Economists Menzie Chinn and Jeffry Frieden argue that as debt is the major factor dragging on...


Economists Menzie Chinn and Jeffry Frieden argue that as debt is the major factor dragging on economic growth, inflation should be allowed to rise. This "would reduce the real burden of debt on households, corporations and governments, spurring both investment and consumption." However, while the Chicago Fed's Charles Evans supports the idea, Ben Bernanke doesn't. (Summary)
Comments (68)
  • Villi Grdovich
    , contributor
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    I scanned this article and unless mistaken, the arguments appear to advocate inflation as it relates to debtors and creditors.

     

    We are constantly told that the cost of providing welfare to retiring baby boomers is a cost to expensive to bear. By increasing inflation, the retired sector of the economy quickly runs out of money, and becomes even more of a burden on the general economy. It appears to me that any argument that does not address this huge social consequence has absolutely no merit.

     

    The real falsity of this argument is that, to protect my savings from disappearing under the weight of inflation, I and all retirees, would be best served by borrowing to fund the purchase of real assets which might withstand the ravages of inflation...which is where the discussion started.
    22 Jul 2012, 06:55 AM Reply Like
  • Neil459
    , contributor
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    Yep, inflation punishes the middle class people that played by the rules and common sense (you know the ones that saved money by delaying vacations and purchases until they could afford it) and rewards the wasters and free loaders. But if you are trying to buy votes from wasters and free loaders, then its sound policy.

     

    The question is, are all of the reasonable people with some common sense going to stand around and take it, or are they finally going to wise up and see that liberal feel gooders will never take care of them, no matter what happens? If you are a working middle class person then you better start protecting yourself, because before long we will be over the hump and it will not be possible to protect you savings from the liberal socialists.

     

    Of course, if your rich it won't matter. So those of you that are rich, go ahead and sell us down the river.
    22 Jul 2012, 11:59 AM Reply Like
  • winningtrader
    , contributor
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    The middle class is toast. It is over. Standards of living will drop by another 50 to 75%, there is absolutely no way to avoid that.
    That will happen either through inflation and the middle classes keep their savings in fixed income mostly or through defaults on pensions, Social Security, muni bonds and perhaps even Treasuries. I think that inflation is the more likely one (path of least resistance).
    22 Jul 2012, 04:06 PM Reply Like
  • DeepValueLover
    , contributor
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    Bernanke knows that increasing inflation = increasing bond yields.

     

    Increasing bond yields = MASSIVE increases in debt service.

     

    Massive increases in debt service = goodbye entitlements.

     

    Goodbye entitlements = riots and bloody insurrection.

     

    No...Bernanke will chop off his pinky fingers before he lands the helicopters dumping tons of dollars over the financial markets.

     

    The only answer is buying as much gold, bonds and silver as you can. A large stash of good ol' greenbacks won't hurt either.
    22 Jul 2012, 04:40 PM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4911) | Send Message
     
    Neil

     

    It does matter if you are rich. Inflation moves money away from investments that generate cash flow and profits to investments that are more speculative. Not many rich people have speculated their way to the top.

     

    The only people who win in a high inflation environment are people who owe a lot of money. Namely the federal government.
    22 Jul 2012, 07:39 PM Reply Like
  • Mike Maher
    , contributor
    Comments (2860) | Send Message
     
    Gold is an inflation hedge. And QE 1 and QE 2 and the coming QE 3 are dumping tons of dollars over the financial markets...
    22 Jul 2012, 09:03 PM Reply Like
  • bbro
    , contributor
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    Doesn't the Fed have a dual mandate?
    22 Jul 2012, 08:00 AM Reply Like
  • Old Rick
    , contributor
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    It does. It shouldn't!
    22 Jul 2012, 02:06 PM Reply Like
  • robgra
    , contributor
    Comments (963) | Send Message
     
    This article essentially recommends that the government collude with debtors to cheat the creditors out of fair payment for the money they lent. I wonder, did they analyze the long term impact on willingness to lend on the part of creditors? Do they think systematic cheating of lenders won't impact their willingness to lend? Do they think this is even an ethical route to take?

     

    I'm astounded.
    22 Jul 2012, 08:07 AM Reply Like
  • doubleguns
    , contributor
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    The fed is now lending the USA tons of money. I doubt they want inflation.

     

    Fed balance sheet. http://bit.ly/MCrapb
    23 Jul 2012, 04:44 AM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4911) | Send Message
     
    double

     

    If the Fed is lending money to the USA that means they are printing money and that drives inflation.
    23 Jul 2012, 09:58 AM Reply Like
  • doubleguns
    , contributor
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    I guess I should have stated it HAS lent lots of money. They do not want to be paid back with inflated dollars.

     

    I dont think they can do a damn thing about it however. I just dont think they want high inflation.
    23 Jul 2012, 12:35 PM Reply Like
  • Neal Razi
    , contributor
    Comments (1243) | Send Message
     
    Plus, inflation is the most usual contributor to a recession. US Private debt has fallen immensely over the recovery. I'm with Bernanke, as usual; better to focus on the recovery over any other concerns, including debt reduction by private or public sector.
    22 Jul 2012, 09:14 AM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4911) | Send Message
     
    What is really amazing to me is that nobody stands up and tells us exactly what the federal government owes outside of the $16 Trillion direct debt. It is hard to solve a problem when you don't know your starting point.

     

    I have seen an estimate for another $18 Trillion in unfunded liabilities including SSA. That is 100% more than we can handle.
    22 Jul 2012, 08:12 PM Reply Like
  • CautiousInvestor
    , contributor
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    From the Economist:

     

    Both the BoE and the Fed target an inflation rate of 2%. Even a modestly effective new round of QE should quickly lift inflation expectations back to target. But if markets think above-target inflation will prompt a reversal of the policy, then new QE will have very little impact.

     

    So in addition to reducing real borrowing costs, raising inflation targets may increase the efficacy of easing itself. On the flip side, creditors get screwed; those with fixed incomes, including pensioners, will be savaged; and, depedning upon rates paid on deposits, savers may pay an inflation tax.

     

    Creditors and the poor will pay for this not so disguised inflation write-down of existing debt to help debtors. What about new debt? Unless the markets are irrational, which they are not, the cost of new debt will rise to reflect higher inflation and the typical premia associated with risk and uncertainty.

     

    This will strain our public finances and may have unintended consequences for corporations presupposed to embark upon a new round of large scale of investing particularly if financed with new, more expensive debt.
    22 Jul 2012, 09:51 AM Reply Like
  • CautiousInvestor
    , contributor
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    I read it and I think the authors went way out of their way and stretched both arguments and statistics to make their case.

     

    In my comments above I suggest the price of new debt will increase but the authors note that there is only a 30% correlation between ONE year treasury prices and expected inflation. What about other maturities?

     

    Overall my thinking has not changed although I would make two additional points, one being inflation will push wages and incomes up and their recipients into higher tax brackets. This carries a cost.

     

    And secondly, most bonds and treasuries are routinely traded and if rates go up in tandem with inflation then market price for debt will tend to fall, meaning their will be losses. If not hedged there will be losses and who is likely to bear these losses?
    22 Jul 2012, 01:03 PM Reply Like
  • Neal Razi
    , contributor
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    I just finished the paper. You know, I'll say this; although I am in disagreement, they make an extremely compelling, well argued, well supported and entertaining case for their argument. It's an excellent paper, and I recommend it to anyone seriously (or even slightly seriously) interested in economics.
    22 Jul 2012, 10:25 AM Reply Like
  • Tom Armistead
    , contributor
    Comments (6201) | Send Message
     
    Thanks for the suggestion, as you have said, it's a thought provoking article. Probably better to read the article and give it some thought, than to join the debating club here.
    22 Jul 2012, 10:45 AM Reply Like
  • financemc
    , contributor
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    I agree with you completely Tom.

     

    Unfortunately, we are in an intractable, loose, loose situation as the paper so eloquently stated.

     

    The debt is forestalling a robust recovery so it must be reduced by one of two means; inflation or write downs/default/bankruptcy. There is no other choice for most of the EU- they are unproductive and do not have control over their own destiny- currency.

     

    Even with a, wishful thinking, "managed restructuring, ala Greece, the private sector will have to be written off too, especially Spain and the US. These actions will destroy even the innocents as most of the anti inflation camp is concerned about. Deflation caused by massive and systemic debt deflation/default will crush everyone. So either way, there will be massive pain for everyone. Pick your poison- crippling deflation or gradual inflation.

     

    At least with the gradual inflation route all debt will be deflated systemically and more gradually than a sudden bout of defaults. The savers will be harmed but not if their liquid assets are reallocated to more inflation protected assets and their hard assets such as homes, which is the primary source of wealth in the middle class, will be benefited by gradual above desirable inflation, such as 4-6%. With the debt deflation through defaults, all assets will suffer except fixed income that are not likely to default. That is why investors are paying (negative rates) Germany, Switzerland, Denmark, Japan, etc to buy bonds, they think there may be deflation around the corner.

     

    Truly, there are no innocents. We picked our leaders and they created the mess we are in. Two unfunded wars, unfunded benefits (Medicare part D), unfunded tax reductions, unfunded future benefit obligations to military, elderly and civil service workers. A complete collapse of the global economic system by hyper-inflation of real estate allowed by lack of regulatory oversight, shoddy lending standards and risk control.

     

    The US can muddle through for now but Spain cannot and that is where the next big decision lies, will the ECB step in or will they try a Greek like default which will unravel the world economies' again- much worse than Lehman, especially considering the fragile state we are all in fiscally. They seem to be acting like a spoiled ignorant child, they refuse to embrace the QE inflation rout and claim there does not need to be a restructuring. The market is very clearly telling them they must make a decision very soon or they will have lost the opportunity to make a decision in an orderly way. I think in a week or two it will be clear. Nothing like 7.2% rates to focus the mind and force a decision.

     

    Very interesting and scary times we are witnessing.
    22 Jul 2012, 12:49 PM Reply Like
  • Stan Piland
    , contributor
    Comments (189) | Send Message
     
    "By a continuous process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method, they not only confiscate, but they confiscate arbitrarily; and while the process impoverishes many, it actually enriches some....The process engages all of the hidden forces of economic law on the side of destruction, and does it in a manner that not one man in a million can diagnose."

     

    John Maynard Keynes
    Economic Consequences of the Peace, 1920
    22 Jul 2012, 10:34 AM Reply Like
  • untrusting investor
    , contributor
    Comments (9903) | Send Message
     
    Stan,
    Exactly, the inflation advocates such as the authors of this article, refuse to acknowledge that high inflation is simply a tax increase that damages the majority of a country's citizens and reduces their standards of living. Generally the most affluent and political classes can avoid much of the inflation effect since they control much of the power and wealth and can take effective counter measures to protect themselves which the majority of the population cannot.
    22 Jul 2012, 01:06 PM Reply Like
  • chopchop0
    , contributor
    Comments (5075) | Send Message
     
    Can't wait to see what happens to all of these suckers buying long-dated T-bills. The bond bubble burst is going to be ugly
    22 Jul 2012, 11:07 AM Reply Like
  • Michael Clark
    , contributor
    Comments (11475) | Send Message
     
    We need higher prices? Is that what these geniuses are saying now? Have none of them any conscience or intelligence. Higher prices without higher salaries? Salaries are going down. Jobs have vanished. Wall Street doesn't want to create more jobs. Wall Street spent the last 30 years sending jobs to Cambodia.

     

    They want an even bigger gap between rich and poor?

     

    They're either cruel or stupid, or both.

     

    We need deflation. We need higher interest rates. We need to reward savers and punish the speculators who are ruining America.

     

    These are the same types of people who want to let rich foreigners into America to buy the houses that are now out of reach of most Americans -- instead of raising interest rates so housing prices will fall and become more reasonably priced so Americans can afford houses without taking out liar loans.
    22 Jul 2012, 11:08 AM Reply Like
  • Mike Maher
    , contributor
    Comments (2860) | Send Message
     
    Falling prices and higher interest rates aren't going to jump start the economy, they are going to cause people and businesses to further delay purchases and investments.
    22 Jul 2012, 12:22 PM Reply Like
  • Michael Clark
    , contributor
    Comments (11475) | Send Message
     
    There will be NO jump-start of the economy without a reduction in debt. The destruction of debt comes first, and with it more pain; but afterward, the economy will then begin to grow.

     

    We cannot have continuous growth in the economy. Nature does not allow perennial growth. There is growth; and there is rest. There is inflation; there is deflation. Growth is a season in the business cycle; rest, deflation, gestation are also a season. During gestation, bad debt needs to be destroyed.

     

    We want it to always be spring and summer. But it can't always be spring and summer. Look at your parents generation: they had hell first, and heaven next. In fact look back at all generations: half a life in heaven; half a life in hell. Every 36 years the global economy breaks: 2001, 1965, 1929....

     

    18 years of growth; 18 years of rest, death, decline, rest, sleep, gestation.

     

    You can water the rotten fruit at the top of the tree in October -- but that doesn't mean they are going to suddenly grow you a new crop. They are going to fall back to earth. It always works that way.
    22 Jul 2012, 01:52 PM Reply Like
  • Ray Lopez
    , contributor
    Comments (1816) | Send Message
     
    But if MC is a saver, then deflation helps him, even if it hurts those that cannot find a job. I think a study found that in Japan deflation or low inflation has helped, over the last 20 years, the seniors. Ironically over the last 5-15 years they've saved less and less.
    22 Jul 2012, 02:12 PM Reply Like
  • Old Rick
    , contributor
    Comments (586) | Send Message
     
    Michael, Your first paragraph describes (I believe) the depression of 1920-21. Deflation was allowed to set in, prices fell, debt was destroyed, and the economy started to recover within 18 months. (January 1920 - July 1921). Compare that to the 132 months of the great depression and the 60 months (and counting) of the great recession.

     

    Also, those of us who lived through it remember that the secular bull market (and bull economy) of 1982 - 2000 began with 15% inflation and 18% AAA Corporate paper as Volker squeezed inflation out of the system. As late as 2005, CPI was running in the 4% range which is the range that it appears these guys would target.
    22 Jul 2012, 02:33 PM Reply Like
  • Mike Maher
    , contributor
    Comments (2860) | Send Message
     
    The economy is not a fruit tree, or a year based on the sun and pattern of the earth. We are deleveraging (reduction in debt), but that doesn't mean we need higher interest rates and deflation to to get there.

     

    The global economy broke again in 2008, that doesnt help the 36 year cycle theory. The Great Depression only really ended due to WW2. Its hard to say that that was some sort of natural cycle, and not man made. The problems we face today are from the folly of men, both individually and on the national level, who took on too much debt and ignored the fact it would come due. The economy falters because of greed, and rises again because of greed.
    22 Jul 2012, 04:25 PM Reply Like
  • johnyhoops
    , contributor
    Comments (2) | Send Message
     
    Smartest thing in the comments section today.
    22 Jul 2012, 06:42 PM Reply Like
  • Michael Clark
    , contributor
    Comments (11475) | Send Message
     
    Mike: Your literal view of the world is part of the problem. You can't see the truth in metaphors. That's because your a rationalist, who believes that details are more important than the pattern containing and directing the details.

     

    Actually, the global theory began to break in 2000-1 with the first bubble, the Nasdaq bubble. Bubbles are a sign of cancerous localized growth, the economy no longer expanding as a whole but as specific 'growths' in the economy that represent unnatural absorption of enegy. Bubbles are produced by too much cheap money. The first sign of a bubble should be met with more expensive money.

     

    The Global economy is LIKE a fruit tree. There are truths to be learned about the Global economy by studying the fruit tree.

     

    Here's an elucidation of this metaphor. Sap is the blood of the Tree of Life as money is the blood of the Global Economy. Sap rises in the Spring and brings life up the Tree. When the growing season ends sap reverses direction and descends the Tree of Life and brings resources back down to the root-system in order to save the tree during the cold winters. That is the full cycle.

     

    Sap in the root system: 1911, 1947, 1983, 2019
    Sap in the fruit at the top of the tree: 1929, 1965, 2001...

     

    What can we learn from this picture about the Global Economy. You say nothing. You want to focus on the nuts and bolts. Fine.

     

    What makes the sap rise? Well, in nature the Sun does. In the financial system, cheaper money makes the sap rise, at first at least. The years above represent the apex of a form of global economic expansion: 1929, 1965, 2001. What makes the sap fall? More expensive money (less money in circulation). Higher interest rates.

     

    What can science learn from poetry? Quite a bit, in fact, In ancient cultures, science and poetry were married. In our modern culture we demand a divorce between these two ways of seeing the world, which leaves us VERY RICH in technology and VERY POOR spiritually. Our humanity is lonely, depressed, addicted to drink and drugs; our hospitals, prisons and insane asylums are filled. Our retirement homes filled with dying parents no longer needed. It is a sad picture. This comes from the forced divorce of the two ways of seeing the world: science always on top; details, nuts and bolts, always the winner.

     

    You say that the Great Depression ended because of World War II. That's your causal view of things. I say that the Depression and the World War were caused by the Night or Deflation Cycle that hit in 1929. Energy, instead of being cohesive and constructive became deconstructive and chaotic. Entropy took over the system. War is the perfect symbol of deconstruction.

     

    Did you know that America had two vicious recessions in 1946 and 1947, after World War II supposedly saved us from depression?

     

    From my book 'Turn Out the Lights':

     

    In their article 'The Great Depression of 1946', Richard K. Veddar and Lowell Gallaway argue that the depression in 1946-47 was even more devastating than the 1929-41 depression. Quoting from this article:

     

    It seems inevitable that some Ph.D. student in economics some time soon will pick up a recent copy of the Economic Report of the President looking for a dissertation topic and learn that there was a ‘Great Depression in 1946’, a topic which he or she will then analyze using all the tools of modern economic analysis. The student will read that real gross national product in 1946 fell 19%, the largest single decrease in annual output in the century of recorded annual GNP data. He or she will also learn quickly that from 1944 to 1947, real output fell by 22.7%. Looking up population figures, the stuent will observe that per capita output actually declined by more than one-fourth in real terms over the three years of conversion from war to peace, and did not regain the pre-depression (1944) level again until 1964.
    From all this the student will no doubt conclude that the heretofore neglected ‘Great Depression of 1946’ was the worst cyclical downturn in modern American economic history, and that, by some measures, it had a greater disruptive impace of the American economy than the earlier, more celebrated Great Depression of 1929 - 1941. For example, in the earlier downturn, real per capita BNP surpassed the 1929 peak levels with 12 years, compared with 20 years it took to surpass the 1944 peak after the 1946 Depression. Moreover, while the 1929-33 downturn wa quantitatively a bit larger (30% vs 23%), no single year exhibited a decline of the magnitude of that witnessed in 1946.

     

    Other people are seeing similar things to what I'm seeing.

     

    In 2002, Gareth Morgan, in ‘This Great Global Bear Market Historical Context’, wrote:

     

    Post Word War II the market can be considered as having three eras.

     

    (a) The 18 years from 1946 to 1964 were the era of the Great Upside Correction from the depression-battered market of the 1930s.

     

    (b) The next 18, 1964-82, covered the period of the Inflation-Battered Market, total annual returns on the S&P were a little more than 7% during this period, slightly better than the galloping inflation rate.

     

    (c) There followed the 17 years, from 1982 to 1999, of the Grand Upside Inflation Over-Correction, which has led to the bear years of 2000-02.

     

    Here's another metaphor: we are over-watering the garden with our continuing low interest-rate policy. We are flooding the garden. The garden is drowning. Higher interest rates will dry out the flood. Remember in the Bible, Noah can't plant the seeds (of the new expansion) until he finds dry land. Lower interest rates are more water added to a flood.

     

    If you want to see the big picture, you have to use a telescope, not a microscope.
    23 Jul 2012, 02:55 AM Reply Like
  • Michael Clark
    , contributor
    Comments (11475) | Send Message
     
    The difficulty is looking at recessions in isolation. The period 1920-1929 is the spring period, when everything grows and creates the Garden of Eden experience. The recession of 1920-21 is somewhat like the recession (the crash) of 1987: a prep to the Spring season of 1992-2001. Spring is the perfect season of growth, ending with a crop of individualized gifts for society. This apex is the beginning and end.

     

    Recessions happen during Day-Cycles and Night-Cycles. Recessions during Day-Cycles are relatively insignificant, as the growth instinct overwhelms the retreat. Recessions are 'nights': they don't last long during the Spring-Autumn season; they last very long during the Autumn-Spring season. Recoveries/expansions are weak during the Autumn-Spring season.

     

    We should have been slowly raising interest rates from 1965-1983, instead of doing all the drying out in the early 1980's through Volcker. Day-Cycles should be accompanied by high interest rates coming down. Night-Cycles should be accompanied by (led by) low interest rates rising.

     

    We need the Fed (if we have a Fed) to have a longer view of things and to lead instead of follow. The Fed can't do this if it is the lackey of the banks. The Fed can't do this if it is the lackey of Washington. Volcker did what he did because he knew it was the right thing to do. Washington wanted to impeach him. Wall Street wanted to kill him.

     

    If you look at the charts of US debt it took us 18 years to work off the 1929 debt mountain; our debt mountain today is even larger; to work off this debt in 18 years will require MUCH default and bankrupticy. Bernnake's policies are 'denial policies' trying to keep everyone safe from pain. But we have MUCH PAIN to go through. You get to be on the top of the mountain; then you also have to go to the bottom of the valley.

     

    The 36-year cycle is the best I have found to mirror our economic cycle. My book takes these cycles back through 1770 as best as I can, with the resources I have. The Fed should have had a tightening bias beginning 2001 to 2019. If they had, we would have avoided much of the trouble we are now in.

     

    The belief in precise cycles is as old as man. Plato wrote: "The Laws of Nature are the thoughs of God. God geometrizes." Kepler wrote similar things.

     

    Are we, today, smarter than Plato? We build better machinery. The Romans had better technology that the Greeks but their art and philosophy was nonexistent when compared to the Greeks. We can't be afraid of seeing the world in new (or even in old) ways. We have to remain always eager to learn: we don't really know very much about nature.
    23 Jul 2012, 03:19 AM Reply Like
  • Michael Clark
    , contributor
    Comments (11475) | Send Message
     
    There are times for investment and speculation. And there are times for saving. I'm saying we are in the saving time again, if we want to save our country. Higher interest rates rewards the common man, the root-system of the tree. Lower interest-rates rewards the speculators and the banks. There time should be over, after what we've seen in the last decade. Bernanke's policies are an attempt to reward the specualtors and the banks.
    23 Jul 2012, 03:21 AM Reply Like
  • Michael Clark
    , contributor
    Comments (11475) | Send Message
     
    One more thought (I know I'm long-winded). You write:
    The global economy broke again in 2008, that doesnt help the 36 year cycle theory. The Great Depression only really ended due to WW2. Its hard to say that that was some sort of natural cycle, and not man made. The problems we face today are from the folly of men, both individually and on the national level, who took on too much debt and ignored the fact it would come due. The economy falters because of greed, and rises again because of greed.
    ____
    Some sort of natural cycle or man-made? I don't accept that distinction. I don't see man separated from the processes of nature. Man is an atom in nature's body. A group of men are cells in nature's body. Does man drive nature's processes (as in 'create' or 'override'?): in my mind NO. I have an emotional reaction to the crimes of men (bankers also) in the topping out of the 2001 Day-Expansion-Cycle. But we could not have avoided the reversal. 2001-2010 is still in the Day Cycle, but it is the decline from the peak. 2008 is part of this decline, much as 1968 (the assassinations of Robert Kennedy, Martin Luther King, Malcolm X) are part of the 1965 decline, much as the rise of Hitler in 1933 -- premium deconstructionist -- and Japanese empiricism -- are part of the 1929 decline.

     

    Man is used by God/Nature as an instrument of creation and destruction. The distinction you draw between Man-Mad processes and Natural processes: I do not accept that distinction. Man is not above and separated from nature. Part of our problem, why we can't see the bigger picture, is because of this false distinction.

     

    Nature has a body and Nature has a mind -- and what you call Man-Made processes are merely attachment to Nature's Mind, not Man's mind standing outside of Nature's or God's processes.

     

    There is a lot we do not know about Nature and God. The idea of Man's triumph over Nature is a symbol of the apex of the Man/Civilization expansion: a sign of the end of that expansion. And an inevitable reversal.

     

    During the expansion Man gets very big, HUGE. The Ego swells like a ripe fruit. Man becomes God, Master of the Universe. Then it pops. All bubbles pop. Then Man down-sizes, gets small. He is getting small so he will be able to fit through the eye of a needle. If he fits through the eye of a needle he will meet God and get a vision of the next world. If he does not fit through the eye of the needle he will not meet God and he will not get a vision of the next world.

     

    Watch the fruit on the tree, swollen with life, rich, proud, beautiful. See it get old, corrupt, see its body collapse. How does this fruit get small? By shedding its corrupt body and returning to its seed, it's microscopic version of itself. The seed goes in to the Darkness (deconstruction) to gestate. It gets buried in the earth. Then, when the Sun returns -- the Sun is Time -- it comes back to life again, pure and energized. This is a symbol of Man's own history through cycles of time.

     

    You can resist this metaphorical view of the world. But this is the language of the Night-Cycle (which is a dream). All of human history is the story of transitions between Days (activity, city-building, in the language of causality and details) and Nights (rests, dream-building, in the language of metaphor). Causality is blind in the Darkness; Metaphor vanishes in the Daylight. But the two ways of seeing the world need one another to be complete. That's why religion never dies.
    23 Jul 2012, 03:40 AM Reply Like
  • phxcrane
    , contributor
    Comments (744) | Send Message
     
    Neither a lender or borrower be. That's who get hurt with rising inflation. How many generations before these type of fixes convinces everyone to spend beyond their means. Because if they save they will get it taken away from them by the government. Of course under the pretense it is the best direction to take for the general good.
    22 Jul 2012, 11:36 AM Reply Like
  • minecanary
    , contributor
    Comments (1211) | Send Message
     
    Of course BB doesn't support the idea. As soon as interest rates are allowed to tick up (under the next chairstan) the sheeple will understand BB is one of the great scumbags in world history.
    22 Jul 2012, 11:47 AM Reply Like
  • GaltMachine
    , contributor
    Comments (2044) | Send Message
     
    If we get that inflation, it will kill the bond market because of the ZIRP policy of the last 5 years. Many people will suffer as a result of increasing inflation particularly the most vulnerable in our society. The FED probably fears this outcome as well especially on bank balance sheets.

     

    The disturbing thing about how we measure inflation is that it is based solely upon a y/y change in the price of something such as gas, bread, milk, etc. If the milk climbs by a dollar a gallon but remains at that price for 2 years, there is no inflation. Even though the price is permanently higher and incomes haven't kept up. The paradox is that if the price then falls back to its prior level, this will set up a deflationary "scare".

     

    However, if we actually do get the inflation genie out of the bottle it will likely set up the next bull market in bonds assuming inflation gets out of control and the FED tries to squash it - maybe a repeat of the early 80's without the 12% inflation but still somewhere well up there.

     

    So bond investors are going to have to be very, very nimble over the next decade if inflation does in fact take root.
    22 Jul 2012, 11:52 AM Reply Like
  • Brendan O'Boyle
    , contributor
    Comments (1283) | Send Message
     
    Correction, this will help debtors with their debts if incomes rise proportionally with inflation. I haven't seen much in the way of rising incomes in the last 5 years to think this will be the case, so we would probably be in for a miserable stagflation if the Fed pushed the inflation rate up, i.e. I make the same income each year yet my purchasing power goes down. Hardly a boon for a consumer spending driven economy.

     

    We don't really need more inflation, we need wages that keep up with inflation. To get that we need more full employment, so I think a higher inflation target would only be productive in combination with programs to repair our aging infrastructure and reduce unemployment. Then hopefully with less slack in the labor market you would see some growth in salaries commensurate to inflation.
    22 Jul 2012, 12:46 PM Reply Like
  • untrusting investor
    , contributor
    Comments (9903) | Send Message
     
    BB,
    And therein lies the complete fallacy of the inflation advocates. Incomes of the average person rarely if ever (and certainly not in the last decade or so) rise proportionally with the inflation generated by the Fed and world central banks. Thus for the average person costs go up and income stagnate, making inflation a large net negative for them.
    22 Jul 2012, 01:13 PM Reply Like
  • Ray Lopez
    , contributor
    Comments (1816) | Send Message
     
    Infrastructure? You mean, bridges to nowhere? Japan tried that Keynesian solution for the past 20+ years and it has not worked to revive their economy. They do have great roads though--mostly toll roads--that are largely empty. Some places in southeast Asia could use infrastructure improvements, maybe a few places in Greece too (Athens-Patra route) but in the USA, short of easing some traffic congestion in certain major cities, I don't see any compelling infrastructure that needs to be built--the interstate highway system is largely completed.
    22 Jul 2012, 02:14 PM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4911) | Send Message
     
    The investment in infrastructure idea is false hope and IMO is just a political throw away line to make it appear like they are doing something.

     

    This is the build it and they will come idea. Then how does this idea match the statement out of the Presidents mouth that jobs are being sent out of the country? We certainly have better infrastructure than India.

     

    If we are building roads well that is very capital intensive not people intenstive and I have never lacked for a road to get me from point A to point B so what road are we missing?

     

    The real truth is that on a relative basis we are not as competetive for a variety of reasons and this President has bad mouthed business to score political points Well he has wracked up the political points but UE is still 8 plus percent. We really need a President that is seriously interested in moving UE down and is ready to do what it takes.
    22 Jul 2012, 07:48 PM Reply Like
  • Mike Maher
    , contributor
    Comments (2860) | Send Message
     
    The waterways, locks and damns in this country need massive amounts of repair/improvements, and the bridges across major waterways all are likely coming to the end of their useful lives. A more efficient electric grid could help too. However, the oil and gas industry builds its own infrastructure, without government handouts, so I'm unsure the government should spend to improve electricity transmission.
    22 Jul 2012, 09:07 PM Reply Like
  • dancing diva
    , contributor
    Comments (2717) | Send Message
     
    I can't believe the authors wrote it worked in the late 40's and 50's and will work again today. During WW2, largely due to the fact there was rationing and so many were employed in the war effort, the US populace massively increased their savings rates. They were cash rich even as the US gov't was highly indebted. Additionally, the buildout of the US after the war and subsequent baby boom when GI's returned and household formation increased was a huge boon to the economy.

     

    http://bit.ly/MB3CRO
    22 Jul 2012, 01:10 PM Reply Like
  • AllStreets
    , contributor
    Comments (1457) | Send Message
     
    Inflation in prices is what has destroyed the balance sheets of the US middle class. With no increase in real wages for 30 years increased living costs have been funded with growing debt/income, rightly or wrongly. It very obvious that inflation doesn't improve the balance sheets of consumers, quite the opposite. Wages simply don't keep up. Price increases end up as disproportionately increased incomes to the top income earners who benefit from increased profits (owners, officers, directors, stockholders, bondholders) because variable costs, particularly wages, don't keep up with the sales price increases, partly due to technological advancement and partly due to outsourcing jobs to cheaper venues.

     

    In addition, increased inflation could raise short term LIBOR rates upon which rate adjustments for adjustable rate mortgages depend while many millions of homeowners are still trapped in adjusting ARMs that can't be refinanced, probably leading to increased mortgage defaults and increased bankruptcies.

     

    I marvel at politicians and bank regulators straining to the point of mental hernias to conceive schemes to INDIRECTLY fix the consumer economy. Trickle, trickle, toil and trouble. Since the current macro environment is unique in our lifetimes, and almost universally recognized to be a consequence of too much consumer debt, why not DIRECTLY attack the consumer debt problem head on? For instance, a regulation limiting credit card interest to, say, 8%, for any borrower who has not had a delinquent payment for the past 12 months. How about a program to convert some of the residential mortgage negative equity to long term federal loans at 3% or less interest and secured by the tax collection system but not secured by the properties? Surely there are solutions more economically helpful than inflation and defaults to reduce the debt burden on the middle and lower classes that also won't harm the investor classes.
    22 Jul 2012, 01:42 PM Reply Like
  • AllStreets
    , contributor
    Comments (1457) | Send Message
     
    Another point, one might credibly argue that inflation has just been tried already. Shadow Government Statistics has their alternate inflation rate averaging about 10% for 2011 and 2012. I agree based on personal experience. Food, gasoline, health insurance and property taxes have roared ahead even as housing values have collapsed and wages have stagnated. Was that a consequence of the QE programs showing up in furious commodity inflation? Another point might be a question about how the Fed would propose to cause the increased inflation, since they apparently think QE programs to date haven't actually caused enough inflation. Would it be via more QE? Don't they need to come clean with the public about whether QE causes inflation or not?

     

    What does the Fed target price inflation and not wage inflation? Price inflation in an environment of high unemployment guarantees wage deflation. In any case, what is the reason for targeting 2% inflation and not zero? What's the benefit to consumers, if any? Purportedly, price inflation signals producers to produce more, assuming their margins also expand, and, therefore, would promote growth. However, in a world economy where labor is accessible across many borders, any wage pressure would only occur in markets where labor costs are significantly less than the US and already have nearly full employment. You could say that US price inflation mostly accelerates the world wage arbitrage that already has the US middle class on the ropes. I suppose the same could be said of European inflation.
    22 Jul 2012, 02:05 PM Reply Like
  • Wyatt Junker
    , contributor
    Comments (4498) | Send Message
     
    A public restructuring is required, but it takes political courage. The Bernank is trying to keep rates low long enough until most people, along with the banks, can get a loan reset. If you are still in an ARM or a variable at this time, you are an idiot, libor manipulation alone should tell you that the scam there can't continue forever with forced, suppressed, arbitrarily manufactured rates. At some point, the real market will speak. Act now before it does, or forever hold your peace, along with your ability to bitch, whine and complain. You have been warned.

     

    There really is no difference between default and inflation. They are the same thing. And deflation punishes us as well by virtue of high unemployment and low investment. So, which is worse? They both suck. It is Janus-headed. They are both, one in the same actually. The pain will out, always. You cannot suppress it. The market works even when under manipulation, like trying to squeeze water with your hands. At some point, hydraulics take over and no amount of hand strength can overcome that.

     

    We either face the fact that our government turns us all Japanese forever, or we get adult about it and try to remove every obstacle to real growth which is primarily government driven. Create incentives. Remove A LOT of government regulations. They are unnecessary barnacles that affect real companies everyday. This takes political courage. The government has created a nation of whiners and victims. Everyone has 'a right' now to sue their employer about any damn thing that takes their fancy. The regulations are so ornate, cumbersome and disheartening that many people have just given up trying. Only the brave go into business now.

     

    And for the Lord's sake, American citizens, hire a politician this time who is an adult. And let's make sure that adult reforms all the dead weight obligations of these last 100 years from FDR to LBJ to Bush to Obama. They are the real obstacle to growth in terms of this 'fiscal cliff'. Americans don't need this false protection anymore. Its turning us into a nation of pathetic wimps and dependents. We are training ourselves into state wards.

     

    It will either happen by us or to us.

     

    Either we do it or the bond market will and other, more responsible nations will rise up and displace us. Either way, the next global power will be more adult than we are acting currently, by not training their people to be sickening sacks of contemptible state dependents. Obama has only expanded the balance sheet of them by the loads.
    22 Jul 2012, 02:15 PM Reply Like
  • Old Rick
    , contributor
    Comments (586) | Send Message
     
    Another good one Wyatt! Keep 'em coming.
    22 Jul 2012, 02:47 PM Reply Like
  • Michael Clark
    , contributor
    Comments (11475) | Send Message
     
    Good post, Wyatt.

     

    We get either: Japan denial for every; or Weimar. Yes, I agree. Those are two of the choices.

     

    Another is higher interest rates and default and deflation of the bubble we created in our expansion 1983-2001. I choose this last option, although I KNOW it will be painful. There is no way out of this that is NOT painful. We all enjoyed the party. Now we get the hangover.
    23 Jul 2012, 04:14 AM Reply Like
  • Ray Lopez
    , contributor
    Comments (1816) | Send Message
     
    "all the dead weight obligations of these last 100 years from FDR to LBJ to Bush to Obama"... you forgot Reagan. Remember his 600 ship navy? That cost money. Deficit exploded. Tax cuts did not help--essentially Reagan was a closet Keynesian ('print or borrow money and spend it'). The stock market boom since 1981 was in direct response to his Keynesian stimulus which got things rolling. Now the chickens have come home to roost. Other than that omission, I agree with you.
    23 Jul 2012, 10:36 AM Reply Like
  • Ray Lopez
    , contributor
    Comments (1816) | Send Message
     
    As the article points out: "But one way or another, they continue, those debts aren’t going to be repaid in full, whether it’s through inflation, default, bankruptcy or negotiated settlements."

     

    so pick your poison if you are a creditor: inflation or default? Those are your two options. As for 'growing out of it', as Reinhart and Rogoff point out in their book "This Time is Different" that only works about 15% of the time in modern history. The vast majority of times it is NOT different and countries either go bust or inflate away their debt once it reaches 100% debt-to-gdp (or even less than that if the countries are developing and rely on foreign investors).

     

    As as saver, you should not worry about inflation if you have hard assets (housing, gold, or even stock in companies that can match their prices with inflation such as railroads with monopoly routes--Warren Buffett was right)
    22 Jul 2012, 02:20 PM Reply Like
  • radicall
    , contributor
    Comments (533) | Send Message
     
    If I can be guaranteed a 10% annual pay raise, I will go with Evans. The problem is that wages/salaries are NOT rising with "inflation" so pushing inflation up does not help people earn more, unless employees have a position to bargain from.
    22 Jul 2012, 03:44 PM Reply Like
  • Michael Clark
    , contributor
    Comments (11475) | Send Message
     
    You're right: so infaltion without wage inflation is further separation of the rich and the poor and a guaranteed (eventual) civil war. Why do we bring the rich and the poor back toward one another during the Deflation Cycle? One of the reasons is to avoid civil war.
    23 Jul 2012, 04:48 AM Reply Like
  • pmiller100
    , contributor
    Comments (358) | Send Message
     
    I've been saying this for a while now. Doesn't matter if it's a good idea or bad idea. It's the only option left (other than outright default).

     

    It's just math, and a little applied common sense. There doesn't seem to be any way to grow the economy faster than we're growing our debt. So inflation as a debt management technique can work. Good for the national balance sheet, and people with a lot of debt. Pretty crappy for people with dollar-based assets. But we've all sensed that this debt thing wasn't going away without exacting its pound of flesh, right?

     

    We've got some time - the public conversation on this has just started. But we'll all eventually come to see we've got no other choice.
    22 Jul 2012, 04:31 PM Reply Like
  • Wyatt Junker
    , contributor
    Comments (4498) | Send Message
     
    Indeed, the fact that people even think they have some magical ability to dictate terms or have a say on how to unravel this fiscal debt bomb or how it should be done is hilarious.

     

    "If I can be guaranteed a 10% annual raise blah blah blah..."

     

    LOL.

     

    Its like saying, "If I can be guaranteed not to fall if I jump off this building here, then sure I'll go along..."

     

    Algebra is not up for debate. It just is.

     

    The problem is that we are living with people who believe in unicorns. They tend to vote democrat.
    22 Jul 2012, 05:00 PM Reply Like
  • financemc
    , contributor
    Comments (647) | Send Message
     
    Wyatt;

     

    With all due respect, we are in this position because Bush squandered the surplus handed to him and commenced two unfunded wars and stated that they would be "off budget", enacted tax reductions while in two wars, enacted Medicare part D while running a deficit, eliminated fiscal oversight of the banks allowing the "banksters" to create new innovative profit centers for themselves while creating a ticking time bomb for the world financial markets. I can go on, but please stop with the politics, we are in a ditch and for the financial community it is how we are going to extricate ourselves is the central issue.

     

    Disingenuous talk, such as the Tea Party espouses, cut the waste but don't touch my SSI, Medicare, Military, etc is the basis of the problem. We need more money coming in or less going out in the long term, simple math. Medicare, SSI, debt service and the military currently consumes more than 100% of the current tax receipts. If we are not willing to raise taxes and demand that the current demands are kept constant (Romney wants to INCREASE THE MILITARY) then we will have to eliminate all of the other federal expenditures- no more, parks, FBI, CIA, NASA, NOAA, nothing else.

     

    We have to be real and adult. We don't want to go back to the "bad ol' days" where seniors died destitute with no health care or without minimal support, children died of curable disease,, raw waste water was pumped into our streams, lakes and bays, etc. We have evolved. China is where USA was 30 years ago.

     

    We need an adult conversation and stop with the strident views. We need more revenue if we want a 1st world society and less spending too. We need to be smart about it and not doctrinaire.

     

    If progress is to be made imho, It must start with us/voters and the first order of business is to get the money interests out of deciding our future.

     

    This all or nothing political devolution of our society is destroying us from within. If you don't believe me just read the S&P US debt comments- we have the where- with- all to solve our problems, just not the political capacity. That is sad.
    22 Jul 2012, 06:11 PM Reply Like
  • pmiller100
    , contributor
    Comments (358) | Send Message
     
    I see the failure of maturity and fiscal responsibility that got us where we are as a truly bipartisan achievement. I also think it doesn't matter. All that matters is how we move forward.

     

    I will add this. If Republicans and Democrats insist on continuing their adolescent and unending food fights, we may have to move forward without either groups. Who knows. Us independents might start forming a consensus that we ought to keep the illegal immigrants and instead ship all members of both major parties back over that river. But as nice as that would sound at first listen, eventually independents would realize that wouldn't be fair to Mexico. That army of adolescents is our problem; not their problem.
    22 Jul 2012, 06:51 PM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4911) | Send Message
     
    financemc

     

    If you don't believe revenues are high enough then you are not really looking at the tax burden many Americans must carry. It is not just federal but also state, local, city, user fees, sales tax, real estate tax, etc. And businesses pay all kinds of taxes also which you should know.

     

    There is no order of magnitude changes that can be made in the tax burden without crushing the taxpayers and downstream businesses and 3rd parties. The overall size of government is now too big for the private sector. That is where the order of magnitude change must occur.

     

    And I say cut defense in half, and be selective about wars and get out as soon as we are done shooting people, but that is only a start.
    22 Jul 2012, 07:56 PM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4911) | Send Message
     
    pmiller

     

    There really is not much difference between Dems and Reps effectively. Their foodfight is only theatre and meant to keep the electorate divided amongst them.

     

    We the people need to move on.
    22 Jul 2012, 07:58 PM Reply Like
  • financemc
    , contributor
    Comments (647) | Send Message
     
    Thomas,

     

    We are spending less as a % of GDP now than in the last 40-50 years. The spending on the local/state level is EXTREMELY REGRESSIVE and that is why the American middle class is being crushed. Example of the wealth migration in the US: the 6 heirs to the Walmart company have more wealth than the bottom 40% of the whole country and the Republicans want to make sure that the siblings of the WMT heirs get to keep 100% through eliminating the estate tax. Not one of the 6 ever did a thing for this country other than continuing the legacy of their benefactor. We allow them to manufacture goods in China and sell them here and funnel the profits to tax havens and be treated as American heroes because they were born into the right family. Micky Arison, renounced his US citizenship to avoid paying taxes on his Carnival Cruise lines enterprise and he is still treated as an American hero because he is rich; while he pays virtually no personal taxes or corporate taxes. We are delusional if we believe this will work out well for us Americans.

     

    The totality of the spending is based on only two, maybe three, entities: old people via Medicare/SSI and on the state level, children and education/schools. The majority of the rest of spending at the federal level is support for education, debt service and law enforcement and on the state level almost the whole budget of states' are; education, roads and health care. That is where the real money is- the "illegals, waste, etc" is a canard, the real waste is in our Medicare/Medicade/ healthcare expenditures and we are receiving poor results as designed and written into law.

     

    We spend more on our military than the whole developed world combined! Our farmers would make more money if they did not grow any crops, our richest real estate owners are subsidized by flood insurance that does not come close to the real cost, etc.

     

    We are an extremely rich country and we can afford a 1st world society if we manage our resources well and not give away our heritage to special interest groups that buy our politicians and our prosperity and expropriate it for the very few. We are being played for suckers and we need to change that.

     

    There is no real debate here, the evidence has been offered and supported by both sides. We are the suckers and we are being played as the fools by both parties. The two parties are dividing us to conquer us, we are the issue and we should correct it.

     

    The starting point should be the incivility between the citizens that elect the uncivil representatives that are holding our country back for the benefit of moneyed interests, imhp.
    22 Jul 2012, 08:56 PM Reply Like
  • Michael Clark
    , contributor
    Comments (11475) | Send Message
     
    One side believes in unicorns; the other side believes in dog-eat-dog, and then works to make their vision become reality.

     

    Is there a middle road between these two illusions?
    23 Jul 2012, 04:49 AM Reply Like
  • Michael Clark
    , contributor
    Comments (11475) | Send Message
     
    Excellent post, Tomas. The more we believe in either/or, the more we suffer.

     

    Make of the two one.
    23 Jul 2012, 04:49 AM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4911) | Send Message
     
    finance

     

    I am not a big believer in measuring tax burden by GDP as our economy is much different than 50 years ago and we have intentionally tried to increase standard of living among people and that requires leaving more money in the hands of citizens. Looking at peoples' tax burdens is the reality of what the government is taking from working people. If those people quit then everything falls.

     

    Agree on defense. Also you have to grasp that 5% of the population drives over 50% of health care costs. End of life care is a big part of that number. We don't need to look at everyone we can just look at the 5%.

     

    The money flow should be at the state level not at the federal level as the federal government is crowding out state budget and control. The fed gov can set up frameworks and work on best practices but this country is too big to manage in an old fashioned USSR centralized Kremlin. It is ineffecient, expensive and it will fail.

     

    I don't think the Walmart clan are heroes so I have no emotion around it. But I do observe that people generally think rich people and Hollywood types are smarter and better. That may or may not be true. We only owe people in this country an opportunity. No more and no less.

     

    Our political system is corrupt because money is earmarked for votes. That is why we need the money to come out of government. As a famous bank robber once said he robbed banks "because that is where the money is." As long as government is pulling massive amounts of money through it we will have the robbers lining up outside its door.
    23 Jul 2012, 10:14 AM Reply Like
  • wald22
    , contributor
    Comments (402) | Send Message
     
    Inflation is coming, not because Bernanke is printing $'s, but because he is printing Treasury IOU's. For many years the Chinese Yuan was an extention of the US$. That is changing, for China is spending our Treasury IOU's as a currency, which in turn is making the US$ an extention of the Chinese Yuan. What will bring inflation is the fact that a good part of the USA ground is so dry that there is not enough moisture in the soil to evaporate into the atmosphere to cause rain to fall. And that in turn means hotter, dryer air that will only dry up even more ground. Soon there will be a race to buy what little production the ground produces. Demand leads supply, Supply leads volume, volume leads price, price leads trend. Bernanke with his credit money without consent, but accepted as collateral can't compete with what nature can dish out. Fact is it takes 1,000 tons of water to produce one ton of wheat. It now takes one unit of oil to produce 3. It now takes one unit of natural gas to produce 15. Using grains to make ethanol is as stupid as it can be. Bernanke is now doing what Hitler did in printing Treasury debt that were later exchanged for cash that had to be printed up in massive volumes. History repeats. After all are we not on a fractional reserve credit system that cheats borrowers who sign over their collateral in exchange for credit money created out of thin air at no cost. Bernanke has no choice but to do just that. Create ever more credit to buy our unpayable debt the Chinese use as a currency and recycle through the FED. Just watch how in a few months or less the Chinese will buy corn at $10 a bushel and soybeans at $25 a bushel with our Treasury debt bills. Our financial system is so systemically corrupt that not even the law can fix it. If Bernanke had a brain he would impliment a program of cash payments printed out of thin air, and use it to pay for farmers to put a layer of mulch on the ground so the ground can retain moisture that can evaporate to make rain to fall.
    22 Jul 2012, 06:33 PM Reply Like
  • financemc
    , contributor
    Comments (647) | Send Message
     
    Wald:

     

    Please read a book and study the water cycle. The earth is covered by mostly water, 2/3's.

     

    " If Bernanke had a brain he would impliment a program of cash payments printed out of thin air, and use it to pay for farmers to put a layer of mulch on the ground so the ground can retain moisture that can evaporate to make rain to fall."

     

    The moisture in the atmosphere is derived from the oceans; not the land. Where the rain falls is a matter of the upper atmosphere's wind currents- mulch will not help bring rain. Sorry.

     

    Bernanke can make currency fall from the sky but he cannot help the drought situation. He's amazing but not god.

     

    btw; mulch holds moisture in the ground so it does not evaporate and turn into rain thousands of miles away.
    22 Jul 2012, 09:07 PM Reply Like
  • little italian
    , contributor
    Comments (19) | Send Message
     
    I live in Italy, with Lira Italy affoded for years about 15% interest rate.
    How? With inflation, we had something that made incomes grow with inflation ad the 15% was just facial because in truth with 115 liras you bought what you would have bough one year before with 100, so the real interest was about 0.
    Also letting wages growth brough a growth of taxes so our governament could pay back everything without problems.
    It was far better than now, if it worked for Italy why can't work for all the world?
    22 Jul 2012, 06:48 PM Reply Like
  • Josh ODonnell
    , contributor
    Comments (229) | Send Message
     
    LOL Yea, lets create more and inflation so everything is even more expense.
    22 Jul 2012, 06:49 PM Reply Like
  • wald22
    , contributor
    Comments (402) | Send Message
     
    Inflation is the way out. It is kind of funny that after the 1929 crash we had the depression 30's. The dust bowl of the thirties caused by the massive ground turn over of the late 20's boom lasted from 1930 to 1940. Now again we have this agricultural boom of turning over ever more land and we are about to run into the same old problem. Then like now mother nature will show no mercy for election year illusions.Then like now mother nature will not care if humans are battling a sovereign debt crisis. If commodity prices surge due to the lack of supply, you can be certain that consumption driven GDP will take a hit. It did in the 30's and will again. But this time the FED has no choice but to open the floodgates of infation to correct a problem we humans must do to correct what nature this time around can not. The ground without a mulch layer acts as a hotplate that dries out the soil. Ever more land is so dry that there is not enough moisture in the soil to evaporate into the atmosphere to cause rain to fall. This time we humans have to fix that problem that we caused. 1934 and 2012 weather maps match.
    22 Jul 2012, 07:22 PM Reply Like
  • wald22
    , contributor
    Comments (402) | Send Message
     
    @financemc - yes the earth is 2/3 water and yes mulch will not make it rain. I didn't say it did. On an average 100 degree day the soil without a cover reaches 140 degrees. And that is what causes it to dry out. A mulch layer will stop the ground from becoming a hotplate, and at the same time it slows evaporation of the moisture in the soil. A mulch layer acts as a controlled release (evaporate). As for Bernanke, he is unable to do anything right. He has yet to drop $1 from his helicopter in the sky that does not exist. All he knows how to do is print up Treasury IOU's for China to use as a currency. We have a accounted for $16T debt that is really $216T and just a little over $1T in cash to pay that debt with. So he needs to drop a lot of cash from the sky. I would like to see him do just that. But instead he wants to suspend redemptions on moey market accounts. To him money market accounts/funds has always been one of the most hated liquidity intermediaries. That is because that money does not go into stocks or bonds, it just sits there, collecting little or no interest and can NOT be incorporated into the rehypothecation architecture of the fraudulent banking system he heads.
    23 Jul 2012, 08:49 AM Reply Like
  • Michael Clark
    , contributor
    Comments (11475) | Send Message
     
    I'm not the only one finding 36-year cycles in history. Interesting read (if you are interested)...

     

    http://bit.ly/LKmknv

     

    SAN FRANCISCO (MarketWatch) -- That voter sentiment suggests a desire for change should come as no surprise. In fact, the country's overdue for a political and economic shake-up.

     

    In a little-noted historical pattern dating to 1788, America has cycled through progressive and conservative periods every 36 years with Swiss-timepiece accuracy. Driving the cycle are economic disturbances and issues of equity and justice the likes with which we're grappling now....

     

    Also, in a much different direction:

     

    http://bit.ly/Oe0xZz

     

    Cycles of 36 Years in Solar Activity and Climate

     

    Cycles of big fingers have a mean length of 35.8 years (178.8 years [big hand] / 5 = 35.76 years [big fingers]). They are closely connected with solar activity. They coincide with maxima and minima in the Gleissberg cycle and open up the possibility of predicting these crucial phases many years ahead [62, 63]. As will be shown below, they also define the length of the 22.1-year magnetic cycle of sunspot activity (Hale cycle). As far as climatic change is concerned, cycles of a length of 36 years are not new. Francis Bacon [102] has already pointed to a cycle in the Netherlands with a length of 35 to 40 years with cool and wet phases followed by warm and dry periods. E. Brückner [7] discovered this cycle again in 1887. He demonstrated that varied climatic phenomena in different regions of the world show synchronized phases in a cycle of 33 to 37 years. He had already surmised in those days a connection with the sun’s activity. H. W. Clough [11, 12] followed this suggestion and found the Brückner cycle not only in 12 meteorological variables, but also in sunspots and especially in variations in the length of the 11-year sunspot cycle. D. V. Hoyt and K. H. Schatten [39] think that the reality of the cycle is confirmed by Scandinavian tree ring data which show its rhythm over hundreds of years. With regard to Brückner’s supposition of a connection with the sun’s activity, they ask which index of solar activity would conform with a 36-year cycle. The results presented here answer this question....

     

    (On 18-year cycles within this:) Often the second harmonic of finger cycles is as important as the fundamental. The thickness of Lake Saki varves is related to local precipitation: the thickest warves ar linked to very wet years and the thinnest varves to very dry years [101]. I could show that maxima in the varve thickness are consistently correlated with cycles of half big fingers with a mean length of 17.9 years. The analysis covers the years 700 to 1894, nearly 12 centuries. A Monte Carlo model and Student’s t-test yielded t = 8.2 for 33 degrees of freedom. The null hypothesis of no connection between the studied variables can be rejected at a high level of significance (P < 6 x10-7 ) [62].
    24 Jul 2012, 06:36 AM Reply Like
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