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Inflation or Deflation?

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Inflation or Deflation? - Page 10 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 10 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...


Last edited by Shelby on Tue Aug 18, 2009 5:52 am; edited 32 times in total

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Inflation or Deflation? - Page 10 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 10 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


Last edited by Shelby on Wed Aug 19, 2009 4:17 am; edited 1 time in total

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Inflation or Deflation? - Page 10 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 10 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 10 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 10 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 10 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 10 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 10 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 10 Empty Actually Fekete was correct about the forever rising value of bonds (until the death of fiat)

Post  Shelby on Thu Aug 20, 2009 3:25 am

Your statement is false if prevailing interest rate in the economy is negative, and there is a lack of supply of trustworthy cash.

Then for sure someone who prefer to offload risky cash (e.g. balance in a bank that was about to go bankrupt) for a trustable Tbond, and then the relative rate of the Tbond grows larger than 3%.

A negative interest rate can be obscured as defaults, since a positive rate with a failing institution is effectively a negative rate. This is why the value of bonds can go to infinitely, because the only other alternative when the private banks all fail, is gold & silver, but people don't trust the liquidity (ability to spend) gold & silver.

Fekete was correct!


> Shelby,
>
> I confess I didn't read your quoted article below.
>
> A $100 bond yielding 3% maturing in 30 years is never, ever, ever worth
> more
> than $190. And any twisted situation where that bond gets sold for more
> than
> $190 is a ponzi scheme. End of story. End of discussion. I'll go to my
> grave
> with this belief.
>
> -XXXX
>
> On 7/31/09, Shelby wrote:
>>
>> XXXX as you can see below, you are correct that the price of an
>> INDIVIDUAL
>> bond can not exceed the total value of it's remaining payments.
>>
>> However, Fekete reasons convincingly that the debt is now perpetual
>> until
>> soceity can live below it's means, as I re-summarized below. The govt
>> will simply borrow for us, if we refuse to. The only way the people can
>> break free is with gold or silver.

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Inflation or Deflation? - Page 10 Empty Hyperinflation as a currency event

Post  Guest on Fri Aug 21, 2009 8:46 am

Hi Shelby,

I am close to signing up for the "hyperinflation is a currency event" camp championed by, among a very few others I know of, Jim Sinclair. Let me give a couple of examples that I believe support this assertion.

Firstly a link to a Mineweb article headed Zimbabwe considering gold-backed currency - Gono:

http://www.mineweb.com/mineweb/view/mineweb/en/page504?oid=87809&sn=Detail

I think that Mineweb have completely missed the true significance of their own article. They write:

"........local currency, which was destroyed by hyperinflation and replaced by multiple foreign currencies in January. (2009!!!) ........ Prime Minister Morgan Tsvangirai in a bid to end a political crisis introduced multiple foreign currencies to stop sky-rocketing inflation and revive the economy. (My understanding is that they did not "introduce" any particular currencies. They allowed the citizens to transact in ANY currency they wished to use.)

Here is the big story in my opinion.
"Zimbabwe's inflation has tumbled from an official annual rate of 231m % in July 2008 -- which independent analysts say was understated -- to a monthly rate of 1% in July 2009 following the decision to abandon the local currency." (From hyperinflation to 12%pa in 6 MONTHS by letting the market/citizens choose their own money. BTW I believe that 12% is relatively low inflation for a developing country these days.)

Second example from the Weimar period. I recently read a piece that discussed the Weimar hyperinflation ( I can dig out the piece if you want the source material). The writer quoted a book written by a senior German banker/treasury official of the period published decades after the 1920s.

In the book he "fessed up" that the initial cause of the hyperinflation WAS NOT excessive money/credit IN CIRCULATION. He claimed that the rising level of excess currency was initially lent by German banks (at very high profits) to international speculators who made a fortune shorting the German currency.

In other words the later issuance of huge amounts/denominations of German currency was an EFFECT of the currency collapse rather than the cause. Not coincidentally the same speculators and bankers made a second fortune buying assets for a pittance after the hyperinflation burned its way through the economy.

In relation to the second example, with hand on heart, let me say that I am not anti-semitic. I think it is noteworthy that Jews have been over-represented in European and International banking and finance for centuries. In the German example their conspicuous financial success could have laid some of the foundations for the Nazis to whip up support for their pogrom. Again, in looking for the fuel I am not supporting the lighting of the fire.

If the person who posted the scenario I linked earlier (The Royal Scam) is onto something then we have another of the "laboratories", Zimbabwe, providing a test of how to "switch off" the hyperinflation used to impoverish the citizens and enrich the PTB. Also, if you look at the ethnicity and positioning of many of the key players in the command and control structures around the world today I think you could argue that the PTB may have learned some lessons from Germany of the 1930s and 1940s.

I have another post coming for the Gold area of this forum with a link to an article from a blogger I have been reading for a while. This article gives, to me, a credible explanation as to how deflation (mandated by the negative Marginal Productivity of Debt) can co-exist with the RAPID build up of massive (read hyper) inflationary pressures.

Sorry for the long post. You have to share some of the blame for being thought provoking.

Cheers!

Guest
Guest


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Inflation or Deflation? - Page 10 Empty Re: Inflation or Deflation?

Post  Shelby on Fri Aug 21, 2009 9:22 am

angophera wrote:Hi Shelby,

I am close to signing up for the "hyperinflation is a currency event" camp championed by, among a very few others I know of, Jim Sinclair. Let me give a couple of examples that I believe support this assertion....

...In the book he "fessed up" that the initial cause of the hyperinflation WAS NOT excessive money/credit IN CIRCULATION. He claimed that the rising level of excess currency was initially lent by German banks (at very high profits) to international speculators who made a fortune shorting the German currency.

In other words the later issuance of huge amounts/denominations of German currency was an EFFECT of the currency collapse rather than the cause. Not coincidentally the same speculators and bankers made a second fortune buying assets for a pittance after the hyperinflation burned its way through the economy...

Good research. Yes hyper-inflation is caused by the flight from the currency, not by inflation of prices. In hyper-inflation there is a stampede to get out of the currency because the herd becomes aware the decaying structure behind it is irreversible and accelerating downward. That is precisely the end-game theme of my paper:

http://www.coolpage.com/commentary/economic/shelby/Bell%20Curve%20Economics.html (improved and more humorous)

After the PTB bleeds the $14 trillion net worth of private sector down to say $1 trillion, then they will likely shift gears with a 'ka-poom" currency event. The only alternative if they want to keep the dollar forever, is a WW3 to get 90% rates of rationing. Or they can kill off most of the people to accomplish the same thing. But I think the hyperinflation currency event is much more probable, but not until the deflation has run the people down to the point where they want to riot. Note that Zimbabwe seems to be falling back into hyper-deflation again, and so the govt is toying with how to do another limited monetary inflation-- the hyper-deflation can not be stopped...which further proves my point...

So short-term is deflation, gold could drop short-term, but will rise against every thing except cash and Tbonds. Look at Exter's Pyramid, we at the cash stage, not yet at the Gold stage. I mentioned all this in my linked paper above.

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Inflation or Deflation? - Page 10 Empty No decoupling! Worse than Great Depression!

Post  Shelby on Sat Aug 22, 2009 6:12 am

http://www.elliottwave.com/club/protected/pdf/free-theorist-july-2009.pdf
(sign up here: http://www.elliottwave.com/r.asp?acn=finsense&rcn=aa38c&dy=aa082009c&url=/club/free-theorist/default.aspx?code=34719)

Inflation or Deflation? - Page 10 W16

Note I think the above charts were produced before the full extent of the current bounce. Nevertheless the next crash down is coming soon and it does appear this period has a more aggressive downward trajectory, as compared to the Great Depression.

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Inflation or Deflation? - Page 10 Empty DRESS REHEARSAL FOR THE LAST CONTANGO

Post  Shelby on Sun Aug 23, 2009 12:47 pm

Fekete emailed me his new article a few hours before he has published it publicly:

http://www.professorfekete.com/articles%5CAEFDressRehearsalForTheLastContango.pdf

He also sees hyper-inflation as the final outcome after deflation runs to it's natural limit. Notice he spoke to Paul Volcker recently!

Code:



DRESS  REHEARSAL  FOR  THE  LAST  CONTANGO

Antal E. Fekete

I have written about “the last contango in Washington” before. The phrase covers the gold crisis that has been brewing under the surface in the world for the past sixty years due to the insane gold policies of the United States Treasury. As a result all newly mined gold, surpassing the quantity of all gold ever mined in the world prior to 1947, has gone into private hoards, from which it will be next to impossible to coax it out. The measure of this act of disappearance of gold is the vanishing of the basis, or the last contango.
   In the technical jargon of the futures markets the basis is the spread between the nearest futures price and the cash price in the same location. The gold market has always been a carrying-charge market, a.k.a. contango market, due to the monetary metal status of gold. This means that the gold spread has always reflected the carrying charge, or the opportunity cost of carrying gold, the lion’s share of which is foregone interest. But a very strange phenomenon has been manifesting itself during the past thirty-five years, since the inception of gold futures trading. The basis as a percentage of the rate of interest, rather than remaining constant, has been vanishing and, by now, has dropped to zero. At the same time gold holdings registered at the Comex-approved warehouses have been dwindling. Both indicators point towards a developing shortage of monetary gold that appears to be irreversible. The support of the paper gold markets is at stake. Without cash gold backing it up, paper gold trading is not viable.
   When the gold basis goes negative, that’s the end not only to contango but also to gold futures trading as we know it. Permanent backwardation in gold has never ever been experienced — unless we imagine that there is a gold futures market in Harare. Gold is not available at any price quoted in Zimbabwe dollars. In that sense the last contango has first occurred in Zimbabwe. Whatever paper trading of gold is still going on in the United States, it is at best a ‘dress rehearsal’ for the Last Contango in Washington that will be followed by the regime of permanent backwardation. The meaning of this is that physical gold cannot be purchased at any price quoted — this time, yes, in U.S. dollars. The U.S. dollar rubbing shoulders with the Zimbabwe dollar?
   Mainstream economists and financial journalists shrug: “So what? We are not watching the basis of frozen pork bellies trading either when we make monetary policy”. These gentlemen betray a complete lack of comprehension as far as the nature of the present financial and credit crisis is concerned. Make no mistake about it, whatever else it may be, this crisis, first and foremost, is a gold crisis with incubation period measured in scores of years. It is about to reach its climax. The world appears to be totally unprepared for it, witness the complete silence surrounding the gold nexus. Even the so-called sound-money websites misread the situation. They are talking about an imminent break-out of the dollar-price of gold from its holding pattern below $1000 per ounce. Such break-outs have occurred from time to time since 2001, when gold broke through the ‘resistance-levels’ of $300, $400, etc. The coming break-out is not distinguished by the fact that $1000 is an even rounder figure than the previous round figures that have been successfully scaled. It is distinguished by the fact that we are confronting a world event the like of which has never happened in all history. It has never happened that gold was unobtainable at any price. It has never happened that all governments have defaulted on their debt obligations simultaneously.
   Still, we have to explain the relevance of this to the present credit crisis.  It is no secret that the bonds, notes, bills, and other obligations of the United States government, or any other government for that matter, are irredeemable. That is, they are redeemable in nothing but more of the same. For example, the bonds of the U.S. Treasury are redeemable in Federal Reserve credit, which is itself irredeemable and is ‘backed by’ the self-same bonds of the U.S. Treasury. Why is it, then, that these Treasury obligations are in demand, where one might think that redeemability is a sine-qua-non of issuing them? What makes people participate in this shell-game? How can such a crude check-kiting scheme mesmerize the entire population of our globe? Come to think of it, the sight of this Ponzi scheme would shudder the Founding Fathers of our great Republic.
   This is not an easy question to answer. But going through all the alternative explanations one-by-one, we come to the conclusion that the debt of the U.S. government is still redeemable in a sense, however limited or restrictive it may be. The debt of the U.S. government has a liquid market in which it can be exchanged for Federal Reserve credit. In turn, Federal Reserve credit can still be exchanged in liquid markets for physical gold, the ultimate extinguisher of debt, albeit at a variable price. But if you break that final link, when gold is no longer for sale at any price quoted in U.S. dollars, then the rug will have been pulled from underneath this house of cards, and the international monetary system will collapse like the twin towers of the World Trade Center. And this is the situation that we are now confronted with.
   Look at it this way. There is a casino where the lucky gamblers can gamble risk-free. Their bets are ‘on the house’. This casino is the U.S. bond market. There is only one catch. The pile of the winning chips in front of each gambler may become irredeemable at the exit when the hairy godfather waves his magic wand.
   As the gold markets enter their phase of permanent backwardation, all rational basis for holding U.S. Treasury debt, or any debt for that matter, will disappear. There will be a mad rush to the exits, and holders of debt will trample one another to death in trying to cash in on their winnings.
   In July I attended the Santa Colomba Conference 2009 at the Palazzo Mundell near Siena, Italy. There were 50 people in attendance by invitation of Robert Mundell of Columbia University, recipient of the Nobel Memorial Prize in economics ten years ago. They were mostly officials of various treasuries and central banks, ambassadors, bankers, professors of monetary economics, authors of monographs and editors of financial journals. Paul Volcker, a former U.S. Treasury official and Chairman of the Federal Reserve Board was present. I have circulated several papers prior to the conference among the participants. In these papers I was trying to call attention to the cataclysmic nature of the present credit crisis that could not be understood without trying to understand gold, the ultimate extinguisher of debt. We are all passengers on a runaway train on a down-sloping track, the brakes of which (gold) have been dismantled at the top of the hill. The train is picking up speed beyond any safe limit, and a crash appears inevitable.
   Our gracious host and the chairman, Professor Mundell, has made two references to gold during the two-day conference asserting that, apart from wartime, the gold standard has been the most crisis-free monetary system in history. (Of course, all monetary system have a habit of breaking down during wars.) Yet not one participant has picked up ball dropped by Mundell, to run with it. They kept talking about green shoots, the recovery of the stock markets, coming bailouts and stimulation packages. As to my papers stating that this crisis is a gold crisis, I got just one feedback, in private. Apparently, the rest of the participants have been turned off by the four-letter word ‘gold’ in the title. It was not worth their while reading the ramblings of this loner on the problem of “putting spent toothpaste back into the tube”.
   One of my papers was an open letter addressed to Paul Volcker. In it I asked whether there were contingency plans in the Treasury or in the Federal Reserve to meet the coming crisis of permanent gold backwardation. Volcker declined to answer my question whether in public or in private. I am inclined to think that there are no such contingency plans other than “muddling through”, as they have in all previous monetary crises. None of the policy-makers see the uniqueness of the coming predictable crisis, or the need to confront it with a comprehensive plan. There is an overwhelming unwillingness to admit that the international monetary system as it is presently constituted has been built on quicksand. It is a mere makeshift that took its origin in the last gold crisis of 1971. Cracks have been papered over as they appeared after every subsequent crisis. Every opportunity to sit down and work out a permanent solution was passed up. This seems to have worked well enough in the past. Policy-makers see no reason why it would not work in the future.
   Yet the Last Contango in Washington will be different from all previous crises. It will be elemental, devastating, and apocalyptic. It will destroy virtually all paper wealth, and render virtually all physical capital idle. It will involve hordes of unemployed people roaming the streets of the cities, caring for no law and order, pillaging homes and institutions. It will destroy our freedoms. It may destroy our civilization, unless we take protective action.
   On the positive side, it will sweep away the complacency of the managers of the regime of irredeemable currency, and fundamentally weaken the sway of Keynesian and Friedmanite economics as it has a stranglehold on the teaching of economic science in the world.
   The Last Contango in Washington will eclipse the Great Depression of the 1930’s. Be prepared!


References

The Last Contango in Washington, June 25, 2006

The vanishing of the gold basis, and its implications for the international monetary system, June 23, 2009

Remobilize gold to save the world economy! An open letter to Paul Volcker, Chairman of the Board of Governors of the Federal Reserve, 1979-1987; Chairman of President Obama’s Economic Recovery Advisory Board;
July 6, 2009

See: www.professorfekete.com



Calendar of Events

University House, Australian National University, Canberra: first week of November, 2009
   Peace and Progress  through Prosperity: Gold Standard in the 21st Century
   This is the first conference organized by the newly formed Gold Standard Institute.
   For further information, e-mail: feketeaustralia@gmail.com ,
   On the Gold Standard Institute, e-mail philipbarton@goldstandardinstitute.com

Professor Fekete on DVD: Professionally produced DVD recording of the address before the Economic Club of San Francisco on November 4, 2008, entitled The Revisionist History of the Great Depression: Can It Happen Again? plus an interview with Professor Fekete. It is available from www.Amazon.com and from the Club www.economicclubsf.com at $14.95 each.

DVD’s of the Gold Standard University, Session 3 (Adam Smith’s Real Bills Doctrine and Its Relevance Today); Session 4 (The Bond Market and the Markey Process Determining the Rate of Interest); Session 5 (A Primer ont he Gold and Silver Basis) are now available. For details, see the announcement on the website
www.professorfekete.com . DVD’s of the other Sessions will also be available soon.

He emailed me in response to what I had emailed him below (as a cc: to an email to someone who disagreed with Fekete), so I think he may have incorporated my concept in his paper, or maybe he had already written the paper which applied to what I emailed him a few days ago:

https://goldwetrust.forumotion.com/economics-f4/inflation-or-deflation-t9-225.htm#1811

Shelby wrote:Your statement is false if prevailing interest rate in the economy is negative, and there is a lack of supply of trustworthy cash.

Then for sure someone who prefer to offload risky cash (e.g. balance in a bank that was about to go bankrupt) for a trustable Tbond, and then the relative rate of the Tbond grows larger than 3%.

A negative interest rate can be obscured as defaults, since a positive rate with a failing institution is effectively a negative rate. This is why the value of bonds can go to infinitely, because the only other alternative when the private banks all fail, is gold & silver, but people don't trust the liquidity (ability to spend) gold & silver.

Fekete was correct!


I sent the following reply to Fekete just now:

Dr. Fekete,

Fascinating to read that you rubbed shoulders with Paul Volcker recently, or at least smelled his cologne. I am just returning the favor for the "hairy godfather" joke. Nice one : )

Your new paper so much agrees with my new paper in terms of the outcome of hyper-deflation followed by an even more abrupt (discontinuous!) hyper-inflation:

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

I think you may find my above paper interesting, as it has some mathematical basis.

I am thinking that short-term that hyper-deflation will accelerate, dragging gold price down with it, as the dollar and Treasury prices (not yields) rise. So I think right at the time when the world should be getting a warning to buy gold, THEY WILL BE LOOKING AT THE WRONG METRIC-- the gold price, when they should be looking at the GOLD BASIS!! Could you please onsider adding that point in your paper? Or do you disagree with that scenario?

Lastly, I am thinking the ongoing hyper-deflation can not turn to final backtwardation until it has caused a lot more pain. So I am thinking 2011 or 2012 for the hyper-inflation. Do you sincerely feel the hyper-inflation is emminent in 2009 or 2010? Do you have any metric to guide you other than the basis? I think the world will be ignoring the basis.

Seems to me the shift to gold could come from the plutocracy who is running this show. You really think Volcker doesn't know the grand plan to create a new Amero backed by gold (an instant hyper-inflation)?

Remember the 1933 revaluation of gold was a 71% hyper-inflation for those who turned in their gold. Remember that hyper-inflation and rationing are synonymous in effect.

Did you see that the Fed in USA and the EU Central Bank are both letting the states fail (the countries of EU are like USA states in size and scope)?? So it seems to me the plutocracy is planning a power grab that destroys the local govts and places the world on a gold back currency of at the regional bloc level.

This predicted in the Bible as the 10 Kings. The 10 Kings will be destroyed and then we have the one world govt. Loaning in gold and silver after this death of fiat would accomplish that. You may remember Jason Hommel that you debated, he has an interesting theory about this:

http://silverstockreport.com/2009/gold-gather.html


Any comments in reply or next paper from you is welcome.

All the best,
Shelby Moore

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Inflation or Deflation? - Page 10 Empty Antal, I have linked to two of your older seminal papers

Post  Shelby on Mon Aug 24, 2009 12:37 am

(email I sent follows below, also read my prior post on the previous page of this thread)

Dr. Fekete,

(1) In the "Knee-deep Warm Manure Huddle" section of my new paper:

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

I have linked to your "ECONOMIC ENTROPY" paper from 2005:

http://www.professorfekete.com/articles%5CAEFEconomicEntropy.pdf

Interesting that is first time I read your old paper and we had independently arrived at the same conclusion that a reduction of economic Entropy (information = knowledge) is what is occuring.



(2) In 3rd paragraph of my paper, I linked "all money is debt!" to your "Whither Gold?" paper from 1996:

http://www.professorfekete.com/articles%5CAEFWhitherGold.pdf


Also With Compliments,
Shelby Moore III

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Inflation or Deflation? - Page 10 Empty Fly in my prediction ointment

Post  Shelby on Mon Aug 24, 2009 6:44 am

Short-term only, this indicates the "green shoots" might last longer then we expect:

http://financialsense.com/Market/pretti/2009/0821.html
Inflation or Deflation? - Page 10 0821_c10

This is not a long-trend change indicator.


Last edited by Shelby on Fri Aug 28, 2009 7:03 am; edited 1 time in total

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Inflation or Deflation? - Page 10 Empty Throwing Rope to the Hyper-inflationalists

Post  Shelby on Wed Aug 26, 2009 5:00 am


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Inflation or Deflation? - Page 10 Empty Rope to the Hyper-Inflationalists

Post  Shelby on Thu Aug 27, 2009 1:50 am

The prior post has been made much nicer as a publish quality article:

Rope to the Hyper-Inflationalists
=================================

http://www.coolpage.com/commentary/economic/shelby/Rope%20to%20the%20Hyper-Inflationalists.html (original)

Published at numerous sites:

http://financialsense.com/fsu/editorials/2009/0826c.html

Butchered:

http://www.gold-eagle.com/editorials_08/moore082609.html
http://www.marketoracle.co.uk/Article13025.html (you can post comments)

Jon Nadler liked my article and he forwarded to the editor at Kitco, so it may get published there (along with a different photo of me than you see at my blog/forum, yikes!).

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Inflation or Deflation? - Page 10 Empty Fekete responds to my new article in prior post

Post  Shelby on Fri Aug 28, 2009 5:05 am

Fekete emailed me a pre-release copy of his new article:

“GOLD IS PALE BECAUSE IT HAS SO MANY THIEVES PLOTTING AGAINST IT”

He emailed me this in reply to an email from me, where I pointed out that I had linked to his prior article in my new article "Rope to the Hyper-Inflationalists" (see prior post). Fekete mentions "musical chairs" twice in the above new article, so I think he was responding to what I wrote in my article, where I mentioned "musical chairs" next to the link to Fekete's article.

In Fekete's new article, he provides the email address for the person who will be running the new Masters Gold Fund, a fund designed to earn gold from gold, without giving up your control of the physical gold. I am awaiting the details. Here are videos on the fund:

https://www.youtube.com/watch?v=WBgjCoxEJq4
https://www.youtube.com/watch?v=-aqTLEBqfEQ

Sandeep has a masters in math:

http://www.linkedin.com/pub/sandeep-jaitly/6/304/952
http://www.soditic-cbip.co.uk/the-team/#sandeep_jaitly (Company bio)

Apparently Sandeep became Fekete's student as early as Dec 2008, when this was written:

http://www.professorfekete.com/articles%5CFORWARDTHINKING.pdf

Fekete wrote:...I have asked my student, Mr. Sandeep Jaitly of Soditic, Ltd., London, U.K., who is tracking the gold
basis for me, to explain. Here is what he had to say...

If you read the rest of that article above, you see Sandeep has a deep understanding of the math of the basis relative to interest rates.



===============
ADD: I emailed Fekete again:

Subject: Shouldn't the discount also include the change in the expectation of the change in price of gold?

I am trying to figure out the math of how one could earn a risk-free profit in physical gold in the future's market on the short side. First I am trying to understand the long side "risk-free" paper profits that you (Fekete) criticizes in your new article. I think I may have noticed a flaw or improvement in your understanding of the basis. (probably not, but here it goes...)

You have explained that instead of holding physical gold (which pays no interest), the future's market bribes one to put 95% of the value into Treasuries and 5% to hold a future's contract on margin, then the discount is interest earned on the Tbond during the period future's contract period, minues the basis (contract price - spot price), ALSO MINUS THE MARGIN INTEREST COST. Btw, I think the above explanation is easier for novice to understand, than the way you explained it.

But the basis is very volatile depending on where the expectation of where spot price goes during the contract period:

Inflation or Deflation? - Page 10 Basis10http://silveraxis.com/basis.html

thus doesn't the discount include the actual change in the spot price (added if positive, subtracted if negative)? Actually instead of change in spot price, I think change in basis is more correct (change in expectation from purchase to end of contract period)

I think by viewing the discount this way, you would be able to remove the noise of the spot price, and get a reliable trend on the direction of the discount. Moreover, I suppose what I am saying is the basis should be measured retrospectively as basis at time of purchase minus it's change at time of end of contract period. I suspect would show the more clear trend of the basis and remove the noise of the casino house's manipulation of the spot price volatility.

Am I mistaken?


========
Emailed Fekete again:

Subject: Withdraw my prior suggestion

I realize that the return on the spot price was "opportunity cost" that was not foregone when trading gold for Tbond+gold contract, thus the change in spot price is not part of bribe offered. Thus, I suppose the volatility of the basis could be used to earn additional profit from any scheme in the future's markets. One could find the mean trend statistically, then sell/buy when basis gets outside of say 1 sigma from it's mean trend. If you were playing this on the short-side, you would still hold your physical gold. Maybe that is what the Masters Gold Fund will do. I await the prospectus and math on that fund.



=================
ADD: to earn an income on gold without relinquishing it, I can think of two possible strategies, one which Fekete mentioned specifically in his past article:

http://www.professorfekete.com/articles%5CAEFGoldInterestBasis.pdf

Fekete mentions trading between your own physical silver and gold, depending on which metal one has the larger basis percentage relative to the carrying cost of the nearest month's contract. So that is one way to earn a profit on your metal without relinquishing it. You have to factor in the spread and shipping cost of the physical metal trade as well, which would I think in most cases be prohibitive for small bullion. BullionVault.com appears to have a spread of about 0.3% for gold + 0.2% commission ($250,000+).

The other way is to sell short in the futures market-- let me explain how it pays to go long on your physical and short on the paper futures market, as the two will diverge (have been but accelerating). Realize that the basis-risk is limited on the upside to the carrying cost of the commodity, which in case of compact (high value per volume) monetary metals, is basically equal to the prevailing interest rate which is foregone by holding metal instead of bonds. But on the downside, basis-risk is unlimited at negative infinity, when the market loses confidence in the shorts ability to deliver the metal. For a short-seller the price-risk is infinity, the basis-risk is limited at the carrying cost, and the price profit potential is limited at price = 0, but the basis profit potential is unlimited at negative infinity. For the long-buyer of futures contract, the price-risk is limited to 0 on downside, the profit potential is unlimited at infinity, but the long buyer has the basis-risk at negative infinity which means he can't get the metal delivered. When I say the short seller has a profit potential on declining basis, realize that basis should be divided by the number of days remaining in the contract to get a "basis per day"-- that is the "basis" I am referring to. So when when the the basis (normalized to per day) is declining then it means the short contract is gaining value (faster than it is losing value in time), the short seller has a gain. If we expect spiraling down negative backwardation, then we need only sell short to earn a profit on our metal without ever relinquishing it, because someone will be offering to buy our contract from us at a higher price-- we do not need to actually deliver our metal. We must assume that someone is always willing to buy our short contract, otherwise it means the futures market has ceased to exist, in which case we do not have to deliver either. We can not see the Comex forcing all shorts to deliver, because JP Morgan is one of the big shorts. Could we see the Comex close, then force certain shorts to deliver, and not the big shorts? I do see that as a potential risk in this strategy.

To improve the above strategy, one needs a method that will work when the basis is volatile and not clearly always trending to backwardation within the timeframe of our short contracts. I have suggested that one could determine the statistical trend mean of the basis, then sell short when ever the basis is above that mean by some statistical margin, or sell longer contract months as the basis fall below.

I am not sure if I am correct in what I wrote above. I await to learn more about this.


============================
ADD: replied to an email regarding my "Rope to the Hyper-Inflationalists":

> I enjoyed your article, and have been noticing how all of the markets seem
> to be tied at the hip, take today for example. To summarize your theory,
> would it be fair to say you expect some short term strength(in gold and
> stocks) followed by a large plunge, followed by a large hyperinflationary
> rally?

Correct I see that as most likely (and breakout might be significant), next most likely is stock market rolls over now and metals down with, and least likely scenario is we go into hyper-inflation (bank holidays, etc) now.

>
> I have been long resources for several years, and an ideal scenario would
> be to exit near what would be percieved as a high, and buy back twice as
> much on the plunge, but I have not been too sure if the dollar would rally
> or plunge on the stock market crash. Fundamentally it seems as it should
> weaken, sending gold higher, but that has not been the case lately.


The thesis of my article is that has not been the case since 2003, except for a few counter-trend thursts which revert to the trend.

>
> My thought is that initially the dollar would rally on a stock crash and
> thus gold would break down, but gold would be the first thing to bottom
> and quickly make new highs, making it dangerous to try to exit and buy
> back on the plunge.


Yes I see that risk also. As well bullion premiums may skyrocket again.

I am rather looking at a strategy from Dr. Fekete to make money on my metal without ever having to relinquish it. I summarized it today in a new post, where I will also place a copy of this reply I made to you (anonymously of course):

https://goldwetrust.forumotion.com/economics-f4/inflation-or-deflation-t9-240.htm#1873

>
> Thanks for your time


Thank you also for sharing your thoughts.

Shelby
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Inflation or Deflation? - Page 10 Empty What goes up parabolically must come down parabolically (eventually)

Post  Shelby on Sun Aug 30, 2009 1:46 am

http://market-ticker.denninger.net/archives/1387-The-Problem-With-Hucksters.html

...Bah. Willie is great at putting forward what others have said, but of course he has a newsletter to sell. I don't.

Oh, and what is Willie's prescription for investors? Here we are again with the same old tired song:

But real money emerges triumphant after the inevitable crisis that ensues. THAT REAL MONEY IS GOLD, ALONG WITH SILVER, EVEN PLATINUM.

Of course he's been calling for this "huge move" for a while. I know, I know, gold is "screamingly undervalued" even at $1,000. Ok. So when will the big move come, and what's the target? Willie, like most of these clowns, plays coy - he doesn't want to be caught having to "revise his calendar" when the end of the world does not materialize (or worse, hand you a cup of grape KoolAid) so he merely says this:

The gold breakout will come suddenly, without warning. In my view it could easily come from ENEMIES AT THE GATE, foreign creditors responding to their own stress.

Emphasis his, of course. But this lack of a means to discern when (or if) the event is coming means that he can never have to say "I blew it"; unlike those of us who put forth an annual forecast with material and objective targets that we can grade a year later, he doesn't. I wonder why not?

The "rush to junk" is one that I and many other commentators have pointed out on multiple occasions. This isn't some conspiracy - it is how these sorts of parabolic blow-off movements come. If you think this isn't a parabolic move, chart the S&P 500's price .vs. P/E over the last six months and tell me if your opinion changes.

As of July 31st we stand at 143.95 for that ratio, with a new update out in a few days. By any measurement you care to use this is a parabolic move and those always follow the same pattern coming off the base (or bottom):

*
First, the strongest firms have a nice, measured, volume-backed move.
*
Then their volume and strength on a relative basis starts to weaken. The middle-tier companies get it next, with their volume supporting their advance, dragging the strong firms along (but on flat to declining volume.)
*
Finally, the used dogfood firms like Citibank, AIG, Fannie and Freddie "catch the fever" and their volumes spike to three, four, five, ten, even 100 times their normal volume and they take off like a rocket. The "drag along" effect gets weaker and weaker as people start to look at the charts and go "heh, wait a second - that's a company that's doubled in three days, represents 10% of the entire NYSE volume, and on any reasonable valuation basis is a zero?

Not long thereafter the move collapses.

The foundational error that Willie and most other so-called analysts (AND "degreed economists") make is that they fail to properly recognize what the monetary base is in a debt-based monetary system. Most will cite M1, M' or some other similar stupidity. This is false and a bit of cogitation will lead you to the right answer, if you think about it for a while. Consider the facts of all such modern systems: Your $100 bill spends identically to your VISA card. What is the "monetary base" of your VISA card? Now consider what, on a population-wide basis, this means for the monetary base of a nation's currency and credit system and the light should come on. If it doesn't please check your cranium for the presence of a functioning set of neurons and if you have an economics degree make sure you turn it in to the university that issued it as it should clearly be revoked.

PS: At least the "bio" on FSN says this about Jim's intentions - in tiny, small print at the bottom, of course:

Articles in this series are promotional, an unabashed gesture to induce readers to subscribe...

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Inflation or Deflation? - Page 10 Empty Willie and Sinclair bashing

Post  Shelby on Mon Aug 31, 2009 6:57 pm

Prior post had Derringer discrediting Willie (which I used to do in private debates before he became a star), and now Mish tears apart Sinclair. I had recently discredited both of these guys too as being too sensational and often wrong:

http://globaleconomicanalysis.blogspot.com/2009/08/countdown-to-dollar-implosion-madness.html

Mish also has a nice word for what I wrote recently:

http://globaleconomicanalysis.blogspot.com/2009/08/spending-collapses-in-all-generation.html

...Distortionary vs. Inflationary...

http://financialsense.com/fsu/editorials/2009/0826c.html

Shelby wrote:...Governments can ... shift supply and demand so relatively higher prices in some things at the cost of much lower prices in other things, but this is not the same as inflation...

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Inflation or Deflation? - Page 10 Empty As I said, PTB are purposely expanding NPLs in developing countries as the final stage of the hyper-deflationary global collapse

Post  Shelby on Wed Sep 02, 2009 6:14 am

I had written recently:

http://financialsense.com/fsu/editorials/2009/0826c.html

Shelby wrote:...So that the world will eat from their hand after the wipe-out, the "banksters" want to first maximize the globalization of NPLs (non-performing loans). The formerly less-indebted, developing world is being forced to offset the hyper-deflation with massive mis-allocated debt ("stimulost"). Globalization is a process of spreading the banksters debt system into the hinterlands of every nook of the earth. For as long as the masses are not running to Gold, the banksters gain by continuing the hyper-deflation...

Now read Mish saying many of the same things I have been saying about China since 2006, and make sure you watch the video:

http://www.marketoracle.co.uk/Article13151.html

...The reason China is buying fewer US treasuries recently is that the US deficit with China is shrinking. Again this is a simple mathematical equation, not some massive conspiracy to dump the dollar...

...In spite of record worldwide stimulus, a global recession is everywhere you look except perhaps in China. The reason is simple. When the Chinese government "suggests" banks should lend, banks lend. This is how command economies "work", using the word "work" loosely. Yes, the US has massive problems, but let's have an honest assessment of problems elsewhere.

Bottom line, China is busy ramping up production for consumers that don't exist: Not here, not in the EU, and not in China (not yet). This love affair with China, a country that will not float its currency or offer freedom of speech, and hides bank solvency issues even more so than the US, is way overdone.

Ironically, over the years, I have been a staunch defender of China, on average. Remind me to reconsider decoupling when China allows freedom of speech and floats the RMB instead of pegging it...

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Inflation or Deflation? - Page 10 Empty China

Post  Guest on Wed Sep 02, 2009 7:30 am

Thanks once again for the sober evaluation Shelby.

Looks like the China story, at least in the short term, is a re-run of the "invincible Japan" story of the 1980s. I was directly involved in the property boom during that period and had big doubts about the over-bullishness of Japanese investors.

Having said that, right up to the point when the wheels fell off, the belief that Japan would be the No.1 force in International investment was an indisputable article of faith for a lot of players.

Plus ca change ..........

Guest
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Inflation or Deflation? - Page 10 Empty Evolution of the IMF Special Drawing Rights

Post  Guest on Sat Sep 05, 2009 6:34 am

Hi Shelby,

Q1. Do you think this change in the process and rationale for the issue of SDRs is as significant as this writer thinks it is?

Q2. If not, given the timing of the latest run-up in the PMs, do you think the perception that it could be an inflationary tool is a factor in the run-up?

http://www.kitco.com/ind/Nathan/aug312009.html

"The SDR has been around since 1967, but never as a convertible asset. That changed Friday, August 28th, 2009. The SDR has quietly mutated."

.................... "The ability to inflate has now been augmented. It has transcended national boundaries from national central banks to a world central bank. This "new" bank now has the power to create money. Inflation is no longer limited to one currency but will affect all paper currencies in the world. We now have the prospect of a synchronized international inflation."

Cheers!

Guest
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Inflation or Deflation? - Page 10 Empty Re: Inflation or Deflation?

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