Bernanke Admits Printing $1.3 Trillion Out Of Thin Air
- Thread starter bearice
- Start date
Breen, you are the typical conspiracy trader. Focused on noise and trading against the trend because you want to be right and you are going to save the world from itself. Good luck! Only 20 years will prove you wrong like all the critics/conspriracy theorists before you. Human nature will not change no matter how loud you yell. There will always be greed. When it comes to this truth.....yes the earth is flat.
Lucky, I am not trading on a 20 year horizon, nor did I suggest that deflation would continue for 20 years...I can't predcit that and I am not trading that. It is obvious that you don't really have any substantial argument as you devolve into personal attack and projection. Read my posts again; I didn't suggest any conspiracy theory or explanaition. In the contrary I outlined an argument based upon a few facts and reasoned analysis. The process I am talking about is a market process and I do not believe it is a result of some 'Deus ex machina' conspiratorial effect. So, our discussion is over. Please get on the other side of my trade...and stay there for 20 years.
Pie, please explain how the context of a fiat currency distinguishes 1930's from the present deflation crises and the Japan Deflation...which of course is taking place in a fiat currency context.
The common threads that need to be distinguished are...1. Systemic Credit Collapse, 2. Asset Price Decline, 3. Expansion of Money Supply that results in a pooling of Excess Reserves at the Central Bank. How does fiat currency impact why this happened in all three crises?
The common threads that need to be distinguished are...1. Systemic Credit Collapse, 2. Asset Price Decline, 3. Expansion of Money Supply that results in a pooling of Excess Reserves at the Central Bank. How does fiat currency impact why this happened in all three crises?
Fiat currency! I don't mean to be flippant, but that is essentially it, and that is a huge difference. You would find it instructive to look at a graph of average returns of stocks from the 19th century on, dividends removed. The difference between period before and after Nixon stopped the French from redeeming in gold (after 1971) is dramatic. Once dividends are removed, there is no question that the most important driver of the US stock market from 1971 onward has been inflation. And that hasn't changed one iota.
Furthermore, it is not credible to claim that there is presently deflation in the overall economy when the data (shadowstats) taking into account the entirety of the economy without slight of hand, such as adjusting for "quality", shows inflation.
You seem to be a pretty sharp guy, so it won't be necessary for me to go into detail as to why the official method of computing inflation was changed at several points in the last 40 years. (Incidentally, this is why I am not a fan of TIPS.)
The US will attempt to monetize as much debt as it can get away with and that will obviously lead to inflation. Human nature dictates that it will be far easier to take money via inflation than by direct taxation. And, of course, paying off a huge debt via reductions on the fiscal side combined with increases in productivity is out of the question, for the foreseeable future at least.
I have said elsewhere in these forums that the US could eventually right its economic ship by bringing both the cost of medical care and defense spending in line with that of other modern nations.
We are a nation driven by crises. When a crisis reaches the critical point, i.e., the nation has to start issuing debt denominated in a basket of currencies, as other spendthrift nations have been forced to do, then there is a chance that we will act and force a substantial reduction in both medical and defense costs. But I would think that's not likely before a true crisis occurs that can not be gotten round by monetizing.
Furthermore, it is not credible to claim that there is presently deflation in the overall economy when the data (shadowstats) taking into account the entirety of the economy without slight of hand, such as adjusting for "quality", shows inflation.
You seem to be a pretty sharp guy, so it won't be necessary for me to go into detail as to why the official method of computing inflation was changed at several points in the last 40 years. (Incidentally, this is why I am not a fan of TIPS.)
The US will attempt to monetize as much debt as it can get away with and that will obviously lead to inflation. Human nature dictates that it will be far easier to take money via inflation than by direct taxation. And, of course, paying off a huge debt via reductions on the fiscal side combined with increases in productivity is out of the question, for the foreseeable future at least.
I have said elsewhere in these forums that the US could eventually right its economic ship by bringing both the cost of medical care and defense spending in line with that of other modern nations.
We are a nation driven by crises. When a crisis reaches the critical point, i.e., the nation has to start issuing debt denominated in a basket of currencies, as other spendthrift nations have been forced to do, then there is a chance that we will act and force a substantial reduction in both medical and defense costs. But I would think that's not likely before a true crisis occurs that can not be gotten round by monetizing.
I have already addressed the Japan issue. In the 1930's there was deflation. Now there is not because we have a fiat currency. We did not then.. I have already acknowledged that some asset prices have declined recently. I also pointed out that there are more loaves of bread sold than Porsche 911's. Regarding the "Pooling of Excess Reserves," this is simply the normal result of Fed actions. The Fed, as you know, not only controls the money supply but can always write a check, so to speak. It does not receive overdraft notices, except from Ron Paul. 
(You might have to combine these points to get a complete picture. Example: Fiat currency, Japan, nation of savers vs. Fiat currency, US, nation of spenders.)
(You might have to combine these points to get a complete picture. Example: Fiat currency, Japan, nation of savers vs. Fiat currency, US, nation of spenders.)
Pie you entirely missed the point and your non sequitor responses are useless...I'm outa here...back to enjoying my EU short, Oil short, Dow puts, TWM position...not 20 year positions mind you...but keep finding the inflation out there...furniture, cars, services, materials, wages, clouthes, accessroies, jewelery, travel, lodging, cars, boats, electronics, computers, entertainment..keep watching those loavs...good luck with your trades.
SIAP but it was obvious at the time what he was doing. Bernanke later lied to Ron Paul at his last testimony that he was not going monetize the debt. Going forward I guess.
It went right over Paul's head.
It went right over Paul's head.
Pie, I didn't read your longer post before your last post when I reponded. I agree with much of the sentiment in your longer post with regard to how to reduce expenses and create a more stable unit of account (dollar) with price level targeting. Although, this conversation has run its course, I want to leave you with the idea that leverage ratios in the private sector are the key to the money multiplier effect that must operate for monetary inflation to take place....this is how it works in a fiat money structure with a fractional reserve banking system...it is the leverage as regulated by that system that translates the change in money supply to actual private activity that results in price index change. When the private sector is not borrowing, because they fear the future value of the collateral assets along with the bank and the coverage ratio's are increased, then the increase in the money supply in the banking system must be loaned to the government or left on deposit with the Fed as excess reserves. This is not what happened in the '70's as leverage remained liberal and the money supply expansion drove inflation that interacte with a steeply progressive tax structure that drove increased government revenues (so no solvency crises) as private individuals emptied their savings to borrow and buy tangible assets with debt that was getting cheaper. COLAS accentuated the process and production was constricted as it was starved of capital....less production, more demand...inflation, capital flows from financial assets to tangible assets assisted by liberal leverage ratios, unemployment rises with reduced production but in a manageable scale as money illusion of COLAs with inflation seduces consumer confidence...goes on until real tax increase destroys production.
Think about what is happening now...govt revenues collapsing, not contracting, production dramatically contracted, leverage ratios decreasing with risk aversion, expectation of collateral asset decline, dramatic unemployment and reduced consumer confidenc, no wage growth, no collas, promise of massive tax increases...
Think about what is happening now...govt revenues collapsing, not contracting, production dramatically contracted, leverage ratios decreasing with risk aversion, expectation of collateral asset decline, dramatic unemployment and reduced consumer confidenc, no wage growth, no collas, promise of massive tax increases...