites want to inflate to infinity, but not as much as they want to get reelected.
In sum, the mood of the populace is turning against the easy money regime just when that regime most needs the populace to remain docile. If enough Americans decide that socializing losses doesn’t sound palatable, it will not happen.
Keep up the good work.
I’m ready to debate FOFOA too, but on different grounds. Trouble is it took so long to get through it that it’s now 6:35 am and I’ve been up all night. I’m not even sure it’s worth the effort though. All this stuff disappears down the memory hole anyway. In truth, we learn nothing – just keep repeating the same mistakes. This applies equally to our so-called elites who aren’t half as clever as we credit them, or we wouldn’t be in this mess to begin with. I’ll just say one thing before I stumble over to the couch (so’s not to disturb my long suffering wife) – these dichotomies – capitalist vs worker, rich vs. poor, saver vs. debtor, are all false. They are mere artifacts of the way our minds work. The ultimate conceit of humanity is the belief that being sentient, we somehow perceive reality as it is, rather than through a veil of myth, superstition and self-delusion, of which this deflation/inflation debate is just one more shining example.
And on that note, I bid you all good night!
ebear
Still following this thread, still reading the amazing comments and dicsussion.
Still very little to add or debate, but I will applaud Cam’s comment about inventories and values… however, there is a logical gap in my mind between the concept of “deflation” (a monetary phenomenon) versus “depreciation” which is a value driven phenomenon.
Crafty new age economists poured from the Keyenes mold are highly skilled in criss-crossing the usage of these terms.
If the price of new shovels is going UP at the neighborhood Home Depot (as they are) while the cost of used shovels is going DOWN at neighborhood yard sales (as they are) then I must ask… is this disparity due to inflation? or deflation?
You tell me what you think. I already have it organized in my mind, but I want to know how many of you can understand the dynamic of the principle in “non-flationary” terms.
When it comes to price aligned with value, Gold is Gold, Silver is Silver, yet shovels are (seemingly) not shovels…
And if anybody chimes in with “you can’t eat shovels”, I swear I will hunt you down, and hit you over the head with a shovel (just to prove that shovels have wide ranging value in usage regardless of price).
Wow Robert ! The price of a brand new Chinese shovel purchased with credit card debt is going up for the humans who don’t have the will to do anything except go to L’s, or HD’s and use their credit card.
These would appear to be the haves, with both partners working the government job. Does not include the 20% unemployed, or the under-employed, or inferior employees of Mc D’s 50k new hires, Mc’D not paying O’Bammer Care.
The yard sale crowd are the barter/trade People who are paying in hard cash, and only willing to buy something of value at an honest price. Prices are deflating because there are more and more yard sellers selling more and more shovels and price pressure is not there because there is too little money chasing more and more shovels which are being sold of necessity.
Then we have the crowd who steals from both and justifies that need by excuses that fiat is the only way, and they don’t have any fiat because that bad guy talked them into lying to get a loan, or they elected rep/him to do what rep/him wants, and everyone knows political hacks lie. So steal the shovel at Lowes causing losses to increase, (great write off like an earth quake) causing prices to go up, and sell that sucker for cash at a garage sale (Bernanke speak), except competition at yard sales is heating up.
Use the small end Robert. It swings faster. It creates more pounds inch squared on impact. The small end is a much better counter-punch to what would be expected under the circumstances, lol. Grab ahold low on the steel where it is curved for a better grip with one’s power hand. Keep your non-power hand about 18″ up handle. Use the principles of leverage to pivot against your strong hand as you thrust straight in to the center of the target with the little pointie end – LOL ! Swinging to the head is a low percentage target.
Steve:
“And this is exactly why they will win Chris T. First one has to be willing to LIVE what one believes even if that costs one their . . .(what was it the signatories of the Declaration said ?)”
While I have much sympathy for your thoughts, and wish it were true, then and now need to be distinguished for very crucial differences.
a) First, and lets be heretic from the start, the Revolution was about principles yes, but first and foremost about money. To some extent, the British were merely trying, in an inept way perhaps, to recoup (some) of the costs of the 7 years war by their increased taxation schemes, feeling that it was a benefit to their colonies, thus the beneficiary ought to contribute.
It was a part (not ALL) of our ELITE, that was most affected by this, and they were able to rouse enough support by the non-elite to attempt the revolt.
The principles that were being fought for, were only things violated by the Brits in order to get the taxation felt appropriate. Thus the principles-violations were not the root cause but mediatory.
The outcome is known, but, see the PRIMARY AFFECTED group at the heart of the revolt:
the Elite.
Today, you are calling for a revolt not BY the elite, as then, but AGAINST the elite.
b) Those you wish to rise up, are by far less able to comprehend (via propaganda, welfare coddling, miseducation, and the Norman Mailer thing) that they ought to revolt, far less able to do so (lack of training, knowledge, weaponry that can compete), and faced by a much better equipped enemy than back then.
The actual weapons on both sides were quite comparable in 1776, even the Brits manpower nunmbers far less superior, rel. to a modern situation..
Today? The purported revolters have machinge guns against tanks, helicopters, etc.
Numbers: add the DoD to all states Nat. Guard, add all police, etc and compare that with what the Brits could muster against their opponents.
If you think of major dissent within the fighting tool of the elite, I will only put one name here:
Bradley Manning
Look at how he is treated from within the system, bottom to top.
The more and more sociopathic element populating the elite’s tools (see all the very very recent atrocities and warcrimes of “our” forces, the ever increasing police violence documented on youtube, and hundreds of websites, the arrogant TSA goons, etc) will not cross massa.
But, by and large, repeat:
Then, a revolt by the elite, today one against the elite.
c) Leaving aside ALL of point a):
It worked in 1776.
When it was tried again (with at least as much justification) in 1861, look what happened to those that LIVED their principles.
Who won?
And look at those who didn’t live their principles did do! Abe , the tyrannical is enough said.
d) “Democracy” vs. tyranny
Those that you want to revolt, believe they have a say, believe in democracy.
Where was the last (or first) popluar revolt against a democratic regime (that was of course ruled by the elite we are discussing here)? Has never happened.
Every one you can cite was against a generally perceiped tyranny of one form or another.
Its only the perception by those that should revolt that matters, not what actually is.
(see my propaganda comment in a) )
So, not my attitude, just realism with respect to what is extant around us in terms of the human potential on both sides.
That is what breeding ala “Idiocracy” does, when there is an elite able to control.
They have learned that the best system to maintain control, and the one most easily to subvert to get that control is democracy.
The names you cited from back then knew that, which is why they DIDN”T IMPLEMENT a democracy and kept the system for a chosen part of society, sort of a broadened elite. Most readers here, I wager, would have belonged to that broadended base…
What could change the above? Some form of utter collapse, making revolt the only obvious way out for most. Would we really want it? Who knows, scary thought.
Which is why the elites will do their best to prevent just that utter collapse. Not saying they will prevail, but they will try.
Chris T, well thought out and well explained.
The elite in 1740 were the Royals based in the British Isles under a feudal system. The higher ranking subjects on the Americas were still subjugated under feudalism to the Royal Caste across the ocean. So, I disagree in part because the scheme was greater and wider than expressed in the thoughtful writing presented by you. The educated and landed people here were willing to give everything, and live life into Liberty even if that meant sprinkling the Tree of Liberty to keep it growing. There is your difference, not explained, to express the distinction between then and now.
It was indeed the need for the Royals to increase taxation that was irresponsible in colonialism, imperialism, and overstretching reality creating “Rebellion” by wars everywhere. That is just like today. More than that the Royals refused to listen to the Americas and ignored the will and needs of a People that brought about the desire for leaders to stand up. This is begining to occur again, and here ‘in the now’ as democracy O’Bammer/Ried/Pelosi do not care what even the democracy mass is saying to them, “NO HEALTHCARE”, no more illegal lying wars, no more bailouts, no more illegal criminals crossing into our Nation. Class envy is building, and it is against the Royal Court who is so disconnected from the People they think they shite in plastic bags – the upper 10%.
As to the Civil War, or War of Northern Aggression. It was a battle in a 5000 year old war, not the end. The united States of America was defeated and supplanted with a tyranical democracy, or corporate reality 28 U.S.C. 3002(15). You are correct Chris T. in all of that, except the War is not over, only the Second American battle lost.
I am beat up, worn out, used and abused in this engagement, so you are correct Chris T. I am financially beaten because I do not believe in the Bull because it is not right. My business of creating is nearly gone because of copper speculation by bankers and fiat fraud that has driven my costs through the roof, and so you are correct Chris T, they have won this battle. In 1791 king George III admitted that the People, all People of the several States were Sovereigns in Common, having Common Rights, Lansing v. Smith 21D.89. I live like that Chris T. I will live into my grave like that Chris T. I will have won the war, even if others win the battles Chris T. because I will live Liberty into the ground you cover me with. I will be at Liberty Chris T., and that is the War to be won. Who are the defeated, well, they are the members of democracy and the Great Senate Rebellion of 1861 who still practice rebellion today – Bernanke. These are dead before they find the ground Chris T. Better to live for something in Liberty, than to find one’s self in the ground having practiced mobocracy in decayed flesh walking dead while alive.
Am I scared Chris T. Damn right I’m scared because I know pain, and I know death, and I know the loss of one’s youthful strength. But, Chris T. I am at Liberty to choose not to do evil, and I will live Liberty until someone shoves me into the ground. Everyone is at Liberty to believe and to act by living into the posibility of doing.
I agree with many parts of what you have written, but; disagree in regard to who was King, and who was subject in 1740-1787. I strongly disagree about the People not being at Liberty to choose Right from Wrong because the war has not been won, only a battle fought in 1861-
This bondage may last 500 years, but; it only becomes a lost war when I no longer believe I am at Liberty to do something about it.
And I think that was well put too.
Both these posts, yours and mine, may appear defeatist to some, maybe mine much more, but I sense hope in yours.
You know, whether or not one agrees on the more intricate parts of these causes/effects, is not relevant, as long as one has at least the ability to perceive and hopefully also to comprehend the overall issues.
I am waiting for the jolt to cause the perception to increase, and you still believe in people being able to comprehend. So, that’s a good thing.
Only detail quibble I’d mention is that in your list of
the annointed one/Reid/Pelosi, a few red-pols ought to be included. I couldn’t pick the proper names, THAT odious list is a long one, too.
BTW, just now read Rick’s introductory italic comments, and that too seems to place a good wrap-up on this article and all the posts.
Speaking of the Dollar, someone please call Timmy G and ask him about his “Strong Dollar Policy.”
He must be refering to the tensile strength of the paper the FRNs are printed on because the BP, SF, AUD, CDN, and EUR are all screaming higher tonight.Gold and Silver are moving up again too.
And crude is at 113.45.
Ben plans to continue with ZIRP forever in spite of that fact.
The problem with lunatics is that they keep bumping into reality.
Gasoline is closing in on $5.
To be continued………………
i cee a big contraction in the next few years, read FOFOA
disclaimer
As I was reading through news headlines and stories this morning, a set of provocative questions popped into my mind.
What would agriculture commodity prices be if the harvest because of weather problems hadn’t been so lousy last year across several agricultural markets?
While at the same time:
What would agriculture commodity prices be if Asia wasn’t rising led by China, greatly increasing agriculture demand across the globe?
Best Answer: prices would be a lot lower than they are.
Where would oil prices be if there was no historic outbreak of unrest across the Middle East?
Best Answer: priced a lot lower than it is.
We could dare to ask if those rising prices are the fault or not of the evil banking Bernanke clan’s economic policy and shenanigans so beautifully outlined in the movie The Inside Job, which we have come so much to enjoy blaming? Doesn’t seem so.
Are the “Illuminati elitist banker rich folks” so influential that they orchestrated the Middle East unrest? I mean, perhaps the CIA made a secret payment to Qaddafi with a note saying “shake things up a bit because we really need higher oil prices to get richer and cover the coming, rising expenses of the oil industry companies because the days of easy oil are over.”
I think we had a year of bad weather for farming at the same time we had unprecedented rising demand from the rise of Asia which more than offset any reduction in demand from the economic softness in the western economies. At the same time, those rising daily food prices finally brought the oppressed lower classes of people in the Middle East to the breaking point.
Take those realities, plus the Fed’s interest to devalue the dollar as one piece of the strategy to 1) inflate away excess debt and 2) to compensate for China’s stubborn refusal to reasonably adjust the yuan/USD peg.
Maybe that’s all the explanation we need to understand what’s going on around us.
I’m not suggesting that such a straightforward, practical and obvious explanation for high ag and oil prices precludes the ponzi scheme shenanigans which have made the wealthiest richer at the expense of everyone else, as well explained and discussed here at Rick’s. We have seen and suffered the tyranny of the elite throughout world history. This time no different.
Cheers All, Mario
Mario,
I really enjoy your posts and forgive my familiarity, but I think you’ve been reading some Tom Clancy. Manipulating the weather patterns and the middle east for the benefit of the uber class? Certainly there are those who would love to do that, but no way they can pull it off. They just got lucky this time and from left field too! Altering the landscape of the middle east, facebook, who da thunk?!
I came on line to post a question about china and, great, I see you are the last poster, how appropriate. Here is one for you on the conspiracy theme.
America has had the luxury of being the world’s reserve currency. There is a pool of us dollars that has grown over the years, (euro dollars, petro dollars, African loans, etc, etc, etc, ) into an enormous pool of money that is used for international commercial transactions. This money is largely outside of the US internal system, and the US has a real luxury of having the world cash float tied to their printing press.
The Chinese would love to have that privilege. What empire doesn’t?!
How could they engineer using their 2-3T of USDs to obtain the reserve privilege?
Any ideas?
I can’t give you an exact answer. However i can tell you that the Chinese are doing exactly the same thing with the RMB, in that they are massively increasing and allowing the RMB money supply which exists outside of mainland China for international transactions, starting with Hong Kong, and even more recently, allowing an ICBC bank to open in New York (planned or opened yet I’m not sure). In doing so, they are effectively bypassing the need for the dollar swap.
I also understand that their currency somehow falls under the guise of the Special Drawing Rights domain of the IMF, but I quickly point out I am not up to speed on such matters.
Does anyone think China has a genuine interest to become the world’s reserve currency? I doubt they are even interested and I don’t see any such possibility on the horizon considering the political issues which exist that would for eons block such a development.
The dollar has yet to hit its previous low around 71. We’ll see what happens there. I’ve suggested before that with the U.S. dominance waning for various reasons including the rise of Asia led by China, ultimately it will drift down toward 60. I don’t at all comprehend all the silly, theoretical talk about a dollar becoming worthless relative to other currencies, but that’s another subject. Meanwhile, a lower dollar makes investment in America more attractive in many ways and the Chinese will not hesitate to take advantage of that in every way possible. I read Nadeem Wayalat suggesting that China using some of those reserves to hold U.S. equities could be a wise move, and such a move would continue supporting U.S. equity markets.
Cheers, Mario
“How could they engineer using their 2-3T of USDs to obtain the reserve privilege?”
Here is one of the best theories I’ve heard on how China might accelerate the yuan’s assent onto the world stage- and, not suprisingly, it involves using Gold to increase the chinese money supply without having to create more inflationary yuan credit in the system…
http://www.youtube.com/watch?v=YPXncTuwFIE
“Does anyone think China has a genuine interest to become the world’s reserve currency? I doubt they are even interested and I don’t see any such possibility on the horizon considering the political issues which exist that would for eons block such a development. ”
- Mario- I agree completely. I think the Chinese (and Russians) are only positioning themselves to be financially strong enough to strong arm the west (Keynesian Anti-Gold) to yield to the monetary philosophies of the East (Austrian Pro-Gold)
The next Reserve currency will be a basket, and it will maintain commodity exposure to maintain discipline within the issuing authority. Bank on it
Rick,
It seems Gary North is a bit miffed with you. “Rick Ackerman Defects to the Hyperinflationist Camp After 30 Years”
http://www.lewrockwell.com/north/north973.html
I cannot believe Rick has been swayed by weak (and long-winded) explanations offered by FOFOA. I cannot understand how anyone who proposes that the Fed will simply print $168 Trillion, to buy the financial instruments owned by the banks and “the elite”, can be taken seriously.
There are three components to FOFOA’s $168 trillion figure: $14T in mortgages, $55T in “other” debt created in the bubble and the huge “unfunded liabilities” category, weighing in at roughly $99T. This last component is simply absurd: it represents an extrapolation of current benefits projected over the next 30-50 years. It isn’t actually owed to anyone – it is a promise, not a contract, and as such the so-called “debt” cannot simply be tendered to the Fed in exchange for $100 trillion of spending money.
To think that the Fed will also underwrite the $55 trillion in “other” debt (consumer loans, credit cards, business loans, etc.) is absurd. Any attempt to buy all of this at face value will be seen not as saving the system, but rather theft from the citizens. Pitchforks will be bandied about and debt holders will be allowed to fail.
It is possible that a very small percentage of the “other” debt could be redeemed by the Fed — but only by very well connected players (such as Goldman Sachs). The less connected will be allowed to fail, if only to set an example, or to put up a show for the taxpayer. One only needs to look at the blatant bias the Fed showed when it bailed out Bear Stears (and subsequently delivered it on a seven-cents-on-the-dollar platter to JP Morgan), and then allowed Lehman Brothers (who was much more deserving of a bailout, in my opinion) to fail in a very sloppy, public manner.
It is entirely possible, both financially and politically, to have the Fed conspire to monetize all residential mortgages. The banks could be made whole, and use the cash to repair their balance sheets. The taxpayer would readily go along with this $9 trillion giveaway if the Fed simply declared a Jublilee and forgave all of the residential mortgages it purchased.
Even with these extraordinary scenarios, the Fed could only get away with printing $10 trillion. Even if this were added to our monetary base in a single stroke, it could not trigger hyperinflation — since it would disrupt the credit markets to the point where all business would be transacted in cash — instead of our $14T economy running with $3T in cash and $20T+ in credit, we’d be running with just $13T in cash. Less money overall in the system necessarily points to general deflation.
FOFOA also throws out the absurd idea that $168T in fresh money could simply be spent before the rest of us figured out what was going on. China can’t figure out how to reallocate even a small portion of its $3T in reserves without distorting the markets — so how could it be accomplished with $168T ? As the money was spent, hyperinflation would be instantaneous. The assets purchased by the first trillion would be greater than those purchased by the next $100T, because it wouldn’t take long for the system to recognize the hot money and bid prices up accordingly.
In the end, FOFOA ever mentions what kind of assets the “elite” would purchase with their $168T in fresh money, but simply alludes to a supposed 40X increase in the price of gold, and assumes that the $6T in gold (supposedly held by these elites) will suddenly become worth $240T. If that’s the case, why even bother spending the fresh money? The mere act of printing the $168T will yield the same result in the gold price, so why bother trying to spend it? It simply doesn’t make sense, and is nothing more than a contrived scenario.
In all of the rambling ideas in FOFOA’s article, no mention is ever made about the $14T that the US Government owes. Is the Fed supposed to bail out the large banks, pension funds and the “elite”, and simply leave Uncle Sam in a lurch? If the Fed is going to print the cash to buy $9T mortgages, it might as well print the $14T to cover the national debt. Of course, doing so will destroy the credit markets and the ability of the US to borrow money, and subsequently, will destroy the government’s ability to spend. Less spending = less money in the system = deflationary forces, yet again.
For the record, I believe we will have significant consumer inflation in the prices of things we need on a day-to-day basis (food, fuel, clothing, electricity and water). This inflation is driven by easy money, growth in Asia (causing competition for resources) and an unfortunate lack bumper crops in the agricultural sector. I believe the increase in prices for necessities will destroy demand for any non-essential goods and services. As things we need get more expensive the economy will slow futher, allowing the Fed to pursue its constant inflation policy. This will drive the price of gold to levels much higher than it is now.
Eventually the economy will reach a bottom, and things will settle down. The dollar will have suffered significant devaluation (instead of being close to par with the Swiss Franc, it might be $20 to the Franc), but nowhere near the 1,000,000,000 to 1 valuations typically seen in hyperinflationary blowoffs.
The things you need will become more expensive. The things you merely want will become cheaper, relative to gold. The Fed might print a few more trillion before they’re discredited, but there’s no way they’ll get away with $168T. Hopefully I haven’t made the FOFOA mistake of quantity over quality with this posting, but this is my opinion…
To mario c. and easyEE:
“Are the “Illuminati elitist banker rich folks” so influential that they orchestrated the Middle East unrest? I mean, perhaps the CIA made a secret payment to Qaddafi…”
SURE go ahead, make light of something absurd! Stupid conspiracy curmudgeons out there.
BUT SERIOUSLY:
Get real!
Have you seen the pictures of the armed democrats (LOL) and their weapons fighting Qadaffi?
They just happened to have those weapons lying around…
NOT.
Where do you think they come from? And isn’t it convenient how this spontaneous uprising just happened to break out when we needed to distract from the quashing of protests in our real puppet clients, like Bahrain, and crackdowns in Saudi Arabia?
This is just more of the CIA orchestrated color-revolutions, be they orange, or red, or green, or yadda, yadda.
And France and Britain those humanitarian do gooders, selflessly helping the poor democrats in the oil-rich part of Libyia.
SAS, French Spec. Forces have been operating in the no-like-Qadaffi east for many months.
Muammar even caught 6 of them, and let them go.
OF COURSE that whole thing was orchestrated by the West and its particular interests, NOT least of which is to keep China away from those resources (shades of the Japan economic blockade orchestrated by UK, US, Netherlands in the early 30s)
You have heard that China had 100s of millions of infrastructure projects under way right now, and they were trying to secure for themselves access to some of the best quality crude in the M.E.
Do you think the new Libyan government will honor all that, when they OWE somebody who also wants access to that same oil something?
Just another western puppet being installed.
Look at Egypt: how quickly they groomed our lap-dog Baradei to be the next Assad.
And if the election in Egypt goe the way Algeria did years back, you’ll see their shut mouths too.
(Other example, did you know that much oil was discovered not THAT long ago in Darfur, and the Chinese were working towards access there with Khartoum? Gee, guess who controls Darfur now? Oh, just pure coincidence…)
But, don’t take this consp-nuts word for it, go inform yourself.
The best informed source to access easily is Eric Margolis, he knows that part of the world like his own hometown.
See his recent articles at the columnists archive at lewrockwell.com
Hi Chris, love your weighing in on this. I much wonder about an accurate percentage of truth on these issues versus Hollywood-style plots. I sure as hell do feel like a pawn on somebody else’s chess board more than I wish was the case.
I knew Rick would eventually have to concede the hyperinflationary argument. Not much choice given that precious metal prices are at all time highs, and the Fed is showing no indication of slowing down the money printing presses, or holding back credit. No need for anybody to pay the price for a bad debt… all the debt can be piled into Maiden Lane until that small Manhattan street becomes so infused with negative equity that it turns into a black hole that swallows up the entire Earth.
Now…the trillion dollar question is…does the day Rick joins the hyperinflationist camp the day precious metals top out for a while?
Gold at all time highs? Only in number, certainly not in worth. Figure out what you could have bought with an ounce of gold at its highs back in the 80’s, and what you can buy with that same ounce of gold today.
@ Steve:
>>The debate is hyper-inflation, not stagnation where prices for goods goes up because of speculators in the top 10% driving oil and other necessary earth produced products. There are two things that can drive hyper-inflation based in too much money chasing too few goods:
#1 Savings (the U.S. corporate enfranchisee doesn’t have any)
#2 Radical wage increases on a daily basis chasing too few goods exterior of the “base” oil/earth items.<<
When the Fed prints money it can be directed toward business expansion and stimulus checks or it can be spent by the state on "services" on the behalf of the people and foreign intervention. Either way is inflationary, but as I already explained: it's when the money is spent by the state that spending is most inflationary:
"1) When wages rise, people may save more, invest in productive enterprises or pay down debts, but Q.E. is always spent completely, wastefully and, worst of all, in a counterproductive manner. It’s far more inflationary than rising wages."
Why do you believe that consumer spending is inflationary but that state spending is not?
BTW: Don't blame speculation for rising prices; it serves a vital economic function as a market signal to producers to ramp up production and to consumers to conserve or find alternatives before disastrous shortages can disrupt the economy.
We/I speak of hyper-inflation, not the normal inflation definition of the fed. I can agree as long as the funds end up in the hands of the workers in the form of wage increases for inflation, and radical wage increases on a daily basis for hyper-inflation. My debate is not about inflation, but; hyper-inflation.
PROOF that Barack Hussein Obama was born in Kenya, East Africa…it says so right on the birth certificate (lines 8 and 11):
http://www.whitehouse.gov/sites/default/files/rss_viewer/birth-certificate-long-form.pdf
However…
the President is Barack Hussein Obama, II…and born in Hawaii…
I think people had the right to have doubts about his fitness to be President based on place of birth….but the issue is now moot. We should instead focus on his friendships and loyalties to those who despise America and capitalsim…as well as his curious refusal to go against the Iranian lackey, Assad, in Syria…while bombing our “kind of” ally in Libya, and tossing our long-time ally in Egypt under a bus.
Never should have been a question about Obama being born in Hawaii, does not matter, only the citizenship of his mother and father matter. O’Bammer could have been born in Kenya as long as his mother was a corporate U.S. small “c” federal citizen, So would O’Bammer find his citizenship through her womb “born” 14th Amendment. (there are legimate questions about Pakistan, and application for college loans as a foreign citizen)
Obama is a Harvard graduate. Obama is an attorney in constitutional law. Obama was a constitutional law professor. One should assume Obama knows the definition of the word “is” as did Clinton, yes ?
@
SONYA ROSS
From Associated Press
April 28, 2011 4:20 PM EDT
WASHINGTON (AP) — Shortly after President Barack Obama declared himself an American-born citizen with papers to prove it, Baratunde Thurston declared himself a disgusted black man.
American born is not Natural Born American, and Obama knows exactly what he said when he said american born. Natural Born means of naturalized state Citizens, or Natural Born parents; both parents.
The reason is that one born to two nationalities has split loyalty. The Framers know this, and set the Constitution with Natural Born of two Naturalized, or two Natural Born Citizens so there would be no split loyalty, no serving two nations.
A Navy Seal taught me how to forge a document like the one just released, you could too. The little tiny black ink foot print would have been better, but; it wasn’t on this birth certificate like it is on mine. Not even that matters, only the citizenship of O’Bammer’s mother, and dad is to be considered. If mom is a U.S. citizen O’Bammer is a U.S. citizen no matter where he was born.
Like Clinton on the definition of the word “is”, O’Bammer testifies NOT being Natural Born as required by Article II of the orignal Constitution. As a second point, I do not doubt for a second that O’Bammer was sworn in to serve the UNITED STATES as 28 U.S.C. 3002(15) a corporation named and created by the congress in A.D. 1872. All I ask is that Congress and Obama tell the truth about corporate reality in practical application in political democracy as opposed to the Republic for Which It Stands
@ben:
>>I knew Rick would eventually have to concede the hyperinflationary argument.<<
Rick didn't have to concede the argument, only his flawed version of it.
I'm sure he would agree that if the Tea Party gains control they would bring about an economically healthy deflation.
There is also a faction of the leftist political class that would happily destroy the corporate and banking plutocrats with a surprise deflation to wipe them out, followed by nationalization of industry and finance.
It was only his argument that the bankers favored deflation that didn't make any sense.
The Tea Party could push things toward deflation, as you say. Concerning the bankers, deflation would in theory allow them to manage the disaster, allowing them, for example, to take possession of physical property in liquidation. In a hyperinflation, however, they could “manage” a financial collapse perhaps only in the way FOFOA suggests: cashing out of paper at 100 cents on the dollar and deploying it in hard assets.
But that scenario implies that the banksters will be granted enough time to do the exchange. Keep in mind that the face-value payoffs made to the banks so far have proceeded at the speed of a political process. Can anyone predict how quickly the dollar will fall to worthlessness when it finally does? This is a crucial concern, and because a flash crash cannot be ruled out — one seems ordained, doesn’t it? — there can be no certainty about whether the rats will escape a sinking ship.
Ebear, I liked your comments very much.
Traders are used to being wrong and hearing opposing views. IN fact, confusion is what makes a market. Certainty can not create a market. Traders will hold their own convictions until convinced otherwise by sound counterpoint. They will also turn on a dime if they change their opinion.
Words on paper do not threaten me, instead they help me strengthen my own trading positions if I merely search for the truth or soundness of the debated points. If I feel any emotion by someone else’s points, for me personally, I look inside and ask why that is. One can really learn things about one’s self.
FOFOA and Rick do us all a favor by debating key points. We should respect both and look beyond mere human failings and concentrate on the argument only. Let he who is without sin throw the first stone.
Remember, a wise trader once said, there is no bull side or bear side, but the right side. Keep those counterpoints coming and help us all make money on our opinions and limit our risk!
Why thank you RB!
I have 3 rules I try to follow:
1. Keep it simple (which is why there’s only 3)
2. Stand on the shoulders of others.
3. Know yourself.
One thing I try to avoid is “nodding head syndrome” – basically a “camp” where everyone’s in agreement. Even if I do agree, I’ll often take the other side of an argument just to see if I can make the opposing case. It’s good mental exercise which sometimes leads me to change my mind, if not on the entire issue, then at least on points where my own thinking is weak.
One thing I’ve noticed about debate on economic or political issues is that the argument usually proceeds from a point based in some economic or political theory. This seems obvious on the face of it, but is often the source of error. The reason, I believe, is that these theories are just instances of more general principles which can only be discovered by stepping outside those disciplines.
Some authors who’ve had a profound affect on my thinking would be Marshall McLuhan, Douglas Hofstadter, Marvin Harris and James Grier Miller. None of them are economists, and yet their work is fundamental to an understanding of that domain.
Why do we believe the things we believe? This is central to my work – epistemology actually – but then people are all like “oh… you study insects!” so I usually keep quiet about it. Of course you can’t practice this discipline without asking yourself the same question, which I notice not many people do. Funny though, when there’s money at stake, the ones that succeed are the ones that ask themselves exactly that. What I find fascinating about traders is they are always questioning their assumptions. Alas, if only those who made economic and political policy would follow their lead!
ebear
Dear Rick,
I’ve been reading your missives for many years. I too am a deflationist. After reading what you currently post, I was unable get myself to accept that you actually have defected.
You have a way with words and are often “tongue in cheek”, but in this case I am not sure.
Hear’s my take on the inflation/deflation debate. As is the case with many competing theories about the markets/economy, we will probably get both.
In the short term QE2 runs out soon, but quietly, without fanfare. What happens next is a game of chicken. Ben must wait until there is a groundswell demanding more funny money. Its anybody’s guess what happens then.
In the simplest of terms, we get what’s left of QE2, then deflation. To what extent? Then panic creation of trillions to generate inflation. Will it work? If it does it will give new meaning to the word volatile.
You are too smart to switch to inflationist. Maybe both sides get what they think is coming in the ultimate cocktail, monetary frenzy.
Whatever. It all leads to a mess beyond anybody’s imagination.
Jim
Very astute, Jim. I will qualify my “conversion” in a forthcoming commentary, but for now let me say that neither side of the argument has a claim on certitude.
RA
Rick – Instead of being a hyper-inflationist, you could simply accept bifurcation: significant (but not hyper) inflation in consumer goods, and deflation in non-essential goods purchased with credit (such as real estate).
For example, an average $200,000 home today sells for that price because interest rates are very low. For most people, homes are purchased based on the payment, not on the overall price. Raise interest rates to 18%, with the second coming of Volker, and the house will be lucky to sell for $60,000. Eliminate residential credit and the house would sell for $25,000 in an all-cash transaction.
Inflation not only destroys the value of current debt, it also destroys credit. As the Fed’s QE policies drive consumer and commodity inflation, credit will suffer; things driven by credit will deflate.
Bifurcation is the future…
Robert:
“Here is one of the best theories I’ve heard on how …”http://www.youtube.com/watch?v=YPXncTuwFIE
Very interesting link.
This is really what Antal Fekete has been saying for quite a long time, when he talks about governments “opening their mint”.
You may want to look in his archive for articles about it.
He has also made the point, that China has traditionally been (for hundreds of years) a SILVER country, not a gold country.
So, quite possibly they could also focus on the former instead.
One of his points has been, that the first to do this “wins”, so let’s hope they don’t do it (because it will never happen here).
Merrill Lynch seeks to calm the waters:
{BofA Merrill Lynch does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm
may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their
investment decision.
Refer to important disclosures on page 6 to 7. Link to Definitions on page 5. 11043680}
Economic Commentary:
The ultimate end game?
Rick Ackerman: “The Tea Party could push things toward deflation, as you say. Concerning the bankers, deflation would in theory allow them to manage the disaster, allowing them, for example, to take possession of physical property in liquidation.”
The people who lose their homes for defaulting on no-recourse loans will escape bankruptcy, but how do you expect the banks that are liable for retiring these loans to escape bankruptcy by taking possession of real estate worth only a fraction of the loan value?
In a deflation, the banks are out of business and their remaining assets would be liquidated to pay off a fraction of what they owe; or maybe the Fed would end up owning a lot of real estate.
Rick Akerman: “In a hyperinflation, however, they could “manage” a financial collapse perhaps only in the way FOFOA suggests: cashing out of paper at 100 cents on the dollar and deploying it in hard assets.”
Is either deflation or hyperinflation inevitable? How about “normal” inflation or merely high inflation. Might not some reforms be made, but not to the extent that would cause the needed healthy cleansing of a good deflation?
“Normal” inflation might not be sufficient to bail the bankers out of their insolvency; I wonder exactly how much inflation will be needed to save them; any ideas?
Steve: “We/I speak of hyper-inflation, not the normal inflation definition of the fed. I can agree as long as the funds end up in the hands of the workers in the form of wage increases for inflation, and radical wage increases on a daily basis for hyper-inflation. My debate is not about inflation, but; hyper-inflation.”
I think you’re looking at it backwards: spiraling wage increases are not the cause of inflation, but the symptom.
Just imagine, for example, the Fed printing $100 trillion/month for the United States to spend on anything but wages; would it be possible for there not to be a resultant hyperinflation and, as a secondary result, wages that spiraled higher daily in order for workers to compete with the state for the goods they needed for survival?
Dear Rick,
The deflation argument is far from over.
Just look at some of the charts in Gordon T. Long’s latest essay (right above yours on today’s Goldseek tableau), especially velocity of money. I’m writing from your old home town, and still miss your trenchant articles in the Examiner.
All the best to you,
Senor R
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