September 2011

[Addendum: I misread the date on Lira's piece -- his blog is not one of my regular stops on the Web --  and it turns out that it was written a year ago in August, not last month as erroneously noted. As readers may have surmised, however, that does not weaken or change my argument.  Nor would I claim that it weakens his, notwithstanding the fact that a prediction he made  more than a year has not panned out.  There is a lot of ruin in a global financial system, and although it sometimes seems as though ours may be no more than days from collapse, we all know how even terminal economic dysfunction, like lung cancer, can persist without producing the expected result. RA]

With deflation tightening its choke-hold on the global economy, we thought we’d drop in on our supposed nemesis, Gonzalo Lira, to see how he has been coping in these very un-hyperinflationary times.  To his credit, the erstwhile arch-inflationist, bending to reality, has acknowledged forthrightly that deflation rules the economic and financial worlds right now. “Yields are  low, unemployment up, CPI numbers are down (and under some metrics, negative) – in short, everything screams ‘deflation.’ ” He wrote those words a month ago in an essay entitled How Hyperinflation Will Happen, and although we are obliged to point out certain dangers in relying too heavily on the scenario he describes, readers should trust, as we do, that he has gotten the big picture right.  He asserts, for one, that economic recovery is no longer remotely possible for the U.S.  We agree. Nor, as he makes clear, is it a case of double-dipping into recession, as most economists and the mainstream media would have it;  as Lira flatly states, we never emerged from the first recession. The inevitable result, he says – and again we concur — is that an epic financial panic centered on the dollar’s collapse is coming, and it will push the U.S. from intractable recession into full-blown Depression. » Read the full article