Is There Any Way This Can End Well?

[tommo]

I think some inflation would be the more pressing answer.

To be honest I don't like this talk of 'world' policies. Free markets should allow individual counties to fight economic events on an individual basis and let the market figure out who is fighting it best.

It's everyone in the world being in the same trade doing the same things that is at the root of a lot of the problems

 

[murray t turtle]

if money printing were the cure Brazil and Argentina would be the richest countries in the world. don't be fooled by those who claim that QE is anything other than money printing.
It will end badly because debasement of the currency always does.

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Good points. Socialism hurt Argentina more than printing+ people wanting to retire early, like the WSJ noted. How do we know that?? Because- been there+ besides a paper note on an oz of gold or silver can be convenient.Ever tried to buy real estate with silver coins-you would need an armored truck-[LOL ] NOT saying run the printing press, wide open, Bunker Hunt called it mostly right when he was buying silver-should have had a selling plan = not borrowed so much, in 20-20 hindsight.

Mostly agree with your comments; like they put on paper money when we went off gold standard;in God we trust.........................................................................................................

 

[achilles28]

Not saying you are wrong. But you cite Europe as a road map for what may happen in the US.

But Europe has even lower inflation than US (despite the bond collapse you referred to) and they still have QE pumping the printing presses

European periphery economies who required a bailout are minor compared to the size of the Union. Also consider that the EU bailout was a multilateral effort (Fed/ECB/IMF etc).

Look at Argentina. One nation, big debt overhang, printed money to pay the debt, prices exploded.

 

[achilles28]

I may be talking out of my a$$, but do you think that world inflation could be suppressed?

Sure, but then we'd have global sovereign defaults. Household, corporate and Government debts are at historical maximums. Deflation increases the burden to the borrower. Inflation lightens it. Natural deflationary forces are alive and well in the real economy (households are deleveraging....not sure about business). Inflationary forces are pushed by Government and Central Banks (ZIRP, high deficits, QE). FED wants inflation, and is targeting inflation. This is how all the banks get paid back, without defaults. I'm not saying this is good or bad, but at the end of the day, Central Banks have a private charter. They work for commerical banks. Deflation at this point would bankrupt the entire financial sector in most countries, bankers rule the world, so we're on a path of sustained QE/inflation, even though deflationary forces make headlines now and again. My 2 cents.

 

[povstanets]

Sure, but then we'd have global sovereign defaults. Household, corporate and Government debts are at historical maximums. Deflation increases the burden to the borrower. Inflation lightens it. Natural deflationary forces are alive and well in the real economy (households are deleveraging....not sure about business). Inflationary forces are pushed by Government and Central Banks (ZIRP, high deficits, QE). FED wants inflation, and is targeting inflation. This is how all the banks get paid back, without defaults. I'm not saying this is good or bad, but at the end of the day, Central Banks have a private charter. They work for commerical banks. Deflation at this point would bankrupt the entire financial sector in most countries, bankers rule the world, so we're on a path of sustained QE/inflation, even though deflationary forces make headlines now and again. My 2 cents.

Deflation and Inflation don't have to be mutually exclusive though; what we have had since the crisis is really best described as credit deflation mixed with simultaneous inflation of the currency through debasement. The Fed assigned huge reserves at all of the banks during the crisis, but the banks kept the money on deposit at the Fed - rather than loan the money out to homeowners and such - that is credit deflation. So you could have a deflation in credit markets such as real estate loans, business loans, college tuition - all of these credit based assets could be falling in value through deflation, while at the same time the Fed is debasing the currency at 10-20% a year causing inflation in non-credit based purchases, such as your insurance bills, groceries, and other goods.

 

[povstanets]

I think some inflation would be the more pressing answer.

To be honest I don't like this talk of 'world' policies. Free markets should allow individual counties to fight economic events on an individual basis and let the market figure out who is fighting it best.

It's everyone in the world being in the same trade doing the same things that is at the root of a lot of the problems

You can't have it both ways though, free markets mean economies will be intertwined and vulnerable to worldwide contagion during a financial crisis. The only way to avoid this is to end free trade, ban all foreign investment and go off the grid completely.

The last financial crisis spread like a contagion around the globe, almost all developed European countries found themselves doubling their national debt during the crisis as they bailed out the banks - just as the United States under Obama took the debt from 10 to 18 trillion during that same time. Now the entire EU is bordering on insolvency - and no one is big enough to bail the entire union out.

The point being that the last crisis was worldwide and caused debt to explode as governments took emergency funding measures; that debt has not been dealt with and may soon be the trigger for the next crisis - a global deflationary debt collapse very likely leading to WWIII as governments eager to avoid an internal revolution, attempt to distract their population with war.

 

[achilles28]

Deflation and Inflation don't have to be mutually exclusive though; what we have had since the crisis is really best described as credit deflation mixed with simultaneous inflation of the currency through debasement. The Fed assigned huge reserves at all of the banks during the crisis, but the banks kept the money on deposit at the Fed - rather than loan the money out to homeowners and such - that is credit deflation. So you could have a deflation in credit markets such as real estate loans, business loans, college tuition - all of these credit based assets could be falling in value through deflation, while at the same time the Fed is debasing the currency at 10-20% a year causing inflation in non-credit based purchases, such as your insurance bills, groceries, and other goods.

Agreed. Perhaps I wasn't clear. I meant to say both inflationary and deflationary forces are at work in our economy today, simultaneously.

 

[povstanets]

Agreed. Perhaps I wasn't clear. I meant to say both inflationary and deflationary forces are at work in our economy today, simultaneously.

Absolutely and you made great points in that paragraph I quoted; I just wanted to talk about that more as so many of us on the last few pages seem to be focused on deflation or inflation like they are mutually exclusive. As you pointed out with Argentina they had hyperinflation in 1989 and not knowing specifics of their situation one could venture to say that their credit markets were in deflation at the same time.

 

[tommo]

I'm not against global free markets at all! I'm saying the markets are global. But they aren't free.

It's a unified state control

 

[achilles28]

Absolutely and you made great points in that paragraph I quoted; I just wanted to talk about that more as so many of us on the last few pages seem to be focused on deflation or inflation like they are mutually exclusive. As you pointed out with Argentina they had hyperinflation in 1989 and not knowing specifics of their situation one could venture to say that their credit markets were in deflation at the same time.

Indeed. How do you see this playing out?