Paco Ahlgren

The Destruction of the Dollar: It's Nearly Inevitable

The chaos theory comparison is perfect. To wit: we cannot know precisely when or where a hurricane will hit. But we know with certainty that a hurricane WILL hit.

Paco


On Dec 07 10:28 AM Toeser wrote:

> YoYoMama
> Check out chaos theory. When and if we have a total meltdown cannot
> be predicted. But, we are rapidly establishing the conditions under
> which one can occur. Plus, we are pissing away our options at an
> alarming rate. There is a condition in flying called "getting behind
> the power curve." It means that you have reached a point that no
> matter how much power you apply, you are going to smack the ground.
> I fear we as a country are going to smack the ground.

Is a Gold Correction Imminent?

I like the arguments about supply and how that might affect the price of gold, but the article ignores what gold is telling us: monetary policy -- especially the printing of more money than ever in history -- has caused markets to value gold higher in anticipation of hyper-inflationary price explosions.

When the Dow hovered at current levels in the late 90s, gold was at about $250/ oz. Remember: commodities, agriculture, and precious metals are always the best indicators of coming inflation.

The article focuses too much on technical indicators, as well as supply and demand. As currencies collapse, gold and other metals will go higher, necessarily. It will have a lot to do with demand, but it will also be a function of falling currency value.

I wrote an article about this not long ago:

seekingalpha.com/artic...

Consumer-Driven Deflation? Not Even Close

I'm going to submit this as humbly as I can:

Many of the counterarguments to my article revolve around fractional reserve banking. What point, exactly, are you trying to make by saying fractional reserve banking refutes my argument that the amount of printed currency in existence is higher than ever in history? Any multiplier only increases the effect of money in the economy, exponentially.

How, exactly, is fractional reserve banking going to somehow eliminate the threat of skyrocketing prices due to a massively increased money supply? Again, when the dam breaks, it's going to flood the economy, any any multiplier is only going to compound the effects. Essentially, it just serves as absolute leverage, economy-wide.

Someone please illustrate the error in my thinking. And please explain how fractional reserve banking mitigates the imminence of massive price increases.

I am your humble student.

Consumer-Driven Deflation? Not Even Close

The dollar qua the dollar... meaning it takes two parties imposing (subjective value) on the dollar to give it value. It's value isn't intrinsic.

Thank you for bolstering my argument. There's no such thing as intrinsic value.


On Dec 02 10:04 PM patrickmx2 wrote:

> You talk about the value of a dollar and then post me a link about
> it not having any value.
>
> I quote:
> "If you think about it, it makes sense: more dollars in the economy
> mean less valuable dollars."
>
> From the link you posted:
>
> "That’s because a dollar, qua a dollar, isn’t worth anything more
> than the paper and ink on which it’s printed."
>
> Make up your mind.
>
> I think you have to settle the argument with the man in the mirror
> before you can decide to agree or disagree with me :)

Consumer-Driven Deflation? Not Even Close

Patrick, you are a victim of the Labor (or Objective) Theory of Value... which leads me to believe you're an egalitarian, which also probably explains your ire.

Of course, I'm just making a bunch of assumptions.

I wrote an article about it not long ago: there is no such thing as intrinsic value.

seekingalpha.com/artic...


On Dec 02 06:57 PM patrickmx2 wrote:

> Money is made from COTTON. It is a SYMBOL. The first thing about
> a symbol is that it doesn't represent itself.
>
> Dead wrong. It has no value. It is a symbol of labor and skill. Nothing
> more! When you take out a loan an account is FUNDED from thin air.
> When Ford rolls that Mustang off the assembly line GOLD doesn't magically
> appear in the vault to back it with. YOUR LABOR backs it! It's about
> your word and your GREED, DESIRE and willingness to work that powers
> this economy. Currency is a symbol of that.
>
> Here is something to think about while you are having lunch today.
> Think about that wrapper, cup, and napkin you are using. If you ate
> at home, think about that can, box, or bottle you tossed in the trash.
> If you didn't eat
> today maybe you should!
>
> Now let's say you tossed .50 cents value in the trash after you ate
> all your combined meals today. Now multiply that by 200 million just
> for giggles.
>
> Food for thought. Currency conversion 101:
>
> Americans throw away 10 million dollars a day minimum just on food
> wrapping. What? Yes, you converted your currency into food that came
> in some sort of enclosure. Americans also throw away 40% of their
> food per the latest news.
>
> Does that boggle your mind? That is a FRACTION of what we throw away
> every day let alone most every asset that you own is in depreciation.
> Think about that when you look at the headlines involving billions
> and trillions. Sort of makes you wonder, is the economy in a manufactured
> crisis? Could they really print enough money to replace what we destroy
> every second?
>
> When you think about our military might and how we have converted
> billions of currency into hardware that we simply fire and forget
> about. We send over a million per copy into the air to target and
> we shoot them like a gangster on a
> drive by. Is there really enough gold or currency in existence to
> stack beside 10 years of all this currency conversion?
>
> You finished your lunch yet? Are you saving that wrapper? Let's not
> even bring up how much currency gets converted into lung cancer every
> day.
>
> Makes you wonder who is really throwing away what doesn't it.

Consumer-Driven Deflation? Not Even Close

I stand corrected about Moore's Law. Thanks to all of you for your attention to detail. Having said that, the practical application of the principle is that technology obviates itself very quickly -- that was the point I was trying to make when I used technology as an example of an industry in which prices consistently fall. I think my point is germane and still stands.

All this nonsense about "laying off the sauce" is ad hominem rubbish that has nothing to do with my article. Sometimes I can't believe the sheer temerity of some of these responses; it's one thing to disagree using a cogent argument -- which I respect immensely. It's quite another to hurl insults, thinking that is somehow going to refute my arguments.

You better come up with something a bit more substantive, xmichaelx. Your response has a hit and run flavor to it, smacking a bit of cowardice...


On Dec 02 02:06 PM xmichaelx wrote:

> Also, Moore's law has nothing to do with the price of technology
> -- it is only concerned with the number of transistors on a integrated
> circuit.

Consumer-Driven Deflation? Not Even Close

Leprechauns. Pffft. Evil.


On Dec 01 10:44 AM Johnny Oxygen wrote:

> I just have to add one thing.
>
> In the past people have ridiculed the Leprechauns for their gold
> hoarding. In the very near future we will see a new dynastic period
> of the Leprechaun. They will be rewarded for their faith in precious
> metals.

Consumer-Driven Deflation? Not Even Close

The fact that velocity is low, considering the size of the current money supply is NOT a good thing. When the dam bursts, prices are going to explode skyward.


On Dec 01 08:42 AM Econ 1 wrote:

> Inflation is an expansion of the money supply? What about the velocity
> of that money supply? If sentiment is freezing all that freshly minted
> cash ( tight-ass bankers and mattress stuffers and those horrible
> consumers who are paying down their debt and even managing to save
> a little) you really don't get that inflationary price shift (akin
> to a stock split change in price but not value).
>
> Inflation means a smoking hot rate of growth and a ratcheting up
> of wages because of full employment, and son, we don't live in that
> world. Demand for goods and services is being met with an historically
> low utilization percentage and unemployment has not maxed yet. <br/>
>
> I would argue that corporate tax revenues being down 52% year over
> year from 2008 (which means ALL revenues are down similarly by proxy)
> could indicate a deflationary scenario that all the money printing
> on the planet can't fix.

Consumer-Driven Deflation? Not Even Close

Definition of inflation from Austrian and Chicago schools (among most others) from Wikipedia.com:

"...inflation is by definition always and everywhere simply an increase in the money supply (i.e. units of currency or means of exchange), which in turn leads to a higher nominal price level for assets (such as housing) and other goods and services in demand, as the real value of each monetary unit is eroded, loses purchasing power and thus buys fewer goods and services.

"Given that all major economies currently have a central bank supporting the private banking system, almost all new money is supplied into the economy by way of bank-created credit (or debt). [These] economists believe that this bank-created credit growth (which forms the bulk of the money supply) sets off and creates volatile business cycles and maintain that this "wave-like" or "boomerang" effect on economic activity is one of the most damaging effects of monetary inflation."

I think that trumps dictionary.com.


On Dec 01 08:42 AM MyrEnforker wrote:

> Definition of inflation from dictionary.com:
>
> "Economics. a persistent, substantial rise in the general level of
> prices related to an increase in the volume of money and resulting
> in the loss of value of currency (opposed to deflation )"
>
> I'd say it's a combination of price and money supply, but I'd base
> it more on price based on this definition.
>
> Also, you don't mention the velocity of money anywhere in the article.
> The reason the Fed is printing money is to try to make up for the
> massive drop in the velocity of money. I can't tell whether we are
> currently inflationary or deflationary, but what you can tell is
> this. INFLATION IS COMING.
>
> It is absolutely correct that the Fed is printing a ton of money
> and the smart people are scared that the Fed won't stop early enough,
> resulting in massive inflation. The Fed has an impossible job at
> this point, because they have no control over the VELOCITY of money.
> Eventually, they will err on the side of caution and wait for clear
> inflationary signs to shut down the money spigot. But by then, it
> will be too late. Question is how much inflation will there be and
> how harsh will it be when it hits.

Artificial Economy? Yes. Artificial Inflation? No

I agree, with the exception that I believe the U.S. will splinter. I have no doubt Texas will secede, and I have no doubt it will be a very strong republic with an extremely free market. I think other geographic areas will follow suit.


On Nov 29 06:50 PM Grumley wrote:

> Hi Paco, I agree that Bernanke will be the architect of this collapse
> (along with Summers, Geithner, and Paulson), but in the end it doesn't
> matter who was at the helm when we go under. The sad fact is that
> no form of government is sustainable forever, including a republic
> with capitalism at its core. It will last longer to be sure, but
> while socialism eats itself from a vacuum devoid of ambition, a democratic
> model eventually eats itself with apathy and greed.
>
> The US has the oldest functioning constitution on the planet today.
> Collapse is inevitable and unfortunately it will happen in our lifetime.
> All we can hope for at this point is a return to the original spirit
> of our constitution, envisioned by our founding fathers. Let's pray
> that this does not end with the herd being led into the abyss as
> they did in Germany in the 30's.

Artificial Economy? Yes. Artificial Inflation? No

You're right. My mistake.

Vertically-challenged Celtic-Americans.

(What was I thinking?)


On Nov 24 12:18 PM Johnny Oxygen wrote:

> Paco
>
> Why the ethnic smears about Leprechauns? You constantly refer to
> them in the negative.
>
> Some of my best friends are Leprechauns, and yes it should be capitalized!
>
>
> I would think you would have more affinity for an ethnic group that
> are the ultimate gold bugs.

Artificial Economy? Yes. Artificial Inflation? No

Respectfully, Ben Bernanke could have wings and a halo, but he is destroying our currency, and by extension, the United States. Thomas Jefferson and his adherents -- of which I am one -- would be (and are) absolutely disgusted by the mess this federal government has become. Hamilton, who was a fool, laid the groundwork for everything we are experiencing, and Bernanke -- well-intentioned or not -- has volunteered to be the vehicle that brings us to a Soviet-style disintegration.

Personally, I believe all of this will be wonderful in the long-term, but it's going to cause a lot of pain in the interim. If I'm right (and I am), Helicopter Ben is going to be the architect of the biggest failed experiment in history. Who cares how nice he is?

And PLEASE don't compare me to Rush Limbaugh. My God. That's like comparing me to a Nicaraguan mountain toad. It's just silly.

(I am not like a Nicaraguan mountain toad.)


On Nov 24 11:22 AM isaac the terrible wrote:

> I agree with much of what you say Paco, but I advise you not to belittle
> yourself by sinking to the level of "Rush Limbaug" speak by demonizing
> people.
> You might not agree with Ben Bernakes tactics or policies, but that
> doesn't mean he not an honorable man. Try to find me a more honorable
> one in public life, and I'd be surprised.
> Cheers

Banning Derivatives and Other Such Foolishness

Yet another cogent rebuttal...

You know you're in trouble when your detractor refers to you as "pal." I learned that from the Flintstones.


On Nov 18 11:40 PM CitizenPat wrote:

> Why exactly were you allowed to post this article on this site? You're
> on the wrong side of the argument, pal. Grow up.

Banning Derivatives and Other Such Foolishness

Can someone please point out how this "rebuttal" has any substance? Because, to me, it just sounds someone repeating the party line, hoping beyond hope that it's somehow going to turn into truth.


On Nov 17 11:38 AM User 73203 wrote:

> You have got to be kidding me. Derivatives, and the derivatives
> of derivatives, and the devices that were insurance on derivatives,
> were dreamed up by the thieves and charlatans on Wall Street simply
> to make money - and a lot of it - off of everyone else. They should
> be banned, along with naked short selling, and - quite frankly -
> the idiots who dreamed them up should be in jail.

Banning Derivatives and Other Such Foolishness

Actually, the article is an attempt to show how important derivatives are, and how ignorant some people can be regarding their existence.

Well... that AND how smart I am.


>>This article frankly seems like an attempt to show us how smart you are rather than logical discussion of the merits of derivatives (and other foolishness).<<