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Peter Schiff: Meet "Lowflation" - Deflation's Scary Pal

Tyler Durden's picture




 

Submitted by Peter Schiff via Euro Pacific Capital,

In recent years a good part of the monetary debate has become a simple war of words, with much of the conflict focused on the definition for the word "inflation." Whereas economists up until the 1960's or 1970's mostly defined inflation as an expansion of the money supply, the vast majority now see it as simply rising prices. Since then the "experts" have gone further and devised variations on the word "inflation" (such as "deflation," "disinflation," and "stagflation"). And while past central banking policy usually focused on "inflation fighting," now bankers talk about "inflation ceilings" and more recently "inflation targets".  The latest front in this campaign came this week when Bloomberg News unveiled a brand new word: "lowflation" which it defines as a situation where prices are rising, but not fast enough to offer the economic benefits that are apparently delivered by higher inflation. Although the article was printed on April Fool's Day, sadly I do not believe it was meant as a joke.

Up until now, the inflation advocates have focused their arguments almost exclusively on the apparent dangers of "deflation," which they define as falling prices. Despite reams of evidence that show how an economy can thrive when prices fall, there is now a nearly universal belief that deflation is an economic poison that works its mischief by convincing consumers to delay purchases. For example, in a scenario of 1% deflation, a consumer who wants a $1,000 refrigerator will postpone her purchase if she expects it will cost only $990 in a year. Presumably she will just make do with her old fridge, or simply refrain from buying perishable items for a year to lock in that $10 savings. If she expects the cost of the refrigerator to decline another 1% in the following year, the purchase will be again put off. If deflation persists indefinitely they argue that she will put off the purchase indefinitely, perhaps living exclusively on dried foods while waiting for refrigerator prices to hit zero.

Economists extrapolate this to conclude that deflation will destroy aggregate demand and force the economy into recession. Despite the absurdity of this argument (people actually tend to buy more when prices fall), at least there is a phantom bogeyman for which to conjure phony terror. Low inflation (below 2%) is even harder to demonize. Few have argued that it has the same demand killing dynamics as deflation, but many say that it should be avoided simply because it is too close to deflation. Given their feeling that even a brief bout of minor deflation could lead to a catastrophic negative spiral, they argue for a prudent buffer of 2% inflation or more. But the writer of the Bloomberg piece, the London-based Simon Kennedy, quotes people in high positions in the financial establishment who offer new arguments as to why "lowflation" (as he calls it) is a "threat" in and of itself. And although the article was primarily concerned with Europe, you can be sure that these arguments will be applied soon to the situation in the United States.

The piece correctly notes that those struggling with high debt tend to welcome high rates of inflation. The math is simple. By diminishing the value of money, inflation benefits borrowers at the expense of lenders. By repaying with money of lesser value, the borrowers partially default, even when paying in full. The biggest borrowers in Europe (and the United States for that matter) are heavily indebted governments and the overly leveraged financial sector. Should it come as a surprise that they are the leading advocates for inflation? The writer admits that higher inflation will help these interests manage their debt burdens and in the case of the financial sector, profit from the increased lending that low interest rates and quantitative easing encourage.

On the other side of the ledger are the consumers, the savers, and the retirees. These groups want lower prices and higher rates of interest on their accumulated capital. Such a combination will lead to higher living standards for those who have worked and saved for many years in order to enjoy the fruits of their efforts. But these types of people are simply not on the "must call" list for our best and brightest economic journalists. As a result, we only get one side of the story.

The article also points out that higher inflation gives businesses more flexibility to retain workers in periods of weak growth. The argument is that if sales revenue falls, companies will not be able to lower wages, and will instead resort to layoffs to maintain their profitability. However, this is only true in cases involving labor union contracts or minimum wage workers. In all other cases, business could reduce wages in lieu of layoffs. Plus, if prices for consumer goods are also falling, real wages may not even decline as a result of the cuts.

In circumstances where wages cannot be legally reduced, as is the case for unionized or minimum wage workers, layoffs are often the employer's only option for keeping costs in line with revenue. However, inflation allows employers to do an end run around these obstacles. In an inflationary environment, rising prices compensate for falling sales. The added revenue allows employers to hold nominal wage costs steady, even when the raw amount of goods or services they sell declines. When inflation rages, higher skilled workers will often demand, and receive, pay raises. But low-skilled workers, who lack such leverage, are usually left holding the bag.

In other words, politicians can impose a high minimum wage to pander to voters, but then count on inflation to lower real labor costs, thereby limiting the unemployment that would otherwise result. So what the government openly gives with one hand, it secretly takes away with the other. Workers vote for politicians who promise higher wages, but those same politicians also create the inflation that negates the real value of the increase. But while government takes the credit for the former, it never assumes responsibility for the latter. The same analysis applies to labor unions. Based upon political protection offered by friendly officials, unions can secure unrealistic pay hikes for their members. But the same governments then work to reduce the real value of those increases to keep their employers in business.

Of course, what the Bloomberg writer was really arguing is that governments need inflation to bail themselves out of the policy mistakes they make to secure votes. But two wrongs never make a right. The correct policy would be to run balanced budgets rather than incur debts that can only be repaid with the help of inflation. On the labor front, the better policy would be to abolish the minimum wage and the special legal protections offered to labor unions, rather than papering over the adverse consequences of bad policies with inflation.

So be on the lookout for any more hand-wringing over the supposed dangers of lowflation. The noise will simply be an effort to convince you that what's bad for you is actually good. And although it's an audacious piece of propaganda to even attempt, the lack of critical awareness in the media gives it a fighting chance for success.

 

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Mon, 04/07/2014 - 19:56 | 4634101 knukles
knukles's picture

 

 

 

Inflation
is
not
a
component
of
real
economic
growth,
Fucktards

Mon, 04/07/2014 - 20:01 | 4634115 deeply indebted
deeply indebted's picture

Real economic growth? What's that have to do with THIS economy?

Mon, 04/07/2014 - 20:17 | 4634162 knukles
knukles's picture

I'm so SSRI, I get so excited and carried away and well, vengeful, restless, irritable and discontent ... maybe I need some anti-depressants or something... and... um  um  um 

Mon, 04/07/2014 - 20:24 | 4634180 Harbanger
Harbanger's picture

This bible quote from pulp fiction always does it for me.

http://www.youtube.com/watch?v=T-K8qi_AoXI

Mon, 04/07/2014 - 20:29 | 4634195 0b1knob
0b1knob's picture

Nearly 10 % inflation (real rate not government BS) is LOW?

http://www.shadowstats.com/alternate_data/inflation-charts

 

Mon, 04/07/2014 - 20:43 | 4634226 Spitzer
Spitzer's picture

Which computes to negative 10 interest rates

Mon, 04/07/2014 - 21:09 | 4634304 dryam
dryam's picture

It’s called metastatic cancer, and it kills the host.  There will not be any ‘inflation’, ‘deflation’, or 'low-flation'.  We are in completely uncharted waters. 

Why do you think the masses are being completely bullshitted by TPTB in regards to the economy?

Once we went off the gold standard the debt-based money system kicked into full gear. Credit (the cancer) started replacing the function of real money.  The cancer has now fully metastasized.   Those cells have been dividing & dividing in an exponential manner.....debt as far as the eye can see, personal debt, government debt at all levels, corporate debt, hundreds of trillions of derivatives, etc.  That ‘inflation’ is anything but positive.  Those inflation cancer cells squeeze out normal functioning tissue and slowly makes the entire body sick in a variety of ways.  This economy will only get sicker and will die a painful & certain death, and the only way to protect yourself in the long run is to get completely out of the ‘financial’ economy by storing your wealth in productive assets within your immediate environment.  All debt-based money economies will perish.  It’s inevitable.

Mon, 04/07/2014 - 21:11 | 4634308 Crisismode
Crisismode's picture

There IS no real econcomic growth.

 

Are you in touch at all with reality?

 

ALL Growth is in the hands of the few (1%) who grow their wealth at the expense of the many.

 

To dream of economic growth for the masses is to be totally delusional.

 

Take another puff.

 

 

Mon, 04/07/2014 - 22:11 | 4634462 MontgomeryScott
MontgomeryScott's picture

Naw, it's not quite so complicated as all that, 'dryam'.

Definition of parasite (n) Bing Dictionary
  • par·a·site
  • [ párr? s??t ]
  1. organism living on another: a plant or animal that lives on or in another, usually larger, host organism in a way that harms or is of no advantage to the host
  2. scrounger: somebody who exploits others without doing anything in return

Leech. Maggot. Scum. Bankster. One who uses up the host in a way that kills it, after extracting all the nutrients; and then discards it to die (or continues to feast on the dead carcass).

Those who are aligned with the F.S.A. are in perfect symbyosis with the above-mentioned parasites (but will be consumed as well).

Tue, 04/08/2014 - 11:55 | 4635792 RaceToTheBottom
RaceToTheBottom's picture

Sad but true.

The FSA are only responding "rationally" to the situation.

The best prices for drinks on the Titanic were available right as it was going down

Mon, 04/07/2014 - 21:02 | 4634281 Anusocracy
Anusocracy's picture

Technological free market economies would naturally create deflation.

Unfortunately government, which turns everything it touches to crap, destroys that ability and creates inflation in its place.

Which brings us to America, turned to crap by its government.

Mon, 04/07/2014 - 21:11 | 4634306 Crisismode
Crisismode's picture

 

double post

Tue, 04/08/2014 - 01:53 | 4634833 hobopants
hobopants's picture

Inflation, deflation or any varying degree there-of is not the issue. These idiots think that by increasing or decreasing the unit of account they can magically create productive capacity and erradicate resource scarcity.

All "flations" are an effect not a cause, The cause is a shit economy that is not being allowed to restructure over capacity and malinvestments. The effect of a shit economy can be either inflation or deflation, or like we have here bi-flation in which we see deleveraging of shit investments that have been slowly dying since the last financial crisis in tandem with rising cost in the basic necessities of life.

The Fed is like an off balance kid whose pet died, but instead letting go and burying the thing he insist on putting a leash on it and dragging it's corpse around the house.

Mon, 04/07/2014 - 20:20 | 4634173 Harbanger
Harbanger's picture

Inflation is the only thing that's real about a keynesian debt-based economic system.  Destruction of the currency is built right into the play rules.

Mon, 04/07/2014 - 21:05 | 4634291 Stoploss
Stoploss's picture

http://research.stlouisfed.org/fred2/series/M2V

And use this to choke the life out of middle class small biz..

Mon, 04/07/2014 - 20:49 | 4634105 Manthong
Manthong's picture

"Ponziflation" might be fitting.

Mon, 04/07/2014 - 21:05 | 4634289 Anusocracy
Anusocracy's picture

Printflation?

Mon, 04/07/2014 - 19:58 | 4634106 buzzsaw99
buzzsaw99's picture

they can call it whatever they like and they will battle it with MOAR 4 the 1%

Mon, 04/07/2014 - 19:59 | 4634109 New_Meat
New_Meat's picture

"... mostly defined inflation as an expansion of the money supply, ..."

nyet tovarich, inflation is a result of the above.

ya gotta' get ur head out of ur ass.

- Ned

Mon, 04/07/2014 - 21:18 | 4634330 MontgomeryScott
MontgomeryScott's picture

I guess I gotta look the quote up, again.

"If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered."

INFLATION is, classically, the GROWTH of a money supply. DEFLATION, classically, is the REDUCED amount of said money supply. The banks, in Jefferson's insightful comment, print money, thus 'stimulating' the 'economy', and when everything gets rolling, they then REDUCE the supply, thus causing an inability to purchase (or to pay debts).

DO YOU NEED A CLASSIC EXAMPLE, Ned?

How about 'the crash of 1929', as one of the most often misunderstood but quite relevant ones...

INFLATION is NOT the increase in prices. This is a RESULT of the inflation of the money supply.

I tried to down-arrow you, but it doesn't seem to work over here in Realityville.

You GOTTA get your head out of your ass, you poor Keynsian acolite. Too many sessions over at PMSNBC watching Kramer will do that to you...

Mon, 04/07/2014 - 19:59 | 4634110 surf0766
surf0766's picture

WORD

Mon, 04/07/2014 - 20:02 | 4634117 Kirk2NCC1701
Kirk2NCC1701's picture

GOLD = Hedge against INflation.

CASH = Hedge against DEflation.

Plan accordingly.  Smart people have some of both.

Mon, 04/07/2014 - 20:37 | 4634213 daveO
daveO's picture

After the Great Depression and 'students' of it, like Bernanke, you don't need to ever worry about deflation. 

Tue, 04/08/2014 - 09:13 | 4635254 N2OJoe
N2OJoe's picture

GOLD, SILVER = Hedge against monetary shennanigans.

CURRENCY = Trust and faith in the Regime.

Hedge accordingly.

Mon, 04/07/2014 - 20:46 | 4634237 Spitzer
Spitzer's picture

Wrong Kirk, dead wrong.

 

Show me one non gold backed currency ever that increased in value as the economy was retracting...

 

Russia ijn 1998 ? Thailand in 1997 ? And those central banks werent even printing money.

Mon, 04/07/2014 - 23:47 | 4634675 Redneck Hippy
Redneck Hippy's picture

Japan's currency is not backed by gold and has increased in value as the economy was retracting for decades, Spitzer, until recently when Kuroda has become hellbent on printing until he gets inflation,

Tue, 04/08/2014 - 03:14 | 4634885 Spitzer
Spitzer's picture

Real physical output increased. Not the same ...

Mon, 04/07/2014 - 21:23 | 4634347 MontgomeryScott
MontgomeryScott's picture

GOLD = Hedge against fiat currencies; a store of purchasing power which does not vary.

CASH = A way to start fires when there is no kindling wood available.

CONTRACTS = A fool's way to think that he owns either one.

PPD = A way to protect gold. Smart people won't rely on others to protect them, or on what they think they have on paper.

Mon, 04/07/2014 - 20:06 | 4634125 LawsofPhysics
LawsofPhysics's picture

"flation" is a myth.  Name one society/currency that has collapsed/died because their purchasing power was too strong.

cash in physical paper and PMs in physical coin (plenty in barter amounts).

common denominator?  physical

Why?  Simple, when fraud is the status quo, possession is the law.

Mon, 04/07/2014 - 20:29 | 4634158 Its_the_economy...
Its_the_economy_stupid's picture

LoP lays it down. End of story...cept firepower to protect posession.

Mon, 04/07/2014 - 20:31 | 4634198 Its_the_economy...
Its_the_economy_stupid's picture

wwell, ok, maybe 2 dozen cases of hooch in 1 pt bottles as a hedge.

Mon, 04/07/2014 - 20:48 | 4634244 Hulk
Hulk's picture

Just found out today that puerto rican rum in a spray bottle kills aphids and also makes the ladybugs happy, so I got that going for me !!!

Mon, 04/07/2014 - 21:06 | 4634294 MontgomeryScott
MontgomeryScott's picture

(True story)

If you put some beer in small jar lids near your garden, the snails head for it and drink so much that they die of alcohol poisoning. it's kind of cool going out to the garden and seeing the snail trails going in aimless circles...

Mon, 04/07/2014 - 21:09 | 4634305 Hulk
Hulk's picture

The rum really works too. Made the ladybug part up, but I do imagine ladybugs eating rum soaked aphid bodies and having a good ole time !!!

Mon, 04/07/2014 - 20:06 | 4634128 Yen Cross
Yen Cross's picture

   It must be nice for the Bloomturd staff to sit in their offices/conference rooms with a bunch of retards(peers) trying to come up with with new Websters definitions for all the miscalculations and policy screwups the people they shill for have made.

Mon, 04/07/2014 - 20:08 | 4634132 logicalman
logicalman's picture

Inflation is a back door tax.

(ass rape?)

 

Mon, 04/07/2014 - 21:28 | 4634365 MontgomeryScott
MontgomeryScott's picture

No, not actually.

You are paying them to fuck you in the ass, so there must be some type of 'contract' involved there.

One of the parties is paying for the other one to do things to them, so I guess that means that the one taking it up the Hershey Highway must be the whore...

(sarc)

Mon, 04/07/2014 - 21:51 | 4634414 kchrisc
kchrisc's picture

Inflation is "printed" money. "Printed" money is theft--"Printed theft." Theft destroys savings, investment, the returns on capital and capital. Less capital is less production; less life. Therefore: "Printed theft" is death.

I’m going to write the mathematical proof of this in the margin of my copy of Arithmetica for later generations to discern.

Mon, 04/07/2014 - 20:13 | 4634150 i_call_you_my_base
i_call_you_my_base's picture

"Lowflation" is one of the dumbest things I've ever heard. Utter bullshit.

Let me tell you about corruptflation. It's when you lower wages through illegal immigration, don't enforce it, take campaign bribes from both sides, and allow investors to bank the overhead. It's when you subsidize food by taxing the same people that pay for it, and enrich yourself in the process. It's when doctors take funds to promote high cost drugs in medical schools. It's when banks jack up lending rates via fraud and no one enforces it. And on, and on. Rising prices are largely about corruption. Is this not the reason people don't understand it? Is this what doesn't fit the models?

Mon, 04/07/2014 - 20:21 | 4634165 Its_the_economy...
Its_the_economy_stupid's picture

ICYMB

Absolutely.

Pay attention 1:40 min in.  https://www.youtube.com/watch?v=TCbFEgFajGU

Any questions?

Mon, 04/07/2014 - 22:09 | 4634472 kchrisc
kchrisc's picture

Interesting video.

Unfortunately I think that most viewing it will see the people on the panel, correctly, as malevolent, and immigrants, illegal or otherwise, as the enemy. However, the bigger picture is that people saw worth in expending time and money to host and attend such a conference. That is a statement toward the level of maleficence that is the DC US today.

Think about it. Thousands of dollars and many hours were expended so that people could discuss ways to exclude viable employment candidates that they obviously need so they can bring over an indentured servant using a loophole in the DC US' controls.

The enemy is the DC US, at all levels.

Mon, 04/07/2014 - 20:31 | 4634200 IPA
IPA's picture

I prefer masterflation, but there does become a point when the chafing is to much to bare.

Mon, 04/07/2014 - 20:35 | 4634206 i_call_you_my_base
i_call_you_my_base's picture

Well, you'll need salves, so Krugman approves.

Mon, 04/07/2014 - 20:13 | 4634151 Seize Mars
Seize Mars's picture

Shit is getting real. You can feel it.

Mon, 04/07/2014 - 20:54 | 4634263 Spitzer
Spitzer's picture

House prices in Calgary just hit an allllll time high.

Mon, 04/07/2014 - 22:04 | 4634452 JuliaS
JuliaS's picture

Wasn't there a flood recently? Shit always floats to the top.

Mon, 04/07/2014 - 20:16 | 4634159 Seasmoke
Seasmoke's picture

I keep telling myself hedge with some paper cash. But then I look at physical gold coins and I can't help but trade them all in for more Gold. I guess Im going down with the Gold ship.

Mon, 04/07/2014 - 20:19 | 4634169 rsnoble
rsnoble's picture

Since when is deflation scarier than a $25 big mac?  Since the .01% say it is.

Mon, 04/07/2014 - 22:00 | 4634408 MontgomeryScott
MontgomeryScott's picture

When I moved back to the CONUS in '69, a Big Mac was $.45. FORTY-FIVE FRIGGING CENTS! it actually tasted fairly good as well. REAL American beef, no GMO crap...

Maryland just passed a law raising their 'minimum wage' incrementally, so as to appease Obama; to equal $10.10 by 2018.

That socialist prick Roosevelt pushed for, and got Congress to enact, the first minimum wage laws, in 1938.

"The minimum wage had its highest purchasing value ever in 1968, when it was $1.60 per hour ($10.64 in 2012 dollars)."

http://en.wikipedia.org/wiki/Minimum_wage_in_the_United_States

LOW-FUCKING-FLATION.

The PTB's get this number wrong, though. Gasoline was $.269 (twenty-six and nine-tenths cents) per gallon, in '69. You had to choose the station that had the S and H Green Stamps, the Blue Chip stamps, the dishes, or the 'Noah's Ark' animals, AND; there was NO SUCH THING as 'self-serve' back in '69. Gasoline is currently averaging $3.64 per gallon right NOW. Conservatively-driven, a 1965 Chevy II Nova with a 283cid could get gas mileage in the low 20's. You could still buy a house for less than 20 grand, in a good area.

McDonald's was always (back then) a first job (part-time) for those in High School. it was a step up from a newspaper route.

FUCK...

http://www.bing.com/videos/search?q=blue+chip+stamps&qs=n&form=QBVR&pq=b...

 

 

Mon, 04/07/2014 - 20:22 | 4634178 quasimodo
quasimodo's picture

 

 

Deflation

Inflation

Disinflation

Stagflation

It's all just mental masturbation......all these ations.

One

Big

Circle Jerk

Mon, 04/07/2014 - 21:14 | 4634320 centerline
centerline's picture

Exactly. The wool that is being pulled over everyone eyes is applying 'flation arguments in the context of closed systems. International capital flows, trade, taxation, etc. all apply.  It's all relative.

 

 

Mon, 04/07/2014 - 20:40 | 4634218 khakuda
khakuda's picture

The entire theory that consumers will put off purchases because prices will become lower with deflation is completely bogus. If that were the case, no one would own a personal computer or cell phone or flatscreen television, as everyone knows the price will be lower next year.

Quite the opposite, I purchased a flat screen TV because the price went down. If the price went up on the 40 inch flatscreen and it were now $5000 I would not have bought it.

A cost-of-living that is rising faster than wages is destructive to demand and lowers the standard of living. Healthcare, housing, and tuition for college have become unaffordable because their costs have risen faster than people's ability to pay through wages which have not kept up.

Tue, 04/08/2014 - 14:20 | 4636396 MagicMoney
MagicMoney's picture

Indeed, according to the flawed deflationary spiral theory of savings glut, we shouldn't have a video game industry, or a computer industry. Everybody would be hoarding their cash for the latest, and greatest technology, and the industry dies in the process.

 

The idea of inflation raising wages is entirely speculative, & faulty assumption. If wages don't surpass the rate of inflation right now, what good is to raise wages through inflation when prices of everything else goes up faster? The inflation advocates have no logic whatsoever. This can seen in Japan, were BOJ increased inflation, but problem is, it never did what it was intended to do, which is a meaningful raise of wages. Instead it simply increased prices to wage ratio. Logically speaking & even empirically speaking, the argument for more inflation is just bogus, but you must understand their views. They don't see economics in a different way. They are trying to extend purchasing power by trying spill over existing purchasing power into new money that is created. To them more debt is growth. More spending is growth, but where does spending come from? Well to them it's more debt, and more inflation. To them, this makes sense. To folks like me, this is laughable.

Mon, 04/07/2014 - 20:47 | 4634239 the 300000000th...
the 300000000th percent's picture

Inflation is not: rising prices. Inflation is not: creation of new money. Inflation is: creation of new money + velocity of the money supply. I can create a bunch of new money and then put it in a wherehouse, it will cause zero inflation. Rising prices are not inflation rather an effect of inflation. In the end rising prices always out-pace rising wages, therefore inflation is not my friend. If I were a powerful deathstar Government on the other hand, inflation would be my best friend and I would do everything possible to convice everybody that inflation was good for everybody. 

Mon, 04/07/2014 - 20:49 | 4634248 Prairie Dog
Prairie Dog's picture

Love the way this shill for the 0.1 percent poses as a friend of the common man. We should get rid of unions to enable companies to cut wages more easily. At a time of record inequality. Yeah right.

 

Mon, 04/07/2014 - 21:04 | 4634274 messymerry
messymerry's picture

The Unions are active players in the Cloward and Piven strategy.  They are not our friends and they have not been our friends since the advent of "public employee unions".  I find it offensive to even type those words.  PEUs are an affront to every person that works their ass off to make a decent living without compromising their intergrity.  FUCK THE UNIONS!!!!!!!!!!!!!  13 exclamation marks, one for each colony.

 

"Consumer" is a derogatory term.  Please don't use it.

Mon, 04/07/2014 - 20:53 | 4634258 messymerry
messymerry's picture

Kabuki  Kaaabuuuuuki  Where's my kabuki?

I will give them a year, maybe 18 months before this charade is ended.

;-D

Mon, 04/07/2014 - 21:21 | 4634340 Crisismode
Crisismode's picture

 

 

You can give them as much, or as little, as you want.

 

They will take what they want without one iota of your permission.

They will own you, and yours, for at least the next 30 to 50 years.

Piss in your beer, and own it.

YOU can't change a thing.

 

 

Tue, 04/08/2014 - 05:10 | 4634935 messymerry
messymerry's picture

That's the same thing the Loyalists were saying in the colonies while King George was screwing them.  Always, always eventually a line gets crossed.  Thanks for the reply,,,

;-D

Mon, 04/07/2014 - 21:07 | 4634298 yogibear
yogibear's picture

In any case Schiff says the Fed reverses taper and re-ignites the QE at a higher rate to spur much higher inflation.

Dollar falls. Inflation is an excellent tool for the debtors,

Mon, 04/07/2014 - 21:15 | 4634324 disabledvet
disabledvet's picture

"reductio ad absurdium" State.

this is not sad...this really is funny...and yes, it makes you laugh...but as with all "hilarity" it has a "downside" too. simply put "you can't have hilarity without the total depression." and that's not the economy but the polity we are in...and unlike economics which presupposes "choice" and "choices" such is not the case with polity and "affairs of State." ("you will buy ICE's. You will buy oil based products. These products will bankrupt you. You have no choice.")

in other words i think the pretense that an economy can in fact even exist here ("i demand bikini beach volleyball on the moon then!" in response to "Bailout Nation") is of course ludicrous. so only through the lens of "artifice ridiculii" can we make "sense" what is in fact en toto "a bunch of nonsense."

this is gonna sound strange but tomorrow i take a test on how "nonsense" actually makes more sense than "sensical things" precisely because such "gibberish" stands out in a world of "the the."

in other words..."the best way to advertise for toothpaste" is to say "asdflkj zsdioun aldskfj tewoib" and then "show the toothpaste" with some "gibberish name" on the bottle. and maybe that's what is driving the market..."algo's that make absolutely no sense whatsoever."?

i mean "how ridiculous is Amazon.com to begin with?"
And of course the answer is "so funny you're laughing all the way to the bank."

Amazingly...while i might need to be a genius to actually execute on Plan Amazon.com, I don't need to be a genius to understand the "product" as a "service." (it's all about the fulfillment...and part of that plan is that it doesn't cost society much at all.)

so isn't the question not whether or not Amazon, Netflix or Tesla make it...but whether UPS, AMC movie theaters or General Motors make it "after the undertow of the Real Playa's" gets underway??

And I would say "yes" to that question.
In short i'm better off buying capstone turbine than General Electric precisely because i can hold it in my hand and it is lacking in complexity.

who cares if the company makes any sense. it sure makes just as much sense as the competition "which has been around forever" (and maybe just too long.)

Mon, 04/07/2014 - 21:26 | 4634353 Crisismode
Crisismode's picture

 

 

When you learn to orgainize your thoughts

without the benefit of drugs,

Come back to us and enunciate your actual philosophy . . .

with a real meaning . . .

maybe you will make some sense then.

 

 

Mon, 04/07/2014 - 21:32 | 4634372 kchrisc
kchrisc's picture

Inflation is the printing of money and the theft of people's purchasing power from this counterfeit money's use.

Deflation is the destruction of the counterfeit money when loans that birthed the said money are paid off, defaulted on or otherwise extinguished. Prices come down against a given level of production that is counting on certain monetary returns based on capital inputs. As a result, businesses see lower returns and may go out of business and purchasing power generally does not increase. After things realign at new price levels, production ramps back up.  See DC US depression 1920 to 1921. If the government interferes in the cleansing of the banksters' schemes and scams, then the resulting depression lingers. See DC US depression 1929 to 1941.

Expansion is, in an unfettered economy, instead of an increase in money relative to goods and services produced, there would be an increase of goods and services produced relative to the money supply. As a result prices would tend down and purchasing power would go up. This was generally what one saw until the thieves of the FedRes were Unconstitutionally enthroned in 1913.

One should not confuse the decrease of production and prices, deflation, with  the increase of production and decrease of prices, expansion.

The banksters hate and spin deflation because it is harder, if not impossible, for them to extract REAL wealth from their victims and much harder to stay afloat when the money supply is shrinking.

The bigger picture reveals how monstrous the crimes of the banksters are. An individual that might counterfeit and spend money would subsequently steal goods and services from their victims. The banksters' counterfeiting allows them to rob people day in and day out in and organized fashion of their product and labor from "maintenance" on their counterfeit loans. It allows them to take fraudulent stakes in real property by way of their counterfeit loans. And they also become the fee extracting gatekeepers for all trades and transactions, even ones they are not a party too. The banksters have enslaved the people to the farm that the banksters stole from the people.

 

The American people's first and foremost weapon is to just quit
paying, Let them try to maintain their house of cards ponzi without the
stolen labor and wealth of their victims, the American people. They
can't. And if one understands how the fraudulent-reserve banks work, they will realize that they stole the money they "loaned" you in the first place.

Then just quit paying, obeying and playing.

The Four Rs
Rejection: Quit paying, quit obeying , quit playing
Revolution: It is inevitable, so prepare, as they are.
Retribution: Is there really any place for these sociopaths and criminals in a restored civil and Constitutional society?!
Restoration: Restore the Constitutional republic.

Mon, 04/07/2014 - 21:36 | 4634381 fattail
fattail's picture

Bank's love inflation.  Fix my liability costs, fix my asset yield, make my spread.  Lend on leverage with minimal down.  Watch the my collateral value go up as the currency is depreciated and my borrower can pay back his loan with cheaper and cheaper cash.  As long as I keep making loans and keep my spread higher than inflation i win as any loan that goes bad is paid off with the collateral which has gone up in value.  

 

But let deflation take hold..... woe is me.  I need a bail out cause my collateral aint worth shit and borrowers are defaulting left and right.  I need to mark to myth or flat out sell my shitty assets to the Fed for par.

I wonder which our overlords will choose?

Mon, 04/07/2014 - 21:39 | 4634383 novictim
novictim's picture

Peter Schiff is a hack and a moron.

 His shtick is all about the dumb or evil Fed/Treasury policy but what it really is is a misdirection to keep the private sector safe for the real bad guys, to keep those bankerscum from scrutiny and costly regulation.

The paradox of a Fed monetary policy that pumps in 85 - > 75 ->55 billion every month but produces seemingly no jobs.and only asset inflation is explained quite easily by the concept of a liquidity trap.  The Fed money is going directly into bank vaults and speculation in stocks and real estate...hence street level low employment and low inflation with high inflation in the real estate and stock bubbles.

The solution that would have been implemented 3 - 5years ago if we had had a Keynesian at the helm would have been to:

1) create MORE real inflation (5-6% range), and

2) instead of paying off the banks/back-stopping the gamblers' bad debts, we should have been putting the TARP $850 billion into direct pay downs of underwater mortgages with

3) a fiscal policy bent on lowering unemployment via infrastructure spending with a goal of 2% or less unemployment rate.

Peter knows all this but his job is to misdirection your anger.

(Someone needed to say it so I did.  You are welcome.)

Mon, 04/07/2014 - 22:07 | 4634464 alfbell
alfbell's picture

 

 

Can't believe how many people misunderstand what inflation actually is. First of all, higher prices is a SYMPTOM or a CONSEQUENCE. Inflation is not an increase in the money supply. Actual cash comprises less than 10% of what we call our "currency" or "money". It is all CREDIT. 90% of the "money" is CREDIT aka DEBT! It is all digital today. It is all about reserves. Those digital reserves go into banks who then apply their fractionalized lending polices to it. IT IS AN INCREASE IN CREDIT. Someone has $20,000 in their bank account that is the result of automatic deposits from their employer (electronic digits)... the bank lends that money out (in a fractionalized manner) to someone (electronic digits)... he then goes and buys a car and gives $15,000 to the car dealer via a check (electronic digits)... and on and on. It's just tons and tons of electronic digits that don't have any tangible assets backing them up.  

Mon, 04/07/2014 - 22:18 | 4634495 alfbell
alfbell's picture

 

 

Wait until something happens that causes the banks to start lending on a whole hog basis to the normal consumer and public again (like the interest the Fed pays them on their reserves being lowered or stopped). Then you'll see the velocity of money (actually of credit) and then there will be so many electronic digits available out there that a steak will cost $75 and will continue to rise. Too few products, toooooo many electronic digits. That is when prices rise. And then add to that the specific commodities that people really need and want now having a much bigger demand on them, and then prices soar up even further. Our government (Public Enemy #1) wants to control this as a slow creep (frog boiling in a pot) as opposed to a major wave of inflation so that they can achieve the goals of their dastardly agendas.

Tue, 04/08/2014 - 00:04 | 4634700 cbaba
cbaba's picture

Economists extrapolate this to conclude that deflation will destroy aggregate demand and force the economy into recession. Despite the absurdity of this argument

 

Me thinks different,

these so called Economist are not stupid, they are lying but they made the deflation a bogeyman for one single reason. They have an agenda, they are following what the fed or other central banksters say.

The only single reason deflation is called a bogeyman is it marks lower GDP numbers when prices start to fall. If the GDP is lower, Depth which is measured as a percentage of GDP will look much bigger and un-payable, it will expose their rigged game by printing dollars and buying infinite number of bonds and decreasing interest rates, the bonds interest rates will explode if GDP drops..or if there is deflation. So they must fight with deflation and call it enemy..

 


 


Tue, 04/08/2014 - 01:29 | 4634817 Downtoolong
Downtoolong's picture

Show me one consumer who is complaining about falling prices and I'll bet you two to one odds they're an economist. 

Tue, 04/08/2014 - 01:30 | 4634819 Downtoolong
Downtoolong's picture

"lowflation"

Holiy shit, that's just one step away from bloviation.

 

Tue, 04/08/2014 - 03:59 | 4634910 Serenity Now
Serenity Now's picture

There is only one definition of inflation.  Inflation is the increase in money supply.  That's all it ever was, and all it ever will be.  

In the 1970s, when interest rates were very high, the media called that inflation.  Now, when interest rates are low, the media calls THAT inflation.  And of course almost everyone uses the word inflation to describe high prices, which is wrong.

Simply put, inflation is not a synonym for increase.  Inflation is a very specific increase....in the money supply.  Not interest rates, not prices, JUST money supply.  

I like Peter Schiff, but even he uses two or three definitions or connotations of inflation in this article.  That's just wrong.

For anyone who is seriously interested in TRUTH, here are the fundamental economic factors:

S = SUPPLY

D = DEMAND

I = INTEREST RATES

M = MONEY SUPPLY

P = PRICE

These factors all work together, every minute of every day, to affect each other.  

Now, take a second to realize that the word INFLATION is nowhere in that list.  

I challenge the entire ZH community to stop using the word inflation for the next 30 days!  Get it out of your vocabulary.  Use your words to accurately describe what you are talking about.  Each of the above items can increase or decrease, so use those words when describing such.  That's easy enough.

The hard part is trying to analyze HOW the different factors affect each other when they increase or decrease.  I know how to analyze it, and it's really very easy if you use the correct words.  If anybody is interested, I can show you.

Again, I challenge each and every person reading this to stop using the word inflation.  You don't know what it means, and you don't even need it.  Economic clarity is within reach if you do this.

Economic clarity doesn't mean the economy will get better.  It just means that you will have a better understanding of it, so that you can plan for yourself and your family.

Tue, 04/08/2014 - 08:07 | 4635073 Stormtower
Stormtower's picture

I say bring on deflation......I want cheaper shit! 

Tue, 04/08/2014 - 08:48 | 4635157 smacker
smacker's picture

I agree with using various terms, circa: inflation, deflation, disinflation etc simply because there are different changes going on and it helps to use a term which is very specific.

Regarding "deflation", as the article says it is the nightmare of those with debts. Since governments are about the biggest debtors and have control of monetary policy, it should be obvious that they will peddle the idea that deflation is bad and must be avoided at all costs. Also, given that our economies are heavily reliant on debt-based consumerism, deflation is bad for them too.

Savers have no say whatsoever in the setting of monetary policy and are ignored by government.

Tue, 04/08/2014 - 11:24 | 4635684 moneybots
moneybots's picture

"Up until now, the inflation advocates have focused their arguments almost exclusively on the apparent dangers of "deflation," which they define as falling prices."

 

Deflation doesn't happen until inflation does.  The Nasdaq didn't deflate to 1,100 until it had inflated to 5,000.  The actual danger was inflation.

Tue, 04/08/2014 - 11:33 | 4635724 moneybots
moneybots's picture

Dangers of Lowflation

 

Another financial fraud.

Tue, 04/08/2014 - 11:48 | 4635773 RaceToTheBottom
RaceToTheBottom's picture

Once you go down this path, it is based on an assumption that from here on out you manage the economy.  You disregard the free market and pull the levers and push the buttons that the FED has built to "run" the economy.

 

I am not holding my breath that it will be done correctly.

Tue, 04/08/2014 - 12:25 | 4635946 smacker
smacker's picture

"I am not holding my breath that it will be done correctly"

It's worse than that.

You can be assured 100% that central planning will not be done correctly. It never has been.

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