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Inflation or Deflation?

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Inflation or Deflation? - Page 9 Empty DROP DEAD FRED..........

Post  SRSrocco on Tue Aug 04, 2009 11:09 pm

Shelby wrote:
Falling prices, means hard times for workers who are also the customers, which means business have to try to eat market share from competitors by lowering their prices. It is a downward spiral. There is no such thing as pricing power in a deflation. So many cheerleading news out there, we must be getting ready for a blowoff top for this re-flation hoax.

And SRSrocco says:

http://jasonhommelforum.com/forums/showthread.php?p=52132#post52132

...Looks like our SHELBY has become under the TRANCE of FEKETE's DEFLATIONARY SCENARIO. I would agree with DEFLATION on things we OWN, but not on things we USE. This is the main difference between ME, SHELBY and the other DEFLATIONARY HACKS...

Steve might want to note that things we own are a huge portion of our debt ATM machine, and thus they affect what we can spend. This means crashing demand:

Steve will someday learn that Peak Energy due to natural limit is a fairly tale. The production of oil is peaking because the debt generation is peaking. Who wants to invest in oil when no one is going to be able to buy it? Nature has a way of balancing these things out. There are huge oil fields around the islands here in SE Asia. There is a huge field out near an island near Guam. No one wants to develop these now. It is wrong timing, we are heading into severe global deflation.

DEAR SHELBY,

DROP DEAD


HAAHHahAhAHAHHAHhaaa.....Only kidding Shelby. How in the HADES are ya by the FRICKEN WAY??? Long time no see.....or hear from ya. ALL of a sudden you come out of the BLUE and start sending me EMAILS from your BLOG. I am not complaining by the way....just nice to see you're still ALIVE and KICKING down there in the land of FILLIPINOS.

Shelby, I plan on writing an article that might help STRAIGHTEN YOU OUT a TAD or at least make you see it another way. Of course, I doubt it very seriously that you will. But HADES.....whats life without a little RIFF and RAFF.....AYE?

Shelby you are missing a VITAL ELEMENT in your DEFLATIONARY THEORY. And that is the PRINCIPLE of DIS-ECONOMIES of SCALE that take place in a DEFLATIONARY ENVIRONMENT. I will agree with the DESTRUCTION of CAPITAL per FEKETE (the gentlemen I quoted back in early 2008 to get a reply as a FLAKE by you) by the lowering of the INTEREST RATE by the MAGICIANS and CLOWNS at the FED.

As DEFLATION takes place in THINGS WE OWN......INFLATION takes place in things we USE....and I would focus these on FOOD, ENERGY and etc. As INVESTMENT CAPITAL DISINTEGRATES.....companies close down and DIS-ECONOMIES of SCALE kicks in. Thus we have RISING PRICES for GOODS in a DEFLATIONARY ENVIRONMENT the direct opposite in an INFLATIONARY ENVIRONMENT with ECONOMIES OF SCALE.

Anyhow.....I am putting the ARTICLE together. It's got some nice CHARTS and GRAPHS....and possibly a few CRAYONS for those who like it a little SIMPLER.

NICE to see you still got some VINEGAR in YA.

best regards,

steve

SRSrocco

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Inflation or Deflation? - Page 9 Empty re: DROP DEAD FRED..........

Post  Shelby on Tue Aug 04, 2009 11:34 pm

Steve, same nice to hear from you and nice to open a debate, so that we can try to convince each other as to the likely future.

LOL on the "DROP DEAD".

The reason I called you out in my email Subject "SRSrocco rebuttal", was because yesterday you accused me of being a "Deflationary Hack" and accused me of saying "Fekete is a flake" in the Hommel forum, which you have repeated in my forum:

SRSrocco wrote:...I will agree with the DESTRUCTION of CAPITAL per FEKETE (the gentlemen I quoted back in early 2008 to get a reply as a FLAKE by you)...

I do not remember calling Fekete a flake. You must have confused me with someone else. "Flake" is a strong word, so please do not accuse me of that. I have been referencing and respecting his work since before you knew about Fekete, as evidenced by my published articles from as early as March, 2007 (where I link to his work and used it as a basis for my writings):

http://www.gold-eagle.com/research/moorendx.html
http://www.gold-eagle.com/editorials_05/moore030807.html (by Shelby Moore)

Shelby Moore wrote:...Dr. Fekete seems to have it all figured out. When Dr. Fekete writes "interest rate", I think he means generally "opportunity cost" of investment...

I think maybe you remember my comments about the debate between Hommel and Fekete in 2008:

http://jasonhommelforum.com/forums/showthread.php?t=2855&page=2

Perhaps you may have time to review my comments again, and you can see I was critical in 2008 of Fekete's claim that future's markets in gold and silver are not naked and are good for mankind. I still continue to disagree with Fekete on that aspect (even emailed him my thoughts on that), although I agree with Fekete that future's markets in other commodities are beneficial as long as the money system has not reached the terminal cancer stage. You can read my summary here:

https://goldwetrust.forumotion.com/economics-f4/inflation-or-deflation-t9-195.htm#1680


SRSrocco wrote:...As DEFLATION takes place in THINGS WE OWN......INFLATION takes place in things we USE....and I would focus these on FOOD, ENERGY and etc. As INVESTMENT CAPITAL DISINTEGRATES.....companies close down and DIS-ECONOMIES of SCALE kicks in. Thus we have RISING PRICES for GOODS in a DEFLATIONARY ENVIRONMENT the direct opposite in an INFLATIONARY ENVIRONMENT with ECONOMIES OF SCALE...

I agree! But the disagreement is on the near-term relevance and timing of the relative effects.

What I mean is the rising prices of basic goods won't be the driving factor for our investments (except as it causes false rallies and volatility due to ignorance of marginal utility of debt), until the notional net worth of westerners has dropped so much that the these basic goods are unaffordable to them and they start to riot or run from the dollar system to precious metals. Instead deleveraging and deflation of investments will be the overriding theme for next year at least. And gold and silver will get caught in the overriding theme, before the finally launch to infinity fiat dollars at the very end, when the public walks away from holding up the debt, because they are all bankrupt and finding it hard to eat. For a while yet (probably until 2011 or so), the net worth crashing will be the larger valued theme that is affecting our investment decisions.

You didn't quote from the posts I wrote where I explained the above distinction:

https://goldwetrust.forumotion.com/economics-f4/inflation-or-deflation-t9-195.htm#1706
https://goldwetrust.forumotion.com/economics-f4/peak-oil-nonsense-t102.htm#1705

It is not only dis-economies-of-scale, but also the reflation to a larger debt bubble, is driving speculation in real estate globally (as the other countries stimulus and competively devalue their currencies), thus making land uneconomic for farming. In Asia, land is being priced far from development, as if it will soon be developed. The rate of debt expansion is making people think the urban sprawl will just keep growing without end. You see PEAK ______ is all being caused by the misallocation of investment due to the debt. Even gold production has peaked, it is not pecular to oil (I know you think oil is causing all the other peaks, but I think debt is causing it and the correlaton to oil). Think of it like this. Imagine someone handed you an infinite credit line, then would you bother to work???? No we would all do stupid things with money instead. Scarce resources are precisely what is needed to remind people that money is not limitless. The debt bubble is the driver. Nature is just cooperating as it always does in exponential boom and bust. Even the plankton experience the exponential S curve.

I know one of your big recent themes is EROEI (something I have been aware since 2006), and this naturally declines as a soceity overstretches itself with debt. Think of it like this. If you had unlimited money (or thought you did), then you would take on growth projects that were less economic. Actually I have been aware of the efficiency equation since high school physics.

Also discretionary consumer items will lose pricing power in this coming deflationary depression. Only basic necessities will retain pricing power. And I don't think inflation will be that high, because the govt is clearly going to resort to FORCED rationing (see the proposed Health Care plan). But even Cap & Trade will be driving electricity rates through the roof. So indeed, the necessities will go up in price, and people will reduce purchases of non-necessities.

Nevertheless for the near-term, deleveraging is the main thing we need to be aware of as investors. Return/liquidity of capital is the most important priority right now near-term-- not inflation hedges. A few years out from now, real money will be the most important thing to own, as the financial & political system will disintegrate into fascism and splintering chaos. Instead of "green shoot", we will see many chaotic "offshoots". Not everyone is going to stay locked in the sinking ship of the dollar at the end. Near-term I expect the dollar & Tbonds to rally when the stock market crashes again. And I expect silver to fall hard, maybe gold as well-- both are supposed to be inflation hedges.

CAVEATS:

  1. PTB could power grab at any time, so having some gold/silver is necessary.
  2. Public mania can drive prices of investments assets higher in spite of deflation reality (e.g. S&P500 has P/E ratio of 723)
  3. We do not know when music stops playing on this dollar jail charade, it could end spontaneously at any time.
  4. Bank holidays and other side-effects of the hyper-deflation could drive gold up at any time



Steve, I have a minor in math. Understand that if debt bubble is causing malinvestment, thus causing peak oil, peak gold, etc. Then of course you will see a correlation between peaking oil and those other peaking things. It is mathematically erroneous to ASSUME that oil is causing the peak in gold-- there might be another root cause of both (i.e. peak debt). Mathematical correlation does not imply cause and effect. Real mathematicians know this. Ask one.

Steve I appreciate and admire your research on agricultural effects of the peaking _______. It has been helpful to my overall understanding. All the best to you.

==========
ADD:

Steve, I urge you to read this about China and metal prices:

http://www.frontlinethoughts.com/article.asp?id=mwo072409

And these about capacity utilization is declining in our deflation, meaning the supply destruction is being more than offset by demand destruction:

http://www.frontlinethoughts.com/article.asp?id=mwo073109
http://www.investorsinsight.com/blogs/john_mauldins_outside_the_box/archive/2009/07/06/make-sure-you-get-this-one-right.aspx

The dis-economy-of-scale you are seeing may simply be the necessary amount be caused by the deflation.

The following deflation article has same negative marginal uitlity of debt logic as myself (& Fekete and Chris Laird):

http://www.investorsinsight.com/blogs/john_mauldins_outside_the_box/archive/2009/07/13/debt-and-deflation.aspx


And in today's Casey Dispatch, we can see why David Galland and his 3 "experts" still don't get it:

...The Hoisington article traces through the mechanics of how increases in the monetary base and then increases in the money supply normally give a temporary stimulus to the economy and – and concludes that the normal chain of cause and effect isn’t working this time. The article cites the unwillingness of shell-shocked banks to lend and thereby turn the increase in the monetary base into an increase in the money supply, and also the reluctance of a nervous public to spend any new money that comes its way and turn the cash into demand for goods and services.

The Niels Jensen piece tells essentially the same story but in a less mathematical fashion.

The center of the deflationist argument is that while the government can create new money, it can’t force anyone to spend it. And once deflation sets in, no one will want to spend it. Motivated by fear and also by the thought that everything will be cheaper tomorrow, everyone will want to hoard cash.

The strength of that argument is also its weakness. The longer a deflation continues and the more tenacious it seems, the more government will print, which will make the eventual inflation that much more severe. Reluctance by banks to lend won’t prevent this. Even if every loan officer in the country posts a big “No” sign on his door, the newly created money will still reach businesses and consumers via government deficits financed by Federal Reserve purchases of debt. The resulting portfolio imbalance that most businesses and households will see (so much cash, comparatively so little of other things) will at some point lead people to spend, which will switch the system from deflation to its opposite...

They miss the point of that linked article above:

..."Thus Barro and Perotti are saying that each $1 increase in government spending reduces private spending by about $1, with no net benefit to GDP. All that is left is a higher level of government debt creating slower economic growth."...

That is the same as saying the marginal utility of debt is NEGATIVE. And it is what I wrote, that govt is crowding out the withering private sector.

========
ADD#2: From the Casey Dispatch for today, this blows my mind!

...Off Balance Sheet, Out of Mind
By Chris Wood

The U.S Treasury's Financial Management Service recently released its monthly Statement of Receipts and Outlays for the United States Government.

For the first time ever, the Treasury reported a deficit above $1 trillion -- $1.086 trillion, and that’s with three big-spending months left to go in the current fiscal year.

To put things in perspective, the reported federal deficit for all of 2008 was $455 billion. At the time, that was a record. But it is less than 42% of the borrow-and-spend total at this year's nine-month mark.

As shocking as that seems, it’s not even the real deficit story. Most of the real deficit is hidden by the Treasury's accounting methods.

For one thing, the annual budget deficit supposedly refers to the difference between government receipts and outlays. But sly politicians sometimes remove a spending item from the regular budget and then bring it back as a supplemental appropriation. Supplementals are real costs that add to government debt, but they don't get counted in the reported deficit. For example, during fiscal 2008, the federal government’s net operating cost (the government’s “bottom line” – the difference between revenue and cost) was $1,009.1 billion, but the budget deficit was reported as “only” $454.8 billion.

But it gets much worse.

To quote John Williams’ Shadow Government Statistics: “Those [2008] numbers, however, did not account for the annual change in the net present value of unfunded Social Security and Medicare liabilities, except in discussions and footnotes. Counting those changes, as a corporation would for its pension and healthcare liabilities for retirees, the 2008 annual deficit was $5.1 trillion [compared to the reported figure of $454.8 billion], versus $1.2 trillion in 2007 [compared to the reported figure of $162.8 billion]...


============
ADD#3: Anecdote that US firms may be accelerating offshoring to reduce costs to stay ahead of the deflation:

http://technology.inquirer.net/infotech/infotech/view/20090804-218774/US-firms-hike-offshoring-says-report

Shelby
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Inflation or Deflation? - Page 9 Empty re: "Deflationary Hack"

Post  Shelby on Wed Aug 05, 2009 7:23 am

Shelby wrote:...The reason I called you out in my email Subject "SRSrocco rebuttal", was because yesterday you accused me of being a "Deflationary Hack" and accused me of saying "Fekete is a flake" in the Hommel forum, which you have repeated in my forum:

SRSrocco wrote:...I will agree with the DESTRUCTION of CAPITAL per FEKETE (the gentlemen I quoted back in early 2008 to get a reply as a FLAKE by you)...

I do not remember calling Fekete a flake. You must have confused me with someone else. "Flake" is a strong word, so please do not accuse me of that. I have been referencing and respecting his work since before you knew about Fekete, as evidenced by my published articles from as early as March, 2007...

Furthermore, Steve how can you say I am a "hack" and that I just got around to the deflationary thesis, when I was writing and predicting it back in March, 2006 when I wrote my main and first thesis paper which I have linked to innumerable times since then:

http://www.coolpage.com/commentary/economic/shelby/Inflating%20Deflation.html

Shelby Moore wrote:...

First world economies face an unavoidable dilemma, regardless whether globalization is switched on or off, either sacrifice now with decades of retirement demographic deflation (globalization off), or sacrifice later by inflating the deflation of globalization for temporary illusionary "wealth", which will end in a hyper-catastrophic global collapse Greater depression.

World politics have chosen "sacrific later", and on the order of 30 - 50% of the capital in developing markets derived from globalization, as well as the matching consumption debt in first world, is "unproductive" and due to be wiped out.

Contrarian investors can drastically increase their wealth betting on hyper-inflation of commodoties and precious metals...


=======
ADD: the reason "basic needs" costs are not yet the driving factor is the relative size of net worth:

http://www.infowars.com/this-depression-is-just-beginning/

...The fact is the Net Wealth of US Households has “declined from a peak of $22 trillion to just under $12 trillion in early March.”...

Let's say inflation of basic goods increases the family expenses by $400 per month, thus $5000 per year, with $100 million families in USA, that is only $500 billion. The $12 trillion net worth is the bigger financial factor, until the stock market drops another 80 - 90%. And that $12 trillion has probably grown since the stock market bounce.

As for political factor, with an increasing Gini coeficient, the inflation of basic needs costs is a big factor already, because there are many marginalized families already in USA.

BTW, I see net worth is up to $15 trillion now and is highly correlated to stock market:

http://www.zerohedge.com/article/money-sidelines-fallacy

Inflation or Deflation? - Page 9 Net20w10


Last edited by Shelby on Wed Aug 05, 2009 1:23 pm; edited 3 times in total

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Inflation or Deflation? - Page 9 Empty CaseyResearch misunderstood the Niels Jensen deflation argument

Post  Shelby on Wed Aug 05, 2009 12:07 pm

First, some recent interesting deflation data/logic from Mish Shedlock:

http://www.scribd.com/doc/17702821/The-End-of-the-End-of-the-Recession
http://globaleconomicanalysis.blogspot.com/2009/08/global-gdp-rebound-is-underway-but-whos.html
http://globaleconomicanalysis.blogspot.com/2009/08/office-volume-down-50-to-91-industrial.html
http://globaleconomicanalysis.blogspot.com/2009/08/federal-tax-revenues-suffer-biggest.html
http://globaleconomicanalysis.blogspot.com/2009/08/european-prices-fall-06-most-in-13.html
http://globaleconomicanalysis.blogspot.com/2009/07/ewave-count-on-us-dollar-suggests-move.html

Also the trailing P/E Ratio of S&P500 is expected to go to INFINITY (negative earnings) in next quarter reporting (Oct), and I expect the forward P/E will look bad also by that time (using consistent Reported Earnings, not the erroneous Operating Earnings):

http://runningofthebulls.typepad.com/toros_running_of_the_bull/2009/08/sp-500-earnings-per-share-1.html

Inflation or Deflation? - Page 9 Sc39


Here is my follow-up email to Casey Dispatch:

---------------------------- Original Message ----------------------------
Subject: You misunderstood the Niels Jensen deflation argument
From: "Shelby Moore"
Date: Wed, August 5, 2009 7:31 am
To: david@CaseyResearch.com
Cc: "Antal Fekete"
"David Galland"
--------------------------------------------------------------------------

Casey Dispatch wrote:

> The article cites the unwillingness of shell-shocked banks to lend and
> thereby turn the increase in the monetary base into an increase in the
> money supply, and also the reluctance of a nervous public to spend any
> new money that comes its way and turn the cash into demand for goods
> and services...

> ...The center of the deflationist argument is that while the government
> can create new money, it can’t force anyone to spend it. And once
> deflation sets in, no one will want to spend it. Motivated by fear and
> also by the thought that everything will be cheaper tomorrow, everyone
> will want to hoard cash...

That is NOT Niels Jensen's argument:

http://www.investorsinsight.com/blogs/john_mauldins_outside_the_box/archive/2009/07/13/debt-and-deflation.aspx

"Thus Barro and Perotti are saying that each $1 increase in government spending reduces private spending by about $1, with no net benefit to GDP. All that is left is a higher level of government debt creating slower economic growth."

The above quote is clearly the same as saying the marginal utility of debt has gone negative. It has nothing to do with what people will do. Once that has gone negative, it is impossible to create sustained inflation ever again (until the debt is forgiven and system reset). The reason is that any new money creation creates negative GDP, no matter if it sits in Fed reserves or not (and it is not sitting in reserves now, the banks are creating money by buying long Tbonds now, to soon take profits on your subscribers who have shorted bonds, when the S&P crashes and long bond run to safety again).

This is precisely what I was explaining to Galland late last week, and he replied that your 3 "experts" said there was no intellectual content in my point.

I have now created a publish quality essay to explain the math (which I will probably publish to gold-eagle.com, financialsense.com, and kitco.com this month):

https://goldwetrust.forumotion.com/economics-f4/inflation-or-deflation-t9-195.htm#1685

You can read my numerous posts in the above thread, where I discuss the mechanics in more detail. Suffice it to say, there is no money being created, only wealth transfer to insider banks via more govt debt.

Galland did request that I not email him further on this matter, but you have emailed me your Casey Dispatch and solicited my feedback. So there you have it. You asked for it. If you don't want my feedback, then please take me off of your Casey Dispatch mailing list-- I never did subscribed to it.

BTW, I have respected and admired your efforts. I bother to email you because I care. If you want to mis-percieve as being impolite, or not respecting your enormous "expertise", that is your problem.

When it finally hit me that the overriding factor is the pre-existing net worth of Americans ($12+ trillion), not counting their $13 trillion debts, then the marginal utility of debt is the overriding factor in the direction of our investments (not counting interim volatility).

God bless,
Shelby Moore III

=========
ADD:

BTW, I see net worth is up to $15 trillion now and is highly correlated to stock market:

http://www.zerohedge.com/article/money-sidelines-fallacy

Inflation or Deflation? - Page 9 Net20w10

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Inflation or Deflation? - Page 9 Empty China, TBonds, Dollar, Deflation

Post  Shelby on Wed Aug 05, 2009 3:40 pm

http://www.gold-eagle.com/editorials_08/saville080409.html

Also I told you the insider banks are buying the bonds:

http://financialsense.com/fsu/editorials/kirby/2009/0804.html

...Bonds required to hedge the growth in Morgan’s Swap book are 1.4 billion more in one day than what is mathematically available to the entire domestic bond market for a whole quarter?

This interest rate swap book is not hedged. J.P. Morgan is the FED...

...J.P. Morgan’s Swap Book was a “black hole” of stealth artificial demand...

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Inflation or Deflation? - Page 9 Empty Chris Laird I think this is nonsense what you wrote

Post  Shelby on Thu Aug 06, 2009 4:00 pm

Chris,

You know I admire your writings, and agree with mostly all that you write. So it blew my mind to see you write this:

http://financialsense.com/fsu/editorials/laird/2009/0806.html

"...But, in this case we were talking the complete bankruptcy (insolvency actually) of the entire world, with for sure worldwide anarchy that might have taken 3 decades to get under control, if it ever was got control of. I am not exaggerating..."


Absolutely false. Do you know how much capital is being held back in USA and in Asia because of the corrupt bailouts? The private sector stands willing to do great things, but they simply can not, because it is too risky and costly for them to do it in this environment of bailouts.

In fact, you got it exactly backwards. The bailouts are going to cause it to drag out 2 or 3 decades and be several times worse in depth.

This is a fact of economics. It is a fact of the current negative marginal utility of debt (govt crowding our private sector).

I thought you have a math background?

"...But from what we know, there would have been a total world financial collapse on two occasions, actually more than two, but I specifically remember two in 07 and 08. And, if you wonder what would have happened if every financial institution had a run on it, and basically went insolvent, imagine food stores running out in less than 3 days, with more or less permanent shortages and riots, and no gasoline either, etcetera, you get the idea..."

That is a profit making opportunity for the private sector! You are socialist! You do not trust the privator sector to move into action.

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Inflation or Deflation? - Page 9 Empty re: Chris Laird I think this is nonsense what you wrote

Post  Shelby on Thu Aug 06, 2009 10:18 pm

Chris replied that he is contrarian and that is not socialist. Thus I replied again:

======================
I do not want to discourage you from me contrarian. And your point about the masses being locked into socialism because they fear collapse, thus no imminent dollar crash, is spot on contrarian and correct. I have been saying the same, in other words.

However, this view you have taken that the fear of collapse is correct, is thus not contrarian, except relative to small audience of gold bugs, austrian economists, and tin foil hats.

From memory the deep recession in before 1920s, was an example of what happens when the President said "no bailouts". The pain was deep and short, and that is exactly what would have happened if we let the fiat system implode. Agree it would have been much deeper, but not 3 decades of pain. Yes 3 decades (or more!) perhaps before getting back to a new top-down coordinated paper financial system, but that would be good thing. A reversion to gold/silver would generate a boom in private investment that would be magnificient.

Right now the govt is crowding out the private sector. At the increasing margins, productive activities is crowded out. This is why all resource production is peaking (Oil, Gold, etc).

I have been living in Philippines (on and off) since 1991, I am here now, and I can tell you that there is a huge amount of private capital (both gold and human) that is either sitting on the sidelines or malinvested in redundant "high value" retail, because it simply can not find suitable risk-adjusted ROI in productive investments. This is why so much capital is being wasted in speculation. Heck even I have been reduced to speculating. The only businesses I can think of doing that are sure to be profitable now are mostly very small scale things that avoid the economic bubbles and increasing tax/regulation/redundancy in the cities. The only way to productive infrastructure type investment is in cohoots with a govt mandated monopoly now.

One of the things the Bible says is that those who do not have faith, will live in delusion and fear.

If the fiat failed tomorrow, and all the productive systems based on debt broke down, this would provide an extreme profit opportunity for those with non-debt, capital. There will be a very deep spike down, followed by a spike back up and then onwards higher and higher. The free market is capable of exponential (compounding) increases in production and prosperity. It is the fiat debt system that parasites this. The parasitic component has now gotten so large that the marginal utility on debt (fiat money creation) is now negative. The fiat system is eating itself. And you think pouring more debt (money) on the fire is a good thing?

Don't you realize the crash has to come eventually, we have averted nothing, just making it much deeper by the end.

====
ADD: Quick deep economic retrenchment means productive assets don't go idle for long-time and rust, they get bought out by real capital on pennies on the dollar, then put back into service. There is no way free market can stay down for 3 decades, as even very 3% rate of re-capitalization, would mean 242% growth in 30 years. And of course the rate of re-capitalization at pennies on dollar will much higher than that, e.g. at 20% for 10 years is 620% re-growth.

Also Chris, please do not feel any animosity from me. I appreciate you from our conversations in past, you were the one who planted seeds in my mind about not being too overbullish on transistion to hyper-inflation (end of fiat). And thus I put extra effort into making this point to you. I think it is a critical error, in your otherwise excellent logic.

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Inflation or Deflation? - Page 9 Empty Bernanke admits the GDP is overstated by 2.5%

Post  Shelby on Thu Aug 06, 2009 11:40 pm

http://globaleconomicanalysis.blogspot.com/2009/08/dismal-unemployment-situation-in-chart.html

Mish Shedlock wrote:...In his Town Hall Meetings Bernanke said:

"It takes GDP growth of about 2.5 percent to keep the jobless rate constant. But the Fed expects growth of only about 1 percent in the last six months of the year. So that's not enough to bring down the unemployment rate."

Inquiring minds might be asking: Why does it take 2.5% growth to keep the jobless rate constant? The answer is the first 2.5%+- of GDP is based on hedonics and imputations. In plain English, the first 2.5%+- of GDP (if not much more) is fictional...

Mathematically I can think of ways that the GDP could grow and employment fall (e.g. offshoring), so the above is not an exact proof. But it is proof that the GDP overstates economic reality that matters in USA.

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Inflation or Deflation? - Page 9 Empty Japan's debt wall could send them back to fascism

Post  Shelby on Fri Aug 07, 2009 6:01 pm

Watch the video:

http://finance.yahoo.com/tech-ticker/article/297420/Japan%27s-Future-%22It%27s-Going-to-Be-Scary

Note Mauldin mentions the world debt increase this year to crowd out the private sector. That means a negative marginal utility of debt (govt grows while private withers).

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Inflation or Deflation? - Page 9 Empty Scenario: "The Royal Scam"

Post  Guest on Sat Aug 08, 2009 2:13 am

Hi Shelby,

The scenario outlined in the piece found at the link below seems to fit elegantly with your math and logic. It also draws in the criminal nature of the lead actors in this process using Argentina as the example. I strongly suggest you read it and Janzen's (iTulip) latest update to his Ka-Poom theory that is referenced in this scenario.

http://www.oftwominds.com/blogaug09/KaPoom2CHS.htm

I greatly appreciate your efforts and intellectual rigour. Like you I read many of the analysts that you refer to and everything that Professor Fekete writes. I have to confess that I feel that some of these good people underestimate the utter ruthlessness of the PTB and their sociopathic contempt for the rest of us.

In closing I think that we should also take note of the experiment that was performed in Japan over the last few decades. If the greatest profit for the PTB lies in a fast crash and (relatively) rapid reset I believe that is what will be attempted.

All the best!

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Inflation or Deflation? - Page 9 Empty re: Scenario: "The Royal Scam"

Post  Shelby on Sat Aug 08, 2009 6:07 am

angophera wrote:Hi Shelby,

The scenario outlined in the piece found at the link below seems to fit elegantly with your math and logic. It also draws in the criminal nature of the lead actors in this process using Argentina as the example. I strongly suggest you read it and Janzen's (iTulip) latest update to his Ka-Poom theory that is referenced in this scenario.

http://www.oftwominds.com/blogaug09/KaPoom2CHS.htm

...

Excellent link! Thanks.

That seems to be where we are headed, but IMO it will be much more extreme and dragged out than Argentina, because of the relative size and that move from the dollar can not be to any other fiat, but to gold, thus the world will have to be run to an extreme first in order to finally capitulate to the "run from all fiats" hyperinflation. First, they have to reduce the net worth of Americans from $12 trillion by 1/10 or more, in the Hyper-Deflation (caused by the prior overshoot of debt to the point of now negative marginal utility of new debt/fiat). So we we will see the DJIA below 1000, so that Americans sell off all their hard assets to stay afloat, then the subsequent hyperinflation will further reduce this by another order of magnitude.

This is why I expect hard assets to first fall with the deflation, because it is necessary to get Americans to liquidate hard assets in order to complete the plan of impoverishment, in order to have maximum leverage against the savings boom in Asia. The savings boom in Asia can actually be viewed as transfer of hard assets (ancestral land) for fiat in the banks. The capital is being pulled away from the people. It is not a positive form of savings. I have also shown how this savings is being siphoned off to the "right people" (ruling class) via the state run monopolies which get 70% of that capital and are 1/3 as efficient as the private sector.

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Inflation or Deflation? - Page 9 Empty Catherine Austin Fitts (former Asst US Secretary) agrees we are in controlled deflation

Post  Shelby on Sun Aug 09, 2009 11:16 pm

Her point is PTB need to manage the risk, by stealing from some to prop up others:

http://www.modavox.com/voiceamerica/vepisode.aspx?aid=38361 (listen from 16 min forward, especially at about 32 min point)

...in slow burn, where achieve sufficient capital and legal control, so you systemically implode, drain, destroy, eat alive certain populations, but keep the system intact, so you subsidize financial assets by liquidating assets of certain groups, e.g. middle class...

And eventually near end to kill off the 5.5 billion underbelly of the population (leaving 500 million alive):

http://solari.com/blog/?p=3532 (Swine Flu vaccine)

...Do you have any idea how impossibly frustrating it is to manage a highly centralized system in which the vast majority of people lack any responsibility to ensure that the whole thing works? Everyone wants their free lunch and there are no real markets or democracy to force accountability or a shared intelligence. Force works. Force has increasingly become the way to achieve most everything. Using force is a lot easier that living with rising risk and the costs of subsidizing an aging population...

At her website:

http://solari.com/

Catherine Austin Fitts makes the point the we (nationwide) earn on average 1.7% on time deposits but pay 13.x% on our credit cards. For example, imagine two neighbors one loaning his money to the bank at 1% and the other borrowing it from the bank at 13%. This is example of how all the local capital is parasited to the centralized banking system.

=============
ADD: more examples of probable bank parasites:

http://market-ticker.denninger.net/archives/1315-Bribed-Regulators-Another-Example.html

...70% of the overdrafts happen at a POS terminal or ATM, not by writing a check...The bank knows before they approve the transaction that the money isn't there in the account...

...$1,000 in your account.

You write checks for $20, $50, $100, $1,000 and all are presented on the same business day.

How many checks will hit you with an overdraft fee?

THREE - every time. The bank will re-order the transactions so that the $1,000 check is processed first...

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Inflation or Deflation? - Page 9 Empty Are the PTB using force?

Post  Shelby on Mon Aug 10, 2009 8:56 pm

Shelby wrote:...And eventually near end to kill off the 5.5 billion underbelly of the population (leaving 500 million alive):

http://solari.com/blog/?p=3532 (Swine Flu vaccine)

...Do you have any idea how impossibly frustrating it is to manage a highly centralized system in which the vast majority of people lack any responsibility to ensure that the whole thing works? Everyone wants their free lunch and there are no real markets or democracy to force accountability or a shared intelligence. Force works. Force has increasingly become the way to achieve most everything. Using force is a lot easier that living with rising risk and the costs of subsidizing an aging population...
...

Interestingly the "force" is self-imposed, because Westerners ate the bait (low interest rates). So it really isn't force, it is just simple animal manipulation, as tying a meat on a stick in front of face of a crab so it will exhaust itself to death trying to chase the meat that always moves forward.

We have Peak animal Stupidity:

https://goldwetrust.forumotion.com/economics-f4/peak-oil-nonsense-t102.htm#1749

Shelby wrote:
angophera wrote:Hi Shelby,

The scenario outlined in the piece found at the link below seems to fit elegantly with your math and logic. It also draws in the criminal nature of the lead actors in this process using Argentina as the example. I strongly suggest you read it and Janzen's (iTulip) latest update to his Ka-Poom theory that is referenced in this scenario.

http://www.oftwominds.com/blogaug09/KaPoom2CHS.htm

...

Excellent link! Thanks.

That seems to be where we are headed, but IMO it will be much more extreme and dragged out than Argentina, because of the relative size and that move from the dollar can not be to any other fiat, but to gold, thus the world will have to be run to an extreme (deflation) first...

The synopsis is to bring the real wages of USA down to lower than China, so that China is busted. This will drag the whole world into the elite control. I can see we are in perpetual deflation now, because the marginal utility of debt (to GDP) went negative in 2007 or 2008. So now all new money/stimulus (debt in a fiat system) is driving the GDP more negative.

The mechanism is the debt load, which then enables all the other thefts (e.g. the TARP, low interest paid on deposits, high interest charged on non-govt debt, etc).

Even if the PTB wanted to stop it, they can't, because the players in the system are self-interested (as they should be).

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Inflation or Deflation? - Page 9 Empty re: Scenario: "The Royal Scam"

Post  dz20854 on Tue Aug 11, 2009 5:17 am

Thanks, that's a very informative read. This sums it up [my emphasis in red]: http://www.oftwominds.com/blogaug09/KaPoom2CHS.htm
It's not so much a “collapse” as a redistribution, from the middle class and the working to the capital class...
The capital class will never allow a wealth tax on their capital. They have convinced the middle class and the working [class] that property rights need to be defended, all the while squeezing and bankrupting them to add to the capital class' wealth. Almost no one can figure out how economics works, so the process evolves effortlessly. There isn't necessarily any conspiracy. I look at it as an unconscious symbiotic arrangement.

Has anyone noticed how deflation is taxed differently from inflation? Under inflation, appreciated property is subject to capital gains taxes. But under deflation, the increased buying power (often substantial) of cash is 100% available for spending and goes completely untaxed.

Another point: Many jobs in the small business category are gone forever. Remember the pride many in the middle and working classes had in going into business for themselves, providing for their families, and being able to give back to the community? I remember Shelby asking someone on a software developers board when was the last time that person had worked on a new software application that had commercial prospects. Remember when one could run off a whole bunch of disks, ship them from one's home, and make a million dollars. And it's not due to "the Royal Scam" or to peak oil. Technology is making things too efficient, reducing meaningful work opportunities. So that now there is less mobility between the classes.

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Inflation or Deflation? - Page 9 Empty (Almost) Everyone Is Wrong

Post  Shelby on Thu Aug 13, 2009 5:30 am

please see next post, as I wanted to place it at top of next page of this thread.

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Inflation or Deflation? - Page 9 Empty (Almost) Everyone Is Wrong

Post  Shelby on Thu Aug 13, 2009 8:06 pm

I wasn't satisfied with my prior attempt at a publishable article (never submitted it for publishing):

https://goldwetrust.forumotion.com/economics-f4/inflation-or-deflation-t9-195.htm#1685

The following will be updated as I update this new superior article I am working on:


(Almost) Everyone Is Wrong

And that is the way it must always be...

Since the marginal-utility-of-debt went negative(1), by definition Hyper-Deflation can no longer be stopped.

Before I get into proving we are in Hyper-Deflation, and a myriad of widely misunderstood ramifications, I want to share a theory of the universe, which has implications on everything in life, especially investing and the concept of knowledge. I hope this will be my finest hour, as this may be my last published thoughts for a long while. I will suggest that you keep coming back to read this essay, over time the layers of deep implication herein, will slowly be revealed to you.

Entropy(2) is an inverse measure of the clustering (order) of matter. The more clustered matter is (i.e. the more ordered it is), then the more negative the entropy. The positive direction of entropy is associated with increasing disorder. Matter is a general term for anything perceived (measured), i.e. mass, gravity, energy, inertia, electromagnetic waves, quantum effects, thoughts, imagination, feelings, etc.. The act of perception (or measurement) means there is a clustering away from the "invisible" (not perceived) ether or vacuum of random disorder. Thus entropy is a measurement of the quantity of information or knowledge(3).

The information content/quantity (disorder) increases linearly (slower, like a line) as the clustering of a set of perceptions decreases exponentially (faster, like a parabola), e.g. 0 binary bits for 1 perception, 1 binary bit for 2 perceptions, 2 binary bits for 4 perceptions, 3 binary bits for 8 perceptions, etc.. Note that if there is only 1 truth (1 possible perception), then information (knowledge) is zero! Conversely, increasing disorder (i.e. increasing possibilties, decreasing clustering) increases knowledge. And note as clustering increases exponentially, knowledge only declines linearly.

Thus since the Bell Curve (normal or gaussian distribution(4)) is the predominate pattern of clustering in nature, then in spite of exponential growth (e.g. of the population), then information content does not increase, and thus exponential growth in nature peaks and decays exponentially. Due to the math of entropy, if any phenomenon is growing exponentially, while the number of different perceptions (i.e. opinions, analysis) of that phenomenon are not growing exponentially (i.e. become clustered/redundant/shared), then that phenomenon must peak (relative to the observers that are perceiving it), because the direction of the universe is always trending towards maximum knowledge, i.e. "The entropy of the universe tends to a maximum"(5). Note that the distribution function(6) of the Bell Curve, is equivalent to an exponential growth curve, and thus the clustering of the Bell Curve offsets the increase in knowledge that would occur with exponential growth. In other words, if the population is increasing exponentially, but the range of opinions is becoming clustered exponentially, then there is no net growth in knowledge, and thus the exponential growth of the population is not sustainable. This concept applies to any exponential growth phenomenon.

Before I go deeper into an interpretation of the entropy-of-matter as a Theory-of-Everything(44), note from the undeniable math above, that agreement (shared opinion) is a reduction of knowledge. However, the act of sharing knowledge does not reduce knowledge, because people are free to realize infinite further implications, thus increasing the number (diversity) of perceptions and increasing the entropy. Unfortunately too many people are lazy, they stop thinking and we end up with Bell Curves of shared opinions, and thus knowledge and growth peaks. Entertainment (e.g. TV) replaces independent thinking, and traps the population in set of lazy shared opinions (aka culture), which as I reasoned in the prior paragraph, thus decreases knowledge and insures the growth of the society will peak. All forms of insurance guarantee failure, because the diversity of allowable outcomes (perceptions) is one, thus the knowledge is reduced to zero. Ironically while concentrating control of major media(7) has been justified as necessary for breaking down local cultural impediments towards a new world order(8), in fact top-down control of herd pyschology(9) is unsustainable and peaks at the point the world reaches zero knowledge with a single entity controlling all thought, transactions, and economic activity.

Currently popular is the shared (parroted!) opinion that price (P) inflation will result from an increase in the money supply (M), due to the Quantity Theory of Money (QTM)(10). However, the QTM makes no such prediction, rather it states that if the GDP (which is roughly proportional to P * Q) increases, then either M and/or V must increase, or vice versa! Thus if M is increasing, and Q divided by V increases more, then there is a deflation of P. In other words, an increase in the quantity (Q) of transactions, coupled with a stagnant or decrease in the number of times the same money changes hands (V), can cause P to decrease even while M is increasing(36). The prior sentence is simply a statement of mis-allocated capital, because it states that increasingly redundant economic transactions have lower multiplier effects (are useless and do not ripple through the economy). An example of such reduced multiplier activity is the "Cash for Clunkers" stimulus, which destroys capital (e.g. affordable used cars for college students) and transfers other capital away from optimum (for maximum multiplier) individual decision makers (i.e. taxpayers)(11).

Thus the QTM does not fully capture the nature of the economy, because M is ambiguous when the money supply M is itself a debt!, as is the case in all fiat economies in world today. QTM assumes a linear relationship, because it does not assume M places a burden on the other variables. But since M is a debt that has to be repaid, it transfers capital from individual decision makers (borrows and savers!) to centralized managers of the society. Former US Asst Secretary Catherine Austin Fitts explains this phenomenon(12), by noting that in the same town there are neighbors, some are paying 13% on their credit cards, while others only earning 1% on their time deposits-- a 12% transfer of capital away from the local decision process to bankers in New York, IMF, WorldBank, BIS, and their political henchmen in Washington D.C., UN, WHO, and all the nations' capitals. Local banking is an unsustainable oxymoron due to the centralizing nature of fiat money. The trend of society is towards centralization (i.e. herding), driven by the universal theory of exponential growth/peak/decay due to limitation on knowledge by the Bell Curve of perceptions, and now we can see final push towards "new world order" with both States of USA being destroyed, and the nation-states of the EU(42).

The true nature of fiat money is a ponzi scheme, because as the debt (which is the money supply M) grows, then M (debt) must continue to grow in order to pay the interest on the prior debt. The irreversible exponential death of the fiat ponzi scheme begins when the marginal-utility-of-debt goes negative, because this means each new dollar of debt (which is M!) is actually decreasing the GDP! This means the parasitic centralization of economic activity has crossed the threshold, where increasing M is decreasing P, as explained in prior paragraphs. The trend towards the plutocracy displacing the withering pluracratic private sector, is now in the terminal phase, as evident by the obfuscation of exponentially increasing deficits(39). When moving from millions of independent decisions (perceptions), to a single-minded one from the central government, knowledge is rapidly approaching zero, and thus the exponential growth has peaked and is in exponential decay-- Hyper-Deflation. There must be widely shared popular delusions-- the entropic mathematical description of knowledge near zero. It is irreversible because there is no way to add new debt without shrinking the GDP, and the interest payments on the pre-existing debt (i.e. the money supply M), requires new debt (increasing M). In a vicious feedback spiral, as the GDP shrinks, the private sector income shrinks and needs more debt (or government subsidies) to pay the interest on prior debt, but the additional government debt spending comes at the cost of the government displacing and destroying more of the useful production and capital of the private sector. So there are only two possible directions, increase the debt (i.e. M) or decrease it, and both shrink the GDP. Some people get stuck on the concept that M is paper currency, but the fact is that M is debt. Increasing (nor decreasing) debt can no longer increase GDP. We crossed the line of no return. The only way to make the marginal-utility-of-debt go positive, is to decrease the debt load back to a level where the private sector is not oppressed by the centralization, but of course this is precisely Hyper-Deflation. No matter which way you slice it, nature's law of entropy can not be avoided.

So I proved the fiat world is in irreversible Hyper-Deflation, but ironically it must end in either hyper-inflation or rationing, which are functionally equivalent in that in both cases some go without. Rationing can also be equivalent to an increase in death rate(19), which history predicts(20), and is already occurring(21). Hyper-inflation results if there is a stampede from fiat, or if central governments pre-empt with a new non-indebted currency. Rationing results if central government and it's fiat money continues in deflation. There is no other possibility-- either people escape the centralized control or they do without, because deflation (of private sector debt, displacing it with increasing ineffective monocratic public debt) under fiat money standard guarantees less (useful) production. Do not confuse this with a prosperous sustained deflation that results from the increased (useful) production on a gold and silver money standard, where millions in private sector make the economic choices. On the price inflation argument, loss of production can not result in price rises (at least as reported on CPI) for as long as the central managers are determined to subsidize costs, ration, (and manipulate CPI statistics(22)), which they are doing and must do to prevent a run from fiat and the hyper-inflation end game. Similarly, the central managers will subsidize debt on assets to prevent rapid price declines and destroy surplus supply(11). It is a repeat of the policies of the 1930 - 1944 Great Depression (e.g. New Deal paying people to walk on crops and destroy milk), except now money is fiat untethered to gold, and the marginal-utility-of-debt is terminal. Once the terminal Hyper-Deflation has started for a fiat, the only way to prevent Hyper-Inflation (flight from fiat money), is to distort the price signals in the free market, of which the suppression of the fiat price of non-fiat money (e.g. gold, silver, oil) is critical. If 99.9% of the people (and the governments(43)) who think they own gold and silver, really own a debt(13), then fiat price signals for gold and silver will act like any other commodity (fall in this deflation). The mainstream debt/subsidized prices or CPI as reported by the government, disconnect from the physical prices actually paid by non-subsidized individuals, e.g. those not on food stamps pay more for the food that is not otherwise subsidized, premiums on bullion increase when official fiat prices decrease, and subsidized speculation keeps prices of real estate higher than return on production can support. Nevertheless, the mainstream has 999.9 times (99.9% / 0.1%) more mass, so I do expect fiat prices of gold and silver to fall as Hyper-Deflation accelerates, at least down to the point where a significant percentage of people are fleeing fiat and "debt metal"(13) for the real physical bullion. Money is just a socialized symbol for stored production(14), so for as long as 99.9% of the people don't believe physical bullion is money, it will not price (act) as real money. Ultimately gold and silver have theoretical efficiency advantages as money over barter, fiat, or theft(15), but irrational circumstances (i.e. knowledge heading towards 0), can warp(16) priorities drastically(14) for a long duration, i.e. the Dark Ages was hundreds of years(17). Being correct about a trend that will not bear fruit in a relevant time frame, is the same as being wrong.

To re-iterate, the plutocracy has no incentive to move to the more chaotic Hyper-Inflation prematurely, because the Hyper-Deflation interventions are enabling the transfer of the formerly $22 trillion private sector notional net worth (down to $12 trillion in March, 2008, back up to $15 trillion in July) of the USA to themselves with a high degree of control and certainty.

I have been contemplating if the BRICs can create global price inflation, given evidence of China's statistical corruption(37) and very low "marginal-utility-of-debt" for fixed capital investment(33). There is also the issue of massive currency swaps between central banks, tying the fate of the world to the dollar, although this involves only the developed nations including Japan. I also had the epipheny that China's infrastructure is a debt (in a balance of trade sense). Buildings and factories are liabilities, they rust and need maintenance. China obtained this infrastructure via a predatory Yuan peg theft (they undercut the manufacturing of rest of world by enslaving their own people in a foreign exchange jail), so they can not escape the exports trap. Remove the exports, the export infrastructure collapses, their people riot because they expect the progress they've worked hard for. Internally China can create price inflation (because the high personal internal savings rate will not be sucking liquidity into debt service as for the developed world), and they must create price inflation when they peg the Yuan and exports are growing, but that price inflation can not be felt externally (due to the Yuan peg). Japan with it's 20 years of deflation, is strong evidence that centrally managed trade is not an escape velocity to independent growth, and that what goes up on declining knowledge, comes right back down to the honest truth. The entire world has a huge dollar debt, the BRICs indirectly via their enslavement to export focus, so as the debt deflation proceeds, there will be an excess demand for dollars to service interest payments on the dollar debt. So I forsee the dollar going up, and the developing world pulled into Hyper-Deflation. Near the bottom of the Hyper-Deflation (2012?), the plutocracy can reset the fiat economy with themselves the winner(41).


...this essay continues on the next post, because this forum limits the length of each post...


Last edited by Shelby on Fri Aug 14, 2009 7:04 pm; edited 36 times in total

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Inflation or Deflation? - Page 9 Empty (Almost) Everyone Is Wrong (continued from prior post)

Post  Shelby on Thu Aug 13, 2009 8:07 pm

...see the prior post for the first part of this essay...

Ironically the central managers of this Hyper-Deflation train-wreck, can not gain increased capital from the aforementioned reduction of the social economic knowledge to zero, unless their capital was originally less than the capital net of the capital they are willing to sacrifice in sustaining the Hyper-Deflation via aforementioned intervention. As a wild guess, I have read some dubious sources that the bankers already own 40% of the world's capital, so that would place the downside of Hyper-Deflation they are willing to tolerate at -60% at most. However, I assume the bankers have no such control, as if they didn't help take society towards zero knowledge, then some other bankers would compete with them to do so. Seems to me that society's capacity for zero knowledge is what drives the outcome, not the deviousness of plutocratic bankers. Each individual (banker or sovereign person) has the choice to come out of this cancer(45), because the train-wreck can not averted as long as human nature follows the Bell Curve (as per the prior discussion of entropy).

Another current popular shared delusion is that interest rates must rise due to price inflation (P) that we are told is coming on a lag due to the increase of the money supply M. But the plutocracy is and will not allow (or not report) secular price rises in the highly inflated notional net worth economies, as evidenced by the negative marginal-utility-of-debt, because their survival is price fixing (symbiotic with the Hyper-Deflation trend towards zero knowledge) until if they must yield and embrace the next epoch (new world order) after hyper-inflation. At this terminal stage of fiat, interest rates are rigged by the plutocracy(38) with artificial demand from derivatives(40), thus the only secular epoch rise in fiat interest rates will be the disjoint one where fiat is replaced by non-fiat(18), where due to capital controls only the holders of non-fiat will receive the instant accrual of purchasing power. I suspect there are many capital controls already buried in the many bailout bills and homeland security acts, e.g. such as this one(32). This delusion is promoted by the plutocracy, so that interest rates rise on the popular expectation, so the plutocrats (e.g. Godeithner Sachsrifices and JPaulson Morgrins) can buy bonds for free via the secret open market operations(18) to drain more net worth from the private sector, when the hyper-popular delusion that the Hyper-Deflation is ending, comes crashing down again and the sheep once again run to safety buying the bonds from the plutocrats at much higher prices (forcing interest rates down again). This terminal fiat Hyper-Deflation is the transfer of private sector notional net worth to the plutocracy. The serial, secular decline of interest rates will not provide significant relief in terms of lower interest on new debt, because mathematically the total debt must double by the time the total interest rate on the total debt has at most halved, assuming the new loans can not pay negative interest. Negative interest would create debt forgiveness and Hyper-Inflation.

Another set of popular delusions (Human Induced Climate Change and Peak Oil) are promoted to take advantage of the illogical fear that exponential growth of population will necessarily outstrip the carrying capacity of the planet. Illogical because it is only the aforementioned Bell Curve of perceptions which is limiting exponential growth. A certain level of abstract thought is required to understand how global oil production could be peaking, yet not be caused by the highly correlated exponential population growth. Correlation does not prove cause and effect, e.g. the exponential growth of debt has also been highly correlated. Let's dig into some facts. America has traded 73 million free grazing bison, requiring no oil for machinery or fertilizer and only the natural, renewable hydrogen+oxygen+carbon fuel cycle(23), for 45 million oil intensive cattle production(24). Ditto for all manner of food production, the large corporate farms are not more energy efficient, but can produce inferior quality food (toxins in many cases) for lower market prices, but with deleterious long-term costs for energy economics, soil, human health and ability to think, etc.. The average MPG in USA for new vehicles peaked in 1987 at 26.2, dropping to 24.7 by 2004(25), while new imported passenger cars are at 32 MPG(26), and $5 - $10 gas could incentivize 50+ mpg(47). The vast infrastructure and operation of suburbanization(30) has a huge sunk and ongoing energy cost. The new GM Volt gets 230 MPG (city) by using electricity for most of the miles, with the potential to generate unlimited high EROEI(34) electricity from nuclear, especially the new super-safe, micro-nuclear power plants(29) which can be built quickly. We had the base technology (or certainly the resources to have focused research investment) to start building a safe(28) Volt+nuclear economy at least 20 years ago. Instead, our increased energy INefficiency is a result of a top-down, mass media and slavery education(27) programmed loss of knowledge (shared stupid priorities), and the symbiotic fiat debt bubble. Incorrect solutions derive from incorrect assumptions as to the cause of a problem. My primary point is not to debate whether oil production is peaking, rather that the root-most cause is decreasing societal knowledge. Additionally we can question if oil production is peaking due to exhaustion of all high EROEI sources that may exist, or if the investment and/or return on investment in exploring for new high EROEI oil declined for other reasons symbiotic to the entropic Bell Curve effect. Oil production is a top-down process mostly controlled by plutocracies and large corporations. Note that for Russia, the world's #1 producer, it's peak oil curve was reversed(31) when it's plutocracy allowed the entry of new competition. EROEI naturally declines as a society overstretches itself with debt, this not being necessarily a function of geologic limitation but of opportunity cost for all the vested interests(35). If you had unlimited money (or thought you did via abundant credit), then you would take on growth projects that were less economic. Peak Oil, Peak Gold, Peak Stupidity, Peak Debt, etc.. are all caused by exponential growth, peak, and decay in my universal theory, due declining knowledge resulting from the Bell Curve of perceptions.

Finally, back to an interpretation of the entropy-of-matter as a Theory-of-Everything(44). Einstein's theory of relativity confirmed the that reality is nothing more than perception, with each observer's perception (aka measurement or receiving filter) creating a different simultaneous reality. For example, for the person standing along the side of the road, the sound of a motorcycle (moving at constant speed) changes pitch as it approaches and passes by ("rrrroooOOOOWWwwwwmmmm"), but for the driver of the motorcycle the sound did not change. Or, for the person driving a car traveling faster than a car beside it, that appears to moving backwards, but for the observer on side of the road, both cars are moving forward. For the ant riding a falling apple, the earth is being pulled towards the apple ("by the apple's gravity"[sic]), not the apple towards the earth by the earth's gravity, just as if the earth approached the sun, we would see the sun coming towards us. Ponder the convincing magic trick where hidden mirrors are used to bend the reality that you think you see, were your eyes an absolute measurement of reality? It is crucially important to understand that quantities such as mass, energy, light, inertia, etc.. are not absolute realities (do not exist independent of the observer), but are manisfestations of perception. Einstein was quoted several times on this, e.g. "Reality is merely an illusion, albeit a very persistent one.", "Not everything that counts can be counted, and not everything that can be counted counts.", "If the facts don't fit the theory, change the facts.", and "When you sit with a nice girl for two hours, it seems like two minutes. When you sit on a hot stove for two minutes, it seems like two hours that's relativity.".

So science is based on evidence, or shared perceptions, that describe a shared reality. Popular shared realities are delusions, because the limiting effect of the Bell Curve-of-perceptions makes shared reality false over long enough time. For example, the world was once flat, the universe rotated around the earth at the center, Newton's falling apple was due to the mass of the earth not to curved space-time. Note that the more intensely you share a reality with a group, the more limiting your life becomes. This is because you have moved yourself towards the center of the Bell Curve. Nature abhors order. Einstein was quoted on this, e.g. "As far as the laws of mathematics refer to reality, they are not certain; as far as they are certain, they do not refer to reality.", "The only thing that interferes with my learning is my education.", and "Common sense is the collection of prejudices acquired by age eighteen.".

The infinite simultaneous realities (perceptions) comprise the totality of our infinite universe. So then what is the universe itself? Mathematically, a collection of all of the infinite set of possible perceptions, is maximum disorder (because the order of each perception is a equally possible, i.e. random, due to infiniteness of the set). Bingo! Remember I wrote above, "... the direction of the universe is always trending towards maximum knowledge, i.e. "The entropy of the universe tends to a maximum"(5)...". Thus my theory agrees with the fundamental law of thermodynamics and the conservation of energy (information). Thus, we get a description of the universe as a beautiful symphony of infinite simultaneous local orders (perceptions), forming the maximum disorder which is the universe.

Besides the importance my theory would assign to the Bell Curve-of-perceptions on limiting exponential growth, my theory appears to provide the conceptual framework to solve the incompatibility between quantum theory's forces and the gravity in general relativity, and to solve some mathematical problems(46) that render current universal theory inconsistent with singularities (black holes).

One of the conceptual challenges with black holes, is where did the information that fell into the black hole go, i.e. the conservation of information. If the black hole is a window into some or all of the other simultaneous realities, that we are unable to perceive or measure directly, then order of the matter/ether (the information) can still exist for other observers who perceive those alternative realities. Thus the information is conserved. We perceive the existence of black holes by some effects they generate in our shared reality as matter passes near to them, but never can fall in them from our perception. Thus we can think of them as a vacuum of the shared order (i.e. physical laws) in our reality, although they are obviously not empty and express themselves in our reality as being very dense. My theory enables us to interpret them as not being (only) a critically dense mass, while still allowing for them to generate space-time effects consistent with dense mass.

In Relativity, Einstein realized that time is a dependent variable on perception, as all our physical perception of time occurs within the bounds of space (forming the space-time tensor) and light/electro-magnetism. Thus we are unable to perceive any thing faster than speed-of-light in the space-time reality, thus it becomes a constant in his theory. However, we can not perceive time when all our space-time-light (physical world) senses are blocked and we are entirely inside our thoughts, because we have no space-time-light frame of reference...

(1) http://kwout.com/t/nf7dzehu
(2) http://en.wikipedia.org/w/index.php?title=Entropy&oldid=307786601
(3) http://en.wikipedia.org/w/index.php?title=Entropy_%28information_theory%29&oldid=305002799#Example
(4) http://en.wikipedia.org/w/index.php?title=Normal_distribution&oldid=306456902
(5) http://en.wikipedia.org/w/index.php?title=Second_law_of_thermodynamics&oldid=307259212#Mathematical_descriptions
(6) http://en.wikipedia.org/w/index.php?title=Normal_distribution&oldid=306456902#Cumulative_distribution_function
(7) http://kwout.com/t/9hsdzehu
(8) http://kwout.com/t/yzbtdmxc
(9) http://kwout.com/t/sbr5aqyw
(10) http://en.wikipedia.org/w/index.php?title=Quantity_theory_of_money&oldid=297850441#Equation_of_exchange
(11) http://kwout.com/t/aytfmxcr
(12) http://solari.com/archive/tapeworm_economics/
(13) http://silverstockreport.com/2009/OTC-silver-fraud.html
(14) http://kwout.com/t/4qv73aqy
(15) http://silverstockreport.com/2009/gunshow.html
(16) http://www.infowars.com/in-just-3-months-americans-bought-enough-guns-to-outfit-the-entire-chinese-and-indian-armies-combined/
(17) http://en.wikipedia.org/w/index.php?title=Dark_Ages&oldid=307651944
(18) http://kwout.com/t/9neirpgb
(19) http://solari.com/blog/?p=3532
(20) http://kwout.com/t/as873aqy
(21) http://www.fair.org/index.php?page=3321
(22) http://seekingalpha.com/article/24933-substitutions-and-hedonics-inflation-data-absurdities
(23) http://en.wikipedia.org/w/index.php?title=Carbon_cycle&oldid=307526719
(24) http://kwout.com/t/pw3mvt2j
(25) http://kwout.com/t/ejkeb7fz
(26) http://www.bts.gov/publications/national_transportation_statistics/html/table_04_23.html
(27) http://www.johntaylorgatto.com/chapters/2a.htm
(28) http://en.wikipedia.org/w/index.php?title=List_of_civilian_nuclear_accidents&oldid=303650975#1990s
(29) http://en.wikipedia.org/w/index.php?title=Toshiba_4S&oldid=300866783
(30) http://en.wikipedia.org/w/index.php?title=Suburbanization&oldid=307431122#Causes_and_effects
(31) http://kwout.com/t/mt873aqy
(32) http://en.wikipedia.org/w/index.php?title=Capital_control&oldid=282831211#United_States
(33) http://kwout.com/t/fbanyw5k
(34) http://en.wikipedia.org/wiki/EROEI
(35) http://en.wikipedia.org/w/index.php?title=EROEI&oldid=303325098#Criticism_of_EROEI
(36) http://kwout.com/t/58ujgb7f
(37) http://kwout.com/t/5jkeb7fz
(38) http://kwout.com/t/mycwjni9
(39) http://kwout.com/t/ykp4ehu6
(40) http://kwout.com/t/urvc9dmx
(41) http://kwout.com/t/nev73aqy
(42) http://kwout.com/t/n6bsfzeh
(43) http://solari.com/blog/?p=3775
(44) http://en.wikipedia.org/wiki/Theory_of_everything
(45) http://www.biblegateway.com/passage/?search=Rev18:4;Mat7:13;1John2:15;Exo23:2;Isa5:8;John15:18-19;2Cor6:14-17;2Tim3:1-5,7;Rev22:11;Rev13:10;Rom13:4;Judg7:22;Rom13:8;Deut15:1-2;Prov22:7;Lev25:10,13,23;Pro23:5;Rev18:11-12,16-17;Ezek7:19;Rev3:15-21;Mat28:19-20;&version=9;
(46) http://www.coolpage.com/commentary/economic/shelby/Mass-Entropy_Equivalence.html
(47) http://kwout.com/t/m2fkxcrp

...no more room in this post, wait for published version...


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Inflation or Deflation? - Page 9 Empty Re: Inflation or Deflation?

Post  Kleerance on Fri Aug 14, 2009 12:20 pm

Inflation + erosion of USD = high raw material prices, net positive for Nordic EPS
Inflation + erosion of USD = US real estate price upvia foreigners/foreign money
Inflation + erosion of USD = neutral for Nordic EPS, Stronger EUR
Inflation + erosion of USD = rising bond yields
Deflation + erosion of USD = contradicting forced on raw material prices –unknown effect
Deflation + erosion of USD = US real estate rebound delayed
Deflation + erosion of USD = Very negative for Nordic EPS, Stronger EUR
Deflation + erosion of USD = falling/flat bond yields, postponesMM to eq. rotation

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Inflation or Deflation? - Page 9 Empty Re: Inflation or Deflation?

Post  Shelby on Fri Aug 14, 2009 2:26 pm

Kleerance wrote:Inflation + erosion of USD = high raw material prices, net positive for Nordic EPS
Inflation + erosion of USD = US real estate price upvia foreigners/foreign money
Inflation + erosion of USD = neutral for Nordic EPS, Stronger EUR
Inflation + erosion of USD = rising bond yields
Deflation + erosion of USD = contradicting forced on raw material prices –unknown effect
Deflation + erosion of USD = US real estate rebound delayed
Deflation + erosion of USD = Very negative for Nordic EPS, Stronger EUR
Deflation + erosion of USD = falling/flat bond yields, postponesMM to eq. rotation

USD will go up, not down, so if I am correct below, then the above is useless:

https://goldwetrust.forumotion.com/economics-f4/inflation-or-deflation-t9-225.htm#1791


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Inflation or Deflation? - Page 9 Empty What Is Money?

Post  wescal on Mon Aug 17, 2009 1:48 pm

Money is whatever someone with a gun tells you it is. Sir Thomas More, the proto-socialist wrote of gold as an adornment for slaves in his book, Utopia in 1516. I am glad you brought up the value of gold during the dark ages.

http://www.luminarium.org/renlit/utopiariches.htm

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Inflation or Deflation? - Page 9 Empty Bell Curve Economics

Post  Shelby on Mon Aug 17, 2009 5:07 pm

Bell Curve Economics

(Almost) everyone is wrong, and that is the way it must always be...

New $100 dollar bills cost 10 cents to print, so who keeps the $99.90 profit?

I will show a mathematical proof that the Quantity Theory of Money does not predict that increases in the money supply always result in general price increases. A feedback loop of irreversible hyper-deflation has started since the marginal-utility-of-debt went negative in 2008.

If the government gives this newly printed money equally to every person, then the value of hardworking people's savings is diluted (decreased), if prices increase due to increased quantity of money floating in the economy, while lazy people get some free money. Even if all people hoard the new money causing price decreases, the future value of savings is still decreased because interest rates decrease as more people compete to save (i.e. loan money to banks). If the government spends the new money for projects, the money enters the economy and has same effect as two prior scenarios, plus projects never benefit all the people equally and the government is never successful at choosing the projects which generate the most business and prosperity.

But worse than all that irreversible structural damage to the real capital economy, every government in world borrows all new money from their central bank, and central banks are secretly controlled by the small group of super rich families, i.e. the plutocracy, aka the "banksters". Because all money is debt! payable to the plutocracy in the fiat (paper) money system (either to their central bank or to their private banks), eventually the annual interest payments on the debt grow so large, the payments consume all the new money that is created, thus making it impossible for prices to increase. It becomes evident when the interest payments to the plutocracy are consuming all new money, because the marginal-utility-of-debt goes negative and the government gives most of the $trillions of new money to the largest banks. Over the next several years, we will all be experiencing a horrific, bankrupt world depleted of savings (capital), that will worsen as the governments create more new money to feed the plutocracy. Hyper-deflation of prices ends only when nearly everyone but the plutocracy is bankrupt and unable to work.Inflation or Deflation? - Page 9 Nigeria_photo-trip_04

The only other possible direction is hyper-inflation, if the governments hand out money directly to the people (not to the banks) in the $trillions, which also ends only when nearly everyone but the plutocracy is bankrupt and unable to work. The hyper-deflation scenario is more probable while the net worth of the private sector is still significant (e.g. $14 trillion in USA), because hyper-inflation is not due to rise in prices but rather a fearful stampede from the plutocracy's fiat system to gold, whereas hyper-deflation causes flight to the "too-big-to-fail", lowest interest rate government bonds, which gives the plutocracy more time to transfer this wealth to themselves by a zigzag (crash, stimulus, "green shoots", ... repeat) mechanism I will explain below. This can explain why Exter's inverted pyramid has Treasuries above gold on the funnel time-line. I explain this further and simplify the math of this paper here. The likely scenario is an abrupt hyper-inflation after an extended hyper-deflation, with most people fooled by a falling gold price (see below), when they should be watching the declining contango basis, much worse than the instant 69% hyper-inflation by revalution of gold from $20 to $35 in 1934.

Before proving we are in hyper-deflation, and the myriad of popular misunderstandings, I first want to share my Theory-of-Everything, which has implications on investing and the concept of knowledge.

Herd Psychology Peaks Growth

Disorder, or entropy, is a measure of the clustering of matter. The more clustered matter is, then the less the entropy, i.e. the more ordered it is. Matter is a general term for anything perceived, i.e. mass, gravity, energy, inertia, electromagnetic waves, quantum effects, thoughts, imagination, feelings, etc.. The act of perception (or measurement) means there is a clustering away from the "invisible" vacuous disordered ether. Disorder (uncertainty) is information. Thus only rare perceptions are knowledge, because if everyone shared only 1 perception, there is 0 information.

Information increases more slowly as the number of (equally probable) perceptions doubles exponentially:

Binary Bits
of Info
# of
Perceptions
Communication
Derivative Potential
Potential Derivative
Binary Bits of Info
0110
1221
24244.6
3840,32015.3
41621 trillion44.3
5322.63e+35117.7
6641.27e+89269.0
71283.86e+215716.2
82568.58e+5061684.0
95123.48e+11663875.2

Thus since the Bell Curve is the predominate distribution of clustering in nature, then in spite of exponential growth (e.g. of the population), then information does not increase, because perceptions become exponentially more shared (i.e. clustered) as they become more numerous. Thus every exponential growth phenomenon peaks, then decays, because "the entropy [information] of the universe tends to a maximum". Information actually increases while exponential growth peaked and is decaying.

Thus decentralized communication of knowledge potentially increases information if it permutates increased diversity of derivative thought. This potential factorial growth of perceptions is reduced to exponential growth, due to scalability limitations. For example, the extent of shared agreement (perceptions) decreases information again. Widespread centralized communication (e.g. TV, central government) replaces continued thinking, and traps the lazy population in set of shared opinions (aka culture and sub-cultures), thus decreasing the information of the society and limiting exponential growth. All forms of insurance mathematically guarantees failure, because the diversity of allowable outcomes (perceptions) is insured to be one, thus the information (and knowledge) is reduced to zero. Ironically while concentrating control of major media has been justified as necessary for breaking down local cultural impediments towards a new world order, in fact top-down control of herd psychology is unsustainable and will peak at the point the world reaches zero knowledge with a single entity controlling all thought, transactions, and economic activity.

Interestingly, computer chip density can only exponentially double every 18 months due to Moore's Law, but nature is potentially evolving factorially the permutations of communications between N neurons and the communications between M brains. The internet has a similar mesh-of-meshes (hub and spoke) network topology, factorially increasing the permutations of communications between the brains.

Sheep Can't Do Slaughter Math

Widely parroted that price (P) inflation will result from an increase in the money supply (M), due to the Quantity Theory of Money (QTM). QTM makes no such prediction. QTM states that if the GDP (which is roughly proportional to P * Q) increases, then either M and/or V must increase, or vice versa. Thus if M is increasing, and Q divided by V increases more, then there is a deflation of P. An increase in the quantity (Q) of transactions, coupled with a stagnant or decrease in the number of times the same money changes hands (V), can cause P to decrease even while M is increasing. Mis-allocational of capital means increasingly redundant economic transactions have lower multiplier effects (are useless and do not ripple through the economy). For example, the "Cash for Clunkers" stimulus destroys capital (e.g. affordable used cars for college students) and transfers other capital away from optimum individual decision makers (i.e. taxpayers), who have the local knowledge to maximize the multiplier of local investments.

Besides the fact that M is arbitrary, QTM does not model that M, V, and Q are mutually dependent variables in fiat economies, but they are because M is a debt! that transfers capital from borrowers and savers to the plutocracy. Former US Asst Secretary Catherine Austin Fitts explains that in the same town there are neighbors, some are paying 13% on their credit cards, while others only earning 1% on their time deposits-- a 12% annual drain of capital away from the local decision process to bankers in New York, IMF, WorldBank, BIS, and their political henchmen in Washington D.C., UN, WHO, and all the nations' capitals. Local banks are eventually merged for profit or by force of regulation, as the plutocracy controls the government.

Fiat money is a ponzi scheme, because as M grows, then M must continue to grow in order to pay the interest on the M (M is debt). That cancer accelerates when the marginal-utility-of-debt goes negative, as each newly printed dollar of M (a debt) is actually decreasing the GDP, i.e. increasing M is decreasing P! The transfer of private wealth to the plutocracy has reached the terminal phase where the government is creating new M (debt!) to offset the withering private sector. The exponentially increasing budget deficits radically understate the time-bomb of unfunded government promises. Millions of private economic decisions (perceptions), transferred to a single-minded plutocracy, knowledge is rapidly approaching zero, and thus the exponential economic growth has peaked and is in exponential decay, i.e. hyper-deflation. This is a global implosion towards more powerful central governments (step closer to "one world order") with both States of USA, and the nation-states of the EU, being allowed to go bankrupt.

In a vicious feedback spiral, as the GDP shrinks, the private sector income shrinks and needs more debt (or government subsidies) to pay the interest on prior debt, but the additional government debt spending destroys more of the useful production and capital of the private sector (see aforementioned "Cash for Clunkers"). The only way to make the marginal-utility-of-debt go positive, is to decrease the debt load back to a level where the private sector can produce more than it's interest payments. At this terminal phase, both increasing or decreasing M (debt), shrink the GDP, i.e. hyper-deflation.

Ironically, hyper-deflation must end in hyper-inflation or rationing, which are equivalent in that in people will have less. Or, rationing can also be equivalent to massive decrease in population, which history predicts, and is already occurring. Hyper-inflation results if there is a stampede from hyper-deflating fiat, or if the plutocracy dictates a new non-indebted currency. Do not confuse this with a prosperous sustained deflation that results from the increased (useful) production on a gold and silver money standard, where millions in the private sector make the economic choices thus increasing knowledge. The plutocracy must manipulate the price signals to prevent a pre-mature hyper-inflation flight from their fiat system.

...continued in next post, scroll down...


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Inflation or Deflation? - Page 9 Empty Bell Curve Economics (continued from prior post)

Post  Shelby on Tue Aug 18, 2009 1:14 am

Knee-deep Warm Manure Huddle

Given knowledge is heading to 0, there must be widely shared popular delusions. An economy without risk is analogous to one unstable shared perception, i.e. minimum entropy = minimum disorder = minimum knowledge. Statisticians believe in the infinity fairytale. Since 99.9% of the wealthy people (and the governments) who think they own gold and silver, really own a debt, then fiat price signals for gold and silver will act like any other commodity (fall in this deflation). For as long as the mainstream has 999.9 times (99.9% / 0.1%) more mass in the "paper" gold and silver (debt!) pricing markets, I expect fiat prices of gold and especially silver to fall, as they've made lower highs since hyper-deflation started after March 2008, especially silver which outperformed the S&P500 from end of April until since under-performing from the $16 peak at start of June. I expect silver below $12 in 2009, between $7 to $8 in late 2010 or early 2011, and gold to dip to between $700 to $800. Smoothed gold price should outperform or be constant relative to an average basket of everything else, except volatile dips relative to cash and Treasuries (we are one level above gold on Exter's inverted pyramid) until the end-game of hyper-inflation, or forced rationing (e.g. WW3, etc). Money is a socialized symbol for stored production, so for as long as 99.9% of the wealth doesn't believe physical bullion is money, it will not price (act) as real money. Ultimately gold and silver have theoretical efficiency advantages as money over barter, fiat, or theft, but irrationality (i.e. knowledge heading towards 0), can warp priorities drastically for a long duration, i.e. the Dark Ages persisted hundreds of years. However, if current fiat system is destroyed into chaos of barter or to a new fiat system backed by gold, then at least 15+% of people already believe physical gold is money.

The plutocracy probably has no incentive to move prematurely to the more chaotic hyper-inflation, because the hyper-deflation interventions (crash, stimulus, "green shoots", ... repeat) are enabling the transfer of the formerly $22 trillion private sector notional net worth (down to $12 trillion in March, 2008, back up to $15 trillion in July) of the USA (and globally) to themselves with the high degree of control and certainty that their fiat system provides.

Ironically the plutocracy will lose capital because the entire pie shrinks in the end game, but the plutocracy has no choice, because if they didn't satisfy society's capacity for zero knowledge due to the Bell Curve, then some other plutocracy would. Each individual has the choice to come out of this economic cancer.

Multiple Corrals

Cheerleaders frequent major media to popularize the (now often parroted by gold bugs) certainty that dollar will soon crash and US Treasuries' interest rates skyrocket, as result of foreigners selling both. Massive currency swaps between the US Fed and central banks of the world recently do not tie their fate to the dollar? Derelict third world nations with their corrupt political systems that have been impoverishing their own people for centuries, will suddenly transform all vested interests to a gold money system that reverses the transfer of wealth from the ruling class back towards their impoverished masses? Remember that China garnished 32% of the world's manufacturing by pegging their Yuan artificially low to other currencies, enslaving their own people to forced rationing by making imports too expensive, so they could undercut the pricing of every other developing nation that has free floating foreign exchange rates. Restricting imports made their economy less self-sustaining, because it allowed no competition to the statistical corruption and fixed capital investment corruption of the one-party rule. China recently outlawed fledgling gaming money systems, apparently because they circumvented foreign exchange control. China's recent $1.2 trillion stimulus created a real estate bubble. Centralization of decision making always ends in failure, per to my aforementioned entropic theory. China's depreciating (rusts and needs maintanance) infrastructure is a balance-of-trade liability, similar to how destroying old cars in "Cash for Clunkers" mis-allocates capital via socialized wealth transfer. Remove the exports, the export infrastructure collapses, their people riot because they expect the progress they've worked hard for. Japan with it's 20 years of deflation now on the verge of fascism, is strong evidence that centrally managed trade is not an escape velocity to sustainable growth, and that what goes up on my theory of declining entropic knowledge, comes right back down to the increasing entropic truth. In USA, despite enthusiam over near-term stimulost headline propoganda and cost cutting driven earnings growth, the hyper-deflation in real estate and the delinquencies in banking are accelerating towards widespread bankruptcies.

Globalization has made the entire world symbiotic to the fiat corruption, so decoupling is a delusion. Due to hyper-deflation, price inflation (P) is not coming from increases in the money supply (M). The entire world is currently being pulled into hyper-deflation exceeding that of the Great Depression, so the demand and value of dollars and US Treasuries will go up, which is what has happened. Near the bottom of the hyper-deflation when net worth of west is drained (2012?), the plutocracy may reset the fiat economy (i.e. instant hyper-inflation) with themselves the winner, where due to capital controls only the holders of non-fiat (gold or undervalued farmland?) will gain the instant change of purchasing power. I suspect there are many capital controls already buried in the many bailout bills and homeland security acts, e.g. such as this one which someone is trying to delete from Wikipedia. Interest rates are rigged by the plutocracy with artificial demand from derivatives. This delusion is promoted by the plutocracy, so that interest rates rise on the popular expectation, so the plutocrats (e.g. Godeithner Sachsrifices and JPaulson Morgrins) can buy bonds for free via the secret open market operations to drain more net worth from the private sector, as the "green shoots" crash and the sheep trample each other for safety to buy the bonds from the plutocrats at much higher prices (forcing interest rates down again). Zigzag (crash, stimulus, "green shoots", ... repeat) hyper-deflation is the mechanism to transfer private sector notional net worth to the plutocracy, without signaling to the herd to flee fiat. The serial, secular decline of interest rates will not provide significant relief in terms of lower interest on new debt, because mathematically the total debt must double by the time the total interest rate on the total debt has at most halved. Negative interest would be debt forgiveness and hyper-inflation.

"Human Climate Change"[sic!] and Peak Oil are propaganda to take advantage of the illogical fear that exponential growth of population will necessarily outstrip the carrying capacity of the planet. Illogical because it is only the aforementioned Bell Curve of perceptions which is limiting exponential growth. A certain level of abstract thought is required to understand how global oil production could be peaking, yet not be caused by the highly correlated exponential population growth. Correlation does not prove cause and effect, e.g. the exponential growth of debt has also been highly correlated. Let's dig into some facts. America has traded 73 million free grazing bison, requiring no oil for machinery or fertilizer and only the natural, renewable hydrogen+oxygen+carbon fuel cycle, for 45 million cattle and chickens requiring oil intensive methods. Modern food production and distant distribution by large corporate farms requires 160 times more energy per unit output, but can produce inferior quality food (toxins in many cases) for lower market prices, but with deleterious long-term mis-allocation costs for energy economics, soil, human health, etc.. The average MPG in USA for new vehicles peaked in 1987 at 26.2, dropping to 24.7 by 2004, while new imported passenger cars are at 32 MPG, and $5 - $10 gas could incentivize 50+ mpg. The vast infrastructure and operation of suburbanization has a huge sunk and ongoing energy cost. The new GM Volt gets 230 MPG (city) by using electricity for most of the miles. There is potential to generate unlimited high EROEI (i.e. low price!) electricity from nuclear, especially the new commercialized super-safe, micro-nuclear power plants which are completely sealed, with no moving parts or water (use solid sodium salts instead), get buried in your backyard, and run 7 to 40 years before refueling. We had the base technology (or certainly the resources to have focused research investment) to start building a safe (no external leaks in 22 years with 438 reactors worldwide) Volt+nuclear economy at least 20 years ago. Instead, our increased energy INefficiency is a result of a top-down, mass media and slavery educational system programmed loss of knowledge (shared stupid priorities), and the symbiotic fiat debt bubble which enabled the mis-allocation. Incorrect solutions derive from incorrect assumptions as to the cause of a problem. My point is if oil production is peaking, the root-MOST cause is waste (of time, resources, alternatives, etc) due to decreasing societal knowledge. Additionally we can question if oil production is peaking due to exhaustion of all high EROEI sources that may exist, or if the investment and/or return on investment in exploring for new high EROEI oil declined for other reasons symbiotic to the loss of knowledge from the Bell Curve of shared perceptions. Oil production is a top-down process mostly controlled by plutocracies and large corporations. Note that for Russia, the world's #1 producer, it's peak oil curve was reversed when it's plutocracy allowed the entry of new competition, i.e. less centralization of decisions and thus increasing entropic knowledge. EROEI naturally declines as a society overstretches itself with debt, this not being necessarily a function of geologic limitation but of opportunity cost for all the vested interests. If you had unlimited money (or thought you did via abundant credit), then you would take on growth projects that were less economic. Lastly, measurements of EROEI are mathematically dubious to meaningless (see the discussion of Nyquist below), thus do not get to the root of the problem, because economists are using the oil price as proxy for energy invested (as well double-counting of resources consumed especially with respect to non-linear opportunity cost feedback loops).

...continued in next post, scroll down...


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Inflation or Deflation? - Page 9 Empty Bell Curve Economics (continued from prior post)

Post  Shelby on Wed Aug 19, 2009 5:29 am

Theory Of Everything

Finally, back to my interpretation of the entropy-of-matter as a Theory-of-Everything. Einstein's curved space-time is a unified model (a model is only a reality in the mind of a mathematician) of the simultaneous alternative realities experienced by each observer's perception in the space-time-light/EM physical world. For example, for the person standing along the side of the road, the sound of a motorcycle (moving with constant throttle) changes pitch and volume as it approaches and passes by ("rrroooOOOWWWwwwmmm"), but for the driver of the motorcycle the sound did not change. Or, for the person driving a car traveling faster than a car beside that thus appears to moving backwards, but for the observer on side of the road, both cars are moving forward. For the ant riding a falling apple, the earth is being pulled towards the apple ("by the apple's gravity"[sic]), not the apple towards the earth by the earth's gravity, just as if the earth approached the sun, we would see the sun coming towards us. Ponder the convincing magic trick where hidden mirrors are used to bend the reality that you think you see, were your eyes an absolute measurement of reality? Alter the filter Q, sampling rate, or sample below period or frequency of Nyquist, the measured signal changes. It is crucially important to understand that quantities such as time, space, mass, energy, light, inertia, etc.. are not absolute realities (i.e. do not exist independent of the observer, except as mathematical models), but are manifestations of perception or measurement. Curved space-time is not a model of the totality of the universe, rather only the shared reality up to early 1900s, i.e. space, time, and light/electromagnetism. Einstein said, e.g. "Reality is merely an illusion, albeit a very persistent one", "Not everything that counts can be counted, and not everything that can be counted counts", "If the facts don't fit the theory, change the facts", "Gravity cannot be held responsible for people falling in love.", and "When you sit with a nice girl for two hours, it seems like two minutes. When you sit on a hot stove for two minutes, it seems like two hours that's relativity".

Science models evidence, i.e. "shared perceptions" (i.e. the limitation of individualized perception, i.e. resonance), that describe a shared reality. Popular shared realities are delusions, because the aforementioned limiting effect of the Bell-Curve-of-perceptions makes shared reality false over long enough time. For example, the world was once flat, the universe rotated around the earth at the center, Newton's falling apple was due to the mass of the earth not due to curved space-time. Note that the more intensely you share a reality with a group, the more limiting your life becomes. This is because you have moved yourself towards the center of the Bell Curve. Nature abhors trending to order, and will only tolerate increasing order in local realities (systems) as an interim step towards maximum disorder trend of the universe. Einstein agreed, e.g. "As far as the laws of mathematics refer to reality, they are not certain; as far as they are certain, they do not refer to reality", "The only thing that interferes with my learning is my education", and "Common sense is the collection of prejudices acquired by age eighteen". Unattributed relevant quotes are, "Absolute power corrupts absolutely" and "Trees don't grow to the moon".

In my theory, infinite number of possible simultaneous realities (perceptions) comprise the totality of our infinite universe. So then what is the universe itself? Mathematically, the infinite set of all of the infinite possible perceptions, is maximum disorder (because the order of each perception is a equally possible, i.e. random, due to infiniteness of the set). Bingo! "The entropy of the universe tends to a maximum". Thus my theory fulfills the fundamental law of thermodynamics and the conservation of energy (or information). Thus, a description of the universe as a beautiful symphony of infinite possible simultaneous local orders (perceptions), that even a 12 year old can understand, forming the maximum disorder which is the universe. Thus, I can answer Einstein's question, "What really interests me is whether God had any choice in the creation of the world.". No, if the universe was not trending to maximum disorder then we have no model for it's infiniteness or edge. Expanding space-time does not describe an edge nor accomodate infinite extent, because the space-time model disallows speeds faster than light. Astronomers recently measured space expansion accelerating, in violation of space-time. Einstein apparently (to make speed-of-light an independent variable) ignored the capability of the Lorentz equations to model speeds faster than light in the complex dimension, where the extra dimenion might be consistent with my model of simultaneous realities.

Besides the causative model my theory provides for the aforementioned examples of correlation between Bell-Curve-of-shared-perceptions and limitations on orthogonal exponential change, my theory may also provide a conceptual framework to build a model that unifies the disorder in quantum theory and the determinism of curved space-time, while it already seems to solve some mathematical problems that render current universal theory inconsistent with singularities (black holes). Noteably, my theory predicts that what we perceive as locally deterministic, is random in the scope of the entire disordered universe. Alternatively stated, the more surety we desire, the more we must limit our shared perceptions (refer to prior discussion of insurance). As the measuring capabilities have been proliferated into the quantum realm, the quantum shared reality has become probabilistic, i.e in between deterministic and random. I will agree with Einstein, that the quantum evidence is "silly", and offer the plausible conjecture/prediction that deterministic perception of matter at the quantum scale is possible, because if the current measuring devices are sampling below the period and frequency required by Nyquist, then random aliasing effects are observed. At quantum granularity, the entropy (i.e. disorder, information content) is much greater than at the space-time scale, thus providing a window to many more possible perceptions (realities). In short, my conjecture is that the frequency of the signals at quantum scale is much lower and/or higher than our current measuring devices can detect deterministically.

One of the conceptual challenges with black holes, is where did the information that fell into the black hole go, i.e. the conservation of information? We perceive the existence of black holes by some effects they generate in our shared reality, as matter passes near to them. In my theory, the black hole is a window into some or all of the other possible simultaneous realities, that we are currently unable to perceive or measure directly (i.e. a vacuum in our shared reality), thus the disorder (entropy) of the matter/ether (the information) can still exist (as possibilities) for other observers who (may) perceive those alternative realities. Thus the information (disorder) is conserved.

In Relativity, Einstein realized that time is a variable dependent on perception, because for all our physical senses perception of time occurs within the bounds of space (forming the space-time tensor) and light/electro-magnetism. Thus we are unable to perceive any thing faster than speed-of-light in the space-time reality, thus it becomes a constant in his theory. However, we can not perceive time when all our space-time-light (physical world) senses are blocked and we are entirely inside our thoughts, because we have no space-time-light frame of reference as our thoughts elapse. Without a physical clock, there is no way to be sure how fast our thoughts are proceeding. Perhaps Einstein was on this trail, when he said, "A person starts to live when he can live outside himself." and "Imagination is more important than knowledge.". A theory which allows thoughts to be independent of the limits of space-time, is not inconsistent with Relativity. Indeed my theory of maximum disorder comprising the totality of the universe conceptually fulfills one of Einstein's predictions, "It would be possible to describe everything scientifically, but it would make no sense; it would be without meaning, as if you described a Beethoven symphony as a variation of wave pressure.".

Quantum mechanics is a discrete statistical and Relativity is a continuous functional, geometric model in the physical domain of space-time-light, making them fundamentally incompatible, as they look at different scales of information content. The quantum level contains many more possibilities, thus has a much more rich information content, suggesting that it is interacting with the infinite simultaneous realities in much more complex way than can be realistically expressed with a continuous geometry in the way that curved space-time models all simultaneous observers (of light/electromagnetism). Although I have not yet achieved a formal mathematical unification nor empirical predictions beyond the loose conceptual ones presented in this paper, I conceptually note that entropy relates mass (perceived discrete order) to potential energy (availability of a system to do work) and that Relativity (E=mc2) relates mass to energy. Quantum forces and Relativity's gravity are field (i.e. space-time distributed potential energy) effects. I am interested in exploring a concept of relative entropy among plurality of observers (entropy-observer domain), to model shared perception-- the basis for the physical laws we agree on, hopefully to model inertia. Resonance is the degree-of-focus of perception, i.e. the quality of shared perception, so probably plays a role in my future understanding. This is a work in progress, and contribution is encouraged.



Disclaimer: My writings are my personal opinions, not to be construed as statements-of-fact. Do you own research. Licenses to think and communicate have never interested me too much, so I am not a licensed research, journalism, investment, legal, nor health professional. Please consult the proper authorities for all matters covered in my writings. I disclaim all liability for what you do after reading my writings. No one can predict the future, and if there is a physical world investment that never loses value, I haven't found it yet in my 44.1 years here on Niribu.


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Inflation or Deflation? - Page 9 Empty Bell Curve Economics (one page, easier-to-read)

Post  Shelby on Wed Aug 19, 2009 8:16 am

Click below to read the prior 3 posts in single web page format:

http://www.coolpage.com/commentary/economic/shelby/Bell%20Curve%20Economics.html

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Inflation or Deflation? - Page 9 Empty My email reply to SRSrocco on my Bell Curve Economics (prior post)

Post  Shelby on Wed Aug 19, 2009 8:29 pm

I linked to yours in the Peak Oil section where I mention that modern farming is 160 times less energy efficient than plow farming. Search for the number "160".

Agreed over-detailed, because I am not intending it to be popular document, but rather to be a canonical one. I only want to convince those people who really want to study, as per entropic knowledge tells me is the only thing possible. The herd we can only move by playing on their fear (or greed), which is what for example Global Warming or "Silver Will Go To Moon Tomorrow" does. The wise steal from the herd by betting opposite of their emotions.

And we agree that fiat is dead, but we disagree on how long it takes to get there. I see the dollar gaining strength at least into early 2010. I don't expect a dollar collapse until the insiders have lowered the stocks markets to 10-20% of their former peaks and thus already stolen all of the net worth they can that way. Then they change gears (the "ka-poom" theory). I see a big drop in silver price to $7-$8 before bottoming and rocketing higher as fiat finally rolls over and dies. I see a more subdued drop in gold to $700-$800 (I linked to some charts to show how I drew my trends lines to get those numbers).

We agree that cheap oil production may be peaking and this will have drastic domino effects. However, we disagree as to the cause, you thinking EROEI is declining due to geologic exhaustion and me thinking it is due to the debt which has allowed people to focus on wasteful opportunity costs. Also I see rising oil prices as inducing a turn around in EROEI to more sustainable priorities. I see EROEI as highly intwinded with price fixing and debt levels in the economy-- meaning EROEI does not cause everything, but is more of an effect of the symbiotic cancer than a cause. Thus I don't take EROEI as an absolute measure, but a relative one to debt levels, price fixing by plutocracy, peek greed psychology, etc.. I understand the concept of variable inter-dependence mathematically, because I have a math background.

Thanks for reading. It would be nice if you could not misquote me when you write in the Hommel forum. You stated some things about me which are not what I believe. I hope I have made my perspective more clear, so you can make it more clear if you want to present your contrasting logic in the Hommel forum where I am able to read but not post.

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Inflation or Deflation? - Page 9 Empty Re: Inflation or Deflation?

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