Wednesday, November 26, 2008

Jesse on Inflation and Deflation

Jesse at Jesse's Cafe Americain has a 12 November 2008 post on Inflationistas and Deflationistas, link:

I'll stick my 78 (2-1913) cents in! I am an unapologetic hard core "Inflationista". Could I be induced to switch camps? Yes, once: Citigroup, Bank of America, Goldman Sachs and Morgan Stanley all go into Chapter 7 and no sooner. And maybe not even then. As it is written, "I returned and saw under the sun that--The race is not to the swift, Nor the battle to the strong, Nor bread to the wise, Nor riches to men of understanding, Nor favor to men of skill; But time and chance happen to them all", Ecclesiastes, 9:11 (NKJV). Now I'll add my spin: All true, but that's how the smart money bets. Until the US returns to the gold standard, I see inflation ahead.

I recently stumbled upon an article first published in 1970, which I read in about 1982, that made its way to the web, "The Nightmare German Inflation", link: Anyone who is seriously interested in the inflation-deflation debate should read this.


Printfaster said...

This quote from the 1970 paper has the strongest resonance:
"biggest beneficiaries of this enormous redistribution of wealth were feudalistic industrial leaders who distrusted the democracy and who proved willing to deal with Hitler, thinking that they could control him."

I keep thinking of the slow dance that dictators seem to have to consolidate power: Hitler, Castro, and Chavez among others. Incrementalism is the strongest modus.

Independent Accountant said...

Isn't the paper a gem?

Printfaster said...

Thanks IA
The paper is more than a gem. It is Mary Shelley writing Frankenstein. A true horror. Anyone who does not shake after reading it has no sense.

It is by far and away the best analysis of fiat currency and its only outcome. It really parses the issues.

What is scary is that the whole world around 1909-1913 went to fiat currencies, that is the major powers. It may not have been a conspiracy, but the global thinking that went with it is redolent of today.

I see the future president had yet another news conference today an wheeled out the corpse of Paul Volcker. I suppose that they can wheel out El Cid, they can put Paul on Wheels.

I am on record as calling out Volcker as the worst fed chairman ever. His rescue of the fiat currency system destroyed US industry and agriculture in favor of the US finance industry. We have been living with this folly for the last 30 years or so. The US needed to takes its medicine on negative trade balance earlier, not continue to rig the currency for massive collapse, and take the world with us. The world may not join us. Russia and China and even Germany seem to be aligning in our opposition, economy wise.

Oh, and the nonsense being propagated that China cannot pick up the consumer demand slack vacated by the US. Balderdash. When the dollar sinks to 1/4 of its value, the value of export to USA will fall below the demand generated internally to China. The artificial dollar value of such great accomplishment by Volcker will collapse, causing the final decoupling.

See also how Al Qaeda is "testing" BHO already? Not even 6mo into the his future presidency. I do not think that he even knows that he is being tested in Mumbai/Bombay. Or cares.

Independent Accountant said...

I read the paper 26 years ago and it stuck with me as something all Americans should read. When I stumbled across it on the web, I decided to wait for the right post then link to it.
As for the major countries adopting fiat currencies in 1909-13, I think it was done to facilitate each country's ability to go to war. As Eliot Janeway wrote, "war is bearish on money".
Russia and China are big boys. Each will do what is in its own interest, Uncle Sam be damned.
You write about the dollar being reduced to 25% of its current value. I estimated it needed to be reduced to about 20%. I will find my post on it.
Michael Savage made your comment about BHO being tested by the 78 people killed and 250 injured in Mumbai today. I say let India deal with its terrorists. All we need say is we side with India no matter what it does to the terrorists.

Independent Accountant said...

My 4 July 2008 post, I wrote of an 84% reduction, or to 16%. See, you're an optimist.

Printfaster said...

China knows that it needs to shift to internal demand. They will move the dollars they to petro purchases to stimulate the internal economy and that will be done with motor vehicles, an industry that does not exist.

Russia is getting weird asserting even in some quarters that Alaska is a "lease". These guys are bullies and if they detect even the slightest weakness or hesitation, they will smash. Think the cossack, who only attacked the weak.

As for Mumbai being a test, it was strictly an attack against US and British nationals. They searched only for those holding US and UK passports. It is most emphatically not an Indian affair. It demands retaliation by USA and UK.

The test is a prototype of what could happen in New York. It could be against hospitals , airports, train stations and Wall Street, all in concert. This was a muscle flex and logistical test. What they are testing now is their communications and coordination to see if it can be detected, and the will of the US to retaliate an attack on its citizens.

Anonymous said...

One difference - we wont have increased wages. Without that, prices can only rise so high.

Anonymous said...

The attack in Bombay (presently, Mumbai) was the LATEST test for green (but not in environmental extremist sense) Barack Millhouse Obama, our pathetic secular socialist president-elect. Russia did it FIRST by bullying Millhouse Obama with its threat to put nuclear tactical missiles in Kaliningrad against the [proposed] U.S. missile shield in Poland and Czech Republic. SECOND, Israel and Hamas exchanged missiles. THIRD, Iran tested an intermediate distance missile with hard fuel (more precise) aimed at the border with Iraq.

The world will be more dangerous with the secular-socialist Democrats in Congress, with some so-called centrist Republicans (i.e. without a spine or balls) and our poor, weak, useless Millhouse Obama.

Anonymous said...

I like Obama, as a person, but I've worried about how tough he will be...

I concur with the analysis in these comments... my main fear about O-Man was how tough he can be... he totally caved already to the financial/Fed/dealer cartel and he is being probed on the defense side... harden up O-Man... our enemies are wily, hard and willing to mess with you...

Printfaster said...

Some grist for the mill, Bolton on foreign policy and defense in the years ahead:

Not good. All we need now is a new fiat money regime and we can repeat the 1909 to 1924 period, with this time the US as the loser.

Anonymous said...

Good reference Printfaster,,,

A money quote from Bolton...

"But the way the new administration handles Russia will have enormous consequences not just for us, but on our friends in Europe, too, too many of whom think that with the end of the Cold War they have passed beyond history and no longer need to be concerned with threats outside of their region. In fact, Europe is actually more vulnerable now because of its dependence on Russian oil and natural gas. That dependence is what led to weakness in Germany and others when considering what to do with Georgia and Ukraine,,,

Oil..oil.. Middle East...

Know of any online resources that show which way oil resources flow... like Russia to China... Russia to India?

Seems like you want to mash that up with financial flows and political alliances... then move that through time... Bolton is good but not enough dimensions in the analysis...