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.
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.
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?[^o)]
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.
Can I meet this man or woman you are talking to?
“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.
I never argued that it was a novel idea. In fact, I gave the citation of MES.
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.
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.
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.
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.
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.
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…
and
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?
(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? [:D]
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?”