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Chris Martenson And Marc Faber: The Perils of Money Printing's Unintended Consequences

Tyler Durden's picture




 

Submitted by Chris Martenson 

Marc Faber: The Perils of Money Printing's Unintended Consequences

Marc Faber does not mince words. He believes the money printing policies of the Federal Reserve and its sister central banks around the globe have put the world's currencies on an inexorable, accelerating inflationary down slope.

The dangers of money printing are many in his eyes. But in particular, he worries about the unintended consequences it subjects the populace to. Beyond currency devaluation, it creates malinvestment that leads to asset bubbles that wreak havoc when they burst. And even more nefarious, money printing disproportionately punishes the lower classes, resulting in volatile social and political tensions.

It's no surprise then that he's feeling particularly defensive these days. While he generally advises those looking to protect their purchasing power to invest capital in precious metals and the equity markets (the rationale being inflation should hurt equity prices less than bond prices), he warns that equities appear overbought at this time.

On Inflation

First of all, I do not believe that the central banks around the world will ever, and I repeat ever, reduce their balance sheets. They’ve gone the path of money printing and once you choose that path you’re in it, and you have to print more money.

If you start to print, it has the biggest impact. Then you print more - it has a lesser impact unless you increase the rate of money printing very significantly. And, the third money printing has even less impact. And the problem is like the Fed: they printed money because they wanted to lift the housing market, but the housing market is the only asset that didn’t go up substantially.

 

In general, I think that the purchasing power of money has diminished very significantly over the last ten, twenty, thirty years, and will continue to do so. So by being in cash and government bonds is not a protection against this depreciation in the value of money.

On His Love for Central Bankers

Basically the U.S. had a significant increase in the average household income in real terms from the late 1940s to essentially the mid-1960s. And, then inflation began to bite and real income growth slowed down. Then came the 1980s and in order not to disappoint the household income recipients you essentially printed money and had a huge debt expansion.

 

So if you have an economic system and you suddenly grow your debt at a very high rate, it's like an injection of a stimulant of steroids. So the economy grew at a relatively fast pace, but built on additional debt. And this obviously cannot go on forever and when it comes to an end, you have a problem. But the Fed had never paid any attention.

 

The Fed is about the worst economic forecaster you can imagine. They are academics. They never go to a local pub. They never go shopping -- or they lie. But basically they are a bunch of people who never worked a single day in their lives. They’re not businessmen that have to balance the books, earn some money by selling goods, and paying the expenditures. They get paid by the government. And so these people have no clue about the economy.

 

And, so what happens is they never paid any attention to excessive credit growth -- and let me remind you, between 2000 and 2007, credit growth was five times the growth of the economy in nominal terms. In other words, in order to create one dollar of GDP, you had to borrow another five dollars from the credit market. Now this came to an end in 2008.

 

Now the Fed never having paid any attention to credit growth, they realized if we have a credit-addicted economy and credit growth slows down we have to print money. So that’s what they did. But believe me it doesn’t take a rocket scientist to see that if you print money you don’t create prosperity. Otherwise, every country would be unbelievably rich because every country would print money and be happy thereafter.

On The Unintended Consequences of Money Printing

In the short term, it has been working to some extent in the sense that equity prices are up and interest rates are down. And, so companies can issue bonds at extremely low rates. But every money printing exercise in the world leads to unintended consequences at a later point. And, this is the important issue to remember. We don’t know yet for sure what the unintended consequences are.

 

We know one unintended consequence, and this is that the middle class and the lower classes of society, say 50% of the U.S. has rather been hurt by the increase in the quantity of money in the sense that commodity prices in particular food and energy have gone up very substantially. And, since below 50% of income recipients in the U.S. spend a lot, a much larger portion of their income on food and energy than to say the 10% richest people in America and highest income earners, they have been hurt by monetary policy. In addition, the lower income groups, if they have savings, traditionally they keep them in safe deposits and in cash because they don’t have much money to invest in the first place. So the increase in the value of the S&P hasn’t helped them, but it helped the 5% or 10% or 1% of the population that owns equities. So it's created a wider wealth inequality and that is a negative from a society point of view.

Click the play button below to listen to Chris' interview with Marc Faber (runtime 40m:45s):

 

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Sat, 03/17/2012 - 12:31 | 2264949 Fluffybunny
Fluffybunny's picture

You're going to shoot 'em all?

Sat, 03/17/2012 - 14:09 | 2265115 Beam Me Up Scotty
Beam Me Up Scotty's picture

Always remember, save the last round for yourself.

Sat, 03/17/2012 - 11:48 | 2264872 Snakeeyes
Snakeeyes's picture

How true. But consider how screwed up our economy, Japan and Europe are with the massive intervention.

Even blue fin tuna has higher returns than gov't guaranteed MBS (aka, Treasuries). When we guarantee everything, there is no private sector Ben and Tim!

http://confoundedinterest.wordpress.com/2012/03/17/even-blue-fin-tuna-has-a-higher-return-than-agency-mortgage-backed-securities/

Sat, 03/17/2012 - 11:48 | 2264874 Vlad Tepid
Vlad Tepid's picture

I think it's clear that we're past a systemic fix and we're reduced to every man for himself scenario - who can get out of the petri dish before the bacteria colony consumes the sum of it's resources in a growth-death cycle towards oblivion.  Other than that, I'm an optimist.

Sat, 03/17/2012 - 13:31 | 2265046 CrockettAlmanac.com
CrockettAlmanac.com's picture

Thanks for not putting too fine a point on it, Vlad.

Sat, 03/17/2012 - 11:54 | 2264885 Crash2012
Crash2012's picture

Has anyone figured out HOW Bernanke can EVER sell the treasury notes the Fed is holding?

What are the odds of Geithner going to congress to ask for more money for the IMF this summer?

And is there anyone here that thinks 'the worst is behind us'?

Sat, 03/17/2012 - 13:33 | 2265048 CrockettAlmanac.com
CrockettAlmanac.com's picture

Well, there's spam, egg, sausage, and spam. That's not got much spam in it.

Sat, 03/17/2012 - 12:05 | 2264905 fractal trader
fractal trader's picture

Me thinks equities going down next week. This last week bullish candle is screaming short.

Sat, 03/17/2012 - 12:24 | 2264908 bob_dabolina
bob_dabolina's picture

I'm sorry to be so terribly O/T but I had to share this video about Kony 2012 that I just found to be the funniest youtube video I have seen this year. This guy has to be the brother of Nigel Farage.

http://www.youtube.com/watch?v=QIlZkMCcszg&feature=player_embedded

Sat, 03/17/2012 - 12:46 | 2264977 t_kAyk
t_kAyk's picture

"The blonde-haired, blue-eyed, Christian filmmaker behind the Internet’s most recent famous activism campaign, “Kony 2012,” has been arrested. For masturbating. And being drunk. And vandalizing cars. In public. In the morning."

http://rt.com/usa/news/kony-2012-arrested-masturbating-777/ 

Sat, 03/17/2012 - 13:32 | 2265047 goldfish1
goldfish1's picture

Maybe somebody slipped him a Mickey?

Sat, 03/17/2012 - 13:34 | 2265049 CrockettAlmanac.com
CrockettAlmanac.com's picture

Where was Costanza at the time?

Sat, 03/17/2012 - 13:38 | 2265059 goldfish1
goldfish1's picture

"...hospitalized for his own good, San Diego police said Friday.

Jason Russell, 33, was partly clothed, screaming incoherently and running into the street at Ingraham Street and Riviera Drive near Crown Point when officers arrived around 11:30 a.m. Thursday.

Police were responding to multiple calls from concerned residents, some of whom reported a man was naked and pounding on sidewalks, Lt. Andra Brown said..."

http://www.signsonsandiego.com/news/2012/mar/16/kony-2012-filmmaker-deta...

Sat, 03/17/2012 - 12:09 | 2264909 Yardfarmer
Yardfarmer's picture

 

What i cannot understand is the unfounded and yet generally assumed presumption that the ghouls who inhabit the Federal Reserve are simply out of touch, incompetent, ivory tower academics who have unintentionally, over the better part of this last century, managed to systematically extort, defraud and swindle the citizens of the greatest economy in the history of the world.

Through a succession of the engineered economic dislocations of credit expansion and contraction, controlled and abetted by manipulative fiscal and monetary policy and concomitant imperial wars of aggression and social repression, the central economic planners have apparently only stumbled their way through the creation of an infinitely complex financial dystopia which in its final phases is now threatening the very foundations of Western civilization.

It is well apparent that what is widely and pejoratively regarded as "conspiracy theory" is actually the quite factual representation of the esoteric architecture of control which even the evil cognoscenti of which have, in unguarded moments or in actual confidence, imparted to the victims of their incredible machinations, the malign purpose and universal extent of which can only be rightly understood as "satanic".

 

"There is a group of men, who, for over 200 years, have been controlling the destiny of the United States. In 1910, they secretly met on a small island off the coast of Georgia.

Their plan: to formulate a program to destroy the financial structure ofAmerica. To do that, they pushed Woodrow Wilson into the presidency; and in 1913, Wilson signed into law, the Federal Reserve Act and the Federal Income Tax.

In 1921, these international bankers established the Council on Foreign Relations (CFR). The U.S. Government took advantage of the CFR’s experience in finance and foreign affairs, and one of their study groups, the Advisory Committee on Post-War Foreign Policy, became part of the State Department in 1941.

The secret goal of this study group was to condition the Congress, and the people of this country to accept the establishment of the United Nations (UN).

The UN, initiated in 1945, does not seek to promote world peace and cooperation– it was the first step towards a one-world government, which is now referred to as the New World Order.

The CFR is a subsidiary of the Round Table Organization, a group of British elitists controlled by the most powerful family in the world– the Rothschilds, who, through an organization known as the Illuminati, have been controlling world events since 1776, and are now poised for the establishment of a one-world government- with them in control.

The Illuminati controls world leaders and the money that runs their countries. They can elect a President, and they can kill a President. They can shut-off the oil, and plunge the world into war. Even though they operate under the strictest secrecy, their goals have been known for over 2,000 years."

http://politicalvelcraft.org/2011/09/18/arrest-the-illuminati-aka-cross-...

 

 

Sat, 03/17/2012 - 14:03 | 2265100 AnAnonymous
AnAnonymous's picture

which in its final phases is now threatening the very foundations of Western civilization.

_____________________________

It does not tell much.

Now, US citizenism has been working the same since inception.

So if this is to mean that US citizen civilization is the western civilization, it is hard to see it threatens the very foundations.

Stealing, it is what US citizens have performed since inception.

So what?

Sat, 03/17/2012 - 17:05 | 2265471 akak
akak's picture

Your blind and all-encompassing anti-American prejudice, and your bitter and vile vitriolic bigotry, are beyond tiresome and loathesome.  You not only add literally nothing to every conversation here, you actually subtract from them, and degrade every dialogue into which you interject your sweepingly anti-American biases and propaganda.

The policies faults, and outright crimes, of the US federal government are legion, but you only shoot yourself in the foot by lumping the victims in with the criminals.  But blind and bitter collectivist hatred, apparently, is your eternal nature.

Sat, 03/17/2012 - 14:19 | 2265130 suckerfishzilla
suckerfishzilla's picture

'true christianity" is an oxymoron. 

Sat, 03/17/2012 - 14:49 | 2265173 RockyRacoon
RockyRacoon's picture

The real questions are, who doesn't already know this, why is the Fed allowed to do this, who lets it continue apace?  When those questions are answered, outside the shroud of unprovable conspiracy theories, then a solution will be obvious.   And, no, I don't have it.  I'm just a common prole getting the royal shaft just like most of us here.

Sat, 03/17/2012 - 12:09 | 2264914 rufusbird
rufusbird's picture

Central Banks become Central Governments..

Sat, 03/17/2012 - 12:20 | 2264928 I am Jobe
I am Jobe's picture

I believe that banking institutions are more dangerous to our liberties than standing armies. 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 [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.
Thomas Jefferson, (Attributed)
3rd president of US (1743 - 1826)

Sat, 03/17/2012 - 14:52 | 2265180 RockyRacoon
RockyRacoon's picture

Proves my point in my comment just above.   The problem has been known for hundreds of years.   The solution is also known.   So, how come the situation occurs on a regular historic basis?   Who/what is to blame?  Do we just chalk it up to human nature and go on about our business, protecting our individual selves as best we can?  When the nature of our humanity changes, societal changes will occur.

Sat, 03/17/2012 - 12:28 | 2264941 Sudden Debt
Sudden Debt's picture

You want inflation but you also want lower wages... That don't rime!

Sat, 03/17/2012 - 12:33 | 2264953 EmileLargo
EmileLargo's picture

Tyler, you didn't include the best quote of all: 

THE ENTIRE FINANCIAL SYSTEM WILL BECOME LIKE MF GLOBAL

Sat, 03/17/2012 - 12:35 | 2264960 Dagny Taggart
Dagny Taggart's picture

Unintended? Like when the kids track muddy shoes into the house on accident?

OK... let's try it. The Fed accidentally looted our wealth and caused the largest hyperinflationary event ever. Um... Don't think so. They know exactly what they are doing. Unintended consequences would be getting tagged as a fall guy, having to take one for the team.

 

Sat, 03/17/2012 - 15:01 | 2265195 RockyRacoon
RockyRacoon's picture

Hey!  You're right, Ms Taggart.  Glad to see you here.

My fervent hope is that the Fed makes a major blunder that is so obvious that even the regular folk will catch on.   To date the Fed has cloaked their shenanigans in an alphabet soup of acronyms and initialisms.  (Or just cloaked them behind a facade of secrecy that only FOIA suit will reveal.)  It will take a really stupid move to shine a light on their other so-called programs.   Yeah, I know, a pipe dream.

Sat, 03/17/2012 - 12:41 | 2264968 Yardfarmer
Yardfarmer's picture

Depraved sociopath. John Maynard Keynes bwahahahahaha! http://www.24hgold.com/english/news-gold-silver-john-maynard-keynes-bols...

Sun, 03/18/2012 - 10:48 | 2267009 mendolover
mendolover's picture

Holy shit!

Sat, 03/17/2012 - 12:45 | 2264976 Sandmann
Sandmann's picture

Time to design a New System so when the Bankers and their Puppet Politicians are defending their manure heaps we can move in and start Galt's Gulch

Sat, 03/17/2012 - 14:03 | 2265102 vh070
vh070's picture

Once you've flown off the cliff, you'll need very special tools to survive.

Sat, 03/17/2012 - 14:28 | 2265149 Fix It Again Timmy
Fix It Again Timmy's picture

Once those in power have perfected and disguised a swindle, it will run for perpetuity unless the swindled catch on.  "Catching on" is called education and there is so very little of it in regards to being swindled by TPTB.  Those who say TPTB know what they are doing are, indeed, correct and without education and the ability to understand the nature of patriotism - the swindles will go on....

Sat, 03/17/2012 - 14:40 | 2265163 hangemhigh77
hangemhigh77's picture

For anyone with a functioning brain in America, which is NOT the majority, Ron Paul is the ONLY CHOICE.  ANYONE who doesn't vote for Ron Paul is either a 1%er or a flaming REEEEEEEEETARD.

Sat, 03/17/2012 - 19:21 | 2265879 dolph9
dolph9's picture

Couldn't disagree more.

Ron Paul is just another politician, not a savior.  He's not the second coming of Christ.

I don't vote because I don't participate in this system.  Which means I don't vote for anybody.

And if you think I should do my "patriotic duty" and vote, FUCK YOU.

Sat, 03/17/2012 - 14:42 | 2265165 jimmyjames
jimmyjames's picture

"When they can't issue credit anymore-they print money"

MF

***************

How can money replace credit-if credit was not money and didn't drive the economy--i wonder

Sat, 03/17/2012 - 16:50 | 2265523 akak
akak's picture

LOL

Shopping list = groceries

Sat, 03/17/2012 - 18:03 | 2265719 jimmyjames
jimmyjames's picture

Of course the loud nitwit has no answer for the question-but-he knows-

a dozen eggs for $2 = Inflation

Such is the mindset of a clueless Keynesian spouting his clap trap drivel-

Sat, 03/17/2012 - 18:22 | 2265763 akak
akak's picture

Funny how it is YOU, the deflationary troll, who is in the same camp as Bernanke, and who constantly buys into and propagates the same monetary misinformation that Bernanke does, and who continues to disseminate the typical deflationary disinformation of the pro-Establishment agenda.

And again, you STILL refuse to acknowledge that ALL of monetary history teaches that the final outcome to the current situation will be inflationary, NOT deflationary.

Sat, 03/17/2012 - 18:48 | 2265818 jimmyjames
jimmyjames's picture

And again, you STILL refuse to acknowledge that ALL of monetary history teaches that the final outcome to the current situation will be inflationary, NOT deflationary.

**************

The final outcome?

The final outcome is never inflationary economic dunce-

After Germany hyper-inflated they crashed into a deflationary depression-

They had "nothing" for a money supply-

You Mr hyper-inflationist-who does not look or more than  likely-does not know how to look at the credit market and cannot grasp its effects as a money supply and more import-the herd spending sentiment that it drives-cannot see/understand that we have already had the sexy hyper-inflation that you're all wet for and have been "sure" for 5 years now-that its' just around the corner- lol-

next up--deflation

 

Sun, 03/18/2012 - 00:14 | 2266496 akak
akak's picture

Holy fucking mother of God!

(I think this guy likes to spout nonsense just for the Hell of it!)

Next you'll try to tell us that the sky is orange and grass is purple!
I simply cannot believe the depths of your outrageous lies.

The final outcome is never inflationary-

Yeah?  Go tell it to the Argentinians, and Mexicans, and Brazilians, and Peruvians, and Russians, and Chinese, and Germans, and French, and Spaniards, and Turks, and Iraqis, and Zimbabweans, and .... fuck, just about EVERYONE and every nation in the last century, most of whom have seen their savings wiped out by inflation AT LEAST ONCE, and in many cases multiple times!  Jesus, Joseph and Mary, can you be ANY more ridiculously WRONG?!

What the fuck is your angle anyway, you absurdly lying son of a bitch?

 

PS:  I hear the Zimbabweans are still waiting for that fiat currency deflation ....

Sun, 03/18/2012 - 00:44 | 2266569 jimmyjames
jimmyjames's picture

I'm sorry--I wrongly assumed the ZH readers were comprehending at a higher level-

For you--I'll get out the crayons and draw you a picture-

http://photos1.blogger.com/img/101/3984/1024/cycleofdeflation1.jpg?force=1

Roosevelt hammered money at it and it didn't work--Bernanke's pipe dream wont happen either-or--is it in your hyper-inflating-salivating mind--going to be different this time?

Do you see anything on that chart that is not happening?

Are you rally that fucken stupid to believe that the elite will destroy their own business--lol-  no $ = no Fed--

Every country you mentioned was/is a third world jr. currency-save germany-who was destroyed by us and had no choice-and btw- ended up in a deflationary crash-

I know you do not understand floating competing fiat currencies-you have no fucken idea what hyper-inflation or deflation is or how either evolves-

You only know how to beak off and you're losing this -the whole board can see it-

 

Sun, 03/18/2012 - 02:28 | 2266666 akak
akak's picture

I wish I could fucking punch you in your dishonest, malicious face, you outrageous son of a bitch.  EVERYTHING you have posted in this forum has been an evasion, a half-truth, or (mostly) flat-out lies.

Every country you mentioned was/is a third world jr. currency

France, Russia, Austria, Spain, Italy, Greece, Argentina, Brazil, Yugoslavia, Israel, South Korea, Thailand, Malaysia, Poland, Hungary, Portugal --- THESE are or were all "third-world nations"?  Israel alone has suffered multiple periods of 100%-500% annual inflation just between 1948 and 2000!  And even if those nations were third-world nations, so what, if the fiscal, debt and monetary parallels with the USA are essentially the same?

Are you rally that fucken stupid to believe that the elite will destroy their own business--lol-  no $ = no Fed--

They have done exactly that, HUNDREDS of times in dozens of countries in just the last century --- "but it can't happen here!", right?

 

You are one of the most INSANE and malicious, dissembling trolls I have ever encountered, in any online forum, at any time --- your lies are literally legion.

So I want you to answer this question DIRECTLY, no dissembling and no beating around the bush as you are wont to do:

Do you believe that the growing federal deficit, and almost exponentially-rising governmental debt, along with the monetization of the latter, is going to lead to a WEAKER dollar or a STRONGER dollar?  Weaker or stronger?

Sun, 03/18/2012 - 02:29 | 2266688 jimmyjames
jimmyjames's picture

You are one of the most INSANE and malicious, dissembling trolls I have ever encountered,

************

You think that because I'm kicking your dumb fucken ass --

 

**************************

They have done exactly that, HUNDREDS of times in dozens of countries in just the last century --- "but it can't happen here!", right?

*****************

There was "never" a time that currencies floated and competed with each other back then--there was "GOLD" always somewhere as a currency--fuckwit-

************************

Do you believe that the growing federal deficit, and almost exponentially-rising governmental debt, along with the monetization of the latter, is going to lead to a WEAKER dollar or a STRONGER dollar?  Weaker or stronger?

***************

Currencies "float" and "compete"

Suck this up--

The price of gold is the reciprocal of the world's faith in the deeds and words of the likes of Ben Bernanke. The world over, central banks are printing money as it has never been printed before. The European Central Bank has increased the size of its balance sheet  at the annual rate of 89%. It's amazing. The Fed is far behind at only 15%. The Bank of England 67% over the past few months

http://www.bloomberg.com/video/88249154/

I "suspect" the Fed has tons of room to print with a ratio like that-and they will-

But-as usual-you cannot see the deteriorating credit (money) market-as a backdrop against the piddly amount of printing in contrast to the size of worthless debt-

Of course in the end--all--fiat currencies go to zero-no discovery about that-but--

When is the end?

1-20--30--50 years out?

I don't know the answer and for sure--you sure as fuck don't-

Go ahead and prepare for hyper-inflation-unless you're very young (i know you're immature) you are gonna get burned--

Ohhhh i forgot-you have some gold--good thing-because deflation is a gold holders best friend-

Sun, 03/18/2012 - 02:47 | 2266692 akak
akak's picture

.

Do you believe that the growing federal deficit, and almost exponentially-rising governmental debt, along with the monetization of the latter, is going to lead to a WEAKER dollar or a STRONGER dollar?  Weaker or stronger?

You evaded the direct question, as I knew you would --- because you cannot bring yourself to face the truth, that it will inevitably lead to a WEAKER dollar, which is all that fundamentally matters.

So you finally acknowledge a bit of monetary history, that throughout most of it gold was a monetary anchor, and that so-called "floating currencies" (read: sinking currencies) were not the norm --- so do you therefore think that having an entire WORLD of purely fiat currencies is going to somehow protect us from governmental profligacy and debt monetization this time around?

And again, you dishonest bastard, you keep bringing up the strawman of hyperinflation, when I already specifically stated that I do NOT believe it will happen in the USA, not at least as it did in Weimar Germany or in innumerable other nations cursed with government-issued fiat currencies --- so will it be a great consolation to you when the dollar suddenly loses ONLY 80% of its value, instead of 99.999% of it?

Sun, 03/18/2012 - 03:00 | 2266706 jimmyjames
jimmyjames's picture

You evaded the direct question, as I knew you would --- because you cannot bring yourself to face the truth, that it will inevitably lead to a WEAKER dollar, which is all that fundamentally matters.

**************

I've never said that-idiot--show me where you got that from??

Here's your hyper-inflating dollar clueless one--

You scream about it constantly-lmao

http://bit.ly/FPPBLp

Sun, 03/18/2012 - 03:25 | 2266709 akak
akak's picture

(Repeating for the mentally slow and handicapped):

And again, you dishonest bastard, you keep bringing up the strawman of hyperinflation, when I already specifically stated that I do NOT believe it will happen in the USA, not at least as it did in Weimar Germany or in innumerable other nations cursed with government-issued fiat currencies --- so will it be a great consolation to you when the dollar suddenly loses ONLY 80% of its value, instead of 99.999% of it?

And all your M1, M2, M3, monetary velocity, etc. etc. statistics don't mean shit in the grand scheme of things --- I don't give a fuck about it, and neither does the average investor or saver; it is all just so much Keynesian masturbatory feedstock at this point. The one and ONLY thing that matters here is, what is going to happen to the value of the dollar (and other similar fiat currencies) as a result of the current trend of rising governmental deficits and debt?  And the conclusion is unequivocal based on ALL historical analogies and parallels: the US dollar is going to lose MOST of its value before the current monetary and financial paradigm ever sees reform and reconstitution under a less corrupt and more sustainable paradigm, most likely involving gold as an anchor. 

THAT is the monetary outcome for which people should be preparing --- not some mythical, historically unknown and intellectually insulting scenario of an appreciating fiat currency, as you keep insinuating is on the horizon.

Sun, 03/18/2012 - 10:22 | 2266972 WonderDawg
WonderDawg's picture

Not trying to take sides here, but akak, you yourself state that you are talking about the FINAL outcome. What about the terrain we must traverse before we get to the FINAL outcome. I believe a deflationary depression is coming, and cash will be king, for a while. The FINAL outcome may well be destructive inflation, but I think we have a ways to travel, yet, and will first encounter deflation prior to the inflation event. Many very smart people agree. You seem to overlook the possibility that we could have both deflation then inflation. Not saying you're wrong about the FINAL outcome, just that you are ignoring the terrain we must cross before we get there.

Sun, 03/18/2012 - 12:18 | 2267152 akak
akak's picture

I actually don't deny that possibility, WonderDawg, but again, based on all of monetary history, such deflationary episodes are typically just ripples on the water compared to the 50 foot tsunamis of currency depreciation which follow them.  Is not the FAR greater danger to the average investor during periods of monetary upheaval, time after time, that posed by the ultimate depreciation or collapse of their fiat currency, rather than a mild and transitory appreciation of the same?

For example, economists noted a mild and brief deflationary period (based on CPI numbers, anyway) in Argentina in middle to late 2001, just before their currency crisis and approximate 75% collapse in the value of that currency in late 2001 and the first half of 2002.  Which episode, the mild and brief deflation, or the 75% collapse in the value of their currency, posed the greater ultimate danger and destroyer of savings?

Sat, 03/17/2012 - 14:57 | 2265190 suckerfishzilla
suckerfishzilla's picture

This is a guess but there has to be a playbook to draw from somewhere for these guys.  Currencies have collapsed in the old world.  The liquidity scams are just new and improved.  The consequences are not unintended.

Sat, 03/17/2012 - 15:31 | 2265284 LucasATX
LucasATX's picture

Instead of waiting for the existing system to inflate its way into oblivion and the world to end, what are some potential solutions for fixing it?

 

What if you create an entirely New dollar which would be issued in concurrence with the existing dollar.

 

All second tier investment transactions would have to be conducted in new dollars. Stock purchases, futures purchases, bond purchases etc. would have to be made in New dollars.

 

All first tier transactions would be conducted in existing dollars. A first tier transaction would be considered any hard good or service transaction - food purchases, mortgage payments (owner occupied only), car insurance, etc.

 

Existing and New dollars could be exchanged by a federally operated market (not the Fed).

 

New dollars would carry the speculation risk.

 

What would happen with a dual currency system like this?

 

I know that the existing system has so many problems. Just wondering if there are any thoughts on how things can be fixed instead of just waiting for SHTF. Ideas?

 

Sat, 03/17/2012 - 15:51 | 2265348 kevinearick
kevinearick's picture

Occupy Free Agency & Soaring Rent Myopia

Devotion:  To forsake all others; to love, honor and obey.

Avoiding the unknown results in prisoners dilemma, devotion to the empire, through the path of least resistance, peer pressure.

Average RE has already collapsed beyond the Great Depression record; hysteresis has grown beyond Georgia and is enveloping the Carolinas on the way to Virginia; Congress just cut contributions to the boomer social security system again, which is already cash negative; New England unions with bankrupt pension plans are employing their remaining horde to buy jobs directly; Southwest police pension plans are bankrupt; the Central Plain is experiencing record drought, the weather is beginning to twist around it, and infrastructure is collapsing; DC is now issuing yet another round of stimulus to the West Coast; and don’t the rentiers in Washington State jack up rents again for another round. That’s it; just keep priming that dead f***ing Laffer pump. Are those Apples or tulips being propelled by the same closed-system program language that lifted RE into the stratosphere?

Power corrupts when it is delayed. A majority forms to take control and pays agency to maintain that control, flipping over the bottom-up economy into a top-down, fixed lottery, ponzi consumption activity. Then agency begins to work to its own end, systematically shorting out pieces of the majority with fraudulent districting, the middleman playing both sides against each other. And all their children are born in a movie theater, which they never leave, projecting out the empire into the future.

Call it feudalism, communism, socialism, capitalism, chauvinism, feminism, Catholicism, whatever you want. It’s all the same sh**show. You are only as good as your word, aggregated, and the American word carries no currency in the world any longer, outside of the FIRE insurance scam. If you agree to do something, do it, with devotion, or be mowed over, which is why the Fed had no choice but to let everyone and their brother electronically print, aka the USSR, and there is no putting that genie back in the bottle. When they start firing high dollar feds, and they will, be at your exit door.

If a corporate individual with free speech can print at will to support its own religion, the embedded exit in the US Constitution, adding 2 and -2 to get 4 or any other  number it wants, the biological individual must be able to print (and could do no worse), to balance the system. You print every time you open your mouth. Fashion your words accordingly, to build the necessary rungs on the ladder out. Print your own money, beyond empire perception, with the last rung catalyzing recognition, aggregated.

Politics is empire TV. To the extent you exit gracefully, all will be well. Your profit depends upon entering the procession correctly. Induction is counter-intuitive. There is one and only one path to change human behavior in real time and that circuit runs through intelligent children. Turn threat into opportunity, through rents.

A good deal of US RE is already down 75% to prop up the likes of Mendocino, a good deal of global RE is already down 75% to prop up Germany, the Pentagon pencil pushers can’t get out of their own way, and the best bomb builders do not work for pedophiles. GE imagination at work can copy words, but has no context.

Question Presented: What can you do for yourself, your family, and your community to eliminate agency and balance trade, to the end of true price discovery?

Sat, 03/17/2012 - 18:35 | 2265791 grid-b-gone
grid-b-gone's picture

Money printing is like being able to drink on someone else's liver. Only outside forces can stop the party now. 

Sun, 03/18/2012 - 05:26 | 2266778 scaleindependent
scaleindependent's picture

How to tell if an oldtimer Zerohedge has an avg or low IQ?

They take Hammy Wanger or MDB seriously.

Mon, 03/19/2012 - 06:34 | 2268864 McPussPuss
McPussPuss's picture

Possibly was posted but Chris was on press tv with Mr Keiser in the weekend

http://www.presstv.ir/Program/232123.html

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youyou208's picture

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youyou208's picture
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youyou208's picture

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