This page has been archived and commenting is disabled.

Guest Post: Austerity And Critical Mass

Tyler Durden's picture


Submitted by Ancient America

Austerity and Critical Mass

Some say that QE3 won’t happen. The U.S. is done with stimulus and force-feeding liquidity and inflation down the world’s throat. Okay, it’s austerity then. How much austerity does anyone think we’re going to have here in America? What is the critical mass and when will we reach it? How much inflation can our creditors handle before they reach their critical mass and have to allow rates to rise? Paradoxically enough, the real question has become ‘can we afford austerity’? I believe the answer is ‘not anymore’. Due to relatively recent events, austerity has become a mathematical impossibility. 

Quantitative easing is not technically “money printing”. However, it did accomplish scaring everyone out of dollars and into “riskier” assets. So, while we didn’t print much, emerging economies certainly did as people ran screaming from the U.S. dollar. The result of which has been rampant inflation all over the developing world and near parabolic gains in commodities and equities. We’re left now with a dangerously deflating economy here in America while our creditors are heavily overheated. Not many people have much confidence in what QE or stimulus have accomplished. Our banks have fresh new reserves they can’t and won’t lend while our employment picture remains increasingly grotesque.

With QE2 ending, negative real interest rates and emerging markets unable to afford more inflation, how does the future look for U.S. government bonds? When rates rise, what of the outlook for equities and for the economy as a whole? If the economy stalls and people want to hold onto their precious cash, business will suffer and who will fund our local, state and federal governments? If our government programs can’t function, and people start to worry about their grandmothers, their pensions and their grandmothers pension, what will happen? Austerity? Not over our Masters of Debt’s (MOD’S) dead bodies! But when will we reach critical mass?

Why will congress and the fed absolutely intervene? When you figure it out, it seems almost comical to have ever believed otherwise. Simply put, that’s their nature. Nowadays, it’s what they are designed to do. Given current events, they truly have no choice whatsoever. Did Volcker raise rates way back when? Yes. Are they sort of attempting austerity all over the world? Well, kinda.  But that’s not what’s  happening here and now. It won’t happen...not for long. Tightening might come from the emerging markets, but not from us. Just as credit card addicts rarely cut themselves off, we’d sooner end this easy money regime as collectively give up cheap oil. In severe debt situations,  the creditors usually do the tightening, not the debtors. What environment will that conflict produce? When congress and the fed stimulate, ease and shuffle around assets and liabilities in a compounding vortex of fear and arrogance, how will our creditors react when they don’t have a choice anymore?

The first point of critical mass will be when the austerity is no longer tolerable for the government. The second is when emerging markets are forced to let their currencies appreciate. The critical question is whether this can occur in an orderly fashion or not? I think not. Our economy is so over-leveraged that austerity simply isn’t an option. There was a tipping point where the cost of providing tolerable austerity became too expensive for the world to afford. That is the main concept to understand. The bizarre fact is that we couldn’t financially achieve a hard money stance if we tried. Unfortunately, this is a somewhat recent development.

The fed’s dual mandate of stable prices and maximum employment is impossibly vague and ridiculous. What are prices? What is employment? Who’s prices and what work? Defining either requires shoving a qualitative square peg into a quantitative round hole. This is why no one believes in any of the models that the fed uses. Metrics such as the CPI, PPI and BLS numbers are useful tools but create a disconnect when applied to “monetary policy”. Fiscal policy has the same fallacy built into it. However, unleashing free market forces upon interest rates currency valuations would mean a complete restructuring of the global economic matrix.

If the fed lets raise rates, payments become too onerous for everybody here. If they continue buying treasuries, emerging markets get inflation and we all get asset bubbles. These inflated economies cannot allow us to do that but if rates rise too quickly emerging markets immediately lose their biggest customer without a significant consumer base established in their own countries. Therefore, QE3 will look very different than QE2. In reality, there are all kinds of back door attempts at stimulus being performed right now. These have been well documented by many pros such as Meredith Whitney, Bill Gross and Zerohedge.

The real issue here is public opinion. Obviously, the giant auction house that is our global market place is an organic amalgam of emotional organisms clawing at each other for some profits. People dictate policy, not economic models and while Bernanke may believe that a stronger CPI and 9% unemployment means one thing, it actually means another thing. The more people hear about the CPI and unemployment data, the angrier they get and the stronger their stance gets against austerity. However, everyone is concerned about debt. America is awash in it. Some believe that we aren’t at a breaking point and that we can mathematically sustain another 5-10 trillion dollars in debt. Whether that is true or not, public opinion is that our national and consumer debt is a ticking time bomb. So, which will prove the greater inertia; fear of a national, possibly global debt explosion or fear of austerity and deflation. Many could stop reading this right now as I believe the answer is inherently undeniable. However, I will continue briefly.

The elite hedge fund managers, bankers and policy makers have the ability to profit in any environment. Whatever combination of inflation, deflation or hyper-reinflationary price deinstagflation we get, they are positioned to prosper. However, because of capital flows and velocity, inflation benefits them the most simply because they get to use the money first. The argument that inflation harms big financial institutions balance sheets and that they would benefit from higher interest rates is incorrect. Deflation slowly kills their balance while inflation gives them a flow advantage. This being said, they aren’t the only game in town.

If congress and the fed were to enforce austerity, the outcome would be unpredictable to say the least. When and how would we  reemerge after a decade of gut wrenching deflation? Is it not possible that given the choice, many citizens might willfully opt for hyperinflation? I could see many possibilities in which hyperinflation would actually be better for a lot of folks. Hyperinflation is only one possibility anyway. We could have a Japanese style deflation inflation cycle for twenty years. I think that’s doubtful given the compounding black hole of debt and the public opinion regarding it, but Mish thinks it’s likely and I like Mish. In any event, the unpredictability of a hard money policy juxtaposed with that of an easy policy definitely favors the likelihood of the latter. When any attempt at austerity reaches the point of critical mass where the pain of a credit crunch overtakes the fear of hyperinflation, get ready.

In conclusion, when esoteric conjecture hits the cold hard wall of human suffering, emotion always wins. Austerity is mathematically impossible given that no one at the top benefits from it and no one at the bottom can psychologically bear it. Emerging markets may try to force rates higher, but only as much as its benefits outweigh its harm. In the end, organic responses will rule the day and the over-leveraged nature of our global economic environment ensures that the cheap money spigot cannot be closed without a complete restructuring. So, get ready for a transitory bout of tightening followed by a continuation of U.S. currency debasement and asset bubble formation.


- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Wed, 05/18/2011 - 13:56 | 1287981 legal eagle
legal eagle's picture

How about this, austerity for the rest of the world - cut our foreign aid in half.  Another light bulb, bring our troops home and end the madness.  Yeah, that's the ticket....

Wed, 05/18/2011 - 14:05 | 1288032 BigJim
BigJim's picture

Cutting our foreign aid means cutting our control over the foreign satraps who receive it.

It WILL happen, eventually, but not by our 'leader's' choice.... we'll just wake up to a morning one day when everyone has realised there's no money.

Wed, 05/18/2011 - 14:10 | 1288049 desgust
desgust's picture

Foreign aid!!! HaHaHa!

You are an idiot! Except Israel who receives "foreign aid"?

Go make your homework, moron!

Wed, 05/18/2011 - 14:37 | 1288233 WhiskeyTangoFoxtrot
WhiskeyTangoFoxtrot's picture

I suspect you're a troll, but in any case you're a fucking dumbass.

Wed, 05/18/2011 - 15:16 | 1288421 Holodomor2012
Holodomor2012's picture

It has been argued that much of our aid to ME nations "other than Israel" is actually still done to support Israel.  That census link shows Egypt, Iraq and Afghanistan among some of the higher recipients.

Wed, 05/18/2011 - 14:43 | 1288260 legal eagle
legal eagle's picture

No substance, no citations, just name calling.  Sounds impotent to me.

Wed, 05/18/2011 - 16:18 | 1288667 LFMayor
LFMayor's picture

Okay desgust, it won't bother you in the slightest if it is cut then.  Remind us of this when the starving masses are pouring over your borders, like two legged locusts.

we should weaponize the food.  Make those ingrates dance for their suppers. That, or convert those hills of corn (so fucking much we have to store it on the ground here, under tarps) to ethanol, drink it and burn it in our cars.

I've mentioned it here before, but in case you're new... did you know we actually make kitty litter out of whole kernel corn?  That's right, so those pampered, free loading ass-lickers can shit all over it at their pleasure. 
We have so much damn food that all but waste it.

Cut it off, no exports,  then we'll see what the market rate is for a litter box full of used corn after a week. 

Make Uncle Sam take a pull at that little brown jug marked "bad".  You've all forgotten what a son of bitchin mean drunk he really is, haven't you?

Thu, 05/19/2011 - 14:49 | 1292681 BooMushroom
BooMushroom's picture

I figured you HAD to be full of shit on this one.  Kitty litter from corn?  No way!

But it's true :(

From their page: 


World's Best Cat Litter™ isn't made from mined, drilled, or artificially made ingredients. It's milled from renewable whole-kernel corn and is biodegradable.1And because it disperses in water, it's also septic-safe and flushable!2

Yeah, we're screwed.

Wed, 05/18/2011 - 14:07 | 1288052 jus_lite_reading
jus_lite_reading's picture

Look at whats going on in spain today!!!

Wed, 05/18/2011 - 14:10 | 1288068 Joe Davola
Joe Davola's picture

Sorry, all the light bulb plants are closed.

Wed, 05/18/2011 - 14:24 | 1288159 smlbizman
smlbizman's picture

i cant afford another light bulb at 50. a pop

Wed, 05/18/2011 - 14:47 | 1288221 Aquiloaster
Aquiloaster's picture

United States Agency for International Development (USAID)'s budget is less than .25% of the national budget. So you are proposing reducing spending by .012% (about a tenth of a penny on a dollar). How did correctly complete the math question required to post that dumbass comment?

Wed, 05/18/2011 - 14:51 | 1288277 legal eagle
legal eagle's picture

I never said it would solve any of our hefty problems, only that by logical necessity reducing foreign aid is austerity - for them.  So, you are the dumbass for imputing a conclusion I did not state and then refuting it.  That, my friend is called masterbation.

Wed, 05/18/2011 - 15:22 | 1288430 Aquiloaster
Aquiloaster's picture

You never said it because your comment trailed off into an ellipsis, rather than saying what 'that' is a 'ticket' to. Ellipses...are easy to type with only one hand free...

Wed, 05/18/2011 - 18:57 | 1289259 legal eagle
legal eagle's picture

You are a dysfunctional narcissist.  You bend reality to suit your needs just like Bernake.

Wed, 05/18/2011 - 15:25 | 1288466 Absinthe Minded
Absinthe Minded's picture

It doesn't sound like much does it, .012%. Oh yeah, the national budget is $4,700,000,000,000. That comes to $564 million. That's chump change. In fact why don't you pay for it out of your pocket money. Seeing as we give Pakistan alone $2 billion a year I'd say your statistics might be off a little. With this kind of thinking it's no wonder our debt is at $14T and climbing.

Thu, 05/19/2011 - 05:09 | 1290588 earnulf
earnulf's picture

First off, the budget is 3.7 Trillion, not 4.7.    Second your computations are off by at least a decimal point and most likely two as State and other international programs was 49.8 Billion in 2010 (CBO Table S-11, 2011 Budget)    Multiplying 3.7 Tril by .012 renders about 44 billion, not 564 million.

Wed, 05/18/2011 - 16:41 | 1288751 pasttense
pasttense's picture

US AID is a small percent of our foreign aid. Most of it is military aid.

Wed, 05/18/2011 - 15:00 | 1288317 AnAnonymous
AnAnonymous's picture

How about this, austerity for the rest of the world - cut our foreign aid in half.  Another light bulb, bring our troops home and end the madness.  Yeah, that's the ticket....


How is that strange? It is classical to an extortion scheme. The extorter tries to fasten the extorted's belt as much as possible to better the day. That is indeed the ticket.

But the numbers show that not that much is to be recouped, than it wont bring that much more to the US table.

The current situation is plain to see: exhaustion of the extortion scheme. The US has saturated the world and there is not that much left to be extracted from the exterior to the US.

Wed, 05/18/2011 - 18:17 | 1289112 Yankee.go.home
Yankee.go.home's picture


Wed, 05/18/2011 - 13:56 | 1287982 SilverIsKing
SilverIsKing's picture


Wed, 05/18/2011 - 13:55 | 1287986 Lets Hang Parliament
Lets Hang Parliament's picture

Austerity is mathematically impossible

Complacency rules yet again...

Wed, 05/18/2011 - 13:58 | 1287988 Imminent Collapse
Imminent Collapse's picture

The question is not whether we can afford austerity, but can we afford not to have austerity.  More to the point, we won't be asked. 

It is coming, bitchez!

Wed, 05/18/2011 - 14:14 | 1288081 Hugh G Rection
Hugh G Rection's picture



They're already coming after the pensions, public or otherwise.  The morons on the left are being told we need to tax more, the morons on the right are being told we need to go after unions.


How about the bankster elites and the corporate oligarchs that pay nearly 0% tax.


Guillotines Bitchezz!

Wed, 05/18/2011 - 14:20 | 1288143 JW n FL
JW n FL's picture

when the debt ceiling is not raised.. that is forced austerity.. upon the poor..


it's all good.. when the poor start burning shit down in your neighborhood.. or when the poor snipe you from your own back yard because they are hungry and you have a nice house with the Bar-B-Que running!


No worries! You want Austerity! and here it comes! and that will be the end of some of you at the least! better hope the U.S. Army Troops can make it to your house before the Hungry Poor do!


Force Majeure' Austerity! which is incorrect because anyone with a brain knows that hungry poor people will act a certain way.. so it really cannot be considered an “Act of God” because this behavior of Austerity will bring about a premeditated response from the hoards! The hoards may not know what they will do, but we know what they will do.. and since we allow the Forced Austerity, we bring the end results upon ourselves!


Got Ammo Bitchez?


Wed, 05/18/2011 - 15:02 | 1288336 centerline
centerline's picture

Its a catch-22 for sure.  Either way, those most dependant on the system are the ones in line to lose the most.  Sick and hungry is the coming new normal for many.  You are right on.  And it is already happen, allbeit a lesser scale.  Whoever junked your post is an idiot... make that 2 idiots.


Wed, 05/18/2011 - 16:12 | 1288653 JW n FL
JW n FL's picture

Thanks Bro..

the thing that really pisses me off.. and maybe the junks get some over flow of the anger.. is!


1%.. Less than 1% of what has been printed was used to help those who need it.. less than 1-fucking-%!

$30 PLUS Trillion Fucking Dollars! and Nothing goes to Americans who need help!

I pay Taxes.. I want my Taxes to help My Fellow Americans and I dont fucking mean more Wall Street Welfare Subsidies!

I want my Taxes to help people who are in Need! My fellow Americans who need a Hand! in this Government Debacle fueled by Lobby Dollars!

I want real people to have real help!

I dont want Corporations getting help when they dont do shit to deserve it or put the monies back to work to the benefit of the Country! Fuck them!

$30 Fucking Trillion Dollars was fucking printed and less than 1 fuckign % went to help the people! Fuck the Government Lobby Whores and Fuck Wall Street for bribing them ALL!

Thu, 05/19/2011 - 00:51 | 1290384 StychoKiller
StychoKiller's picture

Better that you should hang onto those clownbux yourself and donate them to charities of YOUR choice, rather than allowing the Govt to give it to "charities" of their choice!

Wed, 05/18/2011 - 16:21 | 1288677 Pool Shark
Pool Shark's picture


Make that 3 idiots...


Wed, 05/18/2011 - 13:56 | 1287995 oogs66
oogs66's picture

Sadly I believe you are correct, that we will prime the pump until it explodes because austerity is too painful for politicians to deal with

Wed, 05/18/2011 - 14:16 | 1288117 dmger14
dmger14's picture

Absolutely true.  Anyone who believes we will have protracted and deep deflation underestimates human nature.

Wed, 05/18/2011 - 15:29 | 1288475 Hugh_Jorgan
Hugh_Jorgan's picture

I fully agree that the Fed will prime and prime, but just like a junkie and his smack it will require moreand more junk and give less and less effect. We already have the beginning of protracted deflation, and further deflation is guaranteed in my mind.

For all they have spent, we haven't even been able to keep economic output on an even keel much less show any growth. Plus, the results we have seen in the last 2 years is with the economy holding its breath, treading water hoping that things will turn around. I don't see any turnaround for at least 10 years, economic and geo-political events will ensure this.

So, at some point there is another collective shoe that will drop as the US economy "capitulates". That will put us into a deflationary pit that no amount of priming will ever stimulate us out of and the act of trying will bring runaway hyperinflation. This will be much worse than any austerity measures could ever be. Hyperinflation hurts all but the uber-rich, where auterity only hurts the poor and the entitlement classes. (Although, BHO and Co. are working overtime to expand the entitlement class because they think it will keep them in power and will foment a crisis that they can solve with radical changes to governance in the USA. Seems like that plan might be working, eh?)


Wed, 05/18/2011 - 14:00 | 1287999 TruthInSunshine
TruthInSunshine's picture

QEx is already here. It's ZIRP for as long as The Bernank doesn't get mutinized (and not by other Fed Board Members, either, who will never mount an insurrection - it will be by Congressional Incumbents, prodded to throw their hands up by senior citizens, the most fearsome voting block in history).

So, ZIRP is all Ben's got left.

Until that can't be maintained, which might be already sooner rather than later.

Austerity? Austerity can't happen, you say?

We'll all see it.

The reality is that QE3 or QEx, involving anything remotely close to past iterations, will only exacerbate the problems confronting The Bernank, and further, it will actually hurt Wall Street (and I do think the reality is that retailers are already screaming at the Fed and Congress behind closed doors, and that no one can deny that the U.S. and Europe are just too damn big on the consumption scale to be able to sacrifice on the altar of continued levels of inflation without Wall Street getting what someone else referred to as "boomeranged") - on sentence.

Bernank can't merely kick the can, again. There's a giant and sturdy wall at the end of the road he's come to.

When you get to the fork in the road, take it, Bernankincide.

The race to save the day is a slow simmer, and this boiling pace The Bernank has created has already dug his grave. Ben Bernanke is already a casualty, and he even probably knows it.

Cue massive campaign year theatrics and a big USD rally soon.

And cue Bernank's replacement. He wants to spend more time with the family, or teach again, or, whatever.

Wed, 05/18/2011 - 14:08 | 1288034 dizzyfingers
dizzyfingers's picture




Wed, 05/18/2011 - 14:46 | 1288256 alexanderstollznow
alexanderstollznow's picture

no, QEx is not here, and no changing the definition of QE will change the fact that, contrary to the views vociferously expressed on certain discussion forums, QEx is not likely at all, let alone anytime soon.

Wed, 05/18/2011 - 14:58 | 1288314 Jonas Parker
Jonas Parker's picture

TEACH? No, he wants to get to somewhere far, far away before being "Ceausescu'ed" by the American people.

Wed, 05/18/2011 - 14:00 | 1288013 imapopulistnow
imapopulistnow's picture

A Japanese style deflation inflation cycle for twenty years is perhaps the best case scenario that we are facing.  Both alternatives that you wrote of would be a disaster.  I can only hope our policy makers don't screw it up by going too far in either direction (hyperinflation or austerity)

Wed, 05/18/2011 - 14:12 | 1288060 TheTmfreak
TheTmfreak's picture

They set sail in the extremes awhile back now.

Wed, 05/18/2011 - 14:03 | 1288014 Tuco Benedicto ...
Tuco Benedicto Pacifico Juan Maria Ramirez's picture

What austerity measures is the privately held Federal Reserve willing to take in this scenario?  That's what I thought.  None!


Yes, they will print the money.  Death of the addict by overdose as opposed to withdrawal but death just the same!


Tuco Benedicto Pacifico Juan Ramirez

Wed, 05/18/2011 - 14:06 | 1288025 TruthInSunshine
TruthInSunshine's picture

The irony of fractional reserve banksters having to do the opposite of what they desire to do with every fiber of their being and existence will be incredible to see, as it will be the only way to temporarily save their entire dogma, if that is at least one of their important goals (i.e. self-survival).

Wed, 05/18/2011 - 14:12 | 1288091 Korrath
Korrath's picture

You wrote a decent rebuttal, but I still have an incredibly hard time believing that TPTB are going to allow the economy to slide backward into a sinking deflationary cycle which can only end in The Great Depression part the year before a major election.

Wed, 05/18/2011 - 15:23 | 1288457 Oh regional Indian
Oh regional Indian's picture


COnsider the possibility that there may be no major election in 2012.


Wed, 05/18/2011 - 16:06 | 1288626 MrSteve
MrSteve's picture

ORI, consider that during the 4 year Civil War in the USA which killed 600,000 people, the US held elections. No mater what happens, people will go to the polls to choose representatives and a President. Without elections, the government will have ZERO legitimacy, regardless of your opinion about it now.

Wed, 05/18/2011 - 16:51 | 1288794 KickIce
KickIce's picture

Take freedom for granted much?

Wed, 05/18/2011 - 18:17 | 1289106 Green Leader
Green Leader's picture

I am not expecting elections in 2012--as that is part of the plan...

Wed, 05/18/2011 - 16:26 | 1288698 TruthInSunshine
TruthInSunshine's picture

Guys, I'm as cynical as one can be about the true goals of those in power, including our very own (or not, as it is not part of our government, but a proxy organization that is more quasi-governmental, if just a little, when it claims it is - but I digress) Federal Reserve.

However, the math is the math, and that's the fly in the Bernank's ointment.

Whether those who claim QE as we now know it, in form and size, will effectively end, are correct or not, we do have some empirical data proving that it really was a net loser of a program, and implementing it thus far has probably severely damaged the real economy, and thwarted any organic recovery.

History would be kind to call QE a failure, when it's recorded in the books and expounded upon, IMO.

It may wind up as a case book example of what not to do for future students of economics.

Wed, 05/18/2011 - 14:06 | 1288029 buzzsaw99
buzzsaw99's picture

Austerity will never apply to Wall Street.

Wed, 05/18/2011 - 15:25 | 1288452 Shell Game
Shell Game's picture

Agreed. But more importantly, austerity will never apply to city, state or government 'leaders'.

Wed, 05/18/2011 - 14:05 | 1288035 LawsofPhysics
LawsofPhysics's picture

Haircuts all around eventually.  Got something physical to offer or exchange for the fiat du jour and/or the things you will need to survive?  Where are we all heading?  Think of what Russia went through after the fall of communism in the late 80's and throughout the 90's.  America is coming to the same conclusion (with similar racial and state's rights issues - will state leave the union?  maybe) just coming at it from a much steeper angle. 

Wed, 05/18/2011 - 14:10 | 1288038 TruthInSunshine
TruthInSunshine's picture
Think about these two 'proclamations,' regardless as to whether you believe the assertion, and why they are being asserted.

Wed, 05/18/2011 - 14:58 | 1288235 alexanderstollznow
alexanderstollznow's picture


Wed, 05/18/2011 - 14:42 | 1288242 alexanderstollznow
alexanderstollznow's picture

your anti Fed paranoia is really getting to you.. what this means is the majority want to first stop reinvesting interest on the MBS portfolio, then raise rates, then sell assets.  that is all it means.

Wed, 05/18/2011 - 14:09 | 1288041 string
string's picture

Wow. That was a waste of time.

Next time you want to write something, take a nap instead.

Wed, 05/18/2011 - 14:06 | 1288044 apberusdisvet
apberusdisvet's picture

Silver to the moon:


USGS (2009):  total world reserves:  400,000 Mtons

Total mine production 2009:  24,000 Mtons

Since we are aware that current industrial+ investment demand is overwhelming supply, then it looks like the planet will be out of silver within 2 decades, if not sooner.

So forget about the "disinformation bubble"; facts are a bitch.

Wed, 05/18/2011 - 14:11 | 1288055 mirac
mirac's picture

I disagree with this statement...

"The elite hedge fund managers, bankers and policy makers have the ability to profit in any environment."

Unknown variable will come into play that will wipe them out.  They will get caught holding derivative positions that they will not be able to get out of cleanly.  It is my belief that is more than just the Fed and the Brokers goosing this market with certain positions and when the shit hits the fan, they will be blown away into tiny particles of stool

Wed, 05/18/2011 - 14:09 | 1288058 dizzyfingers
dizzyfingers's picture

Perspicaciousness at this site isn't surprising but it always makes my day.

Thank you Tyler and all. You're the best of the best.

Wed, 05/18/2011 - 23:18 | 1290208 samsara
samsara's picture

"Perspicaciousness "

Thank you. 

My word for the day.  Neat.

Wed, 05/18/2011 - 14:12 | 1288066 JW n FL
JW n FL's picture

***** Quantitative easing is not technically “money printing”. ***** 3 Years 300% more Money Printed out of thin air.. the "We the People" back stop and pay for.. but do not enjoy any benefits of.. Technically!

Wed, 05/18/2011 - 14:14 | 1288079 faustian bargain
faustian bargain's picture

All roads lead to austerity. Good luck with your '20 years of inflation-deflation'. That's what got us where we are now; it's not going to get us out.

Wed, 05/18/2011 - 14:11 | 1288085 Hondo
Hondo's picture

I believe it's a fools paradox.  What the author fails to understand is that there is not really a good or best choice.  Both choices are bad and we will zig zag down both directions (a little bit of austerity and a little bit of inflation).  When one gets tired of one way we'll lean the other.  In the end there is no miracle or painless cure.  There is no doubt that the FED favors most of the pain (or the stealing of wealth) put on the populace and not the banks….up until the populace becomes restless then he’ll move the other direction (not unlike what will happen on June 30th).  We’ll move down this road for most of the decade…….with total government debt reaching $20 trillion or more (game over scenario) and then we’ll settle in for the next two decades like Japan until there start leaving baskets of currency outside the various Federal Reserve Banks doors. 



Wed, 05/18/2011 - 14:25 | 1288167 LawsofPhysics
LawsofPhysics's picture

Well put.  Black markets will thrive in this environment.  Once a corrupt market is identified as just that, capital and talent go elsewhere.

Wed, 05/18/2011 - 14:15 | 1288087 Danno Anderson
Danno Anderson's picture

You missed two important factors.   The younger generation is not going to stand for the shouldering the burden of the national debt which will reduce their entire lives to one of indentured servitude.   The national debt will be repudiated in one form  or another.

Secondly, the USA has become poorer each year for the last two decades because we collectively consume more than we produce.  ie trade deficit.

Therefore the solution to two problems is,  Declare henceforth, the national debt that all foreigners own will expire worthless in ten years unless those bonds are used to purchase 'made in America' products.  Voila, the trade deficit disappears.  New jobs are created in Amerika.  



Wed, 05/18/2011 - 14:27 | 1288161 JW n FL
JW n FL's picture

50,000 Manufacturing Jobs a month have left the U.S. for China for the last decade PLUS!!


Senate Republicans blocked a Democratic Bill to End tax Breaks for Moving U.S. Jobs Offshore!

Wed, 05/18/2011 - 14:32 | 1288166 Die Weiße Rose
Die Weiße Rose's picture

Austerity will be the only way out for the US .

it is happening already...

Wed, 05/18/2011 - 14:37 | 1288206 JW n FL
JW n FL's picture

about the 50,00 jobs per month.. well its an average.. some months more, some less.. but its a solid average number to work from.


or do you mean the Republicans thing.. lol Clinton was a republican, look at him and Bush (daddy) or look how close Obama and lil Bush are.. the Lobby rules all! but people dont respond to the truth.. you or I have to add in a word that evokes guilt.. so that people will take notice, read an learn something. while making themselves feel better that it was not all thier fault.


You are new.. so dont bug me when I am working again.. besides.. you feel better now that you know your votes for Bush were not the sole cause.


America since 2006 has been living under a Faux Constitution The Civil Rights that most believe exist are allowed by our Government, for now. Read the Law and Language for yourself, you will be un-happy to realize I am not some fruit cake making this shit up.


***** The fact that you changed your response before I could respond, was / is silly *****

Wed, 05/18/2011 - 16:06 | 1288636 DavidJ
DavidJ's picture

you are correct. We will not pay the whole debt.  Default on a portion of the debt in the future is what is needed.

Wed, 05/18/2011 - 14:17 | 1288106 bigwavedave
bigwavedave's picture

Austerity is Un-American. Print bitchez!

Wed, 05/18/2011 - 14:17 | 1288124 petaloka
petaloka's picture

I'll take out a loan for austerity if I can't afford it.

Wed, 05/18/2011 - 14:20 | 1288131 Die Weiße Rose
Die Weiße Rose's picture

Due to relatively recent events,

Austerity has become a mathematical impossibility ? -

Soon you will realize that statement like these

are based on assumptions of pure Bullshit ! 

(like hope for QE3 and endless supply of zero rate credit)

Wed, 05/18/2011 - 14:19 | 1288132 dexter_morgan
dexter_morgan's picture

People are gonna die!!!

Wed, 05/18/2011 - 14:31 | 1288180 JW n FL
JW n FL's picture

they dont see it.. thier arm chair quarter back morals.. have them thinking that God would want those with less than to suffer at the hands of those who cups runneth over! LMFAO!


God does not want anyone to suffer, let alone those on the bottom.. becuase those on top think that they need more and / or that those with Nothing! need less!


Let them burn, they wanted Austerity.. I dont fight it any more.. pour on the Austerity to those who have nothing to lose and everything to gain! LMFAO!


Cake or Death? Nope! now its just Death! enjoy your creation! enjoy the monster you fuckers have created!

Wed, 05/18/2011 - 15:14 | 1288376 JW n FL
JW n FL's picture

whats wrong with you coward junkers...

speak up you fucking spineless cowards..

its chat room..

no one knows who you are.. you can hide and run your mouth!

when you can NOT! speak up in a chat room.. where no one knows who you are... thats about as sad as it gets.

You cowards are the reason that America is the way it is.. once home to the Brave now home to the spineless austerity cowards..

Republicants and their Coward Secret Holds.. scared that someone will know them for the piece of shit they really are..

speak up you fucking spineless piece of shits! come on cowards you can always change you name after I educate you to save your lil dicked egos!


Wed, 05/18/2011 - 15:23 | 1288437 ElvisDog
ElvisDog's picture

Geez, JW, why don't you leave your mom's basement and go take a walk outside or something. I didn't junk you, but perhaps the reason people don't respond is that your anger seems irrational without any logic or even any interesting point behind it.

Wed, 05/18/2011 - 16:10 | 1288639 Calmyourself
Calmyourself's picture

Agreed, I would take on portions of it but it seems to be more emotional than anything.

We would end up debating what "is" is..

Wed, 05/18/2011 - 17:01 | 1288824 JW n FL
JW n FL's picture
by Calmyourself
on Wed, 05/18/2011 - 16:10


Agreed, I would take on portions of it but it seems to be more emotional than anything.

We would end up debating what "is" is..


ok.. your up. which portions would you like to take issue with..

I am happy to debate the facts contained / inbetween my venom. 3 Years 300%  Treasury Direct $14 Trillion Debt /   $15 Trillion in Loans /  / ='s $29T

Boehner Cuts Spending for the Poor! Gives Tax Breaks to the Rich! $28M Lobby Whore


Senate Republicans blocked a Democratic Bill to End tax Breaks for Moving U.S. Jobs Offshore!


Republican committee voted for a 18-month delay of regulations to reduce risk in OTC Derivatives.


Republican Senate Campaign Contribution Monies from Government Military Contractors with Free Speech Argument


Republicans! Stealing $2.5 surplus from Social Security - Robbing The Middle Class


Republican Tax Cuts! General Electric $14.2B Profits, Pays $0 in US Taxes $39M Lobby


youre up!

Wed, 05/18/2011 - 16:55 | 1288804 JW n FL
JW n FL's picture
by ElvisDog
on Wed, 05/18/2011 - 15:23


Geez, JW, why don't you leave your mom's basement and go take a walk outside or something. a; this is a personal attack and has nothing to do with the points made, sourced and sited.


I didn't junk you, but perhaps the reason people don't respond is that your anger seems irrational without any logic or even any interesting point behind it. a; what part of $30 Trillion dollars has been printed and of that $30 Trillion dollars Printed Less than 1% went to Main Street dont you understand.. or what part of that is boring to you? or beneath your debate "O" wise one? do please enthrall us all with your magical wit!


Wed, 05/18/2011 - 23:13 | 1290202 samsara
samsara's picture

#5 with a bullet from the 25 rules of Disinformation.


"5. Sidetrack opponents with name calling and ridicule. This is also known as the primary 'attack the messenger' ploy, though other methods qualify as variants of that approach. Associate opponents with unpopular titles such as... "

in this case 'Living in your mom's basement.

Shall we use a different techique next time?


Wed, 05/18/2011 - 15:32 | 1288487 Shell Game
Shell Game's picture

Aah, yes, our wonderful junk button. Ain't it grand?  I didn't junk you either, but speaking for God may have gotten you one or two..  ;-)


BTW, if the last two decades of prosperity was illusory, then how can reality be called austerity?  Unless, you would like your share of the printing press prior to its implosion?  Personally, I'm not going to fight for material scraps off of this corrupt table.  I will be as self-reliant as I can be and inch myself further and further away from Oz the Terrible..

Wed, 05/18/2011 - 16:54 | 1288807 JW n FL
JW n FL's picture

Fair Game on the God thing.. as always!


Thanks Shell for showing up to bring me back down to a mortal stance. I can get ahead of myself some times (most of the time).

Wed, 05/18/2011 - 16:42 | 1288769 RockyRacoon
RockyRacoon's picture

The junkers are illiterate, JW.   They can't compose a sentence let alone a thought.   Your comments are above their mental capacity -- ergo, you get junked.

I've grown rather used to your pseudo-rants and find them refreshing.

Wed, 05/18/2011 - 16:58 | 1288809 JW n FL
JW n FL's picture

Thats not fair Rocky.. You see past the smoke and mirrors.. you have been around so long that You are immune to my powers.

Wed, 05/18/2011 - 18:34 | 1289166 RockyRacoon
RockyRacoon's picture

Yep.   There was a day in the dark, gray past that your comments irritated the shit outta me.

Wed, 05/18/2011 - 23:11 | 1290189 samsara
samsara's picture

You have them out gunned JR.   And all it took was a triple digit IQ

Wed, 05/18/2011 - 15:09 | 1288375 centerline
centerline's picture

Everyone should take a real good look at charts of poplution growth over time.  Parabolic moves dont go on forever.  In fact, they usually collapse.  Could a failure of a global financial system be the trigger?  I think it very well could at least represent a top.

Factor in all the people who are dependant on the system for survival via programs, funding, medicine, and so forth.  Look at how fragmented and interdependant we have become.  Without even factoring in the possibility of peak this and peak that, there is already enough evidence to suggest with strong possibility that deflation will be real in terms of world population.

Wed, 05/18/2011 - 15:44 | 1288539 Absinthe Minded
Absinthe Minded's picture



I'm with you on this. Peak population is coinciding with peak oil, guess what happens next? I know the "Peak oil is bullshit!" crowd will probably chime in on this, but the Saudi's keep saying they're going to increase output to help with prices and that isn't happening. Congress just poopooed on cutting big oil's tax breaks. After all they only made $38 billion in profit this quarter. That would hurt jobs and cause gasoline to go up. Not if they took the cuts out of their friggin' profits the Scumbags! Our Congress is 90% bought and paid for. 

Wed, 05/18/2011 - 23:06 | 1290184 samsara
samsara's picture

...possibility of peak this and peak that...


Peak Oil?  That 'Peak This' is now past tense.

We will never pump more than 85ish million barrels per day ever again.  For get to ramping up to 90 or 100 Mil per day.

Burgan, in decline.

Cantarell, in decline(ex. 2.1 million in 2003ish, 400,000 now per day)

North Sea, in decline.

And Yes, Even...

Gharwar,  in decline.

It's over.  We are watching the end days of 'FREE' shipping.

Blackberries flown in over night from Columbia, 1000 mile salads,  And Globalism.


Wed, 05/18/2011 - 14:23 | 1288142 ivars
ivars's picture

Many countries have gone through long austerity periods and learned good lessond how to live during them. They came out stronger.


Why can't the USA?

Wed, 05/18/2011 - 14:29 | 1288170 LawsofPhysics
LawsofPhysics's picture

It can and it will.

Wed, 05/18/2011 - 15:23 | 1288435 JW n FL
JW n FL's picture

people will learn to use fire arms..

people will learn to never leave their doors unlocked..

people will learn to buy good alarms systems..

people will learn that when they have a nice house and food that they are a target of those without a house or food..

people will learn lots! people will learn how to pull themselves up by their boot straps!

People who's cup runneth over.. will learn they should never wish bad things or worse things on people who have nothing to lose!

Lots of learning..


The Religious Wanna be Conservatives.. who want Austerity for the poor.. who did NOT! get 1% of the $30 Trillion Dollars passed out that the tax payers have to back stop...


less than 1-Fucking-% of the Monies printed went to people in need.. but they need less.. while Wall Street gets MORE! and MORE!! and MORE!!!


You scumbags all deserve death, treason against your fellow Americans! for allowing the bullshit to settle in your heads!



Wed, 05/18/2011 - 15:39 | 1288525 LawsofPhysics
LawsofPhysics's picture

Exactly right.  Modern economics remains completely detached from reality.  I can't wait for the laws of physics and Nature to sort this all out.  Maybe then some level of accountability will return to the system.

Wed, 05/18/2011 - 17:59 | 1289062 topcallingtroll
topcallingtroll's picture

What about those who have done well in spite of wall street and who did not benefit from all this moral hazard. Should we be considered deserving of punishment?

Wed, 05/18/2011 - 18:06 | 1289081 Shell Game
Shell Game's picture

A fair question.  I have worked hard and sacrificed much.  JW...?

Wed, 05/18/2011 - 20:41 | 1289647 JW n FL
JW n FL's picture


1st off.. the only people I want to see hung for treason are.. not in any order bare in mind please..



Lobby, in total! "K" Fucking Street and beyond.

The heads of Security for the last 20 - 30 years. C.I.A. F.B.I. N.S.A. and the like...

and lastly the people who own these scumbag fucks!

whomever destroyed this Great Country thru bribery! needs to be hung for Treason.. of course we would need a popular vote to see any of this done and I can not raise enough money to test enough catch phrases to keep the sheepeople interested enough in the truth long enough to effect any kind of real change. Let alone the Air Time.. Commercials are expensive!


"We the People" are doomed to suffer ignorance in all its wonder that the lobby can buy!


I doubt anyone here is party to the systematic destruction of the Constitution, I doubt that anyone here owns several Congressmen / Senators and I doubt anyone here wants these idiots rail roading shit down the Poor and Middle classes throat! well maybe some of the idiots who have choosen not to embrace reality, but aside from the special faith based people..


So no Shell Game.. sorry buddy I dont think you or I or Troll are big enough fish to encompass the rightful wrath of the masses for Treason.


Wed, 05/18/2011 - 20:41 | 1289655 JW n FL
JW n FL's picture

I forgot to hang the Presidents for Treason as well.. my bad! going back to whoever was after Kennedy, save Carter.. he is not evil.. ineffective becuase he was not evil.. but not evil.

Thu, 05/19/2011 - 04:15 | 1290553 Tsukato
Tsukato's picture

Howz bout them cocksucking lawyers? I hate those motherfuckers with a vengence! If shit goes crazy someday in the states, I swear I'm gonna fly back for a week of lawyer hunting.

Thu, 05/19/2011 - 04:21 | 1290557 Tsukato
Tsukato's picture

AND...female, family court judges.

Thu, 05/19/2011 - 04:23 | 1290559 Tsukato
Tsukato's picture

AND... my blood sucking ex-wife, and her idiotic friends!

Thu, 05/19/2011 - 11:41 | 1291662 JW n FL
JW n FL's picture

if the lights go out.. like all this middle income wanna be conservative republicans want so badly.. and bad things happen to bad people.. that would not be a terrible thing would it..


I was thinking child molesters, rapists and the like! but if you were to concentrate on things closer to home... I would guess when it comes to the family court judge that you may be in line waiting to take 1 wack! with a stick becuase of the number of persons also wanting here hung.


I really try to concentrate on "K" Street becuase everyone else is just a pawn.. and "K" Street is all esquires.. damn near.

Thu, 05/19/2011 - 11:41 | 1291665 JW n FL
JW n FL's picture

if the lights go out.. like all this middle income wanna be conservative republicans want so badly.. and bad things happen to bad people.. that would not be a terrible thing would it..


I was thinking child molesters, rapists and the like! but if you were to concentrate on things closer to home... I would guess when it comes to the family court judge that you may be in line waiting to take 1 wack! with a stick becuase of the number of persons also wanting here hung.


I really try to concentrate on "K" Street becuase everyone else is just a pawn.. and "K" Street is all esquires.. damn near.

Wed, 05/18/2011 - 16:48 | 1288795 pasttense
pasttense's picture

Because the last generation which believed in leaving the country in better shape for their children and grandchildren was the World War II generation. And the World War II generation is rapidly dying off.

Wed, 05/18/2011 - 17:58 | 1289048 topcallingtroll
topcallingtroll's picture

Well said.

Thu, 05/19/2011 - 04:25 | 1290562 Tsukato
Tsukato's picture

What!? Why didn't you include the Boomers?! Didn't those selfish, filthy, STD infested, greedy, immoral, drugged out, overly leveraged,hypocrital, leftist, butt ramming, cock sucking, hippies, do good for the Ol USA?

Thu, 05/19/2011 - 04:30 | 1290568 Tsukato
Tsukato's picture

Thats another group I'd like to fly back, and hunt down, when the SHTF. FUCKING OLD HIPPIES! Hate those mother fuckers so completely! And new age american buddhists! "Hey man, whatcha doing with that gun? Man, ur way uncool, just take a drag on this my friend". BLAMMMO!!!!! HAHAHA!!! Fucking idiots!

Wed, 05/18/2011 - 14:24 | 1288149 johnnymustardseed
johnnymustardseed's picture

Rubber bullets and tear gas for everyone!

Wed, 05/18/2011 - 22:58 | 1290158 samsara
samsara's picture

They ain't got enough,  nor enough people to use them.


Wed, 05/18/2011 - 14:30 | 1288177 alexanderstollznow
alexanderstollznow's picture

The fed’s dual mandate of stable prices and maximum employment is impossibly vague and ridiculous. What are prices? What is employment? Who’s prices and what work? Defining either requires shoving a qualitative square peg into a quantitative round hole. This is why no one believes in any of the models that the fed uses. Metrics such as the CPI, PPI and BLS numbers are useful tools but create a disconnect when applied to “monetary policy”.

i dont see what the difficulty is here:  MP is a macroeconomic tool, based on macro economic numbers. 'prices' is the CPI. 'employment' are the BLS numbers.  irrespective of one's own views about the wisdom of that regime, it is quite straightforward and easy to apply.

 stupid statements like "noone believes in any of the models that the Fed uses" only show the author's personal biases, and certainly dont represent main stream economic thinking.


Wed, 05/18/2011 - 14:37 | 1288234 LawsofPhysics
LawsofPhysics's picture

The CPI does not reflect the prices paid for survival of 90% of the population.  Moreover, once a person stops looking for work, they are no longer counted as unemployed.  Pretty clear to me why one might question these numbers as "useful".

The system remains fraudulent and so long as the fraud remains the status quo, smart capital will go elsewhere in order to find better returns and protect asset value.

Why do you think people and banks are holding so much gold and silver right now?  These metals force accountability and hold value because some fuckwad economist from harvard can not simply create more of them out of thin air.  The financial sector had a chance to restore accountability and faith in the system.  Instead they have bought the politicians for thirty years now in order to make all their fraud "legal".

This, very finite world, continues to use an economics "model" that relies on infinite growth with no connection to reality.  We shall continue to reap the just deserts for such behavior.

All I can say is, hedge accordingly.

Wed, 05/18/2011 - 14:31 | 1288179 Bastiat
Bastiat's picture

When I read "Austerity" and Critical Mass I remembered reading this:

Senator questions benefits to ‘adult baby’

Wed, 05/18/2011 - 14:28 | 1288181 dick cheneys ghost
dick cheneys ghost's picture

Austerity is alive and well at the state and city level...the layoff are here and are massive.......800 sheriffs get pink slips in riverside county.........this austerity is bubbling from the local level..........and will only get worse as the whores in congress start work on the 2012 budget....

Wed, 05/18/2011 - 14:38 | 1288215 WhiskeyTangoFoxtrot
WhiskeyTangoFoxtrot's picture

I suspect you're a troll, but in any case you're a fucking idiot.

Wed, 05/18/2011 - 14:36 | 1288218 topcallingtroll
topcallingtroll's picture

The key point is that it is creditors who tighten the strings.

Our creditors are mercantilists and appear ready to subsidize us indefinitely.

Crazy isnt it? Why turn down a fool's extension of credit to us?

Wed, 05/18/2011 - 16:51 | 1288801 pasttense
pasttense's picture

No our creditors won't subsidize us indefinitely: remember the definition of a banker--someone who wants to loan you an umbrella when the sun is shining--and wants it back when it starts to rain.

Wed, 05/18/2011 - 17:48 | 1289015 topcallingtroll
topcallingtroll's picture

But our creditors seem uninterested in the "return" and buy our treasurys to maintain suppressed currencies and employment. If they are buying treasurys for political versus financial purposes this could go on forever.

Wed, 05/18/2011 - 14:39 | 1288223 WhiskeyTangoFoxtrot
WhiskeyTangoFoxtrot's picture

I suspect you're a troll, but in any case you're a fucking idiot.

Wed, 05/18/2011 - 15:01 | 1288331 LawsofPhysics
LawsofPhysics's picture

Wow, I see plenty of room for "Austerity".  End ALL foreign aid pronto!

Wed, 05/18/2011 - 17:52 | 1288225 topcallingtroll
topcallingtroll's picture


Wed, 05/18/2011 - 14:40 | 1288243 TruthInSunshine
TruthInSunshine's picture

Okay, I'll go on a limb.

The first real case of U.S. austerity will be dramatically lower military spending in the coming 12 to 18 months.

A budget will be introduced that cuts away 10% to 15% of the total military budget (either through absolute cuts or restraints on provisional increases).

That's the most palpable avenue for austerity, as between the golden trifecta of Social Security-Medicare-Defense, for starters.

And you'll see adjustments of significant amounts to Medicare AND Social Security, also, shortly thereafter - whether absolutely or by 'adjustments' to future benefits and some stealthy math.

(Even these cuts won't be enough, however, to form a long term budget solution, absent organic economic growth and higher revenues, which is WHAT BERNANKE HAS BEEN THWARTING WITH FED MONETARY POLICY).

Wed, 05/18/2011 - 15:23 | 1288456 ElvisDog
ElvisDog's picture

Looking at the response after OBL's execution, I see no chance for significant military cuts before the 2012 election. Obama played the guts-and-glory card and his poll numbers jumped 10 points. The Dems spend just as much time talking about the war on terror and honoring the troops as the Repubs do these days.

Wed, 05/18/2011 - 16:02 | 1288613 TruthInSunshine
TruthInSunshine's picture


I actually edited my post to put the "18 months" in there precisely for the same reason you just stated.

Wed, 05/18/2011 - 22:56 | 1290151 samsara
samsara's picture

absent organic economic growth and higher revenues,

Bingo, But as we are seeing but not understanding is that

Peak Oil = End Of Growth.




Wed, 05/18/2011 - 14:43 | 1288246 Hedgetard55
Hedgetard55's picture

QE "not technically money printing".


Well, I suppose, that using electrons rather than paper and ink, means it is not, technically speaking, "printing".

Wed, 05/18/2011 - 14:47 | 1288258 hambone
hambone's picture

Austerity in a sovereign nation is a joke!  Anyone who understands our political system knows that politicans only get elected / re-elected for "doing something" for their constituents.  Taking shit away from their constituents when the majority get "something" to a lot of "somethings" (SS, welfare, medicaid, tax breaks, blah blah) and raising the cost for lowering their benefits (higher taxes)...come on!!!

This may play in Wyoming ranching country or N. Dakota where folks want nothing from the gov and are self sufficient but that's like 1 million people out of 300million. 

The vast majority are now somewhat to totally reliant on the government for their income / food / shelter / medical care / transportation / etc.  They will not vote in austerity on themselves.

Austerity will only come once a hyperinflationary collapse has occured and printing is no longer effective...until then, their will be printing and they will buy T's, assets, whatever to extend and pretend as long as humanly possible.  Politico's will make a pretense of austerity but anyone who implements it (and the party they rode in on) will be out on the next go round replaced by promises of big spenders.

Wed, 05/18/2011 - 14:50 | 1288289 LawsofPhysics
LawsofPhysics's picture

Yep, but I disagree with your comment that most people cannot fend for themselves.  In my neck of the woods we will be just fine.  In fact my neighbors and I already came up with a name for all those city folk that will be heading our way.  Just call them "sharecroppers".  Sort of brings new meaning to the saying "will work for food".  Take off the suit asshole, here is a hoe.  Anyone who doesn't want to pick up the hoe becomes fertilizer.

Wed, 05/18/2011 - 15:11 | 1288337 hambone
hambone's picture

I'm not saying those dependent on the Gov couldn't do for themselves - My point is they won't self impose these changes.  They won't take away goodies from themselves. 

Now given they don't own land, don't know shit about taking care of themselves, bout farming, bout running a biz, about being self reliant (truly self reliant for big brother)...that is a decision and change that will only be forced on them.

I think people will more willingly accept inflation (consciously or not) as the byproduct of their politicians / governments attempts to "save them".  There are so many who believe the gov needs to "do something, do more" to fix these issues and there are plenty who will gladly step in to "do something".  They have no understanding that it is the government (at TPTB's behest) that has caused this and will only exacerbate and ultimately lead to our collapse.

Wed, 05/18/2011 - 15:27 | 1288478 ElvisDog
ElvisDog's picture

Well-said fellow dog. Another example is that a lot of people profess to care about "Climate Change" but very few of them give up their cars and ride the bus. The reason we have $1.6T deficits in the U.S. is because that's what the majority of people want. They want to kick the can down the road as long as they can, and they really don't care if some nebulous future generation has to pay for it.

Wed, 05/18/2011 - 15:45 | 1288533 hambone
hambone's picture

I dig it dog!

Wed, 05/18/2011 - 15:39 | 1288513 LawsofPhysics
LawsofPhysics's picture

On no, you are right about that for sure. No one will actually vote to take away the government tit.  There are those of us with capital and know-how who are willing to step in and do things once all the fraud has been cleansed from the system.  

Wed, 05/18/2011 - 14:53 | 1288281 chistletoe
chistletoe's picture


sure, you can find out how to do it,

and still eat all the ice cream and candy that you want,

just check the magazines at the grocery checkout counter ....



(If you can see around the hips of the lady in front of you ....)

Wed, 05/18/2011 - 14:50 | 1288285 TruthInSunshine
TruthInSunshine's picture

A fine but important point is that everyone knows that inflation of a certain amount is baked into the cake over the long term.

Most credible economists will also agree that it takes a minimum of 6 months (it's likely closer to a year in most cases) for interest rate increases to tamp down inflationary uptrends (not reverse them, but merely tamp them down), once such inflationary uptrends are entrenched firmly based on expectations and/or other factors.

And that's the problem Bernanke has saddled himself with. In his stated goal of preventing deflation, he overshot, and he's now going to pay a big price, as has the country and world, for that matter.

My big point of contention that I wish more credible economists would analyze is that deflation is not always the demonic economic force that conventional modern economics makes it out to be, and moreover, inflation as an adverse economic force is far more insidious than is conventionally taught.

We're not in Kansas anymore. This is not 1933. Ben's much lauded (alleged) expertise on depressions (and presumable, the best way to prevent them) is suspect. Deflation is not the boogy man Keynesians, in particular, portray it as.

Wed, 05/18/2011 - 15:01 | 1288319 LawsofPhysics
LawsofPhysics's picture

"Deflation is not the boogy man Keynesians, in particular, portray it as"

No it isn't.  It simply depends on what side of the asset or trade you are on.  But I digress, how much more deflationary can one go when their money and assets have been deflating for 30+ years?

What I want economists to address is "passive income" (especially the large extraction of real wealth from the economy for doing NOTHING).  It is all about sustainability.  If a system is not built that holds people accountable and makes sure that compensation finds its way to those the actually create real value (not simply push paper), then we will revert to the most basic economic system, one of survival.  We may anyway.

Wed, 05/18/2011 - 22:51 | 1290130 samsara
samsara's picture

I think the inflation that everybody is talking about has already happened.  Since 1913 till now. 

The Volume of money that has been loaned into existence is already immense. 

How much money was vaporized when Iceland said Phuku to the UK and Netherland?   How much money WILL be vaporized (written off) when Greece, Spain, et al go under?

That's deflation in action.  Money being vaporized. Just cancelled out.   Poof.

That's Monetary Deflation in action. And it's only starting.


Wed, 05/18/2011 - 15:02 | 1288342 Camtender
Camtender's picture

Seems like a summary of the recent FOFOA hyperinflation article to me.

Wed, 05/18/2011 - 15:06 | 1288359 Seacap81
Seacap81's picture

The Fed will pump and pump and artificially inflate like there is no tomorrow - they have no other choice. 

To know the end result of these actions we have to look no further than those exploding watermelons in China.  It really is analagous.


Wed, 05/18/2011 - 15:10 | 1288378 hambone
hambone's picture


Wed, 05/18/2011 - 22:44 | 1290114 samsara
samsara's picture


They don't print the money.  It has to be LOANED into existence.  You can't loan it to people that won't borrow.

You could give it to your primary dealers and they will drive up commodities,  which will stop people from borrowing even more.


Wed, 05/18/2011 - 15:14 | 1288403 jmc8888
jmc8888's picture

Tolerable austerity?

Well first off I bet if there is such a thing it's 1/10th of what the 'experts' say.

But that gets us off track.

Why endure austerity?

It was the banks/corporations fault.  ALL of it. (through gov't)

It was fraud.

Yes because now that grandma had her life savings stolen, we now have to have grandma pay directly for the incarceration from her social security to house the thief.

That's basically what we'd be doing.

Austerity for Fraud.

So isn't possible, even if it were tolerable, it would crash the system. *and the point of austerity is to save this crappy system and honor crap*

What is tolerable is at most 1/10th of what the experts say

Somehow idiots have forgotten it was fraud, and cannot make the connection that it is Austerity for Fraud.  Or Austerity because of fraud.

Glass-Steagall and there is no need for austerity, debt limit, printing, cutting (needs...not wars and bailouts which can be cut).

Hyperinflation could be good the author thinks possibly? Wow, take your head out of the ivory tower test tube.  Hyperinflation would literally pit everybody against each other to determine what something costs.  In other words the ratio between things will be completely up to grabs, on the whims of a broken hyperinflating market, which has only been getting every sort of price discovery WRONG. the author thinks...that people will be able to pay for the hyperinflated prices.

The money won't trickle down. (it never did)

Things will go up in price, and people won't pay.  That means demand destruction.  Which means industry destruction. 

All the money is locked up into fraudulent debt.  When it's paid to these assholes they just turn around and pour it into commodities or other 'bets'. 

It won't get out to the people so they can pay 1 million for a gallon of gas because the minimum wage is 7 million an hour.  It won't be like that.

Workers will work for literally nothing, as guess what, McDonalds employees won't be able to say, we deserve a million an hour, or 10 million an hour.  They'll save, you get 100,000 and like it.  (and even then I doubt that). The only people able to move up the chain a bit are unions and professionals.  Everybody else will be screwed.

But again, if the inputs are hyperinflated, and the rest is soaked up into debt and derivatives....who is going to be able to pay these sorts of wages? Who will be able

Trickle down effect DOES NOT EXIST.  It was a lie.  Now the author is somehow thinking, that after hyperinflation, all those hyperinflated dollars will make their way through the workforce. Nope.

Only Glass-Steagall style principles will save us.  It's fraud.  Cancel it as fraud.  Don't print.  Don't cut (needs). 

Here is a simple math equation.  Your answer cannot be over 1 million.


Whoops...what is fucking up the above and keeping us from answering the problem in a way where the answer does not top 1 million?

Oh yeah that middle one.  The outlier (in our case...the fraudulent debt).

So you take that out of the equation (via Glass-Steagall)

1+1+ removed+1+1=4

Wow was that so hard?  Just take that out of the equation...the thing fucking everything up.  The FRAUDULENT DEBT. It doesn't belong in our economic system.  It doesn't belong in all the projections. It doesn't belong as part of our debt payments.  It should not exist.  It's illegal, it's fraud, it's illegitimate.

What law can do this? Is one even possible? Glass-Steagall.  Yes it's not only possible, it used to be our law. 


Wed, 05/18/2011 - 15:41 | 1288519 hambone
hambone's picture

There is no saving us - no good way out of this - there is only revaluation (via austerity or inflationary policies) of everything. 

Saying to void the debt is to void peoples capital, void peoples income, void companies future projects, void GDP growth and tear down all the fairy tales "we'll grow our way out of it" paradigms.  No more 7%, 8% returns in petputity.  No more lies can be sustained.  Cold. Hard. Truth.  Not sure many beyond ZH are ready for that?

Saying to pay the debts is less painful on the face of it and the majority don't care to understand where the money comes from or what the implications entail.  Faber, Rogers have this nailed.

Wed, 05/18/2011 - 16:55 | 1288803 RockyRacoon
RockyRacoon's picture

jmc8888 is a one-trick pony.   His solution to bad breath, hemorrhoids, and world hunger is Glass-Steagall.    Always cloaked in a different, but article-pertinent, costume.   I won't argue that its loss was devastating, but I'd like to see him comment on something that is, oh I don't know, 21st Century.

Wed, 05/18/2011 - 17:08 | 1288855 hambone
hambone's picture

Mr. Racoon,

jaaa but then again all that is old shall be new again.  We now talk of gold and silver, of paying for things w/ money (gasp).  How 1st century of I'm not sure there is anything new under the sun to discuss in the 21st century...cept that HFT shit, oh, and peak everything issue is new, oh, and collapse of globalism.  Other than that...there's nothing new.

Wed, 05/18/2011 - 18:39 | 1289178 RockyRacoon
RockyRacoon's picture

True enough.   But I wouldn't be investing in buggy whips or sealing wax any time soon.

Wed, 05/18/2011 - 19:55 | 1289494 Loose-Tools
Loose-Tools's picture

Well then, we could call it "21st Century Glass-Steagall" to make you happy. Would you, in ill health, also reject proven 20th century medicines, just because they were not "21st Century'?

Wed, 05/18/2011 - 15:41 | 1288518 schizo321437
schizo321437's picture

Austerity now or later, your choice.

Wed, 05/18/2011 - 16:01 | 1288600 Shell Game
Shell Game's picture

...but, but, this sidesteps a petty and divisive fight over table scraps.  It also embraces reality, a terribly inconvenient endeavor.  /sarc

Wed, 05/18/2011 - 15:49 | 1288546 Seasmoke
Seasmoke's picture

Black Market Bitchez !!

Wed, 05/18/2011 - 16:29 | 1288721 MrSteve
MrSteve's picture

During the Argentinian crisis, cheap, thin 8K and 10K gold rings were a payment of choice. Gold coins were too highly valued to facilitate black market trading. Little airline serving shots of vodka and scotch were also used as notgeld.

Things like home brewing and wine making will make a BIG comeback. You'll be able to trade your beer for odd jobs. Bartering is a real pain in the neck.

Wed, 05/18/2011 - 22:37 | 1290097 samsara
samsara's picture

You could buy most anything at Parque Lezama and other parks, Recoleta was a bit dicey if I remember.

Corners with military with M16's asking for papers.

All the Banks had corrugated steel over the windows.

You could only draw out something like 1000 pesos per month regardless of your balance.


Wed, 05/18/2011 - 15:52 | 1288571 samsara
Wed, 05/18/2011 - 16:04 | 1288611 Hacksaw
Hacksaw's picture

It's not Americans that won't tolerate austerity in the USA it's the rest of the world that won't tolerate it. Just look at the latest austerity measures, hundreds of thousands of workers are currently in the process of losing their jobs. Many private sector workers are feeling better because they got even with those "blood sucking government workers". They think they will be getting tax relief but the only ones getting that plumb will be the top 20%. The only benefit the private sector workers get from the current austerity will be longer lines at the unemployment office when they get the axe, which is coming in the next leg of the downward spiral. And on and on the merry go round will go.

The end result of all this will be continued waves of reduced spending by the American consumer. Currently domestic home builders and retailers are feeling the result of the first legs of the spiral. Imports of cheap foreign products are up but if the spiral isn't stopped eventually spending by Americans even on cheap foreign goods will slow. When this happens there will be screaming from the rest of the world for the government of the USA to do something to get their economy rolling again. Russia is already publicly threatening another cold war and I feel sure there have been similar threats form others, even if they weren't made publicly.

The government of the USA will probably acquiesce to these demands for further stimulus to get consumption back up, and in turn getting imports back up. The real question is can they derail the spiral. I think not, if one looks at the demographics around the world there will be a huge reduction in population in the next 20 years or so in the developed countries including China.

The smart guys have created a perfect storm. Middle class jobs are moving to undeveloped countries to take advantage of slave labor wages, causing wage deflation in developed countries, and in an attempt by the elite to create other markets. Take that huge destruction in demand and add in the destruction in demand caused by the dieing out of the WWII bulge generation around the world and deflation looks to be unstoppable.

I'm convinced that the global government and the central bankers are bumfuzzled right now because they were certain that the actions they have already taken should have set things right. When they view all they've done and see that the only result to all their stimulus has been to inflate the price of commodities and that only accomplished a further reduction in demand, they are at a loss to know what to do next. They may well throw up their hands and say they are going for austerity but it won't be because they chose it. It will be because they couldn't stop it. Austerity is the worst option for the elite. Just look at the results of austerity around the world, riots and revolts are breaking out almost globally. Deflation makes the elite ass hole pucker up tight, they would take inflation in a heart beat but to this point haven't been able to create an inflationary cycle. 

It is going to be tough the next couple of decades.


Wed, 05/18/2011 - 16:21 | 1288672 Shell Game
Shell Game's picture

Austerity is the worst option for the elite. Just look at the results of austerity around the world, riots and revolts are breaking out almost globally. Deflation makes the elite ass hole pucker up tight, they would take inflation in a heart beat but to this point haven't been able to create an inflationary cycle.

Spot on, deflation will never be allowed to win.  However, wrong in the last sentence, '[they]haven't been able to create an inflationary cycle'.  Oh, indeed they have, one only has to look at oil, cotton, wheat, PMs, etc. over the last year for proof.

You are right, it is a cycle, one that is now transitioning afte the ME riots began to bring on a world tipping point.  They need a good bout of deflationary fear before they can unleash QE3 and resume their march to hyper-inflation.  Plan A was to regain the status quo. Their plan B is to erase all debt in HI.

It will indeed be a tough decade or two..

Wed, 05/18/2011 - 16:59 | 1288812 RockyRacoon
RockyRacoon's picture

Reversion to the mean is a bitch, ain't it?   The "mean" will look like austerity on a grand scale, whereas, it really isn't.   Maybe Moore's Law needs a breather.  

Do NOT follow this link or you will be banned from the site!