FBI Nabs Hyperinflationist in Kiddie-Porn Sting

EST

Now that I’ve got your attention, let me announce that, after tomorrow, I’ll be exiting the Deflation vs. Hyperinflation debate for a while. I’ve concluded there is little to gain arguing on the one hand with a guy who turns rabid whenever someone contradicts him, even in a friendly way; and on the other, with a preening narcissist who comes to argumentation in the same state of sexual arousal that Jeffrey Dahmer must have experienced hovering over the fresh corpses of teenage boys.  These guys are bad news, as lacking in civility and manners as buzzards in a scrum, and you’d do well to avoid them both.  You might try tuning instead to the hyperinflation arguments of Steve Saville, Peter Schiff and a few others who seem less concerned with trouncing, slicing and dicing opponents than with presenting facts that might better prepare you for the financial crisis ahead. The very best of them, in my opinion, is FOFOA blogspot, where the essays are erudite, the discussion elevated and the arguments as knowledgeable as any you will find on the web. ZeroHedge can be pretty informative too, provided the hairy-knuckled provocateurs who hang out there have been fed red meat within the last 24 hours.

Not that FOFOA — or anyone else, for that matter — has won me over; for I remain convinced that deflation, not hyperinflation, will do in the economy. To understand why, I’d suggest following the mile-deep discussion thread that my commentary on the topic generated last week at Rick’s Picks. You’ll discover that there is no point on either side of the argument that is airtight.  Hyperinflationists can make you doubt most anything I might say, just as I can stir doubts about anything they might say.  That said, my biggest doubt concerning their side of the story involves mortgage debt, since hyperinflation will be impossible as long as tens of millions of homeowners are yoked to $250,000 mortgages on homes worth perhaps half that or less.  Also, hyperinflationists assume that a worthless dollar implies hyperinflation. Maybe not. I would argue that the rate at which the dollar falls to worthlessness is crucial (a point explicitly addressed at FOFOA).  Were the dollar to collapse overnight, for example, we might find that suppliers of crude oil, rather than demanding $1,000 per barrel, would require payment in gold. You can dispute whether this is likely, but you cannot argue that it is impossible.

$10,000 Gold?

And how about all of those dreamers who think gold will soar to $10,000 an ounce or more when the financial day of reckoning arrives? I used to believe this impossible, but the forum discussion got me to thinking:  Suppose the dollar is falling apart one day and all of those who hold paper gold in the form of futures contracts determine to take delivery? Would gold get short-squeezed into the ionosphere under such circumstances?  Or would the futures exchanges simply change the rules, letting those who are short contracts slip the noose?  No one can say for sure.

Nor can anyone predict how politicians will react if and when the financial system collapses. Will they push the Fed to hyperinflate, effectively bailing out homeowners?  And if they do, will the legislated action succeed?  One thing’s for sure: hyperinflation cannot possible occur by accident; it can only be enabled by political decision. Under the circumstances, it is impossible to predict exactly what will happen if the dollar crashes. On this point, I will feature the sage thoughts tomorrow of blogger Charles Hugh Smith.  But the final word will go to a Wyoming rancher who, in the forum, reminded us that there are certain things of greater concern, even, than how gold, silver and dollars act in the coming financial collapse.

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Comments on this entry are closed.

David April 23, 2011, 6:57 pm

FOFOA has a new post out today on this subject and it’s great as usual.

Dave April 18, 2011, 1:13 am

Rick, I thought Willie was just harsh and wrong to call out names and hammer on you. We have asset prices that over inflated (artificially) and debt monetization schemes that point at hyperinflation. So both deflation and hyperinflation will occur and how it all plays out in the final analysis is anyones’ guess. We’ll be in a new currency system before the final analysis can be done after much pain and suffering.

DontUSeeHoward April 16, 2011, 10:57 pm

Rick says: “Suppose the dollar is falling apart one day and all of those who hold paper gold in the form of futures contracts determine to take delivery? Would gold get short-squeezed into the ionosphere under such circumstances? ”

Gee – I thought everyone knew – those who hold paper silver and gold will be left holding an empty bag. Rick, THERE IS NO GOLD OR SILVER IN THE PAPER MARKET. THERE IS NO GOLD OR SILVER IN THE LBMA OR COMEX – THERE IS NO GOLD IN FORT KNOX (Clinton sold it all). Why do you think there are NO deliveries each month for Silver? They are paid off with cash premiums. It is happening with Silver and will happen with Gold. Why do you think we all hold physical? So when that fraud is revealed – the price will escalate more…

Christopher Day April 15, 2011, 12:22 am

BOOM, BUST, WAR!
© 1991 – 2011 Christopher D. Day

Rap Verse 1 Intro

Congratulations! Look what you’ve done,
We live your corruption, are ya havin’ fun?
Your puppets deceive on the flickering screens,
We could not resist the “Master of Dreams.”

Chorus 1

BOOM, BUST, WAR!
Keep ‘em entertained, and keep ‘em poor… said,
BOOM, BUST, WAR!
How do you plead? It’s been decreed!
Justice? It’s called “The Rule of Law.”

BOOM, BUST, WAR!
“In God’s Name,” we proclaim,
When we ring the bell, you better sell… said,
BOOM, BUST, WAR!
Created by the SUPER rich to keep us poor.

Rap Verse 2

Well it’s plain to me, where there’s more than three,
We talkin’ ’bout a conspiracy.
The boys up top have got it down,
Their funny-money makes the world go round,
Create the credit, get em’ hooked,
Gangsters, Banksters, Corporate Crooks.
Redraw the world with digital borders,
Serfs unite… it’s a New World Order!

Chorus 2

BOOM, BUST, WAR!
Keep ‘em entertained, keep ‘em poor… said,
BOOM, BUST, WAR!
You’re a number, not a name,
In Big Brother’s terror game… said,
BOOM, BUST, WAR!
Barcode the kids, put an eye in the sky,
We’ve got your numbers so don’t even try… said,
BOOM, BUST, WAR!
Created by the SUPER rich to keep us poor.

Rap Verse 3

Interest and inflation, the two sides of the one,
Give us all your money and you might end up with some.
They say it all began when interest was demanded,
When banks create more money, very few can understand it.
Seeds become more flowers, beasts create more beasts,
Money grows on TV screens, miracles never cease… Hallelujah!

Chorus 3.

BOOM, BUST, WAR!
Keep ‘em entertained, and keep ‘em poor… said,
BOOM, BUST, WAR!
How do you plead? It’s been decreed!
(off-mic) Justice? Hah! We call it “The Rule of Law.”
BOOM, BUST, WAR!
“In God’s Name” we proclaim,
When we ring the bell, you better sell… said,
BOOM, BUST, WAR!
Created by the SUPER rich to keep us poor.

Rap Verse 4 Finale

United in Global Division, the Dark Force appears supreme,
The living dead celebrate its power,
Until soul wakes from the dream.

(finis)

Mark Uzick April 14, 2011, 11:12 am

Rick : ” How do you think lenders will respond to the prospect of being paid in “play money”?”

With a sense of great relief that they will be paid back at all!

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, counterproductively. 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 backlogs 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 their 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.

Rick J April 14, 2011, 4:39 am

I remain convinced that dollars will be created and spent; borrowed into existence by Congress, until it is simply impossible or unfruitful (from the perspective of congress) to do so. I wish it were not so.
The fractional reserve banking system complete with privately controlled central bank can only exist if it is constantly expanding, yes? If everyone started calling in uncollectible debts, how many hours until there are no banks? A devastating downward spiral that would crush everything into the same chaos as the hyperinflationary scenario, and with similar speed.

Steve April 14, 2011, 12:58 am

QUOTE OF THE DECADE

Some people have the vocabulary to sum up things in a way you can understand them.
This quote, I am told, came from the Czech Republic.
We have a lot of work to do.

“The danger to America is not Barack Obama but a citizenry capable of entrusting a man like him with the Presidency. It will be far easier to limit and undo the follies of an Obama presidency than to restore the necessary common sense and good judgment to a depraved electorate willing to have such a man for their president. The problem is much deeper and far more serious than Mr. Obama, who is a mere symptom of what ails America. Blaming the prince of the fools should not blind anyone to the vast confederacy of fools that made him their prince. The Republic can survive a Barack Obama, who is, after all, merely a fool. It is less likely to survive a multitude of fools such as those who made him their president.”

roger erickson April 14, 2011, 7:17 am

thank you; agreed

brutlstrudl April 14, 2011, 12:11 am

My knuckles are not hairy.

FranSix April 13, 2011, 11:21 pm

Don’t distract with the hyperinflation argument, keep your eye on the ball:

http://ftalphaville.ft.com/blog/2011/04/13/545456/goldman-says-theres-been-a-copper-collateral-crackdown/

Tom April 13, 2011, 11:06 pm

Why doesn’t Rick consider the following possibility:

There is a huge amount of inflation in essential items.
There is deflation in non-essential items.

Clearly home loans fall into the non-essential categeory.
Rick never seems to spend any time discussing the rising price of oil or other essential items?

Cam Fitzgerald April 13, 2011, 10:18 pm

Speaking of financial Armageddon, here is a link to a guy who says everything is about to spin out of control as Japanese companies and those they supply begin to report next quarterly results.

Results for some could be dismal.

Normally I avoid the many video bloggers out there but this guy does have a few good valid points and I think this is worth watching. It is a heads up to trouble coming down the pike that is actually pretty predictable.

http://www.thesurvivalistblog.net/opinion/july-latest-caveman/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+PlanPrepareSurvive+%28Survival+Tips+%3A+The+Survivalist+Blog%29

jeff April 13, 2011, 10:12 pm

And yet no one has ever answered the exact question as to how much money can you print, and still get away with it? If I could print steaks willy nilly down at bob’s roadhouse, would they be worth any thing? Money is based on a scarcity principle right? BTW, the whole kiddie porn thing is a pot calling the kettle black, think about it. To damn somebody for being a rabid hyperinflationist, and then associate them with kiddie pornographers. Why not offer specific names, links or points from the people whom you are arguing with? That would certainly appear more objective to me, and seem less like you are just taking a parting shot at people with sound arguments, which is unprofessional, and puts you on the same level as the people your criticising.

Rich April 13, 2011, 7:43 pm

Aloha All
Listening to accurate Lindsey Williams on Alex Jones as this is written, claiming Muslim Brotherhood AQ (Al Qaeda) in MENA (Middle East North Africa) deliberately fomenting oil revolutions and depositions, Yemen next, to get oil to $200 and diesel/gasoline above $5 a gallon, with silver to $100 and gold to $3000 to rob and bankrupt the people to create the criminal (satanic) New World Order with Nazi Checkpoints and police state controls manned by Big Sis.
(That’s why the Saudis, like Iran, now running to China and Russia for help. When/if the House of Saud collapses, so will the dollar and Jersusalem.)
Meanwhile, Soros Stiglitz Summers opened up the Bretton Woods II Conclave saying the dollar is doomed.
Would it not be interesting deus ex machina this time, if instead of breaking the Buck and Fed like he did in 1992 with the Pound and Bank of England and in 1999 with the Ruble and Russian Central Bank, the almighty buck broke the Bilderbergers, despite the USD PnF target flipping down from 115 to 68 Friday when BW II began?
Invested life learning although there is a free market natural order, those with the gold do make the rules.
In the case of Hunt Silver, recall Armand Hammer, like Hillary Clinton, telling Johnny Carson on the Tonight Show, one day he read the paper and got the idea to trade precious metals on the short side. That was the day the Exchange, most of whose Board were short, bumped margin requirements enough to only allow liquidation and put in the $55 silver top.
Is there anyone who doubts that this cannot be done yet again to a new generation of traders who did not learn from history?
Re Irving Fisher’s debt default deflation, it will happen, either through devaluation of the dollar or collapse of the debt pyramid, although, according to Martin Armstrong, just released from prison, this may not happen until after a 2015 peak.
Certainly claiming victory with $38 B in cuts that were really unspent monies from the great reflation of 2008 may be premature, as they are less than 1% of the budget.
Rather, as Rick points out, derivatives and mortgages may be the matter, as BKX, the declining Banking Index, suggests, targeting a double top:
http://stockcharts.com/freecharts/gallery.html?%24BKX
Derivatives and debts far exceed any other asset market, including gold and silver, so they may lead the way.
These are the times that try mens’ souls…
Cheers*Rich

Bay of Pigs April 14, 2011, 12:06 am

That is a damn good comment Rich…and equally scary to comprehend.
Sweat of the Sun, Tears of the Moon?

jack April 13, 2011, 7:04 pm

Hi Rick,

Please explicitly notify us (I’m dim) when the Wyoming rancher’s comments are posted.

TIA

Rick Ackerman April 13, 2011, 8:09 pm

In Thursday’s commentary.

Larry W April 13, 2011, 6:41 pm

Fail to see the logic applied to the recent real estate debacle. We experience a massive bubble resulting in grossly inflated prices and when the bubble bursts and the prices come back down we call it deflation.
It’s like con artist selling someone worthless stock and when the sucker finds out he wants to write if off on his taxes as a loss.

Bam_Man April 13, 2011, 6:25 pm

The bottom line is that anything even approaching a true hyperinflation would do such tremendous damage to the TBTF banks’ balance sheets that the Fed simply would not allow it.

The threat of a possible hyperinflation in the late 1970’s was sufficient enough for Volcker to be put in charge at the Fed and raise interest rates to 20%. They will do it again if they have to. But only if they have to.

Cam Fitzgerald April 14, 2011, 2:11 am

I don’t think that is a likelihood Bam-man. The debt is just too high now at every level (municipal, state, personal, federal) and raising rates to 20% would precipitate a financial crisis like never seen before.

It is much more likely that the QE’s which are largely behind the sharp rise in commodity prices will be withdrawn thus defeating the inflation that is now developing. Money will be withdrawn from the system instead and credit will dry up putting the brakes on the need to raise rates substantially.

This too could result in recession but it would be more manageable (a softer landing) than one precipitated by excessive interest rate increases which would, in frank terms, devastate the economy.

(different) Steve April 13, 2011, 6:19 pm

Rick, are you saying you can dish it out but can’t take it? I may not totally agree with you, but I do value your opinion. And I believe the logistical and practical aspects of how this is all going to shake out is a valuable exercise for everyone involved. All the name-calling and brow beating is pure entertainment from where I sit, but it probably does no one any good in the end. Oh well…

Cam Fitzgerald April 13, 2011, 5:44 pm

“Now that I’ve got your attention, let me announce that, after tomorrow, I’ll be exiting the Deflation vs. Hyperinflation debate for a while” ~~Rick
—————————————————————-

Try not to be put off or intimidated by those who seek to crush legitimate debate via the weapons of faux-intellectualism and logic-traps that only masquerade as covers for egoism and self-indulgent aggrandizement that passes for expertise, Rick.

All of us can see through the nonsense peddled by those who seek to win by shouting louder and offering three dollops of abuse for every one dose of theory.

Peter Schiff on the other hand does take the time to explain his theory in detail without insulting the intelligence of all his many readers and followers and is well worth listening too. Whether right or wrong, we can all respect his valuable and reasoned contributions to the debate and ongoing conversation.

We are not impressed by the loud mouthpieces though.

Steve April 13, 2011, 6:02 pm

Interesting isn’t it Cam, that the masters of abuse tried to turn these words into a WIN,

“. . .for a while.”

Great Job Rick, I laughed and laughed when I opened your site today.

ricecake April 13, 2011, 5:21 pm

“Were the dollar to collapse overnight, for example, we might find that suppliers of crude oil, rather than demanding $1,000 per barrel, would require payment in gold. You can dispute whether this is likely, but you cannot argue that it is impossible.”

You are right Mr. Rick!

So called “Gold/Silver is the only real money taht will keep you safe” I seriously doubt about it.

Gadafi owns over (100 tons?) gold. Is he safe now?

I’m pretty sure Sadam of Iraq owned lots of gold too. He got hanged.

The people who are rich both in gold and oil are the the oil producer in the middle east. They got oil on the right hand and gold on the left. When the dollar or the Euro or other fait currency die, I’m pretty sure they can be self sufficient by drinking oil and eating gold.

LOL.

Steve April 13, 2011, 5:59 pm

Contract Law – If we agree to discharge in bull crap, we must honor that contract, Article I, sec. 20, Oregon Constitution. No-one can morally/lawfully exit an existing contract to pay in federal reserve notes. The Law of Contract is ancient, and antecedent to governments. The U.S. made the rules on ‘use’ of federal reserve notes. Why China this, or why Japan that is just an exercise. (what entity is contracting for whom is a complex question)

But, one thing is true ricecake, he who owns the guns can change the rules.

Christ T. April 14, 2011, 3:03 am

ricecake:

Ghadaffi: he is not Ghagbo just yet, and Mubarak in jail gives all the more reason to go down fighting.
His gold not valuable? From HIS perspective, the only mistake could have been to not have even more.

As to the “drinking oil and eating gold”:
In your scenario (with the fiat dead), would these places be any WORSE off if they did NOT have that oil and gold?
They would be eating sand then, in your analogy.
But guess, what, SOMEONE, SOMEWHERE will want that gold and oil, and they might just have something to trade.
What would they trade for sand, though?

GaryV April 13, 2011, 5:01 pm

This headline is so funny. I don’t envy anybody who takes a stand on what’s going to happen, and then bears defending it. Like you’ve said Rick, no argument is airtight, but your analogies and vocabulary make you a lot more fun to read. I have this image of JW banging the $hit out of his keyboard, unable to acknowledge his doubts for his pride. Thanks for keeping an open mind and skewering the screwballs.

Nobody April 13, 2011, 4:42 pm

“since hyperinflation will be impossible as long as tens of millions of homeowners are yoked to $250,000 mortgages on homes worth perhaps half that or less. ”

But that seems in conflict with the govs own debt which it seems is higher and backed by nothing and thus is even more worthless.

In other words have’nt the politicians aligned themselves, and their own hunger for debt, with the mortgage holders? The mortgage holders are paying off their debt, but the politicians are not and are in fact creating more debt.

I guess it goes back you your comment about rates of change, but again seems to me the inflating away debt is of huge interest to the politicans with homeowners paying off their debts as best and fast as they are able.

If memory servers, the next five years of US budgets are capped, and the 2011 budget …. Which has another 8 months to be further inflated and lots of incentive to pump it up as high as possible to make sure that have lots of money for the next 5 years. Or put another way, there is no limit THIS YEAR, there is only incentive to spend as much as is possible to increase the budget/spending THIS YEAR.

Nobody April 13, 2011, 4:46 pm

Typo fix:

If memory servers, the next five years of US budgets are capped, AT the FINAL 2011 TOTAL budget AMOUNT ….

Steve April 13, 2011, 5:48 pm

Opps Nobody; in the district of Columbia, and the territories ‘the congress’ can do anything they want, for any reason. There is no cap that cannot be taken off by the people who legislatived it. After all, the legislation was created by a “creator” congress, and what the creator creates, he can change.

Bammer voted No on raising the debt limit in 96. Now he wants it raised, now that he gets to abuse.

I say “. . .do anything they want, for any reason.” because the Constitution is not in use, just like the People refuse to “use” silver Specie Dollars that are Legal Tender, and available to the People at the Mint.

“The People by their quiet assent allow the lawlessness to continue.”

Carol April 13, 2011, 6:18 pm

“I say “. . .do anything they want, for any reason.” because the Constitution is not in use, just like the People refuse to “use” silver Specie Dollars that are Legal Tender, and available to the People at the Mint.”

Steve how does anyone get these “silver Specie Dollars” from the mint? Do they have to exchange their Federal Reserve notes for the silver Specie dollars? Yes. Do Federal Reserve notes carry a hidden lien on them? Yes. Then how can a silver Specie dollar that was “purchased” (not bought) with a debt (FRN) be any better legally (for “buying” unleined property) or ecomomically for the People to use?

Steve April 14, 2011, 1:17 am

Carol, by “use” of the Power and Authority of the G-d of Abraham, Issac, and Jacob. The whole thing is a fiction – yes ? There are buffers that can be used to avoid the tar baby of “use” individually. I have defended one such buffer 2006 to Dec. 2009 successfully in the district Court.

Beyond that Carol, use private contract to engage in Trade with the corporate enfranchisees and others. This is not easy but it can be done if one has a product of value in the true sense of Private Individual Trade under Contract.

I didn’t say it was easy – only that it can be done. The whole issue of taking the “benefits” of corporate legislation via interstate commerce can be dealt with under “involuntary” “compelled” and “conversion”.

Are you able to argue against the corporate benefit of the “Clean Air Acts”? In other words, one is enfranchised under the 14th amendment because one voluntarily breathes clean air created as a legislative benefit of enfranchisement. D.O.J. Wermuth question about 2005. See; autonomic nervous system – involuntary; a 100k clue just for you.

pastor morris April 13, 2011, 4:39 pm

I appreciate your candor. I appreciate you’re willingness to state your case and then back away from the intense emotionalism that this debate generates. We each make the best preparations for the future that we can, but ultimately it is how we handle adversity that determines our character and our destiny. God bless you in this ministry of economic education to which you have been called.

Steve April 13, 2011, 5:40 pm

Pastor, I appreciate your words from the perspective of a believer. Yet, life teaches us that people mostly ignor reality, and prepare for what makes them feel good. Living things move away from pain and difficulty as a norm. The ‘reality’ that the living have saddled the unborn with 450k in debt is fact. That the people would rather live in delusion, as factual as the debt slavery passed to the unborn.

Carol April 13, 2011, 6:11 pm

That 450k debt you keep quoting came out of thin air and will return to the thin air that it commenced from one way or another.

A question I have for the hyperinflationist that never seems to get answered is this. If hyperinflation is a “tool” that is used by politico to inflate away debts, how can debts EVER be inflated away in a monetary system where ALL money is created ONLY as a debt? For every old dollar inflated away with a new (more devalued dollar) there is a new higher debt. Debt can never be inflated away in a debt based monetary system and if you think it can please explain how that works.

Rick Ackerman April 13, 2011, 8:05 pm

Thank you.

Steve April 14, 2011, 1:03 am

I agree with you Carol in the sense that deflation will cure the debt. The rest of what you wrote is just brilliant.

Christ T. April 14, 2011, 2:54 am

carol, indeed.

That is what Dr. Fekete has been saying for a long time in his commentary, that things from within this system can never be used to extinguish their obligations.
Only gold can. because it alone is no one’s liability. (could lump in Ag as well, I suppose)

ben April 13, 2011, 4:39 pm

The way I see things…we already have seen a deflationary collapse: September 2008 to March 2009. Defaults were rampant…people were giving away anything they could to generate some cash…retail outlets were dropping like flies all over the place…hosuing prices dropped 50%+ in many places…oil down 70%…do I really need to continue? The thing about “deflation” is that it will never last long becuase the FED can open up the floodgates of credit and money creation to nip it in about 6 months…this is a time frame I always stuck to (you can see it for yourself in my posts from 2008-2009) and I found it uncanny how it lasted 6 months almost to the day.

So yes…we can experience some short-term bouts of deflation…but it will be inflation that rules the day. The fact that the 2008-2009 deflation is now such a distant memory, in light of the shocking price rises we have seen in the past two years, says a lot. You may remain incredulous about everything else that comes out of Bernanke’s mouth…but when helicopter Ben says that he would never allow another Great Depression, believe him.

Steve April 13, 2011, 5:31 pm

I don’t believe Ben is big enough to stop the Laws of Nature. What Ben and the gov can do is LIE about what is happening by use of accounting standards, and what my dad always said “Figures don’t lie, but; liars figure”. From there – how about a standard upon which to judge the position of Man? Let’s try and judge everything against the act of declaration on a July 4th in a statement of protected rugged individualism –

We hold these truths to be Self-evident, that all Men are Created equal, that they are Endowed by their Creator with Certain (absolute) Unalienable Rights, that among there are . . .

So, how is your individual Life ?
How is your individual Liberty ?
How is your individual pursuit of Happiness?

Any of these three heading down? The greatest problem is delusion, that being allowed to “do” as a slave is as good as Liberty. When I set that standard as the declaration, and I am honest; going from Liberty to 450k in forced debt in a mere 61 years is a judgment I’d rather not accept. Delusion is better. The greatest delusion is, that having the government do everything for one has no price. The greatest delusion taught is that democracy will end up great. The greatest delusion believed is that misrepresenation/fraud through voluntary “use” of fiat money will have no cost.

Native Americans once believed that if a single tribe member was killed on a raid – it would be ME ! Americans believe that if there are 100 men on a raid, and 99 are killed, I will LIVE brother !!!! Who is in delusion?

Roger Erickson April 13, 2011, 4:36 pm

Useful articles & commentary. Trying to keep track of all this, in my own way. Just to keep my own sanity.

1) inflation = oversupply of fiat currency;
deflation = undersupply of fiat currency;

2) fiat currency = public-initiative-backed monetary policy (eschewing arbitrary policy constraints & taking on responsibility to match flexibility/kinetics of currency supply & hence fiscal policy to any/all contexts … by “other” means [e.g., mgt responsibility]; WWII comes to mind)

3) freeing ourselves from the constraints of the gold-std was a political decision, dictated by context; just as was the political decision to fight the Revolutionary War, to become free from British monetary hegemony

4) ergo, hyper-inflation with a fiat, floating-Fx, non-convertible currency can ONLY occur as a political decision (could come in multiple forms, but presumably has to include some combination of group over-indulging spenders & failing to regulate unproductive hoarders)

5) ergo, de-flation with a fiat, floating-Fx, non-convertible currency can ALSO only occur as a political decision (could come in multiple forms, but presumably has to include some combination of group over-indulging rentier hoarders of currency & failing to adequately regulate frauds)

Either way, the outcome will be the result of a political process, predicted by political tea-leaves, not by supposed fundamentals.

Therefore my best prediction, as long as the banking lobby predominates, is that it’ll be deflation. Bankers want, above all else, price stability in a dynamic world.

That despite the reality that options for inventive permutations of real assets are infinite, and new stuff daily destroys the value of old permutations. The whole point of having a floating, fiat currency supply is to let currency supply follow reality, and be available to denominate, upon demand any expanding profile of ANY/ALL insanely great products/services we invent ….. not the other way around. As long as the world keeps changing, currency supplies will have to follow – eventually, despite what bankers say.

That’s obviously true for currency.
It’s equally obvious that fixed-commodity “money” has slightly more stable value, but only very slightly.

The only stable survival value for any human is adaptive rate. Ergo, “wits” is the only money or currency that matters. With wits, you can denominate any context, and surf any string of contexts, no matter how long or how unpredictable.

To a biologist therefore, inflation & deflation are only two flavors of deflating group intelligence. Declining group intelligence is an inevitable result of increasing population without proportional improvement in group methods for aggregating on a greater scale.

When a committee process isn’t working well, doubling committee size doesn’t help. Only new committee methodology saves surviving committees.

Steve April 13, 2011, 5:12 pm

Disagree – misstated data – creating a bad theory base.

roger erickson April 14, 2011, 7:09 am

> “misstated data”

Which part?

Rein de Vries April 13, 2011, 4:28 pm

Look it’s not hard, evrything not necessary to live or that is bought on credit will deflate, everything necessary to live will inflate. It’s not about deflation/inflation it is about the destruction of currency, get it through your thick skulls. If a currency crashes, it’s about survival…

Steve April 13, 2011, 5:06 pm

Actually, it is about the moral character of Man. The Dollar is still the same value it was with the Coinage Act of 1792. Misrepresentation/Fraud is still what it has always been via fiat ‘use’. People, using “debt” is a problem, where using CREDIT is a solution. We were a creditor Nation, we are now a debtor country. The People were at Liberty, and now are voluntarily enfranchised by greed in wanting what they cannot afford to extinguish in purchase. Printing more debt to inflate – a fine solution for the loss of Liberty – For that is truely where we are. Oh, it is fine/grand being a slave right now, but; don’t bet the farm on it remaining grand. The best of the best (or best connected at Harvard) end up on top of the heap, even if the heap is fiat dung. Right now 10% are better off than the other 90%, or expressed differently 10/90. It used to be 20/60/20 as a Natural Maxim. One can bet on the Natural Law, or one can bet on artificial manipulation.

Who knows, maybe it will be all different this time. Or, maybe it will be all strung out over a longer period of time because of the speed of information, and the fact that the G7/G20 isn’t exaclty interested in the lower caste 10/90, as long as the 90 can be sheared.

I agree with you that it is all about survival. First, Liberty (gone), then self, and the real issue – What have WE done to the future, by allowing the misrepresenation/fraud to be passed on to the kids, the debts unpaid ?

Rein de Vries April 13, 2011, 4:26 pm

Childish display by yourself Rick.. You can’t win the argument so you quit.. The forum’s got you thinking now of $ 10,000 gold, that’s not really true i hope.. but if true you’re real late.. And strange you need to pick it up from a forum.. So many people talk about it already, for years…It’s all around you.. Maybe you got it from Jim Willie, Bob Chapman or Gonzalo Lira, but don’t want to admit it??

Steve April 13, 2011, 4:48 pm

What ? Get Real !

No one wins the argument until the FAT LADY SINGS !!!! There is no hyper-inflation, but; there has been deflation, and much more ‘hidden’ deflation by slick criminal accounting rules authorized by the congress. There is wage deflation, and food inflation – No Crash, No Hyper-inflation.

My real understanding is in the people who refuse to “use” silver specie Money, and who would rather commit misrepresentation/fraud via the use of federal reserve notes. Yet, I seem to remember that nearly all major deflationary crashes are preceeded by an inflationary spike, not hyper-inflation, but an inflationary spike. That said, I will be very interested when Benanke and Bammer state, as China has stated, that they expect 30% wage increases a year for the next 5 years.

There is no hyper-inflation. There has not been a deflationary crash (30’s style).

The winner as of today – is appearing stagnet criminal activity. Go a braggin when the fight is over – IT isn’t over.

Rick Ackerman April 13, 2011, 8:00 pm

See Pastor Morris’ post below.

George April 13, 2011, 4:25 pm

Too much deflation, people will be unable to pay their mortgage and credit cards. Hyperinflation will pay off mortgage loans with monopoly play money. Any attempt to change mortgage contract terms with revalued dollars risks mass repudiation of those loans. Hell no I won’t pay! revolt.
Gold? Buy and store one to two years of food instead.

Rick Ackerman April 13, 2011, 7:58 pm

How do you think lenders will respond to the prospect of being paid in “play money”?

Christ T. April 14, 2011, 2:44 am

“Gold? Buy and store one to two years of food instead”

Why oh why does it always have to be an either/or thing?
You know the typical: “you can’t eat gold” line.

Today, still, a two years, properly assembled, food supply is hardly so pricey, that there is nothing left over to protect for the time after your food has run out.

Certainly, if all you have is enough for those necessities, then by all means, store-up.
Not much sense in reading here then though…
One should hope that you have saved assetts beyond those necessary for that two year supply.

That supply, if not to such a long extent, should already be part of your life:
“buy what you eat, eat what you buy”, or more simply:
consume FIFO-fashion, with F-L=your chosen time-frame.

richard j April 13, 2011, 4:13 pm

I believe at the least we will have rising prices and declining real incomes. The effect, as many readers have outlined is that the real value of debt declines, but it becomes more repayable if the economy rights itself, the trade deficit narrows, and Americans start building and using products made here again. It seems difficult for many to see the wisdom of a strong, even if protected via import duty-domestic manufacturing base. We have protectionism in many forms in many countries, whether it is exchange rate interference, artificial barriers to trade as existed in Japan not long ago, theft of copyright and patent, etc.
Building a strong middle class seems to be a lost priority these days.

Richard April 13, 2011, 4:04 pm

In my limited understanding the problem is that either case deflation or inflation can occur or even both cases before we start the whole game again. It depends on an irrational government’s unpredictable actions exactly how the debacle plays out. If we were all thousands of years old, we would understand it better since, I suspect, we would have seen the foibles of humanity play out many, many times. In this case the length of time for the day of reckoning is longer than the average human lifespan; further muddying the waters. In the word of the matrix, everything that has a beginning has an end.

bob April 13, 2011, 1:17 pm

Wow, why am I just as confused today as I was last week?

Rick Ackerman April 13, 2011, 4:25 pm

Try using the forum link I furnished. There you can enlighten yourself with the approximately 320 responses that have been posted so far.

Goodsport April 13, 2011, 1:04 pm

Rick – I’ve always been on the side of the inflationists, however, I respect you enough to revisit my position and do more research. The overriding argument that puts me in the inflation camp is the fact that the Feds can only stay in business by paying creditors off with cheap dollars. That said, regardless of how this American tragedy ends – inflation or inflation – I believe that gold will at least retain, and possibly exceed, its current purchasing power in relative terms.

Market Sniper April 13, 2011, 12:45 pm

Been following the argument on both sides. The question remains: as the competitive race to zero in all fiats continues, IF all currencies fall at the same rate, when the USD hits zero, will the USDX still be trading at 74.51? 🙂

Rick Ackerman April 13, 2011, 7:57 pm

The unwind will be in dollars, leaving open the possibility of a short-squeeze on physical cash.

tac April 13, 2011, 10:07 am

I was a regular reader, will be no longer. It seems that most of the people that label others as narcissists wear it well themselves. Deflation or inflation, only time will tell but it will surely be a mess.

Dave April 13, 2011, 11:21 am

Rick narcissistic? ROFLMAO! You may want to check out DSM-IV code 301.83 for yourself though.

Benjamin April 13, 2011, 12:17 pm

If it takes one to know one, then we’re all one, or else no one knows anything. Therefore, you’re saying Rick is a typical/normal person, because he knows one when he sees one. By the same token, you call someone else a narcissist, which, because it takes one to know one, and that being perfectly normal behavior, means you’re a normal person too.

So, um, what was the point of raising a fuss?! Anyway…

Dave, don’t you mean 308.81, aka the newly redefined normal personality syndrome? 🙂

watermanjim April 13, 2011, 3:13 pm

We all need a small amount narcissism just avoid personal depression and you must love yourself at least a little to be able to love others. thats basic Freud.

A seemingly pathological narcissist, like that Lira, enjoys stirring up trouble and then kicking back and watching everyone scramble around in circles. Then ridiculing Rick when he feels like he has won something by “slicing him up”. He reminds me of my ex-wife. what a f-ing bitch.

Im sure Freud, if around, could have a field day “filleting” that self-righteous braggart, but he probably wouldn’t want to waste time on him either.

You are doing the right thing by avoiding this un-winable debate. although no one can argue that without all the govt stimulus it would have been deflation. no question there.

one still has to plan for all outcomes i think. steady stagflation, major market crash, steady high inflation rate in market and commodities cause of continuing dollar depreciation and quick dollar collapse/hyperinflation.

thats why im in cash, real estate, oil, PMs and beer.

I think at some point, they will engineer a another financial collapse and usher in a new world currency im calling the “worldo”

keep it up Rick, and dont feel bad.
I dont think Tyler Durden believes the C banks will allow hyperinflation either. it is simply not in their interest.

BDTR April 13, 2011, 5:12 pm

Mess indeed, tac. But one thing seems pretty clear. All major financial institutions are leveraged beyond any means of orderly unwinding. They’re positioned, and they’re fighting tooth and nail, to preclude any meaningful, regulating controls.

If there were a sudden and diametric policy shift in monetary controls preventing the Fed from monetizing public debt, the resulting spike in interest rates would bring the remnant credit market and its junkie economy to a grinding halt, collapsing a three quarter quadrillion $ derivatives market and imploding the global economy.

There’s deflation, …and a following depression for decades of picking up the pieces of war shattered societies, stone age economies and restrained remnant populations. Shock doctrine played out, I think we’d agree.

But with major moneyed players well hedged in hard assets, there’s just too much to be gained in keeping a systematically controlled devaluation of the global reserve currency while running only a marginal risk of losing control of a systemically ingrained regime

As the lower rungs are progressively wrung dry and police state machinations firmly in place tasked with keeping us in ours, the difference to deflation seems largely the reduced speed, depth and expanse of mayhem and ruin. Deflationary depression-olypse.

Maybe a deflationary effect manifests, in another decade or two, when rates of convertibility reduce a trillion $’s to a small unit weight in gold, most of which by then will have consolidated into the pockets of a very deserving and absolutely controlling power elite.

While most everyone here has an opinion, Rick, as host, is certainly entitled to his. The opinion, and personal, attacks on his position do reek an arrogant condescension and have, understandably, put Rick on the defensive. It’s a minority view, to be sure.

But, Rick’s earned an abiding respect, admiration and even affection on the basis of exemplifying what’s gained through cultivating a broad civil discourse, including trading methodology, in a thoughtful community with a generous humanity of argument. It may be especially true when, (and if, in fact), he’s mistaken.

I disagree that Rick’s narcissistic in countering, even though I continue to disagree with his conclusions. It’s your loss to abandon a humanely diverse discussion board.

Particularly when humility’s in such short supply as we enter the great endgame.

&&&&&&

Thanks for your illuminating post, BTDR — and for the kind words. RA

Christ T. April 14, 2011, 2:35 am

to the above only add, that one can gain a valuable other perspective here, from Rick and the comments, and if still unconvinced by Rick, learn to marshall your own opinion more tightly.

Your loss if you leave, only.

Benjamin April 13, 2011, 6:55 am

Ha! Nice eye-grabbing headline, Rick! 🙂

Anyway, Steve Saville used to be one my favorites to read of the goldseek contributors. I don’t read him so much now, though, as I find the articles and commentary here much more stimulating. Still, Saville deserves honorable mention, as it was he who open my mind to the difference between GDP and gross domestic output, which seems a pretty important distincion.

And of course, Antal Fekete. He posted a new one on goldseek a couple days ago which I think is worth reading…

http://news.goldseek.com/GoldSeek/1302529031.php

Of particular interest is the comment of the Fed buying unencumbered collateral. Gold and silver, the real stuff, fits that bill.

Even if the Fed were to shell out mega-bucks for the metal, the sell-off, assuming holders were game, would weigh the price down, like gravity on Jupiter. This would be especially true considering that paper “metal” is still in over-supply relative to real supply. Paper gold and silver would be the first in the line of fire (sale), if there was going to be a sell-off. Which is to say…

All for sale not being unencumbered, means holders of any other bogus collateral would gladly be rid of it. So they’ve no outs anywhere. Even if they attempted that those assests would take a heavy hit on price, and as it happens, that would result in a rising interest rates on those… which is what the Fed is trying to counter.

What all this means is that the Fed must somehow buy gold, but without causing any disruptive dips in the price from massive paper sell-offs. This they need to do to magically back all their debt with unencumbered collateral to avoid being caught (and hung).

Which can only mean delfation, folks, not hyper, as they clearly cannot do that. Not until paper gold and silver are removed, anyway.

But like the deliberate act of hyperinflation, exectuted exclusively by the central bank, how likely is that to occur, especially considering that a deflation/depression would allow them a cushion of lemming carnage to land on? They could then dust themselves off, start a new currency, and that would be that.

Chris T. April 13, 2011, 6:45 am

Rick writes:

“Or would the futures exchanges simply change the rules, letting those who are short contracts slip the noose? No one can say for sure.”

Not for sure, of course, but history can certainly guide us.

The not-so long ago nickel-default in London? Changed the rules, cash settlements, etc.

The recent London sub 999er gold settlements (not techn. a rules change, the parties were bought off, but..)

The Hunt Brothers:
Far from being perpetrators of pretty much anything, they were the victims of a vicious rule change in their disfavor, and an unsymmetrical one at that.
Their only mistake was to believe that buying paper promises can substitute for the real thing, and their (as part and parcel) apparent belief in the rules not being changed during the game.

Like JohnJay, I’m a cynic too, but 25% seems tame, 100% and margins even above that (!) have been purported.
Even IF the Hunts had had 100% cover, they would have been taken the same way.

It’s even legal, ever since the President was granted specific legal authority to intervene WHEN HE chooses to declare this necessary in the “national security” interest.

Thus, the rule change seems the safe bet, not the paper-moon shot.

Will only forcible cash-settlements be used?
Probably not, the idea of “just” annulling the various counterparty committments, setting it back to as-if-never-contracted has been proposed as well.

They do this now, with the common “mistrade” declaration, which NEVER goes against the house!
Write that large, and it gives another rule-change mechanism…

Rick Ackerman April 13, 2011, 7:33 am

Yeah, the Hunts never knew what hit ’em. With a big lead in the ninth inning, they were done in by a rule change that eliminated all but two players from the game: Eastman Kodak and themselves. This time around, maybe it’ll be J.P. Morgan or Goldman that gets five strikes in an at-bat.

Benjamin April 13, 2011, 12:03 pm

It’s a very interesting subject, Chris (welcome back, btw!). I can only sum up my thoughts by saying that I think any decisions concerning the rules would be a lethal one.

See my post, below, on unburdened collateral. Seems the Fed is painted into a corner. Or more like what they need most being surroned by a barrier of anti-matter. Like so…

If margin requirments were lowered, what they seek only gets pushed further away while increasing the need for it the further it gets from their grasp; lowering margin requirements would be an easing of credit, which would create not unburdened asstes, but more debts.

Raise ’em, and that would ultimately raise questions that I think they’d rather weren’t asked; how does an institution go from having less than nothing to having to having so many solid assets? And how is that fair to everyone else who would be killed in the process? Why, to borrow Rick’s metaphor, does the Fed (or their designated hitter) get five strikes?!

So in conclusion, I don’t think the president will be making such a decision to change rules any time soon. Especially the current one, but his replacement probably wouldn’t go near the issue either. As for other regulatory bodies, well, I can see now why they don’t do their job. Even if it didn’t cost them their life, it would totally wreck any facade of an economy, on a global scale.

fallingman April 13, 2011, 5:57 pm

Exactly. 5 strikes….you nailed it. Eastman Kodak…the bastards. The name still makes me wanna puke.

The answer to not getting screwed is to hold physical. Don’t play the combine’s rigged game. Unless you lived through the Hunt episode, you can’t really appreciate just what the Powerz can do, will do, and have already done. And the Prez won’t have to say a word. He has lackeys at the CFTC to do the dirty work.

cwd April 13, 2011, 6:36 am

I think it is a given that the banksters will have all the inside information that is available and if that is not enough the rules will change to protect them as in the case of the Hunts and silver in 1980.

Tony April 13, 2011, 5:56 am

Where is the “final comment” from the rancher? I didn’t follow…. -cliffhanger?

Rick Ackerman April 13, 2011, 7:29 am

Tomorrow, Tony — along with comments from Charles Hugh Smith.

JohnJay April 13, 2011, 4:16 am

At the risk of being branded a hopeless cynic, I will say that in my opinion, no matter what causes the ultimate demise of the US Dollar, JPM/GS/C etc. will be notified well in advance of the event. I am, of course, engaging in speculation.
And, in the worst (most likely) case scenario, JPM/GS/C etc. will be recruited to orchestrate the whole thing.
I am sure the rules will be changed at the last minute to protect the players involved.
For example, the 5% or 6% margins on gold and crude oil futures could be moved up to 25% after the close of a big up week some Friday afternoon.
You know, to deal with the “financial emergency”, “rampant speculation”, or “threat to the economy”. Take your pick.
Give the weak hands something to think about all weekend before the open Sunday night.
After what the government did to facilitate the great mortgage scam for the players, anything is possible, except, of course, a square deal for you and me!

Benjamin April 13, 2011, 7:05 am

I pretty much agree with yout cynic rant, JJ, but one thing I would definitely change is “advance warning” to already knowledgeable. I mean, how could they not have already anticipated this? If it took me all these months to come to the conclusions I have, then they’re in the chopper…

Helicopter Bernanke is not a pilot for the usual reasons. The trail I have followed has lead me to a dead-end cliff. I’m sure Benny would throw a paper rope to see us “safely” to the bottom. I mean, it’ll snap, as it has no choice to, but even what little is kept in hand… takers still land hard, while BB assures that the pile will be soft enough to land on some day very soon, of course… Another trillion dollar rope ought to do it…

All will hail H. Ben Bernanke, the airborne slayer of countless lemmings!

Carol April 13, 2011, 4:00 pm

“I would definitely change is “advance warning” to already knowledgeable. ”

Have to agree with ben and JJ. I knew that wallstreet, the Fed Reserve and Treasury were in bed together but after watching “Inside Job” yesterday it finally because apparent to me that they really ARE one and the same entity. So there will be no notifying given to GS/JPM/C etc because they will be the ones creating the coming disaster (to their advantage obviously).

After watching “inside job” (which I highly recommend to anyone who has not see it yet) I have a real hard time imagining either deflation or hyperinflation as neither look like they would benefit the boyz. But who knows.

&&&&&&

Deflation will give the Masters of the Universe title to 30 million defaulted homes. From a political standpoint, however, this could beget them only disaster. RA

fallingman April 13, 2011, 5:47 pm

Absolutely Carol. JP Morgan IS the Fed. Goldman IS the Treasury. The “money power” IS the US Government.

Morgan and his pals CREATED the Fed and have always controlled it. They have effected a “silent coup.”

The republic never had a chance. Its demise started with a constitution that concentrated power in the hands of the Feds…and allowed for unlimited concentration. Those who ratfied were conned.

Hamilton and Biddle were the original perpetrators of the coup and the takeover continues today with the likes of Paulson, Geithner, and the Bernanke. They’re the minions who call the tune for our masters…and yeah, they’re not likely to do themselves in by allowing the debts owed to them to be washed away by a collapsing clownbuck.

On the other hand, a deflation could benefit them mightily, as they have the money and get to buy things at fire sale prices. And, if you hadn’t noticed, they get bailed out if they happen to hold anything that goes down in value. So, it’s heads they win, tails they don’t lose.

warren April 13, 2011, 4:02 am

I here you, and thanks for the steerage. I will read what you recommend because I always try to give equal time to differing sides of an argument. Bye



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