Earlier this week I posted my thoughts on inflation and deflation on this blog. I got a lot of good responses and others confused and contrived. Posting it allowed me internalize my thoughts and hear others opinions and piece the whole issue together. After a week of review, I sent the revised piece below to a friend of my families (that was the intent all along). He started 30 years ago with about $10,000. He now is worth over $100,000,000. I've never met any human with a handle on economics like this man, he has constantly predicted the future regarding politics, oil, gold, all commodities, real estate, stock market, collectibles, etc, he is truly amazing. He turned me onto to Mises theory of economics. I didn't want to send him a half baked email so I posted my thoughts here and on a few other blogs. I sent him my final copy last night, and when I woke up I received a response from him that said, 'Ryan, you've got it, I wouldn't change a single word'. If any of you are self made multi millionaires by way of investments as a result of understanding economics your opinion would be considered, everyone else, including me is really not important, as they say, look at the scoreboard. Truly when it comes to economics what else matters? Professors, students, and the like may have it in theory but this man has year after year increased his net worth considerably by way of his knowledge. I share this with you to help you all understand the future and nothing more, it's not a contest, I know none of you, and I stand to benefit nothing. I like the truth; I hate the confusion, so here's a light in the darkness.
Normal 0 false false false EN-US X-NONE X-NONE MicrosoftInternetExplorer4 The misinformation and confusion disseminated by financial newspapers and TV programs is astounding. Glen Beck of Fox news recently had an aggressive piece on the US dollar becoming worthless from the coming runaway inflation. Mr. Beck like most everyone at CNBC is going bonkers over the issue of the Federal Reserve printing money and the supposed inflationary Armageddon. It seems to me they don’t understand what they are talking about because they only tell half of the story. CNBC arguably the biggest financial news program by viewership affectionately calls itself, ‘the best of the best’ or ‘the only business network that has the information and experience you need’. Every day on their program they have guests and panels of so called, ‘market mavens’ or ‘experts’ overwhelmingly spewing misguided information which is nothing more than self serving spin.
My personal favorite was a prediction CNBC made in December 2008. Larry Kudlow, one of their pundits said, ‘we are now officially in a recession and now we know it began one year ago’. What? I almost fell out of my seat. Let me get this straight. Larry Kudlow and 95% of their featured ‘experts’ and pundits were proclaiming we were avoiding a recession. They claimed the stock market was going to stay flat and have moderate growth. They also said we would have a ‘soft landing’ in real estate, remember that phrase? If you watch CNBC I hope so as they said it about 30 times a day for a year. During this time the Dow Jones Industrial Average decreased from 14,000 to 8,000 a loss of more than 40% in just over a year. Every day they had several different people on the tube talking about the soon resurgent bull market. Again this is a network that calls themselves, ‘the best of the best’ and ‘the only business network that has the information and experience you need’. After seeing the result of their predictions those tag lines could be used in a comedy routine. Actually Jon Stewart of Comedy central has done just that, he made a joke out of it. Another glaring example is one of CNBC’s most popular talking heads Jim Crammer. He proclaimed that Bear Stearns stock was not only a hold, but a great buy at 60 dollars per share. This was one week before it went completely out of business and to 0. This brings me to the reason for my letter. I’d like to clear up a wide pervading misconception that most news organizations are creating, the concept of inflation from the printing of dollars. It’s astounding to me that there isn’t a single person anywhere on TV or in the Main Stream media that’s getting this issue right and moreover not giving other viable alternative outcomes. Perhaps the main problem is most people have no idea how money is created in our system.
Let’s first look at few definitions.
Monetization – the third definition is most important and what causes inflation, 1 and 2 mean nothing without 3.
1. To establish as legal tender.
2. To coin (money).
3. To convert (government debt) from securities into currency that can be used to purchase goods and services
Inflation
1. The act of inflating or the state of being inflated.
2. A persistent increase in the level of consumer prices or a persistent decline in the purchasing power of money, caused by an increase in available currency and credit beyond the proportion of available goods and services.
Deflation
1. The act of deflating or the condition of being deflated.
2. A persistent decrease in the level of consumer prices or a persistent increase in the purchasing power of money because of a reduction in available currency and credit.
Monetization is a key aspect to understanding the issue of inflation. If the TV pundits wanted a logical discussion they would put more focus on concept of monetization, not how much money is being printed. The government can print all the money it wants but doesn’t mean runaway inflation, a sinking dollar or monetization. In fact deflation could take hold for 10 years and the result would be the opposite of inflation. If the money being printed does not get into the hands of the consumer, it is not inflationary or monetized. Banks do not loan money to people who are broke, have too much debt, and those whose homes are worth less than their mortgage, it doesn’t happen. Right now our country and world are witnessing amounts of money being destroyed by massive decreases in the price of everything like we’ve never seen before in history. Here are two important facts. Debt destruction is money destruction and credit is money or purchasing power. Credit is how 95% of people buy homes, cars, even food and where has the credit gone? Money and credit are synonymous. When credit is revoked or decreased and debt payment slows and/or stops money dies and deflation ensues. Many of my friends have seen a decrease in their credit offered from their home equity lines, and their credit cards. Some people’s available credit has been shut off altogether! The increase which was inflationary has already happened, the pundits are 15 years late! Did the properties in your neighborhood triple from 1995 - 2005? Why did they? It’s interesting we hardly heard a peep about runaway inflation or a collapsing dollar until now!? We were in a huge inflation due to the biggest housing, stock market, and commodity bubble in history yet now that it’s over, we hear about inflation ad nauseam? Reference the attached chart to view what true monetization looks like to see what creates inflation. This IS NOT what’s happening today. Today banks are not lending anywhere near the level they lent in the past so outstanding debt is falling as people/companies gradually repay their loans or default on them. This contracting of outstanding credit as I have detailed above leads to deflation as money is destroyed. Even when debt is repaid deflation ensues if banks aren’t lending it back out, which they are not. Banks need to expand credit for inflation to actually kick in and you do not see that happening to any level as seen in previous years but all of a sudden we are screaming inflation now? I’m scratching my head. We know from the snippet of information I detailed above that financial pundits being wrong it is not an abnormal concept, it’s a common theme! Right now if you have any US dollars the buying power of those dollars are getting stronger, meaning you can buy more today at a lesser price than last year, therefore, we are in a deflation, NOT inflation. The dollar index has soured over the past 6 months. Dollars may be on the presses but they are not going back into the hands of spenders. The money is going to the banks, who then in turn hoard it, and buy treasuries. Our credit is shrinking, jobs are shrinking, net worth’s are shrinking, and taxes are on the rise. This is not inflationary!!
Again, inflation is what took place over the past 10 years ending just a few years ago when the Federal Reserve, (a private banking cartel who will not tell us where our bailout money is going) printed money and pumped it into our hands by lowering lending rates at breakneck speed. At the same time lending standards became non-existent allowing everybody and their brother to borrow money to buy just about anything they wanted from cars, homes, collectibles, jet skis, etc. Prices went to the moon and this is called INFLATION. Please re-read the definition of inflation and tell me without borrowing or increasing credit how we can have inflation? The media is wrong. Visit this link http://greatdepression2006.blogspot.com/2007/08/famous-quotes-from-past-revisited.html and read what the mainstream media, government officials, those akin to Warren Buffet of that day, and the Harvard Economic Society who was the CNBC and Wall Street Journal of the 20’s and 30’s had to say. They got it wrong. They said everything was great just months before the greatest stock market crash in history when the market fell 80%. Nothing has changed today with information except for maybe a faster medium to disseminate it namely Internet and TV.
Let’s look at an example. Say the year is 2000 and you borrowed $1,000,000 dollars to buy a house. If that house is now worth $500,000 because it dropped 50% what happened to the $500,000 of that loan which no longer has worth? It’s gone, that money/credit doesn’t exist as we explained above. This decreases the credit supply, which decreases demand, which causes prices to fall. Again debt destruction which is what’s happening now, it’s not inflationary, it’s deflationary. The newly printed money IS NOT going into the hands of homeowners at anywhere near the pace it did in the past 15 years, which is why printing is not monetization, inflationary, or going to devalue the dollar. Again, if it was devaluing the dollar why has the dollar been up against just about ever currency in the world over the last 6 months? It’s not devaluing the dollar, that’s why. Could we have runaway inflation at some point way off in the future, sure but first we are going to have a massive deflation and depression. Let’s look at it this way.
Say you have $1,000,000 dollars in cash that gets burned in a fire. That money is obviously no longer in the system because it’s been turned into ash. Therefore if another $1,000,000 is printed and monetized (put into the system or in this case you’re hands) to replace that ash, is that inflationary? Does it cause prices to rise; does it make the existing dollars worth less? NO it does not. More importantly today we may be printing that million dollars but were not loaning it therefore we are not even replacing that lost million dollars. We may be creating more money but it’s not going back into that house to replace that burnt money, it’s staying with the banks therefore it’s NOT INFLATIONARY and NOT MONITIZATION!
In summary it amazes me how many have no idea what their talking about. Most people get their information from the same source and just dress it up differently, think about that for a moment. Where do all these people get their info? Their all reading the same stuff. Inflation is what we had over the last 15 years except the last couple maybe. Today people are going broke faster than ever before in history, jobs are being lost faster than the Great Depression, loan defaults are also breaking records, banks are loaning at a fraction of what they were and people have no extra cash. All of this is a textbook definition of Deflation but the TV is calling for runaway inflation, I’ll be damned. I’ll leave you with this logic to better explain why printing money does not necessarily mean inflation. A punching motion can cause a facial injury, but a punching motion is not a facial injury. A facial injury is not the cause of punching motions. Likewise money supply inflation (printing money), can cause price increase, but money supply inflation is not price increase and price increases are not the cause of inflation. Cause causes effect, cause is not effect. Dollars are scarce, which is anything but inflationary. It’s the concept of supply and demand. If people have little or no cash, there can be no demand, therefore prices drop and you have deflation.
"The money is going to the banks, who then in turn hoard it, and buy treasuries."
I'm newer to this than you are, by far, so forgive the question. If the money goes into treasuries, that means it goes to the government, which then spends it, right? Isn't that just another way for all the new dollars to enter the economy, and cause an inflation as they trade hands?
It sounds to me like what you're saying is, we don't have an inflation coming because banks aren't lending. What happens when that changes? The fed is loaning banks money for practically nothing. The temptation for banks, then, should be to loan that money out at decent rates to people of marginal credit. So, even if a certain number default, there is still a profit being made.
This buildup of new money is a timebomb. Sooner or later, it's going to start burning a hole in someone's pocket. Whether it's the banks lending or the government spending it, it's going to end up in circulation, right?
What am I missing here?
The Rev
Lifes a piece of shit, when you look at it
Life's a laugh and death's a joke, it's true
Just remember it's all a show, keep em laughing as you go
Just remember that the last laugh is on you
Money that goes into treasuries only goes to gov't for gov't spending if it is newly issued treasuries. The US treasury periodically has an auction where investors bid for the bonds. Typically they bid the prices up to match the current demand on the market for gov't bonds.
if bond prices are bid up, interest rates (bond yield) goes down. If bond prices fall then interest rates rise.
The bonds we're talking about here are bonds that have already been auctioned off & issued/sold by the US treasury. They've already received the money for those. Once bonds are sold, they can then be traded on a secondary market. If you own a bond you don't have to wait for it to mature. You can sell it to someone else who wants to take over the bond, by selling it on the secondary market. The one who buys from you doesn't have to wait for the next Treasury auction. They just buy it from you. The Fed participates in this buying of bonds on the secondary market. If people that own bonds want to sell them then if there are no buyers (on the secondary market) then you have to sell your bonds at a discount to get rid of them. Selling bonds at a discount will drive interest rates up. On the next Treasury auction of new bonds the new buyers will only bid the prices up to that of the bond prices on the secondary market (to receive equal bond yield) . This is because bonds on the secondary market are yielding more return than the newly issued bonds. So what the Fed does is print money and buy some of the bonds off the secondary market, to step in and create fake demand for the bonds. Bond prices won't fall and this keeps interest rates low. Therefore, when the Treasury does an auction there will be artificially high demand and artifically low interest rates and the Treasury will get to borrow money at lower interest rates.
Here I was writing an explanation and boom, there it is, bearing hit it right on the head. It IS NOT inflationary. We are in a depression and deflation contrary to what every newspaper, magazine, or TV program says, its like a brain meld. There is no recovery in site, we are 10 years out of a recovery minimum. Study what Japan did in the early 90's....Quantum easing. Their stock market went from 40k to 8k, it's been almost 20 years and their still in a deflationary depression and doing Quantum Easing again.
We are in a depression, there is no inflation absolutely no inflation in site. No Way, No how. Thank you bearing, couldn't have explained better, you are much better than I at explaining it.
My opinion obviously...but I don't see it happening any other way. A massive boom and inflation doesn't end is a couple years.
Ryan,
depression doesn't mean deflationary or lack of inflation. Even printing money to make prices flat in a depression is actually inflation. You can have stagflation or an inflationary depression. The Federal Reserve is aiming for this. This is what we will have.
The Federal Reserve has more than tripled the money supply. If you come on an Austrian Econ. Website and try to claim we're in for a deflationary depression in light of the recent Fed monetary policy you will only get laughed at, perhaps ripped apart, and not taken seriously. If you read any Austrian Econ 101 books you would understand why. I recommend "What you should know about inflation" by Hazlitt http://mises.org/books/inflation.pdf and "The Causes of Economic Crisis" by Mises. http://mises.org/books/causes.pdf
Because one is a good entrepreneur and is rich does not mean he is a good economist. It means he/she is well informed and found an opportunity to provide something which is in short supply and is or will be in demand. Or they are lucky. Or they are a good speculator and were able to rip someone else off. Intelligent people are not necessarily rich. Rich people are not necessarily intelligent. My grand parents and their ancestors were successful businessmen and entrepreneurs. They were not economists nor did they understand Macro economics. They just knew how to run a business well and to supply what was in demand.
Ryan Morelli: "Say the year is 2000 and you borrowed $1,000,000 dollars to buy a house. If that house is now worth $500,000 because it dropped 50% what happened to the $500,000 of that loan which no longer has worth? It’s gone, that money/credit doesn’t exist as we explained above."
I don't quite understand this logic here. So if "you borrowed $1,000,000 dollars" but now the house is "worth $500,000", so, the other $500,000 is "gone" and "doesn't exist"? It still exists as debt. Whoever borrowed the initial $1,000,000 still owes that other $500,000 that you claim "doesn't exist". Now if you mean it doesn't exist cause the borrower is in debt and actually doesn't have the money, well, that's true, but it doesn't mean the borrower isn't obligated to pay this lost $500,000 due to devaluation of house. It just means the house isn't worth $1,000,000 so the borrower will now need to find the money elsewhere to pay back the initial value devised when that initial valuation took place being $1,000,000. The borrower can't cash in his or her house to come up with the borrowed $500,000 no longer to be found in the house. The borrower will have to come up with that money in another way, somewhere. The money didn't disappear and "doesn't exist". The money just has to be taken out from another asset or income of the borrower. It's merely just not in the house anymore but the borrower still owes the full amount of $1,000,000. It isn't "gone". It's now debt. The borrower not being able to find the $1,000,000 value in the house now has to divert other expenses or savings to pay off a debt.
Maybe you had another point?
The money didn't disappear and "doesn't exist". The money just has to be taken out from another asset or income of the borrower.
The house buyer borrowed this $1,000,000 money and exchanged it with the home owner to get his house. If the previous owner bought the house for much less then the previous owner gained a large profit. He put these dollars in his bank, or spent them. If he spent them, he bought or consumed products, services or commodities in the economy with the money. Now the economy is now deficit of these items. The house buyer's promise is to produce the goods, services or commodities worth $1,000,000 to replace the ones consumed by the previous house owner. If the new debtor/owner defaults it means that $1M worth of wealth will not be added to the economy to make up this deficit, meaning the economy will be all that much poorer of goods, services & commodities in the future. Money, or dollars, are just the unit of account for the amount that has been consumed or transacted, and that which has to be produced to replace that consumption.
bearing01, thanks for your insight and book recommendations. This subject is of intense interest to me, because it will affect me rather severely either way. I downloaded the books and will get to reading. If you can think of any other essential info on this subject, please let me know what it is. I can't seem to read fast enough these days...
Ok, so that was the full scenario aimed at maybe. Wasn't quite sure what Ryan was saying at first. As I stated the $500,000 "lost" in the devaluation of the house was not "lost" for it remains as debt. Now continuing with what you said bearing01, if the current owner of the house can't pay off this debt, then yes, it is bubble burst and the home owner and general economy is thus shrinking back to current market values. That $500,000 is therefore "lost" or hurts the home owner that can't pay this back. He or she loses the house by not being able to pay the debt. Another homeless man or woman on the streets.
I would like to add due to my haste of the last post that "lost" in a fiat system is what happens. What wasn't present to begin with, when all the chips are cashed in, those left with too many expenses during the boom compared to their income and savings will mirror "what wasn't present to begin with" = they will have nothing.
To bearing current events:
You've assumed because I say depression and deflation that I don't know there can be an inflationary depressions? I've studied German history in detail I'm aware that a depression can be inflationary, the condescending tone isn't necessary, I can have my opinions.
"I would get ripped apart'. Do I sense a little bit of anger? I've read Mises book and others on the subject of Austrian economics. You can hope for anything you want or predict as confidently as I have about what you believe is going to happen; only time will tell. The Federal Reserve is going to fail miserably in their attempts to create a stagflation as you confidently predict, 'this is what we will have'. I guess your economic future is in need of this happening? It seems to me that most people who adamantly cling to this hope can't face the truth of where this country and economy is going.
To say about my friend, ' Normal 0 false false false EN-US X-NONE X-NONE MicrosoftInternetExplorer4
Do I sense a bit of jealousy?
TO: Wilderness in Current Events....
What I mean by, 'it's gone' is that it's gone in terms of these loans in the scope of our economic cycle. By the time that house comes back most borrowers will be long gone, or most of them will which is all that matters for the wipe out I'm speaking about to occur. You can read as many books as you want and I'm sure you've understand about the concept of 'Theory and Practice'. If the Fed knows what it's doing know why are we in the economic state we are in? If the fiat money system works so we'll why are you a fan of Austrian economics?
We are going into a depression larger and deeper than the Great Depression of the 30's wait and see.
Wilderness....
I wrote the above last night and see your post this morning. Now you've got exactly what I'm talking about.
My comment about speculation & ripping someone off was incorrect and unfair. I appologize. My intent behind this statement wasn't properly stated. Speculation serves a great benefit to society. My thoughts were about a speculative inflationary boom - fueled by the creation of credit out of thin air. Inflationary booms like the housing bubble or 90's NASDAQ bubble are deceptive and ends up ruining people because people are deceived into believing the wealth and valuation is real.
Hasn't stagflation been building for decades? I understand it can be worse from year to year, but why do most households have to work two jobs and day care for their sons and daughters are on the rise for over a decade? I would say prices have risen and the American household has to keep up with its' expenses, so, both parents usually have to work more and more. But then again, stagflation includes loss of jobs, and if both parents are working, then that means lots of jobs are available. Yet, what is not figured into this equation is the lack of income by one parent, thus, it's as if they did lose their job (aka income) for the second parent has to pick up this loss of a job/income by working as well. So job loss can also include income loss. Job's aren't necessary defined, therefore, as somebody working. Jobs also are to include the income of that man or woman working.
Yeah, Ryan, I was just looking for clarification. Glad you saw my recent posts. I wasn't looking to make any big points in which I'm lecturing to you or anybody else. I was more so bringing up points of inquiry and discussion. Thanks.
I'm confused and forgive me for sounding condescending or rude but are you kidding me? Go read the definition of inflation, deflation, and stagflation. I don't know what your saying here. Prices from the 90's to about 2005 were skyrocketing. Homes, Commodities, hotel rooms, boats, vacations, restaurants - bottle service, contractors, etc etc. This was inflationary, there is no way around it, what the hell does 2 parent families have to do with it??? Today practically no one has dollars/money/credit....so the artificial demand that drove all of this stuff up has dried up and thus the supplies are increasing which makes the prices decrease, DEFLATION. Don't you hear about the 10's upon 1000's of cars that are piling up on empty car lots, military bases and so forth that can't be sold? We are in a depression and not an inflationary one, thanks. Skip the first paragraphs and go to definitions and read below it's simple.
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My personal favorite was a prediction CNBC made in December 2008. Larry Kudlow, one of their pundits said, ‘we are now officially in a recession and now we know it began one year ago’. What? I almost fell out of my seat. Let me get this straight. Larry Kudlow and 95% of their featured ‘experts’ and pundits were proclaiming for all of that year that we were avoiding a recession. They claimed the stock market was going to stay flat and have moderate growth. They also said we would have a ‘soft landing’ in real estate, remember that phrase?(A soft landing infers no crash) If you watch CNBC I hope so as they said it about 30 times a day for a year. During this time the Dow Jones Industrial Average decreased, it didn’t stay flat or increase but dropped from 14,000 to 8,000, a loss of more than 40% in just over a year? They also spoke about the soon resurgent bull market but there was no bull market, the market continued to drop as they fostered false hope. Again this is a network that calls themselves, ‘the best of the best’ and ‘the only business network that has the information and experience you need’. Another glaring example is one of CNBC’s most popular talking heads Jim Crammer. He proclaimed that Bear Stearns stock was not only a hold, but a great buy at 60 dollars per share. This was one week before it went completely out of business and to 0. This brings me to the reason for my letter. I’d like to clear up a large misconception that most news organizations are creating, the concept of inflation from the printing of dollars. It’s astounding to me that there isn’t a single person anywhere on TV or in the Main Stream media that’s getting this issue right and moreover not giving other viable alternative outcomes. Perhaps the main problem is most people have no idea how money is created in our system.
Monetization is a key aspect to understanding the issue of inflation. If the TV pundits were having an accurate discussion about these issues they would put more focus on concept of monetization, not how much money is being printed. When the government prints money this does not automatically mean we are going to have inflation or a sinking dollar. In fact deflation is what we have now, the opposite of inflation, re read the definitions. If the money being printed does not get into the hands of the consumer, it is not inflationary or in economic terms ‘monetized’. Banks do not loan money to people who are broke, who have too much debt, who are losing their jobs, and whose homes are worth less than their mortgage. Right now our entire world is witnessing record amounts of money/debt being destroyed by massive decreases in the price of everything like we’ve never seen before in history. Debt destruction is a difficult to conceptualize. You must first understand that money is debt. As an example. When the worth of your home is less than what you owe, and this trend continues along with the loss of jobs, people stop paying their debts. In turn the banks eat these debts and can no longer keep lending. As this cycle continues, prices go down, and banks go out of business. Here are two important facts. Debt destruction is money destruction and credit is money or purchasing power. Credit is how 95% of people buy homes, cars, even food and where has the credit gone? Money and credit are synonymous. When credit is revoked or decreased and debt payment slows and/or stops money dies and deflation ensues. Many of my friends have seen a decrease in their credit offered from their home equity lines, and their credit cards. Some people’s available credit has been shut off altogether! The increase which was inflationary has already happened, the pundits are 15 years late! Did the properties in your neighborhood triple from 1995 - 2005? Why did they? It’s interesting we hardly heard a peep about runaway inflation or a collapsing dollar until now!? We were in a huge inflation due to the biggest housing, stock market, and commodity bubble in history and now that it’s over, yet today we hear about inflation ad nauseam? Reference the attached chart to view what true monetization looks like to see what creates inflation. This IS NOT what’s happening today. Today banks are not lending anywhere near the level they lent in the past so outstanding debt is falling as people/companies gradually repay their loans or default on them. This contracting of outstanding credit as I have detailed above leads to deflation as money is destroyed. Even when debt is repaid deflation ensues if banks aren’t lending it back out, which they are not. Banks need to expand credit for inflation to actually kick in and you do not see that happening to any level as seen in previous years, in fact it’s decreasing as I just detailed. Now that the bubble is bursting there is talk of inflation. Why? People hear the government is printing money and they misunderstand the implications. We know from the snippet of information I detailed above that financial pundits being wrong it is not an abnormal concept, it’s a common theme! Right now if you have any US dollars the buying power of those dollars are getting stronger. This means you can buy more today at a lesser price than last year, this is the textbook definition of deflation NOT inflation. The dollar index has soured over the past 6 months, again if it was devaluing the dollar why has the dollar been up against just about ever currency in the world over the last 6 months? It’s not devaluing the dollar, that’s why. Could we have runaway inflation at some point way off in the future, sure but first we are going to have a massive deflation and depression. This is because the money that’s going to the banks is not being lent, it’s being hoarded it, and the banks are buying treasuries. Our credit is shrinking, jobs are shrinking, net worth’s are shrinking, and taxes are on the rise. This is not inflationary!!
Again, inflation is what took place over the past 10 plus years ending just a few years ago when the Federal Reserve, (a private banking cartel who will not tell us where our bailout money is going) printed money and pumped it into our hands by lowering lending rates at breakneck speed. At the same time lending standards became non-existent allowing everybody and their brother to borrow money to buy just about anything they wanted from cars, homes, collectibles, even boats and jet skis, and we know what good investments they are. Prices went to the moon and this is called INFLATION. Please re-read the definition of inflation and tell me without borrowing or increasing credit how we can have inflation again? The media is wrong. Visit this link http://greatdepression2006.blogspot.com/2007/08/famous-quotes-from-past-revisited.html and read what the mainstream media, government officials, those akin to Warren Buffet of that day, and the Harvard Economic Society who was the CNBC and Wall Street Journal of the 20’s and 30’s had to say. They got it wrong. They said everything was great just months before the greatest stock market crash in history where the market fell 80%. Nothing has changed today with information except for maybe a faster medium to disseminate it namely Internet and TV.
Say you have $1,000,000 dollars in cash that gets burned in a fire. That money is obviously no longer in the system because it’s been turned into ash. Therefore if another $1,000,000 is printed and monetized(put into the system or in this case in you’re hands) to replace that ash, is that inflationary? Does this printing of money cause prices to rise? Does it make the existing dollars in the system worth less? This is the misconception. People hear about the printing of dollars and say, ‘runaway inflation is coming’. Wrong. Not only is that wrong because it would only be replacing what was lost, IT IS NOT BEING LOANED OUT, it is not being put in the hands of spenders as I explained! It doubly wrong, wrong on both fronts. Again, we may be creating more money but it’s not going back into that house to replace that burnt money, it’s staying with the banks therefore it’s NOT INFLATIONARY and NOT MONITIZATION! In order for it to be inflationary banks need to restart lending at a level greater than they have in the past!
In summary your CNBC, nightly news, Wall Street Journal, Forbes magazine and the like are all getting their information from the same source plagiarizing each other. There are many people out there that can read between the lines but you are not going to find them in the mainstream media. Inflation is what we had over the last 15 years except the last couple where we have seen deflation take root. Today people are going broke faster than ever before in history, jobs are being lost faster than the Great Depression, loan defaults are breaking records, banks are loaning at a fraction of what they were in the past. All of this is the textbook definition of deflation but the TV is calling for runaway inflation, I’ll be damned. I’ll leave you with this logic to better explain why printing money does not necessarily mean inflation. A punching motion can cause a facial injury, but a punching motion is not a facial injury. A facial injury is not the cause of punching motions. Likewise money supply inflation (printing money), can cause price increase, but money supply inflation is not price increase and price increases are not the cause of inflation. Cause causes effect, cause is not effect. Dollars are scarce, which is anything but inflationary. It stands to reason that the governments of the world all doing quantum easing at the same time means we are in a heap of trouble. The world governments are not printing money at breakneck speed to buy their own debt because this is a temporary problem, we are in a global depression even if CNBC and the smartest minds on ‘TV’ aren’t telling you so. Remember to reference my link above on the Great Depression, those who do not study history are doomed to repeat it.
Ryan L Morelli
Ryan L Morelli: I'm confused and forgive me for sounding condescending or rude but are you kidding me? Go read the definition of inflation, deflation, and stagflation. I don't know what your saying here. Prices from the 90's to about 2005 were skyrocketing. Homes, Commodities, hotel rooms, boats, vacations, restaurants - bottle service, contractors, etc etc. This was inflationary, there is no way around it, what the hell does 2 parent families have to do with it???
I'm confused and forgive me for sounding condescending or rude but are you kidding me? Go read the definition of inflation, deflation, and stagflation. I don't know what your saying here. Prices from the 90's to about 2005 were skyrocketing. Homes, Commodities, hotel rooms, boats, vacations, restaurants - bottle service, contractors, etc etc. This was inflationary, there is no way around it, what the hell does 2 parent families have to do with it???
I use Rothbard's definition of stagflation which means lose of jobs and prices go up. um, Two parents working means, if only one worked the bills wouldn't get paid. Seems fairly straightforward to me. As I put it into a question for, again, to have a discussion: "Hasn't stagflation been building for decades?" Meaning I let it open-ended. Not a statement with a period. Period usually means "the end", no question about it. But I stated a question. Must I?
Now that I think about it, I'll answer my own question since I'm not seeing it in this post currently. Maybe it wasn't stagflation cause people didn't lose their jobs yet prices went up so a second worker in the household became necessary. So that's probably inflation.
Ryan L Morelli: Today practically no one has dollars/money/credit....so the artificial demand that drove all of this stuff up has dried up and thus the supplies are increasing which makes the prices decrease, DEFLATION. Don't you hear about the 10's upon 1000's of cars that are piling up on empty car lots, military bases and so forth that can't be sold?
Today practically no one has dollars/money/credit....so the artificial demand that drove all of this stuff up has dried up and thus the supplies are increasing which makes the prices decrease, DEFLATION. Don't you hear about the 10's upon 1000's of cars that are piling up on empty car lots, military bases and so forth that can't be sold?
I haven't seen prices go down yet. I was out in the housing market a couple weeks ago and all the houses around here are still the same price. I kept asking myself didn't they hear about the housing market falling? Also our home bills are the same price and grocery prices are up or the same. Maybe you have other prices you can show?
Ryan L Morelli: Inflation 1. The act of inflating or the state of being inflated. 2. A persistent increase in the level of consumer prices or a persistent decline in the purchasing power of money, caused by an increase in available currency and credit beyond the proportion of available goods and services.
Now I don't check the national numbers all the time. I gave you local results for experience. Thus why I questioned if the local housing market heard of the housing bubble, meaning, why aren't the local housing prices dropping. I have heard locally though the economy didn't feel the effects of the housing bubble as of yet and who knows if it will. I know cement is being used locally often and huge industrial plants are being built here as well. Maybe I'm in a local bubble. Anyways...
What was your point again?
My point? I guess the old adage applies here, ' you can lead a horse to water but you can't make him drink'. If you don't know my point I've got nothing for you. You haven't seen it in your area? Do you live on planet earth? Normal 0 false false false EN-US X-NONE X-NONE MicrosoftInternetExplorer4 We are seeing the greatest bankruptcies in history. Heard of Fannie or Freddie? Heard of the largest commercial insurer in the world, AIG? Heard of the 5 largest investment banks of which basically 3 are gone? Have you listened to the Fed say they are employing Quantum Easing along with most Federal Reserves of the world? It's apparent you don't understand much when it comes to what's actually happening out there in the world you live in. Jobs are being lost at a faster pace than the Great Depression, loan defaults on homes are breaking records, banks are loaning at a fraction of what they were and YOU want me to give you more examples. Sorry bud, it seems if it hit you in the face you wouldn't know it. Move along, nothing to see here.
P.S. I'm sorry but I'm literally laughing out loud that people can be so lost. I feel like I've been transported to the land of the lost. There couldn't be more signs of what's coming and your’re asking me to show you proof. LOLOL
Ryan L Morelli: Normal 0 false false false EN-US X-NONE X-NONE MicrosoftInternetExplorer4 My point? I guess the old adage applies here, ' you can lead a horse to water but you can't make him drink'. If you don't know my point I've got nothing for you. You haven't seen it in your area? Do you live on planet earth? Normal 0 false false false EN-US X-NONE X-NONE MicrosoftInternetExplorer4 We are seeing the greatest bankruptcies in history. Heard of Fannie or Freddie? Heard of the largest commercial insurer in the world, AIG? Heard of the 5 largest investment banks of which basically 3 are gone? Have you listened to the Fed say they are employing Quantum Easing along with most Federal Reserves of the world? It's apparent you don't understand much when it comes to what's actually happening out there in the world you live in. Jobs are being lost at a faster pace than the Great Depression, loan defaults on homes are breaking records, banks are loaning at a fraction of what they were and YOU want me to give you more examples. Sorry bud, it seems if it hit you in the face you wouldn't know it. Move along, nothing to see here. P.S. I'm sorry but I'm literally laughing out loud that people can be so lost. I feel like I've been transported to the land of the lost. There couldn't be more signs of what's coming and your’re asking me to show you proof. LOLOL
dude... why the need to put it all in bold face? Why the need to repost something all over again? Why I asked what your point was is this apparent need by you to lecture and 'think' that I'm not agreeing with, meanwhile I thought I have been. Relax, but I'm sure you'll find something to yell to me about again.
And all those locals events happening are true. Just cause it's national doesn't mean it's local. Yet, I know everything you are saying on the national scale. I guess my point also was when I asked you 'what your point was?' can more precisely be asked, "What are you saying I don't know?" Maybe if you make specific comments to specific points I wrote it would help keep track of the discussion and thus why I said, "What's your point?" just asking...
'Dude!' as you say. Or 'head in the sand' as I say to you. I guess you don't read what's happening in the world and your po dunk community is a proxy for the country? Ever heard of Robert J Shiller? Maybe you should Google him. Ever think of why banks who have defaulting homeowners aren't rushing to foreclose? What is the result of them doing that? What is the result to their existing debt holders in those communities? What would that lead to at a faster pace? Think about it if you can. This is why most people with their head buried up their rear end don't, 'see it happening in their community' It's people like you that are the problem. Your heads buried so far you can't see daylight. DUDE.
Home Prices in 20 U.S. Cities Fell by a Record 19% in January
By Shobhana Chandra
March 31 (Bloomberg) -- Home prices in 20 U.S. cities fell 19 percent in January from a year earlier, the fastest drop on record, as demand plummeted and foreclosures rose.
The S&P/Case-Shiller index’s decrease was more than forecast and compares with an 18.6 percent decrease in December. The gauge has fallen every month since January 2007, and year- over-year records began in 2001.
A glut of unsold properties may keep prices low, shrinking household wealth and damping spending. Still, sales of new and previously-owned homes rose in February, indicating the housing slump, now in its fourth year, may ease as policy efforts to unclog credit and aid borrowers begin to take hold.
“Arresting the slide in home prices will be key to ending the recession,” John Silvia, chief economist at Wachovia Corp. in Charlotte, North Carolina, said before the report. Other recent data though, he said, indicate “the housing slump may be nearing a bottom.”
The home price index was projected to decline 18.6 percent from a year earlier, according to the median forecast of 29 economists in a Bloomberg News survey, after an originally reported drop of 18.5 percent in December. Estimates ranged from declines of 17.2 percent to 19 percent.
From a month earlier, home prices fell 2.8 percent in January, after a 2.6 percent drop in December, the report showed. The figures aren’t adjusted for seasonal effects, so economists prefer to focus on year-over-year changes instead of month-to-month.
‘Downward Path’
All 20 cities in the index showed a year-over-year price decrease in January, led by a 35 percent drop in Phoenix and 32.5 percent drop in Las Vegas.
All of the 20 areas covered also showed declining home prices from the prior month.
“There are very few bright spots that one can see in the data,” David Blitzer, chairman of the index committee at S&P, said in a statement. “Most of the nation appears to remain on a downward path.”
Foreclosures surged 29.9 percent in February from a year earlier after rising 17.8 percent in January, according to RealtyTrac Inc. An estimated one in every 440 homes is in some stage of foreclosure.
Still, recent reports showed builders broke ground on 22 percent more homes in February than the prior month -- when starts plunged to a record low -- and that sales of new and previously owned houses increased, signaling the industry’s decline may be closer to reaching a bottom.
Mortgage Rates
Lower prices and borrowing costs are attracting some buyers. The National Association of Realtors’ affordability index increased to a record in February. Mortgage rates for 30- year fixed loans fell to a record low in the week ended March 20, according to the Mortgage Bankers Association.
KB Home, a Los Angeles-based homebuilder that caters to first-time buyers, last week reported a narrower loss in the quarter ended Feb. 28, and said net new-home orders rose 26 percent from a year earlier, the first gain since the fourth quarter of 2005.
Also, while job losses are hurting Americans’ confidence, retail sales fell less than forecast in February and consumer spending had a second straight monthly gain. Economists predict the recession may ease in the second half of this year after the economy shrank 6.3 percent last quarter, the most since 1982.
Federal Reserve officials last week voiced confidence the economy will show signs of recovery by year-end, responding to unprecedented monetary stimulus and the Obama administration’s $787 billion fiscal package.
“Resumption of growth should not be too far off,” Minneapolis Fed President Gary Stern said in a speech on March 26. He added, “Once under way, the pace of expansion is likely to be subdued for some time.”
Robert Shiller, chief economist at MacroMarkets LLC and a professor at Yale University, and Karl Case, an economics professor at Wellesley College, created the home-price index based on research from the 1980s.
Is all the condescencion and hostility really necessary? I mean, if you're right, you're right, and if you're not, you're not. How big of a jerk you are really doesn't factor in.
the government is perpetually a cycle behind, doing the opposite of what it should do. right now we are building fuel for the next inflationary explosion.
Ryan L Morelli: 'Dude!' as you say. Or 'head in the sand' as I say to you. I guess you don't read what's happening in the world and your po dunk community is a proxy for the country? Ever heard of Robert J Shiller? Maybe you should Google him. Ever think of why banks who have defaulting homeowners aren't rushing to foreclose? What is the result of them doing that? What is the result to their existing debt holders in those communities? What would that lead to at a faster pace? Think about it if you can. This is why most people with their head buried up their rear end don't, 'see it happening in their community' It's people like you that are the problem. Your heads buried so far you can't see daylight. DUDE.
I told you, you would yell at me again. Even though I know the home prices are falling and all about the home index. Just cause the national average is falling doesn't mean it hits all areas at once. I'm still not sure what your trying to say that I don't know already.
The Rev: Is all the condescencion and hostility really necessary? I mean, if you're right, you're right, and if you're not, you're not. How big of a jerk you are really doesn't factor in. The Rev
What's amazing is I agree with him and he still is yelling at me. The only disagreement I see going on is he disagrees about what is happening local here. It really hasn't hit here yet. People come in from out of town and notice it too.
"It's a tree," Condescending One
"I know it's a tree," Cougar
"No, I mean it's a tree," Condescending One
"Yeap, I know."
"NO, I SAID IT'S A TREE YOU JUST DON'T GET IT," Condescending One
"I said I agree. It is a tree. I said that way back at the beginning,"
"IS YOUR HEAD IN THE SAND? IT'S A TREE. WHAT THE?" Condescending One
"Yeah, I said it is a tree," Cougar
"WHAT THE? IT'S A FREAKIN' TREE. DON'T YOU SEE THE LIGHT OF DAY?"
"Um, now just for kicks I'm going to say: It's a tree."
"WHAT THE? HOW MANY TIMES DO I HAVE TO TELL YOU IT'S A TREE? DON'T YOU READ THIS GUY OR KNOW ABOUT THAT INDEX?"
How long will it take for him to get?
Falling house prices or the liquidation of any other assets/merchandise or to clear a glut in supply of any particular commodity is not deflation. It's asset price decline. Price fluctuation is a normal market process to signal entrepreneurs to produce more or less of an item.
Ryan, this is exactly the kind of thing I'm looking for. Like you, I've become a little obsessed with the in/de-flation outcome and trying to get things in order, to time investments, etc. for optimal profit.
Anytime everyone is screaming one thing, esp. the talking heads, it's a good idea to look at things a little harder. You're not completely alone, there are some very smart people who argue deflation: Bob Prechter, Hugh Hendry, Mike Shedlock, some folks at the economist.
Questions we all need to consider:How long will the deflation path last until inflation takes over. I think it very likely that the Fed actions will have little effect initially, but will catch up to us down the road in a few years, and that it will be very inflationary.
What actions does the average Joe take to protect himself from deflation, then inflation? How can we take advantage of these macro trends on a personal basis? There are always winners when big changes happen, what does the investor, the worker do to protect and win?
It might be worth starting a new thread along the lines of how to game the system, given immediate deflation, instead of arguing the inflation/deflation probability. I'd be very interested in participating if you do.
Legrand
So you know for certain that a "runaway boom" or hyperinflation cannot happen?
In MES, Rothbard posits that credit expansion can be halted/reversed by bank runs, a system of free banking which would limit the amount of credit expansion by any one bank and force the rapid bankruptcy of said banks, or else the ultimate limit to credit expansion is "the runaway boom" aka hyperinflation.
Presently, the FDIC and federal government promises to guarantee everything and anything prevent any significant bank runs. The lack of free banking in the US prevents any competition between solvent and insolvent banks as, under the guidance of the Fed, 99.9% of banks in this country are already insolvent.
Without any kind of gold standard and the Federal Reserve in control of a potentially unlimited supply of fiat currency, there is no restriction to continued credit expansion except "the runaway boom."
The Fed is currently in the process of monetizing ~$1 trillion of debt. This is the first stage of the runaway boom.
All of this is in MES Ch. 12 Sections A-E
I see no reason to dismiss the possibility of a "runaway boom" aka hyperinflation as you have.
Thank You, I was losing faith. I have been buried and don't have the time now. Quite frankly there seems to be so many clueless know nothings on this board that come up with so many hair-brain possibilites that I would really rather not spend the time. If we could have a few logical people like yourself the discussion would be welcome and it would save quite a bit of time. I was thinking of starting my own site of sorts where I can control the people leaving messages so I can throw out the robots, which I've noticed has nothing to do with education or intellegence. Some of the brightest people I know have no formal education and others with oodles of degrees seem to be the most confused. For me, attempting to unprogram people by explaining and re-explaining what is obvious to me is like trying to stop the ocean in a hurricane. I'm about to address the latest question to this blog, it's so frustrating for me.
Are you serious? No one can know anything for certain but you can surmise with a great deal of certainty issues like these with logic.
Posts like yours that point out the obvious then argue it like it's a novel idea drive me nuts. It's nothing but a regurgitation of someone else’s intellect interpreted incorrectly.
I'm fully aware what Rothbard says. Of course credit expansion can be halted or reversed but it's not going to be. The Sun can burn out tomorrow too but I don't suspect it's going to happen anytime soon.
Presently the FDIC is full of that brown stuff in the park left after irresponsible owners leave after walking their dog. The only reason the FDIC added that 250k guarantee was to prevent panic and convince people like you it's ok to leave their money in the bank. There is absolutely NO WAY they are going to print money and hand it out to people who lost their money due to bank insolvencies. Are they lowering taxes? They take the money from YOU, not give it to you, that's the game, that's socialism. Apparently although you've (hopefully) heard of Bank Nationalization you're dismissing the more logical outcome and determining daddy GOV is coming to our rescue all the while devaluing the currency that keeps them strong. WOW! LOLOLOL. This 250k guarantee is just another lie / control tactic implemented by the Feds, the same people that got us to where we are today. You really think they are out to protect us after what you've seen happen?? They are out to help the common man? Come on you've got to be kidding me, you just don't get how the world works.
For your information and everyone else on here, most of the banks in this country are already insolvent. The Black-Scholes model is a sham and so is market to market accounting (Mark-to-market accounting sets the value of (or "marks") the assets on your balance sheet to reflect their market sale prices). By valuing properties at their perceived value is a pipe dream, (another banker created sham), and projecting values via the Black Sholes model is a disaster waiting to happen. Banks are wholly insolvent, pretty soon you will all be woken up. At that time I'd like an apology for your hair brain posts and a fee for my education which mostly falls on deaf ears.
We are going into a hyper deflation as the Fed continues to sell short term paper and buy their long term notes to drive the rates down. They are getting money for nothing and buying their long term paper. THERE IS NO PRINTING OR MONETIZATION GOING ON. To say monetization will occur as the FDIC hands out money to you and your mommy is NUTS. You live in fantasy land.
Ryan L Morelli: Normal 0 false false false EN-US X-NONE X-NONE MicrosoftInternetExplorer4 Are you serious? No one can know anything for certain but you can surmise with a great deal of certainty issues like these with logic. Posts like yours that point out the obvious then argue it like it's a novel idea drive me nuts. It's nothing but a regurgitation of someone else’s intellect interpreted incorrectly. I'm fully aware what Rothbard says. Of course credit expansion can be halted or reversed but it's not going to be. The Sun can burn out tomorrow too but I don't suspect it's going to happen anytime soon. Presently the FDIC is full of that brown stuff in the park left after irresponsible owners leave after walking their dog. The only reason the FDIC added that 250k guarantee was to prevent panic and convince people like you it's ok to leave their money in the bank. There is absolutely NO WAY they are going to print money and hand it out to people who lost their money due to bank insolvencies. Are they lowering taxes? They take the money from YOU, not give it to you, that's the game, that's socialism. Apparently although you've (hopefully) heard of Bank Nationalization you're dismissing the more logical outcome and determining daddy GOV is coming to our rescue all the while devaluing the currency that keeps them strong. WOW! LOLOLOL. This 250k guarantee is just another lie / control tactic implemented by the Feds, the same people that got us to where we are today. You really think they are out to protect us after what you've seen happen?? They are out to help the common man? Come on you've got to be kidding me, you just don't get how the world works. For your information and everyone else on here, most of the banks in this country are already insolvent. The Black-Scholes model is a sham and so is market to market accounting (Mark-to-market accounting sets the value of (or "marks") the assets on your balance sheet to reflect their market sale prices). By valuing properties at their perceived value is a pipe dream, (another banker created sham), and projecting values via the Black Sholes model is a disaster waiting to happen. Banks are wholly insolvent, pretty soon you will all be woken up. At that time I'd like an apology for your hair brain posts and a fee for my education which mostly falls on deaf ears. We are going into a hyper deflation as the Fed continues to sell short term paper and buy their long term notes to drive the rates down. They are getting money for nothing and buying their long term paper. THERE IS NO PRINTING OR MONETIZATION GOING ON. To say monetization will occur as the FDIC hands out money to you and your mommy is NUTS. You live in fantasy land.
Can I meet this man or woman you are talking to?
Ryan L Morelli:Are you serious? No one can know anything for certain but you can surmise with a great deal of certainty issues like these with logic.
"A great deal of certainty" - this statement makes no sense. There is either certainty or uncertainty. In this case, there should be no argument that the future is certain. It is most definitely not certain.
Ryan L Morelli:Posts like yours that point out the obvious then argue it like it's a novel idea drive me nuts. It's nothing but a regurgitation of someone else’s intellect interpreted incorrectly.
I never argued that it was a novel idea. In fact, I gave the citation of MES.
Ryan L Morelli:I'm fully aware what Rothbard says. Of course credit expansion can be halted or reversed but it's not going to be. The Sun can burn out tomorrow too but I don't suspect it's going to happen anytime soon.
Are you aware of what you said? Look again at your statement. My argument, like Rothbard's, is that credit expansion will NOT be halted by the previous methods of bank runs or bankruptcies. It will continue until the Fed creates a "runaway boom" aka hyperinflation.
Ryan L Morelli:Presently the FDIC is full of that brown stuff in the park left after irresponsible owners leave after walking their dog. The only reason the FDIC added that 250k guarantee was to prevent panic and convince people like you it's ok to leave their money in the bank. There is absolutely NO WAY they are going to print money and hand it out to people who lost their money due to bank insolvencies. Are they lowering taxes? They take the money from YOU, not give it to you, that's the game, that's socialism. Apparently although you've (hopefully) heard of Bank Nationalization you're dismissing the more logical outcome and determining daddy GOV is coming to our rescue all the while devaluing the currency that keeps them strong. WOW! LOLOLOL. This 250k guarantee is just another lie / control tactic implemented by the Feds, the same people that got us to where we are today. You really think they are out to protect us after what you've seen happen?? They are out to help the common man? Come on you've got to be kidding me, you just don't get how the world works.
This is a point of disagreement. Seeing as how the government and FED have bailed out everything since Lehman, I do not think they will stop bail-outs when it comes to the FDIC.
Congress is already indicating they are willing to give hundreds of billions if not trillions to the FDIC. See this article:
http://online.wsj.com/article/SB123630125365247061.html
In this case, it's not about helping "the common man." It's about politicians being pragmatic. They know that if they let the FDIC fails, they will strung up and ridden out of office.
The main point I was arguing here is that, unlike the Great Depression, bank runs will be very limited which will allow for further credit expansion.
Ryan L Morelli:For your information and everyone else on here, most of the banks in this country are already insolvent. The Black-Scholes model is a sham and so is market to market accounting (Mark-to-market accounting sets the value of (or "marks") the assets on your balance sheet to reflect their market sale prices). By valuing properties at their perceived value is a pipe dream, (another banker created sham), and projecting values via the Black Sholes model is a disaster waiting to happen. Banks are wholly insolvent, pretty soon you will all be woken up. At that time I'd like an apology for your hair brain posts and a fee for my education which mostly falls on deaf ears.
Thanks, but I already knew the banks were insolvent. The question you should be asking yourself is, if the banks are insolvent (which they are), why have there been no bank runs? This illustrates my previous point. They ARE insolvent, but without bank runs, the money supply will not contract and hence credit expansion will continue.
Ryan L Morelli:We are going into a hyper deflation as the Fed continues to sell short term paper and buy their long term notes to drive the rates down. They are getting money for nothing and buying their long term paper. THERE IS NO PRINTING OR MONETIZATION GOING ON. To say monetization will occur as the FDIC hands out money to you and your mommy is NUTS. You live in fantasy land.
Again, the lack of bank runs only allows for further credit expansion, it is not the source of credit expansion itself. I'm not sure where your getting this information that the Federal Reserve is not printing. It is false.
See this article:
http://www.bloomberg.com/apps/news?pid=20601087&sid=aeP8.XnGrN64&refer=home
"Officials unanimously voted to expand the Fed’s balance sheet up to $1.15 trillion"
The Federal Reserve expands it's balance sheet by printing dollars and buying debt. This is occuring presently.
Once again, my argument is that credit expansion is unlikely to be halted by bank runs and therefore the likelihood of a "runaway boom" is greater.
You don't say???????????
U.S. Economy: Consumer Prices, Industrial Production Decline
By Shobhana Chandra and Courtney Schlisserman
April 15 (Bloomberg) -- Consumer prices posted their first annual decline since 1955 (that is deflation naysayers) and unused American manufacturing capacity reached a record,
alleviating concern that Federal Reserve actions will cause inflation to soar.
Wow what a shocker this news must be for most of you.
As far as Debtus wrote:
I don't have the time and you don't get it. First you play the logician game with me detailing that I can’t have, 'a great deal of certainty' ok technician ‘I’m relatively confident’, is that better? If you want to correct the logic of my comment when you and everyone else reading it knows what I mean, go ahead, but as far as I’m concerned you are splitting hairs.
Further you state, ' I don't think they will stop bailouts' and 'they indicate' in referencing what the gov't is telling us they will do in regard to the Federal Reserve. They have been definite right on and honest all along? Are you serious? Wake up.
Again, you can think whatever you want. When the government bails out banks most of that money goes back to the Treasury, do you know how the business of banks work? Do you think they turn around and lend it out? HAHAHAHA. You really don't understand how it actually works but your sure ready to state your opinions and correct my, ‘great deal of certainty’ which is the only thing you were correct about in your whole piece, I’ll give you that. My friend you are full of theoretical knowledge without an understanding of the how monetary system actually works. In Germany as an example, runaway inflation took root AFTER the Debt wipe out, that's first.
Furthermore just because you passed Philosophy101 with flying colors doesn’t make your statements accurate.
ryan, i have an observation.
accepted that after an inflationary boom, a 'freed market' would be expected to suffer a deflationary recession. so far so good.
however, a heavy regulated market where the government has ultimate levels of power over the money suppy at its disposal need not experience any net money deflation. they can inflate as much as they like. or accidentally more than they like. fact is there is a political commitment on behalf of the government to inflate as much as possible to avoid deflation. my best guess would be that the governments inflationary action will snowball and override the markets own tendancy to deflate, runaway inflation is certainly an option when the government controls the fed and the treasury. its what central banking and fiat money is all about.the power to inflate and to prohibt rivals to the governments currency.
Where there is no property there is no justice; a proposition as certain as any demonstration in Euclid
Fools! not to see that what they madly desire would be a calamity to them as no hands but their own could bring
Nobody can reliably , consistently predict future economic events , regardless of whether they "understand" Austrian theory, or any other economic theory, or not.
The future is unknowable. Investment decisions made with money one cannot afford to lose, and that are based on the "certainty" of some future economic event, are dangerously arrogant and foolhardy, to say the least.
For more information about onebornfree, please see profile.[ i.e. click on forum name "onebornfree"].
how do you approach providing investment advice services given your aversion for making informed predictions about the future?
One future prediction I am certain of. When the Federal Reserve triples the base money supply in two years, while production is collapsing, then prices will rise. When the dollar loses its reserve currency status then prices will rocket.
As far as today's CPI numbers are concerned, two things. One, The Fed uses substitution to change what's in the basket of goods they are evaluating the price of and Hedonics to further modify that price. As a result, today's CPI numbers underestimate price inflation compared to how they used to calculate it. It gives the Fed the Green light to continue inflation and the additional benefit is the inflated calculation you get in GDP. Two, just because prices are not rising doesn't mean they won't in the future. Dig deeper and you'll see that core inflation was a positive number. We don't want inflation, especially while the economy is still contracting. I hope we don't see inflation for another year. But I doubt we're that lucky. The stock market is likely where it is now due to inflation. The Fed creating money to create loans to buy toxic assets off bank's balance sheets (the Geithner plan) is total inflation.
....However, excluding the impact of fuel and food, core inflation rose 0.2 per cent last month, more than the 0.1 per cent rise economists expected. Over the past 12 months, core inflation has risen 1.8 per cent....
http://www.tmxmoney.com/en/cpnews/b041533A.html
and
http://www.shadowstats.com/article/consumer_price_index
http://www.docstoc.com/docs/1854694/Consumer-Price-Index-Calculation
It's funny, people call falling prices deflation. Rising prices a Bull Market. They rename it inflation after the bubble bursts.
NigrahamUK. In reference to your first post…… Of course there is a possibility, or an option, as you say for inflation to take root. Obviously I do not have a crystal ball and perhaps since you don't live in the U.S. you are not being bombarded with the constant spin of inflation on our 3 major business networks, CNBC, Bloomberg, and Fox. Suffice it to say here in America inflation is the only option they see or speak about, 95% of the time, except for today’s piece which I referenced. This forces the 'regular guy' into the Gold Trade, selling or shorting government bonds, as well as back into the stock market and housing market as a hedge against this runaway inflation. I've heard you must put your money into Gold as our currency is about to be devalued OR you must buy Real Estate as at least a tangible asset that will be worth more than your paper money. My contention is that this is another ploy to suck in the little guy to lose all he has. The capital markets are a place where regular people go to lose their money to the wealthy people, let's face it.
The Government (those who control it) are not going to ruin the currency that makes them strong just yet, there going to take all they can first. Why are they going to destroy the dollar now? To save you and me? NO, sorry, that's not going to happen.
In terms of your 2nd question, I don't understand what you mean?
Normal 0 false false false EN-US X-NONE X-NONE MicrosoftInternetExplorer4 (How do you approach providing investment advice services given your aversion for making informed predictions about the future?)
How do you determine that I have an aversion for making informed predictions? I have no aversion at all. I am short Gold, I am long Government Bonds, Zero coupons to be exact, and I've been long the market since 7000(Dow), on this dead cat bounce we are seeing while the liars pump this market up to 10,000 before we have a colossal unmitigated stock market disaster and decline to under 4000(Dow) sometime in the next 3-9 months, is my thought. We are going to see unemployment approach 25%, social unrest, the nationalization of banks, and the retirement system(401k’s, IRA’s and the like).
How's that for some predictions for you?
To onebornfree bla bla bla.
Yea, I'm we'll aware I'm not God, thanks for that. I'm detailing my opinion simply because my opinion is in the overwhelming minority. EVERYONE who will take a side, or at least the massive majority and just about every single person who's commented on this board is certain of 'runaway inflation'. If not certain they are sure convinced of it and I say NO. WRONG. Deflation ensues, we have a depression worse than the 30's, the money is stripped from the American people out of their 401k's, IRA's, Real Estate, and Gold (LOLOL) over a 7-10 year period. After this has finished we will see runaway inflation that will usher in a new currency and a true New World Order.
Hey Nirgraham, how's that for my own informed predictions?
Disclaimer: This information contained herein is simply opinion and I take no responsibility for any monetary loss that anyone here or otherwise would occur because of my predictions.
the stuff i said about informed predictions was to onebornfree who i'd asked that question to before and he never answered.
Making a comment on here is dangerous; I can kiss a few hours of my day away.
Bearing I'd be careful about being sure of anything. I just take a hard line because most everyone has the same opinion as you. Albeit yours is more informed and read, I don't agree. If you think the dollar is losing its reserve status next year, you've got another thought coming. I agree that the numbers the government pump out are a bunch of BS. I have friends in high places at these bureaus and they tell me on no uncertain terms, 'so you think only private companies cook the books?' I can read between the lines and I guess you can too. I agree that inflation wasn't spoken about while prices were rising but do you disagree that it's called inflation? If falling prices and decreased demand isn't deflation what is?
Lastly again you speak about the Fed's tripling the money supply. Why don't you explain to us the difference between, printing money and the tripling of the money base supply AND monetization. How is that money going to get into the hands of consumers? How is that going to cause inflation? The money is not being flooded into the marketplace? All it's doing is replacing the money that has been lost in derivatives and other financial instruments, it is not being monetized. Please explain how it is being monetized or being put in the hands of spenders to decrease it's value and cause inflation?
Got it Nirgrahm.
"how do you approach providing investment advice services given your aversion for making informed predictions about the future?"
First of all, I take great pains to avoid applying the term "investment advisor" to myself. Your question is a good example of why .
As with anything else, people use terms based on their beliefs/assumptions about what such terms actually mean.
For example, you appear to believe that it is the job of investment advisors to predict the future.
At this point, why you would believe what you believe is a matter of conjecture, or maybe curiosity for myself, nevertheless it is what you believe, for what ever reason.
I claim no such ability to predict future economic events and therefor do not claim to be an "investment advisor" by your definition.
"how do you approach providing long-term financial safety+ asset protection advice services given your aversion for making informed predictions about the future?"