Is It a Deflationary Depression?

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Posted by Peter Underwood on 7/28/2010 6:41:22 AM

Excellent analysis DB, thank you and supported by a recent review of the Japan condition by Dr Housing Bubble:

Japan was the first major economy to go down the path of quantitative easing injecting enormous amounts of money into their economy to stimulate growth. Some point to unemployment in Japan remaining low but economic data can be skewed.

Officially 1 in 3 Japanese workers are considered part-time, as in America, offering few benefits, lower wages, and little job security. Asset prices in Japan have remained depressed for a long time just as prices in the U.S. are showing no sign of inflationary pressures because there is no way to push up wages up given the over-supply of labour in the market.

Central banks can print but they can't force wages up especially in a global market with low wages. The zombie US banks are hoarding funds:

Click to View Link

Banks are hoarding money to fix balance sheet imbalances, have suspended mark to market to avoid disclosing the degree of their insolvency but exposed in Bank Failure Fridays (see Click to View Link Tuesday, July 27th, 2010 in: Jim's Mailbox,) and are dragging out real estate problems by delaying foreclosures.

Four out of ten workers are in low paying jobs some fifteen million are officially unemployed with another nine million workers employed part-time similar to Japan.

The real US economy is stagnating at best, but if Japan is any indicator, recent reports of improved banking and corporate profits will begin to adjust downward in the coming quarters.

Precis from Dr Housing Bubble July 24th 2010
Click to View Link/

Reply from the Daily Bell:

Thanks for the links.

Posted by Adam on 7/28/2010 7:57:48 AM

DB Cite:

This is an Austrian free-market analysis. Such analysis perceives central banks as over-printing money, which fools people into believing that the economy is better than it really is. Thus, businesspeople over-expand and consumers splurge. Eventually the larger market realizes the reality of what is occurring and stocks pull back (often crash) and a "recession" sets in.

The credit-system analysis (as I understand it) AND the georgian analysis would say, at the beginning of the business cycle, banks extend credit to borrowers to 'invest' in real estate; more credit/money is thus created and interest rates are lowered to reflect the greater supply of credit/money ...

As speculation on house-prices and other malinvestments increase due to erroneous cheap money price signals, banks also 'request' central banks to lower reserve requirements so they might lend more and also lobby government to legislate/direct money into the rentier economy ... "boom"; bubbles; "bust" ... banks tighten; government bailouts of failing banks; the rentiers cry out in pain; central banks wail about debt deflation and THEN start up the printing presses in a vain attempt to save their rentier friends. Foreign creditors panic at the printing and send the 'sovereign' debt home by buying up assets. The result: Biflation, simultaneous fiat money inflation (causing price-inflation) AND debt-deflation.

Here's a very good explanation of how all of this gets started:

YouTube -- BubbFromGEI: Property Bust after 14 year Boom: Fred Harrison

Part 1: Click to View Link
Part 2: Click to View Link

My notes:

'Harrison breaks the cycle down into 5 phases: #1 RECOVERY (7 yrs): After the previous crash, optimism returns. #2 MINI-RECESSION (A few months): Will typically bring calls for lower rates and tax cuts. #3 EXPLOSIVE (7 yrs): Low rates, mortgage tax breaks and loose lending terms combine to fuel speculation. Greed eventually overwhelms fear of being left off the property ladder. People con themselves into believing houses are an 'investment' rather than just a place to live. #4 WINNERS CURSE (The last 2 yrs): Wild enthusiasm for capital gains. Property must be acquired at any price cursing everyone with unsustainably high valuations. #5 CORRECTION (3'5 yrs): Mortgages default. Risk is perceived again. Banks tighten up; liquidity/credit/money dries up. Banks sell repossessed inventory at low prices. Prices are driven down. Mortgage holders who bought during the bubble now expect capital losses. Renters switch from renting into buying setting the stage for the next recovery.'

And again, from Steve Keen's analysis, we do not suffer under a fiat money system, but a credit money system with the backing, cheerleading and manipulation by those people calling themselves "the government" (though Keen doesn't mention this because he's likely a statist.)

Steve Keen: "The Roving Cavaliers of Credit"
Click to View Link

Feedback and well-reasoned corrections very welcome.

Reply from the Daily Bell:

The Georgists emphasize real estate above all. Austrians emphasize money. We respect Georgist analysis, but we hang our hat with 300 years of mainstream free-market economics.

Posted by Pat Fields on 7/28/2010 8:19:44 AM

DB Cite: "Recessions occur because central banks print additional money when the economy starts to slow."

We perceive cash infusions as voluntary acts of banks and governments to purportedly stimulate economies suffering from either lack of productive capacity to meet consumptive demand or lack of desire among consumers to absorb production of goods.

Might there be an identical appearance where combined loan principal pay-offs and refusal to contract additional borrowings have so depleted circulation that gross interest service can't be met? That being the case, in order to create funding for interest service, the banks and governments are rather involuntarily compelled to 'publically' issue that 'interest money', not to stimulate the economy per-se, but to maintain circulation sufficient to continue interest service and (hopefully) stimulate enough new 'private' borrowings to maintain interest service sans 'infusion' (until that new 'cash' is once again primarily concentrated into premature principal pay-offs leaving little float for interest service).

This seems a better explanation of the so-called 'business cycle' than the 'imbalance and misallocation' interpretation we're most familiar with though some elements of it are quite plausible.

Reply from the Daily Bell:

What we meant was that central banks print more money during the down side of the cycle so as to produce a shallow "recession" rather than a sharp deflationary depression.

Posted by Adam on 7/28/2010 8:36:16 AM

@Daily Bell

That's not really an answer. 300 years of anything is simply an appeal to authority, in this case, the presumed authority of time.

Austrian Economics isn't 'mainstream'. Perhaps it could be if its promoters would be open to debate.

If you could spare the time to explain more precisely how it is bursts of fiat-money printing that cause malinvestments at the earlier stages of the business cycle rather than the lowering of interest rates and reserve requirements, I would be very grateful.

Reply from the Daily Bell:

Austrian economists created the concept of marginal utility, which is the dividing line between classical and neo-classical economics. In other words, Austrian economics DEFINES economics for the rest of the economic world. That's not mainstream? What other "real" economics is there if not free-market economics? Keynesian economics?

Central bank money printing as we use the term implies every kind of monetary stimulation from low rates and reserve requirements to increased injections of "money stuff" into the economy. All central banks ever do these days is inflate. The idea that central banks would expand and contract the money supply to mimic the free-market's monetary actions died with the Great Depression when banks apparently DID contract the money supply - and aggravated an already terrible situation.

Posted by Leonardo Pisano on 7/28/2010 9:17:51 AM

Very well done, DB.

A deflationary depression is not so strange as it may appear in the light of all this money printing. Business see their revenues wind down and take action to cut their costs (reducing production, selling inventories, lay off employees, etc). To keep their sales going they reduce prices as their inventories are already there.

Next, the people pay off debts and reduce their spending to necessities. This obviously spirals down the economy further, making businesses cut prices further, etc. That's why govs are keen to talk about recovery: the consumer must be pushed to keep spending (start spending again). Note that non-spending customers bring governments in deep trouble " the GDP shrinks, their annual budgets overflow so their debts grow exponentially. In fact, the amount of money is sufficient and printing this would not be necessary. But the problem is, it is in the hands of the common people and these idiots don't spend! So printing money is the remedy, and has the linked effect that people start spending, being afraid that their money becomes worth less (monetary inflation).

Then the central banks have "rescued" the economy, reverse the money supply, and the next cycle can start. So money printing is all about manipulating the common people. The only danger for the manipulators is that people cannot be moved to start spending again. Hence, ensuring that people maintain trust in the money system is vital: that's why banks are bailed out, that's why they talk recovery and green shoots, stimulus plans, etc.

That's why people must be discouraged to take their savings from the bank system at all costs ' then money is no longer visible by the manipulating central banks. This also explains why at the same time fear is put into the heads of people by broadcasting that a collapsing financial system would imply they lose all their savings, instability etc. This subtly promotes the need for a strong central organization.

I see the system like a pyramid. On the top the central banks, then the commercial banks, next investors and big businesses, the next layer are the small business and at the bottom the individual people. Monetary inflation trickles down slowly from top-to-bottom, and this is the reason that Joe and Mary Average only gets confronted by price increases after a while. They then begin to move and protest for increased income " but it's too late. This system also explains why govs do everything they can think of to keep the banks in business (including the "too big to fail" policy).

Banks are the distributors of the money, and essential for the money printing to work (well, at least in their minds). The ultimate inflation is of course welcome to govs: it helps to cut the debts (whilst absolutely equal, they will be relatively lower) and the increased GDP helps them to pay back the loans. Increased salaries for Joe and Mary Average bring about a fallacy of becoming wealthier and are effective in keeping them silent. It's of course a kind of Ponzi scheme where the first (banks, big businesses) profit and the last (the common people) pay the price.

Indeed a gold/silver standard is the only way to stop this robbery. Thanks, DB, for making this so clear.

Reply from the Daily Bell:

Different analysis of same mechanisms. Very good and interesting. Thanks.

Posted by Adam on 7/28/2010 9:44:01 AM

Dear Daily Bell,

Please don't get so upset by asking rhetorical questions. As you should be able to discern, I am far from a keynesian (but you're playing to a crowd, so I can excuse the over-reaction).

Marginal utility. Great idea! It fits the facts. And if we're being correct, a school of thought doesn't create anything, a man had an idea and now that idea exists as part of our understanding of the 'laws of reality', until such time that the idea is improved by scientific method.

DB Cite: Central bank money printing as we use the term implies every kind of monetary stimulation from low rates and reserve requirements to increased injections of "money stuff" into the economy.

Excellent. You have defined your term and the 'Business Cycle' popup (in article above) puts it all into perspective. Thank you!

Yesterday I quoted Steve Keen:

Click to View Link

Keen: "I think [the Austrian school] have a naive theory of money: the state makes it, so the state causes inflation."

Clearly he is misinformed about the depth of the Austrian school's perspective.

Would it help to make a more complete definition of 'fiat money' (defined in the pop up above) if it included an explanation of the mercantilist relationship private banks have to the government and in collusion with central banks in the creation of credit?

Reply from the Daily Bell:

Did we sound upset?

The issue of private banks in collusion with central banks is not especially important from our point of view in the sense that it is the mercantilist central bank that is the cause of all the trouble. No private/public central bank, no problem. Let the market decide.

Here is a link to free-market thought, though you sound as if know a lot about it anyway ...

Click to View Link

Posted by Lila Rajiva on 7/28/2010 10:14:15 AM

@DB

Just a small point offered in a constructive spirit.

With respect, you were adamant that mentioning religion or race in relation to the elites was divisive and misleading.

But then you use the term Anglo-American, which is, at least, a linguistic and national grouping. Yet, many of the banks and organizations are not Anglo-American at all, but continental European.....and others...

Shouldn't sauce for the goose be sauce for the gander?

Reply from the Daily Bell:

True. But it is the Anglo-American empire that rules them and binds them.

Posted by Jack H. Swift on 7/28/2010 11:04:32 AM

Didn't the first phase of the Weimar hyperinflation begin with price deflation?

Reply from the Daily Bell:

Don't know. Not sure it has much direct application, though.

Posted by Victor Barney on 7/28/2010 11:18:29 AM

Dominant Social Theme: "A deflationary depression coming at ya." Is that the same as an economic crash? I know whenever a country is involved in a Marxist takeover by it's own Manifesto, there must be both an economic crash and holocaust. I don't see Obama changing much from the way his idol Mao did things.

Reply from the Daily Bell:

"Is that the same as an economic crash?"

It is longer.

Posted by Ray Simons on 7/28/2010 11:22:51 AM

1. A central banking system (the Federal Reserve) is a grant of power over the people to private businessmen (bankers).

2. The purpose of taxes is to pay the government's bills and not to "manage the economy.

3. Fait money always leads to tyranny.

4. When cooperations merge into "trusts" or
"cartels" gain control over the government which is just another path (read freeway) to tyranny.

5. Socialism is nothing more than the ownership or control of the means of the production and distribution of goods and services.

6. The very purpose of government is to protect me from you and you from me and not to provide for either of us. &. To the extent that government moves from a protectorate to a benefactor it has moved from freedom to tyranny.

7. It has always been thus and ever more shall be.

Posted by Adam on 7/28/2010 11:36:18 AM

@Daily Bell

Many thanks for the link. (Every little helps.)

Cite: The issue of private banks in collusion with central banks is not especially important from our point of view in the sense that it is the mercantilist central bank that is the cause of all the trouble. No private/public central bank, no problem. Let the market decide.

Which came first?

Mercantilism is a methodology and all who employ it MUST be revealed along with your constant, and much valued, explanation of the methodology itself.

It is important to be comprehensive and accurate in your definition as possible else you are shielding bad actors for what can justifiably perceived as ideologically-defensive reasons i.e., that you do not want to further disparage private enterprise and the free-market any more than the statists have already been able to.

While this is so, the sniff of defensiveness remains and provides ready rhetorical ammunition for your ideologically-minded detractors -- and if history proves anything it is that they have successfully exploited this vulnerability time and time again.

I remember a few months back the DB talking about the possibility that the term "capitalism" might now be indefensible. Such a concession, if only an offhand aside, provided much proof of your honorable intentions (rhetorical disinterest).

Reply from the Daily Bell:

Which came first?

Obviously the private market moved to take over the public market. Or to be more precise, the Red Shield moved to refine the mercantilist banking art around the world. This much is obvious. But the problem is not Jewish. The problem lies not with banking. The problem lies not with Wall Street or even the City. The problem does not even lie with the Talmud. The problem lies with unholy public/private alliance between state and industry in which industry uses the color of law for its own benefit. It is a systemic problem. It seems to be very hard for people to understand for some reason.

Posted by Carl on 7/28/2010 12:05:40 PM

Adam's post is 100% correct.

Credit is not money, it is the pretence of money, a bankster fostered fiction of promised wealth that can only exist and function as if it were money for as long as the system that runs on it can inflate.

When credit can no longer expand, it ceases to function as money and it invariably reverts to its natural state, DEBT. You can't spend debt..............

One would think that after Iceland everyone would've gotten the clue, but it appears they haven't.

Posted by Adam on 7/28/2010 12:32:21 PM

@Daily Bell

Cite: DB: But the problem is not Jewish.

Cite: Adam: Mercantilism is a methodology and all who employ it MUST be revealed...

I just want to make it perfectly clear that I am not one of those that wants to take names or ascribe blame to abstract categories of accidental genetic characteristics and lands of birth, though my above comment could have been misconstrued that way. Apologies for any confusion. I will be far more careful with my words. So, instead: "ALL men, women and corporate fictions who employ the violence of the State..." .

Cite: DB: The problem lies with unholy public/private alliance between state and industry in which industry uses the color of law for its own benefit. It is a systemic problem. It seems to be very hard for people to understand for some reason.

Yes, this terrible addiction to statism and violence that people cannot acknowledge without also admitting their own culpability and utter humiliation in acquiescence to it.

There is a community of philosophers working HARD on freeing people from this:

Click to View Link

Reply from the Daily Bell:

Good. Glad to know of them. And thanks for the link.

Posted by Edward Ulysses Cate on 7/28/2010 12:35:18 PM

If you understand that raw materials plus labor creates wealth, then you'll understand that wealth is insidiously stolen from its creators by those who lie to steal, otherwise called pilfering or plunder. Those who have less wealth trade less. Period.

There's nothing wrong with fiat money as long as everyone understands it's only a promise and that promise is kept. If you exchange a certain amount of promises for physical gold or silver, you then have an asset with no promises attached. Unfortunately, folks are lied-to so that a few others can steal the wealth which those folks had created.

Promises must be kept to be believed, and when more money (paper promises) is created than necessary for purely commercial exchanges, it reduces the value of all previous promises. If men cannot keep their promises, what good is gold- or silver-backed promises? If men lie-to-steal, would you not expect gold- or silver-backed promises to eventually be backed by gold-coated tungsten bars or silver-coated lead bars? How would you know? Even today, folks don't have access to EXACTLY what gold their country ACTUALLY owns. It's a state secret. Why? To protect those who control the state from those who create the wealth.

The real problem is that those who lie-to-steal continue to be allowed by governments to continue their plunder, as long as they get a cut. If you own physical gold or silver, you have converted your holdings of promises to a physical asset, and deprived those who lie-to-steal access to your wealth. Whatever stocks, bonds or other promises you hold, you permit those who lie-to-steal access to your wealth.

Understanding promises is fundamental to understanding economics. Just like understanding which-way-finger-bends is fundamental to understanding martial arts. The latter allows you protect your body and the other allows you to protect the results of your labor. It's basically that simple, but requires much thought, effort and understanding to be able to defend yourself and your wealth.

As for the general well-being of society, when most promises are kept, we have booms. When promises are not being kept, we have recessions. When most promises are broken, we have depression.

I'm not smart enough to come up with this idea myself. It is explained in the 1938 book "Promises Men Live By," written by Harry Scherman. I'm sure they were looking for economic answers at that time in history, just like we are now.

Posted by Kevin Fisher on 7/28/2010 1:18:56 PM

To stay on the Deflation topic specifically, most of the "Press" I read about in alternative circles is almost universally calling for hyper-inflation and the ascendancy of gold and silver as investment mediums.

I am constantly seeing headlines saying "Now that gold is down a little, this is a great time to buy" and "Gold to hit $2, 3 or 5,000 per ounce" take you pick of the upper number. Now that I have been studying the work of Robert Prechter at Click to View Link and studied the historical charts that they use to back up their position, a deflation has already arrived, just as predicted, and the facts of history show that in a true deflation ALL asset classes go down, including gold and silver.

So I ask all of the people rushing to buy various commodities at these inflated prices to do a little reading by someone other than a gold bug. A great place to start would be Prechter's book "Conquer the Crash". It was a turning point in my thinking about the markets.

A case in point is the gross misuse of the term "printing money" and comparisons to Wiemar Germany hyper-inflation. Credit expansion, which is what has been occurring, is not the same as printing money and has a different set of effects, or a different timing of effects, both of which are ruinous of course.

Reply from the Daily Bell:

Credit expansion is not "circulating money," if you want to use Austrian definitions. Money has not yet started to circulate. But it will in time, if the system does not disintegrate first. The Wiemer hyper-inflation is not necessarily a good example of anything as it was a tiny region with odd circumstances. But there was huge price inflation in the later 1970s in America during an economic era similar to this one. We suspect that this cycle will eventually correspond to what happened then. This means there are one or two legs to go and another perhaps five years before the cycle turns once more.

Posted by Richard Daughty on 7/28/2010 1:56:01 PM

Bravo! Put as well as I have ever heard it put, and perhaps as well as it can be put!

Reply from the Daily Bell:

Ah, such kind words from the Mogambo Master, Wreaker of Havoc and Perdition on All Economic Churls and Falsehoods Everywhere All the Time. We are ever so humbled and pleased.

Posted by Ed Waggoner Sr. on 7/28/2010 2:21:03 PM

Very good. But, we differ in a small way. "What is really necessary at this juncture is the emergence of a private gold and silver standard. Perhaps one will emerge spontaneously. These are strange times, so perhaps it is possible."

I don't believe in a gold and silver "standard" if by the use of the word "standard" you mean fiat paper and ink currency backed by gold and silver. It seem to me that neither government nor private banks or even state banks can be trusted to print and manage fiat paper and ink currency.

Let's say that Jack writes a check to Bob to purchase a used car. Bob will deposit the check in his bank, gold will be transfered from Jack's account to Bob's account. What is of capital importance is that the check is canceled and is no longer in circulation. No increase in the supply of money in circulation, consequently, no inflation.

Reply from the Daily Bell:

It is an endless debate. To a degree, we are partial to Selgin, White, Fekete, et. al. And to the free-market itself.

Posted by Edward Ulysses Cate on 7/28/2010 2:25:41 PM

To understand my earlier comment as it relates to this article, here's a more realistic version of the article's conclusion:

Conclusion: The bankers already have a fallback plan, of course. They will apparently suggest a kind of IMF promise [money], and insist that such new promises [money] will ameliorate past problems [of previous promises]. The US promise [dollar] and perhaps the EU promise [euro] may be sacrificed to popular wrath and a basket of other promises [currencies] implemented as a new world promise [money].

Deflation could occur simply because folks have less ability to trade due to what's stolen from them. A Dow 10,000 doesn't mean any more than a Dow 1,000 if everything else is priced 10 times more. In 1968, my gallon of gas cost 25 cents. Now it costs at least $2.50. But my labor is said not to be worth 10 times as much as I did in 1968. The same amount [1/8 ounce] of silver buys a gallon today as it did back in 1968. But in promise money, my 1968 quarter [1/4 dollar] only buys a tenth of a gallon. The difference was stolen, pilfered over time, like rats pilfering corn from a silo.

Central bankers, along with key institutional bankers, know exactly what they're doing, and have for hundreds of years. After all, ScotiaMocatta (precious metals), founded in 1671, and Barclays Bank, founded in 1690, are still key players. They really don't want you to understand "promises."

Posted by Snowman on 7/28/2010 3:04:26 PM

@ Daily Bell

Cite: Obviously the private market moved to take over the public market. Or to be more precise, the Red Shield moved to refine the mercantilist banking art around the world. This much is obvious. But the problem is not Jewish. The problem lies not with banking. The problem lies not with Wall Street or even the City. The problem does not even lie with the Talmud. The problem lies with unholy public/private alliance between state and industry in which industry uses the color of law for its own benefit. It is a systemic problem.

Could it be that an internal connection of all the "non problems" listed could be the systemic problem?

Reply from the Daily Bell:

What!

Posted by TMoore on 7/28/2010 4:44:41 PM

Price discovery. On this, much depends.

Posted by Liberty666 on 7/28/2010 5:05:16 PM

Weimar republic had an inflation problem, you needed a wheelbarrow full of money just to buy a potato.

Reply from the Daily Bell:

We never denied it. It is a cautionary tale, especially given what is going on today. But it is difficult to compare the Republic to the larger West itself. Like comparing a mouse to an elephant. Nonetheless, there are some similarities and monetary price inflation is not necessarily ameliorated by size.

Posted by Rolland Carpenter on 7/28/2010 7:05:58 PM

The two plus trillion dollar surplus in Social Security is gone! Pooof! Two plus trillion has been given, yes given, to those "Too Big to Fail". This will not be recovered, beyond one or two percent in taxes, fines and TARP repayments. During this same period of financial manipulation fraud, two or three trillion has been added to America's national debt. Social Security "contributions" were sold as a secure retirement fund. Now, only the billionaires will be paid--and they paid nothing into the "insurance" they collected.

Posted by Bionic Mosquito on 7/29/2010 12:31:30 AM

Deflation of what? CPI? No way. Won't happen and even in the deflationist's darling Japan, hasn't happened. Look at Japanese CPI -- a few years of negative change, but not more than negative 1% or 2%, many years of positive 0% or 1%.

In the era of central banks and fiat money, CPI deflation will not happen because they fool us into thinking CPI is the "target," in an attempt to distract us from the theft. As long as CPI is tame, the banks will feel politically safe to pump. And they will pump...to try to protect asset prices, at which I think they will fail because the market always wins eventually.

Deflation of asset prices? Eventually, most likely where fiat most distorts market activity. Liquid equity markets, nonsensical financial-created derivative instruments, etc. Likely to effect gold less than other assets, because the lower the CPI the more money pumping -- see my first comment above -- this will cause continued fear of holding fiat currency.

Deflation where government most distorts economic activity? Likely, yes. Higher education, public employee compensation and pensions, U.S. real estate, etc.

Posted by Philip Mccormack on 7/29/2010 12:37:43 AM

When one looks at "Too big to Fail" and reads Fekete's recent article."There is no real gold market any more. Goldman Sucks is playing with itself. Most trades are bogus, sales as well as purchases. Leases ditto. What Goldman Sucks couldn't get away in a falling market, it can in a rising one."

Perhaps this was the major reason for the bailout. "Gold bidding for dollars can be kept alive on a life support system. Indefinitely?" Thus enabling the fiat money system (with the cover up of backwardation) to continue for a long time. And of course we don't know how large the profit margin is for Goldman, and how it fits in to a deflationary depression. DB, what is your take on this situation? Happy days ...

Reply from the Daily Bell:

We tend to look at these issues within a business cycle that is playing itself out now and has years to run. Within this context gold and silver seem headed inexorably higher. But hey what do we know?

Posted by Chris F on 7/29/2010 1:21:40 AM

What I don't get is how they plan to get people to accept the IMF SDRs on faith. The dollar was once on the gold standard and people were use to it, so when the gold standard was dropped people continued to use the dollar. When the dollar gets dropped as the world's reserve currency, isn't that going to cause a big drop in the value of the dollar? Won't that be a huge problem, not only for the bankster elite but also for the Federal Government? It seems to me that they are just stirring up a hornet's nest of trouble with not much of a viable plan to execute when the dollar goes bust.

Reply from the Daily Bell:

We don't get it either. We don't believe it will work.

Posted by AmanfromMars on 7/29/2010 2:29:46 AM

"The question that will be asked in the meantime (though never in the mainstream media) is whether people will continue to tolerate the system as it is or demand changes."

Whatever would be the good reason for retaining a system which is catastrophically failed and demonstrably failing spectacularly fueled by a lack of intelligence in bankers, who now wouldn't know a good investment opportunity even if it was presented to them, which is surely what the Daily Bell has just said in the article.

And that is where the problem lies .... right at the head of the system with central banking in a mental block and a Bind and being bankrupt of original ideas, and yet would think themselves to be worthy sagacious paymasters and remote proxy vetting agents for those floating original ideas on the Markets ....... which of course would be to be using completely different intelligence to that which has failed everyone so badly and madly, and thus will it naturally assume an absolute and presumptive overall control with new players seeing an altogether different future ...... which, by the way, is only natural and to be fully expected, as to imagine that anything remains the same is to be delusional and is an insane block on progress and industry and economy.

Fortunately though, are the necessary remedial steps well into their stealthy actions, for SMART Intelligence Services do not need or wait on Protocols and Permissions to Decide to Act Unilaterally and Universally with Stormy Tempestuous Clouds Covering and Hosting New Programming in Advanced Operating Systems.

Such Systems as would it be not here, the time or the place to expand upon, but which are trailled and trialled in anothher phorm for others to consider, here ..... Posted by: amanfromMars | 07/29/10 | 12:46 am | .... Click to View Link/

Posted by MGN on 7/29/2010 7:27:51 AM

Very well written and on the money facts. Maybe when the craziness of all the government games begin to stall out they will mail us cancelled checks for all the nonexsisting things they are buying us.They can send us self addressed boxes with pictures of gold and silver and we can send them our real coins in return so that the wizard of fiat will remain happy.

When the game ends whatever you have is yours.Accumulate what you know is valuable and you will have power over them. Play a hard tough outlasting game of survival. Better times will come after you starve them out.

Posted by Carl on 7/29/2010 11:35:20 AM

"But there was huge price inflation in the later 1970s in America during an economic era similar to this one. We suspect that this cycle will eventually correspond to what happened then. This means there are one or two legs to go and another perhaps five years before the cycle turns once more."

The only thing similar between 1970s U.S. economy and 2010 U.S. economy, it the term "U.S. economy". You may as well be trying to compare a lemon with a watermelon as to compare the two. What's similar, the $57 Trillion in debt? Or maybe it's our industrial earning capacity? How about the 100s of trillions in exotic financial instruments that are dangling like the Sword of Damocles over 'our' Financial District's head, by a fraying thread.

We don't have an economy, we have a debt driven, makeshift busywork clusterf**k posing as an economy and unless you believe that the credit markets are going to suddenly unlock and start flooding the U.S. debt slaves with even more credit, there is nothing about it that will give "high inflation" legs.

And before anyone starts in on 'price pull' generated inflation; if the people can't earn or borrow credit to support rising prices, all price pull will accomplish is a faster disintegration of our makeshift busywork clusterf**k of an economy.

Reply from the Daily Bell:

Perhaps you don't remember the 1970s - especially in the US?

Posted by Charles Pasley on 7/29/2010 12:55:22 PM

I am the main purchaser for our household, and I haven't seen any prices, except for gasoline, going down here in southern Virginia. Groceries, electricity, and health insurance premiums have all skyrocketed for my wife and me during the past two years. Only books and gasoline have come close to maintaining even prices, so if there is price deflation, I have yet to see it!

Reply from the Daily Bell:

Real estate.

Posted by Charly on 7/29/2010 10:28:12 PM

Well, real estate was / is a deflating of an over inflated balloon, that burst due to fraud.

Everything I buy regularly over the last 3 years has gone up 10% to 25% a year. Oh, one other item has deflated,...my social security checks.

Bob Chapman at "The International Forecaster", has much to say about all this, and Goldman Sucks, on a weekly basis at:
Click to View Link

Posted by Charly on 7/29/2010 10:40:47 PM

It appears that that link has been hijacked,...seems to be a lot of that going around on the net these days.

Try going to

Click to View Link

and then pull up the july 28th letter. Hope that works.

Posted by Carl on 7/30/2010 11:57:03 AM

Daily Bell: "Perhaps you don't remember the 1970s " especially in the US?"

Yes I do remember the 70s that's why I stated what I did. While the 70s held their own set of extenuating circumstances that led to high unemployment, stagnant wage growth and high inflation, (primarily due to neoliberal, ideological driven policies that fostered the onset of the destruction of our industrial base and the U.S.'s ability to earn its way in the world), a comparison between then and now, is anecdotal and superficial at best.

I would suggest that one would be far better served in forming their evaluations by examining the economic 'differences' between than and now than they would by limiting their view to the similarities.

Reply from the Daily Bell:

OK, and what are the differences?

Posted by Carl on 7/30/2010 12:30:53 PM

Daily Bell: "OK, and what are the differences?"

A still functioning industrial base.
Higher savings rate.
Almost nonexistant credit card industry.
More cash in the system.
Less debt.
Smaller government.
Less regulation.
More freedom.
One earner families.
Glass-Steagall.
Economic wiggle room.
etc., etc., etc.............

The differences in circumstances are tremendous while the similarities are primarily superficial.

For a better comparative perspective: Click to View Link/

Reply from the Daily Bell:

Obviously we disagree. The 1970s are separated from the 2000s not by a system of polity but by a degree of catastrophe. Still, we thank you for being responsive and presenting your argument along with a link.

Posted by Carl on 7/31/2010 2:10:25 PM

The polity and economic reality drive the degree of catastrophe.

I don't think what we're having here qualifies as a disagreement.