This page has been archived and commenting is disabled.
In Response To Concerns That EFSF Funds Are Insufficient, Axel Weber States Simply That Europe Will Just Print As Much As Needed
After we noted earlier that the latest trending topic regarding Europe's insolvency was that the €440 billion EFSF rescue facility will likely not have enough cash to bail out Spain, the ECB immediately came to the rhetorical rescue, with Governing Council member and Bundesbank head Axel Weber speaking at a conference in Paris, telling participants that "The European Financial Stability Fund should be
sufficient to dissuade markets from speculating against the solvency of
Eurozone member countries, and if not, more money will be provided." Lamenting the market's idiocy, which refuses to stop punishing bankrupt stats, Weber further added that markets suffer from "limited rationality" and players
often follow market movements to the neglect of "fundamentals." Of course the same should be said for all those who are buying into this rally, which is driven exclusively by the genocidal desire of central bankers to ramp up stocks, kill currencies, and make the cost of living unbearable for half their constituencies. But nobody has ever accused central bankers of objectivity, or ever doing something that puts the interests of a few billionaire "Jenny 20" rejects over a billion or so filthy peasants.
Some more unbearable self-serving rhetoric from Jean-Claude Trichet's successor, via Market News:
It should be "easy to convince markets" with the EFSF backstop that
speculation against governments will not be successful, Weber argued.
The facility provides for up to E440 billion in government-guaranteed
loans, which is in addition to a pre-existing E60 billion EU emergency
fund. The IMF has also pledged up to E250 billion, bringing the total
pot to E750 billion. Weber said he was convinced that if the E750
billion is not enough, Europe's political leaders "will do more."
Furthermore, Weber managed to confirm that he is either stupid, or is convinced everyone present at the conference is a prime grade moron, when he said that "the sovereign debt crisis is not a crisis of the euro or the
Eurozone, but rather one of individual countries. The
structural problems of Greece and Ireland are not comparable to those of
other members, he insisted." The fact that the individual states are in crisis precisely due to the fact that their monetary policy tools are eliminated, which serves exclusively to keep the German export sector highly competitive and the German cost of productivity far lower than the rest of the Eurozone (and here we are blaming China for pegging the CNY), was oddly not mentioned by the corpulent bureaucrat.
Persisting with his projectile vomit session of aneurism-inducing mendacity, the rotund teutonic ogre claimed that EMU member states should retain as much sovereignty as possible in
fiscal matters. Oddly enough, this is happening precisely as deep behind the scenes we are now hearing that the EU is contemplating the finishing touches of a unified bond issuance mechanism, in essence completely removing fiscal independence, and making all of Europe a vassal state to a newly-ascendant Germany.
Weber completed his oratory with the following:
In the end, "the crisis will be positive for the Eurozone," since it will oblige the governments to extend their surveillance structures and establish a permanent mechanism to deal with future crises, which will "certainly" occur, Weber predicted.
In response to Eurosceptics, Weber argued that acceptance of monetary union is no longer an issue for younger generations with no experience of the previous currencies. "The D-mark would be no alternative to the euro!"
He is absolutely right. The transition from EUR to DEM will not be parallel. It will be serial, and will occur when all of peripheral Europe has abdicated its monetary and fiscal authorities, as well as it budgetary independence to a reincarnated teutonic knights counsel.
And they say history does not repeat...
»
- 12457 reads
- Printer-friendly version
- Send to friend
- advertisements -
I spent very little time in the post on gold because it won't prove important so I have no comments about that.
>>>The problem with the CPI is that it measures not the price increase of a fixed basket of goods, but tries (failry succesfully in my opinion) to approximate the ongoing cost increase in maintaing a certain standard of living. The CPI is fine for some purposes, not others. It does not accurately reflect commodity price increases for example. Inflation is a sneaky animal - it influences different sectors of the economy in different ways.
-Inflation is the act of diluting a currency, not price increases. Price increases are the consequences of inflation. You are right that so far, we are replacing by printing, not inflating. But this is a just matter of size. Steve Keen estimates that 6-7 trillion in QE would be inflationary, up until that point, we are merely replacing, reinflating the bubble that should be allowed to deflate. What guarantee do we have that Benny gets this just right and does not overdo it? Deflation is what we SHOULD see now. It is healthy. The system is trying to cleanse itself but is not allowed to.
>>>
No, I think you have this wrong. The **CONSUMER** Price Index is precisely what it is. It measures exactly what it says it measures and because consumers are all powerful, it is the parameter that defines price increases, because that is the only measure of inflation that matters.
I know the guys obsessed over what is merely replacement (vs dilutive) printing want to deny its extremely weak value, but the reality is inflation is low -- and Bernanke and 9 of the 10 governors of the Fed agree. Deflation is the crushing danger. Not inflation. When there is an issue of inflation they will react to it. They'd love to. At this point they would love for there to be inflation.
There is none. There can't be. Oil won't allow inflation, oddly, as it spikes in its own price. It crushes all economic activity, which in turn erases the desire of people to consume. It's hard to raise prices of things no one wants.
Oil is everything. EVERYTHING. It is the lifeblood of civilization and as it disappears, it crushes all economies of the world. That . . . is deflation.
Ah, but this is how biflation exists!
It's what I've been trying to explain. Things that are paper based, people don't want, can't be sustained in terms of pricing.
But, the input costs as the real cost of energy via EROI rises, so there is a dilemma presented. The real cost of doing things rises. The amount of doing necessarily declines as energy surplus vanishes.
What happens when the amount of oil it costs to build a house exceeds the amount of oil the buyer might reasonably expect to be able to "purchase" in the future? At the lowest level, there's your cost of construction. Answer: house doesn't get built; nobody buys, nobody sells.
There isn't an economist out there in 1000 who has spent any time whatsoever thinking through the economics of contraction instead of growth.
WTF...Does the word 'inflation', as defined from most common sources have a purposely polluted definition?
Maybe there is no such thing as singular inflation or stand alone deflation on a macro scale?
Perhaps on a macro level there can only be Biflation? Perchance biflation exists then only as an early macro timeline event?
If one considers the concept of inflation as being currency debasement (although most public sources define its symptom of rising prices as inflation), as it often is, then many arguments (and consequent solutions) are lost in a sea of mismatched meanings.
The conundrum of the oil variable really needs more respect and consideration when approaching the currently bantered around concepts of inflation and deflation. As oil spikes, it decimates economic activity of certain, specific kinds, creating niche deflation. Being only part of the story, oil price on viagra ratchets up the price of base living requirements creating niche inflation.
It might behoove us to consider refraining from the continued use of various terms because of their expansive, and cherry picked general meaning. Many of these overly global definitions create semantic constructs which assist us in being unable to arrive at a clear and concise answer.
Perhaps we could use subcategories representing the symptoms of currency debasement:
Wanted Assets or Services (WAS) - Mortgage payments over x? dollars, vehicles over x? dollars, liability producing assets, leisure, humanities education, etc (There would be huge disagreement regarding what is truly necessary!)
Needed Assets or Services (NAS) - defined narrowly by that which is necessary for life to continue, the body not to become sick, income producing assets, food, water, energy, trade education, etc
Paperflation? Fiatflation? FiatFlatulentflation? MentalMasturbation!
Tangible Asset Deflation/Inflation as opposed to paper denominated detritus should have distinct words that call them out!
I'm no economist, so there may be stats already existing right under my snout I'm simply ignorant about. The figures I'm looking for most certainly aren't the PPI or CPI.
-
No, I don't have it wrong. I never said the CPI doesn't measure what it says it measures. But it does not accurately reflect commodity price increases for example, which may also affect consumers and corporations, some more than others. It is the only measure of inflation that mattters to the FED, and thus the only measure of price increases that matters to them. That does not mean it should be the only one important to me. That depends entirely on my situation.
But you aren't society. It is society's inflation that defines pay raises and indexed pension raises. They aren't going to come to you and have your individual spending profile define the pension adjustment for the whole country. This is why CPI is inflation.
Commodity price increases do not need to be measured. Whatever impact they have on people is measured, and seriously, in a world where only oil matters, only oil as a commodity need be of interest. No one is building houses, so why would copper matter in the US. All that matters is societal CPI and it measures very well. Influences on CPI, if they are truly influences, will be captured.
As for trav's points, yeah, those are legit. I have been somewhat confident for a very long time now that 2008's oil price spike triggered everything since -- and we could ignore that price and just look at the undulating top on oil production that started in 2005. It was all downhill from there.
I'm generally okay with the EROI guys, though I do have a vague suspicion that if I could use solar to power ethanol extraction, or some other liquid fuel, then EROI matters a lot less. Nothing like that is scaling yet, or likely ever now since we have so little time left no such approach could be brought online.
But I generally embrace the amorphous idea that the ENGINE of society that generates big growth numbers is oil, and as production has capped, so is growth -- and that's forever sports fans. Yes, I sign onto that and it's why I am still in bonds after a spectacular 18 mos. There can be no growth. Period. The flailing machinations of Bernanke, and let's make sure we remember he and all the Board are very smart guys, are pointless. There's nothing he can do. He can't print oil. They learned from the same econ books I used for my MBA at Wharton and NONE, repeat NONE, of those ever teach anything about economics in a closed system with depleting resources. In their education, scarcity is addressed by raising its price. They think they can create oil out of dollars. If you had them analyse a closed room economy . . . and told them you are withdrawing the oxygen from that room by the end of the week, it would have no impact on their analysis.
Bonds can't be the parking place much longer. US credit will be challenged. But gold will never be the final answer. It can't be electronicized and when speculative price increases end, its value starts to drain away in the form of security guard costs. No, in the final analysis the only storage of value is oil. It helps to own what you produce and sell of that stuff, too. Suncor.