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Hey, You Inflationistas: Was That Your Best Punch?


My recent commentary on the catastrophic debt deflation that lies ahead drew the usual sniper fire, all of it from dreamy inflationists who didn’t address a single point I’d made. Each had his own theories about why (hyper)inflation rather than deflation is more likely to do us in, but none was even logical, let alone persuasive. I’m still waiting to hear some good arguments, so text away. If you want to add your two cents’ worth, please explain how the upcoming Great Pension Bust can be dealt with in a way that would be inflationary. And bonus points to anyone who can explain how digital helicopter money will be used to reinflate the financial/credit system when the byzantine clearing network that supports plastic money lies in smoldering ruin. A daisy chain, it currently operates solely on misplaced trust — trust that will vanish the instant the banks fail to open (and even less trustworthy at that point would be block-chain money.)

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John Jay April 8, 2019, 8:09 pm

Well Rick, look at it this way:
You can’t get any richer than “Owning” the entire wealth of the world.
As the ownership of wealth grows ever more concentrated, at some point, X number of people, say 1000, will “Own” all the privately held assets of the world, including all of it’s debt.

All that is left in the US will be Federal lands.
Once that happens, they just ignore all that debt they hold, and say, “Damn it all, I paid too much!”
They still “Own” the world.
They call the shots, they create a new “Currency” , they decide who dies, who gets to live in whatever housing stock is still standing.
And who gets to be the ruler of each County in the US.
Bringing back the old title of “Count”

I completely over simplified the process to avoid a lengthy Game of Thrones script.
If you hold all that US government debt, you and your pals start to cut “Deals” for yourself and your minions.
Say you hold the 22 trillion Dollars of US paper,
you say, “Let me have Camp Pendleton, Vandenberg AFB, North Island San Diego, etc., and you can forget the debt.”
Or Yosemite NP and all of Nevada.
Whatever, a very messy situation, a Phase Transition to Feudalism.
Any property held free and clear by US citizens is just taxed to bankruptcy, right out of Gone with the Wind.

All completely over simplified.
But the key point here is an unheard of concentration of wealth by a handful of people, who had access to ZIRP Fed money, a Fed they own and operate!

It is to their advantage to extend and pretend as long as their wealth concentration is steadily increasing.
The end game, where they seize US government lands, gold, whatever, will be very tricky, and could get them into a Romanov moment where the peasants call their bluff and revolt.

Hence the rise of AOC and Francis O”Rourke.
The best way to control the opposition is to lead it ourselves!
Trump got elected by telling the Legacy Americans, right out loud, the things they knew have been destroying them for decades.
And that they had been forbidden to complain about for decades.
And it was close, but it worked, and he won.

So now, the Dems have plan B, and have come up with Francis O’Rourke as “Beto” who is proposing, right out loud, reparations, open borders, illegals voting, and Free Everything!
Francis is a de facto billionaire, and is unlikely to seize the assets of his father and FIL if he is POTUS.

See, I am starting to write a book here, but you are smart enough to know it could be Beto, or Bernie, or Danny Trejo for that matter.

We are past traditional economics here ,and into a Phase Transition with the concentration of wealth and political power to a handful of people.

That is why I don’t see an old fashioned market crash and deflation in the cards.
We are way past that now.
The Oligarchs need a “Villain” to blame it all on, and from all of the “White Privilege” fairy tales in the MSM, that “Villain” will obviously be you and I.

And Ray Dalio, and Warren Buffet et al are saying, “Hey,the American Dream is lost” after they have reaped all they could by financialization, destroying that “Dream” in the process!

Come to think of it,to cover all this in depth really would require a lengthy book!

Papiere, bitte

Best to have more than one set of papiere in the future!

John Jay April 8, 2019, 12:41 pm

Semantics is NOT economics!
Housing prices, energy prices, taxes, health care costs, 22 million Government workers earning outrageous salaries, are not nullified by calling them “Lettuce bin inflation!”

They are a 60 year Deflation in the standard of living of anyone without a Government job, or hooked up to all those Government programs.
The Deflation you seek is right there in our standard of living!

NIRP by the Fed means they can print to the moon, and their carrying cost for that debt will be ZERO!

Systemic Inflation has been Government Policy for over 50 years!

Endless debt creation is sustainable with, NIRP, Open Borders, and a ongoing decline in the standard of living of Legacy Americans.

TARP proved the Fed will buy up all the bad MBS paper to avoid dumping millions of houses on the market with resulting house price deflation.

They will do it again, and again, they will go to NIRP, or -2% on the savings accounts of Legacy Americans, and finish them off.
And all those Government programs for housing assistance will be closed to us.
Just like Government jobs.

Robert Francis O’Rourke aka “Beto” who is about as Hispanic as Whitey Bulger, and whose father and FIL are Billionaires proposes Amnesty and no Borders at all!
All are welcome!
More millions needing a flop house, pushing housing prices up some more.
Francis and his ilk will just move into bigger villas on bigger pieces of land, far away from the favelas. And laugh at the huddled masses of urchins they created.

Once again, until you show me actual Deflation, you are engaging in speculation.

And it gets even worse.

I would recommend any Legacy American with the means to do so, should secure a passport from whatever county your grandparents came from.
In my case, what was then the Austro-Hungarian empire.
That covers a lot of ground back there.

Because the Trend in the last 50 years has been to increasingly vilify you because everyone knows that our grandparents got off the boat in Ellis Island on New Years Day in 1892, and were given a chest of gold, and a plantation in the Deep South, well stocked with slaves.
Just wait a short while, and I am sure it will show up in a Google search.

The prescient Jewish guys in Germany started getting out early on with their working capital when the regime there made it real clear they were not welcome!
The ones with a Normalcy Bias stayed and waited for better days.
We won’t have death camps here for us, just favelas in Needles or Barstow.

Rick, it all goes way past Economics now!
We are no longer wanted, needed, or to be even tolerated!

Better ten years too early than one day too late!

Think about that Rick, you have lived through the same steady MSM/Government Guilt Trip turned into law that I have.

It is NOT going to turn around, Trump has sold out and is just going through the motions now to get re-elected!

I am planning for the worst myself.


We are arguing about different things, John. Let me say first that I completely agree with you that the very steep slide in the standard of living of America’s middle class is a “hidden” cost of all the borrowing we’ve done. The cost is debt — a claim against future earnings that has stifled young earners and will ultimately bury them. The problem has been somewhat masked by the distraction of all the fabulous things we can buy and consume. But we can no longer afford the really important things: a stay-at-home spouse; college tuition without having to borrow $50k-$200k; retirement; medical care.

Regarding deflation, I am not saying it is here — only that it is coming and that it will overwhelm the nettlesome price increases we’ve all coped with. We’ve done so by borrowing, and every dime of it is only increasing the power of the deflation that looms.

Your statement that we can just keep borrowing is a widespread and pernicious fallacy. The sums we’ve borrowed are cumulative and continue to grow. An economically debilitating effect is that it now takes nearly $3 of new borrowing to create $1 of GDP growth. (I think the ratio is much, much worse than that, since a lot of counted ‘GDP’ is just Facebook-type bullshit.) This dynamic is clearly unsustainable. As Herb Stein said, any trend that cannot continue indefinitely won’t. RA

John Jay April 8, 2019, 9:57 am

In the past three weeks out here in Southern California gasoline has gone up 75 cents a gallon.
Is that deflation?
Rents and house prices out here have gone up roughly at least 40 percent since 2012.
Is that deflation?
The size of a roll of TP and paper towels have shrunk about 40 percent in the same time period. And the prices went up too!
Motor oil, oil filters, tires, car repair shop labor, a pound of pasta, health insurance, taxes, car registration,
utility bills on and on, all ceaselessly rise.
And insane tax increases are on the drawing board everywhere!

You are my age Rick.
When we were kids, a pack of cigarettes and a gallon of gas were both 20 cents.
What are they now?
And 10 cents bought you a big bag of penny candy that did not have the bitter after taste of cheap ass non-cane sugar.
A new car was $2,000 a new house was $20,000.
A postage stamp was 4 cents until 1963!
In 1963 the nation wrecking regime of LBJ took off.
And so did inflation!

Price of a first class stamp is probably the best quick and dirty inflation measure because it includes the current cost of labor, capital, energy and pensions.
In the 56 years since 1963 the price of a postage stamp has gone from 4 cents to 55 cents.
NYC subway fares are another inflation measure that reflect the costs of labor, capital, pensions and energy.
In 1966 they were 20 cents, today they are $2.75.

The only area where prices have deflated has been electronics which reflect advances in technology.

Sure, house prices and gasoline prices etc. back and fill, but always with a trend that expresses higher lows and higher highs.

The Swiss, Euro, and Japanese Central Banks admit to buying private sector stocks and bonds.
Our Fed does the same thing on the sly, and are preparing to do it out in the open because our electorate is finally sufficiently ignorant to neither understand nor care!

Marty Zweig and other sage investors always said “Don’t fight the Fed, don’t fight the tape.”

Can you show me a deflation trend that goes back to 1963?
Because I just showed you an Inflation trend that does go back to 1963!
Rick, you can’t look at what might happen, what should happen, what could happen.
You only need to look at what has, and what is always happening.
The TREND is always your friend.

The only scenario that would create deflation in the USA would be for Donny Boy to get tough and deport the tens of millions of illegal aliens of the penniless and wealthy species, end chain migration, anchor babies,H1Bs, Section 8 housing, half the Federal government, especially HUD , the FHA, the FED, AND pass a balanced budget amendment!
That is what it would take to create Deflation in this economy!
And it is possible to turn bismuth into gold, 1,000 atoms at a time. It has been done.
So, anything is possible!

So, until you can show me any evidence of Deflation, you are strictly engaging in speculation, there is no Deflation trend in the USA in evidence.

Show me a Deflation Trend, Rick!

You can’t, because the Trend is Inflation!

Speculation is NOT Evidence



In a score of posts over the years, John, I’ve referred to the annoying ‘inflation’ you describe as lettuce-bin inflation. It is not even a drop in the bucket compared to a deflation that will draw its power from the collapse of a quadrillion dollar-plus debt edifice.

But let me make my point another way. Your lettuce-bin inflation has been occurring over decades when wages have stagnated. The growing gap between what people have earned and what they’ve consumed could only have been offset by borrowing — i.e., the accumulation of debt. Debt is deflation’s purest ingredient, and it will not simply evaporate. This is a very simple point. I’ve stated it in another, blunter way: What nearly everyone, including you, calls inflation is just pent-up deflation. Refute my point if you can. No one has. RA

Kevin April 8, 2019, 8:57 am

Since you have dismissed my theories on how inflation would spiral out of control out of hand, how do you think the US government will finance its budget deficits in years to come? This financial year approximately 20% of all government spending is unfunded, i.e will be borrowed, the deficit is going up at around a $trillion per year, should interest rates go up and/or foreigners stop buying treasuries, the Fed will then be forced to monetise the debt, exactly how do you see that as deflationary?

Rick Ackerman April 8, 2019, 11:11 am

1) $1 trillion is chump change compared to a deflationary juggernaut I’ve mentioned here a hundred times that includes a quadrillion-dollar derivatives market.
2) The Fed would have to RAISE interest rates to a level that attracts buyers. That would be deflationary, since it would increase the burden of debt.

Shawn Brown April 7, 2019, 10:53 pm

[I am posting the following in behalf of Shawn. RA]:

I’m a deflationist and long time deflator. I can’t do anything like I used to, isn’t that the real definition of deflation? Is it possible that all the Central Banks are scrambling to add gold reserves to avoid this massive deflation we both agree is inevitable? Could the CB’s be planning to utilize new Basel 3 rules and exponentially increase the price of their balance sheet gold to underwrite the quadrillion in derivatives and $250 trillion of debt? Many believe there’s no gold in Ft Knox but if all the CB’s are already in on this coordinated con, why not just take gold up to $1 million an ounce and keep the party going? Krugman wanted to place a trillion dollar coin in the Treasury, what’s the difference? Sure would create a literal bazillion in new assets to lend against.

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