The Unsustainable Lie of Inflation 138 comments
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“I continue to believe that the American people have a love-hate relationship with inflation. They hate inflation but love everything that causes it.”
“If you tell a lie big enough and keep repeating it, people will eventually come to believe it. The lie can be maintained only for such time as the State can shield the people from the political, economic and/or military consequences of the lie. It thus becomes vitally important for the State to use all of its powers to repress dissent, for the truth is the mortal enemy of the lie, and thus by extension, the truth is the greatest enemy of the State.”
“By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens.”
You are being lied to.
In fact, it has been going on for almost a century. Your government wants you to believe – based heavily on the work of John Maynard Keynes and his disciples – that the only way an economy can grow is by creating moderate inflationary price increases, through the use of monetary and tax policy.
Some of you will notice that I’ve used both the Keynes and Goebbels quotes, above, in past articles, and I hope you’ll forgive me; I felt they bear repeating because they are so poignant and germane to the way the global economy is being manipulated. You may or may not agree with me, but the propaganda being employed to scotch-tape this crisis at its swelling seams is nearly as imperceptible as it is astonishing.
The word propaganda, in its current accepted usage, has been around for centuries. And just for the sake of thoroughness -- and to avoid any misunderstandings -- I’m going to define what I mean by current usage:
propaganda |ˌpräpəˈgandə| noun. information, ideas, or rumors deliberately spread widely to help or harm a person, group, movement, institution, nation, etc. (Dictionary.com Unabridged. Random House, Inc. 07 Nov. 2009.)
Many historians agree that Joseph Goebbels was the “master” propagandist, and after reading the quote at the beginning of this article, it’s pretty clear he took his duty to his government seriously. But how hard was his job, really? I mean, come on… you plaster a few swastikas all over a well-pressed black suit, throw on some jackboots, put on a fancy military hat, and say something like, “Homosexuals, Jews, and Communists are evil. So we’re going to kill all of them.”
Then you point guns at your audience, at which point, its members shrug and say, “Okay.”
Goebbels was, of course, the antithesis of everything I hold dear and beautiful in this universe. But you’ve got to admire a man who has the stones to be so blatantly honest about the fact that he’s a liar. Granted, he did have brute force on his side. But still.
In terms of human rights, I’d like to think things are improving -- that the world is a better place than it was through most, if not all of the 20th century. I’d like to think the governed have become smarter. At the very least, I’d like to think the average human being is more suspicious of, and cautious about his government. And maybe he is.
But then again, maybe he’s not.
The application of propaganda obviously didn’t stop with Nazi Germany. It has been applied with great success by Joseph Stalin, Mao Zedong, Pol Pot, and many others, to hide all measures of truth from the people these leaders suppressed and murdered. Thank God we live in the United States! Home of the Free and the Brave! Our government would never use propagandist techniques to persuade its population of anything! We don’t work that way. Right?
Wrong.
It’s time to wake up; even if the average human being has become a little more sophisticated and leery, governments (and their co-conspirators) have simply upped the ante -- taking propaganda to newer, subtler levels. In fact, the more I think about it, the more galvanized I am toward the tragic conclusion I used to start this article:
We are being lied to. And we still believe every single word of it. But the most revolting part of all this? Unlike decent German citizens forced to endure the tyranny and coercion of the Nazi regime, we actually have a choice not to believe the nonsense being crammed down our throats. And yet we do.
It’s not just governments anymore, either; it’s lobbyists, religious institutions, social movements, and advocacy groups of every sort. It seems like everyone has a sound byte these days. If you haven’t already figured it out, I’m the world’s most cynical skeptic, but some of these campaigns have even given me pause for a moment or two (just before I recognized them for what they were and became nauseated).
Before I bring this topic full-circle to its financial and economic implications – if only to illustrate the subtlety, sheer pervasiveness, and impact of some modern propaganda -- I want to share a few of my favorite contemporary phrases:
Ethnic Cleansing – This is a polite, yet important-sounding way of saying “If you don’t mind, we’d appreciate it if you, and everyone like you, would dig a ditch so we can shoot you and bury you in it. Thanks.”
Political Correctness – This phrase is just a haughty way of saying, “If you can’t say anything nice, don’t say anything at all.” Am I the only person in the world who finds this hackneyed little Clinton-era lyric to sound a lot like the noise a goat makes when it’s being slaughtered? I’m sorry, was that metaphor politically incorrect? I think I hear an angry PETA member throwing a computer monitor out a window somewhere.
Eminent Domain – This is an extremely sophisticated, legalistic way of saying, “We’re stealing your house. Get the hell out. Now.”
Intelligent Design – This is how a bunch of envious Christians respond to a concept as cool as Natural Selection. I’m still wondering what they’re going to come up with in response to The Big Bang. Maybe Provident Ejaculation? Whatever it is, I’m sure it will sound positively scientific and rational. I can’t wait.
And now for my favorite…
Quantitative Easing – This is government’s modern, scientific way of saying, “We’re going to print money and lower interest rates, making you think everything is worth ‘more.’ But in reality, everything won’t be worth ‘more,’ because we are systematically destroying your currency -- along with the economy – as we manufacture this illusion.”
It’s just a lot easier to say Quantitative easing. Plus it sounds sophisticated, which is important when Ron Paul is all but chewing his microphone off its base as he makes you accountable for your irresponsibility.
Propaganda is an art form. Yes it is.
I love the Keynes quote at the beginning of this piece. I really do. I mean, here’s the architect of so-called quantitative easing basically saying, “By making you think your house is going to be worth more every year, your government is stealing your money. And you don’t even know it!”
Again, this isn’t Murray Rothbard, or Jim Rogers, or Peter Schiff, or Milton Friedman! This is John Maynard Keynes telling you your government is stealing from you!
There was a time, believe it or not when price increases were the exception, and falling prices were the rule. As humanity has progressed, technology has always increased our standard of living, and created more efficiency. And this has almost always resulted in falling prices.
If you don’t believe me, think about how much bananas must have cost in Norway during the 16th century. Or think about how expensive cinnamon must have been in England in the 10th century. Most people would never even see these commodities – let alone be able to pay for them. Today, bananas and cinnamon are accessible globally, to anyone, at very low costs. Technology caused them to depreciate over time – not increase in price, as your government would have you believe should have been the case.
Or how about the most contemporary – and perhaps best example of all: the computer industry, and Moore’s Law. Prices of computers don’t increase over time -- they decrease with obsolescence and improved technology.
This is the way the economy should work. Instead, however, in order to create the illusion that everything is increasing in value, your government has created a monopolistic fiat currency and a central bank. No one can compete with the primary medium of exchange, and so the Fed prints currency and manipulates interest rates with reckless abandon.
In theory, it’s a great idea. You buy stuff, the Fed keeps inflation at about 3%, and in most cases, after a long period of time, your stuff seems more valuable. You can boast to your friends at work and at parties, “I bought my house for $50,000 in 1977, and today it’s worth $200,000! I’ve quadrupled my money!”
In reality, your annualized rate of return is a little less than 4.5%, and unless you paid cash, your interest rate was higher (and probably a lot higher) than your rate of return, so you’ve actually lost money on your house. And that doesn’t even take inflation into account.
Of course, you did write off all that interest you paid, and you had to live somewhere, but that doesn’t really diminish my point: considering everything I just said, along with the fact that inflation has – in the best case scenario – averaged 3%-4%, your house hasn’t really gained in value at all. And that goes for anything else you’ve bought, for the most part.
Yes, there are exceptions; Warren Buffett has averaged a purported 23% rate-of-return per annum during the decades of his career. But unless you were both lucky and smart enough to have picked up 100 shares of Berkshire-Hathaway (BRK.A) when it was trading under $500, you probably haven’t been outpacing inflationary price-increases as much as you think you have – if at all.
But it sure feels like you have, doesn’t it? How many times have you heard this statement: “I can remember when [gas, a coke, a pack of cigarettes] was [insert really low price here]!”
And so the government perpetuates its myth. Why? Because it needs you to believe it’s doing a good job. And how does it achieve this? By creating the illusion that everything is going up in value, when in fact most things – in real terms – aren’t at all. In fact, most goods and services are actually falling in value, when you take into consideration the government policy of artificially perpetuating inflation.
And how does the government create inflation? Again, by printing currency and manipulating interest rates. Just to give you an idea of how consistently the government has been printing dollars since we went off the gold standard in the early 1970s, here’s a chart for you, courtesy of the St. Louis Fed:
click to enlarge
Okay, I mentioned the gold standard before, but I want to be clear about something: if the United States dollar ever was truly and directly connected to gold (and this is contentious), it was a very, very long time ago. But whether or not the relationship was ever direct or not, certainly in the 20th century while the dollar had some relationship with gold, the federal government – for instance, under Franklin Roosevelt – made it abundantly clear that it can, and will simply suddenly and arbitrarily announce how much gold is “worth” in dollar-terms.
Or, worse still, the government can simply dissociate the dollar with gold completely – as it did under Nixon. And – as the chart above demonstrates -- since the 1970s (when Nixon took us off the gold standard), the government has been printing money at will, and at an ever-increasing rate -- in its futile quest to manipulate inflation.
So what would the chart above look like if the dollar were tied directly and invariably to gold? It would be flat. And what would that mean? Simply put, goods and services during that period would rise and fall according to the principles of supply and demand only; there would be no distortions related to currency and rate manipulations. The fluctuations of goods and services would be pure, and their true value would be much easier to ascertain. This would mean more efficiency, more accuracy, and certainly fewer – and less dramatic – economic cycles.
Unfortunately, this has not been the case, and the government has persisted in its profligate and unrealistic quest to manipulate the dollar and the economy. The result? You’re living it: unemployment above 10% -- or, if you dismiss government statistics as unreliable (like I do), double that. Gold is breaking multi-decade highs. Oil and agriculture are climbing fast. These are the inevitable signs of inflationary price-increases, and the signs are huge.
In short, the dam before the Fed has 100 holes, but the Fed only has ten fingers to stop the leaks. The printing has been unprecedented. Rates are lower than ever in history. So what’s next? Well, it looks like the unsustainable myth is finally losing its power to persuade the multitudes, and that can only mean that the ultimate correction is looming before us. Some people call it “coming hyper-inflation.”
Disclosures: Paco is long TBT and Gold. He also holds U.S. dollars by necessity, pending the advent of private gold-backed currencies.
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This article has 138 comments:
Street Journal, it's impossible to get the facts regarding issues. On top of this, the government keeps telling us that there is no inflation.
If that is so, how come prices on almost everything have increased
20-50%
Hope you will continue to make people aware of what's going on.
Dick Streich
5
Inflation is the rich stealing from the poor. The Keynes' quote is wonderful: In this case it is the State-Capitalists (Wall Street aligned with Washington DC) that is stealing from its citizenry.
Deflation is the poor getting even with the rich. Is it any wonder the power center in America (Wall Street and Washington DC) will do ANYTHING to protect their inflationary doctrine? They would rather destroy America that have to give back any of the money they've successfully stolen already.
Deflation is God's way of punishing the rich. Deflation will have its day.
Prices doubling every few weeks and days, sometimes by the hours.
No matter how much "money" the FED prints, true "hyperinflation" will not occur in the US unless the unemployment figures return to the 4-5% range.
People who are not working and subsist only on the fixed income of unemployment or SS or pensions are the great weight holding down any "hyperinflation."
The TBTF banks are hoarding this new "money" from the FED which leaves little velocity to ignite serious inflation, let alone hyperinflation.
The TBTF banks, and many smaller community banks as well, have giant black holes on their balance sheets that must be filled with all this money being printed by the FED.
Only if those balance sheet black holes are filled up would the velocity of money rise to maybe create hyperinflation.
If real hyperinflation was to ever take hold, it would not last long in the US as society would collapse and there would be a rebirth of a new nation.
The lie that is being repeated too often by folks who haven't any real understanding of Keynes is that QE is going to (or has already) caused an inflationary problem.
I share your extreme hatred of "euphemisms" (simply another form of lying) and you zeroed in on the ones at the top of my own hate-list.
Yes, inflation is ONE of the "big lies" of governments (most, if not all of them), with lying about unemployment a close second - and for similar reasons. The object is to convince people that official "statistics" are more reliable than their own DIRECT observations of their own society.
CNN is particularly notable for a SERIES of "news" items with the SPECIFIC theme that people "can't trust their own perceptions" or (the variation) "things are NOT as bad YOU think they are".
On Nov 09 02:25 PM Michael Clark wrote:
> Inflation is the rich stealing from the poor. The Keynes' quote
> is wonderful: In this case it is the State-Capitalists (Wall Street
> aligned with Washington DC) that is stealing from its citizenry.
On Nov 09 02:16 PM dick streich wrote:
> You are absolutely right. The sad thing is that most americans believe
> what they here or read. Unfortunately, with the exception of the
> Wall
> Street Journal, it's impossible to get the facts regarding issues.
> On top of this, the government keeps telling us that there is no
> inflation.
> If that is so, how come prices on almost everything have increased
>
> 20-50%
> Hope you will continue to make people aware of what's going on.<br/>
>
> Dick Streich
>
>
> 5
You state that inflation robs from people with money and helps debtors. This is true, except I would clarify that inflation doesn't hurt people with money, it hurts people with cash specifically. In times of high inflation, richer citizens who have more financial savvy will leverage their cash holdings into inflation-linked assets in order to not only maintain the purchasing power of their original holdings, but make gains from leverage. People without abundant access to credit can do no such thing.
On Nov 09 04:23 PM ThirtyNineWinks wrote:
> You've got it backwards. Inflation robs from people with money,
> and helps people with debt. As the government is the biggest debtor
> around, they'll be glad to borrow a dollar today, and repay you with
> a 10 cent dollar next week.
Paco, check out www.goldmoney.com They are setting up the infrastructure to hold physical gold in vaults and let you have a convenient way to use it to make payments.
It won't eliminate your need to hold dollars (yet), but it might be the wave of the not-all-that-distant future.
"It is the nature of the human species to reject what is true but unpleasant and to embrace what is obviously false but comforting."
That's why propagandists have such an easy time of it. Tell people the lies they want to hear and they will love you for it. Tell them the truth that they don't want to hear and they will hate you for it. Tell people they can have free health care and pensions and they will love you. Tell them there is no free lunch and they have to earn their daily bread and they will assault you. Tell them they have 'rights' that entitle them to material goods produced by others and they will love you. Tell them they have no right to anything that they have not personally worked to produce and they will try to kill you.
Is it any wonder that democracy tends inevitably toward socialism? People love hearing about all the free stuff the government is going to give them. And they will never elect an honest politician who tells them that the entire welfare system was a mistake and the country is now bankrupt and has to lay off most public sector workers and default on all the promises to pay pensions and Medicare and all the other welfare programs.
So it's not just the politicians' fault that socialism is rising. The people are demanding it. They are entitled to it. Lying politicians told them they can have it and the people will never abandon that belief because it suits them better to believe the lie.
Since prices advance at the same rate for everyone, but incomes advance based on a variety of factors, inflation being only one, it's very difficult to analyze for whom and on which items inflation has been a penalty. Absent such a detailed assessment, it's really impossible make blanket conclusions about the impact of inflation, deflation or the absence of either.
Generally, however, most global societies, as a whole, seem collectively to keep enjoying increasing living standards, so the Inflation "robbery" doesn't seem to be very efficient, if it truly exists at all, when all factors are viewed on a normalized basis.
On Nov 09 04:23 PM ThirtyNineWinks wrote: "You've got it backwards. Inflation robs from people with money, and helps people with debt..."
ThirtyNineWinks has it right. Mr. Clark has it exactly backwards. Speaking generally, the rich are generally creditors and the poor are debtors.
Monetary inflation make the dollar-denominated assets and liabilities both worth less. The positive net worth of the rich gets smaller and the negative net worth of the poor, while still negative gets smaller too. Deflation works the opposite way, helping the rich and hurting the poor.
Inflation helps the poor by reducing the value of their debt compared to their wages. The fact that it also reduces the debt of the biggest debtor on the planet, the U.S. government, makes it a certainty that there will be inflation, because the U.S. government controls the money supply and will guarantee inflation.
But in the end, inflation hurts everybody, because the primary unit of account (the USD) becomes corrupted and unreliable, making business decision-making, capital accumulation and resulting wage increases impossible.
www.marketwatch.com/st...
It explains how we have been artificially manufacturing demand for our own debt when it isn't really isn't there and about how it wil soon end.
"The usual argument in favor of inflation is debt-based. That is, inflation is wonderful because it enable us to pay off our debts with future "cheaper" dollars. But if our incomes are being robbed by inflation, then is that "benefit" of inflation really so valuable? If I lose a third of my purchasing power in a decade does being able to pay down my mortgage with depreciated dollars offset my loss of purchasing power? No--unless my mortgage payment exceeds my income by a fair margin, which is essentially impossible.
Deflation is excellent for those with cash and earnings and awful for kleptocracy governments and those with over-leveraged debt. The entire idea that "inflation is good" masks a perverse incentive: take on as much debt as you possibly can because interest will become "cheaper" to pay in the future (assuming your earnings keep up with inflation).
If your earnings don't keep up with inflation, well, too bad."
Steve: Do we want to encourage more debt or more saving? The banks want us to be in debt, because debt -- paying $150 for a $100 item -- is where the banks make money. The inflation argument is an argument for a society of debt addicts, dependent upon banks for their fix.
Start paying people to save and they will save. Steal the money from savers (0% interest rates) and they are forced into risky investments or dwindling real returns because inflation robs people of the value of their money.
The idea that currency devaluation -- inflation IS a form of currency devaluation -- is good for the poor is ludicrous. Inflation PUTS poor people into debt. The GOAL of inflation is to put poor people into debt -- because they need more and more income to live, as the real value of their income declines -- and the banks lure them into debt with great deals, almost free money: Come be a debt slave; it feels good; and its ALMOST free money....
Saying inflation is good for the poor is like saying venereal disease feels good -- it is confusing the world of causes and effects.
“By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens.”
-- John Maynard Keynes
"This is deflation in action: falling prices that are, in effect, a transfer of wealth from landlords, goods producers and retailers to consumers."
Tom Petruno
On Nov 09 09:26 PM Steve in Greensboro wrote:
> On Nov 09 02:25 PM Michael Clark wrote: "...Inflation is the rich
> stealing from the poor....Deflation is the poor getting even with
> the rich...."
>
> On Nov 09 04:23 PM ThirtyNineWinks wrote: "You've got it backwards.
> Inflation robs from people with money, and helps people with debt..."
>
>
> ThirtyNineWinks has it right. Mr. Clark has it exactly backwards.
> Speaking generally, the rich are generally creditors and the poor
> are debtors.
>
> Monetary inflation make the dollar-denominated assets and liabilities
> both worth less. The positive net worth of the rich gets smaller
> and the negative net worth of the poor, while still negative gets
> smaller too. Deflation works the opposite way, helping the rich
> and hurting the poor.
>
> Inflation helps the poor by reducing the value of their debt compared
> to their wages. The fact that it also reduces the debt of the biggest
> debtor on the planet, the U.S. government, makes it a certainty that
> there will be inflation, because the U.S. government controls the
> money supply and will guarantee inflation.
>
> But in the end, inflation hurts everybody, because the primary unit
> of account (the USD) becomes corrupted and unreliable, making business
> decision-making, capital accumulation and resulting wage increases
> impossible.
On Nov 09 11:37 PM awgie wrote:
> Powerful piece. Powerful comments. The only part I disagree with
> is the part about prices of computers rising. They aren't, in terms
> of computing power. That's the one consolation in this world. Someday
> computers will be ubiquitous and they'll be smarter than us, then
> all our stupidity and gullibility to the fraudsters in power will
> be moot. Computers and the internet will level the playing field
> -- unless they figure out a way to regulate the internet and free
> speech.
> Computers, and computer chips -- actually everything made with computer components -- is the only place in the ENTIRE global economy where capitalism is to be seen, where competition is actually driving down prices. Show me another place in the economy where price-fixing is not at work...and I will appreciate it. >
--------
One example I've seen given is in the health care field. Lasik surgery is typically not covered by health insurance, and because of that people are using their own money rather than "other people's money" to get the surgery, should they decide to do so.
Innovations have been pretty swift and prices have dropped significantly from earlier levels.
That is one argument used for purchasing high deductible "Health Savings Accounts" and putting the savings from the high deductibles into the savings portion of the plans. People paying with their own money tend to do more shopping, and are more prudent in deciding which procedures to use, which doctors and hospitals etc. Or so the theory goes...
On Nov <span title="Convert this amount" class="currency_conver... 02:39 PM goldbug101 wrote:
> "Hyper Inflation" is a term that should be followed by Zimbabwe or
> Weimer Republic.
>
> Prices doubling every few weeks and days, sometimes by the hours.
>
>
> No matter how much "money" the FED prints, true "hyperinflation"
> will not occur in the US unless the unemployment figures return to
> the 4-5% range.
>
> People who are not working and subsist only on the fixed income of
> unemployment or SS or pensions are the great weight holding down
> any "hyperinflation."
>
> The TBTF banks are hoarding this new "money" from the FED which leaves
> little velocity to ignite serious inflation, let alone hyperinflation.
>
>
> The TBTF banks, and many smaller community banks as well, have giant
> black holes on their balance sheets that must be filled with all
> this money being printed by the FED.
>
> Only if those balance sheet black holes are filled up would the velocity
> of money rise to maybe create hyperinflation.
>
> If real hyperinflation was to ever take hold, it would not last long
> in the US as society would collapse and there would be a rebirth
> of a new nation.
>
> Shakespeare predicted it would start by killing all the lawyers.
> If hyperinflation comes to pass, bankers and politicians will be
> the first to face the anger of the masses.
> Deflation is God's way of punishing the rich. Deflation will have
> its day.
Michael, I agree with about 75% of your comments, but i don't get this one. How does deflation punish the rich? If by "rich" you mean people with plenty of fiat currency in the bank, then deflation makes each of their units of currency buy more.
Interestingly enough, Hollywood is indirectly telling America that the government is lying to them - The new weekly program "V" is pointing it out the lies. But, I fear/doubt the general population gets it. I am not a fan of Hollywood in general, they added to this "dumbing/numbing down" of America.
Keep up the good and spread the word. Hopefully our Children will be able to pay the bill we have created.
j, stalin was a demented pathological realist.
perhaps the world needs a few fewer realists.
j. keynes should have known that inflation is a tax that the govt places on your insurance policy & your savings account, thus a disincentive to saving.
the inflation of 1974-1980 was caused by the arab oil sheikhs, but we asked for it by pumping america dry. in 1952 we had a strategic petroleum reserve, oil in the ground in texas. we should have kept it there & pumped saudiland dry first. however the houston oil millionaires wanted otherwise.
the present inflation in health care costs is caused by the health care monopoly cartel corporations & the big pharmas, they like to keep it that way.
the 2008 inflation @ the gas pump was caused by goldman sachs & the other hedge funds gambling on futures with 40/1 leverage.
will we ever learn?
> jack
First, let's look at the most objective evidence. What happens when we have deflation? We had basically a deflationary spiral during the Great Depression. Everything got cheaper. Was this a great time for the country then guys?
What about Japan? It has had mild deflation for the past 20 years (despite 20 years of 0% interest rates and lots and lots of government spending). Is this a great performing economy?
The answer to both of these questions is NO. The reason? Well, a deflationary spiral creates many problems. The biggest of which is the inability of the private sector to deleverage. For example, in this crisis, everyone agrees that the American private sector is way too overleveraged. And the process of deleveraging is a long one. If everyone tries to deleverage at once, it causes a great drop in demand and hence deflation. The problem with that is that eventhough the private sector might be trying to reduce the nominal value of its debts, if you allow deflation, the real value of its debts will not fall and may even rise. For example, if the private sector pays off 1% of its debts this year but prices are allowed to fall by 2% then effectively the real debt levels have increased. This is what is called a deflationary spiral.
The second piece of evidence for inflation is that it has worked. Yes, prices have gone up a lot since 1932, but incomes have gone up even more. So, again the nominal value of goods have gone up with mild inflation, but with respect to our incomes, prices have gone down and our purchasing power has increased.
Finally, its often cited by the goldbugs and Austrians that the dollar has lost something on the order of 90% of its value since the Fed came to be in 1913. Well, I ask, would you rather be a person in the United States before 1913 with these supposedly more valuable dollars or be you right now in 2009 with your supposedly devalued dollars?
One more thing. Conservative love to blame Keynes for everything. But it is not Keynes who was the main proponent of the mild inflation argument, but the icon of free market economics, Milton Friedman. To appease the Tea Baggers, conservative economic pundits today never mention that had Milton Friedman been alive today he would support pretty much everything the government is doing to battle this recession except for the fiscal stimulus package.
On Nov 09 02:25 PM Michael Clark wrote:
> Reading this makes me feel that I'm talking to myself.
>
> Inflation is the rich stealing from the poor. The Keynes' quote is
> wonderful: In this case it is the State-Capitalists (Wall Street
> aligned with Washington DC) that is stealing from its citizenry.
>
>
> Deflation is the poor getting even with the rich. Is it any wonder
> the power center in America (Wall Street and Washington DC) will
> do ANYTHING to protect their inflationary doctrine? They would rather
> destroy America that have to give back any of the money they've successfully
> stolen already.
>
> Deflation is God's way of punishing the rich. Deflation will have
> its day.
Most of your examples, however, are an obfuscation of lying and you really mean deception. You have to know the truth in order to lie, if you don't know the truth but you just want someone to do what you are saying, you are really deceiving them. This is a non-trivial difference. Most of your examples really get to the art of deception, rather than lying.
To prove my point I will simply say you are deceiving about lying.
Most believers in a doctrine will deceive when confronted with uncertainty. It takes courage to say "I don't know", especially when you are supposed have the answers, and deception includes cunning..... which is why saying nothing is often wiser than disagreeing. As Pogo would say, "We have found the enemy and he is us".
"Intelligent Design – This is how a bunch of envious Christians respond to a concept as cool as Natural Selection. I’m still wondering what they’re going to come up with in response to The Big Bang. Maybe Provident Ejaculation? Whatever it is, I’m sure it will sound positively scientific and rational. I can’t wait."
Correction to your error. Natural selection is not evolution. Many examples of natural selection exist in the near term. Also, how does your reference of "envious Christians" differ from Goebbels propaganda against Jews, homosexuals and communists?
unemployment in Zimbabwe is reckoned to be at 90%, but this has not prevented hyper inflation.
Correct, but that is not the cause of "hyperinflation" in Zimbabwe. It was the Zimbabwe government basically printing what it needed to pay foreign creditors off, then knocking a few zeros off the currency every once in a while.
(Hey there Mr. IMF, we owe you the equivilant of 20 Trillion in Zimbabwe denominated notes?
OK - here ya go all nice, hot & fresh off our printing presses.
Why yes, we did just add 20 Trillion in new notes to our economy to pay you off.
What, that's not gonna work - hey, why do we now need to print another 60 Trillion to buy a few barrels of oil priced in USD?
So, now our money is worthless? Oh well, we'll cut a few zeros off the currency. A "new dollar" is worth a million "old dollars.")
For the forseeable future, all the new FED "money" is going to sit on the balance sheets of all these banks until the loan losses and toxic assets can be valued at the pennies on the dollar they are actually worth (some are worth zero pennies).
- Einstein
The day of reckoning will soon come where the Fed has to choose between a higher unemployment or saving the dollar with an interest rate hike. If you were a board member, what would YOU choose?
I think anger at the Fed is misplaced, people need to vote their anger.
2010. 2010. 2010
long: TBT, DBC, VIX
It feels good and is not significantly destructive, as wages increase in nominal terms along with asset values (e.g. houses). It also keeps the nominal tax rates down, so taxes don't feel so harsh compared to the benefits government provides. What's not to like about that?
Admittedly, if it gets out of hand, it becomes destructive to commerce and then everyone suffers, but IF it is contained, it's a pretty good system for creating middle class wealth, and allowing upward mobility for a lot of people.
On Nov 09 09:26 PM Steve in Greensboro wrote:
> On Nov 09 02:25 PM Michael Clark wrote: "...Inflation is the rich
> stealing from the poor....Deflation is the poor getting even with
> the rich...."
>
> On Nov 09 04:23 PM ThirtyNineWinks wrote: "You've got it backwards.
> Inflation robs from people with money, and helps people with debt..."
>
>
> ThirtyNineWinks has it right. Mr. Clark has it exactly backwards.
> Speaking generally, the rich are generally creditors and the poor
> are debtors.
>
> Monetary inflation make the dollar-denominated assets and liabilities
> both worth less. The positive net worth of the rich gets smaller
> and the negative net worth of the poor, while still negative gets
> smaller too. Deflation works the opposite way, helping the rich
> and hurting the poor.
>
> Inflation helps the poor by reducing the value of their debt compared
> to their wages. The fact that it also reduces the debt of the biggest
> debtor on the planet, the U.S. government, makes it a certainty that
> there will be inflation, because the U.S. government controls the
> money supply and will guarantee inflation.
>
> But in the end, inflation hurts everybody, because the primary unit
> of account (the USD) becomes corrupted and unreliable, making business
> decision-making, capital accumulation and resulting wage increases
> impossible.
1. Your income stays the same but prices rise.
2. Prices don't rise but your fixed retirement income from savings plunges to .1 % due to Federal Reserve manipulation.
P.S. The Big Bang was proven scientifically impossible years ago. It's all "Inflationary Universe" now unless I'm also a theory behind at this point. (Every time the current theory gets debunked the theory's faithful, unquestioning adherents change the name a little in scientific circles to keep them straight, but fail to tell the doting public they are being duped.) Again, try to know some facts when mocking someone.
You are right that monetary inflation is a lie. But, I’d like to distinguish between embezzlement (stealing financial assets from another person) and fraud (a lie told to damage another person), because inflation has both these characteristics.
Monetary inflation (money printing) is embezzlement because the price inflation it creates transfers wealth from creditors to debtors without the debtors’ knowledge. (Other commenters above have gone over this pretty thoroughly above.)
But money printing also is fraud. It is a way to mislead market participants about market conditions to trick them into taking risks that they should not take.
Monetary inflation makes credit more available and reduces Interest rates. This tricks the entrepreneur into borrowing money to start a new business. This misleads the investor into moving into riskier assets. Of course, the lower interest rates are not real, they are fraudulent, so the investments are malinvestments and the bubbles eventually burst.
Inflation is a particularly vile form of fraud, because it corrupts the unit of account, attacking the heart of free markets.
The current crisis is the result of Greenspan and his lieutenant Bernanke committing money-printing fraud in the wake of the bursting of the dot.com bubble. The current bubble in equities and commodities (the run-up in USD since March 2009) is the result of Bernanke's even more egregious monetary fraud. It is going to burst soon enough.
Greenspan and Bernanke are embezzlers and fraudsters on a global scale.
So, while Provident Ejaculation is good material, it's about 80 years too late. "Big Bang" itself was a term of derision coined by an atheist to describe what struck him as an unacceptably religious model. You see, ideological bias is an equal opportunity employer.
On Nov 10 08:34 AM fairtradenow wrote:
> DUDE, you're spouting...where's the bibliography on the Big Bang?
> Please look into who came up with BB - or, we'll all start Naturally
> Selecting another source of information
On Nov 10 07:49 AM Carlos Lam wrote:
> On Nov 09 02:25 PM Michael Clark wrote:
But the current system is so embedded there seems to be little chance of deconstructing without reverting to the so-called Dark Ages of chaos, pestilence and constant war. Wait, we have that now too.
Inflation has been so persistent because wage inflation is absolutely required to make usury banking work. Workers need rising wages to keep up with compounding interest, or else money would eventually aggregate into the hands of lenders.
Thirty nine, if inflation robs the rich then why has the gap between rich and poor risen? Top managers who are paid 50 or 60 times more than the production worker leave the lower ones in the dust.
And I question Tack's assertion that living standards are rising.
Yes, we have Blackberries and I-phones and 52-inch HD screens and cars that make the Model T look like a golf cart. But in the Dark Ages peasants only worked six weeks a year to take care of all their shelter and food needs.
No, I do not want to go back to huts and porridge, but some of the standard of living is illusory as the 17 percent unemployed are finding out. Does sitting around at night being mentally programmed and entertained by Modern Family actually cut into our real productivity and a real rise in sustainable living standards?
As for the person who cited Buffett, his 23 percent rate of return would have been given a big haircut if the government elites had not bailed out his financial positions, the same government that has told seniors - whose transfer payments lag real post 1990 inlfation by 50 percent - to stuff it and tighten their belts.
But again, this article does a great job of summarizing reality. But the financial elites - what Ferdinand Lundberg called Finpols - absolutely have us by the throat.
BTW, the article is a keeper.
On Nov 09 11:37 PM awgie wrote:
Someday
> computers will be ubiquitous and they'll be smarter than us, then
> all our stupidity and gullibility to the fraudsters in power will
> be moot. Computers and the internet will level the playing field
> -- unless they figure out a way to regulate the internet and free
> speech.
GMOs are poison that deny the body needed nutrients and make a handful of mega-corporations powerful and rich.
The government BACKS this because of tax dollars.
Real food makes for healthy people. Healthy people do not contribute to the corporate takeover that has occurred. The government, pharms and Monsanto do NOT want healthy people. That want ever growing market share and the $$$ that goes with it.
On Nov 10 09:06 AM Aaron Ashcraft wrote:
> Terrific article! Thanks! I will add GLOBAL WARMING to the lies
> being told by governments!!!!! I will also add environmentalists
> and government opposition to genetically modified foods while there
> are forecast to be 1 BILLION hungry people around the world in 2010
> because of lagging farm production.
Deflation hurts the leveraged rich because they took out loans to purchase income assets. With deflation, the cashflow generated by income asset falls below the level needed to service their debt and they go kaputz. Case in point is all those LBO's that have gone bk recently.
As for the asset rich that owns their assets outright with little debt, I would say inflation and deflation makes no difference. They win either way.
The problem with out society is that easy money has overweighted us towards the leveraged rich whereas Asian countries have more asset rich...thus our preferance towards inflation.
On Nov 10 07:49 AM Carlos Lam wrote:
> On Nov 09 02:25 PM Michael Clark wrote:
Prevent outlandish risk taking behavior. This may be correct but it is not the solution.
The solution is to improve the financial condition and the purchasing power of the people. It is small business and people that make our economy work. I am not saying we should give anything to anyone. I am saying that the economy needs the means of exchange (credit or paper money) available and obtainable either by work or from the financial industry so the number of exchanges of goods and services can increase so the economy can heal. We have not been able to do that yet because the economy is being misguided again.
Lets get to the very bottom of this mess. Wall St. and the GSES were buying and selling debt. Debt created by consumers and investors. Our economy is a consumer-based economy not an export-based economy. Our primary means of exchanging goods and services is with the use of credit. The financial industry has their finger in almost all of those exchanges. Our income tax system encourages the use of credit and leveraged investing. Without all of the credit use Wall St. and the GSEs would not have as much credit to buy and sell. There is the problem. The solution is; do not encourage credit use when prices are increasing too fast and the economy does not need more credit use. Currently we are in a deep recession. To increase people's purchasing power the economy needs the Stimulus Mortgage. To prevent excessive use of credit during the inflation cycle, which would create another economic crisis, enact the ZERO INFLATION TAXATION POLICY. economysflaw.wordpress...
I also am thinking the BLS is now a big propaganda machine, as I have seen some major flaws in the numbers, and shared the numbers with my collegues who are stunned, and in disbelief that the government could blatently publish such lies, or if nothing else, be so stupid.
Clearly, with inflation, she raises her rents 5-10% every year, if she can, if the inflated market allows her to.
She is asset-rich but she is losing money through deflation.
On Nov 10 11:02 AM hanumanhojo wrote:
> I think that really should be spoken with a caveat. There are two
> types of rich...the asset rich and the leveraged rich.
>
> Deflation hurts the leveraged rich because they took out loans to
> purchase income assets. With deflation, the cashflow generated by
> income asset falls below the level needed to service their debt and
> they go kaputz. Case in point is all those LBO's that have gone
> bk recently.
>
> As for the asset rich that owns their assets outright with little
> debt, I would say inflation and deflation makes no difference. They
> win either way.
>
> The problem with out society is that easy money has overweighted
> us towards the leveraged rich whereas Asian countries have more asset
> rich...thus our preferance towards inflation.
On Nov 10 10:19 AM ralf38 wrote:
> Deflation hurts business as they usually don't manage inventory well.
> Their products price is decreasing while constant cost inventory
> is being worked down.
And by the way, no lie told by Mr O and his team can match the lie about WMD told by the Bush gang.
College tuition has climbed nearly 2000% in 30 years. Health-care -- how much? Housing? The cost of autos has climbed over 1000% in thirty years. Salaries have not climbed 1000-2000% in the last 30 years.
From 1976 to 2007, University of Oregon full-time tuition for non-resident graduate students increased from $320 per term to $5447 per term, an increase of 1602%.
To put this in perspective, a person earning $20,000 per year in 1976 (a reasonable salary at the time), would need to be making $320,400 in 2007 in order to keep up with this suggested inflationary rate.
A person earning $60,000 in 1976 (a higher administration type salary), would need to be making $961,200 in 2007 in order to keep up with this suggested inflationar rate.
When I was entering college in 1970, a new Volkswagon bug cost $1700. Today, a new bug costs $20,000. This is an increase of 1100%. A person making $20,000 in 1970 would need to be making more than $215,000 dollars today to keep up with that inflation rate.
Oil went from $10/barrel to $150/barrel in 30 years, an inflation rate of 1400%.
This is NOT mild inflation.
How did Americans deal with this inflation? Single wage-earning families became double wage-earning families, with the resultant social problems accompanying a lack of home supervision for children. When two salaries weren't enough, DEBT became the answer....a mountain of DEBT. Since stock markets were going up, that was another kind of ATM machine; since housing prices were going up, this was another kind of ATM....through refinancing. Then housing and stocks tanked together and the ATM culture, the debt culture. as a way of trying to keep up with rampant inflation, broke apart, and families rolled over into default, bankruptcy and despair.
That is where we are now. That is how 'the cult of inflation' destroys a society.
On Nov 10 09:47 AM Tetrapod wrote:
> Exactly right, Steve. Inflation is a mixed bag, but mild inflation
> tends to benefit the middle class, which I think is why governments
> everywhere try to keep it that way.
>
> It feels good and is not significantly destructive, as wages increase
> in nominal terms along with asset values (e.g. houses). It also
> keeps the nominal tax rates down, so taxes don't feel so harsh compared
> to the benefits government provides. What's not to like about that?
>
>
> Admittedly, if it gets out of hand, it becomes destructive to commerce
> and then everyone suffers, but IF it is contained, it's a pretty
> good system for creating middle class wealth, and allowing upward
> mobility for a lot of people.
On Nov 10 09:23 AM MarkitWacha wrote:
> Good article.
>
> The day of reckoning will soon come where the Fed has to choose between
> a higher unemployment or saving the dollar with an interest rate
> hike. If you were a board member, what would YOU choose?
>
> I think anger at the Fed is misplaced, people need to vote their
> anger.
>
> 2010. 2010. 2010
>
> long: TBT, DBC, VIX
On Nov 09 05:19 PM Bad Dog wrote:
> I have not noticed prices going up 20%. I think your grocer is ripping
> you off.
On Nov 09 04:23 PM ThirtyNineWinks wrote:
> You've got it backwards. Inflation robs from people with money, and
> helps people with debt. As the government is the biggest debtor around,
> they'll be glad to borrow a dollar today, and repay you with a 10
> cent dollar next week.
Michael Clark:
Good response to Tetrapod above seekingalpha.com/artic...
We have seen runaway inflation devastate the working class over the last three decades, and the response is two-career families.
Rob
On Nov 10 01:48 PM Michael Clark wrote:
> That's a very interesting question -- and has profound psychological,
> philosophical and religious implications. In my view (it isn't MY
> view, but a pretty widely shared view I think), we are all (all men
> at least, women's role seems to be the reverse of men, spiritually
> and psychologically) composed of dualistic natures that are sometimes
> united and supportive and some times at war. Twin natures. 'Brothers',
> symbolically.
>
> Sometimes one nature is on top, the creative nature; and sometimes
> the destruction nature is on top. My view of this is that during
> the Day-Cycle (expansion of Light, credit, empire, economies), the
> Light Nature (the Masculine Principle) comes to power and wealth
> at the expanse of the Dark Nature (the Shadow, the Feminine Principle).
> The Spring is an emblem of the Light Nature rising, being reborn.
> The Light Principle (metaphorically) 'casts' the dark principle (negativity)
> down in to Hades at Spring. The Light Principle climbs into the
> mansions of the sky, making money, building civilizations, creating
> empires....while the shadow is oppressed. Here we have a historical
> picture of slavery, ethnic cleansing, racial domination white over
> non-white....and this domination continues until Noon (the high point
> of the Day or Year, the apex: Summer in the annual cycle). At Noon
> the Sun has NO SHADOW -- has completely defeated the power of the
> shadow. At Summer Solstice, the Daylight lasts longest, the Night
> is weakest, shortest. This represents the absolute defeat of the
> Dark Principle; and the apex of civilization, banking, money-making,
> city-building, the masculine daylight activities involved in physical
> plane evolution. This is 2001, by my reckoning, in our current historical
> cycle. But then the strength of the Shadow is suddenly reborn, and
> begins to grow slowly, minute by minute.
>
> The Light Principle, during this climb to power, uses the Dark Principle
> as something to step on, to drive down, to destroy. As the power
> of the Dark Principle (the Night) begins to grow, the resentment
> of the poor, the lowly, the dark, the negative, the passive or female,
> remember that the Active Principle abused them during its climb to
> empire, to power. They begin to make plans to get even. Castration
> (the mythic equalizer) is the method they will use to attain equality
> with the Light Principle.
>
> Nature is on the side of the rich during the expansion. But when
> the expansion (the bubble) reaches its apex and then begins to decline,
> then the power of Nature shifts, and begins to be on the side of
> the poor, as a balance is sought, a re-examination of the karmic
> ledgers. The Lord gives; but the Lord also takes away.
>
> In Christianity, God the Father sends his Son down to Earth to be
> on the side of the poor. The Son is the Soul. The Soul has been
> on the side of the rich in heaven during the building stage; but
> then the Son, the Soul, joins the side of the poor against the rich.
> Suddenly, it becomes clear; the Rich have no soul. The world turns
> against the Rich when it becomes clear they have no soul, that money
> and power are their only creed. As the light changes, the world
> becomes more spiritual, and the Rich appear corrupt and diseased;
> and the society sees clearly the sins the Rich have committed.<br/>
>
> When Jesus throws the moneychangers out of the temple, this is a
> symbol of this change of Nature from pro-rich to anti-rich, from
> Day to Night. The Daylight force justifies its own wealth and power
> by telling itself that it is rich and successful because God is on
> the side of the rich -- the 'covenant', the agreement between the
> Day and God has made them rich, and has justified the Light Principle's
> war against the Darkness. (Michael, the Archangel, casting Lucifer
> out of heaven is an expression of the Light Principle casting the
> Darkness out of heaven in the spring.)
>
> Jesus comes to cast the bankers (the moneychangers) out of the temple
> (the government) as a way of announcing the renunciation of the covenant,
> speaking for the father. Why? Because the Light Principle has forgotten
> God, has begun to worship false gods: Wealth, Status, Power (military
> and political power)...hence the covenant has been lost. The alliance
> of banks/business with government has helped to create the empire;
> but the alliance with God, the religious contract that made the empire
> possible, has led to what the Jungian psychologists call 'ego inflation'
> (which is a kind of bubble creation in the psyche). Jesus comes
> back saying I am on the side of the Shadow Nature, on the side of
> the poor, on the side of the unwanted, on the side of the abused,
> the dark skinned, the weak, the lowly -- not on the side of the rich.
> (Again: 'The Lord gives; but the Lord also takes away.')
>
> Jesus is not a revolutionary in the normal sense of the word. He
> does not build an army of dark revolutionaries (Black Panthers, for
> instance; or Jewish guerrillas to overthrow Rome). This means that
> Jesus will be hated by both sides: the angry revolutionaries who
> want to overthrow the Rich; and the Rich who fear Jesus's philosophical
> opposition, his condemnation of the Rich as a spiritual principle.
>
>
> Jesus, instead of choosing to be king of the Earth, chooses to make
> of himself a 'king in heaven', becomes a messianic self-sacrifice,
> understanding that his self-sacrifice will end the reign of the Roman
> Empire, the rule of the Light Principle grown corrupt, the Daylight,
> the masculine force of empire building, aggressive military expansion,
> wealth, and brutal suppression of the Feminine Principle. (Jesus
> was taken to the top of the mountain in the wilderness by the Devil
> who offered him absolute power over the Earth; offer JC (Jesus Christ)
> the power of JC (Julius Caesar), which Christ refused.)
>
> Jesus was emblematic of the coming of the New Religion, that overthrew
> the Masculine Era of war and aggression and urban wealth and technology...and
> Jesus led to the devastation of Rome and the coming of a Dark Age
> that lasted for 1000 years and more, which eventually led to a Middle
> Age (Dawn/Renaissance) which was the rising of the Light Principle
> again, in a more pure form, a New Son, a New Light. Spring. (Renaissance.)
>
>
> Spring is the Renaissance Man -- Middle Principle, both this and
> that -- (the Hero), the religious man coming out of the religious
> darkness (Dark Age of Night) and moving toward the Light of Day,
> toward the City, toward Science, toward technology again, on a quest
> to pull humanity back in to the heavenly mansions, back into power
> over the forces of Nature. Renaissance periods in art and literature
> represent this rebirth phase -- art that is balanced (with both meaning
> and technique, with both religion and science)
>
> Summer is the Renaissance Man after he has cut himself off entirely
> from the Darkness (the Tyrant): he is an engineer, a scientist, a
> banker, a soldier, and tyrant (empire builder)...power and causality
> is all he knows. He has no soul. A symbol of this second Man is
> Julius Caesar (JC also, like his opposite, Jesus Christ). This man
> hates the darkness, hates religion, hates women...he is the Noon
> Principle, the Sun at High Noon, casting no shadow. Art of this
> period is soulless, materialistic, all technique, lacking real meaning
> -- in the sense of eternal meaning. This expanded empire man is
> physically very large, a Titan (remember the war with the Titans
> in Greek myth), a force of nature physically -- as his opposite,
> the Dark Principle Winter Man is a frail man (think of Jesus Christ,
> Ghandi, etc.), one whose physical body has shrunk....but whose spiritual
> body has grown very large.
>
> Autumn is the Romantic Man -- Middle Principle again, both this and
> that: another Medieval Man in this sense -- (the anti-hero), the
> Scientific Man after he has reached his apex and fallen back toward
> Earth. He is moving away from science, from war, the conquest, from
> empire, moving away from the Material Light, back toward Nature,
> back toward the Night, the Female Principle, the Mother, who represents
> to him the womb of Nature, and spiritual rebirth. The Earth is the
> Mother is the womb in which the anti-hero needs to hide, needs to
> find solitude, needs to escape from the human nature of the city
> and progress and technology and materialism. Romantic movements
> in art and literature represent this autumn period. Again, this
> period in art is balanced, exhibiting both technique and meaning....but
> also adding the element of 'emotion' -- as the Renaissance Periods
> add the element of 'reason'.
>
> Winter is the Spiritual Man, who appears Dark to the Light Principle,
> who seems to choose Death (Spiritual Life) over Life (Spiritual Death).
> Religious periods in society correspond to this season. Religious
> periods connected to Judgment Days, as the Dark Principle (spiritual
> beings) face the Light Principle (the rich and powerful) and accuse
> them of sins against their better nature, condemning greed, theft,
> murder, extortion, political aggression....the pure nature stands
> in judgment of the crass, selfish material nature and condemns it
> to infertility, sorrow, pain, powerlessness, poverty as a price for
> the sins it has committed against the shadow nature, the weaker nature,
> the more passive nature.
>
> That is why we hate the rich: because we are moving into the Night
> Cycle, wherein judgment (self-judgment, remember the two natures
> we all have, the two natures within one, the Cain being judged by
> the Abel) of the aggressive nature by the less aggressive nature,
> judgment of the male nature by the female nature, judgment of the
> material nature by the spiritual nature, brings justice to the world.
>
>
> Until Time begins again. Then Nature loves the rich again, creates
> the rich, loves fertility and creativity and the process all begins
> again, with expansion and crimes and sins against the weak.
>
> Evolution of the material world proceeds during the Day Cycle, from
> Dawn to Dusk, from Spring to Autumn. And then there is a period
> of rest, of status quo, and judgment and condemnation and retreat
> into religion, an attempt to find God and eternity...this is the
> Night Cycle. A descent into sleep and nightmares and a descent into
> the valley of the shadow of Death.
>
> Death lives in the Night-Cycle, at Midnight -- when Light is wiped
> out. There is not shadow at Noon. There is no Light at Midnight
> (Winter Solstice). But Death is transitory. Death is also rebirth.
> Light is a seed, planted in the Earth, which begins to grow at Midnight.
> Christmas, the Birth of Christ: this is a symbol of the birth of
> this light. In this Valley of Darkness, the Light is born as a point
> of light, grows slowly, a child, gaining strength by the bit by bit....until
> the Light is reborn at Dawn, the Hero again, casting the Darkness
> (the Storm Clouds of Late Winter) back into the pit of darkness.
> Light again climbs the ladder of Spring back into the Heavens.<br/>
>
> I didn't intend for this to go on for so long. This will teach you
> to ask such a provocative question.
Great article! Very thought provoking posts too.
On Nov 10 03:20 PM LittleMiMi wrote:
> Inflation helps debtors with debt that has a fixed interest rate.
> It harms debtors that have debt with variable interest rate tried
> to CPI, LOBOR, etc. This is why CC lenders have changed the terms
> on fixed interest rate CCs to variable rates in anticipation of inflation.
> If you owe an uninflated dollar, you will end up paying 10 devalued
> dollars (or more). In this instance the debtor is not getting ahead.
> The CC companies haven't missed a trick. They know how to make a
> buck.
This shell game the Fed has been playing is just a big, untested experiment. The consequences are already beginning to appear.
On Nov 10 11:12 AM perremon wrote:
> OK chicken Little. Easy to pick apart the status quo. A bit more
> difficult to find the answers to enormous problems. What is your
> unified theory for economic correction? Good luck with that. What
> we have is imperfect but it has raised the standard of living to
> levels unimaginable 50 years ago. What would happen if the government
> didn't save institutions and didn't print money and lower interest?
> Is that a world in which you would like to live? Still entertaining
> prose. I read the whole thing - there's something. Thank you Machiavelli999.
> Loved your comments. How about a dose of realism with your morning
> Java.
Alternatives are always good.
On Nov 10 10:32 AM swaps wrote:
> Very good summary.
>
> But the current system is so embedded there seems to be little chance
> of deconstructing without reverting to the so-called Dark Ages of
> chaos, pestilence and constant war. Wait, we have that now too.
>
>
> Inflation has been so persistent because wage inflation is absolutely
> required to make usury banking work. Workers need rising wages to
> keep up with compounding interest, or else money would eventually
> aggregate into the hands of lenders.
>
> Thirty nine, if inflation robs the rich then why has the gap between
> rich and poor risen? Top managers who are paid 50 or 60 times
> more than the production worker leave the lower ones in the dust.
>
> And I question Tack's assertion that living standards are rising.
>
> Yes, we have Blackberries and I-phones and 52-inch HD screens and
> cars that make the Model T look like a golf cart. But in the Dark
> Ages peasants only worked six weeks a year to take care of all their
> shelter and food needs.
> No, I do not want to go back to huts and porridge, but some of the
> standard of living is illusory as the 17 percent unemployed are finding
> out. Does sitting around at night being mentally programmed and
> entertained by Modern Family actually cut into our real productivity
> and a real rise in sustainable living standards?
> As for the person who cited Buffett, his 23 percent rate of return
> would have been given a big haircut if the government elites had
> not bailed out his financial positions, the same government that
> has told seniors - whose transfer payments lag real post 1990 inlfation
> by 50 percent - to stuff it and tighten their belts.
> But again, this article does a great job of summarizing reality.
> But the financial elites - what Ferdinand Lundberg called Finpols
> - absolutely have us by the throat.
>
I think most of us know why coins have milled edges. It is to prevent the dishonest person from shaving the edge of the coin to debase its value. When coins were really made of precious metals, this was a serious matter. Now the coinage is made of nothing more than nearly worthless metal. Just think of the dimes in your pocket as being a lot smaller than they used to be when they were really silver. Likewise, at one time you had a dollar bill that said it could be redeemed for a dollar's worth of silver which was referred to as "lawful currency". I guess that's all you have to know about what a Federal Reserve Note represents - Unlawful paper.
> Computers, and computer chips -- actually everything made with computer
> components -- is the only place in the ENTIRE global economy where
> capitalism is to be seen, where competition is actually driving down
> prices. Show me another place in the economy where price-fixing
> is not at work...and I will appreciate it.
Ok Walmart.
The whole history of Christianity is full of dogmatic epistemological dictators who would rather perpetuate their ideas through intimidation than through reason. And how many times has any given Pope had to take his Holy Pulpit just to backpedal
"Er, yeah... that whole geocentric universe thing... Um... yeah. Well, turns out we were wrong about that. We'd like also like to take this opportunity to issue a big apology to a Mr. Galileo Galiei."
Yours is a fatiguing and specious argument. Let's talk about the death of the dollar. That's a lot more fun.
On Nov 10 10:18 AM Ashley 5849 wrote:
> The only problem with this article is the red herring in the middle.
> If you are going to talk about something, get the facts first. Otherwise,
> it will make your knowledgeable readers mistrust your other stated
> "facts". I'm talking, of course, about the Intelligent Design straw
> man he sets up and knocks down in the middle of nowhere. What Creationist
> doesn't believe in Natural Selection? I challenge him to name ONE.
> THERE AREN'T ANY. It's the beginning we disagree on, not the observable
> present. (Evolution of one species into something totally different
> is not observable, nor provable, so I don't include that with Natural
> Selection, as he mistakenly does. They are separate and far from
> equal.) Get your facts straight before you purport to argue about
> something. Especially if you are trying to pull off the sophisticated
> yet mocking, ultra dignified, know-it-all guru aura.
> P.S. The Big Bang was proven scientifically impossible years ago.
> It's all "Inflationary Universe" now unless I'm also a theory behind
> at this point. (Every time the current theory gets debunked the
> theory's faithful, unquestioning adherents change the name a little
> in scientific circles to keep them straight, but fail to tell the
> doting public they are being duped.) Again, try to know some facts
> when mocking someone.
On Nov 10 09:01 AM GotLife wrote:
> Paco said:
>
> "Intelligent Design – This is how a bunch of envious Christians respond
> to a concept as cool as Natural Selection. I’m still wondering what
> they’re going to come up with in response to The Big Bang. Maybe
> Provident Ejaculation? Whatever it is, I’m sure it will sound positively
> scientific and rational. I can’t wait."
>
> Correction to your error. Natural selection is not evolution. Many
> examples of natural selection exist in the near term. Also, how does
> your reference of "envious Christians" differ from Goebbels propaganda
> against Jews, homosexuals and communists?
1. What is the best gauge of coming inflation?
A. Government statistics.
B. Gold.
C. Your knees start aching.
2. What happens when the government prints money and creates low interest rates?
A. Ben Bernanke starts crying.
B. People buy lots of stuff and create bubbles.
C. Jesus returns.
3. When the price of gold is hitting multi-decade highs (in real terms), at the same time the stock market is gaining 35% in value, this likely means:
A. Stocks are obviously undervalued.
B. People are confusing gold for cocaine (easy mistake).
C. Jesus issued a proclamation that "Gold is great. Gold is good."
4. When all the "smart" people on CNBC are saying, "Yay! Stocks are going higher! It's all better!" This is:
A. Representative of reality.
B. Stupid.
C. Yet another opportunity to imagine Erin Burnet wearing a cheerleader outfit and waving pom-poms.
On Nov 09 02:57 PM Skjellifetti wrote:
> “If you tell a lie big enough and keep repeating it, people will
> eventually come to believe it..."
>
> The lie that is being repeated too often by folks who haven't any
> real understanding of Keynes is that QE is going to (or has already)
> caused an inflationary problem.
original Big Liar was VI Lenin, of course.
D - a commodities basket.
2.
B, although they may not create bubbles if there is accompanying inflation (i.e. goods become fairly priced at a higher nominal level)
3.
D - none of the above - stocks are fairly valued (maybe a bit over-valued), unless inflation makes A) come true.
4.
A - a broken clock is right twice a day.
On Nov 10 03:53 PM Paco Ahlgren wrote:
> Here's a little quiz:
>
> 1. What is the best gauge of coming inflation?
>
> A. Government statistics.
> B. Gold.
> C. Your knees start aching.
>
>
> 2. What happens when the government prints money and creates low
> interest rates?
>
> A. Ben Bernanke starts crying.
> B. People buy lots of stuff and create bubbles.
> C. Jesus returns.
>
> 3. When the price of gold is hitting multi-decade highs (in real
> terms), at the same time the stock market is gaining 35% in value,
> this likely means:
>
> A. Stocks are obviously undervalued.
> B. People are confusing gold for cocaine (easy mistake).
> C. Jesus issued a proclamation that "Gold is great. Gold is good."
>
>
> 4. When all the "smart" people on CNBC are saying, "Yay! Stocks are
> going higher! It's all better!" This is:
>
> A. Representative of reality.
> B. Stupid.
> C. Yet another opportunity to imagine Erin Burnet wearing a cheerleader
> outfit and waving pom-poms.
The way I see it, it's a matter of integrity, and whether or not it's tied to a yellow metal with nearly zero utility is irrelevant.
Bottom line, if fiat fails, so will gold. Guns, ammo, water, and dried food will rule the day. Of course, in a sense, they already do.
The only other points to make is that the increasing costs of oil and food are not the result of inflation, they are the structural results of an economy discovering that neither food nor oil is infinite.
We are coming to the end of easily accessible and plentiful oil and so the price reflects both is recovery costs and its scarcity value.
We have also damaged our food production systems like soil and water so badly that it too is becoming scarcer, harder to grow and so more expensive.
Everything else, from airline seats to clothes to appliances to houses, things about which we have at the basest level, some choice about buying, all of those are falling in price because the demand for them is drying up, the deflationary effect of collapsing credit and hence scarcity of money is being competed for by more and more stuff and because energy and food are soaking up an ever higher share of income.
The economics stack up. It WILL be a rough ride.
> oh brother... after 8 years of Bush & Cheney, THIS is the "lie"
> that upsets you?
Without making any particular political argument, emily x is exactly right. Pulling out the Goebbels quote -- which is constantly trotted out by everyone for everything -- for something so relatively trivial is fairly ridiculous.
There is no shortage of quotes relevant to your thesis -- why use this old workhorse?
This entire post is like smashing home a staple with a sledgehammer. Yes, it works. But it makes you look more than a little ridiculous. Make your argument without the histrionics and you might find an audience beyond the already-converted here.
> You've just advanced my point. Thank you.
A truly lame response that denigrates only you, and that solidifies my opinion of your intellect formed from reading the original 'article'.
2. Why on earth would ANYONE believe that the fed or government would not increase interest rates at the appropriate time? Interest rates were increased after the recessions of the 70's, 80's, 90's 2000's. To say that this will not happen now is ridiculous.
3. One can debate about WHEN interest rates should increase. I would make the case that it is certainly not now, with unemployment at a 25 year high, the output gap huge, consumer prices falling (year over year), and NO wage pressure at all (most workers are taking pay or benefit cuts).
4. Oil and gold may go higher (maybe even 30% higher). But I would not like to be holding either as the fed increases interest rates in 2011, 2012, 2013. One thing they will do this time is keep increasing rates if they detect any sign of an asset bubble WHEN the economy is growing (i.e. not what Greenspan did in 2002-4). If you hold oil at $100 a barrel or gold at $1500 an ounce be prepared to lose half your money. Too much risk for me. I hold 50% international stocks, 20% DBV (carry trade play), and 30% JNK (17% yield when I bought it - still 12% now)
Prices on a product go up or down based on supply vs demand. Inflation warps that curve by introducing more plentiful dollars, thus causing more dollars to be offered for the same product. The product is not necessarily "worth" anymore - in fact it may be less, but due to more and cheaper dollars the it appears that the "cost" has gone up.
Actual deflation would probably be a very good thing, but there are far too many things permanently built into the system on the idea of permanent inflation - so even if prices went down due to deflation, no worker in the world would accept the fact that their wages would have to go down to match. Politicians, labor unions, and many others have fed on that fact for centuries - meanwhile hiding the simple fact that making more dollars per week does not mean your actual purchasing power has gone up.
On Nov 09 07:53 PM derryl wrote:
> A blogger recently quoted H.L. Mencken,
>
> "It is the nature of the human species to reject what is true but
> unpleasant and to embrace what is obviously false but comforting."
>
>
> That's why propagandists have such an easy time of it. Tell people
> the lies they want to hear and they will love you for it. Tell them
> the truth that they don't want to hear and they will hate you for
> it. Tell people they can have free health care and pensions and they
> will love you. Tell them there is no free lunch and they have to
> earn their daily bread and they will assault you. Tell them they
> have 'rights' that entitle them to material goods produced by others
> and they will love you. Tell them they have no right to anything
> that they have not personally worked to produce and they will try
> to kill you.
>
> Is it any wonder that democracy tends inevitably toward socialism?
> People love hearing about all the free stuff the government is going
> to give them. And they will never elect an honest politician who
> tells them that the entire welfare system was a mistake and the country
> is now bankrupt and has to lay off most public sector workers and
> default on all the promises to pay pensions and Medicare and all
> the other welfare programs.
>
> So it's not just the politicians' fault that socialism is rising.
> The people are demanding it. They are entitled to it. Lying politicians
> told them they can have it and the people will never abandon that
> belief because it suits them better to believe the lie.
On Nov 09 05:19 PM Bad Dog wrote:
> I have not noticed prices going up 20%. I think your grocer is ripping
> you off.
On Nov 09 02:25 PM Michael Clark wrote:
> Reading this makes me feel that I'm talking to myself.
>
> Inflation is the rich stealing from the poor. The Keynes' quote is
> wonderful: In this case it is the State-Capitalists (Wall Street
> aligned with Washington DC) that is stealing from its citizenry.
>
>
> Deflation is the poor getting even with the rich. Is it any wonder
> the power center in America (Wall Street and Washington DC) will
> do ANYTHING to protect their inflationary doctrine? They would rather
> destroy America that have to give back any of the money they've successfully
> stolen already.
>
> Deflation is God's way of punishing the rich. Deflation will have
> its day.
However I think the time for the Iridium standard has come. It is both rarer and shinier than mere gold and definitely more original.
OR! perhaps we could to a compound currency, like the salt standard. It was good enough for the Romans, it should be good enough for us.
Whatever the end result, it is clear our monetary policy should be determined only by those who are clearly the most capable: mining corporations.
I noticed you left out the cause of much of this "inflation" though - Ayn Rand's old boyfriend Alan, who forced negative real interest rates on us every time one of his friends from (the Chicago) school got into trouble.
I guess this comment so disgusted the Editors of SA they deleted it. Is that because an explanation of a historical process that incorporates religious ideas is politically incorrect? Sorry if I offended the politically correct who are afraid of the subject of religion. It's pretty hard to study the history of human society and blind yourself to the history of myth and religion in this process.
On Nov 10 03:22 PM Paco Ahlgren wrote:
> I'm sorry... besides making my eye swell, what does this have to
> do with inflation?
On Nov 10 07:46 PM jessducky wrote:
> Mr. Ahlgren's article is to inflation what Dan Brown and the Da Vinci
> Code are to Christianity. The inflation "Illuminati" have a plan
> that is perpetuated through generations of Fed chairmen to perpetuate
> the myth of inflation in much the way that the Illuminati of Mr.
> Brown's book perpetuated a lie about Mary Magdalene in order to suppress
> women. Hey this may sound crazy, but Paco is quoting Joseph Goebbels,
> a prominent Nazi, to make a point about inflation. Its entertaining
> and even includes some element of fact, but claiming that the government
> creates inflation that would otherwise not exist as a means to convince
> citizens of the republic that it is doing a good job is absurd.
> Yes, prices for certain goods and services declines over time under
> the right circumstances, such as increasing competition to supply
> those goods and services and due to technological improvements that
> reduce costs, but these factors are only the supply side of the equation,
> and while we appreciate the benefits of these developments, they
> don't eliminate the demand side of the equation. Its amazing how
> many folks on his page quickly agreed with the author's thesis, as
> if the laws of supply and demand don't exist and that increased demand
> in the face of limited supply does not drive inflation. Anyone here
> go to school? It is also clearly not the case that the government
> continually perpetuates inflation for its own benefit. Has anyone
> heard of Paul Volcker? The former Fed chairman raised rates into
> the high teens in the 70s which ultimately stopped inflation in its
> tracks for a substantial period of time before a strong recovery
> (and strong demand) began to push inflation higher again. Mr. Volcker
> is a very inconvenient fact for this author. We are now in a period
> where deflation, not inflation, is a serious problem and that will
> continue until the banks and private lenders start making capital
> available to small and medium size businesses. Why? Because those
> are the nation's principle employers of most people and people with
> jobs are the source of spending (demand). A tight money policy and
> reduced gov't spending while the consumer is flat on his back will
> not achieve this goal. Hyper-inflation? We should be so lucky to
> have some mild inflation. I believe it will be years before we have
> consumer driven growth again. Stable, not falling, prices are healthy
> signs. In the author's dream world i imagine he believes falling
> prices make us all richer..but what really happens is that the economy
> shrinks, people lose jobs and a depression looms as possible. Nobody
> wants huge government, but what has been done was necessary to keep
> this country's economy from falling off a cliff.
On Nov 10 03:33 PM Zenfar wrote:
> On Nov 10 01:03 AM Michael Clark wrote:
I tend to agree with you that the government in the last few decades (probably since Nixon took us off the gold standard completely) has shown consistent euphoria in printing dollars and devaluing the currency vis-a-vis real goods. I also agree that real wealth is derived from efficiencies, technological and educational, not from economic policies.
Yet, I think you should reexamine your thesis when it comes to controlled inflation coupled with responsible fiscal and monetary policies.Studies in history, psychology and economics have clearly shown that the best environment to operate an economy is in fact controlled inflation.
The reason for this is that an economy can only grow when people are willing to spend money. An economy where people expect money to be worth more in the future than the present is going to be inherently stagnant. Due to game theory, the people who save while the rest are spending are better off, but if all of us were saving and nobody spending we would have a phenomenon of a protracted recession or depression.
That would result in economic contraction and lack of productive investment because nobody would be willing to invest or consume. With lack of productive investments, you would not see the technological breakthroughs that do in fact bring progress, prosperity and eventually wealth to a society as a whole.
I think the problem lies herein and if we exclude the last 2 years, I think the Fed has been a responsible actor in managing monetary policy. The underlying problem lies in the fact that the last 20-30 years, the percentage of REAL productive investment in technology, R&D, education etc has declined vis-a-vis consumption.
This is a direct result of government policies that focused more on maintaining consumption rather than investment and unfortunately that is the responsibilty of the government and sorry to say the people that voted for it. I can still recall a previous President calling for the American People to "go out and shop". And this comment is not partisan. I think the leaders available that can re-focus on the long-run well-being of their voters are greatly diminished compared to the 40s, 50s and 60s but that has to do more with the people who elect them. Unlike Nazi Germany, we do live in a free country, so the ultimately responsiblity falls on the shoulders of the American people who fail to vote out the incumbents and ask for REAL change.
History is not a straight line in the perfection of civilization. It is a spiral through periods of expansion of civilization (city-building) and expansions of culture (nature-living). A Light Age (a construction of the civilization) is always followed by a Dark Age (a deconstruction of the civilization).
On Nov 10 03:30 PM Paco Ahlgren wrote:
> I disagree. In my book I posit the failure of the dollar and a Soviet-style
> breakup of the U.S. It's not unrealistic. If the dollar falls, there's
> no reason to believe the U.S. will (or can) remain unified. But that
> won't mean a return to the dark ages; it will mean more competition,
> more efficiency, and competing currencies.
>
> Alternatives are always good.
On Nov 10 11:02 PM User 183836 wrote:
> In a deflationary environment each dollar buys more. So people with
> money actually become wealthier even though they have the same number
> of dollars.
Religious writing is not meant to be taken literally. The Hebrew Six Days of Creation are not literally six days as we know days. Religious writing in symbolical writing and uses metaphor freely.
Science has no soul with religion. Religion has no reason without science. Why are the greatest minds in the history of humanity also believers in a Divine Being? Because the ancient world did not separate Nature into parts, did not delight in the object and distrust the subject.
Atheism is a 'modern' conceit that shows up at the end of civilizations and lasts for a very short time before it disappears. Atheism is connected to a 'modern egoism' during which the individual refuses to put any force in nature above their own shining intelligence. It is akin to pride, hubris...and leads to a forced humiliation (man forced to his knees) as the illusory power of the civilization collapses around his head.
A man can feel huge in the City -- the City is the creation of the Ego. A man never feels huge in Nature. Nature is the creation of the forces of Divinity.
Science and Religion are like the Man and the Woman. They are not complete until they are brought together in a Union.
On Nov 10 09:01 AM GotLife wrote:
> Paco said:
>
> "Intelligent Design – This is how a bunch of envious Christians respond
> to a concept as cool as Natural Selection. I’m still wondering what
> they’re going to come up with in response to The Big Bang. Maybe
> Provident Ejaculation? Whatever it is, I’m sure it will sound positively
> scientific and rational. I can’t wait."
>
> Correction to your error. Natural selection is not evolution. Many
> examples of natural selection exist in the near term. Also, how does
> your reference of "envious Christians" differ from Goebbels propaganda
> against Jews, homosexuals and communists?
On Nov 11 02:08 AM ElSid wrote:
> xmichaelx's "This entire post is like smashing home a staple with
> a sledgehammer" well describes the unnecessary tone. And ironically,
> all this outrage during a period in which we are probably about to
> tip into deflation.
>
> I noticed you left out the cause of much of this "inflation" though
> - Ayn Rand's old boyfriend Alan, who forced negative real interest
> rates on us every time one of his friends from (the Chicago) school
> got into trouble.
On Nov 10 02:32 PM Moon Kil Woong wrote:
> The Fed doesn't dam the holes it makes them. The simple fact is the
> American public seems to be a sucker for believing they are making
> progress when they are just holding more dollars that can but the
> same amount of stuff. Inflation is a form of taxation without representation.
Greed is not being satisfied with a reasonable profit on a product or service you provide...wanting more and more and more profit....wanting to keep raising prices more and more until your are rich as Croesus. Inflation serves this greed. Deflation mitigates greed, and alleviates the consumer of the pain they suffer from such greed.
The independently rich, those who do not depend on investment for income, who have money in dollars in the bank, will not be hurt by deflation. In fact, they will also benefit from a stronger dollar and lower prices.
On Nov 10 07:49 AM Carlos Lam wrote:
> On Nov 09 02:25 PM Michael Clark wrote:
However, with our new zombie banks we're in a giant liquidity trap right now. Most of the new money has been squirreled away in excess reserves with the Federal Reserve or used to buy US Treasuries.
As an investor we will have plenty of time to change strategy if inflation becomes an issue. Meanwhile, this Ayn Rand Libertarian viewpoint may be interesting, but it's adherents' have missed one of the great bull markets in history. They need to rethink their investment strategies.
Successful investing requires an understanding of the liquidity/business cycle. Bernanke and the Central Bank understands this. They will continue to increase financial market liquidity until it flows into real estate prices. Notice when Australia began to raise rates. All central banks read and use the same economic crisis research.
The S&P 500 will earn at least $80 in 2010 and $95-100 in 2011. Banks alone will see record profits. Look at the insider buying going on in small bank stocks. Why is this taking place? I enjoy "Alpha" every morning and hope you don't allow your political views, which I don't totally disagree with, to influence your investing.
"the bigger the lie the more people will believe it"
the fit survive =
the survivors survive =
water is water
On Nov 10 09:01 AM GotLife wrote:
> Paco said:
>
> "Intelligent Design – This is how a bunch of envious Christians respond
> to a concept as cool as Natural Selection. I’m still wondering what
> they’re going to come up with in response to The Big Bang. Maybe
> Provident Ejaculation? Whatever it is, I’m sure it will sound positively
> scientific and rational. I can’t wait."
>
> Correction to your error. Natural selection is not evolution. Many
> examples of natural selection exist in the near term. Also, how does
> your reference of "envious Christians" differ from Goebbels propaganda
> against Jews, homosexuals and communists?
Having said that,inflation is a mixed bag tahts true. Color Tvs jeans and stereos and life insurance is actually cheaper now
Concert tickets cars and health insurance is of course much more
Look everyone wants the rest without journey
Like it or not those of us who do what we are supposed to will do fine
and those who whine and complain about how bad america is will fail ,primarily because of their habits and sour disposition
This is not politaclly correct but its really correct
Oh well, we are all challenged and we are what we are...
On Nov 11 08:38 AM Ben Young wrote:
> I've never understood how a tautology could be useful in science
> even if completely true:
>
> the fit survive =
> the survivors survive =
> water is water
Has anyone, in their heart of hearts, really bought the thinking that this off-the-wall and totally unnatural agenda has been successful in the America we see today?
On Nov 09 06:09 PM lower98th wrote:
> Have you noticed, in recent years, that the person objecting to a
> crime is more likely to be ostracized than the person Committing
> a crime. At all level. Our society has perfected the art of obliterating
> anyone who tells an inconvenient truth.
Dear Dave,
I remember when top wages were around $4,500 a year for most people back in the '50s. Everybody wanted to lay some heavy taxes on those rich bastards who made $10,000 a year. And so they did. Who could ever spend that must money in a year?
Because of inflation, those people making $4,500 a year were, in a few short years, making $10,000 a year themselves, though they were not a penny richer than before. Yet they were paying taxes at the $10,000 a year rate.
Things got so bad that President Kennedy slashed taxes, more than Ronald Reagan did later, and the nation began to climb out of what had become a prolonged period of stagnation.
How quickly we forget history. The piece below covers most of the bases of why we, as a nation, behave so stupidly when it comes understanding taxes and inflation.
One base it fails to cover is that the entire educational system nowadays pretty much brainwashes kids into believing that the government takes care of everybody and is the source of all wealth.
No kid, no high school senior and no college graduate has been taught that what the government "gives" to one person, it must take away from another person. And the person who is on the receiving end gets far less that what was taken from the person producing wealth. Because the government also has to pay all those bureaucrats administering the giving and taking, and all those enforcement people who will put folks in jail who refuse to pay.
Another concept that is absent from the present discussion is that the person getting something from the government probably would get a lot more from the person providing the wealth, if the wealth were left in the "rich" person's hands. He might get a job. She might get cheaper diapers for her baby because the "wealthy" person could aggressively cut prices to overcome competitors.
Example: Wal-Mart has done several hundred thousand times as much good for the poor as the government has done. It has provided a higher standard of living for almost everyone because of lower prices. But it has especially benefited the poor who spend a larger percentage of their income on food, clothing and light bulbs, among other necessities.
Wall-Mart has hired hundreds of thousands of people. It could be argued that the government never creates a productive job and that most government jobs reduce real GDP. (It could also be argued that almost all government spending harms the poor, rather than helps them. But for the sake of argument, even allowing that the billions of dollars the government has taken out of the economy to "spread the wealth" has helped some recipients, Wal-Mart has done far more in pure dollar value.
However, you'll make more money by adjusting your portfolio to buy new growth stocks and stocks that are in ascending sectors than you will just buying gold.
On Nov 10 10:18 AM JRA wrote:
> He needs a hint: the Big Bang theory was authored by a Catholic priest.
> Lots of people like you denigrated and rejected the theory earlier
> on because they thought it was a "Christian" plot to inject a Genesis-like
> event into physics. (You can still find crackpots who still carry
> on about this today.)
>
> So, while Provident Ejaculation is good material, it's about 80 years
> too late. "Big Bang" itself was a term of derision coined by an atheist
> to describe what struck him as an unacceptably religious model. You
> see, ideological bias is an equal opportunity employer.
On Nov 10 03:37 PM MichaelJ007 wrote:
> The GOV needs inflation to sustain its perpetual growth and intrusion
> into our lives. I was listening to NPR on the radio today. Tax
> revenues here in Georgia are down 18%. Without inflation how else
> are our state and federal GOVs supposed to continually borrow now
> and pay later with interest?
He nails the rest of it perfectly. The necessity of inflation for growth is a massive lie. My apologies to the author if I misunderstood his representation of the linkage between the USFed and the USGovt.
On Nov 10 05:22 PM user396040 wrote:
> Way over the top rhetoric dealing with some complex economic issues.One
> general point is correct - since about 1940, the economic policy,
> whether explicitly stated or not, has been slow and controllable
> inflation. Anyone who hasn't figured this out by now and is outraged
> by his feeling that he has been "lied to" is unbelievably gullible
> and probably also believes that Professional Wrestling isn't fixed.
> Whether or not this is a good policy is an interesting and complex
> question. The alternative is not stable prices - prior to the abandonment
> of the gold standard, we had periods of substantial inflation followed
> by periods of serious deflation - this resulted in prices in 1940
> being roughly equivalent to prices in 1800. But prices swung wildly
> from year to year and decade to decade during those 140 years. Since
> 1940, we have almost never experienced deflation and the result is
> prices than are roughly 10 times higher now than 70 years ago.
> Is this bad? Who benefits? These are tough questions. Generally,
> the middle class does surprisingly well under inflation because for
> many middle class households the biggest asset is the house which
> goes up with inflation. For wealthier households a higher percentage
> of assets are generally held in the form of financial instruments
> which tend not to do as well under inflation - these generalizations
> are very broad and there are all sorts of exceptions but the inflationary
> 1970's tended to be a comparatively good decade for middle class
> Americans. The problem with returning to the pre-1940 model of alternating
> inflation and deflation is that deflation tends to produce severe
> unemployment because wages are "sticky" on the down side. As compelling
> as the case may be, it is very hard to convince a group of employees
> that, although their nominal wages are being cut, they are really
> doing just fine because each dollar that they earn is worth more
> due to deflation. The specter of deflation also discourages investment
> and long term loans. On balance, I think we are better off with
> the existing policy but it is a fairly debatable issue. Over time,
> most people have picked up on the fact that there is a long term
> inflationary trend and have adjusted their behavior accordingly.
> If anyone hasn't picked up on it by now(after 70 years) and thinks
> he is being "lied to", I have sympathy, but not intellectual respect,
> for him.
On Nov 11 11:23 AM Andy Sutton wrote:
> I am not sure if this is intentional or not, but the early portion
> of the article creates the illusion that the Fed is somehow a government
> entity, which it clearly is not. What actually happens is the the
> US Treasury prints the money through the Mint, then carts it off
> to the Fed who in turn lends it back to the Treasury - at interest.
> The Digital Dollars are created at the Fed and then 'lent' to the
> Treasury and others - always at interest.
>
> He nails the rest of it perfectly. The necessity of inflation for
> growth is a massive lie. My apologies to the author if I misunderstood
> his representation of the linkage between the USFed and the USGovt.
On Nov 11 08:38 AM Ben Young wrote:
> I've never understood how a tautology could be useful in science
> even if completely true:
>
> the fit survive =
> the survivors survive =
> water is water
I would suggest that anyone who says that the Fed is not private is a fascist or is ignorant of the facts. The Fed has more loyalty to the Bank of International Settlements than to our government. The Fed is a blood sucker who needs to be shown the door. The Fed allowed ponzi off balance sheet banking and the housing bubble and they should all be thrown in jail or out of the country. They are traitors to the United States of America.
On Nov 11 12:27 PM Paco Ahlgren wrote:
> Respectfully... just because the Fed claims independence does NOT
> mean it isn't a de facto government entity. Technically, you are
> correct, but making the argument it isn't a part of the government
> is a tough sell...
We will lose our superpower status because of this Republican lie. Our taxes are the lowest in the free world.
We ARE NOT a low tax country. Our corporate tax rate is the second highest in the world (without government health care too), we are ONE of TWO countries with a "death tax," we are one of few countries that taxes GIFTS (to the giver too).
We have THOUSANDS of hidden taxes that only hit American made products (and BTW Congress - controlled by Democrats since 2006 - has been working to REMOVE import taxes from Chinese made products while giving ZERO relief to American made firms over the past couple weeks).
Yes, a large percentage of our population only pays FICA taxes (still a tax) and no income tax AND we gift them thousands more because of their innate ability to produce offspring, but this fact does not change reality. We are not "low tax" and those screaming for higher taxes are soon going to be facing reality.
No jobs, millions more on the dole, a defunct fascist government and the reality that most of our food and necessities are not produced in America.
The only people that claim we are "low tax" are those that have never had to make payroll or keep a business afloat.
You know not of which you speak sir.
But, have no fear, you too will soon be crying about increased costs and less choice as thousands of major companies decide to close American shop and move off shore, or close completely.
On Nov 11 02:23 PM systemBuilder wrote:
> The most Hilter-esque lie today is, "Your Taxes are Too High, Vote
> Any Politician Out of Office if he raises your taxes!" This lie is
> keeping us from balancing the budget, keeping us from balancing our
> world trade, and is eating our freedom alive.
>
> We will lose our superpower status because of this Republican lie.
> Our taxes are the lowest in the free world.
> The most Hilter-esque lie today is, "Your Taxes are Too High, Vote
> Any Politician Out of Office if he raises your taxes!" This lie
> is keeping us from balancing the budget
It is impossible for the government to balance the budget thru increased taxes taken from the people, just like it is impossible for you to balance your budget thru increasing your income by robbing convenience stores.
"You can boast to your friends at work and at parties, “I bought my house for $50,000 in 1977, and today it’s worth $200,000! I’ve quadrupled my money!”"
Just had the almost exact same quote said to me the other day when talking to a couple of my friends. The amounts were significantly higher, but the principle has not changed. These weren't dumb people either, all graduates of prestigious universities in highly paid positions. But somehow, the dots just don't connect for the majority of the people.
You have no idea how high your taxes are including all upfront fed,state, local plus misc.fee's attached to utilities, gas etc.
When the gov't can't tax you upfront they devalue the dollar - which is the same as an ILLEGAL TAX.
On Nov 11 02:23 PM systemBuilder wrote:
> The most Hilter-esque lie today is, "Your Taxes are Too High, Vote
> Any Politician Out of Office if he raises your taxes!" This lie is
> keeping us from balancing the budget, keeping us from balancing our
> world trade, and is eating our freedom alive.
>
> We will lose our superpower status because of this Republican lie.
> Our taxes are the lowest in the free world.
On Nov 09 09:26 PM Steve in Greensboro wrote:
> On Nov 09 02:25 PM Michael Clark wrote: "...Inflation is the rich
> stealing from the poor....Deflation is the poor getting even with
> the rich...."
>
> On Nov 09 04:23 PM ThirtyNineWinks wrote: "You've got it backwards.
> Inflation robs from people with money, and helps people with debt..."
>
>
> ThirtyNineWinks has it right. Mr. Clark has it exactly backwards.
> Speaking generally, the rich are generally creditors and the poor
> are debtors.
>
> Monetary inflation make the dollar-denominated assets and liabilities
> both worth less. The positive net worth of the rich gets smaller
> and the negative net worth of the poor, while still negative gets
> smaller too. Deflation works the opposite way, helping the rich
> and hurting the poor.
>
> Inflation helps the poor by reducing the value of their debt compared
> to their wages. The fact that it also reduces the debt of the biggest
> debtor on the planet, the U.S. government, makes it a certainty that
> there will be inflation, because the U.S. government controls the
> money supply and will guarantee inflation.
>
> But in the end, inflation hurts everybody, because the primary unit
> of account (the USD) becomes corrupted and unreliable, making business
> decision-making, capital accumulation and resulting wage increases
> impossible.
On Nov 09 05:19 PM Bad Dog wrote:
> I have not noticed prices going up 20%. I think your grocer is ripping
> you off.
On Nov 11 12:25 PM Paco Ahlgren wrote:
> Professional wrestling is fixed?
The world is not imploding , this is not the end of days.
Those who stayed the course and added to positions have reaped big profits. Sometimes you just need to grow a pair.
There is absolutely no reason under the sun to leave your money in a bank savings or checking account when you can trivially set up an investment account and set up an automatic transfer from the investment account to the checking account to handle monthly expenses. Anyone with half a brain can do that.
But, you know, I think you will be disappointed by the results (of trying not to hold dollars in any significant quantity).
If you don't have any free cash then inflation is meaningless. You may think it is meaningful when you see prices rise but all that means is your wages will eventually rise too. Wages bounce around actual living expenses, both on the negative AND the positive side. Inflation is not the cause of that, the economy and job picture is. With so many people out of work now the glut of workers is depressing wages. In good economic times the lack of workers cause wages to go up.
Excessive inflation is an enemy. A small amount of inflation is certainly not. Everything has wiggle room and a small amount of inflation is just one of many knobs which turn. Inflation is better than deflation simply because the world has a lot more experience dealing with inflation than deflation. There is nothing magical about deflation or steady state that makes it better then a small amount of inflation (or vise-versa). It doesn't mean you will be paid higher wages, for example (and if you think it does you are plain and simply WRONG). there is this expectation in our society that wages should always go up, but that only exists due to inflation. Without inflation wages will go flat but you will still see them bounce around based on the jobs picture, negative and positive. So you won't be in a better place.
If our currency had no inflation or deflation the wiggling would occur in other parts of the economy. It's that simple.
With regards to quantitative easing... why don't you try to guess what would have happened if the government hadn't done that. What I see is the government trying to prevent unemployment from throwing us into another great depression and they are willing to devalue the dollar to do it. At least then we know what the 10-ton gorilla in the room is. Without the easing the economic mess would take other forms. Do you think it would just disappear? That things would magically get back to normal? I'll tell you what I think. I think that if that action hadn't been taken we would be sitting at 15%+ unemployment right *NOW* and heading into another great depression. That's what I think. The government has very little real control over the economy. All they can do when it goes bad is try to steer where that badness ends up and moderate it rather than let it meander around wildly as an unknown quantity destroying everything in its path.
-Matt
This is why the government will allow (cause) inflation to run amok--that will be the only way that they can afford to pay back the massive indebtedness our country is incurring.
On Nov 09 02:25 PM Michael Clark wrote:
> Reading this makes me feel that I'm talking to myself.
>
> Inflation is the rich stealing from the poor. The Keynes' quote is
> wonderful: In this case it is the State-Capitalists (Wall Street
> aligned with Washington DC) that is stealing from its citizenry.
>
>
> Deflation is the poor getting even with the rich. Is it any wonder
> the power center in America (Wall Street and Washington DC) will
> do ANYTHING to protect their inflationary doctrine? They would rather
> destroy America that have to give back any of the money they've successfully
> stolen already.
>
> Deflation is God's way of punishing the rich. Deflation will have
> its day.
Machiavelli: Interesting choice of screen names. Your comments about Milton Freidman don’t really have much meaning for those not stuck in the illusory Keynesian vs Monetarist debate, as you seem to be. While modern Keynesians tend to focus more heavily on simulative fiscal policies, that’s just a matter of focus, and Keynesians favor inflationary monetary policies during a contraction as well. The bipolar world of Keynesians vs Monetarists is just another lie. It’s a clever game really, create two sides of an argument that seem at odds with each other, but are really just two approaches for achieving the same ends. Don’t feel too bad, most of us have fallen for this ruse at some point.
For the propaganda machine to be effective "they" have to isolate and vilify those who choose to turn away from establishment thinking. The first way that’s always handled is through name calling and attacking those who have left the reservation, most often by generating public doubts about their motives, intelligence, etc. Such tactics have rarely worked in the long run. As a “tea bagger” I’d like to thank you for your participation in this centuries old practice.
Why? If you haven't figured it out yet, your children might. But their school books will be written by those in charge of the destruction.
On Nov 17 10:59 AM Hot Richard wrote:
> The author avoids the real question: Were the dinosaurs Christian?