Peter Schiff Destroys The "Deflation Is An Ogre" Myth

Tyler Durden's picture

Submitted by Peter Schiff via Euro Pacific Capital,

Dedicated readers of The Wall Street Journal have recently been offered many dire warnings about a clear and present danger that is stalking the global economy. They are not referring to a possible looming stock or real estate bubble (which you can find more on in my latest newsletter). Nor are they talking about other usual suspects such as global warming, peak oil, the Arab Spring, sovereign defaults, the breakup of the euro, Miley Cyrus, a nuclear Iran, or Obamacare. Instead they are warning about the horror that could result from falling prices, otherwise known as deflation. Get the kids into the basement Mom... they just marked down Cheerios!

In order to justify our current monetary and fiscal policies, in which governments refuse to reign in runaway deficits while central banks furiously expand the money supply, economists must convince us that inflation, which results in rising prices, is vital for economic growth.

Simultaneously they make the case that falling prices are bad. This is a difficult proposition to make because most people have long suspected that inflation is a sign of economic distress and that high prices qualify as a problem not a solution. But the absurdity of the position has not stopped our top economists, and their acolytes in the media, from making the case.

A January 5th article in The Wall Street Journal described the economic situation in Europe by saying "Anxieties are rising in the euro zone that deflation-the phenomenon of persistent falling prices across the economy that blighted the lives of millions in the 1930s-may be starting to take root as it did in Japan in the mid-1990s." Really, blighted the lives of millions? When was the last time you were "blighted" by a store's mark down? If you own a business, are you "blighted" when your suppliers drop their prices? Read more about Europe's economy in my latest newsletter.

The Journal is advancing a classic "wet sidewalks cause rain" argument, confusing and inverting cause and effect. It suggests that falling prices caused the Great Depression and in turn the widespread consumer suffering that went along with it. But this puts the cart way in front of the horse.  The Great Depression was triggered by the bursting of a speculative bubble (resulted from too much easy money in the latter half of the 1920s). The resulting economic contraction, prolonged unnecessarily by the anti-market policies of Hoover and Roosevelt, was part of a necessary re-balancing. A bad economy encourages people to reduce current consumption and save for the future. The resulting drop in demand brings down prices.

But lower prices function as a counterweight to a contracting economy by cushioning the blow of the downturn. I would argue that those who lived through the Great Depression were grateful that they were able to buy more with what little money they had. Imagine how much worse it would have been if they had to contend with rising consumer prices as well. Consumers always want to buy, but sometimes they forego or defer purchases because they can't afford a desired good or service. Higher prices will only compound the problem. It may surprise many Nobel Prize-winning economists, but discounts often motivate consumers to buy - -try the experiment yourself the next time you walk past the sale rack.

Economists will argue that expectations for future prices are a much bigger motivation than current prices themselves. But those economists concerned with deflation expect there to be, at most, a one or two percent decrease in prices. Can consumers be expected not to buy something today because they expect it to be one percent cheaper in a year? Bear in mind that something that a consumer can buy and use today is more valuable to the purchaser than the same item that is not bought until next year. The costs of going without a desired purchase are overlooked by those warning about the danger of deflation

In another article two days later, the Journal hit readers with the same message: "Annual euro-zone inflation weakened further below the European Central Bank's target in December, rekindling fears that too little inflation or outright consumer-price declines may threaten the currency area's fragile economy." In this case, the paper adds "too little inflation" to the list of woes that needs to be avoided. Apparently, if prices don't rise briskly enough, the wheels of an economy stop turning

Neither article mentions some very important historical context. For the first 120 years of the existence of the United States (before the establishment of the Federal Reserve), general prices trended downward. According to the Department of Commerce's Statistical Abstract of the United States, the "General Price Index" declined by 19% from 1801 to 1900. This stands in contrast to the 2,280% increase of the CPI between 1913 and 2013

While the 19th century had plenty of well-documented ups and downs, people tend to forget that the country experienced tremendous economic growth during that time. Living standards for the average American at the end of the century were leaps and bounds higher than they were at the beginning. The 19th Century turned a formerly inconsequential agricultural nation into the richest, most productive, and economically dynamic nation on Earth. Immigrants could not come here fast enough. But all this happened against a backdrop of consistently falling prices.

Thomas Edison once said that his goal was to make electricity so cheap that only the rich would burn candles. He was fortunate to have no Nobel economists on his marketing team.They certainly would have advised him to raise prices to increase sales. But Edison's strategy of driving sales volume through lower prices is clearly visible today in industries all over the world. By lowering prices, companies not only grow their customer base, but they tend to increase profits as well. Most visibly, consumer electronics has seen chronic deflation for years without crimping demand or hurting profits. According to the Wall Street Journal, this should be impossible.

The truth is the media is merely helping the government to spread propaganda. It is highly indebted governments that need inflation, not consumers. But before government can lead a self-serving crusade to create inflation, they must first convince the public that higher prices is a goal worth pursuing. Since inflation also helps sustain asset bubbles and prop up banks, in this instance The Wall Street Journal and the Government seem to be perfectly aligned.

 

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Slave's picture

Who's ready to inflate with Yellen?

FUCK YOU YELLEN!!!!

Martial's picture

Mrs. Debtfire behind the printing press is a sickening thought.

nope-1004's picture

I would hate to see savers rewarded, most notably the elderly of our society.  How dare those retirees and shut ins be allowed to have purchasing power.

 

 

/s

 

Fish Gone Bad's picture

I stopped being a consumer a long time ago.  People will eventually figure out that if they are not careful, their possessions will possess them.

LawsofPhysics's picture

Define "possession", I often possess and consume food.  just saying, now I am left to wonder how you sustain yourself without consuming something.

Silver Bully's picture

"Define "possession", I often possess and consume food. "

Wait, food hasn't consumed your waist line along with every other American? Food has possessed our health, that's for certain. We have record numbers of people in western countries possessed by type 2 diabetes, preventable cancers, chemical imbalances, and a whole host of issues directly caused by obesity. That's what happens when food possesses you.

"People will eventually figure out that if they are not careful, their possessions will possess them."

So how has food NOT possessed the western world? Along with all the other consumer items, tv shows, and culture we 'consume' on a daily basis?

 

LawsofPhysics's picture

Should some people eat less and make smarter dietary decisions, sure, that wasn't the question fucknut.

Still believe you don't need to consume anything?

Good luck with that.

Boris Alatovkrap's picture

Deflation, carbon emission, war on terror, Ford Pinto, always is scary boogieman on horizon, no shortage of crisis to keep political class to do bidding of bankster class in shadow.

LawsofPhysics's picture

It's after 5:00 PM boris, Piva Pashalosta.

A Nanny Moose's picture

Who the fuck pissed in your bitch ass Cheerios? Go away till you have had an attitude adjustment, and are done trolling.

yepyep's picture

taking it a little bit too literally mate.

Being Free's picture

That's why I only buy sex toys anymore.

dognamedabu's picture

So to avoid being fucked over you chose to go fuck yourself?

StychoKiller's picture

Have sex with someone you luv the most...

obelisks's picture

In  Japan they call it chindogu

BigJim's picture

The people who worry about 'deflation' and see it as just consumer prices dropping are confused.

Price deflation is natural in most markets as more efficient means of prodution are found and productivity increases (these decreases are usually masked by a constantly increasing money supply, however)

Monetary deflation happens when debts are paid/written off faster than new credit is created and causes real problems in our debt-based monetary system.

Price deflation in the present circumstances is a symptom of monetary deflation.

lasvegaspersona's picture

BJ (can I all you that?)

Your reasoning is sound but folks here just want a fight.

Deflation for debtors (gotta mortgage?) sucks. That is why the system loves slow inflation. Sure lower prices are nice but not at the expense of lower wages and harder to pay debts. All of us are both debtors and savers and spenders and producers in our lives. For the older folks with no debt and fixed income deflation is a blessing. For the younger people who just got the student loan and mortgage, it is nice to see wages rise even at the expense of higher prices for somethings. That is why a target of 2% strikes many as OK. 

just don't save in currency...or its derivatives...

 

Boris Alatovkrap's picture

BJ is hit nail of the head! Deflation is describe in ambiguity by member of political and bankster class, but citizenry is equate, much to joy of political and bankster class who is take pleasure as citizenry is muddle and confuse.

Deflation of collateral back equity is problematic for underlying debt instrument and can collapse bank. Deflation of cost of good and service is natural effect of free market, or any market, simple derivative of supply and demand, is good for all market participant, all consumer, and all (re)seller, except speculator who is bet against deflation.

dark pools of soros's picture

collapse the banks and use bitcoin.  the blockchain is a public trust ledger with no thieving banksters

and for anyone saying 'what about the economy without the banks providing their god's work!!?'   yeah. sign me up for that

 

limit_less's picture

Boris - You are exactly correct. Inflation is a completely artificial phenomenon which serves only ONE purpose. Inflation exists to enable governments to borrow. THAT IS IT. Without inflation government would be defaulting on their debts constantly because government borrowing does not fulfill any of the two conditions as to why money is borrowed. 

You have the money centre banks making their money by skimming the interest (ie labour and land) payments that the government extorts from taxpayers.

Deflation is human progress, inflation is reversing human progress

How deflation reduces the value of your life http://independence4walesdotcom.wordpress.com/2013/11/20/what-is-deflati...

I need Another Beer's picture

Mr. Vegas, what will deflation do too the price of PM ? I am wondering ur thoughts since u seem knowlegible on the subject. I heard a dude say that deflation/stagflation will bring PM down big time.

Please enlighten me.

Thx

Heineken tonight

limit_less's picture

Las Vegas - "Deflation for debtors sucks". So does interest, what is your point? With deflation interest rates will drop as the risk will be paid for by getting back more valuable dollars than the ones you lent out. 

N2OJoe's picture

So deflation sucks for debtors.

God forbid we not be a nation of debtors...

Cugel's picture

Monetary deflation happens when debts are paid/written off faster than new credit is created and causes real problems in our debt-based monetary system.

It *fixes* real problems with our debt-based monetary system, namely the inability of the real economy to back money created through credit expansion with an equal supply of new real goods. You're mistaking what feels good for what is good.

OC Sure's picture

This is true. Don't forget about the moral aspect of the argument as well.

As prices come down, whether from a lessening of the increase in the credit expansion or from a "fixed" credit problem, purchasing power increases to those who hold dollars. It is the reverse of how the inflationists steal from dollar holders. Instead, dollar holders "steal" back from the original thief. Inflation favors the thief; Deflation favors the honest worker.

This is why the bureaucrats and corporate quislings squeal the most about the "evils" of deflation; their jig is up.

BigJim's picture

 It *fixes* real problems with our debt-based monetary system, namely the inability of the real economy to back money created through credit expansion with an equal supply of new real goods. You're mistaking what feels good for what is good.

Believe me, I'm no fan of the present system. And even less of a fan of bailing out people who stand to see their assets get wiped out when their bets go wrong. But consider this - in the present system we labour under, if all debt was paid off, there would literally be no money* (at least in the sense of currencies... I expect people would start trading things other than currencies to facilitate commerce long before their respective economies' MB reached zero).

So proponents of the economic status quo are right to fear deflation (at least of the monetary variety). Given the fact deflation wipes out banks, and that all the money in our economies is derived from bank credit, and governments have decided that from now on depositors are going to be bailed-in... any real monetary deflation would lead to a cascade of bank defaults and be unbelievably disruptive. More disruptive than hyperinflation, which is ultimately the alternative? I don't know... and it's not like there's some third option now that debt has reached such insane levels... or that we'll ever find out, as our overlords will inflate rather than see monetary deflation take hold.

So bring on this 'taper' already. Let's see the markets front run the Fed by dumping treasuries, yields skyrocket, equities tank because bonds have higher returns... and Yellen announce more QE.

*yes, I know it's more accurately described as 'currency' rather than 'money', but people confuse 'currency' with physical cash... and currencies trade as money, so 'money' it is.

dark pools of soros's picture

you mean use non debt-money??  like bitcoin?

 

usury is vile.... burn the bankers

 

 

BigJim's picture

'Usury' just means lending money at interest... and it's perfectly reasonable to expect people to be paid for i) taking on the risk of full or partial default, and ii) deferring their gratification by lending their money out for some agreed period.

foodisgood's picture

Money creation with usury attached is what he is speaking to you BigDumdJoom.

Usury of this sort is rooted in the root of evil death to all that is human and why we are slaves.

BigJim's picture

I have no stake in banking.

I was answering Soros' denunciation of usury - ie, lending capital out at interest - not eulogising our current money-out-of-nothing system.

Even if the banks created money out of nothing and lent it at no interest it would still be an abomination.

So go fuck yourself... dimwit.

edit - I see you edited your post while I was writing my response to it, making mine (above) appear to be a non-sequitor.

So here's my answer to your rewritten statement: 'usury' is an ancient term that just means lending at interest, not government-imposed cartels being allowed to rent out money they counterfiet... though I can see why an ignoramus like you might conflate the two.

striped-pad's picture

"But consider this - in the present system we labour under, if all debt was paid off, there would literally be no money*"

It's true that if all debt is paid off, there would be no money left at that point. But it doesn't matter. As soon as someone needs some money again (i.e. they want to buy something before selling something), they can go to a bank to borrow some, and some new currency is created.

In fact, not only does it not matter, I'd say it's *essential* that "fiat" currency is destroyed as debts are paid off. If currency weren't destroyed by repayment of debt, and everyone managed to pay off their debts, lots of people would be left with pieces of paper which they received in return for actual goods and services, but nobody is under any obligation to sell them anything. Those pieces of paper are only as valuable as forged coins - people will only knowingly accept them if they believe they can pass them on to someone else in exchange for something of value. It's like musical chairs.

I put "fiat" in quotes above because while I think it's an appropriate term for a currency simply printed by government, it seems misleading for a debt-backed currency. In our system, people are trading promises: for every dollar which exists, someone has promised to sell a dollar's worth of goods and/or services. That someone is either the borrower who created the money together with the bank, or the bank itself (if the borrower defaults). The government's role is not to declare by fiat that the currency must be accepted in exchange for goods and services, but simply to enforce contracts.

This is obviously not to say that everything is fine at the moment. The systemic problem arises if defaults on loans by banks exceed the bank's capital (capital meaning, loosely speaking, the amount invested in it rather than deposited with it). This is why it is essential to quickly close down banks in danger of losing all their capital (prompt corrective action) before the losses start affecting depositors.

BigJim's picture

 But it doesn't matter. As soon as someone needs some money again (i.e. they want to buy something before selling something), they can go to a bank to borrow some, and some new currency is created.

Why the hell should someone have to borrow money in order to buy something, just because the system uses money that represents debt, and everyone else paid their debts off? Yes, this would never happen, there would always be some debt in an economy, but the point is that the resulting elasticity of the amount of money in the system means wildly unstable prices and inflationary booms and deflationary busts following the credit cycle.

In fact, not only does it not matter, I'd say it's *essential* that "fiat" currency is destroyed as debts are paid off. If currency weren't destroyed by repayment of debt, and everyone managed to pay off their debts, lots of people would be left with pieces of paper which they received in return for actual goods and services, but nobody is under any obligation to sell them anything. Those pieces of paper are only as valuable as forged coins - people will only knowingly accept them if they believe they can pass them on to someone else in exchange for something of value. It's like musical chairs.

This is only the case if the credit is created 'out of thin air'. If the currency lent out reflects a combination of lending (ie, depositors really do 'deposit' and don't have access to their deposits for a significant length of time relative to their loan), AND a speculative position in the creditworthyness of the bank doing the lending, then a proportion of those 'pieces of paper' would still represent actual money even if all debt were paid off.

I put "fiat" in quotes above because while I think it's an appropriate term for a currency simply printed by government, it seems misleading for a debt-backed currency.... The government's role is not to declare by fiat that the currency must be accepted in exchange for goods and services, but simply to enforce contracts.

I agree 'fiat' is a bit of a misnomer because (unlike, say, tallysticks) the currency is being created by commercial entities rather than the government... but it ultimately derives its 'moneyness' by governments demanding it to extinguish tax debt, so it's fiat in the sense it wouldn't be used as money if the government backing it were to collapse.

In our system, people are trading promises: for every dollar which exists, someone has promised to sell a dollar's worth of goods and/or services. That someone is either the borrower who created the money together with the bank, or the bank itself (if the borrower defaults).

No, in a fiat system, when a bank lends currency into existence by extending you credit, no one is promising to sell that currency's amount of goods/services to you. YOU are promising to pay back that amount of currency (+ interest), that is all. Not even the government is promising you that you can use the currency to extinguish that amount of tax debt in the future; it's usually a safe assumption that they will (which, ultimately, is the chief reason people put faith in its store of value), but throughout history plenty of governments have revalued their currencies, or issued new ones. And consider scenarios with high or hyperinflation; the currency you've borrowed starts losing its value immediately. No one has promised you anything; as a borrower, you're the one who did the promising.

This is obviously not to say that everything is fine at the moment. The systemic problem arises if defaults on loans by banks exceed the bank's capital (capital meaning, loosely speaking, the amount invested in it rather than deposited with it). This is why it is essential to quickly close down banks in danger of losing all their capital (prompt corrective action) before the losses start affecting depositors.

Central baking (and government depositor insurance) encourages excess credit creation because it disconnects depositor risk and bank lending behaviour; all banks' issuance of currency has the same value, irrespective of their underlying creditworthiness. When you use the passive tense "This is why it is essential to quickly close down banks" - who should be doing this? the depositors? the market? or the government and the central banks that encouraged the systemic risks inherent in central banking in the first place?

limit_less's picture

Jim - "But consider this - in the present system we labour under, if all debt was paid off, there would literally be no money*" 

Techincally you are correct, but for there to be no debt there would be no way to pay for things except barter.

People, business are prepared to get into a days debt, a weeks debt, a months debt in order to have money so they do not have to barter.

The fundmental difference is a true free market would be that money is backed by the labour of the person spending it and if that goes bad then whatever meterial the money printer was using to back their currency. As opposed to a fiat currency where you are screwed if the money goes bad.

Dick Buttkiss's picture

Actually, deflation is a reduction in the money supply. Yes, it leads to falling prices but to falling wages as well, the question being which falls faster. In the Great Depression, wages did, though Schiff is right to say that at least prices were falling as well.

Conversely, falling prices due to increased productivity — which is what Schiff is referring to with regard to consumer electronics — is an entirely different matter, as both producers and consumers benefit. I paid over $2,700 in 1986 for a 512 Macintosh that was nonetheless worth every penny and more due to the increased productivity it gave me. Look at what I can buy now, however, even inflation-adjusted, for half that dollar amount:

http://www.apple.com/mac/compare/notebooks.html

No comparison, on top of which an appreciating currency like Bitcoin will complement, rather than counteract, increased productivity, especially as computerization (including robotics and 3D printing) embeds itself further and further into our products and services.

An unprecedented revolution, in other words, and one that the state is going to be helpless to stop.

 

zaphod42's picture

Interesting commentary. 

How does deflation help the middle class individuals who have mortgages?  They lose their equity and their homes.

What about students who cannot escape debt by bankruptcy?  They may as well give it up!  Lower prices won't pay those student loans that will take greater and greater percentages of what little they are able to earn.

Deflation is a nightmare for the middle class; it is does not really help the poor since they will earn less and less.  The uber-rich will do fine, thank you, since if you start with 150 million and it is reduced by 90% you still have 15 mil left and you are investing at 2 cents on the dollar as the middle classes are forced to sell of their part of the markets.

I also purchased a Mac, back in 1985.  Paid $3,200, got a dot matrix printer with it, and a free year of Mac Magazine.  Doesn't help us much today, though.  As far as I am concerned, rapid inflation or deflation is bad, each for its own particular reason.  The real problem will be when the inflation follows hard on the heels of the deflation, and things really come apart.

Any way you slice it, we're pretty much screwed.  That's why the PTB are doing whatever they can to maintain status quo. 

Just delaying tactics.

Craig

LawsofPhysics's picture

"They lose their equity and their homes."  -  Perhaps, but then again, they still possess a home or multple homes.

Moreover, given the current laws, that particular debt becomes easier to pay off.  Especially of they still have wages.  I am a landlord I know how this works (give paper-pushers enough rope and they will hang themselves).

As far as students go, they still gain knowledge (if they were good)  If one has real knowledge, they remain valuable and perhaps they are simply waiting for prices to reset.

Please, anyone worth their weight in fucking salt knows the following;

When fraud is the status quo possesssion is the law.

acetinker's picture

Laws, if you know me at all, and there's no reason you should, you'd know I don't practice religion. HOWEVER.  If I recall the various Abrahamic canon correctly,  individuals are due a reset (jubilee) every seven years and for nations it is "seven times seven", or 49 years.

Think about that for a bit.  How much different would the financial landscape be if we actually did that shit?

LawsofPhysics's picture

"Think about that for a bit.  How much different would the financial landscape be if we actually did that shit?" -

For one thing, people would quickly recognize their own self worth, this would make people very humble overnight.  From that perspective alone, things would be tremendously better.

Really tired of dealing with arrogant fucks on a daily basis.

acetinker's picture

Oh, so I'm arrogant for suggesting that acquiescence to physical law and personal humility is just stupid.  Is that what you're saying, or are you just so angry that even in agreeance you seem hostile?

Pretty sure we're on the same side, breathe.

Papasmurf's picture

Fuck your reset or jubilee or whatever you want to call the theft.  How about people living within their means?  However, lenders who extend credit to those they know or have reason to know can't pay, those lenders should eat the loss.  

acetinker's picture

Uuh Pops, you contradict yourself.  It's common, I've done it myself.  THE LENDERS ABSOLUTELY KNOW THAT THERE'S NO FUCKING WAY THAT ANYONE CAN EVER BE FREE OF DEBT.  Did you hear me OK?  If so, go back and consider that all money is debt.

Start again with your fuck me from there, fuckwit.

Cugel's picture

Then a lot of people would take out trillion-dollar loans in year 48.

Bankruptcy and default are perfectly adequate means for dealing with over-leveraging. Bad lenders and bad borrowers bear the worst of the consequences. Or would, in the absence of bales of free money.

acetinker's picture

I get that, but I'm talkin' 'bout nations at year 48, not wealthy individuals, who, by the way would never exist in this system.

BigJim's picture

There were plenty of wealthy individuals back in Old Testament times.

Think about what you're proposing. Lenders would crank up interest rates as time passed, as they got closer to when there would be state-sanctioned debt forgiveness. If the government capped interest rates no one would lend in the years immediately running up to the jubilee year. It would be insane.

We need to reign in the groups that create credit, however, to prevent them buying the entire world 'with a stroke of their pen'. The way to do this is for banks/firms/individuals to issue their own currencies which would float against each other, and for government to allow them to fail if/when they overextend. ie, no government 'deposit' insurance. Something very like the gold standard would arise, but it would be market determined, so governments couldn't just suddenly announce that, no, from today henceforth, your 'dollar' is only worth 1/35th of an ounce of gold, not 1/20th... People who wished to eschew risk altogether could 'deposit' their money with banks that were risk averse. People with more risk apetite would deposit their money with banks that lent money to more risky ventures. The banks' currencies would trade as money but they'd really be more like stocks.

acetinker's picture

Yeah, Solomon and such.  Solomon was rich because he was wise, not because he was a conniving fuck like Blankfein.  He became rich at the will of those who adored him, and from what I remember, he built the mines that made it possible for his people to build great temples and prosper.

Blankfein is a wanna be Solomon, but the mines are already built and so are the temples.  He has become rich at the will of those who adored him, but he's not building anything but the servitude of his adorants.  Big difference.

I can understand that if (zoom back to the present) you're invested in the market, you'd wanna see it flourish, and you don't wanna entertain any thought that maybe it's not real.  Maybe a jubilee would wipe you out.  I don't wish that upon you.  But, if a jubilee would wipe you out, what are you, really?

BigJim's picture

Soloman was a fucking KING. He was rich for the same reason kings have been rich throughout history - because he exacted tribute and had many slaves.

I can understand that if (zoom back to the present) you're invested in the market, you'd wanna see it flourish, and you don't wanna entertain any thought that maybe it's not real.  Maybe a jubilee would wipe you out.  I don't wish that upon you.  But, if a jubilee would wipe you out, what are you, really?

Sigh. No, I'm not invested in the market. Did you actually read my explanation of why a regular jubilee would be economically disastrous? Even if we had a sound-money system, even semi-advanced economies cannot run without credit. There are better ways to make the monetary system less of a counterfeiter's paradise than interfering with voluntary credit arrangements in a free market. (and no, that's NOT what I'm saying we have now)

acetinker's picture

Yes BigJim, I read what you wrote.  Who, exactly would be wiped out by the jubilee, is the question I pose.

I'm thinking it's the most vocal opponents, such as yourself.

Que sera.  Whatever will be, will be.

acetinker's picture

BTW, a jubilee is simply a reset, not the abolition of credit.  Would certainly put a muzzle on it, though.  Is this a bad thing, in your mind?

withglee's picture

The way to do this is for banks/firms/individuals to issue their own currencies which would float against each other, and for government to allow them to fail if/when they overextend. ie, no government 'deposit' insurance.

This from he who say's I don't get it? Read about finances in the USA in the 1880s ... and several like periods before and after that.

acetinker's picture

Kegel, I'm gonna say you're my downvote, because you seem like a system sycophant.  Failing that, you're just extremely stupid.

Who would make, or extend, a loan longer loan 7 years in such a system?

C'mon, spit it out.