Faber: Nations Will Print Money, Go Bust, Go to War…We Are Doomed

[dhpar]

ok - fair enough with taxes - i misunderstood you.

about living in a society where one steals from another you pretty much get it - we are human after all.


but on a serious note. the question is not if you get an inflation after throwing 2T at the problem (especially during private money creation destruction).
the question is whether if you throw enough money at the problem you get an inflation (sic!)


in reality the fact that we have no inflation today is creating false sense of security vis-a-vis the inflation dangers (a la your thinking) and may make fed going ballistic. aimho

 

[the1]

This may work in the short run but probably not in the long run. If you have 100k in your hands you spend, thereby creating demand and short run inflation but this type of "gift" can't be created without creating debt. Remember, money is debt and debt accrues interest and has to be repaid. What was once "gifted" with the right hand will later be retaken, at a much higher rate, with the left hand, thereby choking off the inflationary effect. The gap between the short run and the long run is something that could occupy some endless study. When shall we start

Quote from m22au:

There are some deflationists such as Mish Shedlock who believe that we can't get hyperinflation because the Federal Reserve / US Govt is impotent to stop deflation from happening.

I'm largely in agreement with Daal. All it takes to stop deflation is some imagination, eg., mailing $10 trillion to US citizens. Then hey presto you take care of a lot of debt. If $10 trillion isn't enough then try $100 trillion. If you have a printing press then you just need to turn it on and solve the debt problem.

Whether or not these extreme "solutions" are implemented is another thing. This is why Mish Shedlock (and others) could be proven right.

 

[dhpar]

Quote from the1:

This may work in the short run but probably not in the long run. If you have 100k in your hands you spend, thereby creating demand and short run inflation but this type of "gift" can't be created without creating debt. Remember, money is debt and debt accrues interest and has to be repaid. What was once "gifted" with the right hand will later be retaken, at a much higher rate, with the left hand, thereby choking off the inflationary effect. The gap between the short run and the long run is something that could occupy some endless study. When shall we start

you are joking right? look at Zimbabwe.

the fact that so many people are clueless about inflation tells me we are ready to learn the experience the hard way...

 

[the1]

There is one wild card that may or may not happen. Keep in mind we are still knee deep in a technological revolution that probably smoothers the positive economic impact from the Industrial Revolution. I say "probably" because I'm not educated enough to express an opinion on the topic but as a casual observer I have to say that the advance in technology is in its infancy. This wild card could most certainly be the economic driver to create what you say is the solution to the problem -- growth and income.

Quote from Ed Breen:

Kass , the only way to repay debt is with income. The only way to increase income is through growth. Growth, in a nation, is a matter of fiscal policy that is not interferred with by monitary policy. The solution is that we need to grow faster and stop spending so much. In order to grow faster we need to put in place a fiscal policy and culture of positive future expectation that you can make an after tax profit on risk capital in the U.S.

A good start would be to repeal corporate income tax so that dividends are taxed only once as regular income. Reducine capital gains tax to zero or at leas keeping them at 15% would also help.

 

[Trendytrader]

All is well in the world.... Isn't it? The government says it is so.


http://www.bloomberg.com/apps/news?pid=20601087&sid=ap5_oG1A..x4&pos=4

Japan Unemployment Rate Unexpectedly Rises, Prices Fall Further
Share Business Exchange

By Aki Ito

May 28 (Bloomberg) -- Japan’s unemployment rate unexpectedly increased in April and the decline in consumer prices deepened, signaling that domestic demand is restraining the nation’s recovery from its deepest postwar recession.

The jobless rate rose to 5.1 percent from 5 percent, the statistics bureau said today in Tokyo. The median forecast of 23 economists surveyed by Bloomberg News was for no change. Prices excluding fresh food slid 1.5 percent from a year earlier after dropping 1.2 percent in March.

The reports come a day after government figures showed a sustained rebound in exports, driven by demand from Asia’s emerging economies, and highlight Japan’s reliance on trade to sustain growth. The export revival hasn’t been strong enough to spur hiring that would in turn boost household spending, which unexpectedly fell in April, today’s data showed.

“It’ll probably take until next fiscal year for companies to step up hiring,” Noriaki Matsuoka, an economist at Daiwa Asset Management Co. in Tokyo, said before the reports.

The Nikkei 225 Stock Average has tumbled 12 percent this month on concern that the European sovereign debt woes may derail the global recovery. It rose 1.5 percent at 9:08 a.m. in Tokyo as China’s commitment to investing in Europe allayed concern the crisis will worsen. The yen traded at 90.99 per dollar from 90.98 before the reports.

Household spending dropped 0.7 percent in April from a year earlier, the bureau said. The median estimate of economists surveyed was for a 2.5 percent increase. Retail sales rose 4.9 percent from a year earlier, led by gas stations and auto showrooms.

Fading Stimulus

Japan’s economy expanded at a 4.9 percent annual pace in the three months ended March, extending its rebound from its worst postwar recession, data showed last week. That report showed that outlays on durable goods increased at a slower pace, while spending on other components failed to pick up, adding to concerns that stimulus boosts are fading. Government programs have provided incentives for people to buy cars and electronics.

Finance Minister Naoto Kan cited “severe” job prospects this week as one factor that has kept the government from upgrading its assessment of the economy since March.

A separate government report today showed the ratio of jobs to applicants fell to 0.48, meaning there are 48 jobs for every 100 candidates. It was the first deterioration in the measure in eight months.

Takeda Pharmaceutical Co. aims to reduce its workforce by about 10 percent, it said this month. Asia’s largest drugmaker wants to save 50 billion yen ($550 million) over three years.

The drop in consumer prices was exacerbated by the introduction of a government waiver on high school tuition fees as part of a pledge to assist households. Prices fell at a faster rate than the 1.4 percent median estimate of economists.

Bank of Japan

“Excluding the school fee effect, which is temporary, downward pressure on prices will keep waning, but the pace will be very slow,” said Hiroshi Watanabe, a senior economist at Daiwa Institute of Research in Tokyo. “Given this, the Bank of Japan’s exit from its emergency policy mode is still remote.”

Japanese retailers continue to cut prices to spur consumer spending. Nitori Co., a furniture retailer, this week said it will lower prices of about 500 items by as much as 40 percent - - the company’s ninth round of discounts since 2008.

“Spending on some items, such as cars and home electrical appliances, are robust thanks to government subsidies, but consumers are still penny-pinching for everyday products,” said Daiwa Research’s Watanabe.

Faced Pressure

The Bank of Japan has faced pressure to fight deflation from the government, whose ability to spur the economy is constrained by record public debt. Kan has been urging the bank to adopt an inflation target, and last week repeated that he expects it to support the recovery.

Central bank Governor Masaaki Shirakawa this week warned against becoming too fixated on prices when setting policy. Central banks should aim to achieve a stable financial environment that helps sustain growth, and price stability is “not the sole factor,” he said.

The central bank last month began developing measures to encourage banks to lend in areas that may spur growth. It has held the benchmark interest rate at 0.1 percent since December 2008 and offered banks 20 trillion yen in three-month loans under a separate program.

 

[thurstonhowell3]

Quote from Ed Breen:

My point of view in these posts is that the current credit contraction is preventing the attempts at reflation, which as you comfortably, though immorally, endorse that strategy, I am sayin in my posts that it is not working, as I explained. If it is so easy, then why after the Fed has increased its balance sheet to over 2T, almost two years ago, the largest expansion of base money in history...why don't we have inflation...why will the YOY Core PCE show decline when it is released tomorrow at 8:30 a.m. ?

Bingo. Bernanke is pushing on a string. He can "print" until the cows come home and not make a dent in the overwhelming delflationary pressures. There is no inflation, so says the bond market. There is only deflation. To say otherwise shows a lack of understanding of our single-issuer, non-convertible monetary system. One might even argue that the deficit doesn't really matter, as the US Government can never possibly default.

 

[sumfuka]

Quote from the1:

There is one wild card that may or may not happen. Keep in mind we are still knee deep in a technological revolution that probably smoothers the positive economic impact from the Industrial Revolution. I say "probably" because I'm not educated enough to express an opinion on the topic but as a casual observer I have to say that the advance in technology is in its infancy. This wild card could most certainly be the economic driver to create what you say is the solution to the problem -- growth and income.

I agree to a certain extent. Tech revolution 'should' pull the economy back up. But the unemployed are mostly un-trainable people. Most of the jobs in those sectors requires years of training. And the truck driver that got laid off is going to have a tough time feeding his family while going back to school to learn about nano-robots or whatever.

2.) The problem with this world economy is there is too many people. So a world war is inevitable.

3.) No matter what kind of economic driver you toss in; unless you can control human greed and fear, the same problems would occur again and again until the end of time.

 

[Misthos]

Quote from thurstonhowell3:

Bingo. Bernanke is pushing on a string. He can "print" until the cows come home and not make a dent in the overwhelming delflationary pressures. There is no inflation, so says the bond market. There is only deflation. To say otherwise shows a lack of understanding of our single-issuer, non-convertible monetary system. One might even argue that the deficit doesn't really matter, as the US Government can never possibly default.

I somewhat agree with you and Ed on this. However, I also think that both inflation and deflation can co-exist, if you don't focus on the quantity theory of money, but the value of money instead.

Bernanke needs to depreciate the dollar, in a controlled manner - to better service debts, and to re-inflate asset values.

But it's not just Bernanke/Monetary policy, it's also fiscal policy that is at work - don't forget all the Obama checks for cars, houses, etc... and there will be more programs.

The best way to view the inflationary forces is to imagine Bernanke and the White house never engaging in the fiscal and monetary measures of the past 2+ years. Then you would have seen deflation like no other. Catastrophically so.

So, how did we avoid catastrophic deflation? By instituting massive inflationary monetary and fiscal policies. The battle between the two is even so far. One dataset can show inflation, and another deflation... but no clear winner. It's a pretty even match.

One day, one force will overwhelmingly win over the other. Or the currency just collapses.

 

[NumLock]

Quote from sumfuka:



2.) The problem with this world economy is there is too many people. So a world war is inevitable.

I am sorry but are you stupid ?

You do realize that technology has developed something called Nuclear weapons

Unlike Saddam Husein's imaginary weapons of mass destruction. These nukes everyone has are real.

ONLY 10 are enough to spill so much radiation into atmosphere KISS YOUR FAMILY AND YOUR LIFE GOODBYE





PS: also kiss your pets lives goodbye

 

[Misthos]

Quote from sumfuka:

I agree to a certain extent. Tech revolution 'should' pull the economy back up. But the unemployed are mostly un-trainable people. Most of the jobs in those sectors requires years of training. And the truck driver that got laid off is going to have a tough time feeding his family while going back to school to learn about nano-robots or whatever.

2.) The problem with this world economy is there is too many people. So a world war is inevitable.

3.) No matter what kind of economic driver you toss in; unless you can control human greed and fear, the same problems would occur again and again until the end of time.

I still disagree with a tech solution saving us. What does technology do? It makes us more efficient, which means we need fewer people to accomplish the same task. BTW, I'm not anti-tech progress. But let's think it through.

Imagine an "energy revolution." What would really occur? More coal miners out of work but more solar jobs? Fewer shale gas drillers, but more windfarm operators?

It's somewhat of a wash.

To me, technological revolution was replacing the horse with the car. A horse didn't need a lot of people to create, service, and maintain. A car did - and was still worth the increased cost over the horse. Robotics was the second tech wave, and it basically caused a lot of assembly line job losses. Sure, many people were employed by robotics, but not as many as the jobs were replaced. If that wasn't the case, then robotics would not have been competitive enough to replace the assembly line worker.

Man needs food, a place to sleep, clothes to wear, and transportation to travel. All of these things have been revolutionized the past 100 yrs. What are we accomplishing today other than merely optimizing these existing technologies? And in the process, becoming so much more productive, that fewer people need to engage in the servicing of these needs?

Keep in mind, in the last 40 years, the FIRE economy absorbed a lot of workers that would have been otherwise unemployed. But what is the FIRE economy other than the ponzi/casino child of a fiat irredeemable monetary system that is on its last legs? FIRE relied on debt growth to constantly increase, even above and beyond the ability to service it. That's what we're fighting now, and I think it's madness.