The Proposed Iranian Oil Bourse

[jimrockford]

Quote from 2cents:

one minor thing though: not to say that it is impossible, but it is a LOT more difficult for G7-type countries to 'cook' econometric type data in any material way for any significant period of time, than for any corporation to fudge its financial statements at any time. again i don't want to argue whether or not it is a valid comparison to make, but i am sure you can appreciate that because of the sheer multiplicity of informed, smart, interested-one-way-or-the-other type observers, critics, data collectors etc and the multiple points of reference, perspectives taken to cross-check the data in as many ways, it is difficult to think that this type of macro-economic data is not the best possible available data to man to perform any econometric-based meaningful analysis. that's not to say that any such analysis is sufficient by itself of course, nobody is saying that...

I disagree with this very strongly. This viewpoint is just not at all how the world works. It is a very well known fact that major governments, including the U.S. government, issue false and misleading statistics all the time, and that they routinely get away with it. I gave, earlier in this thread, one particular example of the many techniques used by the U.S., to conceal the true size of its public debt, as well as the deficit which makes the public debt grow every year. Social Security taxes have been included in the budget, in order to make the deficit and accumulating public debt look smaller, but then, the corresponding future obligations to Social Security beneficiaries, including the U.S. Treasury bonds issued to the Social Security Trust Fund, were omitted from the published public debt. This is only of many examples. Many other well-publicized games are played with things like the government's obligations to guarantee private pensions, lowball calculations of CPI inflation and resulting Social Security cost of living increases, etc., etc.

Let us, in addition to this approach based on reality, also take a literary excursion through Orwell's 1984:

But actually, he thought as he re-adjusted the Ministry of Plenty's figures, it was not even forgery. It was merely the substitution of one piece of nonsense for another. Most of the material that you were dealing with had no connexion with anything in the real world, not even the kind of connexion that is contained in a direct lie. Statistics were just as much a fantasy in their original version as in their rectified version. A great deal of the time you were expected to make them up out of your head. For example, the Ministry of Plenty's forecast had estimated the output of boots for the quarter at one-hundred-and-forty-five million pairs. The actual output was given as sixty-two millions. Winston, however, in rewriting the forecast, marked the figure down to fifty-seven millions, so as to allow for the usual claim that the quota had been overfulfilled. In any case, sixty-two millions was no nearer the truth than fifty-seven millions, or than one-hundred-and-forty-five millions. Very likely no boots had been produced at all. Likelier still, nobody knew how many had been produced, much less cared. All one knew was that every quarter astronomical numbers of boots were produced on paper, while perhaps half the population of Oceania went barefoot. And so it was with every class of recorded fact, great or small. Everything faded away into a shadow-world in which, finally, even the date of the year had become uncertain.

 

[eusdaiki]

Quote from 2cents:

i am with you for the most part here

you haven't addressed my questions re ignoring available relevant data but there was no obligation, i don't intend to push you

one minor thing though: not to say that it is impossible, but it is a LOT more difficult for G7-type countries to 'cook' econometric type data in any material way for any significant period of time, than for any corporation to fudge its financial statements at any time. again i don't want to argue whether or not it is a valid comparison to make, but i am sure you can appreciate that because of the sheer multiplicity of informed, smart, interested-one-way-or-the-other type observers, critics, data collectors etc and the multiple points of reference, perspectives taken to cross-check the data in as many ways, it is difficult to think that this type of macro-economic data is not the best possible available data to man to perform any econometric-based meaningful analysis. that's not to say that any such analysis is sufficient by itself of course, nobody is saying that...

but i still don't see how ignoring it can be justified

I agree that macro economic data is very difficult to cook, but is not very hard to make it sound better or worse if you pick the right indicators to mention...

One thing I don´t like about US economics today is that interest rates hikes have done little to contain inflation, but Im not worried about hyperinflation {to me it seems like too much of a long shoot, you would need a series of bad decisions to get there...} Im affraid the FED might overshoot the rate hikes and end up cooling the economy into a recesion {that seems like a more likely scenario in the near future}...


I´m sorry I haven´t looked at the data you provided but I usually don´t look into links that are in the middle of a flamewar... most times they´re worthless repetitions of whatever it is everyone is fighting about. If you could please point me towards the more significant ones I´ll take a look at em.

 

[eusdaiki]

Quote from jimrockford:



Let us, in addition to this approach based on reality, also take a literary excursion through Orwell's 1984: [/B]

1984, what a great book, Orwell was a master writer. I was constantly reminded of that book on the weeks previous to the iraqui invasion... how people where calling fries "freedom fries" and destroying bottles of champaign, because they where told france is the enemy... so france was the enemy...
They where told Hussein was allied with Al Qaeda {eventhough all the evidence pointed in a different direction} and they bought it... Collin powell trying not to laugh at the "evidence" presented to the security council... etc...

So goverments do cook evidence when they want to move things their way... I agree with two cents, in that cooking macro evidence is very hard, but I also agree with you in that evidence of any sort can be manipulated by not having proper standars in place.

There´s one more thing I like to add, with good media manipulation any reaction can be created on the masses, even if all the evidence points in the other direction, because once people enter into a panic they don´t listen to reason they just react.
So, bringing it all back to the topic of this threat, that seems to be the possibility of hyperinflation in the US markets. In the right scenario it could happen if there´s panic; even if the evidence points in a differnt direction. The billion dollar question is what would it take to create such a panic.

 

[jimrockford]

Quote from 2cents:

however what piece of econometric or otherwise hard data would you say supports ANY VIEW that hyperinflation is on the horizon today? any more than, say, and i am not trying to be cute, the Arcturian attack is on the horizon?

First, this has not been the issue in our debate. You claimed that future hyperinflation of the dollar is impossible. The discussion has been over whether your claim is supportable.

Second, U.S. public debt is uncontrollably expanding as a percentage of GDP, and will continue to do so if policies are not radically changed. History is littered with many examples of currencies which hyperinflated due to excessive government debt or other financial pressure. This is hard data supporting the view that future hyperinflation is a substantial danger for the dollar.

Third, as the world's reserve currency, enormous dollar holdings might be panic-dumped, at any time, both by large numbers of small international holders, as well as by a relatively small number of foreign central banks and other huge global dollar players. This risk of a panic from abandonment of the dollar's global role is a special risk which does not exist for other fiat currencies. This is a hard fact.

Fourth, any student of financial history knows that future hyperinflation is always a substantial danger, when one is dealing with a fiat currency, such as the U.S. dollar. This is also a hard fact.

Fifth, you have not specified what you mean by "on the horizon", so that anybody who attempts to answer that question will be making an ambiguous statement which can then be misused to interfere with the future progress of the discussion.

 

[jimrockford]

Quote from eusdaiki:

1984, what a great book, Orwell was a master writer. I was constantly reminded of that book on the weeks previous to the iraqui invasion... how people where calling fries "freedom fries" and destroying bottles of champaign, because they where told france is the enemy... so france was the enemy...
They where told Hussein was allied with Al Qaeda {eventhough all the evidence pointed in a different direction} and they bought it... Collin powell trying not to laugh at the "evidence" presented to the security council... etc...

So goverments do cook evidence when they want to move things their way... I agree with two cents, in that cooking macro evidence is very hard, but I also agree with you in that evidence of any sort can be manipulated by not having proper standars in place.

There´s one more thing I like to add, with good media manipulation any reaction can be created on the masses, even if all the evidence points in the other direction, because once people enter into a panic they don´t listen to reason they just react.
So, bringing it all back to the topic of this threat, that seems to be the possibility of hyperinflation in the US markets. In the right scenario it could happen if there´s panic; even if the evidence points in a differnt direction. The billion dollar question is what would it take to create such a panic.

We are talking about a fiat currency. This means that perception is reality. If people perceive that the currency is worthless, then voila, it immediately becomes worthless. It is just like a bank, especially back in the days before deposit insurance. If the bank was perfectly solvent, but people perceived that it was not, then there would be a run on the bank, and then: perception would become reality. Then bank would fail. Same with fiat currencies.

 

[jimrockford]

One should not wait until one sees hyperinflation "on the horizon", before one takes reasonable precautions. If one waits until hyperinflation is seen "on the horizon", then it will already be too late to do the things that should have been done long ago.

Example. If you bought a gold hedge against inflation, during the many years while gold was in the range of $300 or so, then your savings would have been protected against hyperinflation. Gold has recently fluctuated between roughly $750 and $550. If you wait until hyperinflation is "on the horizon", before hedging against it, the prices of gold, silver, and similar inflation hedges will have gone so high, that it will be too late. Inflation hedges will skyrocket long before inflation itself skyrockets (if it does skyrocket).

 

[jimrockford]

Here is another example of how excessive public debt, relative to the tax base, can cause hyperinflation. The American colonies, in 1775, soon to be known as the United States, financed its Revolutionary War against Great Britain, by issuing "bills of credit". Political will to levy appropriate taxes, to pay this public debt, was lacking; and so, the result was hyperinflation during the first years of the United States.

See http://www.mises.org/freemarket_detail.asp?control=462&sortorder=title

 

[jimrockford]

We have discussed, in this thread, the two examples of the Weimar Germany hyperinflation of 1923, and the United States hyperinflation of 1775 thru 1780. Both of these examples showed how excessive public debt, relative to the ability or willingness to levy taxes, helped cause hyperinflation.

Here is another example. Russia suffered hyperinflation in the early 1990s, again, just as in Weimar Germany, and Revolutionary America, because of excessive public debt. http://www.pbs.org/wgbh/commandingheights/shared/minitextlo/int_jeffreysachs.html#16

 

[jimrockford]

I hope that these examples will put to rest the ignorant claim that excessive public debt had nothing to do with hyperinflation in Weimar Germany or elsewhere. See the earlier, very detailed discussion of Weimar Germany in this thread, for solid historical proof that the Weimar hyperinflation was caused by excessive public debt. No economist or historian disputes the connection between excessive public debt and the hyperinflation which sometimes results.

 

[2cents]

Quote from eusdaiki:

1. I agree that macro economic data is very difficult to cook, but is not very hard to make it sound better or worse if you pick the right indicators to mention...

2. One thing I don´t like about US economics today is that interest rates hikes have done little to contain inflation, but Im not worried about hyperinflation {to me it seems like too much of a long shoot, you would need a series of bad decisions to get there...}

3. Im affraid the FED might overshoot the rate hikes and end up cooling the economy into a recesion {that seems like a more likely scenario in the near future}...


4. I´m sorry I haven´t looked at the data you provided but I usually don´t look into links that are in the middle of a flamewar... most times they´re worthless repetitions of whatever it is everyone is fighting about. If you could please point me towards the more significant ones I´ll take a look at em.

1. well, yes and no... meaning, one can and will of course, more likely if one is a politician ( ;-) ), ATTEMPT to paint the reality of a situation in a particular way that fits a particular purpose 'better', however:
. central bankers (G7 in particular but not exclusively) by nature of their mission, their mandate, tenure, statutory independence, but more importantly the very high standards of integrity and objectivity they are held and hold themselves to, ARE a different breed... you don't have to believe me of course... but this alone could justify a whole thread...
. but even if you choose to be sceptical and that's always a sound and reasonable attitude to have, the limits as far as cherry-picking of measurable indicators are, notably, the existence in relative abundance of independent and recognized (... by their peers across a wide range of economics-related discipline, as generally making relevant or original or acute etc type observations) experts and observers, in the country, in the opposition, at supra-national level, at 'central banker' aspiring level, i mean... pretty much anywhere you can think of... and these people have no incentive whatsoever to pull any punches if they can establish that your choice of indicators MATERIALLY MISREPRESENTS reality, all the contrary, they'll immediately expose you... its a pretty rough world out there, even for central bankers

2. the reality is that inflation in the US is very tame...

now, if you want to form your own opinion as to why the Fed, the ECB etc's chosen set of inflation indicators are appropriate, materially relevant and representative, this will give you some pointers as to why a lot of the confusion over terminology alone http://en.wikipedia.org/wiki/Inflation (and if you have the inclination and time also click on 'hyperinflation' somewhere down the page, it's all fairly well explained and instructive) and this but thats just the beginning of the road as far as prevailing theory, doctrine, indicators etc http://en.wikipedia.org/wiki/Money_supply (notably scroll down to monetary exchange equation) and http://en.wikipedia.org/wiki/GDP_deflator
sorry but i don't really know of any shortcuts to make any of this 'easier'...

of course there are contradictors, notably, say, john williams (huh? who?) telling us this is all smoke & mirrors http://www.shadowstats.com/ again that would be another thread, not worthwhile in my opinion, but then that's just an opinion, as i said i don't intend to convince everbody, life's to short and as you said there would be no 'mkt' if we all thought the same ... http://www.elitetrader.com/vb/showthread.php?s=&postid=1051049&highlight=williams#post1051049

in any case, on the one hand, the 'official' indicators all point towards tame levels of inflation, and rising (but not by that much) inflation expectations, and the mkt type indicators that reflect how the mkt prices inflation expectations (TIPS, TUT spreads notably but not only), and that includes the people who are influenced by the likes of john williams, come to the same 'assessment'. is that proof that inflation is tame, controllable, under control? no, it just says that there is a broad enough consensus & confidence that this is the case... can that change? of course, however what all the big money, experts etc counts of people think that your point 3. IS a reasonable possibility. not hyperinflation, and that's notably because there is no single known (set of) econometric measurement(s) that today could hint that hyperinflation is even anywhere on the distant horizon in the US... if you know one, that is reliable, feel free to share

3. see above... however plse note that this is not the 'majority' consensus opinion at this point in time... a slight overshoot with decelerating but still positive growth is currently a much more likely scenario... as per the experts and as per the mkt...
but again that could be another thread in its own right, you don't have to believe me... plus we are essentially talking about reasonably likely scenarii here... can be argued ad nauseum for people who have the inclination

4. as regards the j.williams type 'statistics', beyond the ad hominem characterizations and other more serious counterarguments available, it is worth noting that calculations have been made by numerous experts... in the info i provided here, the CEPR notably discusses some 'similar' issues, and basically establishes how little impact they WOULD have in any case on the magnitude, size, sustainability of the US public debt / gdp ratio (unless it starts growing at a HUGE annual rate of course, which isn't the case, but then how huge is huge and we can all argue forever... except the mkts daily express a 'view' as to what shld be considered 'huge'), amongst other equally-watched ratios...
http://www.elitetrader.com/vb/showthread.php?s=&threadid=62735&perpage=6&pagenumber=9

and the other links in there simply show that this ratio is in the same range as the Euro-area's ratio, say 70%ish, and not considered a risk of "hyperinflation on the horizon" in Europe, 170%ish in japan, etc... therefore, as i said, if one cares to check before making random assertions , not a causative nor relevant ratio at all in this discussion, unlike suggested by some other poster (whose definitions of hyperinflation include:

Quote from jimrockford:

It is very easy for people to misunderstand each other, when they use terms refering to increased inflation, on the one hand, and the beginnings of hyperinflation, on the other hand. The phrase, "beginnings of hyperinflation", can be defined in many different ways, including as any increase in inflation. The question as to whether or not we have seen "the beginnings of hyperinflation" depends on exactly what technicalities of definition one chooses in using those words. A resulting answer could go either way. 2cents is misusing the ambiguity to play word games, distracting us from serious and worthwhile discussion of the real topic at hand.

)

and for the reasons i have cited http://www.elitetrader.com/vb/showthread.php?s=&postid=1120039#post1120039 and the flaws of 'informal & formal fallacy' (see post courtesy of another poster) neither is weimar's hyperinflationary episode (also see the wiki link on 'hyperinflation' above)


but beyond this otherwise petty dispute - who cares if the poster, me or anybody else, has performed proper due diligence / research after all? - to my knowledge there simply ISN'T any (set of) credible indicator(s) pointing towards any sort of risks of 'hyperinflation on the horizon' in the US, ECB notably... happy to be wrong but then, where are those indicators?

now as to the initial subject title, here is an 'opinion' fwiw:
http://www.elitetrader.com/vb/showthread.php?s=&postid=1118937&highlight=peter#post1118937
abrasive perhaps but i don't think it is inappropriate in such an instance... just my opinion again...
and this too: http://www.elitetrader.com/vb/showthread.php?s=&postid=1119486#post1119486

i hope this helps. i stand by EVERYTHING i said, all along this thread.

a last word... man to man, do you understand better why very early in this thread i said that these type of articles and requests for refutations were getting tiiiiring...?