This page has been archived and commenting is disabled.
Shadowstats' John Williams: Prepare For The Hyperinflationary Great Depression
- AIG
- Alan Greenspan
- American International Group
- Arthur Burns
- Bear Stearns
- Ben Bernanke
- Budget Deficit
- Capital Markets
- China
- Chrysler
- Citigroup
- Excess Reserves
- Fail
- Fannie Mae
- Federal Reserve
- Freddie Mac
- General Motors
- Germany
- Global Economy
- Great Depression
- Gross Domestic Product
- Hyperinflation
- John Williams
- Lehman
- Lehman Brothers
- Main Street
- Monetary Policy
- Moral Hazard
- None
- Purchasing Power
- Stimulus Spending
- Washington Mutual
John Williams, who runs the popular counter government data manipulation site Shadowstats, has thrown down the gauntlet to deflationists, and in an extensive report concludes that the probability of a hyperinflationary episode in America over the next year has reached critical levels. While the debate between deflationists and (hyper)inflationists has been a long and painful one, numerous events set off in motion by the Bernanke Fed (as a direct legacy of the Greenspan multi-decade period of cheap and boundless credit) may have well cast America as the unwilling protagonist in the sequel of the failed monetary policy economic experiment better known as Zimbabwe.
Williams does not mince his words:
The U.S. economic and systemic solvency crises of the last two years are just precursors to a Great Collapse: a hyperinflationary great depression. Such will reflect a complete collapse in the purchasing power of the U.S. dollar, a collapse in the normal stream of U.S. commercial and economic activity, a collapse in the U.S. financial system as we know it, and a likely realignment of the U.S. political environment. The current U.S. financial markets, financial system and economy remain highly unstable and vulnerable to unexpected shocks. The Federal Reserve is dedicated to preventing deflation, to debasing the U.S. dollar. The results of those efforts are being seen in tentative selling pressures against the U.S. currency and in the rallying price of gold.
And even as Bernanke continues existing in a factless vacuum where he sees no asset bubbles, Williams takes aim at the one party almost exclusively responsible for the economic carnage that will soon transpire:
The crises have been generated out of and are centered on the United States financial system, triggered by the collapse of debt excesses actively encouraged by the Greenspan Federal Reserve. Recognizing that the U.S. economy was sagging under the weight of structural changes created by government trade, regulatory and social policies -- policies that limited real consumer income growth -- Mr. Greenspan played along with the political and banking systems. He made policy decisions to steal economic activity from the future, fueling economic growth of the last decade largely through debt expansion.
The Greenspan Fed pushed for ever-greater systemic leverage, including the happy acceptance of new financial products, which included instruments of mis-packaged lending risks, designed for consumption by global entities that openly did not understand the nature of the risks being taken. Complicit in this broad malfeasance was the U.S. government, including both major political parties in successive Administrations and Congresses.
As with consumers, the federal government could not make ends meet while appeasing that portion of the electorate that could be kept docile by ever-expanding government programs and increasing government spending. The solution was ever-expanding federal debt and deficits.
Purportedly, it was Arthur Burns, Fed Chairman under Richard Nixon, who first offered the advice that helped to guide Alan Greenspan and a number of Administrations. The gist of the wisdom imparted was that if you ran into problems, you could ignore the budget deficit and the dollar. Ignoring them did not matter, because doing so would not cost you any votes.
Back in 2005, I raised the issue of a then-inevitable U.S. hyperinflation with an advisor to both the Bush Administration and Fed Chairman Greenspan. I was told simply that "It's too far into the future to worry about."
Indeed, pushing the big problems into the future appears to have been the working strategy for both the Fed and recent Administrations. Yet, the U.S. dollar and the budget deficit do matter, and the future is at hand. The day of ultimate financial reckoning has arrived, and it is playing out.
Looking at the events over the past year demonstrates that Williams is not just being a drama queen.
Effective financial impairments and at least partial nationalizations or orchestrated bailouts/takeovers resulted for institutions such as Bear Stearns, Citigroup, Washington Mutual, AIG, General Motors, Chrysler, Fannie Mae and Freddie Mac, along with a number of further troubled financial institutions. The Fed moved to provide whatever systemic liquidity would be needed, while the federal government moved to finance corporate bailouts and to introduce significant stimulus spending.
Curiously, though, the Fed and the Treasury let Lehman Brothers fail outright, which triggered a foreseeable run on the system and markedly intensified the systemic solvency crisis in September 2008. Whether someone was trying to play political games, with the public and Congress increasingly raising questions of moral hazard issues, or whether the U.S. financial wizards missed what would happen or simply moved to bring the crisis to a head, remains to be seen.
More on the impending timing of the complete economic collapse of the US financial system:
Before the systemic solvency crisis began to unfold in 2007, the U.S. government already had condemned the U.S. dollar to a hyperinflationary grave by taking on debt and obligations that never could be covered through raising taxes and/or by severely slashing government spending that had become politically untouchable. The U.S. economy also already had entered a severe structural downturn, which helped to trigger the systemic solvency crisis.
The intensifying economic and solvency crises, and the responses to both by the U.S. government and the Federal Reserve in the last two years, have exacerbated the government's solvency issues and moved forward my timing estimation for the hyperinflation to the next five years, from the 2010 to 2018 timing range estimated in the prior report. The U.S. government and Federal Reserve already have committed the system to this course through the easy politics of a bottomless pocketbook, the servicing of big-moneyed special interests, gross mismanagement, and a deliberate and ongoing effort to debase the U.S. currency. Accordingly, risks are particularly high of the hyperinflation crisis breaking within the next year.
What are the alternatives for the US? In a word, none. Presumably this means you should ignore what the axed "experts" from various bailed out sell side research chop shops try to tell you.
The U.S. has no way of avoiding a financial Armageddon. Bankrupt sovereign states most commonly use the currency printing press as a solution to not having enough money to cover obligations. The alternative would be for the U.S. to renege on its existing debt and obligations, a solution for modern sovereign states rarely seen outside of governments overthrown in revolution, and a solution with no happier ending than simply printing the needed money. With the creation of massive amounts of new fiat dollars (not backed by gold or silver) will come the eventual destruction of the value of the U.S. dollar and related dollar-denominated paper assets.
What lies ahead will be extremely difficult, painful and unhappy times for many in the United States. The functioning and adaptation of the U.S. economy and financial markets to a hyperinflation likely would be particularly disruptive. Trouble could range from turmoil in the food distribution chain to electronic cash and credit systems unable to handle rapidly changing circumstances. The situation quickly would devolve from a deepening depression, to an intensifying hyperinflationary great depression.
While the economic difficulties would have global impact, the initial hyperinflation should be largely a U.S. problem, albeit with major implications for the global currency system. For those living in the United States, long-range strategies should look to assure safety and survival, which from a financial standpoint means preserving wealth and assets. Also directly impacted, of course, are those holding or dependent upon U.S. dollars or dollar-denominated assets, and those living in "dollarized" countries.
In other words, the economic cycle will come back with a vengeance. Having pulled America out of the abyss by the last hairs on its Rogaine infused head, the Fed and the Administration have merely purchased one-two years of excess time in which insiders can sell all their holdings (look at recent reports indicating the ratio of insider sellers to buyers) and banks can book one/two years of record bonuses before signing off.
And whether one is a deflationist or inflationist, the take home message from Williams' thesis that everyone should be able to agree on, is what everyone knows yet is unwilling to admit: that the US economy (and its derivative, the undecoupled global economy, which that most certainly includes China) is that we are now caught in the greatest Ponzi bubble of all time. One small hiccup in which there is no incremental hollow value added on the margin courtesy of printing presses pushing fiat pieces of paper in overtime, would lead to precisely the same outcome as the world saw with Bernie Madoff: from $50 billion to 0 overnight. It is somehow fitting that world GDP is 1,000 time greater, at $50 trillion. Take away the fiat illusion, and the real value collapses to those concepts of tangible value that will remain in a post bubble implosion scenario: whether these be spam, gold, or lead.
And just so there is no confusion about the course of events, Williams presents the Zimbabwe hyperinflation episode as the case study that the historian Bernanke should have been focusing on, instead of spending long nights, "learning" from the Great Depression.
Hyperinflation in Zimbabwe, the former Rhodesia, was a quadrillion times worse than it was in Weimar Germany. Zimbabwe went through a number of years of high inflation, with an accelerating hyperinflation from 2006 to 2009, when the currency was abandoned. Through three devaluations, excess zeros repeatedly were lopped off notes as high as 100 trillion Zimbabwe dollars.
The cumulative devaluation of the Zimbabwe dollar was such that a stack of 100,000,000,000,000,000,000,000,000 (26 zeros) two dollar bills (if they were printed) in the peak hyperinflation would have be needed to equal in value what a single original Zimbabwe two-dollar bill of 1978 had been worth. Such a pile of bills literally would be light years high, stretching from the Earth to the Andromeda Galaxy.
In early-2009, the governor of the Zimbabwe Reserve Bank indicated he felt his actions in printing money were vindicated by the recent actions of the U.S. Federal Reserve. If the U.S. went through a hyperinflation like that of Zimbabwe’s, total U.S. federal debt and obligations (roughly $75 trillion with unfunded liabilities) could be paid off for much less than a current penny.
What helped to enable the evolution of the Zimbabwe monetary excesses over the years, while still having something of a functioning economy, was the back-up of a well functioning black market in U.S. dollars. The United States has no such backup system, however, with implications for a more rapid and disruptive hyperinflation than seen in Zimbabwe, when it hits.
Maybe in retrospect it is good that banks are not lending out. If the $1.2 trillion in excess reserves were to actually hit circulating currency overnight, or even in a much more gradual fashion, then hyperinflation would surely be unavoidable, not so much as function of the consumer becoming a dominant force once again, which is the deflationists' key point, but as a result of the excess liquidity of the capital markets, which is the only reason why the S&P is where it is, into Main Street. As it stands, banks' unwillingness to recreate the cheap credit bubble by lending to anyone who has a pulse and can walk is the only thing that is so far preventing America's name change to the United States of Zimbabwe.
»
- 100548 reads
- Printer-friendly version
- Send to friend
- advertisements -
+10000
This will be the longer-term outcome. But, the poster above is also right, though the chaos will only be the transition to what you describe.
We never stay at a given point, it's always changing. And people need to see things as constantly evolving rather than some static/set point.
... and the Euro does what?
Falls apart and implodes. Germany will get tired of subsidizing the mediterranean countries.
No state has ever succeeded at monopolizing the currency while it was in crisis. Usually that is done when the state is on a war footing, hence at its most powerful.
Member states in the Eurozone are no more significant to ECB policy than California or New York State is to the Fed. The Eurozone states will collapse, and the ECB bankers will laugh and laugh while they let the member states starve and burn.
The Euro will then be the world's strongest currency.
but, but, but.....
you mean...
peter schiff was right all along
and
robert prechter and mish shedlock were wrong?
oh my, that is terrible news.....
The "deflationists" actually conflated deflation and depression. The first is a shrinking money supply, the second is a shrinking demand for assets.
Because we are in a depression, demand for assets is falling. Private demand for loans is also falling, hence private bank credit is shrinking. This would be deflationary if public credit wasn't increasing exponentially, offsetting the private decline in the money supply.
The end result is that demand for private assets is falling, while government demand is increasing at hyperinflationary rates. We are therefore in an inflationary depression, not a deflation. You may still lose on stocks.
Double the national debt (which took 230 years to accrue) in the LAST TWO YEARS.
We are in the exponential end of the function that will do in mere months what used to take proportionally decades before.
It ends quickly here.
Careful there. Mish always said deflation in the short run, and was open to inflation later. Just a timing issue, I think.
The timing's the thing.
There are a few million Americans that can attest to that timing thing as well.
exactly, I don't wanna go for that payday loan, til the very last minute
Mish, tends to be america centric, and left field is full of curve balls, still, I read him everyday, lots of good stuff
I think Mish may be closer to the mark, but you really cannot discount depressionary hyperinflation to be an outcome. Perhaps that's the ultimate outcome. But I cannot imagine that what the Fed wants, as it will mark the end of the Fed.
Watching what the Fed does over these next few months will be very important in determining what path we eventally take. Many believe the Fed is dead set on printing money and providing the next massive debt bailout, whether it be CMBS, Alt-A, Prime, etc.
Perhaps that's the case-- and if so-- the risks for hyperinflation become dangerously high. Given that path, if the Fed thinks they can come in and take liquidity out of the system at a time when the world doesn't trust the dollar anymore-- well... they just won't be able to react in time. Anything associated with the fx derviative market implodes... and poof... the dollar and the Fed are markers in history.
Another possibility is the Fed has used this period of reflation to help their "fatcat friends" boost reserves (issue equity, etc) for the next nasty round of deflation and debt liquidation. Sure the equity and debt markets will tank, and mountains of wealth will be transferred yet again-- but the dollar will still have some semblance value. The Fed can take actions to aggressively reflate again in repsonse to the next panic... but the result is likely 20% unemployment instead of 10%.
The most unfortunate thing is that our leaders may have already send us down a path to where there is no return. And the math that John Williams applies apprears to come to that stark conclusion.
If he's right, I sure hope it is coming at us in slow motion (3 years from now), versus warp speed (3 weeks). I want to buy enough underwear for the occasion.
Mish does not take into account that his deflation argument is based on a stable unit (the US dollar). What happens to his argument if the denomiator shrinks? I would start to buy underwear in about three months to 5 months.
When you are cycling and going 45 miles an hour down a hill, you do not want to brake too abruptly, you will endo, do a face plant, and die. If there is a problem up ahead, you have to brake in order to be able to control the bike to maneuver around it. You don't brake, you crash and probably die. There are all kinds of ways to brake in the middle that can still get you destroyed. And it could be by the time you got a heads up on the problem there just isn't enough time/room to maneuver.
Add in that the brakes can wear away before you have completed the stop, or they can actually melt because the rims are too hot from the friction produced while trying to brake against the force of gravity, which is always trying to make you go faster, and you have quite the problem.
I say all this because I see some great metaphors, but there is a point I want to get to. When I choose to ride my bike this fast, I get ready for it before hand, and know I need to have this and nothing eles on my mind. It is a rush, and that is its own reward. If I am going down a steep hill and I don't want to go this fast, I ride the brake down in the first place.
Now I am the Fed. The economy was obviously heating up, going too fast. Did I even check my brakes before I started? Or did I know and decide to go for the ride down hill to see how fast I could go because, hey, I'm a good cyclist, it will be okay, and, God, what a rush? Did I decide I wanted to crash my bike? Did I forget myself, the ride was so fun? And now, what looked like a bump is a cliff?
Lots of metaphors not spelled out here, but it is clear that computers have made it possible to run the economy hotter and faster than has ever been possible before in the history of mankind. This also means the resulting disaster/meltdown will be greater than has ever been possible before.
Exhibit 1: Derrivates
Exhibit 2: HFT
Exhibit 3: The modern loan system dependent on FICO scores instead of human relationships.
I don't think anyone even thought about brakes.
Perhaps they thought about the brakes... but didn't advance the technology for "better" brakes to account for the technology advancements of higher speeds.
I do understand your point-- and it's a very good one.
So starting next year Houses skyrocket, Wages skyrocket, Auto prices skyrocket......yeah right. This guy has been preaching hyperinflationary depression for years and it hasn't happened.
Wrong! He's been predicting it will happen by 2020, not tomorrow. He's moved his forecast up because of the printing by the FED. Try spending a little money to subscribe and learn something, you retard.
Listen.
It's the winds of change.
Extreme pessimism usually marks the bottom.
I think the bottom is now in. Dollar rally in 10...9...8...7...
The bottom of what? We're in a recovery, haven't you heard?
You're right, of course, but it's a 12-step recovery program and those first 11 steps are murder!
Spank that recessionary/depressionary bottom! Yee Haa!
BINGO ...
watch as the next financial melt down drives everyone to $$$ and lets the CB make out onthat net short position
after this next $ rally, I think all bets are off
The problem with this, and similar, prognostications is not that they reach erroneous conclusions, but that they overlay a temporal certainty that remains speculative at best. Despite claims to the contrary, no one has successfully predicted a market crash. Many forecastershave diagnosed an impending decline or the emergence of conditions that could contribute to a significant decline, while some uber bears have successfully predicted 12 of the last 1 crashes.
This dicotomy is evident in the above analysis, as there is at least some justification of why a hyperinflationary spiral can (will) occur, but no justification of why the spiral will commence in the next year. Additionally, the analysis presumes a static federal reserve/treasury/vampire squid response. Assuming all of the collective efforts of TPTB are merely extend-and-pretend, it is highly likely that their efforts would grow evermore intense as the precipice approached. While some machinations increase the likelihood of a collapse, others clearly bring a (very) short-term benefit, such as C4C.
I, for one, would appreciate those generating the near apocalypse, dollar collapse scenarios to provide some effort at generating justification(s) for the temporal aspects of their catastrophic views.
Perhaps you want to subscribe to Shawdowstats and read the rest of the report for the missing information you desire.
I am Chumbawamba.
Wouldn't it be cool if chumba was really John Williams? Can you see John with an interviewer who is giving him a hard time and finally, John can't take it anymore, he gets up in his face and says, "What don't you understand about 'Gold Bitches,' bitch?"
It would be the same burst of laughter when O got the Nobel Prize - a different emotion for Chumba, but the giggles and occasional laugh-tershocks all day nonetheless.
I'll take a stab. Consider yourself fortunate to be the recipient of my first posting to this site...
I'd agree with your statements if this was any time in the past (yes, I know, hindsight is always 20/20). But, this is far greater a precarious situation that has ever existed prior to now.
Because of wide ranging global interdependencies we have far more situations in which countries can implode due to the loss of a key trading partner: this condition of collapse was identified in Jared Diamond's Collapse. Think China, think what will happen to it as the US economy (consumerism) continues to contract. China is only able to stave off disaster via insane growth: well, as people will come to see from me, ANY growth is problematic. China's growth WILL end, and this is what I would say is the actual timing trigger for the US as well (consider it as death dance embrace). As soon as China faulters it's likely to see widespread upheaval. So, China is pretty much in the same boat as the US, only it has a better balance sheet; these funds, however, will be exhausted very quicky as China's government attempts to stem the upheaval. China spending more money internally means less support for the USD (treasuries), which will result in the US having to come up with money to back its deficit spending- no lenders? Print! Print and viola, there's the inflation! (right now private sector holes [banks] are being filled, but once the gov starts to fill public holes in earnest it's another game).
But... this is no more of the same projecting/guessing that most everyone else is doing. In order to provide more of a bite I suggest that it's diminishing resources and that fact that will be the tipper. Further, oil, as it is the fuel for the world's growth, is the thing to watch. Affordability (if it increasingly gets traded in other currencies, away from USD), is key, and as it dmiinishes THEN you will see heck break out in the US. You see, the system (as apparent in China) is only able to operate with growth (to say that this is a Ponzi Scheme is a mild understatement).
As odd as this may sound, as goes China so too goes the US, and too the rest of the world. China loses the US as its key trade partner. Game reset.
We go to basics- food, shelter and water. Minerals and other real "earth" things (such as gold) then take on greater value.
This all stated, I make no claims on what will "replace" the existing system. You can be assured, however, that the US's influence on what will be next, should there be an actuall collapse (rather than a negotiated/coordinated change, which I just don't see happening, not unless the US is willing to get cleaned out), will be only a shadow of what it once was (as happens to all fallen empires).
How much longer until D-day? You can postpone it by continuing to buy Chinese stuff, that is, until your credit runs dry... 1 to 2 years would be my guess: I've already given up on trying to be prepared (things passed me by), so this timeframe isn't like some who provide one based on getting themselves prepared (or die of old age- which I, unfortunately, don't expect to do before all heck breaks loose).
Seer,
In the case of oil...it is easy for us to suddenly discover that Chavez's second cousin once removed once spit on a street where two American Sisters of Holy Mercy were walking ...and send in the Marines ...only to find the people really love us so much we have to make Venezuela the 51st state.
The point being that the ease at which our Administrations can drum up solutions to resource shortage issues has to be considered as well?
Yes, I guess that stranger things have happened :-)
Your point is valid only should there be a mutually embraced contract- i.e. Venezuela as a 51st state. Only when people voluntarily adopt something will they not be hostile toward it. But... as in this example, the odds of the Venezuelan people (read "not the rich corporatist ones") embracing capitalism for the sake of exploiting their country is, well, near zero. All countries with actual physical resources are going to have a better negotiating position with the US; this equates to a greater cost to the US, at a time when it doesn't exactly have money! That military spear will dull quite quickly without the constant polish from taxpayers...
I think that, thanks to the Internet, people are becoming educated to the fact that the US government lies to them (that's one thing that the Russians had to their advantage- they always knew that their government was lying to them), and are going to be less likely (as they continued to be screwed- such as the health care refrom fiasco) to buy into any BS.
Anyway, more and more people will begin to realise that the tensions are due to resource shortages: it'll be time for the rich to start acting a bit more humble...
I believe in "Mish". I can hardly wait to buy more gold for ~$2/oz.(I love eagles) Meanwhile, just to be sure I am buying overpriced 7.62 mm bullets (old love of mine), hoping I will make it up on gold.
I'll pay 10x that for gold. But no more. It's an over valued piece of dirt, much like the lot my prestigious home sits on that I bought because I was told to "buy now or be priced out forever".
Is there really that much of a market out there fof 7.62 mm bullets over gold?
The tricoteuse are beginning to knit faster.
If I were an html geek I'd start a web site named "Madame DeFarge's Knitting" where you could submit names and charges, and watch her knit.
Another possibility would be a take off on "People of Walmart". Only in this case, it would be "People of Government". Take photos and post the persons' respective contact information. Might come in useful as sheriff's and other "authority" figures begin to attempt to enforce rentier contracts.
Some Sheriffs are already refusing. The Wayne County Sheriff (Wayne is home to Detroit) stopped doing foreclosures for a while this year, claiming it was due to concerns over fairness. (I'm certain, certain that his run for Mayor at the time had nothing to do with this!)
I'm not sold yet. Much of the US debt is of a relatively short duration. This should limit the ability of the federal government to borrow without concern for real rates. Additionally, we are no where near the point of (official) debt to gdp where the red lights start going off (dont get me wrong we are in a distinct shade of orange right now).
Finally, I don't think the Fed would try to run the presses with QE to the point where hyper inflation starts up without any response (other than more QE). I suspect that people in the Fed know that if they fail their price stability mandate so badly that we get persistent hyper inflation then things will not go well for them. And I'm not talking about just getting fired.
Additionally, various states (e.g., Texas, Montana ...) have been making sovereignty noises recently. If the federal gov and the fed allowed or promoted persistent hyperinflation, I suspect that many of the states would raise their voices to a point that the federal government could not ignore the issue.
Just a few thoughts.
Thanks for the GDP reminder ... we have to keep that in mind at all times. The Gross Public Debt is about 90%+ of GDP and as long as they can keep a cap on interest rates, the net present value of our debt is well below crisis, but if the combined rate moves to 10%+, we approach the precipice. This is the trend to monitor ... but it will explode before we hit a trigger point (in anticipation of the events). What are the triggers is anyone's guess.
right after I start out on a ski run, I'm nowhere near the bottom, but I most assuredly will get there, hopefully still on my feet. THE economy has started down an INEVITABLE slope. but hey it's not as bad as expected, we thought we were going off a cliff. so who gets the big fat pat on the back?
I am da Bear ... been short since 1/1/08 ... looking for the crash that never comes. I am now convinced that the markets will move very slowly sideways until it crashes all of a sudden. If you look at VXZ9 ( Volatility futures ), you will see any hint of a market drop drives volatility skyward. Wait for major market drop, then rapid recovery and then buy VX and wait for it double or triple in short order.
I just read the Greenspan-Guidotti formula for national bankruptcy and default. It's that a nation needs at
least 100% of reserves to cover the debt coming due within the next 12 months. Total US reserves counting gold, emergency oil reserve and foreigh currency is $500 Billion, total debt coming due in the next 12 months is 3.5 trillion.
Oops! Oh, yeah and it's likely that the 8000 tons of gold
isn't there. It's more like zip-nada.
Which one will end a government faster?
Hyperdeflation
Hyperinflation
Gee, lets see???
Most common folk earn 20 to 40k a year and have very little in terms of assets, none really. Don't forget the bank owns their house.
On the other hand, a small minority make 100k plus and have real tangible assets.
So, if hyperinflation comes, what happens to the common folk? Oh that's right, they get crushed when their wages don't keep up.
What happens after that? Bye, bye existing government and
society as we know it.
Median salary for US private sector employee (including benefits) is $59,909 ... Federal median $119,982 (Per Cato Inst.) ... If Federal Government ceases to exist we save bundles and will be able to balance the budget. Bye, bye government ... let the good times roll.
I won't dispute your salary numbers but take a look at the federal budget sometime. Defense spending + entitlement programs + interest on debt makes up > 70% of the budget. Even firing all those employees wouldn't make much of a difference.
Down is up.
http://www.usatoday.com/news/washington/2009-12-10-federal-pay-salaries_...
This outcome can be avoided if the Federal Govt agressively cuts taxes, agressively cuts regulations across the board, agressively cuts spending at all levels of govt (federal, state, and local), immediately raises interest rates, and drains excess liquidity out of the system.
The hyperinflationary super-depression being forecast is not inevitable, it can be avoided with swift and clear minded action.
Toss Keynsian economic theory in the trash can of history, it is a complete and absolute failure.
The time is now for an immediate return to a proven trustworthy sound money policy.
Yeah, your cure might stave off hyperinflation but it would still surely destroy the economy all the same.
There is no easy way through this. Every way is going to be butt-fucking hard. The only thing you can do is lube up on gold and silver and enjoy the ride.
I am Chumbawamba.
The proposal to cut taxes and cut regulation on businesses in the US will do much more to stabalize and stimulate economic growth than all the money printing the Fed can conjure up. Look at the velocity of money for example, given the massive expansion of the Fed balance sheet it has had no effect on either economic growth or the velocity of money in the real ecomomy.
Simply accepting an outcome as inevitable is not acceptable to me.
We need to change course, and enable entrepruners to invest in the US economy.
We need to get the federal government out of the the way and create the best possible environment that will enable the private sector of the economy to stabalize and heal itself.
Lowering the tax burden on business creation and expansion, reducing regulation on businesses, combined with a stable currency will not "surely destroy the economy". Rising taxes, excessive and increasing regulation, a collapsing currency and an unstable economic and social structure very well could do exactly that however (which John Williams is pointing out is exactly the course the US is currently cascading down).
We must change course, change tactics, in fighting this crisis. Applying the same failed Keynsian economic theory that put us into this mess in the first place is creating bigger problems than it is solving (as John Williams points out).
We must get govt. and business working together intelligently to solve this crisis in the best possible way for our long term economic survival as a nation.
yeah, just flip a different switch and everything will be ok.
Peak oil says no it won't.
We're bankrupt; that's how we got "into this mess."
All this bs about tinkering here and there to solve what are immense and utterly intractable systemic and structural problems is just polyannaish bullshit.
The US economy is a dead investment, a sinkhole. The entire world economy built on debt and growth tomorrow is bankrupt as a fundamental premise
"The entire world economy built on debt and growth tomorrow is bankrupt as a fundamental premise"
Close, but people will just say "no ain't" because they think growth is magic.
Say it like this:
"The entire world economy built on unsustainable debt and growth tomorrow is bankrupt as a fundamental premise once the free-energy sugar tit is withdrawn."
Cuz it ain't magic adn never was. It's physics.
cougar
Preach it kitty!
the fur won't purr
and the black gold's gettin old
we built a house of cards
on a hand that's sure to fold
Indeed!
Aces and Eights pal.....
must be a stacked deck. there are too many jokers
Ouch! Had to look that one up.
Ok you lower the tax burden and release loans from the banks to stimulate the private sector - this will merely increase personal consumption for a limited period until consumer inflation takes off and you will be back to the summer of 2008 with less reserves to fight the crisis , more debt and less potential for investment in the core energy economy.
Keynsian stimulus on the capital infrastructure that is not oil dependent is the only way out of this mess.
Keynsian stimulus on the capital infrastructure that is not oil dependent is the only way out of this mess.
When, and where, has this ever worked?
The French state embarked on a major nuclear programme in 1973 (using American designed PWR reactors) - this at the time was considered a dramatic move as other western states were beginning to embrace the ideas of monetarism
They also developed there rail system beginning in the late 70s early 80s
There was not a rejection of large scale high technology which happened in The UK (North Sea oil gave them the illusion of success)
France has extensive economic problems but is not a basket case like the UK and its economy is more balanced then Germany which is a mercantile state withen the EU.
Its growth rate is higher relative to debt in comparison to anglo-saxon economies.
So, your answer is that we should build a whole lot of nuke plants (which I could certainly get behind though I think the stimulative effect is nil) and rail lines (which will never be used - Amtrak was, is, and ever shall be a failure and any follow-on program will fail as well) and hope we can only reach French levels of chronic unemployment and socio-political strife.
Well, that's a pretty loose definition of "working" but kudos (seriously, not snarky) for the info.
Cheers -
PS: You asked below - Warren G Harding, 29th President of the US. I'll leave the rest to your curiosity.
Thanks for the info on Harding
Regarding Amtrak - very little money went to Amtrak so it cannot be a good example for stimulus spending indeed I believe cargo trains are always given priority and are believed to be the slowest main line trains in the western world.
The last nuclear plant in USA was constructed in 1971! - the base load power is provided chiefly by coal fired power stations some over 50 years old(east coast)
The newer power stations are to a large degree gas powered - these stations have the lowest capital cost of any power station , this enables its owners to reduce risk by transferring the risk on to consumers who pay for fluctating gas prices
Both banks and Utilities share numerous characteristics - such as the above where these companys use very low capital ratios and transfer risk - the dynamics for nuclear power stations are reversed
Also stimulus is the wrong word ,I prefer investment indeed come to think of it I hate the concept - it invokes ideas of short termism and waste.
Oh, apologies - I wasn't using Amtrak as an example of stimulus or investment spending. It's not. It's just an example of a massively awful program that is absolutely radioactive. The pork-politics potential for it is enormous and yet nobody will touch it because, short of some sort of on-high mandate that would be political suicide, nobody is going to give up their cars to ride the train from point A to point B.
In some ways it's a shame. I've ridden the rails in the UK and France pretty often and found them to be quite cost effective, fast, timely, clean. But they don't seem to me to be workable for the sprawled suburbia/exurbia we've become in the US and I'm here to tell you Middle America is not moving back to the cities anytime soon.
I largely agree with you on nuclear, but the problem there is that governments can't get out of their own way. They'd need to do a complete 180 paradigm shift from their current 3-Mile Island vintage "NO NUKES NO WAY" mentality. Which is also quite a pity - I love nuclear power, I've even spent some weeks underway on some US Navy nuke-driven subs - safe, clean, quiet. The US is 30-40 years behind the times there - alas and alack I don't see that changing.
Both rail and nuclear seem to be natural monopolys - private companys seem to only want them after major goverment investment provides the capital and they then procede to run down their capital over time turning the goverment investment to profit for shareholders , also goverment agencies seem to have very strong labour contracts that are much more expensive then private companys.
Could the solution be that the goverment owns and invests in the infrastructure while having private companys staff the facilities..
You are correct the distribution of the American population makes commuter movements almost impossible but high speed rail is more of competitor for inter-city travel of up to 1000km and therefore could replace short-haul jet flight
I'm curious, do the trains in Europe get second-class billing on the rail lines like Amtrak? When the deal was done to allow Amtrak to operate it was only as a poor second-class citizen, freight retained the key timeslots and owns the tracks.
But it's still not fair to compare, as the trains in Europe have shorter connector points than in the US: the US has a LOT of real estate.
And, though this isn't the best place to place the following comment, transportation will be contracting EVERYWHERE. Law of physics. We're spending too much energy hurling our bodies all over the place (nature doesn't do it).
Yes, freight will be around for a while, but, what will it be hauling? Not Chinese goods; not a bunch of lumber to build McMansions; not a bunch of autos. Economies of scale also has a reverse, and it isn't going to be pretty.
Yes the population density of Europe is far greater and more suitable for medium distance travel (coast to coast high speed is not practical for the USA) - but if you imagine the West before train travel when the horse was the fastest - they managed the transformation , why not now.
Trains in Europe are getting more and more of there own high speed lines freeing up more freight trains.
Also the carter administration liberalised the trucking industry in the 70s before that era trains transported consumer goods to regional centres instead of being transported point to point which is done more so now - indeed Walmart would not exist without the carter adminstration!
That was not keynesian stimulus. It pre-dates keynesianism greatly. It was the American School of economics or the "National System". French Dirigisme adopted principles of the American school or National System. The National System was also what got Germany out of Hyperinflation and turned it into Europe's industrial powerhouse once again.
but if you imagine the West before train travel when the horse was the fastest - they managed the transformation , why not now.
Lack of energy. Plus, with job losses there will be less people commuting. Again, it's the population density issue- nt enough people to subsidize (decreasing numbers) commuters.
For an idea on how this is going to turn out take a look at The Olduvai Theory (google it).
In order to create new industries and have commuters to begin with the infrastructure needs to be build. Infrastructure has historically always come first, industry always comes second. This was proven in the 19th century US under the American system of economics.
As for energy, the whole grid needs to rebuilt. We need perhaps more nuclear reactors and a carbon-neutral grid.
Saying it has to be so doesn't make it so. Because one has never had cancer before doesn't mean that they won't end up with it.
There's NOTHING in nature or physics (or though devine intervention) that says that humans were meant to hurl their bodies all over the place at high speeds.
You're putting the cart before the horse. Energy comes BEFORE infrastructure.
NEVER before has mankind been faced with deploying a new infrastructure on top of an already existing HUGE one. Anyone familiar with deploying new computer systems into a production environment can attest to the levels of difficulty of this. It's one thing to switch over to new computing systems, but global systems that people are dependent upon to survive? (yes, pull the plug and there'd be widespread chaos, death).
It's like being 50 years-old and saying that you'd once run a 3 minute mile therefore you could do it again. Yes, you did it in the past. Yes, you can still run. But, the capacity to achieve the same, or in this case of new BETTER infrastructure, faster mile, well, let's not kid ourselves. That infrastructure was built using massive amounts of fossil fuel that no longer exists; there is no amount of energy available today to duplicate our efforts, efforts that spanned decades, when we're going to need to make some change within perhaps two! And, keep in mind that we've got a heck of a lot more people on the planet now: a LOT of energy today goes toward food production.
Look it up -Olduvai Theory.
Of course it is not going to happen over night. Yes, many may in the world may die (possibly billion+). There still is nuclear energy, which can last for at least hundreds of years more at a minimum to thousands of years. First of course what has to be done is the implementation of an infrastructure that is capable of utilizing nuclear energy.
BTW Are you familiar with the new movie Collapse? I believe it is out on thepiratebay.
One has to be careful about forecasting longevity rates of resources. One has to state the rate of consumption in order for prognostications to have any real meaning. For more on the importance of this fact see Dr. Albert Bartlett's presentation Arithmetic, Population and Energy (http://www.guba.com/watch/3000053112/Arithmetic-Population-Energy). There's also Jevons Paradox, but, in a declining world I don't think that it will apply...
Yes, just watched Collapse the other day. I've followed this stuff for many years. I even think that I corresponded with Ruppert a couple of times :)
Obviously uranium is also finite, but in terms of energy needs on a carbon-neutral grid it may carry us over for a few centuries to millenia until we can discover a new way to produce energy without depending upon finite resources. Perhaps a much more efficient form of solar energy or something along the lines of cold fusion.
But, just as you cannot have infrastructure and other things without energy, you cannot have infrastructure without materials. Chop down all the trees and then what? The Easter Islanders are no longer around to tell us what they were thinking when they cut down their last tree: we can see what it resulted in- their final demise.
.
Don't take this personally, dood, but your post suggests you really aren't aware, or are ignorant of, the details of the US tax structure.
There simply aren't that many existing taxes to be cut. Instead, massive tax recovery should take place in the following arenas: monies parked offshore by U.S.-based transnationals - to avoid taxes, transfer pricing fixing via offshore finance centers - to avoid taxes, assets parked in SIVs, SPVs, SPCs, SPEs, SPRes, etc., - to avoid taxes.
End those changes to Internal Revenue Code of 1986 allowing for interest tax deductibility and the aforementioned tax dodges.
Good start, but this will not put even a small dent in the problem. We are in a massive hole and there is no way out through any tax structure changes ... we collect 100% of all income and we still have problem.
"The proposal to cut taxes and cut regulation on businesses in the US will do much more to stabalize and stimulate economic growth..."
Isn't that what the "W" did? That worked out real well, especially for the bankers.
Dude I've got bad news for you. In our current cluster**uk, not only is a Keynesian approach destined to fail but your free market stuff is not going to work either. You need to recognize where we're starting from.
The loss of cheap energy inputs changes everything. It squashes all of these economic models. Right, Left, whatever.
The private sector did not do such a great job either the past 15 years of allocating capital. What was their BEST idea? Monetizing the nation's housing stock. Wow. Genius.
Your textbook won't save you now. But take comfort, the Keynesian's don't have the answer either.
The only system that has ever worked has been the American school or the National System. The encouragement of investment into private infrastructure to increase industrial production and raise living standards. If the Austrians had their way and there had only been a corporate military in WW2, would they have national interests or business interests in mind? Corporations do not take risks on large magnitudes such as investing in infrastructure. Perhaps if it wasn't for the "socialist" Manhattan project maybe Hitler's Germany would have been able to develop the atomic bomb in time to change the outcome of WW2.
The encouragement of investment into private infrastructure to increase industrial production and raise living standards.
This is meaningless unless there's a check on growth, as growth will inevitably result in a decrease in living standards. Please note that 2/3 of the worlds population lives on $3/day or less.
If we can't find a way to operate given our daily allotment of energy (solar derived) then we will always be spending our childrens' future.
This is why a new infrastructure has to built from the ground up. We cannot continue to rely on crude oil as a sustainable form of energy going forward.
Most of the world is un-industrialized and lacks the basic infrastructure to support a productive base.
Could you please define what you mean by "productive base?"
Given that there are NO sustainable energy sources other than the sun* (what it is responsible for generating- solar, wind, water flows), any infrastructure could have no more than a day's (or so) worth of solar output. *The exception would be tidal flows (moon's contribution).
Those building infrastructure are NOT creating that which sustains us (only Food, Shelter [a slight exception here] and Water).
First priority? Our food system.
That is why nuclear energy as it stands right now can be used to replace oil to a considerable extent. Solar as it stands right now does not have the capacity to replace oil.
Nuclear fuels cannot replace the myriad of oil-derived products! Think of all that plastic! Michael Ruppert does a fairly good job of laying out all the issues in Collapse; I recommend people watch this movie.
Also, people assume that there's plenty of uranium. As Dr. Albert Bartlett says, the greatest failing of the human race is its inability to understand exponentials. With increases in nucelar power you have increases in the rates of depletion of uranium (Jevons Paradox would be something that you should review as well).
The transition won't be easy. There is glass, ceramic, wood and natural rubber.
Perhaps if it wasn't for the "socialist" Manhattan project maybe Hitler's Germany would have been able to develop the atomic bomb in time to change the outcome of WW2.
I doubt that in the end we'll look back at this as being as glorious as people portray.
It has been proven that Germany wasn't working on a nuclear project. The reason they weren't is because Hitler didn't accept any expenditures on projects that couldn't produce within 6 mos (?). In a somewhat supporting way, this backs up your statement that it would take a socialist approach; Hitler's was more of a corporate approach (short-term).
Germany was bound to fail for all the reasons why wars of agression fail: over-reach; wouldn't be able to appease/control far away populations (just like the US has failed in Iraq and Afghanistan).
So instead if the Soviet Union had been able to develop their own Manhattan project and nuclear energy first the world would have been a much better place, no? They certainly didn't even have regard for their own people.
And IF pigs could fly?
Your point?
The USSR was a f*cked up system. F*cked up systems cannot prevail, because, you know, they're f*cked up!
China's government is an exception, though it has adapted to change (albeit slowly) which alters itself just enough to keep internal revolt from taking it down. But China hasn't been an aggressor; with the exception of some of its fringes (like Tibet) it doesn't act like a controlling empire of other peoples. In time, however, China's government WILL fall (all nationalist/statist governments are going to crash and burn because they're not sustainable- think of the energy equation).
But back to the USSR... the Stalinists were/are more interested in maintaining power than really spreading. Small wars (think Granada) are good to keep some control over the local populations, but big wars, being highly unpredictable, risk destroying governing power (think WWI, WWII, Vietnam or Afghanistan). The USSR was never going to spread itself all over the globe. All the militarism was for show, for controlling its own people (folks have to understand how militarim is used to ward of internal dissent- in the US one can not question military actions without being accused of not supporting "the troops" [like stomping on the grave of grandad who served in WWII!]). The USSR needed an adversary in order for the ruling elite to stay in power!
The USA right now is also a "f*cked up system". China is willing to fight for taiwan and it will if necessary.
Well if you put it that way ALL governments will eventually crash and burn. China is Market Socialist, the National Socialists of Germany actually did not do bad economically.
If the USSR had developed the bomb first, the US as you know it might not even be.
WW1 was a disaster for Europe, it was incited by the British as a way to keep Britain the dominant power in the world. Hitler was appeased to be used against the Soviets.
If you look at modern day Latin America you will see that China and Russia are now allying themselves as a future bulwark against the US. The Soviets had a long term plan, they are not finished yet, Putin is ex-kgb.
If the USSR had developed the bomb first, the US as you know it might not even be.
Sigh, this commie paranoia stuff just doesn't die easily I guess.
The US _WAS_ the first and it used it on a CIVILIAN population! If the Soviets had developed the "bomb" first, then one would have to ask whether THEY would necessarily have been evil to drop it on a population that had the moral capacity to do the same (and in fact did so)!
But, as I said, the Stalinists were about hanging on to power, engaging in uncontrollable wars, esp wars of aggression, present great threats for maintaining stable power/control.
Well the soviet union always really an empire of sorts.
It was a union of 15 different nations, 100 languages with racial backgrounds ranging from slav to mongol. In fact the soviets did a pretty good job of secularizing the formerly muslim central asian nations. Even prior to the soviet union most of area known as russia was formerly not inhabited by slavs. Siberia of course was composed of various sorts of central/east asians and eskimos. The urals were inhabited by asian uralic peoples such as the magyars. The pontic steppe and the northern caucasus were inhabited by turks and various caucasian peoples.
Anyway the soviets did expand their influence, they had eastern European puppet states. Now of course this all comes pre-ww2. They also supported mao initially of course.
Considering as they already were an empire, all they would be doing is expanding that empire.
Harding did that and look what happened after that!
Excuse my ignorance but who the hell was Harding and what did he do?
US President 1921-1923, ushered in the Roaring Twenties in the States.
Warren G.
You can find out more about Harding here:
http://justfuckinggoogleit.com/
If everyone believes this guy, you all should be pulling the nails out of your houses, spending all of the money you have buying guns and ammo, and buying land for subsitance farming. However, I see this entire premise as being rediculous, comparing the U.S. to a third world african country is like comparing NASA to a three year old with a model rocket. Everyone has been claiming that Bernanke will fail for over a year, but he and the federal government have been able to sell record amounts of treasuries at record low rates. The fed and the U.S. are holding all of the levers that control the economy. If they want to scare people out of equities and precious metals, just like they did last october, they can do it in about three days.
Treasuries continue to sell because a) the system is not set up for auctions to fail, only to monetize themselves, and b) The current leadership has cultivated an economic environment so unpredictable that people would rather see their money stagnate in zero-yield treasuries than risk it in investments that are at the mercy of the same unpredictable government (GM bondholders, anyone?)
Give it time. They can't borrow indefinitely. I'm not at the point of pulling nails out of my home, but the last two years of educating myself about our financial system and the fraud it's based on has been a wake-up call to me personally, that I have been ill-prepared to deal with the societal collapse that becomes more and more likely the longer this failing economic system is propped up. Our kleptocracy in Washington would rather allow its citizens to starve and its cities crime-ridden before giving up its power, so all I can do as an individual is prepare myself for outlasting it.
Who would let athree year old play with a rocket? Sounds dangerous. Just kidding by the way.
Yes, indeed, your premise for survival is indeed ridiculous. Pulling the nails out of your house? What for? If you have the time to do that, why would you do it to your own home when you have all of Inland Empire awaiting you. Silly guns and ammo. Silly farmers.
After Katrina, a lot of affluent individuals ended up in elementary-school-turned-emergency centers - for days - all the local motels were full and gasoline was non-existent. They whined to local emergency service workers (that actually showed up for work) - demanding food blankets, food, and potable water. The hallway space their starving family occupied, waiting for the calvary (FEMA) to arrive, did not provide much solitude from the other unprepared individuals, like crack addicts and children of welfare queens. What if local services are interrupted for weeks? Can you survive three weeks without assistance that probably won't show up? What if it's months? Would you show up to help a bunch of confused, cold, hungry whiners when you know you're not going to get paid anytime soon?
A currency collapse will not force you into refugee status like a natural disaster can, but a currency collapse is much worse than a natural disaster. You're right about comparing us to a third-world country. They had it easier - when their currency collapsed they could still milk their goat and harvest local foodstuffs - the sun still shined. They have the ability to produce enough calories, locally, to live. They didn't have supermarkets that everyone needed to visit once or more a week to get buy. Yes, it will be much worse here.
you cannot solve a problem, you will not face
Another diehard Libertarian. Don't you know; IT WAS DISCREDITED TOO. What do you think Bush et all were? Get a grip. The world is playing chess & you are playing checkers.
Another diehard Libertarian. Don't you know; IT WAS DISCREDITED TOO. What do you think Bush et all were? Get a grip. The world is playing chess & you are playing checkers.
I don't mean to be rude, but it would be nice if Mr. Williams would just allow ZH to post the entire report instead of dribs and drabs. If he wants people to subscribe fine, but I would like to see a little more meat on the bones before doing so. Posting the entire report would only help get subscribers, not hinder him, IMO.
and BTW, I find Williams to be totally credible, just grousing, I guess.
Hey Chumba, are you the Mogambo Guru's Evil Twin?!?
Luv ya, sexy.
Do you know that John Williams actually said no to posting the report? Or are you assuming he did since Tyler didn't place a link to the .pdf? Just asking because I've been a subscriber of Shadowstats.com for a while now and the price is very reasonable and the reports are great. This particular report was 36 pages of fun filled facts and figures and was a great read.
No offense, but John Williams doesn't need your paltry subscription. He already has lots of subscribers for his excellent work. ZH didn't post the entire report because it's copyrighted, and that would not be considered "fair use". Me guesses.
I am Chumbawamba.
I've been on the fence for awhile about subscribing. And yes Chumba, you rightfully accuse me of assuming and I should not. Sometimes I just get bitchy like that. I generally have a 3X rule: if I hesitate about buying something 3 X I buy it because usually I just wish I did later. so alright, I'll just get it over with.
so yes, my statement assumes much and like I said, I was just grousing. I don't know what the arrangement is.
Thanks guys.
perfect - when you get it could you please share some additional snippets
out of curiosity, what is the annual increase in the cost of his subscription over the past 10 years?
Everybody keeps talking about deflation vs. hyperinflation. I don't know if this is even a relevant argument. The real question is simply whether the currency ($) will hold any value or the value of the currency intrinsically falls to zero- and for what period.
As inter alia, Prechter, Denninger, Shedlock, Ilargi and Stoneleigh (The Automatic Earth) argue, the collapse in credit as a consequence of the deleveraging of the derivatives bubble ($1.4-1.5 quadrillion)will be addressed by the the Fed printing money in an effort to reflate. But there is only so much money that can be printed. If the Fed merely relies on printing of money, the depression will be deflationary in nature.
However, if the Fed decides to devalue the currency (e.g. North Korea) or if the overall market simply repudiates the dollar, the result will be a currency crisis with secondary and symptomology reflective of hyperinflation.
That is why, should deflation become critical during 2010, the Fed may decide to revalue the currency (similar to what Roosevelt did in 1932 by revaluing Gold upward- and devaluing the dollar downward in order to reflate. To the tune of about 60%- only higher this time because of all the credit).
There is some likelihood of an interim period of deflation of assets followed by a fast closing of banks (pursuant to a terrorist attack/false flag event- note Obama approval rating 44% and falling), followed by a devaluation of the dollar (Chapman, others)to the tune of about 60% to 90%. That would certainly create conditions of hyperinflation.
Of recent vintage, that's Argentina.
Hmm, my view is that credit inflation is stretched to the max. To stave off deflation, the rubber band has to be stretched some more. However, banks are not lending, consumers and firms are not borrowing. The only ones borrowing are the govarmints - just how much they can stretch this further is the key question. Unless there is a major technological or social change where consumers and organization start borrowing again (but this time, hopefully, the banks will want to make sure they can be paid back), this era of credit inflation has to end. When the rubber band snaps back, it will be violent, vicious.... and deflationary. First inflation, then through deflation, just as Jefferson predicted, property will be amassed by the bankers as they seize collateral and property in return for their debts.
By the way, while the federal debt may be paid off through inflation, I am not sure the rest of their obligations/liabilities (social security and especially medicare) will benefit - after all, those are future costs that will increase instep with inflation unless the government reneges on those obligations, by changing SS formulas or outright Medicare rationing.
"The only ones borrowing are the govarmints - just how much they can stretch this further is the key question."
Is it moral for a government to borrow money on behalf of it's citizens who don't want to?
Is it moral to enslave your children for your own beliefs / agenda?
It is already stretched beyond reasonable levels. The question is when will people realize the whole that they are is very very large.
This is why all democracies fail. Unlike monarchies, where there is an inherent tension between the "supposed" owner (king) and parlimentarians (people), democracies formalize monopoly powers granted to states.
By enabling democratic states with the force of law, they are by definition "right". Because, after all, the state = The People, no? Exactly. In fact, to the point where free-riders determine the wealth of producers is rightfully their's, because, "they" now represent the state.
That means in addition to taxation, debasing the currency and enslavement of future, yet unborn people are the perogitive of the People who embody the "legitimate" monopoly use of force.
Absolutely correct; However morality is now a quaint old fashioned notion. Why do you think America can do absolutely NOTHING about our festering social problems? Morality cannot be legislated. Properly constituted religions CAN reduce the amount of law devoted to mandating morals. The Bible says,"Satan rules in this world." In America he rules ABSOLUTELY. I'm beginning to think the Muslims are right.
I am a rock, I am an island, eh? Despite being a believer in Lead and Liquor as universal 3rd dimensional currencies and coping strategies, I pay more attention to cultivating community and knowing my neighbors. Sure Gold is good for preserving wealth, but you won't be able to buy dinner with Kruggerands. Even if you can, you won't want anyone to know that you have Kruggerands. The question that hoarders must ask is what will I do in the 7th (or 13th, or 25th) month when all the ____runs out? And even if it doesn't run out, how many have actually bartered for anything recently? Or even haggled? While giving some appropriate thought to tools/items of universal practicality and value that can be obtained now, I'd say that staying flexible and creative and practicing barter commerce is better and more enjoyable preparation for a dollar collapse than focusing the mind on gloom and doom.
By the way, I'm expecting deflation and Primary 3 down before hyperinflation.
By 'hyper-inflation'... he means 3%.
Ha! This is dumb^10.
In the episodes of hyperinflation that have occurred since 1980, the % of total expenditures that have been deficit-financed has exceeded 40%. In the 3rd quarter, this milestone was reached in the US. I am not trying to say this is a causal relationship necessarily, I'm just sayin'.
I don't understand the deflation vs inflation debate as it is being conducted. Deflation is the imminent threat to the US economy in its present form. Since we cannot accept that we were living in a bubble economy, we prop it up instead of letting creative destruction run its course.
We are trying to get back in a boat full of holes instead of swimming to shore and build a new one, which would be painful and mean someone would drown.
I don't believe we will get to hyperinflation, but I think the idea of risk of real dollar destruction will take hard asset prices higher and I invest accordingly in gold and silver. From the monetarist point of view, the worst effects on the dollar should be felt about 48 months after the high in money supply increases. Which would take us out to 2012-2013.
Price
Real estate rally 2010!! Get your blazers ready.....
Can the Fed print enough money to offset the losses in real estate and equities?
Perhaps more importantly, could they give it directly to the people who suffered those losses?
For example, I lost approximately 25% of the value of my house in the last two years (I bought in May of 2007). Perhaps the Fed could just send me a check directly to give me a softer landing. Perhaps the Treasury could also give me shares in General Motors and AIG.
I'm investing in Brass and Tin - bullets and canned food!
Great quote, ever?:
Having pulled America out of the abyss by the last hairs on its Rogaine infused head, the Fed and the Administration have merely purchased one-two years of excess time in which insiders can sell all their holdings (look at recent reports indicating the ratio of insider sellers to buyers) and banks can book one/two years of record bonuses before signing off.
Greatest quote, ever?:
Having pulled America out of the abyss by the last hairs on its Rogaine infused head, the Fed and the Administration have merely purchased one-two years of excess time in which insiders can sell all their holdings (look at recent reports indicating the ratio of insider sellers to buyers) and banks can book one/two years of record bonuses before signing off.
Deflation or hyperinflation? Even the Good Book offers only more confusion...
Assets to Ashes, or Debts to Dust?
I need a new religion.
http://en.wikipedia.org/wiki/Subgenius
Thanx Max. I just emailed the church to see if followers get discounts on bulk purchases of sacramental wine. If so, color me Brother.
:)
I think you would enjoy a good devival.
I celebrate the Feast of the Blessed Leprechaun with relgious devotion.
go john go.....the usa economy is past the point of no return and its demise is certain....not a new thought for me but one worth repeating.....
the back up currency is gold although beware the totalitarian satanists who will attempt to confiscate it....
Whoever thinks this is just BS should go and read the bbg article today about riots set for next year due to inflation.
they have printed a crapton of dollars in the past year - yet the population has less dollars. The money is just being parked at the fed for the banks after it was given to the banks. They will not lend to the consumer because they see whats happening. Therefore, with no extra money in the hands of consumers, you see deflation until assets come back in line with earnings.
Credit is 1 week (if not just this past few days) - about to contract for the first time in a long long time. This, in a fractal banking system, means exponential deflation. 1 dollar removed will now mean 6 - 10 less dollars available in the system. Absolutely no chance of inflation until the deflation black hole runs its course.
Regardless of your opinion of John Williams stats we all know the government stats are total BS and not to be taken seriously.. We have no inflation because they don't include fuel and food prices in the inflation equation. Have any of the government bureacrats been to the grocery store lately? Everything is going one way UP.
Abby Normal
sugar at warehouse club previously .42 per pound is now almost .57 per pound. prices are going up on other groceries as well.
Somebody help me with this:
Where are all the dollars going that Ben is supposedly printing?
Aren't they all back at the Fed, safe and sequestered? If so, the banks don't have access to them and so can't put them into the system. This, plus higher reserve requirements means no money in the system to cause inflation.
Also, where are the dollars in the supposed carry trade coming from and where are they going to?
Fallacy in the deflationist perspective...
"The "price level" is allegedly determined by three aggregative factors: the quantity of money in circulation, its "velocity of circulation"... and the total volume of goods bought for money. These are related by the famous equation of exchange: MV=PT" http://en.wikipedia.org/wiki/Equation_of_exchange
but this equation is fallacious - there is no "equality" in any trade, since both parties BENEFIT from any voluntary exchange, one gains a good he values more than the money, the other the money that he values more than the good...
"The equal sign is illegitimate in Fishers eqation."
As for P... "the concept of an average for prices is a common fallacy. It is easy to demonstrate that prices can never be averaged for different commodities..."
As for T... "the total physical quantity of all goods exchanged, is a meaningless concept and cannot be used in scientific analysis."
finally V... "V is an absurd concept... what is the velocity of an individual transaction?... Velocity is not an independently defined variable... it is absurd to dignify any quantity with a place in an equation unless it can be defined independently of the other terms in the equation."
"The Fisherine eqation has been popular for many years because it has been thought to convey useful economic knowledge. It appears to be demonstrating the plausible quantity theory of money. Actually, it has only been misleading."
Rothbard - Man, Economy, and State pgs...832 - 842...
It seems to me that deflation will win the game. The FED can create the money, but someone has to agree to spend it. The consumer sure isn't and I don't think there is really too many businesses out there looking for a loan to expand their business with.
Now I'm sure there are tons of businesses that are looking for a loan to roll some debt over. But these are the idiots that the idiot bankers lent to in the first place that got us in this mess. They need to go away.
My fear though is that the idiot banks aren't going to let them (or the idiot homeowners) go away and what they'll do is let them slowly rot until they have no choice but to cut them loose. It's no secret that there is still a ton of toxic waste on these banks balance sheets. This could take years and years to get through. Now factor in the uncertainty that our Uncles Ben and Sam are imposing on the American people and businesses.
Whaa-Laa! Abra-Kada-Bra - KA-POOF you actually end up with somewhat of a stagflation scenario.
The government is spending the money the FED is printing.
That is essentially correct. The Fed has been buying agency debt and agency MBS by the boatloads.
In a bank example, the bank receives the cash in reserves - or takes the cash and buys US Treasury notes, essentially in an indirect "exchange" of "bad" for "good".
In other instances, banks are borrowing 0% from the Fed window, and then are purchasing assets that make great spread income. In some instance that might also mean buying Treasuries.
It's a nice little scam for finanical institutions... while it lasts.
What about a loss of confidence in the $? Wouldn't a run
on(out) of the dollar be hyperinflationary?
when gold was removed, the only thing backing the currency was trust. tell me how much of that is left, and do you think it is increasing? without trust in a relationship, what do you have? I'm thinking that in the future , america will look a lot more like mexico, without the spanish
I've been a shadowstats subscriber for some time. This report came out almost two weeks ago. Personally, I don't think the timing of a hyper-inflationary outcome is a forecastable event.
More importantly, I don't think it's fair to judge the site and its content on excerpts from this report. The site primarily deals with the rework of various economic data fed to us by the government. The reworks are generally to some prior period removing various methodological gimmicks over time by the bureaucrats to make headline numbers better.
Further, there are ongoing breakdowns of these headline numbers as they are released. These breakdowns are far more useful than anything from the retards on CNBC.
I believe the site is a terribly useful tool for evaluating economic data and offers "consistent methodological" data series over longer periods of time. Think CPI back to 1980, as one example.
I don't read it like the bible, but it's a useful point of view.
As for the debate of deflation/inflation, I submit it makes sense to avoid being too "directional" in your thinking or portfolio positioning. The timing of hyper-inflation, almost by definition, can't be forecast.
It's possible to have the right ingredients in place, much like gunpowder. But ignition still requires a spark. It may take years for such a spark to occur and, I'm sorry, but if you're 5-years early, you're wrong.
I always leave open the possibility that I may be wrong in my analysis and position accordingly.
Besides, if the US collapses in either a deflationary or inflationary spiral, lots of things simply won't matter. Industrial materials and base metals?
What, precisely, will be manufactured?
The whole system will grind to a halt. Start thinking of Maslow's Hierarchy-of-Needs. You won't be worried about the latest shiny Apple toy when you've become a bartering hunter/gatherer. Guaranteed.
Just saying.
Happy Holidays,
CCS
Hyperinflation destroys the value of debt held by foreigners. Debt repudiation does the same thing, albeit without affecting US domestic conditions to anywhere near the same extent. This is an immediate stop gap to hyperinflation, as it effectively reduces the broad monetary base by $5 trillion.
This same "nuclear option" exists in the event large foreign holders such as China threaten to offload: the US could simply repudiate this debt (by CUSIP number) leaving China with no buyers of their USG paper. (Don't tell them, but China is stuck.)
If the Williams' scenario approached, where US survival was truly at stake, repudiation of that 40% of debt held by foreigners would come first. There would be nothing to lose, relatively speaking, except for some seized US Corporate assets. At least this is the lesser of two evils.
I don't foresee the "reserve" currency experiencing the situation you discuss but I could easily see the establishment of a trade dollar again within our system and the bifurcation putting the domestic side into the hyperinflationary spiral with the consequence being our bond holdings oversees being held at 10x the domestic currency valuation to support a trade dollar scenario.
The foreigners do have one advantage over us; they produce a considerable amount of the durable and non-durable goods consumed within our nation plus supply upwards of 30% of all the food supply at any given time. This supports the idea that we might repudiate our debt via hyperinflation but contain it within our borders to prevent an impact on the suppliers of goods to our markets.
It's a dangerous game no matter how it plays out because of the financial and political leadership in our nation and the absolute corruption they engage in on a daily basis.
Again, this is dumb^10.
There IS NO inflation without wage inflation. (Who's buying?)
Zimbabwe, Argentina, Weimar Germany ALL had external liabilities due in foreign currency. ALL episodes of hyper-inflation combine poor/corrupt monetary regimes with FOREIGN CURRENCY liabilities. We DO NOT have that.
That said, the Fed is pushing for 3% inflation. 3% inflation will liquify the banking system (asset-based lending) and make billionares out of risk-takers. 3% inflation will push the Fed to tighten somewhat in the natural course of the business cycle.
There is nothing really to be scared of. Go look for good investments. Many stocks will be up 100-5000% over the next 5 years. Many small businesses will be even better investments. OR you could hide in a hole with your shotgun and then complain about how badly the system is broken.
The rest of us plan to be eating a thick steak with a nice cabernet on a boat somewhere... but hey, it must be a mirage.
I'd suggest that it is you who is climing into a hole. History proves that the bubble era that we were living in is an absolute dead-end.
Short-term thinking, while producing instant gratification (eat your steak), mostly pushes the inevitable only that much faster.
What goes up (via energy consumption) will come down: http://www.hubbertpeak.com/Duncan/Olduvai.htm
You simply cannot ignore US funds flowing back to the country, influencing the dollar positively...
If another crisis strike, the Dollar will get strong...
Oh, great! A strong dollar will mean less exports (increased trade deficit) and the purchase of more goods from China!
Yeah, that'll fix things!