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Da. Da. Da.
Is Ben Bernanke The Second Coming Of Rudolf von Havenstein?
Indeed he is, Uncle Ben is Rudolf von Havenstein on steroids. More money must be printed to feed the ravenous appetite of the vampire squid and his minions. What will it take to keep this thing going? What is the tipping point for the silent majority?
A major factor of the Weimar inflation was left out of this article. Half the nation as unionized and a quarter were govt employed. Workers were not paid with paychecks, they were paid in cash. It was a cash economy. Because of the rising prices, the general perception was that nobody had enough cash, particularly the corporations had trouble raising cash to make payrolls. Because of this, the perception arose that the problem was not too much money but rather too little. So, a huge part of the motivation to print resulted in the desire to avoid riots that would occur when there wasn't enough cash to pay them. Of course, by then they were caught in the classic wage/price spiral that motivated them to print evermore.
The literature of the time is full of references to "not enough money." People actually believed that a lack of money was the source of the problem. No doubt that was the result of propaganda, but it effectively initiated the call for ever more cash. I suspect that if checking accounts were in use at the time, that inflation would not have reached the levels it did.
I would add that seeing a total collapse of our entire financial system is unlikely given the fact that financial transactions are largely electronic and not in cash.
Some here seem to want to predict that.
True. Yet if confidence is lost in the currency, many people will want to change their electronic currency into cold hard tanglible goods.
Then, what is the difference if the currency is paper or electronic. Too much currency chasing too few goods.
Well then logically, just like when certain paper currencies were discounted, so will electronic bits and bytes. Why would/should they be any different? Pay bills on time, and your credit will be better. Electronic payment helps this at times.
However Citi has claimed the right to hold funds for 7 days, without clear reason given.
Last I knew Citi cleared international transactions.
If Citi started refusing to clear checks or allow withdrawels is anybody really going to want to run an international transaction through them? International commerces ends at that moment.
Seems to me both cash and "electronic" can both be pinchpoints to commerce, it keeps comming down to perception.
Don't see how the article can freeze-frame a point in time and say that's where the problem was. For starters, Americans look at when FDR nationalized the banks, but it was a couple years earlier that Britain that went off gold, in 1931. What happened, the punishing loans that Germany had to pay off as a result of World War I, were underwritten by the US, so when Germany couldn't pay back France and Great Britain, they couldn't pay back the US, or something like that, who could no longer make loans to Germany, etc etc. Hm.
I don't see how your position makes any sense. In the fall of 2008 Hank committed the daylight robbery of the American people, by demanding $700 billion (NOW, RIGHT NOW DAMMIT, OR I PLUG THAT KID YOU'RE HOLDING) from Congress (purportedly the representatives of the People).
That episode alone, is proof enough that electronic "money" cannot be considered de facto "more stable".
If the powers that be, wanted to, Mini-Greenspan could have electronically transferred $700 billion to his buddies (or as it later turned out, to anyplace and anyone that met his fancy).
Covering payrolls with electronic "magic" is no less inflationary, when the recipient uses their Visa/Debit card to buy goods before the goods double in price.
I wouldn't bet that the house of cards will collapse, but I also wouldn't bet against it, either.
Just to add fuel to your fire, when you add the additional 9 to 25% interest rate to the card holders monthly bill that they can no longer cover in one payment the Hyperinflation looks like a drop in the "exponential bucket". You also make make mention of the Electronic "magic" money. Which again I add how many people are not subject to the direct deposite controlled by the banks when it may or may not post?.
WallSTOnion.blogspot.com is under new management.
ALl funny........Not Serious ...........Somewhat Truthful.
Argentina did have bank accounts. So did many other countries. Didn't prevent them from defaulting, did it?
Although, currently, the size of the workforce in the public sector in the US is small compared to the total size of the workforce, one has to account for the fact that many of the outsourced work that private industry is performing for the government can hardly count on their employees as being in "private sector".
Also, most of the workers belonging to unions are part of the public sector.
So at the moment the government is the economy! With the advent of Direct Deposit and PayCards, the people looking at their digital money being devalued on a computer screen wish they had chosen ( is that even possible in most cases now a days ) to be paid in cash, at least for a while ...
I guess HeliBen also thinks there is "not enough money today", so he is just adding his contribution to the solution of this "scarcity" problem.
From my UK perspective the importance of this issue is understated, because Unions own the politicans at municipal level, just as Wall St. and big business owns the federal politicos.
The US has never cut Union power down to size as the UK did in the Thatcher revolution of the '80s. Can the US halt it's transition into financial and organised labour oligarchy?. Go long on pitchforks.
Hey Ben, do you want to manage perceptions? We know that's the only goal you want to achieve. Submerged in shit and feeling like in the heaven?
Noah, Ben, Moshe, David, Aaron they all try to make you feel better!
By the way, why all those guys tend to be the same mordehai nationality?
I read somewhere, that currency speculators, had a significant impact, on the accelleration, of the decline, in value. and someone referring to the cash, as jew confetti
In Noah Vail's first comment, replace the words "cash" and "money" with the words "credit" and "liquidity" and see how it reads.
What will happen when, after enough bailing out by creating new "liquidity", banks again feel confident in extending credit, and consumers again feel like borrowing? Won't the resulting spending spree ignite a "classic wage price spiral"?
During the 1970s we were no more of a "cash" economy than we are today, yet inflation raged as a result of the same monetary and fiscal policies we are pursuing today.
When confidence returns, so will inflation. Given the magnitude of the "quantitative easing" now in process and the amount of new "liquidity" required to restore that confidence, it is likely to be much worse than the 1970s.
As in 1920s Germany, the political struggles we are witnessing are fights over who gets to be first in line to receive the newly created money. So far the big banks and other well connected financial institutions are winning this fight.
Electronic or paper, the form of the currency does not matter, as long as it can be created at will and handed out to the politically well connected. Which is why the common man has only one way to protect himself: buy gold and silver.
The Occupation of the Ruhr took place when Germany defaulted on reparations payments to France.
France occupied the Ruhr area in order to seize payments, but the German Government urged its citizens to adhere to its policy of "Passive Resistance", where economic activity slowed to a crawl because, for lack of a better description, people just stopped working. The Government, in their wisdom, encouraged adherence to passive resistence by continuing to pay every striking employee to sit at home and do squat.
So the real huge motivation to print was that the German government needed to pay a whole of people who were sitting down at home instead of working in factories, mines and timber mills.
Despite obvious debasement parralells, I don't think we're living in an era where the US is having to pay war reparations and living under a foreign occupation.
Maybe the thought of paying what was thought to be the unjust debt led to the debasement (e.g. more of a nothing to lose mentality than the US today). The US is still the only world super power and the dollar the reserve currency, not quite a comparable situation.
The war reparations were an enormous, if not decisive, factor. I was surprised that they received no mention.
Reparations were mentioned, but only briefly in order to toss them out on the assertion that they simply weren't causal.
This article has some major flaws - I'm surprised, Tyler, that you buy into them. Do you know what the word "ostensible" means?
1921-1923 was not a time of global growth everywhere but Germany. Are you aware of the U.S. depression that started in 1921?
The reparations were a significant part of the outfow of capital from Germany starting in 1919. Equally significant were the debts incurred by both the government and private industry after the war, during the attempt at economic recovery. European, and especially American, bankers and speculators bought every bond issue the Germans brought forth to "re-capitalize" from war-induced bankruptcy. The result was a steady flow of mooney (in dollars, francs, and pounds) out of the country to meet interest payments on this debt. Any failure (as in a wave of defaults) on this debt would have produced financial crisis in Europe and America - which we made clear was unnacceptable. So, money was printed, payments were made (in dollars, francs, and pounds), the Reichsmark sank in value both at home and abroad. The German citizens were screwed, but the gov't and businesses with all the loans were happy (for a while), and the foreign "speculators" were happy, too, because they were getting paid in their own currency. After the hyperinflation went nuclear, the German gov't calmly issued new currency and went forth as if nothing bad had happened. With a stable currency, they soon found themselves again unable to make reparation payments, so the U.S. gov't started loaning Germany money (which was never repaid - a sort of prequel to the Marshall Plan) with which to make pay France et al (not directly, of course, but it ended up there). The whole story is much more complex than this article suggests.
We do not "know that if you keep monetizing deficits eventually you get inflation". That is one possible effect; another is that you don't get inflation (e.g., Japan). There are many factors in inflation, and an equal number of theories (Monetary, Wage-Push, Commodity Supply), that go into explanations of any specific historical episode of inflation, and there are many examples of predicted hyperinflation in the U.S between 1984 and the present - based on one or another theory - that never happened.
I could go on, but why bother?
ahhh, all good points! but then you must have thought ZH still presents informational pieces and lets the community discuss. this article is just another in a line of ridiculous, straw-man argument/ opinion pieces. oh how i miss the old days, with informed commentary on market infrastructure, basis trades, and other things you couldn't find elsewhere in the financial press.
if it werent for the fact that coming to ZH is a bit of a habit if/when bored, i would probably stop navigating here.
couple good posters still on this site, but few and far between.
Instead of actually adding your take ON THE ARTICLE we only have a long, empty waste of time. We'd love to hear your real thoughts except that it's pretty obvious we don't have real markets anymore. You never liked gold, so we already don't care about your views.
Anything else, or glorious one?
You have to understand the whole situation of Weimar. Way too many people take facts out of context. Germany became a dysfunctional nation right after the war with an incompetent government. The behavior of France, which essentially wanted to destroy Germany economically, was also a major factor. They seized the Ruhr valley and cut off a huge amount of their production. If anybody caused WWII it was France by destroying Germany. Neither does anybody ever mention that the inflation was worse in the other axis powers like Austria and Hungary. So what caused it in all three, mere coincidence? i'd say the proximate cause was loosing the war plus the treaty, not just reparations.
It is not war reparations, per se, but the quantum of war reparations.
We do indeed have a parallel, by spending more than we earn as a country in "good times" and doubling up on the bet in "bad times".
It is our children and grandchildren that will pay for our squandering and our debt.
We have been spending more than the net growth of our economy for more than a decade and (not so) Great Britain once held the world's reserve currency, so the USD is not "ordained by God herself"
This is one of my most frequently visited sites... Me and the guys in the chat have been reading up on your blog before the market analyzing everything before the day begins in a small lil chat we made. http://stockson.blogspot.com/p/chat_22.html
thanks for keeping us informed.
Does history tend to repeat itself???
No - as long as you just print secretly everything will be OK. That's what the Fed is for. What is good for the banker is good for the nation.
your one taco short of a complete mexican meal
just keep printing ,, we will be okay,,
the level of stupid is apparent \\
why not start your self a business ,, pay every one with electronic digits
depends: if you know your history, yup; if you retro-fit history to fit what you think is occuring today, then, um, just wait n see how "inflation" 'works' out over the new few years (before it actually occurs).
What the fuck does that mean?
I should have qualified my question" Does history while central banks have existed repeat itself?
Yes it does.
The entity described as "inflation fighter" is in fact the biggest stimulus for inflation. Don't worry. No one will notice.
Who does inflation serve most?
Whe does inflation serve least?
What he means is that you can retrofit history to parallel today but that it doesn't necessarily mean it will happen. Deflation is still a huge possibility before inflation. And the truth is, we just don't know--and won't know until it happens. Deflation could become such a problem that Ben will go ahead and print us into hyperland in 2 or 3 years. It's all a wait and see situation.
(I THINK) what he means to say is:
BERNANKE = WWIII
...that is, after you've whittled down the equation, of course.
I think not.
I think you're wrong.
Bernanke = Destruction of Society
by Inspector Asset
Tim Geithner announces the new and improved monetary policy for U.S. that was hammered out over the weekend with Lawerence Summers and received a two-thumbs up from the Obama administration. The new policy comes as a result of the new tough reforms coming out of DC against Wall Street due to the crisis in 2008. Tim Geithner, speaks excitedly about the new policy and states "unlike the past, this new reform package, and new monetary has plenty of transparency and oversight."
In fact the new policy is so simple that oversight may not be needed at all, as pointed out by Congress member Maxine Walters. It is better known on the hill as "The 3 rule system."
Rule # 1. If the investment is worthless (toxic) the Treasury shall buy it and pay full price. If a price is not known, then we shall make up a price.
Rule # 2. If the investment has any value at all, or has the potential to show value in the future than the Federal Reserve shall buy it.
Rule #3. If you not sure, call Goldman Sachs and let them decide. Give them a little time so they can make their investments, as needed, before the herds stampede in looking for a deal.
Geithner admits the plan may seem to simple, but argues "that sometimes complex problems require simple solutions, and oversight." "This plan being so simple, allows for that oversight that was lacking before."
When asked what happens when the FED balance sheet gets so big, would it pose a risk of being "To Big To Fail?" Geithner sniped back,
"Don't you worry about the FED, they will take care of themselves." "Long after America is bankrupted, just an example of course, the FED will still be here standing. Get it? They are a separate entity! "
Geithner closed out the interview saying "we should be more concerned about the actions of our own government, than snooping around the FEDS business."
When asked, by Congress Maxine Walters, "which government, do you work for?: Geithner lit up like an alien, seemed confused, and then left the room. He was unable to answer the question.
Please answer the 2 questions. Then think about the deflation argument.
Inflation HELPS debtors, asset owners, equity owners and generally risk takers.
Inflation HURTS cash savers, fixed income investors, and generally the "risk averse".
IF you think there is going to be inflation... you should be looking to borrow as much money as possible at low fixed rates. This money will be very easy to pay back at the new inflated prices, especially if you've invested it in any cash-flow producing assets.
ZH -- Where is the bond auction failure? Ha!
To Anon 247329
There will never be a bond "failure" so long as Ben gets Indirects, Households, and can strongarm the New York Mafia, to buy Timmy's paper; and of course Ben can buy it himself through the many "conduits" available to someone that insists on stiffarming the public.
After all, anyone that will lend you short term at zero and allow you to buy long at a profit, and will guarantee both sides of the transaction to boot, well, that person is a little hard to say no to.
But time is fleeting and the question is how many times can you twist the devil's tail.
And yes, you can have inflation and deflation at the same time. Hyperinflation can ruin the value of assets that cannot keep up with pricing power.
Where is the bond auction failure?
A better question is: How can we *ever* have a bond auction failure with the primary dealer system in place?
Inflation helps debtors, and they are the only ones who get a clear pass. equity owners and risk takers can get burnt by taxes on profits that really don't exist ex-inflation.
Inflation really helps the tax collector the most, especially with a graduated income tax
The deflationary episode in 1920 led to the initial money printing, which then fed upon itself as seen above.
More accurately a blast of inflation in 1919 didn't do the trick and led to a deflationary whiff which freaked 'em out causing 'the flood'..
Much like deflation freaks out today's Federales.
Deflation is the midwife of hyperinflation.
Absolutely spot on. Deflation makes debt more expensive, including sovereign debt, which therefore encourages debt monetization which in turn leads to inflation and ultimately hyperinflation. Because the initial stages of money printing seem benign, this encourages the authorities to believe that they have found the alchemist's stone - money without effort, which leads inevitably to disaster.
Because we are more sophisticated does not mean we are wiser. The bankers of the early twentieth century believed that they too were knowledgeable enough to understand the forces that they were playing with.
Now that is spot on.
But the money has to flow. The dollar is sitting more than moving from hand to hand.
No job, no income no spending is my life.
To me that spells deflation , especially when i see more businesses closing .
My mainstreet is now a dead end, a cul de sac
of poverty .
I would like the government and states give a small piece of land to each citizen free and clear. That would restart a new boom.
In fact the fed ought to just give away all those properties .
This would equalize the discrepancy between rich and poor, make them look like saviors and allow the ponci to continiou with the same thieven assholes still in charge. Oh forget!
Am looking for a way out, wishing we all wont have to suffer so.
"I would like the government and states give a small piece of land to each citizen free and clear. That would restart a new boom."
Let's not ruin more small pieces of land. I'd prefer a tax-free/Federal Gov't free Detroit. Call it an experiment in FREE ENTERPRISE.
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