• Tim Knight from...
    04/28/2016 - 00:27
    I was expecting a few boring candidate statements of the U.S. Senate - AKA the World's Most Exclusive Club - but, boy, was I wrong. Just take a look at some of these gems.
  • Tim Knight from...
    04/28/2016 - 00:27
    I was expecting a few boring candidate statements of the U.S. Senate - AKA the World's Most Exclusive Club - but, boy, was I wrong. Just take a look at some of these gems.

Goldman's 'Unconventional' Inflation Policy vs. Austrian Deflation Endgame

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Wed, 09/28/2011 - 01:22 | 1717467 redpill
redpill's picture

When the only tool is a hammer...

Wed, 09/28/2011 - 05:07 | 1717678 Cynical Sidney
Cynical Sidney's picture

unconventional policy/deflation endgame == WWII, which ended the great depression.

What these cluebags are really saying, is that we need revolutions and another world war to end current crises. if that's the case i sincerely wish that these white collar criminals and financial gluttons are the first to be purged in the upcoming war/revolution

Wed, 09/28/2011 - 07:07 | 1717779 DormRoom
DormRoom's picture

The Fed must not implement a policy of higher inflation!  Firstly, Goldman Sachs assumes a large fiscal stimulus coupled with Fed action.  But fiscal stimulus by means of direct government jobs, which has the largest multiplier effect, has a slim chance, due to the Tea Party.  So without proper fiscal stimulus, increasing inflation expection, implies further misallocation of capital, likely into commodities, which will lead to HUGE adjustments in the medium term, ie a great depression or US sovereign default.


Furthermore, increased inflation expectation, but a fiscal stimulus, that produces < 1 mutliplier effect, also leads to the same result.


Therefore the Fed must not act unless it is certain proper fiscal stimulus is applied before hand, or concurrently.

Wed, 09/28/2011 - 13:46 | 1718993 i_fly_me
i_fly_me's picture

WWII did not end The Great Depression; WWII delayed recovery. It was only after the war ended, once the restrictions, price controls and, rationing were removed, that growth returned.

Wed, 09/28/2011 - 08:55 | 1717993 Sean7k
Sean7k's picture

I hate to spoil the ending, but you have to read to the ending. If you read the conclusion of the Austrian article, you will see exactly what the FED is doing and will continue to do in the future. If you just read the conclusion, you will not understand it, but you will see the path chosen by Bernanke and the Banking Class.


Thu, 09/29/2011 - 01:25 | 1720933 mcguire
mcguire's picture

the austrian article is one of the best articles i have read...  bravo!! 

yet, one aspect of his analysis that falls woefully short is that he does not consider the international nature and aspirations of the banking class..  

i wonder what he thinks of 'the bancor'.. http://www.infowars.com/bancor-the-name-of-the-global-currency-that-a-sh...

if a monopoly on money in one country is good, then a monopoly on money in the entire globe would be better..

we all see the competitive devaluations, taking turns, around the globe.. it would be logical (albeit naive) to think that this in terms of central bank 'game theory' where the idea for each country is to gain trade advantages over the next..  but if we are going to talk about a 'banking class', it is more consistent to think that what is happening is a coordinated global attack on all currency regimes, getting ready to achieve that global monopoly that has been sought after since language was confounded at babel.. 

and of course, if you look outside of the economic sphere, there is more than enough evidence to corroborate aspirations for a "new world order", which would of course be the marriage of the political and banking class..

global hyperinflation is the price that will be paid to bring in the 'new monopoly'.... ordo ab chao... 


Wed, 09/28/2011 - 11:02 | 1718425 covert
covert's picture

deflation is always the best policy and consequently, the least popular.



Wed, 09/28/2011 - 01:24 | 1717470 Dasa Slooofoot
Dasa Slooofoot's picture

Do we get to flatten the #2 & #3 economies too? 

Wed, 09/28/2011 - 01:24 | 1717471 UP Forester
UP Forester's picture

They lost me at "unconventional" unconventional options.

Oh, yeah, its Newspeak,  er,  um,  Fedspeak.

Whiskey Tango Foxtrot, over.

Wed, 09/28/2011 - 12:28 | 1718724 MrSteve
MrSteve's picture

To best avoid confusing double-talk, read Charles P. Kindleberger. His Manias, Panics, etc is in every public library and can be read for free. Order up a copy today and get smart. He makes it all crystal clear.

Manias, Panics, and Crashes: A History of Financial Crises 

Wed, 09/28/2011 - 01:28 | 1717482 Fips_OnTheSpot
Fips_OnTheSpot's picture

Ok, so they have this ubersekret box including verrrry unconventional tools.

When do we see it? Christmas would fit - all the presents for a rallye (to nowhere).


This, my dear Sir, is a dead parrot!

Wed, 09/28/2011 - 01:34 | 1717488 UP Forester
UP Forester's picture

It is an EX-parrot!

Wed, 09/28/2011 - 01:55 | 1717495 philipat
philipat's picture

It's actually pining for the fyords where they don't use the Euro?

Wed, 09/28/2011 - 08:27 | 1717943 Thomas
Thomas's picture

Is it just me or is anybody else suffering vomit fatigue? I find it harder and harder each day to read this stuff without getting physically agitated.

Wed, 09/28/2011 - 01:40 | 1717497 Fips_OnTheSpot
Fips_OnTheSpot's picture

EX-actly :)

Wed, 09/28/2011 - 01:32 | 1717486 Spitzer
Spitzer's picture

This article is referring to Austrian deflation but Austrian deflation is only possible when currency is at least partially backed by gold under a gold standard.In case the author is not aware, the US is not on a gold standard.

There is a big difference.

Wed, 09/28/2011 - 04:44 | 1717662 Re-Discovery
Re-Discovery's picture

I am sorry, I usually appreciate your posts, but did you read the article?  The author very clearly explains the evolution -- or more appropriately devolution -- from the gold standard into the no standard.  In fact, this shift is the whole argument why we will face deflation, in his opinion.

In his view, in our current 'no standard' environment, our commercial banks have literally choked our system with debt.  As a result, the author expects that the system has no where to go but to start puking up that debt in the form of massive default and deflation.   The author believes that Fed action of increasing reserves in the system will not generate inflation because debt creation has already maxed out.  Fed has been a follower when it creates reserves for the banking system rather than a leader, as commercial banks have already stuffed debt into all the economy's channels without regard to the reserve requirements.

I think the 'inflation deflation' all comes down to whether you think the money creation mechanism in the banking system still works.  If it does, it seems inevitable that it will break down at some point.  The author is arguing that that point is now.

Wed, 09/28/2011 - 05:18 | 1717685 lookma
lookma's picture

The author is a moron poseur trying to pander to a crowd by using a label, "AE," instead of bothering to unerstand anything Mises wrote in lieu of a semanto-linguistic circle jerk.

Clearly what happens when the banking system fails is that the paper dollar grows ever stronger in purchasing power.  And the Fed is powerless because banks won't lend. 

WTF is that crap? Thanks for playing know run and get youself a snowcone.

Wed, 09/28/2011 - 05:25 | 1717688 lookma
lookma's picture

Some Mises:

No government is, however, powerful enough to abolish the gold standard. Gold is the money of international trade and of the supernational economic community of mankind. It cannot be affected by measures of governments whose sovereignty is limited to definite countries. As long as a country is not economically self-sufficient in the strict sense of the term, as long as there are still some loopholes left in the walls by which national governments try to isolate their countries from the rest of the world, gold is still used as money. It does not matter that governments confiscate the gold coins and bullion they can seize and punish those holding gold as felons. The language of bilateral clearing agreements by means of which governments are intent upon eliminating gold from international trade, avoids any reference to gold. But the turnovers performed on the ground of those agreements are calculated on gold prices. He who buys or sells on a foreign market calculates the advantages and disadvantages of such transactions in gold. In spite of the fact that a country has severed its local currency from any link with gold, its domestic structure of prices remains closely connected with gold and the gold prices of the world market.

Still confused?  How about this one (and no Johnny, that's not deflation we see when a huge credit expansion ends)

The wavelike movement affecting the economic system, the recurrence of periods of boom which are followed by periods of depression, is the unavoidable outcome of the attempts, repeated again and again, to lower the gross market rate of interest by means of credit expansion. There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.

Wed, 09/28/2011 - 05:37 | 1717700 lookma
lookma's picture

Just to make it clear:


In theoretical investigation there is only one meaning that can rationally be attached to the expression inflation: an increase in the quantity of money (in the broader sense of the term, so as to include fiduciary media as well), that is not offset by a corresponding increase in the need for money (again in the broader sense of the term), so that a fall in the objective exchange value of money must occur. Again, deflation (or restriction, or contraction) signifies a diminution of the quantity of money (in the broader sense) which is not offset by a corresponding diminution of the demand for money (in the broader sense), so that an increase in the objective exchange value of money must occur. If we so define these concepts, it follows that either inflation or deflation is constantly going on, for a situation in which the objective exchange value of money did not alter could hardly ever exist for very long. The theoretical value of our definition is not in the least reduced by the fact that we are not able to measure the fluctuations in the objective exchange value of money, or even by the fact that we are not able to discern them at all except when they are large

Wed, 09/28/2011 - 08:58 | 1717998 tarsubil
tarsubil's picture

The second bolded line is so easy to forget. Forgetting that is the key to the deflationista's argument.

Wed, 09/28/2011 - 10:15 | 1718243 Pinto Currency
Pinto Currency's picture


Red Pill (above) and Spitzer -  you are right on.


The inflation (currency debasement) has already occurred over the past decades and the debt edifice is collapsing, worldwide.  The debt and currency bubble is unsustainable.


The deflation is only occurring when prices are measured in gold and silver.


How's the dollar doing?  http://www.mrci.com/client/crb.php


Central banker and economics profession sophistry can find endless theories and proposed scenarios where debasing the buying power of currency just a bit more will benefit us when that is what has launched us off the rails in the first place.  Yakkity, yakkity.

Wed, 09/28/2011 - 07:35 | 1717820 DormRoom
DormRoom's picture

Austrian economics has been applied in the US under Hoover.  His Treasury secretary, Andrew Mellon, argued for the "leave it alone", or 'bleed out the excesses' economic approach ala Hayek.  And what happened?  The mother fucking depression. It wasn't until Keynesian intervention did the US economy slip out of the great depression.




Wed, 09/28/2011 - 09:07 | 1718007 Sean7k
Sean7k's picture

What part of Austrian economics includes a central bank? Or government expansion and the creation of cartels? Or fixed wages? Do you even know what Hoover did? The information is out there.

Wed, 09/28/2011 - 15:10 | 1719323 BigJim
BigJim's picture

Or Smoot-Hawley? Or doubling income tax?

There seems an inexhaustible supply of Keynesian cannon-fodder out there, willing to fling themselves headlong onto the teeth of historical fact.

Wed, 09/28/2011 - 09:14 | 1718040 tarsubil
tarsubil's picture

I think you're thinking of 1920 when Harding didn't really do anything and the economy recovered quickly. Hoover's band of experts did stuff like raise taxes on the highest earners and well, you know this already, don't you?

Wed, 09/28/2011 - 15:01 | 1719289 BigJim
BigJim's picture

O dear. Every few months we get one of these guys, spouting the same nonsense.

Yes, Mellon argued for 'leave it alone'. Did Hoover listen? No. He was thoroughly interventionist:


Read it and weep, ignoramus.

Wed, 09/28/2011 - 07:54 | 1717874 narnia
narnia's picture

Deflation has always been the market signal.  Trillions of $ of promises have been made on prices the free market cannot support. Absent another divergent mother of all bubbles coming along- which also would eventually pop- this debt has no where to go but destruction.  

What the author overlooks is the extent to which the Treasury is bound. This pocket- directly, through the FDIC, IMF, etc.- is the mother of all CDOs.  It is the owner/guarantor of all worthless government & post-paltry banking sector equity debts. Additionally, this pocket is also on the hook many more times over should interest rates rise to blow up the swap market.  

The Fed has to print to infinity to stay ahead of the destruction of the Treasury or to finance the destruction of the Treasury.  The posse is bearing down on the FRN & it truly has no where to go.

Wed, 09/28/2011 - 09:02 | 1718003 Sean7k
Sean7k's picture

Actually, the author is arguing that the deflation is being managed with controlled inflation, targeting the MBS overhang. This should remind readers of the shadow banking systemic collapse and the creation of easing to offset it. The consequences are high unemployment (which we can see) and and a static buisness environment of very low growth (Japan). 

This is being done to control popular passions and to maintain the structure that allows the banking class to maintain its' position in control of wealth transfer. 

Wed, 09/28/2011 - 01:45 | 1717507 Goldtoothchimp09
Goldtoothchimp09's picture

this argument is an ongoing battle -- Geithner the weasel suggesting the Europeans leverage up -- and the Europeans calling the idea stupid.

The US won't be able to go it alone... seems clear they would go the inflation route.  Europe may not allow them.  The war of ideas is on currently.

Wed, 09/28/2011 - 01:51 | 1717514 newbee
newbee's picture

And they still think big brother can control the economy.  Good lord, let the free market do what it's best at, and get big gov out of the way!!

Wed, 09/28/2011 - 06:25 | 1717738 Bartanist
Bartanist's picture

Obviously they can't have that because they would be forced to collapse all of the major banks, individual stocks/companies would all fall to the value of their cash flows and those bucket shop bets they have been selling for the last 10 years would fall to a price of $0. Endus Ponzius.

This would a result in the global banking cabal losing all of their power... and they cannot allow that. It is fascism, martial law, global war and Governor Tarkin squeezing his greasy fingers around your throat first.

Wed, 09/28/2011 - 02:04 | 1717528 Gubbmint Cheese
Gubbmint Cheese's picture

Reminds me of Rummy's classic, ' unknown unknowns' from the beginning of the Iraq war (part II).

Wed, 09/28/2011 - 02:11 | 1717532 philipat
philipat's picture

“There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we know we don't know. But there are also unknown unknowns. These are things we don't know we don't know”


Come again? I think he had been taking too many of his own pharmaceuticals?

Wed, 09/28/2011 - 05:54 | 1717707 N57Mike
N57Mike's picture

I always liked .... "the Syrians are being noticeably unhelpful"

Wed, 09/28/2011 - 05:57 | 1717708 jeff montanye
jeff montanye's picture

not at all.  for a hard core war criminal rummy sometimes offered insight.  an unknown unknown?  the cause of disease prior to the understanding of pathogens when doctors argued about which humor (choleric, melancholic, sanguinary, phlegmatic) dominated the patient and bled her.  the doctors knew they weren't sure which humor was excessive or exactly how much to bleed her, but didn't know they didn't know anything about what was really happening.

for some reason i am reminded of the report of the 9-11 commission (or more exactly of the credulous readers of same).

Wed, 09/28/2011 - 02:11 | 1717533 geekgrrl
geekgrrl's picture

WTF is "unconventional" unconventional policy?

These bankers have the most convoluted explanations imaginable. How does jacking up inflation solve a debt problem? It reminds me of what my mother always used to say: You can dazzle them with brilliance, or you can baffle them with bullshit. I think I know which we're seeing here.

Wed, 09/28/2011 - 04:09 | 1717636 itchy166
itchy166's picture

Unconventional unconventional policies are somewhat more conventional than unconventional unconventional unconventional policies but are less conventional than conventional unconventional policies.  Do not confuse them with unconventional conventional unconventional policies which should only be used in conventional unconventional deflationary times.

I hope that helps.


Thu, 09/29/2011 - 06:04 | 1721168 geekgrrl
geekgrrl's picture

Thanks for the comic relief itchy! That was the best laugh I've had in weeks! I'm just glad I read it tonight and not in the morning with coffee... :-)

Wed, 09/28/2011 - 02:14 | 1717536 Whalley World
Whalley World's picture

Did Goldman say that FDR's policies ended the depression.  Not from my research

Wed, 09/28/2011 - 02:15 | 1717538 Johnk
Johnk's picture

As Spitzer points out, there are no brakes on this train. 

What do the last, oh, say 2500 years of human history tell you?  If they can print/debase, they will, and they can. 

Every conceivable endgame (except for an asteroid hitting the Earth) results in your cost of living being markedly higher in the future.  Deflationists can argue semantics and theory over reality all day long - in the end our purchasing power is declining.  It's the natural order.

Wed, 09/28/2011 - 02:21 | 1717540 philipat
philipat's picture

"CPI does not include volatile food and energy prices because...................................................................."

Answers please on a postcard to Mr B. Bernanke, Washington DC.

Wed, 09/28/2011 - 04:23 | 1717645 akak
akak's picture

" .... because manipulating the government's CPI figures downward to pretend that the debasement of the US dollar is at all times less of a problem than it really is for the average citizen is tradition."

Wed, 09/28/2011 - 04:58 | 1717671 UP Forester
UP Forester's picture

".....because if we told you the truth, you might want to tar & feather, draw & quarter, mob & lynch or boil us in oil, thus reducing the value of the $10,000 suits and $2 ties that our bonuses from the value of the money we have stolen from you have paid for.  Thus we decree that you can't handle the truth."

Wed, 09/28/2011 - 02:28 | 1717544 Poor Grogman
Poor Grogman's picture

This is just a trial balloon, same one as Volker was talking about a week or so ago. The head morons are just trying to raise inflation expectations to get everyone borrowing money again.

This is all they have....

Global market horse-wisperers. Truly pathetic...

Wed, 09/28/2011 - 02:29 | 1717549 DalaiLamaInAShark
DalaiLamaInAShark's picture

I know there aren't many Krugman fans here, but I happen to believe that he's the best Keynes-o-meter available.  Interestingly, he's also been in support of higher inflation targets.


Yes, that's from back in May!

And, this one from July...


So, not all Keynesians are predicting higher inflation.  Krugman at least has been calling for a HIGHER inflation target as well.

Just an FYI.

Wed, 09/28/2011 - 02:32 | 1717551 Poor Grogman
Poor Grogman's picture

You are correct about one thing. There are not many Krugman fans here

Wed, 09/28/2011 - 02:37 | 1717559 DalaiLamaInAShark
DalaiLamaInAShark's picture

If there's one thing this on-going crisis should have proved to us is that modern economic theories (ALL OF THEM) are severely deficient.  I just try to stay abreast of what all the different camps are prediciting.  I've found that to be "prudent".  I'm just passing along some observations.

Wed, 09/28/2011 - 02:44 | 1717564 Cliff Claven Cheers
Cliff Claven Cheers's picture

Thanks for the insights. I think you are very well served to stay abreast of all the camps.

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