Deflation vs. Hyperinflation—Stoneleigh vs. Lira

It’s clear that some type of economic depression is coming to the United States and to much of the rest of the world. In many ways, it has already begun.

The question is, Where is the United States headed?

• A 1930s-style deflationary depression?

• Or a Weimar-style hyperinflationary crisis?

For the first time ever, two of the most prominent writers on this issue will face one another in a live online debate, to be held on Thursday, February 10, 2011, at 9pm EST.

Nicole Foss, a.k.a. “Stoneleigh” at The Automatic Earth, ranks among the most prominent of the deflationists. She maintains that the ongoing contraction of jobs and overall income in the US will lead us into a sustained deflationary depression. Consequently—and in direct contradiction to the advice of hyperinflationists such as Lira—Foss strongly recommends Americans stay liquid in US Dollars and avoid going into any debt. As jobs and many businesses disappear, Foss foresees a crash in the money supply, leaving most people without cash or credit, and a minority hoarding the little that remains.

And as far as me? Well, you who read this know that I’m a hyperinflationista—but a thoughtful one, not some crazed tin-foil hatter. I’ll be drawing on my personal experience from Chile in the early 1970’s, and arguing how the same hyperinflationary crisis will soon take place in the United States, due to the massive oversupply of debased U.S. dollars chasing after a finite supply of tangibles. I’ll be arguing that anyone wanting to survive and prosper would be well-advised to structure their investments and their own personal lives in anticipation of a rapid and stunning hyperinflation.

This live online debate will be moderated by Jay Carter of Financial Survival Radio.

Stoneleigh and I will be taking your questions—live. So if you sign up (and I certainly hope that you will), please have a microphone attached to your computer, in order to participate in the live Q&A.

Remember: Thursday, February 10, at 9pm EST. 

Hope you catch our debate!

GL

The Blind Men & The Elephant—The Totally Bullshit FCIC Commission Report and Dissents, Which Put All Together Actually Reveal Something

The Financial Crisis Inquiry Commission came out with its report—and two dissents!

Wanna cop a feel?

Lots to read! Lots of bullshit to wade through! Lots of finger pointing! Lots of skewed analysis that justify a political agenda!

Whoo-hoo!

Actually, cynical glee is the only emotion that keeps major depression at bay: The FCIC was set up in May of 2009, with the goal of getting to the root causes of the Global Financial Crisis, and find what policies and which actors were responsible for the melt-down. In a very real sense, the FCIC was supposed to be the modern day version of the Pecora Commission—

—but it wasn’t. Not by a country mile.

The bipartisan Commission members cleaved along party lines: The six members of the Democratic majority wrote the report, the four Republican minority members wrote two separate dissents.

The official report of the Commission—the one written by the six Democrats—starts by saying that the financial meltdown of 2008 was avoidable—which is trivially true: Every man-made event is “avoidable”.

Read more »

Not Lazy—Busy

Dear Readers and Kind Fans, 

I haven’t been posting this week because of three reasons: 

• I’ve been getting The Hourly G on track. 

• I’m traveling to the south of Chile for a wedding (I’m leaving today, as a matter of fact). 

• I’ve been prepping an upcoming debate with Nicole “Stoneleigh” Foss—Deflation vs. Hyperinflation. The official announcement will be on Monday, but here’s where you can sign up, if you’re interested. 

Please excuse me for not having posted—but I promise that next week, I’ll make your wait worthwhile: A big ‘un is brewin’. 

Until then, let me suggest you read a couple of old posts which I think are worth revisiting: 

Was Stagflation in ‘79 Really Hyperinflation?

Is the U.S. a Fascist Police-State?

Why Corporations Matter, Part I

All the best, 

GL

The Trooper: Installment V (Pages 110–145)

Another Saturday morning, another installment of The Trooper. Today’s pages are:

• Pages 110–128 are here: Wherein the Trooper defers to dying Baby Boomers, who are now the establishment. 

• Pages 129–145 are here: Wherein the Trooper goes to check up on Kendrick. Not “Kramer”—Kendrick. (A nasty bit of action goes down here.)

For those looking to start at the beginning, click here to read it all in order. 

There is also a missive from me to the readers—this book might get published by a mainstream press: But if that’s to happen, the book needs your support. 

Not money—no. Something much more valuable: 

Readers. 

So pass this along. Be that annoying friend who keeps telling you to read some book or other—and when you finally do read it, it becomes your favorite book. 

GL

See also Is The U.S. a Fascist Police-State?

    

Kremlinology? Call It Fed-Res-ology: Reading the Tea Leaves of the Federal Reserve Board

Time was, no one gave a shit about the Federal Reserve’s board. Who the drones were? What they did? Who cared!

No, not the Kremlin:
The Eccles Building.

But ever since the Fed started to expand its balance sheet in the fall of 2008, what the Fed does has mattered—and now with Quantitative Easing 2 and the effective monetizing of 50% of the Federal government’s deficit, it matters more than ever. 

Next week, on January 25, the Federal Reserve’s Open Market Committee (FOMC) will meet. This meeting is important, because the composition of the board will change—and therefore, possibly the direction of the board. 

So like Kremlinologists of old, we have to start paying attention to what the FOMC looks like, if we want to divine what will happen.

What will happen not merely with monetary policy, but with the American economy itself. 

Read more »

Vacuuming Up the Baby from Mommy’s Tummy

When I was six years old, in Southern California in 1974, I remember quite clearly a conversation I had with a classmate of mine. I don’t remember the boy’s name, but I remember his face, and the expression he had—he was lording it over me and the other boys listening to him in a semi-circle in our first-grade homeroom class, confident in his superior knowledge, yet at the same time hiding a tinge of worry, as he was deploying this superior knowledge without really understanding it.

He was telling us a new development in what had heretofore been a rather boring saga. Previously, he had told us—casually and not particularly interestedly—that he was going to have a baby brother or a baby sister: A perfectly common occurrence among our six-year-old set. In fact a few months before, I myself had told my clique of friends that my mom was going to have a baby, and had gotten an earful of varying opinions about having young siblings—usually negative if it was a girl, but slightly less negative if it was a boy.

But then my friend gathered us all around him with a new piece of startling news: He wasn’t going to get a baby brother or a baby sister after all—and the phrase he used to explain this new development is a phrase I have remembered quite clearly all these years later: He explained that they had “vacuumed up the baby from mommy’s tummy.”

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The Trooper: Installment IV (Pages 84–109)

Another Saturday—another installment of The Trooper: 

• Pages 84–96 are here: Wherein the Trooper meets the Richardson family, then meets Yuri and his “family”. 

• Pages 97–109 are here: Wherein the Trooper deals with the Richardsons. 

To you Kind Fans who have been following this nasty bit of story-telling: Don’t be shy about going into specifics about what you like and don’t like of the book, both in its form and in its content.

And to you New Readers just joining this story-in-progress: Click here to start the story from the beginning.

Just so you know: This novel runs 305 manuscript pages, and it has a big wind-up—but in the end . . . well, let’s put it this way:

All good stories always end with a bang.

Enjoy!

GL

Why Democracies Will Always Go Bankrupt

When I was growing up, finance was mother’s milk to me, not only because my dad was in the field, but because I was a bit of a math geek. But for my formal education, I was trained—rather rigorously, and in spite of my laziness—as a philosopher and a historian. This odd combination is why I have such a jaundiced view of economics: I don’t find economics particularly intimidating, or even particularly challenging—it’s just finance’s snooty but poor (and slightly daft) older cousin. History’s surprisingly ignorant and blinkered accountant. Philosophy and Math’s lightly retarded, Puritanically rigid, and altogether rather embarrassing spawn.

Now, it’s all good and fine for me to rant about how useless economics is—but these aren’t empty complaints on my part: I can point to a single, specific, monumental failing of economics—a failure in the discipline which pretty much proves my point:

The United States is going bankrupt—and economics cannot explain why.

In fact, a surprisingly large number of economists choose to ignore the problem of America’s looming bankruptcy altogether; or claim there is something called a “structural deficit” (a highfalutin way of pretending that it cannot be fixed, and therefore doesn’t need fixing); or else—as is the case of the fools backing Modern Monetary Theory—they make the claim that all deficits are just debts the government owes itself, so therefore the American government cannot go broke, so therefore—and let’s ring out the QED—the fiscal over-indebtedness is actually not a problem because it doesn’t even actually exist!

They really do claim that. And no, they are not high.

Of course, sovereign over-indebtedness does exist, and it is a problem—a terrible, life-or-death problem: As a lot of historians have pointed out, sovereign bankruptcy presages and ushers the collapse of great nations—often violent collapse. And this is something we want to avoid, no? 

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The Hourly G

So as I threatened—I started up The Hourly G.

It’s a blog about economics and finance—but quicker and more succinct than my regular blog here. I’ve been posting since yesterday morning, and as of now, I expect to put up three to four posts a day, regarding whatever’s going on in the world of money. 

Rest assured—I will still continue to post long, crazed ramblings about the state of affairs we find ourselves in on my regular blog. As a matter of fact, tomorrow (Monday), I’ll be posting a long piece called Why Democracies Will Always Go Bankrupt. 

But The Hourly G will be quicker and looser—little asides about what’s going on, instead of big think-pieces about What It All Means. If this blog is the professor giving a long lecture, then The Hourly G is the peanut gallery, shooting off spitballs and clever/snide remarks. 

I do hope you visit the site—and I do hope that you enjoy it—and if you do, pass it along! 

GL

The Trooper: Installment III (Pages 54–83)

Here are a few more pages from my unpublished, unpublishable novel, The Trooper:

• Pages 54–68: “Wherein the Speeder threatens the Trooper, the Trooper threatens the Speeder.”

• Pages 69–83: “Wherein the Speeder processes the Speeder, chats with the prison guards, then visits Travis.”

Like I said when I started: Black as outer space. 

GL

Is the Federal Reserve Really Purchasing Over 60% of 2011’s Fiscal Deficit? In a Word, uh . . . Yeah.

The other day, in my post “The Lull Before the Storm”, I mentioned that for fiscal year 2011, the Federal Reserve would be purchasing over 60% of the Federal government deficit.

Literally.

In other words, the Fed would be dancing the Monetization Waltz, just like Latin American countries used to back in the 1970’s: Proof positive that America is indeed a banana republic—only with nukes.

A lot of people didn’t believe me—or wanted me to check my figures. Or wanted to know if I was having an acid flashback from those aformentioned 1970’s. A lot of people couldn’t believe it.

Mark Twain said it best: There are lies, damned lies, and statistics. If you want to deceive your audience, you source your numbers from some shifty salesman with an ideological ax to grind, gussy it up with percentage signs and charts and graphs, and thereby “prove” any damned foolishness you like.

But deceit in this context serves no purpose: It’s in all of our best interests to know exactly what is going on, in fiscal year 2011. 

So in this brief post (yes I know—shocker), I’m gonna check the figures for my observation—but I’m gonna get ‘em right from the horse’s mouth: From the White House, and from the Federal Reserve. 

To begin—

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Thank You

To My Readers and Kind Fans,

I started this blog this past June as a lark: A place where I could make sense of my crazy ideas, without any expectation that they would be read by anyone except me—and that’s how it was for the first couple of months. A day where I got 40 pageviews was a big day for me.

But then out of the blue, I got an audience—you. In the past four months, my blog has received well over a million hits—and it’s been an exhilarating experience. Addictive. The rush I get from reading comments is hard to describe—especially because the comments I get are smart, even when they completely disagree with what I’ve written.

I feel I owe you, my audience, for this wonderful feeling.

Read more »

The Trooper: Installment II (Pages 24–53)

©David Dees.

In this second installment of The Trooper, our eponymous hero/antihero/bogeyman has a run-in with the Speeder—unforseen consequences will ensue. 

The Trooper is ignorant of these consequences, as he goes looking for entertainment on Saturday, then to Church on Sunday. 

Enjoy!

GL