Deflation vs. Hyperinflation

[This discussion topic has just started to get rolling, so I’m going to let it run for another week.  If you’re looking for timely trading suggestions and fresh analysis in the holiday-shortened week ahead, tune to the Touts section and the Rick’s Picks chat room.  A free two-week pass can be yours by clicking here.  RA]

Most of us understand that the audacious fraud that has sustained the U.S. economy and the global financial system can only end badly. But how?  As far as I’m concerned, there are only two possibilities: deflation; or less likely, hyperinflation.  In any event, it’s time for another go-round in the continuing debate.  This issue seems to pop up in nearly every forum discussion no matter what the topic, so let’s use the holiday lull to focus on something that is almost certain to be more interesting than the markets. To get things rolling, here are some bullet points of my own:

  • Because of its quadrillion dollar size, the financial bubble cannot be inflated or deflated away via a gradual process; only a catastrophic implosion or explosion is possible.
  • The most deflationary event we can conceive of – i.e., the banks failing to open one weekday morning – is also the most likely.
  • The monetarists’ definition of inflation/deflation as an increase/decrease in the money supply is worthless in an economy that runs on credit. To understand deflation better than most economists seem to, you need only consider its most pernicious and destructive symptom:  an increase in the real burden of debt.
  • This is the force that is suffocating Europe but which is being held at bay – barely – in the USA by the artificial and unsustainable suppression  of mortgage rates.
  • Federal taxes are steeply on the rise, putting yet more deflationary pressure on households.  Add in Obamacare, the largest new tax ever enacted, and it’s only going to get worse.
  • So are cutbacks in pension and healthcare benefits.  Detroit’s bankruptcy has opened a legal avenue for states, counties and cities to significantly reduce benefits if the money to pay them doesn’t exist.
  • Price increases for groceries, tuition and health care do not represent inflation —  as how could they if real wages are stagnant? Under the circumstances, an increase in the price of any or all three of those things leaves households with less money to consume other things.
  • He who says hyperinflation is coming must explain how homeowners will be let off  the hook, presumably by an explosion in real estate prices.
  • No fudging that last item, please, since mortgage debt is such a big chunk of what we collectively owe.

What say you, readers?

  • mava January 3, 2014, 3:20 am

    According to my understanding, Andy, yes. Once created, money is not destroyed by a default. At best, the money can be destroyed UPON the full payment of the credit.

    So, if the homeowner repays the debt, the bank is supposed to destroy that loan money balance (not the interest, of course, or any fees).

    But in a debt default, all the money survives at the very least, and possibly more get created to bail out the lender. They system is inherently inflationary.

    Of course, different people have different definition of inflation / deflation. With my definition (classical) there can be no deflation. But if you define deflation as decrease in prices, then of course, you can say that deflation happened every time the prices fall.

  • Andy Gutterman January 3, 2014, 2:04 am

    I’m confused. In our fractional reserve system banks create money by issuing loans out of thin air, then go looking for the reserves to back the loans up.

    So a bank issues a loan for $550K to the homeowner to buy a house, from another seller. Bank gets a mortgage which it holds in its account, homebuyer gets a house, and the seller gets their funds.

    House = mortgage.

    The accounts balance. A year passes. For whatever reason the value of the house has dropped by $200K and the new owner has lost his job. He defaults entirely. The bank takes over the house but is unable to sell it for anything close to the loan. They let it go for a net $350K.

    $550K – $350K = $200K loss.

    What happened to the $200K? Is it still in the system somewhere, we just can’t figure out where?

    Or does money supply decline by $200K?


    • Chris B. January 3, 2014, 2:24 am

      “What happened to the $200K?”

      The $200,000 is in the previous owner’s pocket. The “loss” is merely a re-valuing of an asset. The “value” is not money – it is a guess as to what someone is willing to pay for a tangible item. Money can never disappear unless it is physically destroyed. Value/Equity can disappear in the blink of an eye. During the Weimar inflation, all those Marks were still in existence, and during the Great Depression all those dollars were still in existence as well. Assets simply became re-valued relative to the amount of “Money” available to the market. All the “Dollars” being used to inflate the Markets will still exist when the house of cards comes crashing down – they will simply be re-distributed while assets are re-valued. This will take some time and plenty of pain to sort out.


      Ah, yes: plenty of pain. For a minute there, you had me thinking you believe that, in the turbulence of a quadrillion-dollar bust, Obama-trained helpers would be able to do the re-distributing and revaluing by rejiggering everyone’s balance sheets, adding or subtracting zeros wherever needed. RA

  • mava January 2, 2014, 10:03 pm

    I do not want to bore anyone with endless arguments. Anyone, that is, who is not interested to know the truth.

    I’d like to clear one of my points that is currently at risk of being confused.

    I was responding to Andy’s statement that I have understood as “debt default reduces money supply”.

    I argue that the debt default does not reduce the money supply, and therefore, those who define the deflation classically, as a reduction in money supply, must conclude that the debt default itself does not cause the deflation.

    RA:”Okay. So both seller and lender have $550K in their respective pockets, all attributable to a house on which payments have ceased? Wrong wrong wrong. You are failing to see the big picture, Mava, which is simply this: After discharging our collective debts and liabilities through hyperinflation or deflation (take your pick), including those folded into a quadrillion dollar derivatives bubble, nobody will have ANYTHING. RA”

    I must have been unclear. I stated: “In your example, the seller of the house has the money, the tenant has got the house (hopefully), and the lender has got the jack.”.

    I meant that:

    Whoever sold the house (a builder) is left with money.
    If it is $550K then this is what still exist in the system, even after the debt default on the $550K has already occurred.

    The borrower (i.e. the home owner) has the house. He had exchanged the borrowed $550K for a house. He still has the house, even after he has defaulted. (He may loose the house to the lender).

    The Lender no longer has the $550K. He had given the money to the borrower, and the borrower had sent the money to the builder. If the home owner defaults, then the lender has lost that $550K. The lender may foreclose on the house, in which case, he will deny the homeowner the possession of the house, and he may try to sell the house again.

    In the case where the lender left the house to the home owner, what we have is the $550K that moved from the lender pocket to the builder pocket. The lender has lost money, the builder has exchanged money for the house, and the homeowner has gained the house for free. His gain, directly offsets the lender’s loss. There is no change to the money supply. The money had moved, not disappeared.

    In the case where the lender foreclosed on the house, then the lender had in effect purchased the house. The homeowner is out of the picture. There was an exchange (money for house), even though the lender did not seek such exchange. But again, no money had been lost because of debt default.

    This should explain that the debt default can not be the cause of decrease in money supply. Andy should also note that the credit had not disappear either, because it is equal to other claims on wealth, i.e. it is indistinguishable from paper dollars that function as money in our system.


    See my response to Chris’s post. RA

    • Chuck January 2, 2014, 10:19 pm

      you forgot to add into the mix….PMI – not sure where that money will go to, but likely the lender….and all the Credit Default Swap derivatives…..not sure if they are still doing those at AIG… anyone?……

  • VILE VLAD January 2, 2014, 3:03 am

    Your tacking another week to this discussion of inflation vs. deflation is a total bore. But then again, it’s the ‘holidays’, and so you want to rest, and not think. So no problema. But this site will stink until you bring up something real to discuss.


    Here’s your chance to produce the next Topic of the Week, Vlad. Please get it to me by Saturday if you’re interested. Incidentally, your first effort — What Rick thinks, and why he does what he does — is hardly fodder for a good week’s discussion. Your thoughts about being one of the 10% might be worth developing, though.

  • Andy Gutterman January 1, 2014, 3:26 pm

    Woodrow Wilson signed the 1913 Federal Reserve Act. A few years later he wrote:

    I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the civilized world no longer a Government by free opinion, no longer a Government by conviction and the vote of the majority, but a Government by the opinion and duress of a small group of dominant men. -Woodrow Wilson

  • mava January 1, 2014, 8:49 am

    Happy New Year!

  • mario cavolo January 1, 2014, 1:22 am

    Sweet spot on calls wrapping up the year with the market rally and gold’s swan dive to your 1184ish target, Happy New Year to you and yours!

    Cheers, Mario


    Thanks, Mario — and all the best to you and your family in 2014. RA

  • mava December 31, 2013, 11:41 pm

    “Deflation and inflation are effects of changes in the REAL rate of interest. That is why I keep harping on the point that we can take deflation’s measure by simply noting whether debt is getting easier to service or harder.”

    I think, Rick, you are confusing the cause and effect. The deflation and inflation can be a cause, but not the effect of the change of real interest rate. (Fisher)


    Please re-read my posts on this, Mava, since I’m done repeating my point. RA

  • mava December 31, 2013, 11:21 pm

    “Unless you can conceive of a way in which hundreds of trillions of dollars of debt will become much easier to service in the years ahead, you must accept that deflation will eventually win out.”

    I can conceive a way. The same way as before – by inflating, inflating and inflating. Here, I define an inflation as it is traditionally defined – an increase in the money supply.


    Inflating the price of lettuce, maybe. That’s what countless trillions worth of inflating inflating inflating has accomplished so far. And still, no one has addressed my question about what will happen to mortgage debt in this supposed inflation inflation inflation. RA

    • mava January 1, 2014, 8:46 am

      (Like Gary, you’ve conveniently chosen to ignore the salient points of my argument. See my specific rebuttals, which I’ve embedded in your post. RA)


      It has been already done. Inflation creates miracles (for the purpose of this conversation).

      What would happen to the mortgage debt? The lender will get screwed (which historically is a normal). [Screwed?? Let’s call a spade a spade: ALL lenders are in line to receive CONFETTI. And we are not talking merely about mortgage lenders, but holders of a quadrillion dollars of downstream debt that has been daisy-chained mainly from real estate assets. RA]

      The inflation will eventually [Eventually?? There is no ‘eventually’ here. The global financial system is so tightly torqued that it will implode in the space of a few hours] create a situation where a minimum wage job earner can pay three or four monthly payments from his single paycheck [This is a non-starter for more reasons than I have time to list. RA] where before it would require a middle class salary to pay one payment.

      Prices rise with inflation. Wages are prices of labor. Wages rise, even if later than other things. The inflation can not be a cost-pull, but strictly with relation to wage inflation, it purely is a cost-pull phenomenon. Workers stop working for old wages, and they thus get raises. [Ahh, more ‘eventuallys’. Wage inflation came organically and over time in the 1970s. The current era, financially speaking, is about as similar to the 1970s as feudalism was to the Industrial Revolution.]

      The debts are nominal, – not adjusted. Yes, the interest rates can “adjust” the debt service, but, Rick, during “easing” the nominal rates go DOWN, not up. Thus, the debt on a house already sold can not be adjusted for inflation. It will remain nominated in pre-inflation dollars, while being paid in post-inflation dollars. [There is no ‘inflation’ in our future, only ruinous deflation and/or hyperinflation. RA]

      This, essentially, is a scam, of course. The reason it is ALWAYS executed is that the main beneficiary is the government. It receives the benefit of the purchasing power stolen thru inflation. But in its wake, those who follow, also get benefits – those who mimic the government.

      Government is a scam, therefore it likes debt. To mimic the government you also take on debt. Inflation wipes it out. [Yes. And hyperinflation wipes out EVERYTHING, including all institutional conduits of saving and lending, such as the bond markets. RA]

      “Neither the lender not the borrower be” [Say what!? RA]

      The lender gets wiped out. [You seem not to have thought much about what this implies. It is somewhat disingenuous to say ‘the lender’, when in reality you are taking about every saver and lender on this earth. RA]

      The borrower destroys itself from point of view of work ethics (welfare rot).

      Not sure why are you asking about this, I think I read you explaining all this stuff a while ago.

      [I asked because neither you nor anyone else who disagrees with me has addressed any of my arguments. RA]

      • Andy Gutterman January 1, 2014, 3:34 pm

        “Let me issue and control a nation’s money and I care not who writes the laws.” Mayer Amschel Rothschild (1744-1812), founder of the House of Rothschild.

        “The few who understand the system will either be so interested in its profits or be so dependent upon its favours that there will be no opposition from that class, while on the other hand, the great body of people, mentally incapable of comprehending the tremendous advantage that capital derives from the system, will bear its burdens without complaint, and perhaps without even suspecting that the system is inimical to their interests.” The Rothschild brothers of London writing to associates in New York, 1863.


        Thank you for sharing this. In one sentence, Rothschild, the ultimate banking insider, has explained how the Fed could be so evil and get away with it. RA

    • Jason S January 3, 2014, 1:36 am

      Mava, I think the reason for Rick’s frustration is that you are referencing inflating away the debt without considering that the way central banks around the world create more money is through additional debt. So if you conceive of a way of servicing a dollar’s worth of debt through inflation, that entails creating more than a dollar of additional debt to do it. When all is done, the amount of debt will be greater not less.

  • mava December 31, 2013, 10:19 pm

    “Eventually debt service on that national debt is going to skyrocket.

    What then? ”

    … then you just double, or triple, or quadruple the amount of money (and or credit). Problem solved, debt is twice easier to pay. (has been done many times in history, over and over.)

    Unlike you, I am ready to take unlimited credit. Especially at negative rates.

    “Debt defaults also come into play, money just disappears.”

    You think so? You lent me a dollar, I bought an ice-cream from Mario, now I go bankrupt. Debt default.
    You think Mario no longer has that dollar?


    Who cares about the dollar Mario received for the ice cream cone. When the defaults really start to snowball, I want to know who’s got the $550,000 that bought someone a suburban house. RA

    • mava January 1, 2014, 8:33 am

      Rick, do you seriously think that where $1 could not disappear, the $1 TRLN can?

      In your example, the seller of the house has the money, the tenant has got the house (hopefully), and the lender has got the jack.


      Okay. So both seller and lender have $550K in their respective pockets, all attributable to a house on which payments have ceased? Wrong wrong wrong. You are failing to see the big picture, Mava, which is simply this: After discharging our collective debts and liabilities through hyperinflation or deflation (take your pick), including those folded into a quadrillion dollar derivatives bubble, nobody will have ANYTHING. RA

      • mario cavolo January 2, 2014, 2:56 am

        Rick, help me here just to get my head around it. In the end the only one left with anything will be the one with the house, presumably then valued at far less than $500k, let’s say…$200k. Obviously deflation. As debt defaults could occur in lots of industries, we can easily see this also happening to cars and lots other goods in a widespread way, everybody obviously is holding a lot less in asset value/price relative to demand and available credit/cash. Tell me that’s your point?…Cheers


        Exactly. You have stated what I stated above, but in a slightly different way. Mava’s big picture comprises one house and one lender. RA

    • Chris B January 2, 2014, 8:45 pm

      “I want to know who’s got the $550,000 that bought someone a suburban house. RA”

      The homebuilder and the landowner have the $550,000. The new “homeowner” has some equity (his downpayment) and a contract that allows him eventual ownership of the home providing the terms of the loan are met. The Entity that lent the money to purchase the home has the remaining equity in the home. When Joe loses his job and can no longer abide by the terms of the contract, the Lender will still possess his portion of the equity in the home, and if the Market is rising, the Purchaser will walk away with his portion of the equity in the home, minus any penalties. If the Market is Down, then the Purchaser will lose some or all of his EQUITY – not his MONEY. His money is now in the hands of the homebuilder and landowner, or previous owner, and all he has to show for his money is EQUITY. In a mass default/upheaval, it will be EQUITY that is wiped off the books – not MONEY. The money never disappears, it only changes hands. However, it could be re-valued higher or lower by various means or situations, or it could be replaced by another form of exchange and become worthless once the time period of exchange lapses. (Like script during WWII)

      Don’t confuse equity with money – they are two entirely different things.


      You haven’t addressed the small matter of the global daisy-chain collapse that will occur on the inevitable Day of Reckoning. $550,000 is not a sum that the landowner or lender will likely have kept around the house. They will in fact have invested it in something — a financial instrument, perhaps, that will in turn have been hocked (i.e., “leveraged out”) 50 times.

      When this house of cards collapses, I would not want to be the landowner or the lender, standing in line behind hundreds of others whose claims to the $550,000, or at least some piece of it, will be subordinated to the claims of…well, who can possibly say who will get first dibs?

      Concerning “equity,” it is you who are confused, for there will be precious little of it to go around after the quadrillion dollar debt pyramid has imploded. What equity remains will be based solely on the income stream that an asset is capable of generating. RA

  • Andy Gutterman December 30, 2013, 4:32 pm

    To get back to the original discussion, compliments of our Fearless Leader:

    “The sources of deflation are not a mystery. Deflation is in almost all cases a side effect of a collapse of aggregate demand – a drop in spending so severe that producers must cut prices on an ongoing basis in order to find buyers. Likewise, the economic effects of a deflationary episode, for the most part, are similar to those of any other sharp decline in aggregate spending-­namely, recession, rising unemployment, and financial stress.”

    Ben Bernanke, 2002

    Possible Deflationary Events:

    1. Elimination of unemployment insurance to 5+ million people. They have to cut somewhere, from their perspective they were making ~$300/week, now its zero. About $88 billion a year in demand.

    2. This one is tricky. The ACA requires us to have health insurance. All things being equal, if you buy insurance you do not buy something else. Prices of other stuff may have to go down to allow consumers to purchase. This is my dilemma. I can buy insurance for $140/mo, but I’m going to have to cut spending elsewhere to do that.

    3. Debt Service: This is the main driver of deflation. Debt service goes up, spending goes down. Debt defaults also come into play, money just disappears.

    4. Recession, unemployment, etc. Anything that causes the economy to decline reduces demand unless said demand is made up via government support.

    Keynes had a solution for this. SAVE the surplus in good times, spend it in bad. Problem is, whenever we had a surplus, certain politicians couldn’t wait to return said surplus to the taxpayer, thus, when bad times arrived, and they always do, there was no surplus to spend. Money had to be borrowed to make up for it, thus increasing the national debt.

    Eventually debt service on that national debt is going to skyrocket.

    What then?

    There is a 5th item that comes into play when government realizes it cannot pay for the combination of rising entitlement spending, rising debt service, defense spending and all the other expenses of running a government. Something has to give.


    • DK December 30, 2013, 11:07 pm

      Excellent summary, Andy!

      IMO this is by far the best forum I regularly visit!

  • mario cavolo December 30, 2013, 7:34 am

    Following up on your comments today, let me suggest the pieces of the American economic puzzle as:

    1. America has a demographic driven problem for around 8 more years and that can’t be changed. Real estate will have continued weakness and may fall further as you suggest regardless of any supporting buttresses in place. Indeed, rising rates will add fuel to the fire.

    2. Manufacturing and exports – will continue to improve and that trend could strengthen supported by the consistent theme of reshoring back to America. Its not a passing whim and people needs jobs. The employment picture of society has transformed.

    3. Mid/upper income population and related retail will continue strong enough. These folks are doing very well and have a lot of money and security.

    4. Low/mid income population and related retail will weaken further, buttressed by the reminder that employment participation is at an all time low, 50 million and rising on food stamps, unemployment benefits, O-Care subsidies, etc. This burden may overwhelm the system and ruin the party but we can’t anticipate the who, what, where, when, why… a deflationary force here no matter how you look at it…

    5. In coming years, bloated municipal and company pensions will get cut one way or another, alot of angry people, much angst and headline news along the way. No maybes here…

    6. Domestic stock markets no crash in the cards, 50% of S&P earnings are international, Asia/China expansion/rising will absolutely continue please ignore the headlines…India next on deck with nowhere to go but up, can remain stable as world GDP continues to grow unless an unexpected black swan event comes along, bringing a global economic nightmare to all.

    Skipping our ongoing dismay re political shenanigans and all related, this seems a reasonable framework.

    Cheers, Mario

  • Andy Gutterman December 30, 2013, 1:58 am

    The FED has nothing to do with this argument, since they cannot create money. All they can do is issue credit. If the credit is not used, nothing much happens in the real economy.

    Only the Treasury can create the money to fuel hyperinflation, and it has never done that in modern times.

    Failing that we will get deflation. How it plays out is anyone’s guess. I’m willing to bet when it does we will all be surprised. I can hear it now:

    I SURE didn’t see THAT coming!



    The Fed could in fact have a role to play, since it is empowered by statute to buy not only worthless Government paper, but worthless corporate bonds as well. It is in that respect that the Fed’s capabilities come closest to the mechanism that induced the Weimar hyperinflation.RA

    • Andy Gutterman December 30, 2013, 2:41 pm

      Please how me where the FED can BUY corporate bonds.

      From here:

      I get: 4) Control the yield on corporate bonds and other privately issued securities. Although the Federal Reserve can’t legally buy these securities (thereby determining the yields); it can, however, simulate the necessary authority by lending dollars to banks at a fixed term of 0 per cent, taking back from the banks corporate bonds as collateral.

      That is an exchange of one asset for another. The bank now has a FIXED liability that costs zero percent, the FED has the corporate bonds. No NET growth in the money supply occurs, and it definitely does not occur at the consumer level, via printed money, where all hyperinflations get started. The banks have to take the bonds back at expiration.

      When the FED buys government securities there is no zero interest rate loan to the banks. They can do what they want with the proceeds.



      Okay, so that explains how the Fed could effectively buy corporate bonds. My recollection is that the direct purchase of corporate debt was enabled via the Monetary Control Act of 1980. The source of this information was probably Vern Myers, although I cannot provide a specific citation. RA

    • mario cavolo December 31, 2013, 3:19 am

      Hi Andy, correct me if I’m wrong, I’m thinking they can simply announce that that’s what they are now doing and enact the accompanying law.

      Recall when the FED first announced it would actually be buying our own bonds? Historically speaking, insane, we all couldn’t believe it, and at that time, we all were told it would be temporary! Five years later it has continued to the tune of trillions. So, as noted by many here, the economic model was completely transformed. So, at this point, no announcement of policy regarding Wall Street, banks, the FED, Washington will be a shocking surprise in its extremity. The precedents have been set, the control has been obtained, the America of yesteryear has been thoroughly dismantled.

      Cheers, Mario

      • Andy Gutterman December 31, 2013, 2:44 pm


        Somehow I don’t think so. Especially since there is zero evidence they are staving off deflation or actually rescuing the economy. If anything they are making it much worse, as all that money tied up in the FED balance sheet that isn’t doing anything. Ditto for corporate cash.

        We are a credit driven economy. The most obvious downside to a credit based system is how do you get people to use the credit? If your debt to income level is stressed out enough no amount of tantalizing credit offers are going to get you to take on more debt. The FED cannot force people to take out loans to support current spending, of any kind.

        Myself included. I get offers to take on more debt in the mail every day. I can barely service what I have now, they want me to take on more? And I have friends or know people who fell for the enticement, and they are in much worse shape now than before they took on the debt.

        Profits going up the chain to the top 1% do nothing to stimulate the economy, but they do a lot to stimulate deflation.

        I think the FED is fighting a losing battle. The consumer, who drives 70% of the economy, is tapped out. And even the wealthy consumers, those whose spending patterns are different than the bottom 80%, they are going to be slowing down their spending as well. And dog forbid anything happens to their net worth or income in the stratosphere they live in. Like maybe a stock market crash or something else to destroy wealth.

        Maybe the next trigger is subprime auto loans, making up 27% of new car sales. Didn’t we do a subprime event on something else a few years ago?

        Or student debt. It has exploded as the college scam has taken over the expectation window for young people. Our boomer based income suction system is based on 8000 new seniors a day being supported by 2000 new juniors a day, in debt to their eyeballs. That’s a happy event, don’t you think?

        The list goes on.

        The ability of the FED to engineer perpetual motion is as limited as it has been for every other inventor who claims to have discovered perpetual motion. The universe we live in doesn’t work that way.

        Every generation thinks it has repealed the laws of economics, and this one is no different. History says otherwise, but as I hear from my small family/friends discussion group, there is always someone who thinks we shall figure it all out and sail through the megastorm to the other side and reach our destination.

        Wishful thinking is what allows these events to transpire as they do.

        But who knows? Maybe they are right this time.


  • Inception December 29, 2013, 9:06 pm

    So the true question is not: “Will there be inflation or deflation?” [(because it will depend on the decisions of the FED, whether the graph of constant growth is steeper or flattened) see Bartlett ]
    This current interest-based system will always contain the need for constant growth.
    The true question is: “Which SYSTEM does stimulate growth, but NOT create HAS NO NEED for constant growth?”

    P.S.: (Hint: *You will have to separate the functions of money*)
    …much more on FOFOA’s blog…

  • Inception December 29, 2013, 5:53 pm

    An interest rate-based system creates inflation by default because new currency (debt) has to be created too to make it go on working. In the end necessary debt cannot be payed anymore and the system will stop working.
    So the question “inflation” vs. “deflation – what comes next?” is like asking: what can we do to prolong the system until it finally must fail?
    Debt forgiveness and micro-interest rates mean deflation creating new debt and higher interest rates mean inflation. We all can see both forces at work now, but keep in mind that inflation is not only a (changeable) force here, it is the way the system is structured. It is always at work even if it is invisible sometimes.


    Debt forgiveness and BANKRUPTCY mean deflation. In The Coming Depression, the disposition of real estate assets will be the key variable. I think all mortgages will be rewritten as lease agreements, which obviously would be deflationary. What do you foresee? RA

    • Inception December 30, 2013, 1:44 am

      Bankruptcy is a special case of debt forgiveness.
      Even a lower(ed) interest rate is a special case of debt

      It depends on the rules of the reset, whether you are right.
      On a macro level deflation and inflation are effects of interest rate changes.
      Now the rates are near zero, which is strongly deflationary in terms of money as a store of value and strongly inflationary for money as currency.
      Adjust the interest rate to 7 percent and money as a store of value will inflate.
      It’s always deflation AND inflation because the functions of
      money are tied together!


      Deflation and inflation are effects of changes in the REAL rate of interest. That is why I keep harping on the point that we can take deflation’s measure by simply noting whether debt is getting easier to service or harder. This can be somewhat subjective, of course, but that’s the point of the exercise — i.e., to help those who mistake higher grocery prices for inflation to understand that there is a much more powerful force — i.e., deflation — bearing down on us all.

      Unless you can conceive of a way in which hundreds of trillions of dollars of debt will become much easier to service in the years ahead, you must accept that deflation will eventually win out. Hyperinflation would remain a possibility nevertheless, but anyone who says it’s coming must also say how real estate lenders will ultimately fare. RA

  • Ben December 29, 2013, 2:44 am

    Deflation first. Followed by hyperinflation. Hyperinflation is the endgame for the currency so I think a strong deflationary depression would precede it.

    Reasons for deflation:

    1. Computing and automation are driving down labor prices and driving up unemployment. This will soon affect nearly every job everywhere.

    2. Immigration and globalization are also driving down labor prices.

    3. It does not make sense that the rich, the Fed and the Congress would bail out middle class debtors at the expense of the savings class– the ultrarich and multinationals, banks etc by deliberately hyperinflating

    The deflationists are closer to the mark imo.

    But both parties are sort of right.

  • John Jay December 27, 2013, 7:25 pm

    CME and CBOT exchange fees for my platform are going up 21% effective 1-1-14.
    That is called…………Inflation!

  • mario cavolo December 27, 2013, 9:42 am

    Rick, today’s gold tout shows your wizardry again, I’m watching the 1214.10 flirt as the east is still asleep…

  • mava December 27, 2013, 9:22 am

    “The monetarists’ definition of inflation/deflation as an increase/decrease in the money supply is worthless in an economy that runs on credit. To understand deflation better than most economists seem to, you need only consider its most pernicious and destructive symptom: an increase in the real burden of debt.” – RA

    This debate is meaningless without a definition for Inflation, Hyperinflation and Deflation.

    I would argue that the traditional definition of Inflation – the increase in total money supply – still stands, as I do not see the credit as being ANY different than the cash in your pocket.

    You (RA) seem to decline this traditional definition, and not present any replacement.

    As to the increase in the real burden of debt, – this is not the deflation proper, but only a consequence of it, which may or not signal the deflation process occurring. Currently, if there is any increase in the real burden of debt (which I don’t feel yet exist), then it is a consequence of the malinvestment and not of deflation.

    I am a bit troubled how you can see any deflation where anywhere I look I see inflation. What do you call the QE? Is it not an increase in the money supply?

    It is assumed, I think, that you regard the QE as an unsuccessful attempt to catch up with supposedly occurring deflation. If so, where did that deflation comes from? I hope you do not consider the credit defaulted upon as some sort of “disappeared” money, because it is not.

    Absent another definition for “I”, “H” and “D”, I would still say that we are looking at more Inflation in our near future, followed eventually by a Hyperinflation event. How people feel about their day-to day struggle to pay bills is immaterial here. I can say that during Russian Inflation and Hyperinflation, if you could be on the ground observing, you would see plenty of people struggling with their real debt burden, and yet, that didn’t save them, and it did not stop the purchasing power of the monetary unit they were using from falling precipitously.

    As for the matter of policy versus the inescapable nature, I would say that the deflation can only occur when there is money (gold) in use. Gold would enforce the principle “if not by the debtor then by the lender”. However, in the environment of absence of money, as is now, the deflation can not happen. Inflation is the only possible development without money, and it has to end by the policy decision to initiate the hyperinflation.

    Lastly on Obamacare. This is anti-inflationary measure, but in no way a deflationary one. The government is simply trying to escape the necessity to print money by instituting new taxes. It does impoverish the people, however it has nothing to do with either “I” or “D”, as it does not increase nor decrease the money supply, whether it is measured by notes, digits or credit.


    You may have missed this along the way, Mava, but I have written here perhaps a hundred times that one should know deflation by its chief symptom, an increase in the real burden of debt. I have addressed all of your other points a hundred times as well, so I won’t repeat myself.

    Meanwhile, it should tell you something when ‘fear of inflation’ is almost nil — when, in fact, most of the developed world is praying for the inflation that tens of of trillions of dollars worth of stimulus has so far failed to produce. RA

    • Andy Gutterman December 27, 2013, 2:49 pm


      EVERY hyperinflation in history was started by running the physical paper printing presses. Go back and look at your Russian hyperinflation from 1917-1924.

      “The early Soviet hyperinflationary period was marked by three successive redenominations of its CURRENCY, in which “new rubles” replaced old at the rates of 10,000-to-1 (January 1, 1922), 100-to-1 (January 1, 1923), and 50,000-to-1 (March 7, 1924), respectively.”

      It was ALL about paper money. Ditto for every other hyperinflation.

      The world has never seen hyperinflation based on digital money or credit.

      The FED can only expand credit. It has ZERO control over the physical, paper money supply. That is 100% in the hands of the Treasury, a government department, part of the executive branch.

      The FED is a private bank designed solely to push out credit to nations and consumers. It has done very well with this until there is a surplus of credit without the assets to support it. Like today.

      You saw my chart of how much debt it took to create a $1 of GDP, and how it’s flattened out? That’s a stealth signal that something is not quite right, along with all the other stealth signals the economy is throwing off. (Humans, being mostly optimistic, don’t see these signals until its too late.)

      In the words of our Emperor, Ben Bernanke:

      “Well, I wish I’d been omniscient and seen the crisis coming,”

      Something very bad is going to happen in our future, and it isn’t going to be hyperinflation.

      Other than what you see in financial assets, which today are mostly owned by the very rich.

      This chart here says it will all come to an end, just not when:


      • mava December 28, 2013, 6:47 am

        When Bernanke still wasn’t omniscient, I was listening to the people who already knew what is coming.

        For this reason, laymen like Bernanke do not impress me much, nor whatever it is they have to say.

        I still think there is no difference between the paper money and the credit as far as they may relate to the hyperinflation. And the FED is not a private bank.


        Paper money is at least tangible and will still exist the day after rioters have laid siege to banks across the U.S. Digital money and credit cards, on the other hand, will have ceased to function. The Guvvamint could try adding three, or six, or nine zeroes to everyone’s credit card limit, but no one would even remotely imagine that such a scheme might work. RA

      • mava December 28, 2013, 6:58 am

        It doesn’t really matter, but I should have noted that I was referring to the hyperinflation of 1992-1997 (I am not that old to remember the 1922).

    • mava December 28, 2013, 7:10 am

      I haven’t read all your articles religiously, RA. I might have missed some.

      I might have missed the exact ones where you actually define the deflation.

      I remember that this isn’t the first time I am asking you to define the deflation. Again, I might have missed where you had done so. If that’s the case, I am sorry.

      The description of the symptom is secondary to the definition itself. This is because, the symptom may or may not be a consequence of the event defined.

      I don’t pay any attention what it is most of the world fears. And I haven’t noticed you doing much of that either. You usually have your own opinion.

      The reason that the world fear deflation, as you no doubt understand, is because inflation is what they are going to give us a boatload of. So, TPTB promote the fear of deflation, – it makes everybody wanting to paint the fence (Tom Sawyer), or… inflate. Most of the people have absolutely no brains. So, they just keep repeating the propaganda. I don’t have much brains either, but I have enough to make me want to keep my own dead rat on a thread all to myself.

  • Chris t. December 27, 2013, 3:15 am

    “Price increases for groceries, tuition and health care do not represent inflation – as how could they if real wages are stagnant? Under the circumstances, an increase in the price of any or all three of those things
    leaves households with less money to consume other things.”

    also vehicles, the other big ticket item.
    I think these items are those areas of the economy ARE the visible signs of money printing, because they are so heavily financed by borrowing (save groceries, perhaps), and that’s the conduit from the Fed to the consumer.

    the slice of pie argument seems to accept the premise that demand increase causes a rise in prices, while actual giving the fixed money supply answer as why that notion is incorrect bar expanded money supply.

    I do agree that this cant be ended gradually, but they’ll try, and IMO, they’ll chose the hyperinflation solution= expand M.S., vs the deflation solution=repudiation.
    But whether that choice will have the final blow up it seems to imply is the unknown.
    but its the easier choice to make now, esp. as the leeches can benefit all along that route
    (100 millon warhols, anyone?)

    • Andrew Gutterman December 27, 2013, 6:06 am

      Who will choose the hyperinflation solution? The government? How can they? Our government, in its infinite stupidity, gave away central bank control to the private sector 100 years ago.

      The FED is owned by the banks. The banks don’t want hyperinflation as that would mean their loans would become worthless. So they will fight tooth and nail to maintain the status quo, which means low inflation.

      What they will eventually get is deflation of the debt, via massive defaults. There is no way there is enough income available to support debt service, let alone debt payments, once the economy really slows down.

      Its only a matter of time…


      • Chris t. December 28, 2013, 4:51 pm

        “massive defaults”

        that’s my point, not going to happen, thats the repudiation route.
        Sure some municipalities might go there, like Detroit, maybe ka poh-dunk state and its debt (thone AL or MS for ex.), but no big one.
        Remember CA’s inability to even pay out tax refunds, other than with IOUs, that were back stopped by the feds (via private bank acceptance?)
        there is no need or desire for the important sovereign debt to default, they’ll print more to redeem as promised, thus choosing NOT to repudiate
        who is buying up all that federal debt roll-ever?
        why should they stop?
        the blow up, or blow in, Rick mentions, will stop then, nothing someone.
        and then what?
        thats the question here, we’ll know at some point

    • mario cavolo December 27, 2013, 8:35 am

      Chris, to my best understanding, hyperinflation happens by a policy “choice” or set of choices and very much “is” the final blowup….its not a trend or gradual happening or combination of circumstances that sort of brings it along…Cheers, Mario

  • Snorky December 27, 2013, 2:10 am

    I don’t think the deflation/inflation arguments are mutually exclusive. In the end, it all ends in a deflationary collapse due to the magnitude of the outstanding credit/debt. We could have the following:

    (1) Deflation in some assets and inflation/hyperinflation in other assets (it could be argued that we have that now) followed by a deflationary collapse
    (2) Deflationary collapse
    (3) Deflationary collapse preceded by an intervening hyperinflation

    If we get bail-ins like in Cyprus, we will have (2). If we get a panic by the Fed that increases QE after one or two tapers, we will have (3). Anyway, place your bets ladies and gents and GLTA!

  • Flash December 26, 2013, 11:37 pm

    First thing that struck me was why set this up so you compare deflation with “hyper inflation”. It seems that hyper doesnt apply to deflation. I would not wish hyper inflation on many countrys. Imagine such velocity of trasnaction in cash,checks etc that the rate of increase in money is parabolic and doubles monthly or more? We curently have such low money velocity that hyper inflation isnt in the cards. I tried to read many of the previous emails but there are so many. Rick made a point earlier that govts are at the root of most problems that economies have. Most of the risk that exists in our nation and EU will come from excessive public sector spending. Politians are good at saying yes and looking busy. Let us hope we have the guts to fire many of these folks and get the hard decisions made that make govt smaller.

    • Redwilldanaher December 27, 2013, 2:24 am

      “Let us hope we have the guts to fire many of these folks and get the hard decisions made that make govt smaller.”

      They are the borg, replacing them won’t matter as the new ones will be assimilated.

      You can opt for peaceful secession or a new constitutional convention that attempts a loose confederacy where the FED and DC have no place in it.

      • mario cavolo December 27, 2013, 3:01 am

        …back on your secession point Wayne, noticed a draft put forth recently to divvy California up into six states…you’re right, at some point in the future, something along secession lines is going to gather more steam…Cheers, Mario

      • Redwilldanaher December 27, 2013, 4:45 am

        Thanks, I caught that story Mario. As has been noted here many times, there is a strong divide now in this so-called country or corporation as some call it. I don’t see that changing unless forced or in response to something dramatic occurring. Cities dominated by free lunch/coercive machinery. Outside of those its mainly people that just want to be left alone that are growing increasingly frustrated by government overreach in nearly every conceivable way. That’s the trend which I would expect will continue. I can see the just leave me alone crowd recognizing the obvious futility in trying to solve issues with their polar opposites in a rigged arena and then deciding that another solution is the only way. 3 more years of this NWO puppet followed by another NWO puppet elect may be the enough is enough moment especially if the centrally planned stock and bond markets, etc. begin to spiral the other way due to decreasing marginal returns on manipulation.

        In the end the only thing keeping Amerikans enslaved is themselves. We could peacefully walk away and refuse to play the game. I always bring up Tank Man but that’s an event that would force them to show their hand. If Texas seceded would the feds naval blockade them and station ground forces? How would they justify it through State media? False flags? They’d have to make every Texan a party to the false flag. Doesn’t seem possible. Once one state leaves its game on for many others. Let those that want to go over the cliff go. They’re the ones that brought things to the precipice in the first places.

  • Andy Gutterman December 26, 2013, 10:05 pm

    I ran across this chart on FRED the other day:

    Couldn’t find any rational explanation for it until this morning, when I found out about Steve Hanke, professor of Applied Economics at John Hopkins University:

    “The Fed and policymakers, he says, have completely misdiagnosed the situation by focusing on the wrong valve. To understand the problem, Professor Hanke breaks down the total amount of money circulating through the economy into two categories: “State money”, which is high-powered money supplied by the Fed, and “bank money”, which is money or deposits created through private banks.”

    “The Fed’s contribution to the total money supply is only 15%, whereas 85% is created through the wider banking system. If we think of these as two valves, the Fed has opened up the floodgates of “State money”, which mainly helps the financial markets, while squeezing “bank money” created through the interbank lending market—the exact place where the overwhelming majority of loans are actually created. The net result has been a booming stock market but a very slow economy.”

    “To fix the problem, Professor Hanke argues that the Fed needs to allow interest rates to rise so that banks will begin to lend to the wider economy again.”

    “When that happens, the interbank lending market should begin to function normally, opening up a much needed relief valve to small and medium-sized businesses, which also drive half of the jobs in the U.S.”

    We all know what the FED thinks about interest rates. They want them as low as possible, so as to get people to want to borrow again. (The FED doesn’t seem to understand the concept that low rates discourages lending) So the FED is not going to listen to Professor Hanke, or anyone else with half a brain. The FED is going to pursure its deflationary policy until it creates the next crisis, whenever that may be.

    We certainly won’t get hyperinflation out of this.


  • redwilldanaher December 26, 2013, 8:18 pm

    Off topic for this week but on topic relative to a few weeks back. Thought you’d want to see these graphs:


    A good graph: What could go wrong? Bearish sentiment has hit a 25-year low at 14%. RA

  • mava December 26, 2013, 6:31 pm

    And there is this too “…The implosionary force of a quadrillion dollar…”.

    Numbers-wise, it is true and beyond argument at this point, that if the rules of the game are obeyed, the current situation does result in the implosionary force.

    What if the rules are changed?

    What if the monopoly gametop game is stopped, and the kids are sent to bed without even as much as making sufficient record to be able to continue another evening?

    I think that any prediction we make, is made necessarily on assumption that the rules of the game must be observed. With gold being money – the rules will be observed no matter what, because if the borrowers don’t pay up, then the lenders will.

    But with the dollar? Any amount of dollars could be created in a few seconds, and distributed to those who must pay up. The lenders, in this case, will not enjoy the windfall, yet, they will not be destroyed by their own obligations either, for as long as they are to some degree the debtors to someone else, they too will be bailed out at the expense of the each dollar bill purchasing power.

    So, then we are back to how much devaluation can the people bear?

  • mava December 26, 2013, 6:18 pm

    “…The implosionary force of a quadrillion dollar financial shell-game cannot be held in abeyance indefinitely. I continue to believe that the huge new tax represented Obamacare will be enough, at the margin, to tip us into Depression. RA”

    I continue to struggle with this. I agree, of course, with the notion that the shell-game has to collapse, and that Obamacare represents a huge new tax. The trouble is, for me, in making the determination if this new tax is going to be the last straw that will break the shell-game.

    Mathematically, this is similar to how a human mind views progression functions.For an illustration, I suggest taking a look at the chart of the dollar devaluation frequently presented as a picture of torn dollar bill. If we are at the devalued end of the chart, then the past devaluation seem to be huge, and the future devaluation seem to be impossible. This is because we are at the lowest chartable value already (zero, almost) and there isn’t seem to be a way to get lower than that.

    Yet, if we were looking at that same chart half a century ago, then it would seem impossible to us that things could get much worse.

    The truth is, of course, that even if our dollar is now only five percent of the original dollar by value, there is still room to devalue it another ninety five percent down.

    To those who lived in 1912, everything is already lost, and no future devaluation can be of any material significance. But we do manage to eke out a living using only a fraction of a dollar value.

    Thus, how do we know when enough is enough? How to find the absolute limit of impoverishment, beyond which no shell game is possible?

    Say this Obamacare tax will devalue the dollar another seventy percent. How do we know that that will be enough to stop the shell-game. How do we know that the new slavish generations will not simply consider their miserable existence a new normal?


    Unlike financial trickery, which is geared toward inflation, Obamacare is pure deflation, since the day-to-day costs of providing health care must somehow be paid with someone’s real money. If the cost all medical procedures were to quadruple tomorrow without a commensurate rise in income, how would that be inflationary? RA

    • mario cavolo December 27, 2013, 2:57 am

      I like your question phrasing here Mava,

      “How do we know that the new slavish generations will not simply consider their miserable existence a new normal?”

      The answer is that it already IS a new normal. You make a key point that a generation of households feels that whatever societal and household situation they entered into is their “normal”.

      In the U.S. for many , that very normal future is a low wage future. U.S. manufacturing is now growing for various reasons and that trend will continue upward including reshoring. That’s great, that is and will create jobs. The commerce dept has finally wised and making more and more effort to increase U.S. exports, which are on the rise, and at record levels to China at $110 billion last year yet just getting started so plenty of upside left to that number. However, as noted by Rick and others elsewhere in this thread, the U.S. is competing with a global labor force and so the above framework will depend on U.S. workers accepting lower wages in those job positions. Now we also see how Obamacare fits in, the model is this:

      “Two income household at lower (manufacturing or otherwise) wages, Obamacare subsidy, shop at big warehouse/discount stores, welcome to the new U.S. suburban socialism lifestyle.” If you’re lucky enough to be in America’s tier 1 sector of society with a nice Fortune 500 job, etc. terrific, you and yours are doing ok. If not, you’re in this tier 2 group, its just daily existence with acceptance of tempered aspirations.

      Cheers, Mario

      • mava December 27, 2013, 5:50 pm

        The powers that be always view socialism as a convenient method to quail the growing dissatisfaction of the people with the results of government’s meddling with the economy. This is because the first outcome of socialism is the narrowing of the spread between the rich and the poor, which happens not through the true rise in living standards but through the redistribution averaging.

        But then the economy takes a dive, an there is no longer a way out of ever worsening conditions brought about by the socialism.


        Just so, Mava. You’ve also perfectly explained Obama. The soon-to-be-hatched scheme to bail out health insurers will severely test the limits of Obama’s kind of socialism. Because the cost will run into the trillions of dollars, with only America’s beleaguered middle class to pay for it, it is already foreseeable that there can be no winner in this fight, only two big losers: the health care system itself and its patients.

  • John Jay December 26, 2013, 3:13 pm

    Not at the Post Office!
    First class stamps are going up 3 cents 1-26-14 to 49 cents.
    That is about a 6.5% increase.
    Bulk mail, periodicals, and the package rate will be going up 6% as well.
    So, a first class stamp will have a price increase equal to what a stamp cost when I was a little boy!

    But wait!
    The Postal Regulatory Commission tells us the increase will be “temporary” for 2 years only.
    Like income tax withholding during WWII, perhaps that manner of temporary!
    Let’s see if UPS and Fed Ex decide to raise their rates.

    And yes, I know all about their pre-funded health care issue.
    Why don’t they quit delivering magazines and junk mail for next to nothing, and shut down the money losing
    Post Offices?
    And layoff 70% of their workforce?
    I wonder why?


    Why? Same problem as with teachers, transit workers and all other public employees: payroll is no longer the big expense; pensions and healthcare benefits are. You could lay them all off, discontinue mail service entirely, shut down the schools, and taxpayers would STILL be saddled with enormous, ongoing costs. RA

    • John Jay December 27, 2013, 3:37 am

      Speaking of the Post Office.
      I just received renewal forms in today’s (12-26-13) mail from my insurance company and the date on the Pitney Bowes meter stamp is 11-21-13!
      Lost for a month somewhere!
      Luckily my insurance company sent me an e mail when I did not respond right away.
      Maybe things will improve at the Post Office when the 6% rate increase goes through on 1-26-14!
      I sure hope so!

  • BG December 26, 2013, 9:46 am

    Loved reading all the posts —

    One thing that strikes me is my need for confirmation by others for my opinions. I read voraciously about these very topics, trying to come to a conclusion and begin making plans accordingly. I have seen this hallowed blog and its leader, Rick, change directions, which is understandable given the complexity of all the illogical moving parts. There is simple economics and the way things SHOULD be done — which I want so badly as a man of logic from a time when men could generally be counted on to do the right thing by their fellow men. But today it’s as if the devil himself is pulling all the levers — the worst of man, Godless – has permeated society because our corrupt leaders have allowed it. People do follow leaders – even corrupt ones because no one is there to expose the lies. Once we lost the media I believe we lost our checks and balances. If the press were exposing the truth these lying bastards wouldn’t have a place to hide. Instead, they are emboldened to do as they please. They really don’t care about us or getting caught. If the media had a conscience and values they would kick the bums out of govt, the corporations, teaching positions, media / movies / TV / radio / internet, etc and far better people would begin filling in the leadership roles to help knock the devil out his many positions of power. Good leaders do the right thing and give people hope. We were never perfect but in our prime this country was better than anything that came before it. None of the blogs today are very hopeful so I wanted to point to the one place I feel could change and make a difference.
    Next blog — how do we change our course!
    Merry Christmas

    • mario cavolo December 27, 2013, 8:46 am

      BG, you sound like one who would enjoy and appreciate the Pope’s recent rant on global capitalism.

      And as far as your “If the press were exposing the truth these lying bastards wouldn’t have a place to hide.” line goes, actually, there has been plenty of press exposing all of it over the entire past several years. We’d have thought the age of the internet would have helped expose the “truths” and it has. That’s what’s so mind boggling; the machine still on the same course with abandon and lack of punitive consequences for the majority of them.

      Cheers, Mario

      • Bill December 27, 2013, 9:51 am

        Super Mario –

        Come on – if – and of course that’s a very large IF – if the press was truly dedicated to the truth and dogged the bastards who are taking this country down I think we would have a fighting chance. But, the media is owned by left or right leaning individuals / corps and what’s lost is the truth. The simple damn truth.
        Our food is unhealthy;
        Our schools underachieve and spit out underachievers;
        Our foreign policy serves defense contractors, big oil;
        Govt is crushing the middle class with taxes, healthcare, jobs lost overseas or to illegals;
        Lack of moral leadership by allowing the smut in the movies, TV and games kids see and play;

        People want the right things done and there’s no voice for them speaking the truth in print or TV. All you see is mud slinging by the libs and conservatives in the ‘press’ and the people are sick of it. It’s become quite obvious the Dems & Repubs are one and the same. Both parties do not care about us – – both behave in a sociopathic way. There is no other explanation for how systematically this country is being dismantled. Abe was right: America will never be destroyed from the outside. If we falter and lose our freedoms, it will be because we destroyed ourselves.
        A political messiah could be out there somewhere and both parties would flog & crucify him/her to keep their status quo.
        Sadly, this blog goes to a few hundred people and dies. You need people who love the country at the microphones 24/7 countering the lies we hear with the truth.

        People would respond.
        There are so many good people out there.
        All they need is a voice.

        BTW – If the Pope sounded like this the other day then I am going back to church.

      • mario cavolo December 27, 2013, 2:38 pm

        Hi Bill…I am with you all the way on this “It’s become quite obvious the Dems & Repubs are one and the same. Both parties do not care about us – – both behave in a sociopathic way.”…George Carlin lover’s here know he said that truth best 🙂

        I just want to suggest I’m the impression that the laundry list of items you mentioned and other hot topics have been pretty much hammered publicly on the various battling talk shows, Beck, Limbaugh, O’Reilly, exposes, internet media sites, Rolling Stone…etc. Even if not by the major media, people still seem to have reasonable access to what is really happening…again its the total malaise in response that stands out…

        Cheers, Mario

      • BG December 27, 2013, 8:42 pm

        The malaise is because those who are informed and passionate about the topic feel they have no way to make a difference — hence the malaise.

        The real issue in my book are the uninformed who believe everything they read or hear in the media. That’s your electorate as you know. If this group was getting the truth the bums wouldn’t have a chance at the polls.

        Really confounding no one has started a news service dedicated to the facts & truth. I wouldn’t read another source if that were available.

        Mario? Anyone? It starts with an idea —

        Truth Reporter awaits!

      • mario cavolo December 28, 2013, 9:40 am

        Right Bill, that’s what I did my best to do with respect to my book on China; ie, what’s really going on. There’s only so much time in this life to cover the issues! Book’s going to be published in North America around March…Cheers, Mario

  • Duane December 25, 2013, 8:52 pm

    US paper dollars are not trash, but merely the coin of the realm and people are clamoring for them more than ever. Everyone here would like to have more of them. We price our products/services to get the most of them possible. Most trading countries in the world have real faith in the US dollar. Small foreign countries, businesses, and even criminals prefer to hold much of their wealth in US dollars. Foreign bonds are being issued denominated in US dollars which will keep up the demand for them to cover the debt service. Eschew the extremes. As Mario points out, old models will not work in a global and interconnected world. Expect more (or less) controlled debasement/inflation with painful downward pressure on labor/wages and by extension some hard asset classes like in the 70’s. With competitive currency devaluations more or less keeping pace with each other, expect food, fuel, commodities (incl. gold and silver) and basic living expenses to rise as Americans and Europeans can afford to consume less and less as true wealth continues to shift east. It will be more like water torture than a waterfall. Currencies will trade in a broad range back and forth with each other over the next few decades. Some may go off the board (Euro back to the way it was), Argentina, et al. but the dollar is here to stay. For a long time (at least another 20 -40 years). Never in monetary history has the dominant world reserve currency gone into hyper inflation (see Hoye and Armstrong’s research). We are the biggest, safest and most liquid pool in the world and that will not change anytime soon. There is no realistic alternative.


    I wouldn’t disagree with a word of this, except for the idea the globalism will somehow prevent a precipitous collapse. The implosionary force of a quadrillion dollar financial shell-game cannot be held in abeyance indefinitely. I continue to believe that the huge new tax represented Obamacare will be enough, at the margin, to tip us into Depression. RA

    • mario cavolo December 27, 2013, 8:53 am

      Now we’re talking the heart of the matter! On one side, global growth is definitely there in a way to help buoy the U.S. while all the shenanigans unfold. The S&P 500 represents 50% of overseas earnings.

      Yet, the knife cuts both ways. When the financial shell-game as Rick refers to it here hits some crisis anywhere in the globally linked system, the havoc to come will therefore also be instantly globally linked. I can only imagine what the charts on my trading platform will look like on that day. Who, how, what, where, when is anyone’s guess along with how it is all going to look when the dust settles. No matter the anarchists, I genuinely hope this never happens, as I believe the suffering and chaos will be far worse than the benefits…Cheers, Mario

  • mava December 25, 2013, 8:00 am

    “…all debt must be paid if not by the borrower then by the lender…”.

    You’re confusing the money with the trash, my friend. That was said about money, i.e. gold. It is, incidentally, why they called gold “honest money”.

    Now, what we use today is not money. It is trash. It is true that by the virtue of having a complete control over these markets, the socialists made us use the trash as if it was, in fact, money, but that still did not make it money. Why should I insist so? Because, if it did, then the saying above would apply to what we think as of money today. It does not, hence, it is trash.

    When you are given credit today, the lender pays NONE, and you pay NONE. The people around you, however pay 100 percent of it, and they are too stupid to understand that fact. When you accept credit, you play the role of a peddler, for it is you who takes the counterfeit out for the circulation. You are actually the one mixing the fake note in with the rest. So, again, neither the debtor, nor the lender pays in our case.

    You are given the counterfeit, which is deriving its purchasing power STRICTLY from the fact that it is indistinguishable from the same trash notes that you and I already hold in our pockets.

    You own a house? Say you just purchased it. You can stop paying, and other than to make an example out of you, there is zero need for anyone to enforce the terms. You can keep the house, – you will never have to pay.

    And the bank that gave you the credit, it doesn’t care either. They did not borrow this money from anyone, therefore they have no one to return it to. They “digitally” printed the money into existence.

    And the rest of the people who paid for it all at the moment their money (dilutable trash) were diluted by the new issuance? They do not have enough mental facilities to understand the process. Unless their government shows them the proof of the inflation, they don’t believe there was any. They are the funny ones. The debtor and the lender, at least these two both believe that the other pays.

    But those who truly pay, they just believe in a free lunch, magic. They truly think there can be a single extra dollar printed without inflation. We are all those other people, most of the time. Except when we load or take out the loan ourselves. So here is my advice: Borrow More.


    Whether our money is honest or not, the debts we owe are absolutely real, and they will all have to be paid, down to the last penny, in one way or another. Meanwhile, it’s unnecessary to determine who, exactly, will pay, since we all will — through the ‘mechanism’ of a collapse in the standard of living. RA

  • Jason S December 24, 2013, 6:32 pm

    Since all money in the world (all currency is fiat) is loaned into existence, then there is an exponential growth of debt burden to be born. The central banks of the world will continue to increase the amount of money with reckless abandon to keep the system going since to not do so will cause the system to implode.

    The central banks have no tools other than money creation to deal with deflation and they only have money creation as a monetary tool to deal with their various mandates to keep their economies stable. So for them, they are a hammer and everything looks like a nail. All they can do is foster inflation and since their tool is something that grows exponentially, then that inflation will grow until it reaches a point confidence is lost by the lenders.

    As Rick has stated, all debt must be paid if not by the borrower then by the lender. Once the lenders start to loose money then the system goes into reverse and the deflationary spiral begins and cannot be stopped until the market clears (the excess debt is paid or forgiven).

    Since central bankers have only the inflationary tool and the politicians that influence (dare I say control) them are short sighted, myopic narcissists, then I believe they will use that tool with reckless abandon until it is worn out. So I see increased inflation (which will continue to be exported overseas to developing countries for a little while longer before coming back home) while deflationary pressure mounts through decreased standards of living here at home until the point is reached that our lenders break and then deflation has its way.

    • Mario December 25, 2013, 4:39 am

      Nice Jason, yet again we must consider that other interested parties with big skin in the game are hand in hand reacting and responding to each other. Look at Japan’s major policy shift a few months back now giving us a plunging yen and soaring stock market there. All the major economic books can and will make all such types of unexpected pronouncements suddenly shifting the scenario once again. We’re in uncharted territory.

      Cheers, Mario

  • mava December 24, 2013, 6:05 pm

    You can bring the horse to water, but you cannot make it drink.

    People are accustomed to theft now. You can’t change that. This is part of who we are now. For this reason, it is impossible to turn this around. You can’t talk the people into capitalism.

    Some will argue, that we haven’t lived in capitalism for a very long time, at the very least the last one hundred years it was plain textbook socialism. And yet, we lived a lot better.

    Yes. May-be it wasn’t a text book socialism, but more of a socialism-fascism mix, but yes, we lived better. I would explain, however, that this should happen every time a parasitic system takes off. Say, someone stole a car. He gets pure benefit, at first. He doesn’t need to pay for it, yet, he gets to ride it. But, then there slowly creeps up the need for the maintenance. It doesn’t get done, not on a stolen vehicle! Therefore from that point on, the ride only gets worse.

    Same with countries. At the point that America decided to steal the fruit of capitalist production – the wealth accumulated, it was pure benefit and a joyride. It started to gradually wore off the day one, however. By now, the decline is very noticeable. The decline will not become arrested, – it can’t. It has to progress to the point where someone else takes over, or somebody is made to pay for the next few years. That is, the decline will progress unless we make a war on someone and take their life resources, their wealth.

    By ourselves, we cannot return. There is no such thing as return to holiness. By it’s very nature, it is so, that if we could not see how sick is the socialist idea back when we were a healthy nation, then we will not be able to see than now, as the first think socialism does is it mixes up the cause and the consequence in order to make such return impossible.

    Our future is nothing but the theft and the plunder. It is that or the suffering. Until the end.

    • Mario December 25, 2013, 4:33 am

      Your view of socialism sounds quite extreme mava. A combination of market driven capitalism and socialism seems to work quite nicely under the guise of leaders who are actually trying to govern in the interests of the society. In the US they are instituting more and more socialism but after letting capitalism first destroy a swath of the society. Here in China, socialism was first, now they’ve added capitalism to it. So for example, there is a rising private enterprise economy, yet there is still reasonable SOE driven societal support, such as inexpensive service driven healthcare. At the moment is in a good balance, of course well see where it’s at years later…

  • L fry December 24, 2013, 8:13 am

    Hi folks, Where I live ,in a very upscale area, all the big Mcmansions are on the market . I see truckloads of wood going up the street. Hardly any Fedx /Ups trucks running , ie no spending .We are in a Huge contraction that’s going to get worse. John Jay+Andrew are both correct. Folks in their 50’s dreading the layoff notice. As Scrub so eloquently said ” this suckers going down “. Tom, As Jim Sinclair says , GOTS.All the QE’ing does is slow the collapse .

    • John Jay December 24, 2013, 2:15 pm

      L fry,

      I am beginning to believe we may not see a dramatic collapse in the USA.
      I think we may just see a slow, continuous descent into
      poverty, squalor, and thuggery.
      That process is already evident in American cities.
      At the low end of that scale we have the city of Detroit, where that process has run its’ course.
      Other legacy cities on the same slide as Detroit abound in the Post Industrial Rust Belt.

      Individuals posting here from all over America can probably attest to the decline in cities they grew up in.
      In my opinion, the process is irreversible.
      All you can do, is make some more money to be sure you will be able to afford to live in Greenwich or it’s equivalent as the economic cancer consumes this land.
      There is no better way to spend your time.

      And your chances of achieving financial security are much, much better than your chances of seeing this nation return to general prosperity and safety.
      In my opinion, a return of that nature is a forlorn hope!

      • Mario December 25, 2013, 4:22 am

        What you’re witnessing JJ is a combination of economic pressure along with the destruction of marriage/ family. Modern America doesn’t like to acknowledge the devastating emotional damage to spouse and their kids via divorce and the reality of its aftermath, economic and emotional. It’s a deep wound in the society, much like the wound of the holocaust Jews feel. Add to it economic despair and frankly, a man has truly lost all he feels worth living for and loses it. In this sense we could also call single parent household a deflationary force too, highly limiting that household budget.

    • Rick Ackerman December 24, 2013, 9:38 pm

      Two interesting developments I can report:

      1. A childhood friend who raises money to hand out to very needy cases in Asia and Africa says contributions are WAY down. His donors are hard-core givers who would cut back only if they themselves were feeling serious economic pain. (Click here for information about The 100 Friends Project.)

      2. An art dealer I know, owner of one of Atlanta’s top galleries, says the market inexplicably turned flat several months ago.

      • John Jay December 25, 2013, 3:48 am

        Rick, the growing poverty in the States is bad enough, but the insane levels of violence and brutality are very disturbing.
        I hate to assume the role of the “When I was a boy” oldtimer, but seriously, I don’t recall any parents killing their children over a custody dispute when I was a kid.
        Now, it happens all the time, like that lunatic that tossed his kid off the roof in NYC, and then jumped himself.
        Human nature hasn’t changed in 50 years, it must be the drug culture.
        How else could such a thing be possible?
        Scary, very scary indeed.

  • steven December 24, 2013, 5:43 am

    There’s a great documentary called End of the Road: When Money Became Worthless. It talks about inflation and deflation. The reasoning is sound and spot on. Its worth a watch if you can find it.

  • VLAD'S BACK December 24, 2013, 5:38 am

    rick, I disagree with the primary argument.
    because IMO, there is ZERO huge deflation vs. hyper inflation debate.

    since I consider hyper inflation possibility to be totally and fully moot, zero chance,
    and for most of the points you already list, and many more, that I know, for sure.

    however, the most important of all, is this—the ALL powerful, will NEVER allow,
    their already MASSIVELY accumulated wealth, to be diluted, by hyper inflation.

    No way. this is their master plan, to destroy others wealth. via debt and it’s service.
    it’s a great plan, and it will work. I would like to be one of them. but then again, humm,
    I have trouble working with others, ha, as you well know, I only fly solo. until death.
    and I only write here now, since I am bored, for I lost my ‘sperm bank,’ as jack greatly told,
    in ‘the shining’, talking to lloyd, the spirit bartender (yet excised, in recent tv p.c. lib editings),
    so, I’ve reverted back to offend, your perennial rat pack. (but now you’ve got a ‘troll’ klingon, ha).

    dude, here’s the ticket.

    there are only 2 possible scenarios, in my opinion.

    devastating deflation occurs overnight, to last 2 decades for any recovery, of even a semblance.

    or, the tenuous daily milking of fiat money worldwide, continues on and on, for years.

    I think there is no chance for hyper inflation. yet that is the illusion, that the ubermasters,
    want to keep alive, as long as they can, thru their owned tabloids and puppets, worldwide.

    time, and shortterm trickling dilution, are the only battling factors, as far as I see.
    how far will it go? 2014 starts soon. I never dreamt the BULLSHHTT would last this long.
    how long can it go? well, if you look at the one late post I made in your prior weekly blog,
    the resemblance of overlaid charts, to now, vs. 1929, 1937, 1987, and 2007,
    it’s incredible, especially in the angle of ascent, it is identical, on all four;

    and 3 of them, show there is no more room, to run, before the indubitable cliff dive.

    however, IMO, the most important one, 1929, historically, emotionally,
    the 1929, still shows, there is much more room to run. because 1929, was tulip mania time.

    but now—humans are headed to the—MEGA tulip mania, of alltime. entire planet.
    why? as you say—‘da boyz.’ ha. overnight. doin dirty deeds, in the futures table.
    and I’d like to be one of them, and be a ‘master of the universe’, as tom wolfe said.


    I mostly agree. As I continue to remind readers, the most deflationary event that I can imagine — the banks failing to open one weekday morning — is hardly unlikely. Another reminder: If you are hoarding physical bullion, you should also be hoarding $5s/$10s/$20s by the shoeboxful. U.S. currency will be the coin of the realm after the inevitable Day of Reckoning.

    • redwilldanaher December 24, 2013, 9:31 pm

      Vlad, don’t cross the line. Your commentary is entertaining and humorous. Don’t want to see you exiled again.

      The comments this week remind me of the old days. Great comments to read on the whole.

      • Cam Fitzgerald December 25, 2013, 8:31 pm

        Just what I was thinking, Red. Like the old days.

      • VLAD December 27, 2013, 4:02 am

        redwill, I wrote you a repost…..


        C’mon Vlad! This post was way off-topic…


      • mario cavolo December 27, 2013, 9:38 am


      • VLAD December 28, 2013, 6:11 am

        you are wrong, rick. what I wrote re clintons to redwill, is right on the money, for the BIG picture, of your current specific weekly blog. it’s the BIG picture. that the game, all games, are LIFE RIGGED. by the 1% ubermasters, and their 10% lackeys.

        because, in order to see the truth, you have to step back, a lot, to see BIG picture. and I pointed to redwill, several consequential factors, re past 2 clintons murder history, and of 911 and also current crimes, which show, the path that will come, to world, assuredly; albeit whether world markets prices go up another year or 2, or not. and if you keep censoring me blatantly like this, I will quit posting.

        I think this market will go into froth heaven. 1 or 2 more years. highest market mania ever. the huge volume, in 2 up days, last 2 weeks (if yahoo charts are accurate) assures it; yet, all based on nothing, except lying, cheating, crafting, carving, and crapping on those weaker, and more stupid. the duped dufus caucasianus middle-classus extinctus americanus.

        and 1929 chart was very similar to the current one, so this current (fake) rise will go on—however, this one will rise higher, than 29’s, since it’s a bigger fake rise.

        until, one day, that rick ackerman himself, actually plays the role of the famed economist irving fisher, and openly states, like fisher did, and only a few days, before the huge 29 major crash, that–stocks have reached a ‘permanently high plateau.’ haha.

        and here is fisher, actually on film, trying to cover his butt, in oct. 23 ’29, soon after he made his comments, and after the market was already crashing, but still had ahead, oct 28 and 29, black monday and tuesday–

        youtube is great.

        and like I already wrote before, 10 days ago–CURRENT MARGIN IS ALREADY AT AN ALLTIME HIGH.
        however, margin can keep climbing. 1 0r 2 years. until it implodes fully–in only 1 day.
        just listen to cabdrivers and shoeshine boys. when they tell you to get in, then get out.


        Fisher? Hardly, Vlad. The Hidden Pivot analysis I use to forecast prices does not permit such a bold pronouncement as ‘stocks have reached a permanently high plateau’. I offer bull market targets cautiously, one rally leg at a time. And because I keep a close eye on the intraday charts, where the first sign of a major downturn would be apparent, it’s unlikely I will miss the turn by much if at all.

        For the record, my current target for the DJIA is 17622.18 — 1144 points higher. I am therefore no prospective Fisher, just someone who sees the market moving higher against the certitude of a Second Great Depression that will make the first look like a picnic.

        Concerning the Clintons and other conspirators, to me Hillary is the real-life version of the Angela Lansbury character in ‘The Manchurian Candidate’ — perfidious, power-hungry, and capable of destroying whatever remains of the Republic when Obama has finished with it. But what does that have to do with the Inflation vs. Deflation debate? Surely you have some interesting thoughts on this?


      • VLAD December 29, 2013, 7:26 am

        rick, you are funny. you make me laugh, or at least chuckle.
        not because you are wrong, but because of your take on things.

        first, I find it funny, that you actually believe, that when the big shht goes down,
        you will be able to twinkletoe out, due to your ability, to hear prior, when music ends.

        I do not agree. I think your subscribers will be burned to the bone, then.
        and I think it will happen overnight, with your well known friends, ‘da boyz.’
        and the only way, you can survive it, is, if you are part of the take. one of them.

        which I have always considered, very possible. but time will tell, your own tale.

        as to angela lansbury, I have always considered meryl streep, much more
        disgustingly menacing, in the remake; even though the remake, is utter monkey crap.

        I can only compare hillary clinton to stalin. so despite the current [Obama],
        trying to destroy all white middle-class—I still think hillary, would have been much worse.
        because she is much smarter. and more vicious. and with many more ‘hits,’ under her belt.

        and I am offended, that you do not add what I wrote, about 2 young women, butchered.
        IMO, both, by the clintons. barbara olson, in 911. and in 2013, bill’s ‘close ‘ assistant.

        and what does this all have to do with the moot hyperinflation vs. major deflation debate?

        EVERYTHING. and that is why it scares you. because YOU are being played,
        along with everyone else. unless you, of course, are part of the IN 10% uber crowd.

        and then, of course, none of this means anything, since you are just collecting,
        future room 101 visitors. compiling and collating. which I consider, quite possible.


        I’ve never had any illusions about dodging the coming Depression, Vlad, especially since it stands to be so much worse than the 1930s Depression. I can only hope that I’m resourceful enough to keep my family out of harm’s way.

        Regarding Hillary, we evidently agree, although I think you’re far too mild in your characterization of her. And yet, her candidacy keeps chugging along, inured to challenge and aided most recently (and brazenly) by the New York Times’ attempt to sanitize Benghazi. If Hillary wins, the only logical explanation is that Americans richly deserve her.

        Regarding Inflation vs. Deflation, I fear that the argument is ultimately moot, as you seem to be implying, since either course leads to the same place: a plunge into deepest poverty for the West. If there’s a reason to doubt that The Illuminati, or The Banksters, or The Powers That Be will wind up with all the assets, it comes down to whether even they will be able to weather the economic Armageddon that lies ahead. In that regard, I see Buffett not as one of The Conspirators, but rather as a very smart investor from Nebraska. RA

      • VLAD December 29, 2013, 7:40 am

        ackerman, if you have not seen these 2 films, I think they will affect you.

        talk radio.

        adam resurrected.


        I’m a film buff, Vlad, but I somehow missed both. I’ll check them out and let you know. RA

      • VLAD THE IMPALER December 30, 2013, 4:39 am

        Vlad, although I think you have valuable contributions to make here, please note my substitutions and deletions for future reference. I despise Hillary and Obama as much as you do, but this is not the place to give vent to those feelings with such raw vehemence. Better to do so at ZeroHedge, which is to be cherished for its no-holds-barred policy. RA

        rick, you always make me laugh.

        “Regarding Hillary, we evidently agree, although I think you’re far too mild in your characterization of her.” you say.

        haha. I still laugh, while I post it back to you. despite all I previously wrote, about hillary.

        however, I have a couple of additional points, re witch beetch, hillary.

        1. prechter wrote an excellent dissertation, re obumba, before he was re-elected.
        and he bottomline said, even if he was re-elected, he was the closest reincarnation to nixon.
        it’s on the web, it’s one of the most read pdf’s of all time, according to what I saw.
        he wrote it in 2012, before [Obama] was re-elected. a study on usa presidents.
        and their connection to usa stockmarket action. a very close connection, it appears.

        therefore, IF [Obama] is IMPEACHED, before his term ends, as I EXPECT,
        then, ‘democrat’ hillary, will be dust in wind. for no one will vote for a…democrat.

        I don’t know why [Obama] will be impeached. he has committed so many usa crimes,
        and no one [cares]. however, IF, ‘obamacare’ ha, yeah, ‘care,’ right, destroys usa,
        then the worthless trash pretentious [Obama], will be shown, asap, the ‘white’ house door.
        and brainy-killer-‘it-takes-a-village-but-I’m-the-boss’ hillary stalin, will have zero chance.

        2. I think hillary is major-cancer sick. all her current pics show her looking [unwell].
        so forget stalin hillary, she’s gone. and get rid of [Obama].

        3. I have no suggestions for usa 2016 president. try someone libertarian in mentality.


        News item out today about a DNP fund-raising pitch that raises the possibility of Obama’s impeachment if the GOP should take control of both houses. Here’s the link: RA

      • VLAD THE IMPALER December 30, 2013, 5:42 am

        I hear what you are saying, r.a., but I am what I am, and you are what you are.
        I will not change. and neither will you. I will not ‘clean up’, into p.c. speech.
        so, you can ‘p.c. clean it’ for me, or, ban my i.p. again. don’t give a shhtt, it’s your place.

        all I can say, that when I talk of the big pic, is that, the market is a microcosm,
        of what’s happening, in the ‘real’ world. and myriad girls running naked, outdoors,
        MEANS SOMETHING. and always has, historically, due to the hemline indicator.

        So I concur with you, and near-18k dji, it is. this credit-fed insanity, has longer to run.
        so “happy days, are here again…” or “the rich get richer, and the poor get children…” ha.

        whatever. I no longer give a fahk. for everyone deserves what they get. my motto.

        as to buffett, he is not even worth addressing.

        yes, he is a very smart investor. but also, a true proven bought conspirator.
        and if you do not believe that, then, you are also a true conspirator yourself.

        however, he is not worth addressing. for he will soon be, hopefully, ‘worms’ meat’.

        you know something, rick? maybe you should bring back socialist glib gary.
        for you yourself is getting boring, sucking up to insider decrepit buffett’s arse.

        zerohedge is all over the place. I want to focus your place. oldtimer hardcore comments.

        as to films, dude, I cannot believe, you have not even heard of these 2, I recommend….


        If I had an email address for you, we could take this discussion off-line where it belongs…

      • VLAD THE IMPALER December 30, 2013, 6:10 am

        kid, why do you keep asking for, what I will not give?


        Okay. But don’t take the heat when I withhold posts from you to which I would prefer to respond privately. RA

        ps: I may have overlooked your Oliver Stone movie, but ‘Finzi-Continis’ is one of my all-time faves. I’ve watched it a dozen times, though not in years.

    • Mario December 25, 2013, 4:14 am

      Great points except that the economy of today is global, not U.S. centric. The e disaster cliff isn’t going to come this time. Other interested parties across the globe all have skin in the game together. That makes the previous historical chart comparisons moot, or at least less likely imply a high correlation this time around. For one example, The Chinese are holding most of the cards today, everyone knows it, you think they are going to stand by idle to watch the dollar collapse or soar? Absolutely not, there will be and can be plenty of intervention along this road, all driven by each party’s self interest, to avert an extreme scenario. No rosy pronouncements from me here, just a reminder of the global connections which weren’t there previously.

    • mario cavolo December 29, 2013, 6:11 am

      Vlad has moxy and passion, comes up with insightful points that add to the knowledge base. He may be worth trying to train Rick, perhaps like a hyper adorable puppy that just a bag of jelly beans, on how to behave on this board if he wants to participate in posting here, afraid I might be warming up to his melodramatic style and his threatening not to post here as a result of your attempts to keep him reasonably ON TOPIC brings a welling of tears to my eyes…ooh, occasional sarcasm, is that forgivable gang?

      Indeed, margin is again at an all time high, a scary backdrop to current market heights. Why is copper popping? A million such questions….How can one not be itching with the dare to short January?

      • VLAD December 31, 2013, 10:35 pm

        rick, I have a question for you.


        Whatever it is that Mario — not ‘Maria’ — said to offend you, I was unable to find in his numerous posts anything even remotely as vile and offensive as what you have written in response. Anyway, this is the last time I will communicate with you publicly. If you’ve got a grievance, you’ll need to put it in an email to me rather than attempting to air it in this forum.

        You should know by now that I have little patience for high-maintenance types, trolls, narcissists and others who come in here just to set the curtains on fire. RA

    • DK December 30, 2013, 10:59 pm

      Whoa, what a commentary!

      Aside from the usual drool of the Troll (give it a rest and stop exposing your ignorance). Oh, and while you’re at it, stop b*tching and ACTUALLY do something of the planet. Sound familiar?
      I know I’ll never get an answer to my question(s).

      Rick, you’ve made some pretty concrete points above, I cannot currently dispute them, especially since I fully agree.

      I’ve actually come to agree with Vlad in many of his recent posts, but not all. I know his posts are not easy to swallow for many.

      Hat-tip for the movie mentions.

      “devastating deflation occurs overnight, to last 2 decades for any recovery, of even a semblance.”

      IMO, not going to happen, because that’s remotely optimistic. The real fundamentals are toast and we, as a global population, are traveling down far too many of the wrong roads, in too many areas, at an accelerating pace, en masse.

      Recovery is the wrong term, reboot is more like it, IF we get lucky.

      Humpty Dumpty’s great fall will happen sooner rather than later, IMO, and there will be no return. “Back in the old days” will be the beginning of new fables and tales.
      Some form of garbage will replace what is current, complemented by more 1’s and 0’s. No Amero’s? No SDR’s? Something…
      Perhaps a VeriChip IS on the horizon.

      Come on Vlad, Rick akin to Fisher? I’m with Rick on that one.

      I agree, no one will be immune (at least those who have massive credit exposures to their lives, that are the judge, jury, and executioners). Guess that’s the 99%.

      Clinton is worse than Barry, they’re not even in the same league. Heck, they’re not even in the same galaxy. Is that not completely known to everyone that’s not Gary (or Jill, or Martin, or Troll)?

      Larry Nichols has been mentioned on here many times, if you don’t know of him – get a clue by checking him out. Find out about Hillary. I’m not sure there are words to describe Nichols, himself, except that he is as real as it gets.
      Bill’s on a short leash and he’s a prop, Hillary is ruthless and disgusting. Chelsea “Clinton,” huh? Hillary’s probably going to be the one controlling the drones soon, oh joy.
      She’ll be laughing about Benghazi and Libya over cocktails soon (oh wait, she’s already doing that – “we came we saw he died,” was it?)

      Buffet is practically joined at the hip with Gates, enough said as far as I’m concerned. His purchases into rails and the likes of XOM show that he’s well aware of how this story is likely to end. He’s just as immune to insider info as congress and he’s buddies with Goldman/Blankfein.
      How much more slime can the man possibly keep in stride with, without completely publicly exposing himself. All my opinion for the record. Warren’s a sellout, IMO.

      But, then again, I think it’s going to get MUCH worse. Has anyone read The Road?
      Speaking of exponential functions, Inception (which a few in here have discussed, including myself), you can apply that to the aforementioned novel.

      So many tertiary subjects have been discussed on this board, they’re not going away. Catch my drift? Keep compounding.

      Just my .02

      I hope I am dead wrong about everything.

      Happy New Year’s all! See you all, eventually!


      Thanks for your comments, Daniel. My deepest fears about what we will experience over the next 25 years go beyond anything I’ve expressed publicly, but McCarthy’s ‘The Road’ comes close. Concerning ‘sooner rather than later’, although I agree with you, I no longer trust my instincts, since I was so certain we’d had it when the 1990-91 recession hit. (Remember how Third World Debt was going to capsize the global financial system?)

      If we are both very wrong, the Dow could be on its way to 40,000, even as a broad swath of America’s middle class sinks into penury. This has always seemed impossible to me, but doubters must face up to the fact that the Dow has tacked on 10,000 points during a Great Recession that has yet to end for tens of millions of Americans.

      Most persuasive of all that things must end badly — and this is beyond argument — is that the economy and financial system are sustained by an epic, brazen fraud. Can it continue to fool most of the people indefinitely? I should think not. But I have been wrong about this for many years. RA

      • VLAD December 31, 2013, 10:50 pm

        I have see the film ‘the road’, several times. I find it too idealistic, simplistic rosy. I think things will be much worse. [Worse than cannibalism? RA] So I prefer scifi book ‘lucifer’s hammer,’ over ‘the road,’ as a more specific usa future.

        and, as to my comparing rick to fisher, fisher was a great economist, in his time, except—he made that small comment, right before the crash, which sealed his fame. could happen to rick too, I think. however, 1 difference is, rick is a day trader. so, as long as he does not hold major positions overnight, he could survive. when the music stops. as it certainly will. whether now, or 3 years from now.


        Fisher, a celebrated economist in his day, will alway be known for his famously ill-timed prediction. I don’t see any similarities betwen his life and mine. Have I even made any predictions — other than that it all must end badly, probably in deflatonary bust? RA

      • Redwilldanaher January 2, 2014, 2:30 am

        Rick, I think that “40000” and your comments surrounding it are just about right. When I first got started in the early 90s it didn’t take long before I became bewildered by the degree of detachment that was possible. I quickly realized that reality only ever intrudes on the party very infrequently. The rest of the 90’s demonstrated how long the bs can persist and how high it can run too. I never forgot this information fortunately. When you think about how much control they have over everything, you realize that you just have to trade/invest by your charts. If you’re smart with your options selections you can play almost any market and sleep at night.

        If it not in crash mode, I look at it this way: it will eventually destroy nearly everything. It can happen soon or in the very distant future. Predicting timing way in advance is very difficult. So just chart what’s happening at present and envision the most likely scenarios. I can be just easily convinced of 40000 as I could 4000 and I try to keep my mind that way despite how utterly absurd and fraudulent to the core that it all is and apparently will be for the indefinite future.

  • mava December 24, 2013, 3:11 am

    A reduction of purchasing power is a consequence of a monetary inflation. Deflation is characterized by the increase in purchasing power of each unit of money.

  • Traveler December 23, 2013, 10:38 pm

    I’ll go with Martin Armstrong’s call.
    He says we will not see hyperinflation here because the banks will not allow it to happen as that would cause their bond portfolio to vanish. That hyperinflation scenarios we have seen have occurred in economies in the midst of upheaval but with too little in debt markets, those governments can’t borrow or as in the case of Weimar, a substantial portion of their tax base disappears, hence they make political decision to print.

    Won’t happen here, instead will get the kind of deflation that eventually collapsed the Roman Empire. Essentially, governments and large corporations continued to extract more and more of the people’s wealth until there wasn’t any more to extract. Then the final collapse happens. Obamacare is a very good example of a deflationary event in its forced reduction of purchasing power on the part of those who make too much to get subsidies.

  • mava December 23, 2013, 10:34 pm

    I would offer you to think of this in a different way. Think in a way of real meaning of things.

    The debt. What is it? Simple. The debt means that someone hasn’t been paid yet. There is a promise, however, that that someone will be paid later. What do we call that promise? We call it “the system”. So, the system exist to provide the promise of getting paid, in the future.

    This is not unlike any other scam humans put each other through. There is usually a promise involved, and a system to support the promise. The point of the game is (and has always had been) to:

    1. Get something from you now, in exchange for the promise of a future repayment.

    2. Leave the system, not ourselves, responsible for the fulfillment of that promise.

    3. Let the system fail.

    4. Remain with the loot, because it is not us who did not pay, – it’s the system.

    In another widely used version of this scam, you die and cannot go after the system. Oops. Too bad.

    So, where does this leave us? Ah, yes, the debt. Do you not see this yet? No? Ok…

    What do you hold? The debt? The system owes you?
    What do those who control the system hold? The wealth that you gave them already, in exchange for that promise to be repaid in the future.
    So, which way will the system fail?

    Deflation? Meaning that what you hold will be allowed to rise in value (you are getting repaid), while what they hold (wealth) will fall in value? You really think so?

    Tell me, if this so happens, what would be the point to create this system?

    • Rick Ackerman December 24, 2013, 9:14 pm

      I’m with you until your penultimate paragraph, Mava. Where homeowners are concerned, it inverts reality. To start with, anyone with a mortgage does not in fact own his home; the lender does. And for two, although the real owner, the bondholder, has the deed to a tangible asset, he is stuck with it — so much so that he will eventually wind up renting to you for a pittance just to keep the dwelling occupied.

      In The Coming Deflation — the de-leveraging event of the Millennium — there will be no big winners. The geniuses will be those who are able to hold onto what they have. I’m betting on Buffett.

  • Northshore December 23, 2013, 9:08 pm

    As a health insurance agent, there is one element of the new law that I have not seen addressed in news reports, and that is the imbalance in premiums vs. benefits that I am seeing for those who qualify for a subsidy. As an example, a married couple, each 60 years old, had a $5,000 deductible and out-of-pocket plan at a cost of $943/month. Their “substandard, so called junk insurance (which is another crock)” plan was canceled, so they have to get a new plan. A new silver plan would normally have a deductible of $6,300 each and a cost of $1,471/month. Because their combined income of $29,000 qualifies them for a subsidy, they will pay $138/month combined and the deductible will drop to $2,500 for each of them. By the way, they went from complaining about Obamacare to thinking that it’s the best thing since sliced bread. My point is that those who qualify for these subsidies are getting far better insurance at a completely unrealistic cost than anyone else.

    • Rick Ackerman December 24, 2013, 8:56 pm

      Nor have I heard this point discussed, even on Fox. Thanks for the insight, which I’ve forwarded to Bill O’Reilly.

    • redwilldanaher December 24, 2013, 9:25 pm

      Another interesting point that I think has been under-discussed is that of the forced drops. The numbers and impact of the millions of forced drops have been over-discussed but that this was part of the plan, the intent all along, has barely been discussed. When the truth is revealed/the sheeple figure it out, ObaMAO might finally be in real hot water. They needed to force tens of millions out of their coverage so that they’d HAVE to participate in the corrupt system. We all know that they needed them for increased subidization of others. Most still believe that this caught ObaMAO and Sebelius and Patheticlosi and Weid by surprise but I don’t think that people will believe this for much longer. I think for once at least a few million will get their Irish up.

      • Mario December 25, 2013, 3:57 am

        Indeed, seems the plan all along completely ignored the fact that outrageous prices were baked into the system. The purpose isn’t to be nice to everyone, not at all. No one in Washington or elsewhere ever stood up to petition first that if you want us to pass national healthcare you first have to stop billing $3000 for an MRI, $1000 for a 30min visit to an emergency room just cuz it’s a Sunday, $200 for an office visit and $75 more for a simple urine test that takes 5 minutes to get the results, and on and on. Now, as Rick well notes, to pay $1000/month plus deductibles is leading this party down the road to an economic nightmare.


        Yes, it’s criminal that there was no attempt to reform the price structure ahead of Obamacare’s implementation. The reason, one would surmise, is that the Obamacare coup was intended to complete the consolidation of pricing power so that Medicaid and Medicare would call the shots to an even greater extent than they do now. Privately insured patients at that point would be outliers, at the mercy of insurers with respect to monthly premiums and medical fees.

        What is most interesting now is the question of how the healthcare system will be reconstituted once the collapse of Obamacare is complete in perhaps six months. Whereas we might have expected The Guvvamint to ride in on a white horse, Obama and the Democrats will have almost no popular support to implement the single-payer system that was the plan all along. Under the circumstances, it’s hard to see how the insurance companies could put Humpty Dumpty back together again. The implication is that the healthcare system will remain nationalized come hell or high water — that there is no practical way for private enterprise to restore it. RA

  • ronbl December 23, 2013, 7:53 pm

    Lost in all of this is that health care is simply an exchange of service. When you call the plummer to fix your sink or toilet he expects a return for his service. The agreed upon exchange today is via currency rather than barter. When Obamacare says a surgeon’s service should be capped then the young person looking into the future will note that cap and also see that their is no cap on suing the surgeon so why not become a lawyer. Never heard any word about caps on bureaucrat salaries either. Their service is one free of stress and checks on quality. Indeed ask them who is responsible and they act shocked. Still waiting for some astute report to demand a simple thing called an org chart.
    Any ways in my opinion saying we have a moral obligation to pay for your health when you choose to overeat take drugs etc etc is absurd. I never go to the doctor because my medicine is my food and my life style. I shouldn’t pay for your plumber your house, your car…your anything. As for Canada, I have 2 uncles who left practicing medicine in Canada due to the restrictions on their practice. Both McGill graduates, they have done quite well for themselves and their patients. When rich Canadians, including socialist leaders (Renee Levesque head of the Parti Québécois) need care they run to the US for treatment. Big scandal when it turned out Canadians were going to Vets to get MRI’s due to the excessive waits for treatment.

    The left always seeks to cap the private sector but never themselves or their allies, the trial lawyers. My nephew, a brilliant young kid accepted to Oxford, left behind his engineering future to become a political aide. We wonder why the young don’t choose careers in science. Well, why should they choose a life of stress and pressure when the easy life of a bureaucrat is there for the taking?

  • Galt December 23, 2013, 7:34 pm

    Retail has had a rough year, lots of companies and especially retailers are missing revenue projections even if profits are on track. I have a good friend who has worked for a major retailer for over 20 years. They had a bad quarter and were bracing for a restructuring – before Christmas sales were down and their credit card database was hacked. Margins are being squeezed and the consumer is too. It’s a world of everyone vs. Amazon. Consumers are holding out for better deals – good for them, but bad for retailers. I know I wait for items on sale and shop on double coupon day at the grocery store. The plight of retailers in the next year or even quarter is a small version of the larger economic reality: prices need to go down for more buyers, and that goes straight to the bottom line.

    • VLAD'S BACK December 24, 2013, 6:12 am

      interesting. someone has the guts to call himself galt, in a short retail squib.
      yet, I expect much more from galt. a sixty page, tiny print speech, at least.
      however, the humble honest struggle, of your post, is admirable. SO FIGHT ON!!
      and maybe, one day, you will become– galt.

  • Joe Doaks December 23, 2013, 7:14 pm

    Significant social and political factors that will influence the outcome need to be taken into consideration.
    1. Global warming – Atmospheric CO2 is increasing and the climate is changing, affecting crop yields worldwide while the human population continues to grow. What will this do to food prices? Warming oceans may be the last straw which will destroy already overextended fisheries. What will that do to food prices? 20 million people in Bangladesh will have to move somewhere else due to rising sea levels. Who will take them in?
    2. Immigration – The U.S. is accepting about one million legal immigrants per year, yet we don’t have enough jobs for Americans now. This cannot continue, yet nobody currently supports immigration restrictions, let alone deporting the 11 million illegals already here. We are facing an “Elysium” future.
    3. Automation – The headlines claim “productivity is increasing” instead of telling the truth: “jobs are being eliminated.” When machines do most of the work the millions of additional unemployed Americans will be viewed as useless mouths to feed. The high current unemployment rate does not even include the 27.5 million Americans on disability. Let’em starve?

    • John Jay December 24, 2013, 4:07 am

      Americans by about 60% want the Immigration laws enforced before any talk of Amnesty.
      The Government couldn’t care less what we want.
      Big Business wants cheap labor, Big Government wants cheap votes.
      Americans were about 100 to 1 against the TARP bailout, Congress voted it in anyway.
      I have to agree with Jimmy Carter, “We no longer have a functioning Democracy.”

      Prices up.
      Wages down.
      That’s their plan.
      And they are not interested in what we think.
      The FSA is too big now, and we do not have the votes to change things.
      So look for Inflation to continue in prices, just as it has for the past fifty years.
      And any pressure to increase wages will be met with a flood of H1-B Visas and Amnesty.
      Hell, they might even actually raise interest rates to crush wage pressure.
      It’s all very predictable if you ignore the propaganda and just look around you.

  • Phil December 23, 2013, 6:54 pm
  • Tom December 23, 2013, 6:49 pm

    My question Rick…

    In your scenario that we wake up one morning and banks have quietly closed therefore cash on hand is King…what happens to funds in Insurance Company annuities? Does this make it more likely that the BITCOIN becomes prevalent?


    Bitcoin is a scam. So are annuities. And so are insurance companies. The money isn’t really there. RA

  • ter December 23, 2013, 5:34 pm

    Almost uniformly intelligent comments on topic. Gary must be asleep. In the early ’30’s the prevalent notion was deflation could be arrested by price-fixing of wages and commodities. Hoover raised taxes to balance the budget when government spending was minuscule, in retrospect. Many of the commodity price-fixing “solutions” are in place today. Another that has been resorted to from time to time since was destroying livestock, grains, and milk to reduce supply to support prices. Then, none worked. Some are arguing cogently the purpose of Obama Care-Less (the Unaffordable Care Act) is to destroy the middle class, thereby doubling the millions already dependent upon the government for survival. I agree. What we see happening as it unravels is the Intended Consequence of an ill-intended monstrosity.

  • Frank December 23, 2013, 5:27 pm

    I would like to make a meaningful comment but my understanding of economics and finance is minimal. I am amazed at the deep-thinking and expression that is posted here and yet the resulted conclusions are so diverse.

    I can only report my own circumstance as a retired federal employee who at the time of retirement thought my pension would place my family in a status well above average middle class. Was true for a time, but over the years my pension’s purchasing power was being eroded by a steady influx of 5 to 10 percent inflation counteracted by COLA’s of 1 to 2 percent. The obvious result has been a lower standard of living for me and family.

    Isn’t my example happening to millions of others? Seems to me that planned and under reported inflation is causing nationwide deflation.


    As you have demonstrated, it doesn’t take ‘deep thinking’ to understand what’s wrong with the economy. It would seem to be just a short step for you to understand the Grand Ponzi Scheme and how you fit into it.


    • John Jay December 23, 2013, 8:01 pm


      I believe for the purposes of this discussion, and to keep it simple, Inflation is rising prices, Deflation is falling prices.
      Your condition of the prices you are paying rising much faster than your pension COLA can be described as Stagflation.
      If you are retired then you remember this condition arising back in the 1970s.

      The only long term Deflation I have seen in the USA is Wage Deflation, which is related to Price Inflation to some extent.
      In our case, Wage Deflation, has been a deliberate policy of the Federal Government for 50 years.
      It has been accomplished via the off-shoring of American jobs, and the constant influx of legal and illegal immigrants.
      See Cam’s comment above for an example of the off-shoring consequences for the USA.
      This policy, in addition to depressing wages, increases Inflation in housing costs, health care costs, and taxes to support indigent immigrants.
      Visit greater Los Angeles or California’s Central Valley for an example of the consequences of the Governments Open Borders policy.

      Keeping on topic, the net effect over the past fifty years has been stagnant or falling wages here,
      and rising prices.
      That has been the Trend for fifty years, and I see no sign of this trend reversing.
      Because Wage Deflation and Price Inflation is not an accident.
      It was, is, and shall continue to be the Official Policy of the US Government.

  • David Silver December 23, 2013, 3:34 pm

    P.S. People can still lose their homes despite being able to pay their existing mortgages. Their property taxes, fuel and maintenance costs, etc. could go through the roof.

    • mario cavolo December 24, 2013, 12:13 pm

      Nice point David, as for many, such costs are already outrageously high ( particularly in the Northeast from what I understand, NY, Connecticut, NJ, etc.) . Here in China, no property taxes, though they are going to start them at a low levels, another reason why real estate is a preferred choice long term asset.

      Cheers, Mario

    • Rick Ackerman December 24, 2013, 8:46 pm

      Hugely deflationary, I might add, since lenders (i.e., bondholders) will bear the cost of defaults. Whether they then rent the vacant homes or sell them, it will be a buyer’s market. Property taxes will take a hit, too, since municipalities will not be able to squeeze much blood from stones.

  • David Silver December 23, 2013, 3:29 pm

    Just a brief, off the cuff, comment. It seems to me that hyperinflation does not automatically imply higher real estate prices. Real estate prices are a function of the availability of credit as well as interest rates. If the Average Joe cannot qualify for a mortgage loan I believe we could see a crash in real estate prices despite hyperinflation generally. Yes, people with money would flock to real assets such as real estate, but the oversupply would be staggering as very few people would be able to afford to buy homes—actual $$$ would be required—thus bringing prices down. The cost of necessities of life could still skyrocket. I have done no academic study of this notion, but we should remember that present day conditions—an economy propped up for decades by runaway credit—may have no historical reference with which to compare. I think the way to look at the systemic risk is in terms of a massive collapse of CREDIT, resulting from the massive explosion of CREDIT we have all witnessed. The scarcity of real money would cause all kinds of rebalancing of asset prices which had previously been distorted. JMHO.


    My point was that hyperinflation, by definition, would allow homeowners to retire their mortgages with the ten-thousand-dollar bills they’d be carrying in their wallets. RA

  • Andrew Gutterman December 23, 2013, 3:14 pm

    Throughout history, banks, the government, the rich, all thought they were in control. They always lose control, eventually. If they didn’t then we would have one-world government, run by the Babylonians.

    The cycle of the economy is a natural cycle.

    We think that because we think that somehow we are no longer a part of nature, but nothing can be further from the truth.

    It just so happens that our form of natural imbalance is in the form of excessive debt, relative to the underlying economy.

    Imbalances in nature always work themselves out. And they are almost always messy. This one isn’t going to be any different.

    Government, the banks or the very rich notwithstanding.

    Actually, its the very rich that will most likely be the trigger for the next collapse. When all personal expenses are covered to infinity what do the rich do with their money?

    They speculate.

    Anyone want to make a guess where speculation on a gigantic scale leads to?

    It certainly doesn’t lead to hyperinflation.


  • John Jay December 23, 2013, 2:32 pm

    Will Deflation be the eventual outcome?
    I don’t know for certain.
    However I do know the Fed/Government will fight it to the last ditch.
    Because the Big Banks can’t make Big Bucks, the local governments can’t make Big Property Taxes, the Realtors can’t make Big Commissions if you can easily payoff a mortgage in five years.
    And that is just the housing market!

    Deflation spells Doom to TPTB.
    They will never let it occur as long as they continue to wield the tremendous power over us they enjoy.
    They do not care about the consequences to you and I.
    Remember George Carlin……….
    “They don’t care about you,
    They don’t care about you,
    They don’t care about you,
    At all,
    At all,
    At all.”
    So anything goes as far as they are concerned!

    • Mario December 25, 2013, 3:43 am

      30 year mortgages are the Perfect example of societal brainwashing. The banks purposely look at you like your nuts of you e want a 15 or 20 year, taking in huge additional upfront interest on the 30. Interestingly here in China it’s the opposite, the bankers will actually encourage you to get as short a mortgage as possible, remind you that a longer one will cost you more, and the longest they offer is 20years.

      Cheers, Mario

  • Andrew Gutterman December 23, 2013, 2:25 pm

    I posted this in the previous discussion, but realized when I woke up this morning that its telling us something different.

    Total debt divided by total real GDP, or how much debt it takes to produce $1 of real GDP.

    It seems to have reached a plateau. The parabolic curve of the increase of debt for each dollar of GDP has stopped.

    That could possibly mean only one thing. We ran into a brick wall. Takes a bit of time to sort itself out, but I’m willing to bet the rise reverses itself and heads south, and a lot faster than it did on the rise.

    That can only happen because of a debt implosion. Otherwise known as debt deflation. Dollars disappearing from the economy faster than they can get replaced. Massive debt defaults.

    The net result: Falling prices. Kroger bacon will be the last to fall. (I don’t know of anyone whose budget is stressed out that buys bacon at full price. We always wait for a sale, buy one, get one free, $4.00/lb or less. Only those with surplus income pay the full price)


    • Rick Ackerman December 24, 2013, 8:41 pm

      Very persuasive, Andrew. Since the ratio of debt to GDP cannot continue to expand indefinitely, it must eventually contract. As you have suggested, the reversal of this ratio would be intrinsic to the process of deflation itself. I also agree with the logic that the price of bacon (and such) will be the last to fall.

    • Mario December 25, 2013, 3:38 am

      Nice Andy, the real price is what people pay, I’m middle class and first buy anything on sale. We can already recognize by this year’s retail holiday shopping that low to mid level retailers are having to offer deep discounts to lure enough low/middle income buyers. Should expect more of the same for several more years…

  • VegasBob December 23, 2013, 1:40 pm

    The government has been cleverly disguising inflation through hedonic adjustments and substitution adjustments for decades.

    The government makes GDP changes look positive by using deflators that show even less inflation than the CPI.

    I laugh when I hear that jackass Bernokio talk about “low inflation” while decent bacon is $8.39 a pound at the local Kroger. That joker clearly has no idea of the hardships his policies are causing to the formerly middle class.

    The problem is that inflation can only continue while credit continues to expand faster than GDP. This is why Bernokio keeps interest rates at zero and is printing money as fast as his printing presses will go. But eventually, the accumulation of debt becomes so oppressive that without negative interest rates, economic collapse becomes the only possibility.

    So in the long run, we are going to deflate big time.

  • mario cavolo December 23, 2013, 12:45 pm

    It has always been my understanding that “hyperinflation” is an event, not a trend, brought on by some specific decision/decisions made by a government/governing body of some sort, which then create an exaggerated relationship between price/currency value, more of a disaster over a short period of days, weeks/months/perhaps a year, not an emerging trend. Hyperinflation is not a 15% increase in prices year after year.

    Deflation in comparison seems the slow moving tortoise. As we see in America now, with more and more lower/middle class people struggling, that is a force that is depressing the prices of common household goods; re Walmart, Target, Big Lots, etc, . American retail household goods are now dirt cheap. Portions at restaurants are very large offering high value for price, etc. Why? Because there are 150 million Americans who can barely make ends meet. It is suggested by many here that any additional burden of debt and budget costs will further cause deflation due to reduction in demand and therefore prices. Makes sense to me. At its core, the problem is how the country has been economically divided in two more severely than at any other time in history. Those 150 million or so who have been marginalized economically by various forces will now have to survive, supported, learn to live a very basic low cost lifestyle without the frills like 5 TV’s, an iphone each, etc.

    Now as I KNOW JJ is going to chime in on packaged food costs, he’s right. Households in fact don’t NEED to buy that crap in the first place to live, to survive, to be healthy. Daily food is noodles, bread, rice, other grains, vegetables, meat, fish which should be bought and cooked, that’s what kitchens are for folks. But then we look at the life of the single parent and now we are cutting closer to the bone on the societal nightmare which exists in America. A single parent needing to work full time, pay child care, and go home to take care of the house too? Not a chance, hence the trend of people learning that they will have to live together, with roommates, etc. to save money. All of this seems quite a deflationary scenario to me based on economic/societal trends which have been developing for decades since the 70’s…

    Cheers, Mario

    • Rick Ackerman December 24, 2013, 8:14 pm

      The Fed played its last remaining ace when it acted to alleviate mortgage debt. This was accomplished by engineering a sub-3.5% refinancing ‘window’ that has since slammed shut. The effort boosted household cash flow significantly; however, there was a deflationary offset, since homeowners had to bring a big chunk of their savings to re-fi deals in order to take advantage of the low rates.

      The relief will prove temporary and can last only until such time as home prices begin to fall anew. Since I began writing on the subject of deflation nearly 20 years ago, I have expected home values to drop by at least 70%. If I am correct, it would imply that the first stage of the housing collapse brought us only halfway to a bottom.

      • Mario December 25, 2013, 3:31 am

        Great additional points Rick…and let me add I believe I’m right, thankfully, when I say that the further U.S. housing collapse you note won’t happen. For an obvious reason that is well entrenched; foreign money, primarily Chinese /Asians coming in to snap up properties. U.S. real estate at today’s prices is globally cheap. Demand from this arena will, is offsetting any domestic demand weakness. Plenty of references n research to cite in this regard, so I’d say the bottom is in.

        Cheers, Mario


        Wild-eyed Asian speculators will not even be able to prevent Vancouver’s housing bubble from imploding, let alone sustain inflated real estate prices across the U.S. (The same could be said of the crazed South Americans who have been driving Miami’s latest boom.) Under the circumstances, I’ll stick with my prediction of a 70% collapse (and a 90% collapse in vacation home prices). We are halfway there. RA

      • Cam Fitzgerald December 25, 2013, 8:56 am

        If only it were so Mario. Alas though the influx of Chinese money is only supportive of a few key markets and select cities where new bubbles are being blown rather than being spread around in a way that would give credence to a floor being put under prices nationally. The other thing is that the Chinese psyche yet remains aloof from the traumas other economies have experienced these past years. All they have know is boom times and growth at home, never yet a bust in recent living memory. Of course real estate always go up for them when they have never seen it go down before. Live long enough though and life can be a great teacher.

    • mario cavolo December 27, 2013, 2:39 am

      Hi Rick, Cam, continuing a friendly argument on this cuz its a pivotal item, a couple of points come to mind to offer a framework on this:

      1. I would caution not to underestimate the numbers of “Asian speculators” as Rick notes. The sheer numbers of wealthy Chinese with over a million USD sitting around is staggering. Forgetting the wealthy top group for a moment, its important to remember in terms of historical stats that the sheer size of even today’s China rising middle class is the size of the entire pop. of the U.S. , that’s just the middle class and they too are far more loaded with cash than commonly understood. Household bank deposits here have increased by USD $1 trillion per year for the past 3 years, while they have remained pretty much flat in the U.S, that’s a lot of eggplants as a NY Italian might quip, needing somewhere to go…

      2. Any Chinese citizen can send USD $50,000 overseas with the push of a button bank transfer per year. Additionally, as small groups of “guanxi” relationship close friends/family ties, they are in the habit of pooling their money together to invest it, and so, eg. $100 to $500,000 is in the states in the blink of an eye with no barriers whatsoever to doing so.

      3. Real estate is a preferred mindset asset, and they always like America, even still. Its in many ways a lovely country so I can’t say I blame them.

      4. They like a bargain and in relative terms, U.S. real estate is a bargain

      I understand Rick’s example of Vancouver prices however Chinese are more like bargain hunters and are going into most of the U.S. 2nd tier cities and suburban areas to buy in the $200-$500,000 range, paying $100/sq ft, believe me it is a suburban paradise purchase for them to be able to buy something at that price with a decent plot of land too, FOR their family’s future. A RE industry records check of the #’s of Chinese overseas buyers will most likely reveal far higher # of transactions than you might be thinking. In many cities, its like 30% of total transactions.

      5. 90% plus of U.S. visa application by such Chinese are being approved by the consulate visa offices here, they know which side the bread is buttered on and the money is flowing in.

      I only want to suggest that the above framework explains, barring any additional unexpected outlier events in the industry, how and why prices firmed up in the past 2 years.

      Of course now we all just watch the show and see where it goes…

      Cheers, Mario

  • Benjamin December 23, 2013, 10:59 am

    I think it would be helpful to restate what hyperinflation is. It needn’t be marked by zillion dollar loafs of bread, but it must be marked by the loss of faith in a currency. That is all that hyperinflation is. Like so…

    Which brings a most ludicrous scenario to mind: hackers or a foreign government(s) initiating and sufficiently sustaining a campaign in which they serve as a digital genie to the masses. But even if that were to happen, it would only make digital currency worthless*. Cash and barter would be king, as banks would have to close until the digital mess was sorted out (if ever!).

    * since digits don’t know what country they originated in, a hit like that to any digital currency would certainly affect digital accounts worldwide, regardless of denomination. So it is _highly_ unlikely that hackers or foreign governments would initiate such an attack. Zero, in fact. What would be in it for them to do such a thing (assuming they even could)?

    That’s about all I can contribute to this topic, as the deflation points are pretty darned air-tight!

    • PhotoRadarScam December 23, 2013, 4:22 pm

      You could argue that is already happening. Many countries have stopped trading in US dollars, at least when they trade with countries other than the US.

    • Benjamin December 23, 2013, 6:35 pm

      Hi PRS,

      Wonder what the blackmarket exchange is in those countries. Hard to say what the situation is without knowing that. Too, there is a difference between private airlines rejecting a currency vs another government doing so. Though I don’t trust my government one iota, I trust other ones even less.

      Therefore, and maybe I’m being biased, but I trust international airlines operating in Venezuela as a reliable indicator. When the private sector loses trust… That is what matters, imo. Governments playing games with each other, on the other hand, is just that.

      • Cam Fitzgerald December 24, 2013, 12:24 am

        Black market exchange rates are terribly high at times here in Africa, Benjamin. Sometimes costs run over 5% for good paper. There is a steep premium to be paid. Dollars are very much sought after and in great demand every single day. It is illegal to hold them in large amounts in most countries and it is illegal to buy and sell them on the black market.

        ALL dollars MUST be turned over to the government.

        Those essential dollars make up the core of how international trade is conducted and settled. You need them to buy oil and gas from neighboring countries for one. You need them to buy milk and chicken and car parts and aircraft from Europe and China too. Don’t be fooled by the idiots who try to tell you dollars don’t matter anymore.

        They matter a great deal in Africa. They matter everywhere.

        Ethiopian Airlines for example were unwilling to accept too many Kenyan Shillings at one point recently. There were no dollars available to exchange for flights due to a sharp drop in tourism (foreign income in reserve currencies).

        Ethiopian birr and Kenyan Shillings are worthless in each others respective country. Those bills are really just chits of paper offered by each government to the people for domestic trade. You would probably call them money if you lived here an dused them day to day.

        You could use those bills to buy homes, autos and food locally if you liked. But don’t be deluded. They are worthless everywhere else outside the borders. They are NOT good money.

        Dollars are what everyone wants and need.

        So what did Ethiopian airlines do to solve this dilemma?……well what they did was they bought skids of canned pineapple and other goods produced in Nairobi with the local Shilling payments and then shipped them back by air to Addis Ababa to sell in the local markets where canned goods are still a luxury product.

        They sent money back in the form of hard goods (commodities) in other words. Canned goods, that is. Commodities really do matter. I am telling you this for a reason. Some people try to say that any paper money is OK to run trade and engage in cross border relationships. Some fools think it is good to save for all your life.

        I am telling you that most money in Africa is utterly worthless even between bordering countries and that even airlines resort to converting paper to hard goods to balance the books.

        So what real difference is there between major paper currencies and minor ones then? It is about status and acceptance. It is about belief systems and tradition. At the end of the day Ethiopian Airlines flew home to their Bole International Airport with cans of fruit in exchange for a foreign currency earned for flights they delivered that was utterly worthless within their own country and could not even be traded off at the Bank for International Settlements (BIS) for dollars.

        So greenbacks are a big [email protected]@king deal here exactly as they are across the entire globe to settle trade between nations. Do not listen to the dollar doomers. They are mostly a pack of armchair idiots with no insight whatsoever into how the world really works!

        Dollars matter. They matter a lot!!!!

      • Benjamin December 24, 2013, 2:59 am

        Hi, Cam

        Well, thanks for the detailed explanation. In addressing PRS’s point, I found myself going to a greater length and into more territory than I felt necessary (albeit well outside the context of Africa). If you guys are wondering, it pertained to Russia/Putin and Iran, and speculated as to what they could be up to. In the end, I settled on “the games governments play”.

        That said, while I find Cam’s input insightful, I also find it more than a bit troubling. Not sure what you guys and everyone else here keep abreast of concerning the U.S., but I can tell ya… This year was one heck a turning point. Yet, it only marks the beginning, and TPTB aren’t going to just let go. How the rest of the world reacts to what is going to be a much-needed house cleaning, what impact that has on weaker countries that depend on the U.S. and FRN/”dollar”… Well, I sure as heck can’t say!

      • VLAD'S BACK December 24, 2013, 5:51 am

        cam, you are 100 percent correct, on fiat dollar’s worth, around the world;
        some countries more that others, depending on internal circumstances.
        and I thought you were in canada, not china. so right back at you.

      • PhotoRadarScam December 24, 2013, 7:33 am

        Just USD? What about Euros and Yuan?

    • Rick Ackerman December 24, 2013, 8:04 pm

      North Korea, for one, could get away with a takedown of the global money system. Richard Clarke implied as much in ‘Cyberwars’ — i.e., that a country so completely un-‘connected’ as North Korea needn’t fear retaliation. The same could be said of private actors bent on destroying The System, such as al Qaeda.

  • Joseph December 23, 2013, 8:14 am

    For those of us old enough to remember, this is the early to mid seventies redux. In 1972 while still in high school I worked for a hardware store chain. The employees demanded higher wages as the cost of living was rising for everyone. The employees unionized, everyone got higher wages until the store closed and the company went under. Home Depot bought most of these locations several years later. Anyway, the comment above about the higher skilled demanding more pay upon an increase in the minimum wage is a lock, but only if the employers can actually afford to pay more. If they can’t, they all pack up and quit the game. Then deflation really sets in.

  • PhotoRadarScam December 23, 2013, 7:43 am

    It’s hard to disagree with the points for deflation. The one thing that is overlooked is the push for minimum wage growth, which is somewhat of an independent event. I seem to think that this movement will continue to gain traction. Wage growth is what will spark inflation – or at least counteract the deflation a bit. Because suddenly the skilled laborer making $15/hr today (vs. min wage at about $8) will demand $23 when min wage is $15. This increase should echo all the way up the wage ladder, as wages are all relative, not absolute.
    As a side note, increasing min wage will only hurt the poor unemployed, as the wage increases will be paid for with higher prices in every product and service, while government benefits will probably lag significantly and will be increasingly insufficient. An increase in the minimum wage will not solve anything for the people in this income bracket.
    Even so, wage increases will not create any kind of hyperinflation, unless the movement accelerates into a rapid cycle of wage increases.
    On a related note, I believe the fed and the government have other tricks up their sleeve, including a seizing of a portion of retirement accounts & pensions, and currency controls.

    • Rick Ackerman December 23, 2013, 4:34 pm

      This isn’t the 1970s, and the worker who would demand higher pay is competing directly with workers in China, Korea, Brazil and Japan. That fact, and the much higher levels of automation in manufacturing, are reasons why wage-driven inflation is not possible in the U.S. If you play forward a $15 minimum wage in non-manufacturing U.S. jobs, it would be more disruptive and deflationary, even, than Obamacare.

      • Cam Fitzgerald December 23, 2013, 6:07 pm

        Exactly so Rick. Just 90 meters from my home is a factory where workers earning a paltry dollar or two daily toil wearily to produce shoes for one of the US’s most famous name brand retailers. Those shoes cost peanuts here at the factory gate but go for over a hundred bucks in the US. Lets run that math for a second and wonder who is really getting the short end of the globalization stick. In fact, low wages are now being exported to the US for the simple reason that there is a large suplus of labour here in East Africa (as an example) willing to work at local “minimum wages” in order to support the business interests of overseas retailers where the service economy is king. So while jobs disappear over there (in America) they now miraculously reappear here or in Asia in the lowest wage economies on the planet. Americans do not benefit. Africans indentured to these factories live on the very edge of existance. Who is the real winner in what is clearly the most deflationary of global trends that suck profits from one end and drain wages from the other simultaneoulsy? This could probably be the topic of a book if someone would be brave enough to write it and get it published. What is happening is so incredible and obvious to me that it defies logic. You all need to travel to the developing world to understand the dynamics better. It is a stunning draining of wealth happening on two continents at once. The labourer winners are neither here nor are they there. Both are losers in this game and only a few select business in the middle take all the profit differential for themselves.

      • PhotoRadarScam December 24, 2013, 7:30 am

        I agree, but the movement is proceeding. SeaTac voted for a $15 min wage, and min wage increases are in the works elsewhere. Of course, such a move would also be deflationary as you suggest as American exports would diminish greatly.

  • buck novak December 23, 2013, 6:07 am

    It’s deflation. Cash will be king and queen. It’s the best form of credit and debt. Just ask the Target customers. Deflation may avert a revolution and overthrow of the guvermint. Everyone wants things that rise in value not fall. There isn’t enough paper for hyperinflation. It is a waste of good paper and ink. During the hyperinflation of the Weimar Republic the guvermint had paper shortages and to save ink only printed on one side. It is easier to simply not pay and default on creditors. Of course the creditors take a hit too.

    • PhotoRadarScam December 23, 2013, 7:44 am

      Not sure where you’re going with the paper and ink reference. The dollars will be digital…

      • Andrew Gutterman December 23, 2013, 2:04 pm

        Show us a hyperinflation where the currency was digital. It has never happened. Every last hyperinflation has happened through the printing of paper currency.

        The same will be true in the United States. If we want hyperinflation then the Treasury has to print the currency to make it happen.

        It won’t.


      • Cam Fitzgerald December 23, 2013, 3:24 pm

        Yes Andrew. Exactly as you wrote. “They” must print to make it all happen. It must be deliberate and planned out. Hyperinflation is never an accident. It is a last act of the political class that invariably ends in ruin for all the parties behind it. Only when those with the power to bring about such an event are deeply indebted themselves is it even remotely possible. Until then expect that debt burdens will pile upon those who must pay only to grow heavier as time goes by. You cannot extract blood by wiping away the burden typical citizens have gladly embraced in better times. There will not be relief for those who could not resist the plums of what looked like free money. That is the bait is it not? Why even bother if you are going to give it all away for nothing later?

      • Rick Ackerman December 24, 2013, 7:46 pm

        PhotoRadar: By its very nature, a deflationary collapse (or a hyperinflationary one, for that matter) would vaporize the misplaced confidence that currently supports our fraudulent ‘digital money’ system. On the inevitable day when the banks don’t open, ‘digital money’ will command the same measure of confidence as…Obamacare.

  • Troll December 23, 2013, 6:03 am

    And before you point fingers, most here seem to think the US and the rest of the world is already losing to some “unseen” tyranny.

    You start where you can (ie your own country). Then you expand outward.

    You don’t leave your home to protect others if it means your own back yard becomes vulnerable.

  • John Jay December 23, 2013, 5:49 am

    To myself, there is no question that the defining force in the US economy has been Inflation for the previous fifty years.

    Wages never kept up with prices during that time period.
    The Government/Economy has been geared up to obfuscate that fact for fifty years, by debasing the currency, encouraging debt, and promoting open borders/off-shoring to drive down wages.

    Look at the signposts along the way:

    1964, the end of silver coins in the USA

    “In the early 1960’s, the silver supply for the nation’s coinage was dwindling rapidly. As Congress and the Administration debated over silver’s future role in coinage, the silver market jumped 10% immediately, and another 30% by 1962. This set the stage for the complete elimination of silver from our coinage by the end of 1964.”


    1965, Credit Cards go national:

    “The original goal of BofA was to offer the BankAmericard product across California, but in 1965, BofA began to sign licensing agreements with a group of banks outside of California. BofA itself (like all other U.S. banks at the time) could not expand directly into other states due to federal restrictions not repealed until 1994. Over the following 11 years, various banks licensed the card system from Bank of America, thus forming a network of banks backing the BankAmericard system across the United States.”


    1971 Nixon closes the gold window.

    “So, ignoring what Nixon said publicly, what did his policies actually do? Nixon’s package of proposals included:

    Closing the gold window (elimination of the Bretton Woods gold standard).
    Letting the dollar float.
    Placing a temporary freeze on prices and wages to “combat inflation.”
    Placing a temporary 10% tariff on imports to “improve balance of payments.”
    A very nice article on this at this link:

    I do not wish to post a book here, but those three incidents got the Inflation Rocket off the ground back then.
    And, here we are in 2013, and suddenly fast food workers are holding demonstrations demanding $15 an hour because they “Can’t live” on the minimum wage they are being paid.
    Well duh!
    It took a long time for them to figure out that Inflation has made them peons.

    So, I will always argue that Inflation has been all around us for the past fifty years.
    And it is now so obvious that the dumbest of the dumb are finally catching on.
    And Obamacare influenced increases in Health Insurance premiums easily qualify as Hyperinflation.
    Almost no one can absorb increases of that magnitude
    in that financial necessity without being reduced to penury.
    It’s already here.

    • Benjamin December 23, 2013, 12:30 pm

      Hi, JJ

      The references you made, while illustrative, only explain how we wound up in an exclusively debt-based system. They cannot be used, however, to explain where the system is going to go. It has to go the route of depression — that is, as Rick put it, the real increase in the burden of debt — because every last penny and digital facsimile thereof that we use today is created from a debt.

      Employers would pay $15/hr if they had the cash or credit by which to do so. Their customers would pay the higher prices if they could afford to, by cash or credit (depending, I guess, on what the employers started the process with). Do they? Maybe, but it would come at the expense of other things. If not, then the brave employer’s effort kills them. More depression, either way. Thus…

      “I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.” — Thomas Jefferson, in a letter to the Secretary of the Treasury Albert Gallatin, 1802

      Inflation = jaws of beast open wide
      Deflation = jaws of beast clamp down (to ask it for more money is to clamp ’em down harder).

      Anyone got any jawbreakers? It’s been so long since I’ve had any of those!

  • Troll December 23, 2013, 4:38 am

    I am only going to comment on “Obamacare.”

    I do not understand how the US cannot come up with a reasonable solution to universal health care when the US is the LAST (look it up) of any civilized country to admit to (and adopt) such an important facet of community living.

    Is Obamacare flawed? Obviously it is, given the hikes you are about to receive, but could that be because the US pisses away good money elsewhere? Like the army, navy, air force? You are so busy worrying about veiled women in Afghanistan that you have forgotten about your own rights.

    In Canada, we tax smokers and drinkers, big time. What do you guys do? You still sell booze and smokes dirt cheap.

    Why? Because the red neck addicts in your own country who spend their days betting on NFL football apparently have more say than those of you trying to eek out a decent living.

    I really don’t get the US, as much as I love it.

    • Wayne December 23, 2013, 5:52 am

      “Forgotten your own rights”

      Ha, health care is not a natural/universal right. By insisting that it is you are in fact making demands and enforcing obligations on others to provide capital and labor for your own service. In actual effect you are enslaving others for your own selfish ends through taxes and compulsory service.

      Then you attack the U.S. for external aggression and their foreign policy to continue and extend the Old World Order of Great Britian and the Pax Romana before that!

      Well just look at your own nature and the nature of man and it won’t take you long to figure out that w/out a strong presence on the global scene, people, tribes, and nations will start exploiting, enslaving and making war on each other in fractal, secetarian, and ethnic conflicts.

      See 5,000 years of recorded history if you doubt this.

      Oh and learn the difference between natural/universal and negative rights that exist for anyone, anywhere, and at anytime (Ex. liberty, person, and property), and your made up socialist, authortarian rights that are a great fiction where you try to live at the expense of productive people and through political means, (read the barrel of a gun!)

      • Troll December 23, 2013, 5:56 am

        Oh, I see.

        So, despite the fact your country is dead broke, you still feel some patriotic need to “save the world?”

        Is that it?

        Why don’t you try saving your own asses first.

        How about that, Wayne?


        You’re barely treading water in this argument, Steve. Wayne’s comments are as elegant a summary of our ‘rights’ as you could ask for. RA

      • mario cavolo December 24, 2013, 12:10 pm

        Troll & Jim K,

        What you’re both pointing at is the fact that healthcare in America is created as a profit-driven industry, not a service to human beings in a society. So, as in all capitalism driven economies, those in power will run amok and create insanity, which is exactly what they have done. Of course, this subject was ignored as part of any discussions about Ocare, the entire point is to preserve the profit-making nature of the system, which is as corrupt and out of control as any other has ever been. That’s a simple fact. Price has nothing to do with cost and the system just sucks money out of people’s pockets, its quite ludicrous and unfortunate. Yet, it is a done deal. The best we can say is that all that money “does” create employment for people. In China, healthcare system is created as a service to society, that everyone needs, not a profit-making venture, though that is changing in part of course as China modernizes.

        Moving on to its deflation/inflation impact. I don’t have much to add, as Rick and others well indicate, if for too many Ocare creates further burden, taking money out of people’s daily budgets for daily living, seems obvious that will be a mighty deflationary force.

        Cheers , Mario

      • Troll December 27, 2013, 6:13 am

        That is funny.

        If you two “capitalists” are comfortable throwing away your tax dollars “policing” the world instead of looking after your own country (which is quite obviously working, given how well the US is doing) who am I to disagree?

    • Rick Ackerman December 23, 2013, 6:24 am

      Whatever the problem, Troll (and Mario), Government will ALWAYS turn out to have been its root cause. In this case, Government hyper-incentivized the growth of employer-based health insurance by making it a tax-free benefit to employees. Naturally, the employees became oblivious to healthcare costs over time. Then, the Government systematically underpaid for healthcare services provided by Medicare and Medicaid, forcing those of us who are privately insured, and who pay for health care with after-tax dollars, to make up the difference.

      We now find that NO ONE can afford health insurance. Ergo, the wildly popular idea that ‘The Government’ can somehow afford it for us via Obamacare (for which it was claimed, brazenly, that it wouldn’t cost a dime more than we were already paying). Under the circumstances, Obamacare is the most aggressive soak-the-rich scheme ever devised, since it is soaking everyone who makes more than $40k.

      • Troll December 23, 2013, 6:27 am

        I don’t disagree with you there, Rick.

        I just wonder why this costs you guys ten times more than everywhere else.


        Try re-reading my explanation — then let’s get back on-topic, okay? It’s ‘Inflation vs. Deflation’, and I’m going to be a stickler about it from this point forward, since this commentary is only a day old.

      • JimK December 23, 2013, 1:55 pm

        The missing question during the entire O-care debate was ‘why does healthcare cost 5x as much as it does in, say Costa Rica or Ecuador, which have excellent systems? The answer may lie, in part, in the profound conflicts of interest that have poisoned the FDA, where a medical review board member can still own 50k worth of stock in the company that makes the drug under review – and it used to be unlimited up until a few years ago. Meanwhile, the board members come from the Pharma world, and return to it – a revolving door. What could go wrong? And we witness the parade of drugs, which despite 500M apiece to test (by the companies themselves!) somehow entered the market without anyone realizing that they maim and kill. We literally have a system that is a monopoly of ‘patent medicines’ of yore – but instead of Snake Oil, it is Vioxx, etc.

        M.D.s are the goats in this – they are trained in schools that are heavily subsidized by Pharma – guess what you will not hear taught in medical school? Ask a medical student how much time is spent on understanding the relationship between nutrition, toxicity, and state of mind to disease state – it is not much at all.

        Marcia Angell, who was the editor of the New England Journal of Medicine for 20 years will tell you that ‘the most authoritative voices in medicine and medical research are simply not to be trusted – a conclusion that I came to slowly and reluctantly’. Our system extracts one house from the family of every very sick person – and the drugs used to treat the sickness cause the sickness – it is truly Kafkaesque.

        This comes back to Ricks observation wrt what happens when that much power is concentrated in government – with the reliability of gravity, the government can be relied upon to do a worse job, and for much more cost, than it would be done by the private sector – who act as though the consumer always has a choice.

        The FDA should be shut down as a regulatory agency and for that matter as a certification body, as well – we would all be better off if they converted their effort to supplying a few choice nutrients, at cost, to the population – Vitamins D, C, B12, and minerals Magnesium, Zinc, and Iodine. The country would be richer and healthier for it than we are now.

      • VLAD'S BACK December 24, 2013, 5:58 am

        rick, troll’s a commie, can’t you tell? or at the very least, he’s a very loose socialist, that believes in sticking his hands in others pockets, and be –righteously– allowed by law, to do so. so why even bother answering the commie? (since he’s probably the new reincarnation, of ‘gary,’ as they both have very similar bottomline philosophical points, of commie views…) just sayin.


        Wayne’s post deals with Troll’s curious ideas nicely, Vlad. RA