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Inflation or Deflation?

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Inflation or Deflation? - Page 13 Empty Denninger again shows he has globalization myopia

Post  Shelby on Mon Dec 28, 2009 9:36 pm

Denninger explains very well why we have deflation of things that had been severely over-financed with credit:

http://market-ticker.denninger.net/archives/1796-Gary-North-You-Asked-For-It.html

However, as I pointed out in my prior 2 posts, as 1/7 of the world's population's net worth is deflating in real terms due to the implosion/stagnation of their credit, the other 6/7 are inflating away as their billions of youth enter their prime workforce years and their borrowing is increasing. I see this on the ground here in Philippines (annual doubling of motorcycles sold on credit in past few years and accelerating! now cars, appliances, everything), and the aggregation of that is the dollar carry trade.

On net balance, we have inflation in the world, and interest rates are too low. This is why gold is rising (gold pays no interest or income thus it is only attractive during times of negative real interest rates or in times of flight of capital). And people who are not invested in the developing world in cash businesses, are exponentially falling behind in terms of their share of the world's wealth.

Make sure you note that USA current account deficit is losing market share of world GDP! That is global inflation.

As I explained with examples in my prior post, Denninger is a socialist (but he probably doesn't realize it...and note I respect and link often to his excellent research and analysis), because he thinks the solution is regulation and law enforcement, and he doesn't seem to understand that you can't regulate human greed just as there can't be a sustainable gold standard because people demand credit and the mining of new supply of gold will not support loaning gold at greater than 2% (2% in gold weight per year interest). The imbalance between the developed and developing world was driven by the selfish greed of boomers period. Majority of boomers wanted what Greenspan did, they cried in support of the Obama dream, they read Time magazine in support of Bernanke as man of the year. Now the imbalance is correcting, and you don't stand in the way of that free market blowback tsunami with domestic regulations or law enforcement. Denninger seems to forget that we had sweatshops in the USA too when we were competing to produce the world's goods.

It is now very clear to me that Fed is going to use a "kick the can down the road" strategy of creating massive liquidity that is exported via the carry trade, and centralize the domestic liquidity where the govt becomes the private sector and all ROI is merely a paper return that is being offset by the inflation abroad, or in short a transfer of private wealth from USA to the developing world (and thus to the managers of that capital in developing world):

http://finance.yahoo.com/news/Fed-exit-strategy-Let-banks-apf-647618622.html?x=0&sec=topStories&pos=3&asset=&ccode=

They will even levitate the housing prices by sweeping it all under the rug of the F*Maes, leaving the problem as a socialized morass in the end:

http://market-ticker.denninger.net/archives/1800-Are-Banks-Scamming-Fannie.html

Note North agrees with me that "mother of all defaults" could come at the bitter end:

http://www.lewrockwell.com/north/north123.html

Gary North wrote: THE CRACK-UP BOOM

There is a long-term deflation scenario that I accept: the scenario presented by Ludwig von Mises in 1912. He predicted the possibility of long-term monetary inflation, followed by price inflation, followed by a contraction in the division of labor, followed by a raging mania to get out of money and into commodities. This scenario, he called the crack-up boom. It is always followed by the adoption of a new currency unit and massive readjustments in the economy. This is the depression stage.

The worse the crack-up boom is, the less painful the following deflationary period.

===============
Something I had written to Gary North about his stance on usury and silver.

North may be stating
that usury is now allowed by the Bible, but he may not be arguing that it
is favored by God. I think Hommel has even written that the Bible allows
usury and we should not try to force people nor ban it (we can't, effort
would be counter-productive...just look at the crazy inquisition genre of
crazy blowbacks things society did when they tried to ban usury in the
middle centuries).

Lack of understanding starts with being obsessed about money and certainty/insurance.

Wages in USA priced in gold have declined by 2/3 since 2001.

What is really happening is a re-balancing of the value of the world.

Burying money in a hole enables someone else to better redistribute your
capital to do the most good for the most in need who are the most
productive.

If the world ever consumes 0.6oz silver per capita, as it does in the
developed world, that would be 4 Billion oz per year consumed.
There isn't that much silver in the world.

But some investing in small business in developing world right now, are
seeing 50 - 100% returns on capital per year, so clearly those putting their
money in precious metals are falling behind, unless the govts of the world
totally destroy the financial system of the developing world (which I
think is unlikely, because govts would be overthrown worldwide).

In short, it pays to not think so much about money, and think about doing
good.

As for usury, it is simply a stupid way to manage money. It enslaves the
lender (saver) and the borrower and gives power to socialism. 1 Samuel 8
and numerous other verses apply.

Shelby
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Inflation or Deflation? - Page 13 Empty 2010 danger of deflationary spiral

Post  Shelby on Thu Dec 31, 2009 3:07 pm

This guy is very detailed in his research and very intelligent (computer programmer, former CEO, CTO like me):

http://market-ticker.denninger.net/archives/1793-Where-We-Are,-Where-Were-Heading-2010.html

However, he (and I too) underestimated last year the degree to which the central banks would create new credit (or hid defaults due to lies which is a form of extending credit) to combat the deflation.

The deflation is inevitable, as I had written and predicted in 2006:

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

The deflation is being made worse by misallocation of all this capital now (e.g. overcapacity in China, all manufacturing being sucked out of the Asian tigers to China).

However, I can not be sure the deflation hits in 2010. The central banks will again try to delay it with more stimuLOST.

But as I say, by 2012, the wheels are sure to fall off the global economy. The smallest asian tigers with floating currencies will benefit most from this in long-run (get back the manufacturing China stole with currency peg, get a wave investment from China/Japan/Korea when Asian monetary union is formed), but the short-term effects could be like the asian crisis of 1997 - 1999.

BE-AWARE.

===========
ADD: people are making a big issue of the fact that we go from $0.2 to $3 trillion in net bond issuance from 2009 to 2010. What they mean is the total net bond issuance, minus the portion bought by the Fed with QE was only $0.19 trillion in 2009 and that Fed has said it will stop QE by March (you believe that!), so I think this is not such a big change as they claim below (just more of the same from 2009 and the problems and inflation effects are accumulating and accelerating):

http://www.kitco.com/ind/Lewis/dec302009.html
http://www.zerohedge.com/article/brace-impact-2010-private-demand-us-fixed-income-has-increase-elevenfold-or-else

1) Announce a new iteration of Quantitative Easing...

2) Prepare for a major increase in interest rates...(must happen unless all bonds are bought with #1)

3) Engineer a stock market collapse...(to drive demand for bonds)

As I had stated in prior posts, I think we will get #2 first (high interest rates will drive them into stocks), then #3 later in year or 2011 (PTB don't want to crash stocks until the masses have been pushed out-of-bonds into stocks, always the masses must be bled so that this transfer of wealth from the boomers can be completed). #1 will continue secretly in swaps and other lies as necessary to get the main theme of #2 then #3 on track.

#3 won't happen until more of the middle class have moved out-of-bonds (due to mounting losses because of #2) into stocks.

I think Denninger is wrong and they boys can kick the can down the road until 2011 when the next round of mortgage defaults will overwhelm Timmy and gang.

Denninger alludes to the accelerating problem of rollover by 2011 (which will be astronomical by 2012):

...A huge part of this is Treasury debt, and there the news is even worse, as there's a serious duration problem in this regard - nearly half (about 40%) has a maturity of one year or less. This means that Treasury must roll over that debt - about $3 trillion worth - "or else."

Ask the asset-backed commercial paper market and auction-rate securities folks what happened to them when their short-duration paper couldn't be rolled on commercially-reasonable terms. Then extrapolate that to what happens to Treasury if (or possibly when) they're unable to roll $3 trillion plus issue another $2 trillion on top of it to fund the deficit. Do you really think that $5 trillion and change of Treasury paper is going to be "all ok" sans "monetization" - or will "they" foment an intentionally-engineered stock market crash to scare people into Treasury debt?...

But then it finally comes crashing down, it is going to the largest financial crash ever, with "debt" at 840% of GDP!!!

http://www.forbes.com/2009/12/18/government-budget-deficit-personal-finance-financial-advisor-network-treasury-debt.html


=================
Here is how I introduced myself to Denninger in email:

Again I continue to be impressed by the breadth of your research, which aids me, and here is my analysis of your 2010 predictions.

Besides my point that the masses have to first be moved from bonds into stocks (afaik most have not yet moved out of their short-term fixed income accounts), before they can be moved back into bonds, also realize the next round of (residential) mortgage defaults doesn't peak until late 2011 and doesn't really get rolling until later in 2010.

P.S. I hope you didn't misinterpret my one main criticism of you. I said that you are a socialist and do not realize it, because you favor enforcement as a solution. I hope I can convince you that what is happening to the boomers is enforcement (reaping what they sowed) by the free market (for their excesses and refusal to go into the world and invest their talents, see the story of talents in the Bible). If you instead support wide ranging increase in laws and enforcement budgets because of this, you will aid in the creation of a locked down, fascist NWO. Please consider backing off your fantasy of well functioning regulated capitalistic society. It never has existed and never well. Please read 1 Samuel 8 and understand the mathematical and economics implications of it.

Shelby
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Inflation or Deflation? - Page 13 Empty Traded emails with Denninger

Post  Shelby on Fri Jan 01, 2010 2:55 am

ADD: deflationalists miss the fact that just by slowing down the rate of defaults of mortgages (e.g. TARP, unlimited funding for F*Maes, new home buyer credits, etc), this is in fact pumping money into the economy that would not have otherwise been there. Just because there is an net deflation of credit globally, does not mean that the fiats are not being debased in value. One can actually hand out money from helicopters more efficiently by taking less money away than the defaults would have taken. DEFLATIONALISTS CAN NOT SEE THIS. You can indeed have deflation of gross global GDP and at same time have transfer of wealth via the inflation tax. This is the key epiphany and the really clever plan that was devised by the PTB that are running the globalization process.

=========
As you read this below, note that Denninger shut me out once he lost the debate about gold & silver. Understand folks that the boomers are still living in lala land, and when they realize they are without hope by about 2011/12, then they are suddenly going to run for the exits. You will not be able to get out by that time. It will too late. The system will go into lockdown mode. Also be aware that the boomers are going to be very jealous and angry, just see Denninger's scary socialistic comment near the end. They will come after your gold and silver. I am warning you now, to get it out of the USA or at least bury it well and get prepared to pretend you are one of them. If you are a boomer and this doesn't apply to you, then you are the exception and I applaud you.

Note his incorrect prediction in 2009

http://market-ticker.denninger.net/archives/689-Where-We-Are,-Where-Were-Heading-2009.html

Denninger wrote:* Precious metals will not be a safe haven. The callers for $1600 and above on gold will be wrong, unless there is a major military conflict. I do not rate that probability as particularly high, but it is an event (along with a major terrorism incident - nuclear or biochemical - that would cause a rocket shot in Gold prices), so I am hedging that call. The risk of this sort of "response" to the economic crisis is, however, real, and will rise significantly going into 2010 and beyond. We'll revisit this one (a major war) next year.

He was only 56% correct (that is not better than flipping a coin!) from 2009 predictions.

He doesn't seem to note that even when oil took a dive from $147 to $40 (or whatever it was), gold was only down 32%. They can smash commodities all they want, and gold is not going to get very smashed. As long as you buy slowly over next few months, it is very unlikely you end up down more than 15 - 20% in gold at most at any point, and it will be very temporary if you do.

Now I do not want to totally discount his logic on problems outside the USA (every broken clock is correct 2x a day). Indeed he could be correct about that, and we see a strengthening of the dollar right now, that is why I am being cautious/slow to average in on buying precious metals. But even if he is correct, it doesn't matter, just look at this chart of gold priced in everything but the dollar! (it says $GOLD:$USD which means gold priced in the price of the dollar in foreign currencies)

We can see why he thinks gold and silver are not the solution because he hoping people will stop spending and we will get defaults and depression sooner (he is hoping lawsuits will bring this out sooner also):

Denninger wrote:We keep hearing so-called "pundits" talk about how "we must spend like mad or we will have a Depression." Folks, that die was cast in 2001 when the decision to avoid a recession by pulling forward demand through excessive debt. It is no longer possible to avoid the outcome, we can only choose when the outcome occurs, and the longer we wait to do it the worse it will be as a direct consequence of the fact that in all modern monetary systems money issued by the government is in fact debt and the problem is that we have too much debt already!

I realize he is captivated by the "negative marginal utility of debt relative to GDP" that also fooled me back in August/September. I am confident he thinks I am a simpleton hyper-inflationist and he doesn't realized that I already explored that negative marginal utility of debt concept in depth (ad nauseum) with Antal Fekete and others. Negative marginal utility of debt does not stop monetization/debasement, it only renders it counter-productive to GDP. The only thing that can stop determined debasement is hyper-inflation. That is the mistake I made and he is making. And where does the flight of capital go that changes inflation into hyper-inflation (a flight of capital event)? The other fiats will all be competing to devalue, so there is only one place for hyper-inflation capital to go-- GOLD & SILVER (or other hard assets). Someone should email him this or post a link in his forum. I am not going to bother, because I have expended too much of my time on this.

He doesn't seem to appreciate that a system in this stage is like a freight train. The boomers are not (not all of them) going to choose to stop this train by willingly stopping spending (and taking action to stop the Fed and Treasury from spending with currency swaps that send the cash abroad so others can spend it, they aided the Chinese to sell out of bonds so the Chinese could spend abroad, no problem they printed the money, and they will continue doing this). The Fed and Treasury dept will see not creditable force to stop them until there is runaway inflation. Then pushing on a string won't work any more (because prices will rise faster than money can be distributed and there will mayhem and unrest). Until then, gold is up, up, and away....

Denninger wrote:Debt is inherently deflationary; the "hyperinflationists" will once again be shown to be wrong (how many years running will it be now?)

Does he really think we are that simpleton? We know there is deflation of things priced in credit (e.g. real estate, except in some developing countries), but we also know the Fed and Treasury are doing a lot to keep these values from imploding entirely, and while doing this, they have QE to the tune of $1.5 trillion ($2 trillion next year, and accelerating with rollovers and unknown bailouts coming) and thus gold has been up 15% on average every year since the 2001 date that he claims this deflation was cast in stone.

Granted that physical demand was down significantly in Q3 2009, with prices rising. Gold is correcting now and we should not be too cocky, because it is true that we small time gold investors currently have nearly no effect on demand.

I think the basic point that Denninger is missing is that perhaps on the order of $3 - 5+ trillion in new fiat will be created worldwide in 2010. Even if that is not enough to feed the exponential debt bubble (i.e. there might be some defaults), it still is enough to send gold higher. Monetary debasement causes gold to go higher. He will learn this lesson the hard way (the experience of hard knocks). China will be able to monetize away any default as long as internal price inflation does not making it pushing on a string. I have seen no evidence we are there yet. We may get some scares abroad and give us some nice dip prices for gold, but we are not over the cliff in 2010 (I do not see the evidence for that yet... we need to see price inflation and rising interest rates first).

Denninger wrote:Protectionism and currency manipulation will rear their ugly heads in 2009, originating not here but in Asia as their economies go straight into the toilet. China and Japan are at severe risk here.

Does he contemplate that if China ever goes into a trade war with us and decides to lift the Yuan peg, that price inflation for many goods in USA goes through the roof? I doubt that will happen in 2010 though. As what I can see, Asia continues growing. Japan has been a basket case for decades, who cares (anything new?). China is not going to go under until price inflation gets out of control, which is what happen in early 2008.
==============================================================


Greetings Mr. Denninger,

I will read the updates to your year end predictions posts. Thank you for the reply.

The constitution is dead because we haven't used gold and silver coin since 1933 and 1964/71 respectively, and that is the only action that will return the minimal govt that you seek and punish those who have profited from socialism (any other course of action is pissing in the wind):

http://www.financialsense.com/fsu/editorials/2008/0923b.html

I was still fighting for that up to about 2006/7. I volunteered in Westlake Village, CA for Perot in 1992. I am 44. I am a computer programmer and former business owner also.

Am I not correct that majority of funds of the masses (that had left stocks 2007/8) are still in bonds? Thus my logic is that interest rates must rise (masses lose) then they will run to stocks, then later in 2010 or 2011 we get stock market crash (greater fool loses again), and send them back into bonds again (for the final kill on USA default). That combined with more sneaky ways of hiding QE may keep this afloat until the next peak of (residential) mortgage defaults 2011/12:

http://www.kitco.com/ind/Clark/dec152009.html (see chart of resets)

"masses" includes pensions funds. Wall-street will make the boomers pay for their excesses. Wall-street is putting the cost of the boomers excesses and socialism squarely on the backs of the boomers (doing 1 Samuel 15 in response to the boomers defiance of 1 Samuel 8). Yes the boomers are socialists. And any one who has capital and isn't a socialist, better get out now while they still can. Vote with the feet, but not to another community bank but to gold, if they want to revive the constitution:

http://www.financialsense.com/fsu/editorials/2008/0923b.html

I have written my share of nonsense (you are more consistently well researched and thought out), but the following is food for thought about real estate and constitution:

http://www.financialsense.com/fsu/editorials/2009/1012b.html

Note I recognize that a gold standard is unsustainable, because people demand debt and it is mathematically impossible long-term to loan in gold (payable by weight) at interest rate greater than the yearly mining increase in production. Nevertheless, when the masses and govt has gone socialist, it only takes a few % of population to buy gold and silver in order to destroy the socialism. We can not even get 1% to do that now! The boomers have their heads in sand and their arses up in the air in the homosexual position.

My thought is the only thing that can drive the gold price down in 2010 is rising dollar. But what can drive the dollar higher now? EU is not going to bail out the member countries banks, thus the Euro should get stronger not weaker? Japan may re-enter QE? Afaics, only a dollar liquidity crunch would drive the dollar consistently higher. Thus I view the current dip in gold as buying opportunity. Interest rates can't rise fast enough to put us in positive real interest rates (no Volcker reset is mathematically possible):

http://www.kitco.com/ind/Mickey/dec222009.html (see excellent chart)

Gold also rises as interest rates do. Apparently this is because interest rates changes lag opportunity cost, so rising interest rates correlate with negative real interest rates:

https://goldwetrust.forumotion.com/precious-metals-f6/gold-as-an-investment-t60-90.htm#2460

See the pattern of the gold chart in all currencies:

http://www.gold-eagle.com/editorials_08/degraaf120809.html

My forum is publicly viewable.

Let's win! And let's win globally! I am in Asia, setting up businesses to capture the exported credit and inflation. Demographically the future is here. Want to dump that back in gold+silver and break the backs of the socialism. But of course I am too slow and I am only 1 person. We need better advocacy.

If we are going to move any capital outside the USA, I think 2010 may be the last year to do it. Would be interested to read any thoughts you have about that in future.

Any way just stoking the idea mill.

=====================
> Gold and silver have nothing to do with the problem.

There is a reason our constitution requires only gold and silver.

It is this peculiar problem of human nature where when people have the chance to cheat, they most always will (because if they don't they will be outcompeted by someone who will).

Thus the only way you keep any govt honest and small is with the pendulum of gold and silver. Without gold and silver, our constitution is dead.

If you have a counter-logic, I want to read it.


=============
define free market

Free market = maximum independent (not co-dependent) decisions

How can each person vote now with independent financial actions in this economy without using gold and silver?

Community banks? You advocate to fight fire with fire, perhaps you forget who control the reserve and insurance premium requirements and who are deliberately killing the small banks and can kill them and steal you paper bullets ad infinitum.

This is war. We must burn it down and reset. Gold and silver absolutely. You are wasting precious time. You will wake up too late, as most boomers. You will keep waiting for the fire to beat fire default, and wake up one day with capital controls, Amero repriced in gold and severe rationing and 90% taxes.

You must grab your real bullets (gold & silver) and fight while you still can.


==================
> The Constitution makes no such demand. Go read it again.
>
> It prohibits THE STATES from making anything other than Gold and Silver
> legal tender for THEIR debts, but contains no such stricture on The
> Federal Government...
...
>Please argue from a position of actual research and knowledge.

REPUBLIC NOT DEMOCRACY (socialism)

I have on the order of 4-8 man-years of research in this.

Of course Karl, I am aware of that. Did you read my article about the constitution that I had sent you:

http://www.financialsense.com/fsu/editorials/2009/1012b.html

Did you forget that the constitution was for a Republic (of STATES), with a very limited Federal govt?

Also the states were only supposed to coin in gold and silver. Everyone was using gold and coin as currency already. Fiat is debt, so that means all current fiat money should be in gold and silver coin and should be issued by the States. But the CITIZENS of the FEDERAL corporation known as UNITED STATES (study more carefully the legislation and admendments!) have chosen to reject the constitution and use a debt that usurps the intent of the constitution.

Realize the federal govt was never supposed to have the powers it has now. The constitution was usurped by a series of admendments. Actually those depressions you mention in some cases helped catalyze those faulty admendments.

There have been depressions throughtout world history, on both gold and fiat standards. There is no panacea. Actually depressions are good, they cleanse the mis-allocation and bad debt. The point of gold and silver is that they are the only anti-dote to fiat run amok (the only thing that can clear the bad debt). Whether you like it or not, they will be again, the only difference you can advocate is whether boomers help drive that anti-dote sooner and save what is left of their net worth, or if defy the wisdom until mayhem and enslavement by about 2012 - 14. Odds are for the latter, and your mis-understanding of the Constitution is an example of the way the boomers were mis-educated by the bankster from about 1940 on wards (after they got full control and started to invade the education system).

Like most boomers, you apparently do not understand the constitution was for a Republic with a very limited govt, which could only be maintained if the people had the means and will power to fight back at times against their own govt. This can't happen when the states are no longer competing with each other, because the whole things has been merged and 30+% of the population is on the welfare state.

Also another reason that we had more frequent depressions on the gold standard, was because precisely the free market was working better. The people were constantly fighting back against the banksters (e.g. the Bank of United States, Andrew Jackson, Civil War used as means to indebt the USA and to get federal citizenship mandatory in an admendment, etc). I know a heck of lot more than you may realize. Do you want me to rattle your head with pages of facts about history?

And because of that we had net deflation throughout the 1800s. This meant savers were retiring and get wealthy. Contrast that against now where dollar is worth 2% of what it was in 1913 and savers are going to be wiped out.

I will agree with you that a pure gold standard impossible, for the reasons I stated, and thus the pendulum must always swing between fiat and gold. Guess which direction it is going to swing until the global economy is reset and toasted?

Sorry your logic doesn't compute. Try again, I want to read any further logic.


==================
> Gold and silver have exactly nothing to do with why we are in this mess
> and present no solution.
>
> You're either delusional or self-interested in trying to rape the public
> for your own personal profit. Either way, you're right - there's no
> further point to discussing this with you.


I have also stated that gold and silver will not return equity to the boomers, because once a few % buy it, the rest will be bankrupted relatively speaking. But Karl, again you show that you've been fully mind programmed as a socialist. A free market is never supposed to reward everyone equally-- it stop being a free market. The boomers are already bankrupted. They will never fully get their equity back. All they can do now is default the fiat system, and stop the bleeding. The bleeding the mis-allocation that driving farms to close (have you studied that!), driving out what is remaining of the industrial base, etc.. Their paper value is already gone, they will never get that back. The only thing they can save now are the hard assets they already have, and if they don't fight soon with gold and silver, they are going to lose it all and end up with severe shortages, rationing, and mayhem at the end.

Of course I am not delusional, and I have also warned that gold and silver investors are going to be under attack and this is not a panacea. But they are heros who are trying to bankrupt the system sooner. The free market rewards those who are first. As in the dark ages, if this goes too far, we may have to bury our gold and silver for a long time, or face retribution.

You are delusional if you think there is any other solution. The fiat system will not reset in near-term. You will watch gold go to the moon as the fiat system hyper-inflates in desperation even beyond 2012. It is just after the liquidity crunch of 2011, the system will get much more aggressive, so there will be real changes on the ground, such as capital controls, and other unpredictable force.

Do you really think the central banks are ever going to stop monetizing? They will when the masses have been totally bled to nothing.


=======================
watching your generation go down in flames

Boomers will just never admit that it was THEIR fault because they participated in it and lived beyond their means (and ignored their children and did drugs and many other severe screwups that come from being spoiled by stealing the capital from the rest of the world).

Payback is coming now.

You think there is some core cancereous group that can be extracted. You do not see that most of the country is complicit (and co-dependent on the continuation of the fraud, just wait until 72% of all (including many prime) mortgage holders realize their mortgage is going underwater!). They are already bankrupt (as your research proves). The paper value is an illusion. We produce nearly nothing in USA, not even our own energy. It is all gone. It is a hollow shell of notional digits now. The gold and silver investors are simply not going to cause the boomers to lose their equity, Wallstreet did not cause them to lose, the boomers did it to themselves.

So who are you going to punish with the law Karl? See that is why the free market is so much more efficient, as it will punish those who deserve. Right now the boomers are getting exactly what they deserve and anyone who doesn't deserve it, better move quickly to the lifeboat and anti-dote.

Sorry you have good research because you are interested in trying to find proof for prosecution. I know the free market is already doing the prosecution. And trust me, Wallstreet crooks will receive their punishment, but not in the way you expect. They receive theirs in the pit of burning sulphur.



========================
APOLOGY?


> When you can stop insulting me and start discussing things, we can
> continue.
>
> I'll give you one more chance - and only one more.
>
> I stopped right here:
>
> Like most boomers, you apparently do not understand the constitution
> was for a Republic with a very limited govt,

You insulted me first Karl. You accused me of not reading the constitution, and ridiculed my knowledge, without even knowing who I am and how much research I have done. Apparently you didn't even read the links in the first reply I sent you tonight. I started this discussion by saying you do excellent research, but unfortunately you seem to have a socialistic bent. You told me that you are for the constitution. I said the constitution requires a republic with gold and silver coin for debt (fiat). You have not proven otherwise. You have also not proven that gold and silver had nothing to do with this mess. It is precisely because the people were fooled into not using gold and silver to fight the accelerating fraud in past few decades, that we have the excessive fiat problem now and the corruption and mass complicity it begets.

Just because you are older than me, and you have been a CEO, does not give you the right to insult me and then me to not insult. FYI, I have been a CEO and CTO also and have shipped million user products (Cool Page, Corel Painter, WordUp). Mutual respect.

Cut the crap and send the logic. If you stick to logic, I will too. I would love to learn something. Maybe you will too. That is the whole point of debate. I am not here to stroke my ego, and I hope you are not also. So who cares about the silly apology? We are programmers, not premadonnas! SHOW ME THE CODE PLEASE. NO VAPORWARE.

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Inflation or Deflation? - Page 13 Empty Debate with Karl Denninger continues...

Post  Shelby on Sat Jan 02, 2010 1:53 am

Obliteration of the deflationists

Deflationalists may be correct that total quantity of global debt and/or real global GDP has topped, but in any case, their point is irrelevant with respect to transfer of wealth via the monetary ("inflation" or transfer) tax and the implications on gold.

With $trillions in quantitative easing (QE), no one can argue that there hasn't been a transfer of wealth. Perhaps I should not call it "inflation" but rather "distortion" or "transfer". Gold rises because people expect to lose wealth due to theft. Can anyone argue that QE is not a theft via transfer of wealth? I think deflationalists get too hung up on the concept of the aggregate level of monetary base, and they miss the fact that when people are losing wealth via the theft of QE (of which negative marginal utility of debt is an aggregate symptom or indicator), then they will exit the instrument of that theft, i.e. fiat. This is why gold is rising in spite of deflation of the monetary base, debt, or real GDP. And this will accelerate as this realization of theft becomes more apparent, as the negative marginal utility of debt starts to really kick in as QE accelerates.

Also the monetary inflation did occur since 1913, and as all things monetary, the effects on gold are occurring on a lag, and in this case of decades since the bond bubble initiated in 1980s. The dollar fiat system was so pervasive that it was able to cause this decades degree of delayed effect. The method of the effect is described in the prior paragraph.
====================================================

Denninger wrote:> One more time.
...
> It starts with you.
...
> You haven't read The Constitution.
...
> You're right. I don't read material from people who begin with a
> blatantly-false premise.
...
>> the constitution requires a republic with gold and silver coin for debt
>> (fiat).
> No it doesn't.
...
> challenged you to provide me with a cite showing otherwise.
...
>> You have also not proven that
>> gold and silver had nothing to do with this mess.
> Yes I have. I have pointed out that over the more than 230 years of
> this republic there have been MULTIPLE detonations exactly identical to
> the one we are in now, and all but this one happened on the Gold Standard.
...
> Unproven assertion and blatantly false. If it were not then 1929 could
> not have happened - but it did. Nor could have 1873.


Karl,

I will try to elevate to a level of mutual respect, but you please must stop insulting me, you continue to insult me in this email-- I have read the constitution. And again the fact is you were the first to insult me, it started with you. You've finally provided some code which I can obliterate quite easily (no insult intended, and my nice tone will improve as you stop insulting me).

Btw, I don't understand your false accusation about me and the monetary base. I believe in your definition of the monetary base.

There are several key things that you MAY (not an accusation) be missing in your analysis, and I will write an article today to explain these in more detail. Here is a quick synopsis:

1) I did not ignore your point, I wrote this in prior email, but I repeat it with more explanation because apparently you did not get it the first time. The increased frequency of depressions that occurred on the type of gold+silver standard we had in our former republic, is evidence of the benefits of such in avoiding the extreme degree of mess we have now, as debt excesses were defaulted (by bank runs demanding gold on deposit) more quickly (and recovered from more quickly) before those debt ratios got as excessive as they are now. The debt-GDP ratio has never been higher in history of world (Forbes claims 840% including unfunded welfare state) and has run for 80 years since start of last depression, which is not a good thing obviously. An additional proof is the persistent deflation on the gold standard, which meant savers got wealthy and were able to retire. Whereas, now a dollar that is worth 2% of what is was in 1913. An additional evidence is that the death of fiat type depressions have been more voilent and catastrophic, e.g. French Revolution following John Law fiat, Hilter following Weimer Germany, Dark Ages following debasement of coin in Rome, etc.. As for 1873 and 1929, I am confident they will be much less severe than this one, and in 1934 the gold standard was removed (domestically), so 1929 is not entirely applicable. Karl do you still persist to claim that gold&silver have nothing to do with this? And what logic can you use now?

Scientists know that correlation does not prove nor disprove cause & effect. For example, just because there was fraud in all cases of depressions, does not prove that fraud had nothing to do with depressions.



2) I was originally fooled by the negative marginal utility of debt, and it is a critical error. It means increasing debt is counter-productive to GDP. However, it by itself does not signify a limiting force against debasement/QE.


3) The only limit to debasement (via QE) is political will, which means that the people suffering from debasement, a) realize it, b) outnumber or outpower those who are benefitting from it, c) have enough force to kill the Fed+Treasury. Remember, "its our dollar but your problem". QE will continue and the rest of the world has to eat it (because neither gold nor any other fiat can replace the dollar quickly, and additional dollar debt via carry trade is cementing this co-dependence). Thus there are only 2 scenarios that cause enough pain to end QE, a) hyper-inflationary flight of capital from fiat (to gold) or to a strong fiat, and none of this scales because there is no country on a gold standard anymore, b) severe rationing and starvation that comes from destruction of the GDP due to negative marginal utility of debt as QE continues. Tangentially, this appears to be an ideal plan if one wanted to create the mayhem needed to bring about a world or regional currencies and government, because it is naturally unstoppable until the host dies). And this is why it is just a serious matter that I have a right to get frustrated that boomers are in lala land, and to argue forcefully with deflationalists who are arguing to prevent the only anti-dote to this terminal virus.


4) "Deflationalists" miss the fact that just by slowing down the rate of defaults of mortgages (e.g. TARP, unlimited funding for F*Maes, new home buyer credits, GMAC bailout, etc), this is in fact injecting (via a net result of) money/debt into the economy that would not have otherwise been there. Just because there is an net deflation (topping) of debt globally, does not mean that the fiats are not being debased in value. Scientists do not conflate things which are not perfectly correlated. One can actually hand out money from helicopters more efficiently by taking less money/debt away than the defaults would have taken. DEFLATIONALISTS CAN NOT SEE THIS. You can indeed have deflation of global debt (or even real GDP) and at same time have transfer of wealth via the inflation tax. This is the key epiphany and the really cleverly corrupt plan that was devised by the PTB that are running the globalization (re-balancing) process.


5) Why is it that the deflationist says that "'hyperinflationists' will once again be shown to be wrong (how many years running will it be now?)" (Denninger), yet gold has been up every year for 9 years and has a compound growth of 15% per year?? Why is it the deflationist is using the potential crash of commodities to argue that precious metals are not a safe haven? When I note that oil fell some 70+%, and gold only fell 30%, that means those holding gold got more wealthy. Not a safe haven relative to paper? Well if someone feels secure holding paper, I will just refer them to the game of musical chairs. Hold cash is not exceeding the rate of return on gold over the past 9 years, ditto bonds forward (the H&S secular top has formed). Those who want to speculate (e.g. shorting bonds) are not talking about safe haven but a different genre of activity and risk.


6) I do not know why we need to argue about the imperfection of the US Constitution as it has obviously failed. It does require a Republic of states, and it requires that the States shall make only gold and silver coin as legal tender for payment of debts:

"No State shall[...]make any Thing but gold and silver Coin a Tender in Payment of Debts"

One may argue that the Congress's power to coin money is allowed to supercede the obligation on the States. I can cite and argue against that effectively, but it is a mute point, as the fact is that my arguments would be dead. The constitution that I believe in and the gold+silver standard that was the anti-dote, is now dead. So why argue it? Does winning or losing this prove anything? If you convince me it is counts for anything, I will cite and argue why the States rights and obligations are superior to the Congress and cite and argue about the limitation via separation of powers, etc.. But it is all dead now any way, so it is pointless. We are in the death spiral. Just to give you taste of my line of argument, the Congress was created with a very limited purpose of mutual defense and coordinate the foreign and inter-trade and that is all, which by now has been violated:

"The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States"

The Congress was not given the constitutional power to coin the money for general use in the States! The Congress was merely to be the glue between the States and the foreign countries. And why was the power of the federal govt limited by our fore fathers? Do not forget they were escaping from a King and a centralized oppression (like what we have now). Unfortunately, we are having to re-learn the same lesson again.

Shelby
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Inflation or Deflation? - Page 13 Empty 30 year mortgage is the root cause, not fraud

Post  Shelby on Sat Jan 02, 2010 7:57 pm

Karl, I haven't read your replies yet (food poisoning and clear my emotions).

At the following post, you emphasize the fraud which you say encouraged people to finance beyond their income potential:

http://market-ticker.denninger.net/archives/1809-The-Mainstream-Media-Wakes-Up-HAMP.html


Do you not see that the 30 year mortgage itself is the problem? When the masses are able to leverage 30 years of income, this drives the prices of homes up, and everyone pays (30 times?) more than they would otherwise.

This is why the bible says "borrower is slave to the lender" and the bible says there must be a release every 7 years from debt. The entire society disobeyed this common sense for decades before this underwriting fraud of late.

This death spiral was built in culturally and mathematically over decades.

You are focused on is the way the society is flaming out in its death spiral. Due to the aforementioned support by society for the ever increasing home values (has to be, because due to the 30 year mortgage, people overpaid decades ago), the political will does not exist in the society as a whole, to do anything else but flame out in a death spiral. There is no way housing should be 30% of one's production! What a waste! I pay $90 a month rent (because no 30 year mortgages where I am), which is much less than 0.1% of my income.

This is why gold & silver are so important. They enable a wiser and much smaller % of the society to force the default the death spiral sooner. If you are waiting for the entire society to wake up and lobotomize the death spiral, you will be waiting a long time. The death spiral is built into the culture now of the math of the 30 year mortgage's effect on prices.

And I disagree with your advice (in other post) to consider mortgages that are 2.5x average income in a region as potentially a reasonable price. The world is re-balancing, there is competition with regions (7 billion people) that do not use debt for housing, and 2.5x is going to be about 10 times too high eventually, when gold & silver finally default this fiat death spiral.

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Inflation or Deflation? - Page 13 Empty Debate with Denninger continues more...

Post  Shelby on Sat Jan 02, 2010 9:46 pm

Apologies for the delayed gratification, as I really did eat some rotten rice had to battle a mild food poisoning. (my maid was off for the holidays and I ate the rice from the rice cooker and I'm in the tropics)

below interleaved...

>> 1) I did not ignore your point, I wrote this in prior email, but I
>> repeat
>> it with more explanation because apparently you did not get it the first
>> time. The increased frequency of depressions that occurred on the type
>> of
>> gold+silver standard we had in our former republic, is evidence of the
>> benefits of such in avoiding the extreme degree of mess we have now, as
>> debt excesses were defaulted (by bank runs demanding gold on deposit)
>> more
>> quickly (and recovered from more quickly) before those debt ratios got
>> as
>> excessive as they are now.
> No. The depressions were in fact both more severe and more frequent.

You should say "yes" because you just agreed with me.

Yes they were more severe and more frequent. Exactly.

Define "severe". This point is the debt ratios were not allowed to get to such extremes. And yes the corrections were more abrupt, which was a good thing. In fact, you are asking for an abrupt correction on your website.

> Indeed, they usually bankrupted virtually EVERYONE

Yes that is what happens when most people use debt. It will be the case this time too, but the difference is as I said before, the savers were winning in the 1800s, and now the savers are losing.

This time what you will have is socialism. Before we still had capitalism. That is difference.

> and what's worse,
> they weren't created by the debt:income ratio, they were manufactured.

Exactly my point. The banksters could not get what they wanted, because of the weapon of gold & silver, thus the battle was waged and more frequently too.

Life is competition (free market). Evolution. Insurance guarantees failure, i.e. socialism. People want someone else to take responsibility for their inability to control their desire to use debt. What can I say? People get what they deserve.

Trying to teach this to a socialist is pointless (not accusing you of being one, I need to see your reply next). Their mind is already set on the concept of equality. Equality exists in fairytales, not in nature and evolution (nor in the wisdom of the bible).

> This is a provable fact - indeed, the British Banking Elites sent people
> over here to America and literally bribed Congress into creating the
> conditions for a Depression - twice.

Yup. And they (and/or their American offshoots) are now feeding the 30 year mortgage mania to its final death spiral now. And they will maximize this death spiral and the populace is complicit, bankrupted, and thus co-dependent.

> Hard money makes this possible. It is the lack of understanding that
> the issue is not the amount of money in the system, but rather the issue
> of insoluble debt, that causes the problems.

Yes hard money makes it possible to manipulate and so does a pure fiat money. That is irrelevant on the point of manipulation, but revelant on the point of the frequency of the battles.

Indeed it is debt which is the root cause. As I said before, hard money is the antithesis of debt, because it can't be loaned at interest rates higher than the annual increase in the supply of the metal.

Metal money is not a solution, but rather it is one of the instruments of the free market, used to swing the pendulum between too much and too little debt in the economy.

Fiat and gold are always in competition with each other, and when the public is too much fooled to one side of pendulum, then debt ratios get way out-of-whack (either too low or much too high).

> The issue of credit has
> nothing to do with the type of underlying monetary system (fiat .vs.
> hard); as that's not where the problem comes from.

Disagree.

Debt can not be significantly expanded when everyone is holding gold. Dark Ages is a good example of what happens when debt is too low.

>> The debt-GDP ratio has never been higher in
>> history of world (Forbes claims 840% including unfunded welfare state)
>> and
>> has run for 80 years since start of last depression, which is not a good
>> thing obviously.
> Unfunded welfare statism is not debt. It is a bald political promise
> that will not be kept (can't be kept!)

So is debt. Debt is nothing more than a promise (future's contract). And unfunded welfare is a promise. I don't see any need to make a distinction? Most of all of those promises are going to be broken eventually (or we will have a global socialism and parasite on the developing world for another decade or more).

In any case, I am sure you agree the debt ratios are the highest ever recorded?

>
>> An additional proof is the persistent deflation on the
>> gold standard, which meant savers got wealthy and were able to retire.
>> Whereas, now a dollar that is worth 2% of what is was in 1913.
> Ah, but you forget that there was no interest paid on savings nor any
> realistic capital appreciation.

Wrong, it was greater than 5%:

https://www.globalfinancialdata.com/images/charts/IGUSA10D.jpg

5% compounded for 25 years (338%) with deflation in the economy is what built the concept of retirement in our culture. Work hard and be rewarded was what built this great nation. It is why we were so powerful, coming into the 20th century.

> Therefore we're not really any better
> or worse off - it is not how many dollars you have but what they buy.
> If I have $1,000 and it buys a suit I am no better or worse off than if
> I have $100 and it buys a suit. In either case I can buy a suit.

I have corrected you above on the point about savings. That is why we have a very low savings rate now and have socialism, no longer capitalism.

> Indeed the usual argument against fiat money is that it has lost 95% of
> it's purchasing power since 1913. Ok, fair enough. But what is that in
> real terms? About 1% annually. If you earn 3% annually you're
> dramatically ahead in purchasing power terms, again, due to compounding
> (the graphs run away from each other.) This is why, by the way, the
> "system" wants a ~1% or so inflation rate - over long periods of time it
> actually promotes the ability to retire, even in a lowly passbook
> savings account.

That argument only works for the person whose savings is very small relative to their income. Again this is why we have a very low rate of savings and no longer have capitalism. An economy needs savings to grow an industrial (capital intensive) base. We've been bleeding for decades because of this.

I am not trying to kick you in the side, but I have really blown away your thesis against hard money. I hope I have now convinced you and you will have the epipheny. I wouldn't have bothered, if you were not an important person to influence and you have helped me a lot with the detail of your research. Also you helped me in this debate to have a couple of new epiphenies which have brought more clarity for me. That is a compliment.

> The problem with deflationary busts is that they wipe out anyone in
> debt.

Perfect! It keeps people on their toes when they consider taking on debt. That is capitalism, only the most efficient survive. Which thus provides the most benefit (productivity) to society.

> They arise when one tries to tamper with the ordinary
> recessionary cycle, which is an INHERENT mathematical requirement for
> ANY monetary system in which financial leverage (Debt) is allowed.

Only the socialist believes there is some optimum level of retrenchment for recession. The free market respects nature and it random ability to LITERALLY anneal the optimum outcome. The socialist wants to apply a smoothing filter (i.e. insurance and centralized management), but in reality ends up masking the feedback mechanism and ends up with much worse retrenchment by delaying it. Hope you can understand that deeply and mathematically. I think you can/do. Otherwise we can dwelve into this deeper.

>> An
>> additional evidence is that the death of fiat type depressions have been
>> more voilent and catastrophic, e.g. French Revolution following John Law
>> fiat, Hilter following Weimer Germany, Dark Ages following debasement of
>> coin in Rome, etc..
> ALL hyperinflationary explosions (e.g. Weimar, Zimbabwe, Argentina, etc)
> have resulted not from Central Bank games but from the government
> grabbing the printing press and using it. Weimar is particularly
> instructive - as soon as the government started printing non-debt-backed
> fiat currency the banks instantly shut down all lending (to preserve
> themselves from being sucked into the vortex) which simply tightened the
> spiral.

The central banks (over decades or more) lead to this final outcome, which is guaranteed for every fiat. That the banks jump out at the end game, is irrelevant to my point (although still interesting to note).

>> As for 1873 and 1929, I am confident they will be
>> much less severe this one, and in 1934 the gold standard was removed
>> (domestically), so 1929 is not entirely applicable. Karl do you still
>> persist to claim that gold&silver have nothing to do with this? And
>> what
>> logic can you use now?
>>
> By 1934 the damage was done

No the greater damage was done by the New Deal which followed, which was enabled by confiscating the gold. Prices were declining faster than wages until the New Deal crap started and aggregate measures were favorable, i.e. people were eating more butter. Whereas, by WW2, people couldn't even eat butter. Go check the statistics, or read Howard Katz's articles.

> and the metallic standard was not in fact
> removed. You do remember Silver Certificates yes?

The manipulation of the gold/silver ratio was one the techniques used by the banksters to foster their power to get us on to a 100% fiat system. I have written about this manipulation and how USA drove a depression in China with silver in early 1900s, which lead to the Communist china. If you want the link, it is my first article on gold-eagle. The banksters as you know first attacked china with the opium trade and silver centuries before that.

> I had a number of them in my younger years. They were issued until 1964.

I still have one here. And it is a broken promise. I can not get 1 silver dollar for it as promised by the US govt. The default of the dollar itself comes next.

> The issue is not now and never has been about monetary standards.

Agree while disagreeing, in that I think what people use as money is the issue in the following sense.

It is about the free market for people to choose which store-of-value is best in each epoch, because this free market is the feedback mechanism for control of debt ratios. Right now, absolutely gold and silver, because the fiat system is in death spiral. The banksters have manipulated the normal signals that would drive people to gold and silver sooner, i.e. a futures market in money itself is an abomination (we have discussed this in deep detail from 2006 - 2008 as to how it harms the free market at the jasonhommelforum.com). That abomination is exactly what is allowing us to enter negative marginal utility of debt. The feedback loop has been temporarily disabled.

> It is
> and always has been about the ability to issue credit without bound.

Agreed, and moreover gold and silver are the only counter-balance. The socialist believes that a centralized institution can be a counter-balance. They understand not nature, evolution, the free market, the exponential function, etc.. Nothing is nature is smooth or ordered. The universe trends to maximum disorder (1856 law) and all order is exponentially increasing and decaying. I can even relate this to fundamental theorems of computer science and the Shannon-Nyquist theorem, but that is probably too deep at this point in our discussion.

> The reason we did not blow up for 60 years from the 1930s to 1990 had
> everything to do with the fact that everyone died who lived through the
> stupidity of the 1920s credit creation and we thus tore down the
> protective barriers, most particularly the bar on speculative
> cross-collateralization that enabled cheating on reserve ratios, and
> then later an outright removal of any pretense of leverage limits.

Granted on a pure fiat system, the banksters were quite willing to allow a creeping and incideous socialism, as they knew they had to bring billions into this fiat system.

>> 2) I was originally fooled by the negative marginal utility of debt, and
>> it is a critical error. It means increasing debt is counter-productive
>> to
>> GDP. However, it by itself does not signify a limiting force against
>> debasement/QE.
>>
> That much is correct.

Thank you.

>> 3) The only limit to debasement (via QE) is political will, which means
>> that the people suffering from debasement, a) realize it, b) outnumber
>> or
>> outpower those who are benefitting from it, c) have enough force to kill
>> the Fed+Treasury.
> No.

Did you mean "yes", see below...

> Debasement in a world where there are hard protectionist barriers (or no
> trade outside your boundaries at all) in fact does little as you get a
> nasty wage-price spiral - inflation skyrockets but so do wages.

Incorrect. It causes all sorts of destructive distortions to the way capital is allocated in the economy, thus destroying productivity.

Never is any centralized action free. There is always a cost paid in terms of the optimum allocations that would be performed by the free market. This is the key thing that the socialist does not admit.

> In an "open trade" world, however, there are two competing forces. One
> set (net importers) want a strong currency while net exporters want a
> weak one. This means you will never come into alignment, and what's
> worse is that global wage arbitrage prevents the wage increment from
> occurring. Debasement thus ultimately impoverishes from the bottom up -
> the limit is not political but literal privation and ultimately
> revolution if it goes too far.

Impressive analysis. Agreed this is an example of the distortion of the free market, and the destruction of productivity.

So then back to your "no" above, I can not see that you have disagreed with me?

>> Remember, "its our dollar but your problem". QE will
>> continue and the rest of the world has to eat it (because neither gold
>> nor
>> any other fiat can replace the dollar quickly, and additional dollar
>> debt
>> via carry trade is cementing this co-dependence).
> Bah. Ben has already pulled back dramatically from QE and has announced
> he is ceasing it entirely at the end of the first quarter.

It is a lie. They just opened the floodgates with F*Maes, so they obviously intend to QE more. It is a short-term lie in order to pull interest rates up and push the masses out of bonds to stocks for the kill later in the year or 2011.

> I have on
> VERY good authority that they are efforting VERY hard to figure out how
> to unload their balance sheet at The Fed. They didn't think far enough
> ahead - they thought they could stop the credit contraction but now KNOW
> they failed. That's where the bus stops for them - Ben is many things,
> but dumb isn't one of them.

We will see. I have heard rumors about all sorts of things that never came true. PTB like to plant rumors with influential writers who will bite. You haven't printed it (have you?) but you are letting it influence your thought process. I ignore all rumors. I pretend I never heard them.

Ben has 1600 SAT. Thus he probably knew what I am writing to you even before they started this all. He knows damn well that his job is to destroy the dollar, complete globalization and bring about the Amero.

> He is not going to destroy the only thing he has to sell.

Sure he is. That is the job he has been given by Rockefeller (JP Morgan, which is the Fed as you know).

>> Thus there are only 2
>> scenarios that cause enough pain to end QE, a) hyper-inflationary flight
>> of capital from fiat (to gold) or to a strong fiat, and none of this
>> scales because there is no country on a gold standard anymore, b) severe
>> rationing and starvation that comes from destruction of the GDP due to
>> negative marginal utility of debt as QE continues.
> Nope. QE is ending now. Not because they can't continue but because it
> didn't work. Bernnake's thesis has been invalidated and he's recognized
> it.

It will appear for a few months that it has ended. This is a necessary consolidation before the next wave. I am sure you read that the House has already passed a $4 trillion bailout for the next wave. Japan did multiple stops and starts of QE.

We know that if they stop QE, then world is going to blow up. It is pretty easy to see they can't stop QE. The world has no choice. It is too late for choices. There is only one choice, gold.

>> Tangentially, this appears to be an ideal plan if one wanted to create
>> the mayhem needed to
>> bring about a world or regional currencies and government, because it is
>> naturally unstoppable until the host dies). And this is why it is just
>> a
>> serious matter that I have a right to get frustrated that boomers are in
>> lala land, and to argue forcefully with deflationalists who are arguing
>> to
>> prevent the only anti-dote to this terminal virus.
>>
> There is no antidote.

Agreed in certain measures. But it is an antidote in terms of stopping the QE sooner (if 1% of high net worth individuals would act now).

These people have to be prepared to re-capitalize the world unselfishly. If they hoard these metals, we will have war.

> Hard money is in fact the WORST possible
> scenario.

I think I understand why you think that, and I will be able to refute, but rather than guess, please tell me your reason?

> Answer me this: How much gold or silver do you own? In
> dollar terms, in ounce terms, and in percentage of net worth terms?

A lot, but declining as I move into cash businesses in asia.

> Hard money not only won't work it will make things dramatically worse.

Globally it will help.

> It is NEVER acceptable to base your monetary system on anything you
> cannot produce 100% within your own borders. Ever.

This crisis is indeed going to destroy the concept of sovereign nations. That is the plan of Rockefeller and Rothschild.

Actually the Americans deserve it, because they gave up their capitalism (see my savings logic earlier) and sold out to the bankers. Now they are slave to bankers and they will join the regional or world govt that the bankers want.

> There are solutions to this dilemma but they do not involve a gold
> standard.

I think you are referring to fantasy of socialism? I.e. enforcing laws?

Trust me you haven't really thought that out. Show me your code, so I can explain.

> And by the way, I agree that most of the boomers are fucked,
> but for a different reason - they believe their political promises
> (entitlements) will be paid. Nope. Not mathematically possible.

Agreed. And I do not see how that is a different reason. That is just an effect of what I have been saying.

>> 4) "Deflationalists" miss the fact that just by slowing down the rate of
>> defaults of mortgages (e.g. TARP, unlimited funding for F*Maes, new home
>> buyer credits, etc), this is in fact injecting (via a net result of)
>> money/debt into the economy that would not have otherwise been there.
> Doesn't matter. The INTENT was to restart the credit creation machine.
> It failed.

You are going to hang your hat on intent and a rumor and misdirect your entire subscriber base on that hunch? Scary.

I prefer to look at the actual deeds and effects. I like facts.

The Fed is not going to stop QE until the credit creation machine restarts, which means not until they are forced into a default. This is why gold is the only antidote.

Long before people show up to cut off his head, they will have purchased gold.

>> Just
>> because there is an net deflation (topping) of debt globally, does not
>> mean that the fiats are not being debased in value.
> Oh yes it does.

You are ignoring the changing composition of the aggregate. Distortionary effects affect individual value. The govt is eating more the pie, thus the private sector is losing value.

Also, the GDP is declining, thus there is less pie to divvy up.

>> Scientists do not
>> conflate things which are not perfectly correlated. One can actually
>> hand
>> out money from helicopters more efficiently by taking less money/debt
>> away
>> than the defaults would have taken.
> Nope. The entire premise of GDP growth REQUIRES credit growth. That's
> the lesson of the last 50 years. We have pulled forward demand but
> pulling forward demand doesn't increase final demand - it only shifts it
> in time.

Again you are incorrectly correlating GDP to value. See my logic in retort above. I agree the GDP is declining, while the private sector is being displaced by govt. Thus we have a massive theft of value in terms of what paper will buy (it hasn't hit yet, but the shortages will hit if this goes on more years).

>> DEFLATIONALISTS CAN NOT SEE THIS. You
>> can indeed have deflation of global debt (or even real GDP) and at same
>> time have transfer of wealth via the inflation or wealth transfer tax. This is the key
>> epiphany and the really cleverly corrupt plan that was devised by the
>> PTB
>> that are running the globalization (re-balancing) process.
>>
> The inflation has already happened.

Agreed. But the final effect was hidden, by the futures market in gold and silver. Now the delayed effect of inflation will be felt. It may not be felt in prices of all things immediately, but eventually we are going have severe stagflation and rationing. The global GDP will decline at the same time there is massive QE trying to prop it up.

> Do you read and understand Mises?

Some. I agree we are in the crack up boom, but it has a slightly different mechanics than he described, because of the nature of the labor arbitrage in the world, the currency pegs, futures markets in gold, etc.

> He's right - but here's where you get
> it wrong. The inflation already happened. We exported a lot of the
> visible components to other nations and hid the rest in house prices.
> Now we're getting the deflation - with a vengeance. This can no more be
> avoided than can the sun rising in the morning.

VERY IMPORTANT:

The deflation is indeed happening in terms of the GDP and debt, but this is not so drastic, instead the govt+cbs are propping it up by displacing the private sector into the public sector, which is where the drastic deflation is occurring. And this is why we will have severe stagflation, because the deflation was restructed this way.

>> 5) Why is it that the deflationist says that "'hyperinflationists' will
>> once again be shown to be wrong (how many years running will it be
>> now?)"
>> (Denninger), yet gold has been up every year for 9 years and has a
>> compound growth of 15% per year??
> Gold is not money.

It is in terms of store-of-value. The evidence is that when oil declined 70+%, gold only 30%.

> You wish it to be money in the future, but it is not
> money now. On a basket basis (that is, what you actually spend on in
> your daily life) we had a horrific inflation from 2003-2007, and a
> terrifying deflation for the last two years. It is not over either.
> Indeed, the worst part of it is likely yet to come.
>
> Of course if you define out of the basket 30-50% of your actual
> household expenses you can claim neither happened (by refusing to
> recognize home prices as part of the equation) but that's just flat
> dishonest, just as is ignoring asset prices anywhere else.

What is your point? Gold is up even more than 15% relative to housing prices.

>> Why is it the deflationist is using the
>> potential crash of commodities to argue that precious metals are not a
>> safe haven? When I note that oil fell some 70+%, and gold only fell
>> 30%,
>> that means those holding gold got more wealthy.
> No it didn't.

What didn't? Relative to oil, gold got more valuable during the great liquidity squeeze. That means it is more like money than oil is.

> And by the way, you do remember what happened to gold in
> the 1980s, right? Was there DEFLATION in the 1980s? No? Then how come
> Gold, the so-called "inflation barometer", collapsed from $800 to $300?
> I thought gold was an inflation indicator?
>
> At no time during that period did we see deflation.

Because a futures market in gold was created in the mid-1970s. This abomination has manipulated the feedback loop of the monetary free market, and it is going to revert with venegence. As I explained earlier, monetary inflation effects always have a lag before they are felt in the economy. In terms of gold, this lag was increased to decades by a massive bond bubble, and the bond bubble would have been impossible without the futures market in gold. If you want to learn more about this, we can go into the math.

> Gold's price has nothing to do with inflation or deflation in a monetary
> sense.

Again you make the error of assumption on cause&effect from correlation. I have noticed that pattern in your analysis.

Just wait a few more years and we will have more clarity on this matter.

The dollar bubble has fooled many, you are not alone.

>> Safe haven relative to
>> paper? Well if someone feels secure holding paper, I will just refer
>> them
>> to the game of musical chairs. Hold cash is not exceeding the rate of
>> return on gold over the past 9 years, ditto bonds forward (the H&S
>> secular
>> top has formed). Those who want to speculate (e.g. shorting bonds) are
>> not talking about safe haven but a different genre of activity and risk.
>>
> What will you say if Gold collapses to $300/oz? Don't tell me it can't
> - it DID the last time during a period when inflation doubled the price
> of gasoline and per-capita income went from $8400 to $22,000! Oops.

The bitch of reversion of fraud is that gold went down during the persistent inflation (due the futures market in gold) and it will go up in the persistent deflation. It is already happening and this will become more clear to you in a few years. Then you will buy gold.

>> 6) I do not know why we need to argue about the imperfection of the US
>> Constitution as it has obviously failed. It does require a Republic of
>> states, and it requires that the States shall make only gold and silver
>> coin as legal tender for payment of debts:
>>
>> "No State shall[...]make any Thing but gold and silver Coin a Tender in
>> Payment of Debts"
>>
>> One may argue that the Congress's power to coin money is allowed to
>> supercede the obligation on the States.
> Of course it does. The record is complete on this point - a resolution
> to bar The Federal Government from issuing bills of credit (fiat
> currency) was debated **AND VOTED DOWN**. That's the end of the
> discussion - the historical fact is what it is.

You are still wrong. The constitution clearly states that role of the Congress is for matters between and foreign to the States. These bills would be for that jurisdiction only.

>> I can cite and argue against that
>> effectively, but it is a mute point, as the fact is that my arguments
>> would be dead. The constitution that I believe in and the gold+silver
>> standard that was the anti-dote, is now dead.
> The Constitution never required what you claim and Gold is no antidote
> to anything.

Sorry but I cited the constitution where it says what the role of Congress is.

> It is a shitty inflation hedge but a damn decent
> geopolitical instability hedge. I recognize it for what it is, and
> trade it accordingly.

Oh it has always been a hedge against inflation and it won't be any different this time. It will just be on a decades lag, due to the abomination of a futures market in gold. The banksters are clever, but they can only delay the free markets feedback loop, they can not outlaw it.

If you want to start to understand the math on that, again I will send this chart to you (which I think you ignored before), which shows that Gold's price rise is correlated to negative real interest rates:

http://www.kitco.com/ind/Mickey/dec222009.html
http://www.kitco.com/ind/Mickey/images/12-22-2009_img2.jpg
Inflation or Deflation? - Page 13 12-22-11

Then I can explain to you how interest rate manipulation was only possible because of the futures market in gold and silver.

>> So why argue it? Does
>> winning or losing this prove anything? If you convince me it is counts
>> for anything, I will cite and argue why the States rights and
>> obligations
>> are superior to the Congress and cite and argue about the limitation via
>> separation of powers, etc.. But it is all dead now any way, so it is
>> pointless. We are in the death spiral. Just to give you taste of my
>> line
>> of argument, the Congress was created with a very limited purpose of
>> mutual defense and coordinate the foreign and inter-trade and that is
>> all,
>> which by now has been violated:
>>
> http://federationist.org. My site top to bottom (look up the domain
> pointers.) Next.

I see no rebuttal there on the home page. Sorry no time to dig.

>
>> "The Congress shall have Power To lay and collect Taxes, Duties, Imposts
>> and Excises, to pay the Debts and provide for the common Defence and
>> general Welfare of the United States; but all Duties, Imposts and
>> Excises
>> shall be uniform throughout the United States"
>>
>> The Congress was not given the constitutional power to coin the money
>> for
>> general use in the States! The Congress was merely to be the glue
>> between
>> the States and the foreign countries. And why was the power of the
>> federal govt limited by our fore fathers? Do not forget they were
>> escaping from a King and a centralized oppression (like what we have
>> now).
>> Unfortunately, we are having to re-learn the same lesson again.
>>
> Read above.

I see no retort from you.

> So why did Gold fall from over $800 to ~$300 from 1980 to 1982, and
> remain depressed until 2002? Was there monetary DEFLATION from 1980 to
> 2002? Obviously not.
>
> Your thesis fails to fit the facts.

The futures market in gold was created which enabled the bond bubble, which kept real interest rates positive, during inflation.

Without an UNLIMITED supply of paper gold and silver, that could never have continued as long as it did.

It is also in the OTC, with 20x more paper silver promises created in half of 2009, than entire annual production of silver:

http://silverstockreport.com/2009/BIS-and-updates.html

And you think that will resolve with a price decline? I think you must not be aware of this!

=================
ADD: Do you realize China's private sector gold investment going exponential?

http://www.gold-eagle.com/editorials_08/ash123109.html

It doesn't scale enough to displace the overcapacity in the export sector, at least not at $1000 an ounce, but after few more years of QE, exponential growth of accumulated physical demand, and $10,000+ price, then the "certain implosion" of China may morph. At $100,000 gold it sure does scale.

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Inflation or Deflation? - Page 13 Empty Oh my gosh, Denninger shows us why to be afraid of BOOMERS...

Post  Shelby on Sun Jan 03, 2010 3:15 am

Readers, I am concerned about your safety in USA.

Read this post and the one or two that preceded it.

Influential people (such as this Karl Denningger) in the USA really think that all control over the money supply should be publicly accountable and that the gold bugs are thus criminals trying to control and profit on the public.

Denninger also did a search on my admin contact for my domain. He asked me if I am in Philippines. He has threatened to attack me by reporting me to my ISP and I suppose he might try to report to the domain registrars too and fabricate some lies or intrigue.

Note after the final reply below, I sent Denninger a request to end all communication. The guy is scary. I don't want to have anything more to do with him. I really feel bad for those of you who are going to try to fight it out in the USA. I think you may be underestimating how this is going to go in the coming years.
==================================================================

>>> No. The depressions were in fact both more severe and more frequent.
>>>
>>
>>
>> You should say "yes" because you just agreed with me.
>>
>> Yes they were more severe and more frequent. Exactly.
>>
>> Define "severe". This point is the debt ratios were not allowed to get
>> to
>> such extremes. And yes the corrections were more abrupt, which was a
>> good
>> thing. In fact, you are asking for an abrupt correction on your
>> website.
>>
> Incorrect. Leverage (which is what debt is) got VASTLY more extreme in
> several of the previous busts - while on a Gold standard. Indeed land
> speculation in Florida in the 192x period was dramatically worse. When
> Tulip Mania happened that was an order of magnitude worse than anything
> we are seeing now.
>
> On the facts you're just plain wrong.

On the facts you continue to be wrong, and I will give you one more reply to stop using erroneous diversionary tactics. Either you want to have a scholarly debate or you want to go into denial. I don't have time for the latter.

These assets bubbles were not driven by leverage (debt), they were pure speculation mass manias. And they were the effect of national (and global) capital being focused into one small area. The leverage was due to the funnel effect of having the world/nation get all excited about 1 small asset class. And thus the speculations did not become engrained. The tulip mania only lasted 1 year! The florida bubble last only 4-5 years, and it can be argued it was part of the expansion of credit in the roaring 1920s.

Also it is myopic for you to claim a gold standard in the 1920s, because the bubbles in the USA in the 1920s were caused by the fact that Europe was going off the gold standard, which was driving capital flows to the USA. So indeed I can argue that the florida land bubble was caused by leaving the gold standard.

>>> Indeed, they usually bankrupted virtually EVERYONE
>>>
>>> Yes that is what happens when most people use debt. It will be the
>>> case
>>> this time too, but the difference is as I said before, the savers were
>>> winning in the 1800s, and now the savers are losing.
>>>
>>> This time what you will have is socialism. Before we still had
>>> capitalism. That is difference.
>>>
>>>
> Irrelevant and thus elided from further consideration.

Irrelevant that you lost the point on saving in 1800s versus 1900s?

Okay Karl, looks like you've decide to shut down, now that you've lost the debate. I expected that of you.

>>> and what's worse,
>>> they weren't created by the debt:income ratio, they were manufactured.
>>>
>>
>> Exactly my point. The banksters could not get what they wanted, because
>> of the weapon of gold & silver, thus the battle was waged and more
>> frequently too.
>>
> Incorrect again. They got exactly what they wanted - all the property
> was effectively escheated to them.

Oh yes, but as part of the process of getting what they really want, which is the ability to control the creation of money and credit, which is part of the process of getting what they ultimately want which is a world government.

My point is they couldn't get the latter things immediately. They had to fight for it. And the reason the people lost is because they were stupid to put their gold on deposit at the banks. If they had held their savings in gold and silver (and trading the silver/gold ratio arbitrage to prevent manipulation of the bi-metallic ratio), then the banksters could never have defrauded them.

>> Life is competition (free market). Evolution. Insurance guarantees
>> failure, i.e. socialism. People want someone else to take
>> responsibility
>> for their inability to control their desire to use debt. What can I
>> say?
>> People get what they deserve.
>>
>> Trying to teach this to a socialist is pointless (not accusing you of
>> being one, I need to see your reply next). Their mind is already set on
>> the concept of equality. Equality exists in fairytales, not in nature
>> and
>> evolution (nor in the wisdom of the bible).
>>
> Who said anything about equality? If you're going to go off on a
> tangent we will stop now. I tire of having to keep reminding you to
> remain on the points of debate.

It is not a tangent, and just like my prior emails where you didn't realize the relevance, until later, this will be case again, if you continue you will walk into my logic. Of course, you will quit, because you've lost the debate.

> This should not be necessary and if it is once more I will withdraw from
> this conversation.

If you chicken out because you've lost the debate and fabricate some silly excuse, that will serve you very well.

>>> This is a provable fact - indeed, the British Banking Elites sent
>>> people
>>> over here to America and literally bribed Congress into creating the
>>> conditions for a Depression - twice.
>>>
>>
>>
>> Yup. And they (and/or their American offshoots) are now feeding the 30
>> year mortgage mania to its final death spiral now. And they will
>> maximize
>> this death spiral and the populace is complicit, bankrupted, and thus
>> co-dependent.
>>
> Bull. The 30-year mortgage was and is in fact reasonably sound.

Absolute nonsense. If you draw demand forward by leveraging income by 30 years, you create all kinds of long-term statism and mis-allocations in the economy. If you can't even see that, then you won't be able to even carry on a discussion with me at the level of intellect that I have.

> It was
> the "roll 'em over every 2 years" model that blew sky high

No that is merely the final death spiral effect of what was built-in by the 30 year mortgage statism.

Karl I can now say with clarity that you are clueless about what drives socialism. And this is why I was correct from the very beginning to observe that you are socialist, but you don't even realize it.

> - because
> that model required higher prices not to cover interest, but the fee
> machine. Interest was almost immaterial to the banksters (which
> incidentally is why they offered "teasers" that were below-market) - the
> point was to garner another set of fees through what amounted to a
> captive transaction. I have documented this in extreme detail over the
> last 2-1/2 years.

You are myopically focused on the motivation for the death spiral itself, but there was something that drove it to that point in the first place. Rockfeller's overall goals are much more lofty. Sure these motivations are part of the blowoff stage of the death star.

>>> Hard money makes this possible. It is the lack of understanding that
>>> the issue is not the amount of money in the system, but rather the
>>> issue
>>> of insoluble debt, that causes the problems.
>>>
>>
>>
>> Yes hard money makes it possible to manipulate and so does a pure fiat
>> money. That is irrelevant on the point of manipulation, but revelant on
>> the point of the frequency of the battles.
>>
> If you believe the first part of this then Hard Money is not a
> solution. Therefore, since you believe it is, I must conclude that you
> mis-spoke.

How many times do I have to explain to you that hard money by itself is not solution, and fiat by itself is not a solution, but the pendulum between them is absolutely necessary to maintain a free market balance?

>> Indeed it is debt which is the root cause. As I said before, hard money
>> is the antithesis of debt, because it can't be loaned at interest rates
>> higher than the annual increase in the supply of the metal.
>>
> Wrong. It both can be and is. On this you are simply factually
> incorrect.

Mathematically impossible. Maybe you are referring to paper promises for metal?

If you loan gold at say 4%, payable in metal itself. And if all of the money is on loan (meaning all of it is saved in a fixed income account), then then by definition there must be default, because the total supply of gold does not increase by 4% a year in order to pay the interest.

> The expansion of leverage (an effective expansion of the
> monetary base without any increase in the gold reserves) was insane in
> the 1920s. It was in the years leading to 1873 as well. Both took
> place under hard money; Gold did not prevent either. Nor did it prevent
> any of the previous expansions of credit which led to busts.

Who ever claimed that a gold standard should prevent the expansion and contraction of **PAPER** leverage? I am claiming that gold is the tool by which the public uses to cause contraction or expansion. If the public sees the leverage in the economy is too high, it can move to gold, thus contracting the leverage, and vice versa. My gosh, I didn't think I would have to spell that for you.

>> Metal money is not a solution, but rather it is one of the instruments
>> of
>> the free market, used to swing the pendulum between too much and too
>> little debt in the economy.
>>
> Nope. Metal money is simply a means by which one hands control of the
> money supply to a tiny, unaccountable group of people.

Not if the public is the one holding the gold!! And when people are too stupid to do that (and leave their money in a bank), then they get what they deserve. Actually some money should be in the bank and some should in your vault at home. This keeps the banksters honest. The ebb and flow of the ratio between what is in the banks and what is in the public's vaults, is what is the regulator of debt ratios.

> Unless you are
> one of them you have no reason to want this. If you are, you should be
> murdered and your corpse consumed
by those who understand what you're
> trying to do. (Rhetorically, of course.)

Hey no problem. I know the socialists are coming after the honest money folks. That is why there is no way I am going to tell you who I am or what I have. I know full well that anyone holding precious metals inside the USA is either insane, or they better be damn good at digging a very deep hole. The future is outside the USA. Would be much better to be in China, where the public is actively increasing their gold holdings. Whereas in the USA, the people are selling their gold at gold-selling parties.

> The issue is always one of control of leverage, that is, the limit of
> fractional lending. When this is allowed to be gamed then a boom/bust
> is assured.

Exactly, I think the control should be in the public hands-- not in a centralized institution which can be manipulated.

I advocate everyone placing their votes on debt ratios, by buying or selling precious metals. It seems the Americans are voting to increase leverage, as they are selling their gold. I told you, the QE won't stop. Even of those who are supporting you now, many of them will fall away and join the calls for more govt, as they realize they too are bankrupted. If you stay in paper, you too will soon join them bankrupted.

> In any fractional system (at any fraction) recessions are necessary for
> business balance. But when gaming the fractional system is permitted
> you get extreme booms and then deflationary collapses. These have
> absolutely nothing to do with whether you on a metallic standard or not.

The gaming will always be possible unless the control is dispersed to the individual free market decisions of the public-at-large. And this can only happen when the people hold some precious metals in their personal vault at home. The gaming in the 1800s was because people put too much of their gold in the banks.

> This is not an assertion - it is a fact.

Yes it is a fact. And as you see, giving the power to the centralized institution doesn't work. It is socialism.

> The 1920s featured raw
> violations of the fractional system in both land and stock speculation.
> While the official reserve ratio was 1:10 the allowance of 10x margin in
> the market made the effective leverage and debt 100:1. Florida
> swampland was trading with ratios of over 1,000:1 in some cases.
>
> This was the cause of the bust.

But you need to look over the forest and ask yourself what allowed those ratios to be violated? What natural phenomenon drove it politically and socially and economically? As I said, it was the end of the gold standard in Europe and massive capital flows coming into the USA as a result.

Law never trumps nature. And that is why a centralized law making body will never be able to control manipulation. Only a dispersed system where each member of the public votes by the quantity of gold they withdraw from the banks, can regulate.

The 1800s were fine (savers got more wealthy) except the public made the mistake of putting too much gold on deposit with the banks (because the public wanted to chase ever higher yields and credit) and this bit them in the ass. They got what they deserved for being overzealous. This is how the free market works. And no amount of regulation or law can ever stop manipulation. Sorry history proves you wrong 1000 times over.

> In the present case the same thing happened, beginning with sweep
> accounts under Greenspan. When Paulson had the leverage limits dropped
> on investment banks he provided the rocket fuel necessary for the
> terminal phase of the boom and guaranteed the bust.

Yes but again look over the forest and figure out what caused the demand for the manipulation. Nothing happens without a demand for it. I already told you it was the public's desire for 30 years of pulling demand forward leverage in housing.

> In one case we were on metallic money, in the other on fiat. Neither
> mattered because the issue does not lie there and never has.

I have already retorted this statement above.

>> Fiat and gold are always in competition with each other, and when the
>> public is too much fooled to one side of pendulum, then debt ratios get
>> way out-of-whack (either too low or much too high).
>>
> Assertion without evidence and thus invalid.

Gold and silver have never been more dishoarded by the USA public in the history of the world than today. And we have the highest debt-GDP ratio in the history of the USA (and world history for any large society).

Just a coincidence eh?

>>> The issue of credit has
>>> nothing to do with the type of underlying monetary system (fiat .vs.
>>> hard); as that's not where the problem comes from.
>>>
>>
>>
>> Disagree.
>>
>> Debt can not be significantly expanded when everyone is holding gold.
>> Dark Ages is a good example of what happens when debt is too low.
>>
> Oh yes it can. Explain how we had effective 100:1 leverage in the stock
> market in 1929 and over 1000:1 on some land deals in Florida - both on
> hard money in the 1920s - if that's impossible. You're DEAD WRONG on
> this.

Because the public wasn't holding the gold. PERIOD. That is what is missing from all your logic above.

In 1920s, it was exacerbated by dis-hoarding by the European public into the banks of USA (fractional ratios, as the banks were liars and manipulators), and not into physical holdings of gold.

>>>> The debt-GDP ratio has never been higher in
>>>> history of world (Forbes claims 840% including unfunded welfare state)
>>>> and
>>>> has run for 80 years since start of last depression, which is not a
>>>> good
>>>> thing obviously.
>>>>
>>> Unfunded welfare statism is not debt. It is a bald political promise
>>> that will not be kept (can't be kept!)
>>>
>>
>>
>> So is debt. Debt is nothing more than a promise (future's contract).
>> And
>> unfunded welfare is a promise. I don't see any need to make a
>> distinction?
> There is a tremendous distinction. Entitlements have no legal authority
> and can be changed with the stroke of a legislative pen. Debts are
> collateralized in some fashion.

Oh that is all nonsense distinction. You have seen all that can be voided by the overriding manipulative pressures. The law is not going to stand up, because 50 - 75% of everyone in the country is bankrupt (they just haven't been marked-to-market yet). You've already seen the secured creditors violated on bonds.

Your God (i.e. trust) is the law? As I said from the beginning, you have socialist tilt.

>> Most of all of those promises are going to be broken
>> eventually (or we will have a global socialism and parasite on the
>> developing world for another decade or more).
>>
>> In any case, I am sure you agree the debt ratios are the highest ever
>> recorded?
>>
> Where and under what rubric? What are you including and not?

http://www.forbes.com/2009/12/18/government-budget-deficit-personal-finance-financial-advisor-network-treasury-debt.html

Debt as % of GDP
Public: 141%
Household: 99%
Corporate: 317%
----------------
Total: 557%

Unfunded Mandates: 283%
Grand Total: 840%

I have seen similar calculations elsewhere such as:

http://mwhodges.home.att.net/nat-debt/debt-nat.htm

I have seen charts comparing it to Japan, and other cases in history, but can't find that quickly.

> Put forward your specifics but before you do, clear the points above -
> we will deal with this in order or not at all.

Hope you don't get offended, but I am really don't have time to waste if you are going to make a point, lose the point, and then say it is irrevelant. That sort of pisses me off for wasting my time. What is the point the debate, if there can't be anything capitulated?


> If you're not interested in that all you have to do is send one more
> email like the below and I will simply place your email address in to
> the black list for my email system and report you as a spammer to your
> ISP.


Ooh I am so scared. I have been with my ISP since 1996. Good luck.

It is up to you, you seem determined to cling to illogic.


Last edited by Shelby on Sun Jan 03, 2010 11:22 am; edited 2 times in total

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Inflation or Deflation? - Page 13 Empty My synopsis & implications of the discussion with Denninger

Post  Shelby on Sun Jan 03, 2010 9:18 am

See the prior few posts for the details of the discussion.

===========
Essentially Karl Denninger, the founder of and key computer programmer for his regional ISP in USA (sold in 1998 and has done nothing on his resume since), creator/publisher or Federalist.org, and apparently one of the more popular financial bloggers, stated that he feels that when the people use gold & silver as money, then the leverage ratios (and thus whether we get catastrophic depressions instead of well managed recessions) in the economy can be manipulated by unknown people who control large amounts of gold & silver. He thus states that anyone wishing to own large quantities of gold & silver are thus intending to defraud the public, and he stated gold and silver hoarders should be murdered and cannibalized (beyond a small % held for geopolitical strife). He is very adamant that the control over the leverage ratios, i.e. the expansion and contraction of debt (money), in the economy must be done by a centralized federal institution so that the citizens are supposedly protected by the transparency of public accountability. And Karl asserts that such a central bank can better manage the recessions necessary to prevent catastrophic depressions.

Okay the above is illogical:

1) If the people actually hold their gold and silver, then it can not be concentrated in a few manipulators' hands. The problems of past banks runs were due to the people trusting the bankers with their gold deposits and using paper promises and even interest bearing paper instead. Note I am not saying that 100% gold standard (i.e. no paper leverage) is workable and in fact we never had 100% gold standard in the history of the USA, but rather that the people should hold some of their savings at home in physical gold&silver and increase or decrease their personal leverage ratio** (and bi-metallic ratio) as needed and thus that these individual actions will thus regulate the aggregate ratios in the economy. As proof of its effectiveness, I stated that savers in 1800s did 22,000% ÷ 64% = 344x or 34,400% better than savers in the 1900s. Also, if the people do not do this, then some foreign nations' people will (i.e. as is happening in China now) and then the people of the USA will lose control of their economic destiny (which is of course happening now).

2) The central bank has never been openly audited in the public record. Even the gold at Ft. Knox hasn't been audited in decades. Karl Denninger is living in a fantasy world that doesn't exist. As for the benefit of the central bank, I pointed out that during the 1800s, there was a persistent deflation from 51 in 1800 to 25 in 1896 and 10 year Treasury bonds were paying nominally in excess of 5%, so savers got at least 22,000% more wealthy in 96 years [1.05 (x^y key) 96 = 108 * 51 ÷ 25 = 220]. Whereas, in the 96 years since 1913 the saver in the dollar only retained 1.5% of value***, due to inflation, and Tbonds average under 5% for 70 years, and perhaps a weighted average of 7% in past 26, so let's approximate it as 64% more wealthy [1.04 (x^y key) 96 = 43 x 1.5% = 0.64]. Denninger said the 34,400% difference in effect on savers was irrelevant.

===========
Denninger also argues that gold & silver do not regulate the level of debt in the economy, and he points to occurrence of extreme debt leverage and depressions during periods in which the domestic legal tender was gold and/or silver. This is also illogical:

3) The legal tender gold standard was not a perfect regulator of leverage because the people themselves misjudged and placed too much faith in the banks, and did not actually perform their duty to hold increasing metals at home in times of escalating leverage. Nevertheless, the 34,400% advantage for savers during the period of gold and silver legal tender, demonstrates that the people-at-large were much wiser regulator than the central bank has been since its creation in 1913. I think that 34,400% difference is sufficient to prove that increased public participation in gold and silver indeed regulates debt leverage better.

===========
Denninger quit before making his complete logic known about my assertion that gold rises during negative real interest rates, like we have now. And that gold did not rise during the inflation from 1982 to 2001, was due to the fact that real interest rates were positive. And I did not get to hear any retort from him on that or my assertion that the bond bubble since 1982 (and the positive real interest rates during the inflation from 1982 - 2001) was enabled by the creation of the abomination of a future's market in gold and silver starting in the mid-1970s.

I also explained to Denninger that the deflation that is ongoing, is mainly not occurring in GDP or total debt deflation, but rather it is most pronounced in the rate of change of the portion of GDP and total debt being transferred from the private to the public (govt) sector. In short, the private is decreasing debt and the private business sector is shrinking, while the public govt is increasing debt and spending. Thus my point is that the deflation is in net effect a monetary inflation on the private sector, in spite of an aggregate deflation overall. This is expressed as a negative real interest rate, and this is why gold is rising in spite of overall deflation in the economy. The reason this transfer of wealth from the private sector to the public sector is inflationary, is because although total production (real GDP) is decreasing or flat, the portion of it being earned by the private sector is decreasing, but yet the population is not decreasing. This will end up causing stagflation.


** by "personal leverage ratio", I mean the ratio of the portion of net worth in the paper assets (banks, etc) relative to portion held in physical gold&silver at home in vault. The bi-metallic ratio means relative holdings of gold versus silver, to take advantage of distortions the market might create in the relative gold and silver purchasing power. Realize that in 1800s all money was gold and silver coins, except when you deposited in a bank, then you could spend banknotes (promises payable in gold and silver coin).

*** SGS true inflation. 5% if you use the BLS official stats.


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Inflation or Deflation? - Page 13 Empty Final examples of Karl Denninger's failures in logic

Post  Shelby on Sun Jan 03, 2010 10:13 pm

You may want to re-read the prior post, because:

* I added some links to that synopsis
* corrected the paraphrased quote of Karl's death threats in red
* corrected the math to account for the rate of interest in the 1900s
* explained how the current aggregate (public+private) deflation is net effect a monetary inflation on the private sector

Given that Karl Denninger claims to be a programmer, we also discussed software engineering. I stated that when 1000 cores arrives in CPUs (roughly within 11 years given Moore's law), that programming paradigms (languages) would have to change (from stateful, imperative probably to lazy, functional), else some of the cores would be wasted. You may not understand that, but hopefully you can understand that 1000 cores means 1000 microprocessors inside of the microprocessor chip running your computer. Moore's law says that computing power doubles every 18 months (1.5 years), but lately the best way to do this was by doubling the # of cores, because of power dissipation issues and that decreases in the width of the silicon chip lithography have run into quantum limitations. Denninger said emphatically and condescendingly "Bull" at least for webservers, and he ridiculed me by making the point that each visitor to the website could simply use a separate core on the CPU (either as a separate thread or process). Well this just goes to show how myopic he is even in his claimed career core competency (although note Karl's core expertise may be in networks), because there are several problems with his insulting retort:

1) Probably less than 1% of the websites (and thus webservers) have 1000 simultaneous users (i.e. website visitors or requests), as this indicates in the realm of 1 - 10 million hits per month. Although it is true that many websites are run on shared servers, this still presents technical waste due to rapid cycling of the processor caches.

2) No webserver will always have exactly 1000 simultaneous users. With Karl's idea, the web applications can not run faster by utilitizing all the cores when there are less then 1000 simultaneous users.

3) When there are more than 1000 simultaneous users, so Karl advocates they wait in line (latency).

There were several other statements from Karl about cell phone hardware design, code bloat, etc.. that shows me that he "thinks he knows it all" and is very quick to attack and not listen or try to learn anything new (in short he doesn't respect anyone who disagrees with him, probably thinks most people are stupid), and these sort of people are very dangerous to correct logic. I may have some of these traits also, but I do listen openly and think deeply about what other people say and write (and it is one reason I flip-flop a lot, because I am always learning), and generally I don't think people are stupid, in fact quite the opposite, I am usually shocked when I realize people are not as intelligient as I assumed they were (e.g. Karl, Hommel, etc). Note I will say Hommel has a specialized area of intellect which is very high, but he is quite average in most other areas (same can be said of me and most people I suspect). I would love to have an economics discussion with Bernanke, given he is reported to have a 1600 SAT score, ditto Ron Paul, Gary North, etc. But most people are unwilling (insecure, unmotivated, or just too busy?) to spill their guts as I am. One thing I can not tolerate is people who can't get to the point and agree on the outcome of a debate quickly. Any way, enough nonsense about people.

Note, Karl responded to my synopsis (in prior post) and he basically said if I go public, he will attack back. This showed me he is probably not someone I should fear, because very strong people simply do, they do not need to threaten. That is fine, because I doubt I will bother to go publish any attack of him at widely read websites (in fact I temporarily closed this forum to new members and made this thread members only). I am satisfied if he leaves me alone, and I will probably do the same as long as he does too. Although getting him to publish an expose on me, might bring my ideas a lot more attention, it is not going to change the world and would cause me potentially more trouble than it is worth. Instead, what I may do is publish an article refuting his ideas, without naming him specifically. However, I do not know if I have time to publish an article right now. I think the points in the prior synopsis post are very important, and I hope someone will publish them.

Btw, Karl made some more stupid remarks in his latest reply. He said that my utopian ideal of the people holding hard money would only be achieved with a gun held to my head (ignoring that China and India are already doing it), thus that makes me a statist (what??!!!). Perhaps one of you can help me understand his logic:

Denninger wrote:You're dead wrong about the inexorable outcome of where we are now, and you're worse than dead wrong about what any return to "gold money" would result in. You claim to not be a statist but this is a lie as your utopian ideals can only work with the gun of the state
in your face - absent that they are utterly impossible to be imposed. This is clearly documented through history, including in /The
Congressional Record/, where the British Bankers did indeed attempt to, at gunpoint, impose their will for "hard money" as they defined it.

We do not live in a world in which lending at interest is imposed, we live in one in which the market desires it, dating back to Hammurabi. When one recognizes the world as it is then one is prepared to offer alternatives that can actually be implemented by means other than having the barrel of a gun shoved up your nose. My efforts are dedicated to both exposition of why the current system is failing along with debate and discussion intended to bring the market to recognition of an alternative that they would prefer and thus will demand of their own will, rather than at gunpoint.

Seems he still can't get that my point is not for a required use of gold and silver, but rather a choice made by each individual. I don't know why he can't admit the clear math showing that savers got 344 times more wealthy in the 1800s than in 1900s? I guess people have a hard time believing that because we have so many more material things in 1900s due to great advances in technology (and cheap oil, which may be now peaking). Also an illusionary wealth debt bubble which kept 3rd world impoverished and let westerners live higher. Nevertheless, the math is clear. If we had remained on a gold standard in the 20th century, there would be amazing things already on our planet almost beyond our imagination (can you imagine 344 times more wealth in the world?). I hope people understand that when I say "gold standard", I do not mean that there is no paper leverage in the economy. I simply mean that people have the right to choose, and that since gold and silver are recognized as legal tender (but not forced to be legal tender, Hommel showed that spreads are decreasing since govt got out of the silver money business), then there is great liquidity as a currency when people do choose to store some precious metals. Karl's point I think is that the bankers will then fight, even fight to require hard money and restrict individual choice. Of course they will, because they are always fighting. Right now they are fighting to enslave us in a world govt using their control over central banks in every nation, and those who don't fight back with gold and silver, are going to end up enslaved. From a biblical perspective, fighting with gold and silver is analogous to forcing a small govt and thus is in agreement with God's command in 1 Samuel 8. I am not arguing for 100% hard money nor 100% fiat, nor any form of force, but rather for the "ying-yang" of constant diversity and change of individual decisions on the matter. The banksters will always be trying to manipulate the situation, no matter what forms of money we use. Might as well let the people fight individually and maximize their resistance as proved by the 344 times better result in 1800s. Evolution has always been about fighting for survival and not getting eaten by the bigger fish, and no amount of centralization of the control of credit will eliminate that war, in fact centralization is proven to make us 344 times poorer (more enslaved). I doubt even Karl knows why he wasting his life fighting against the 344 times more productivity that was achieved in the 1800s. I figure that judging by his resume, that he just hasn't done anything productive since 1998 and gotten addicted to being a babbling parasite. Lest I fall into the same category, I better shut up now.

One positive thing I can say is that Karl used the word "utopian" in his last criticism of me. I think that means I got to his subconsciousness. Eventually he will realize I was correct, it may just take a decade or so of suffering (from a central bank run amok) for him to realize it. And folks, this learning process that boomers will undergo is the reason the gold bull market will go on for a long time. Every year, some more of them will come to realize that their false hopes and ideas have failed, and they will capitulate to gold if they still have any positive liquid net worth, or they will probably dig deeper into socialism and fighting the goldbugs otherwise.

Why am I so sure I am correct? Because of the laws of entropy. The basic law of the universe (1856) is that of a trend towards maximum disorder (i.e. diversity). Thus centralization always fails given enough time. That is a fundamental concept that I am absolutely sure of. I have not (since I've known it), and will never, waiver on it, because it is a fundamental nature of the universe. Note, I am allowed to consider local exponential onslaught+decay of order (centralization), as these occur along the way towards the long-trend of maximum disorder (diversity).

http://www.gold-eagle.com/editorials_08/baltin010210.html

Alan Greenspan, former head of Fed wrote:"Deficit spending is simply a scheme for the confiscation of wealth". GOLD stands in the way of this insidious theft by the people we trust and who have sworn to protect us. It also stands as a protector of property rights .If one grasps this, one has no difficulty in understanding the statists antagonism towards the Gold Standard".

Denninger apparently does not believe in individual property rights.

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Inflation or Deflation? - Page 13 Empty How Deflation Is Inflation

Post  Shelby on Mon Jan 04, 2010 3:53 am

The following essentially says the same thing as I do, but in less mathematical manner (by a billionaire hedge fund manager that recently moved from GLD to physical gold):

http://www.caseyresearch.com/displayCdd.php?id=310

David Einhorn wrote: Four years ago I spoke at this conference and said that I favored my Grandma Cookie’s investment style of investing in stocks like Nike, IBM, McDonald’s and Walgreens over my Grandpa Ben’s style of buying gold bullion and gold stocks. He feared the economic ruin of our country through a paper money and deficit-driven hyperinflation. I explained how Grandma Cookie had been right for the last thirty years and would probably be right for the next thirty as well. I subscribed to Warren Buffett’s old criticism that gold just sits there with no yield and viewed gold’s long-term value as difficult to assess. However, the recent crisis has changed my view.

The question can be flipped: how does one know what the dollar is worth given that dollars can be created out of thin air or dropped from helicopters? Just because something hasn’t happened, doesn’t mean it won’t. Yes, we should continue to buy stocks in great companies, but there is room for Grandpa Ben’s view as well. I have seen many people debate whether gold is a bet on inflation or deflation. As I see it, it is neither. Gold does well when monetary and fiscal policies are poor and does poorly when they appear sensible. Gold did very well during the Great Depression when FDR debased the currency. It did well again in the money-printing 1970s, but collapsed in response to Paul Volcker’s austerity. It ultimately made a bottom around 2001 when the excitement about our future budget surpluses peaked.

Prospectively, gold should do fine unless our leaders implement much greater fiscal and monetary restraint than appears likely. Of course, gold should do very well if there is a sovereign debt default or currency crisis.

A few weeks ago, the Office of Inspector General called out the Treasury Department for misrepresenting the position of the banks last fall. The Treasury’s response was an unapologetic expression that amounted to saying that at that point “doing whatever it takes” meant pulling a Colonel Jessup: “YOU CAN’T HANDLE THE TRUTH!” At least we know what we are dealing with. When I watch Chairman Bernanke, Secretary Geithner and Mr. Summers on TV, read speeches written by the Fed governors, observe the “stimulus” black hole, and think about our short-termism and lack of fiscal discipline and political will, my instinct is to want to short the dollar. But then I look at the other major currencies. The Euro, the Yen, and the British Pound might be worse. So, I conclude that picking one of these currencies is like choosing my favorite dental procedure. And I decide holding gold is better than holding cash, especially now, where both earn no yield.


Working on this article for publishing. What you think so far?

This article is going to publishing now to gold-eagle.com, financialsense.com, marketoracle.co.uk, silverbearcafe.com (any others?):

http://www.coolpage.com/commentary/economic/shelby/How%20Deflation%20Is%20Inflation.html
http://www.marketoracle.co.uk/Article16212.html (3154 reads already)
http://www.gold-eagle.com/editorials_08/moore010410.html
http://financialsense.com/fsu/editorials/moore/2010/0105.html

Also available in professional formats, if you want to email it to others, just right click the links below and choose "Save target as":

http://www.coolpage.com/commentary/economic/shelby/How_Deflation_Is_Inflation.pdf
http://www.coolpage.com/commentary/economic/shelby/How_Deflation_Is_Inflation.doc


How Deflation Is Inflation

Let's squash the debate between deflationalists and hyper-inflationalists. Here follows the math that shows how we get the equivalent effect of price inflation (and skyrocketing gold price) when there is deflation on a debt money standard.

In short, purchasing power is decreasing during deflation on a debt money standard. That has a similar wealth destroying effect as price inflation. Purchasing power is decreasing because private sector (non-government) share of total debt is decreasing, as well for a more complex second reason. What deflationalists miss is that although totals are deflating, the composition of those totals are changing and there is a transfer (theft) of wealth from the private sector to those on the coattails of government and stimulus lost to waste, failure, and corruption.

Given a fiat money standard, where all money is debt, then as is the case now, there is deflation when the total (private+public) levels of debt and real production (GDP) are declining. Simultaneously, the private sector's portion of total debt and GDP is declining. While the public sector's portion of total debt is increasing and faster than its positive contribution to real GDP (i.e. negative marginal utility of debt, aka MUOD), because the government is always less efficient than the private sector at allocating spending. Thus by simple algebra, the private sector's portion of total debt is declining faster than the total debt is. And thus, the private sector's portion of total purchasing power (i.e. portion of total debt, since debt is money on fiat standard) is declining while the total production of goods and services is also declining faster than total debt is, both factors contributing to a reduction of purchasing power for the private sector. Note that a reduction in purchasing power is the same effect as holding a negative real interest rate asset during price inflation. Thus, we can conclude mathematically that prices do not have to rise, to get the effect of price inflation on the private sector. And thus we know the reason why gold is a hedge against negative real interest rates (click to see very compelling chart!), and not a hedge against inflation or deflation (which this article proves are ambiguous).

Given this deflation on a debt money standard, if the MUOD is negative, then prices rise because real GDP declines faster than total debt. Irregardless of whether MUOD is positive causing declining prices, or negative causing rising prices, the algebra of the preceding paragraph shows that the private sector's purchasing power is declining, and thus that deflation (on a debt money standard) is the equivalent effect of price inflation (while the private sector holds negative real interest rates paper).

The fact that the above is difficult for people to understand and the private sector is fooled by the total level of deflation, is what prevents the private sector from immediately jumping to gold to stop the destruction caused by the government run amok, i.e. climbing the "wall of worry" in the gold bull cycle. This is why the government and central banks are most concerned about "inflation expectations", i.e. how long the private sector can be fooled. Eventually, the private sector does move to gold, because the public sector's cannibalization of total purchasing power (total debt) eventually becomes unbearable.

The above logic is only true on a debt (fiat) money standard, where the government is determined to fight the private sector decline/defaults by increasing the public sector debt and spending. Whereas, on a gold+silver money standard, it is generally impossible for the government to expand the total debt once the private sector has decided to hoard its gold+silver and reduce debt. Thus, on a gold+silver money standard, deflation actually results in an increase in purchasing power for the private sector. For example, this was true in the non-depression from 1929 - 1933 as people were becoming more prosperous, until FDR confiscated gold and took the country off the gold standard domestically, enabling the depression to start in 1934 and loss of purchasing power which ended in severe shortages and rationing by WW2.

Thus until the government is willing to emulate the restraint of a gold+silver money standard and thus stop increasing the public sector's portion of the total debt (i.e to stop compensating for private sector defaults), then it is mathematically insured that the private sector's purchasing power will decline and negative real interest rates will persist. Positive real interest rates would be a means for the private sector to increase its purchasing power, thus can not exist until the government restrains itself. Gold increases in purchasing power during negative real interest rates, which thus logically brings us full circle to the fact that gold+silver money standards increase the purchasing power of the private sector during retrenchments of the business cycle. Proof of this is in the fact that holders of 10 year Tbonds during the 1800s gained roughly 33,900% more real appreciation than those in the 1900s. Interest rates were more than 5% in 1800s and less than 4% in 1900s, while prices declined by 51% from 1800 to 1896 versus an increase in prices by 6,667% from 1913 to 2009:

Appreciation 1800-1896: 1.05 (x^y key) 96 = 108 ÷ 0.49 = 220 = 22,000%
Appreciation 1913-2009: 1.04 (x^y key) 96 = 43 ÷ 66.67 = 0.65 = 65%
Appreciation Ratio: 220 ÷ 0.65 = 339 = 33,900%

If it seems hard to believe that we had 339 times more prosperity in the 1800s, consider the delayed truth of delayed gratification and reversion to the mean. There has been a massive boom in technology in the 1900s, massive increase in the supply of cheap energy, and a massive transfer/parasite of natural resource wealth from the third world to the developed nations by the fiat system. Payback is going to be beaach. Currently the public debt is 141% and the private sector is 416% of GDP, but the public debt will climb another 283% if unfunded promises are funded, not to mention snowballing $trivillions for bailoops and stimulost, with the upper limit of $quadrillions in derivative promises in the private sector. The secular top in gold will occur when real interest rates go positive, then we will know the mess is done.

Gold is appreciating in all currencies, with a repeating staircase of breakouts. Pattern says we are at the start of a major breakout that projects to 25 ratio of gold to dollar index, or roughly $1600-$2200. A dip first back into the green rectangle is underway, as was the case in Dec. 2005, currently driven by the Fed's improbable promise to stop quantitative easing. If real interest rates rise enough to go persistently positive, then we will know the Fed is serious, however the Treasury has recently pledged unlimited funding for the F*Maes and the House has passed another $4 trivillion bailoop.

The reason we are in the mess is because of positive real interest rates and a bond bubble since 1980 (in synergy with real estate demand pulled forward by 30 years with 30 year mortgages compounded by orders-of-magnitude derivative distortions and a welfare state), which should have been impossible on a debt money system with no precious metal component, except the free market feedback loop of rising gold and silver prices, that regulates interest rates and debt levels, was delayed for decades by the unlimited selling of paper gold and silver on the future's and worse OTC derivative markets-- paper market abominations that did not exist before 1971. The upside leverage for physical gold and silver investors is thus violently scary. I suggest you give very careful thought to who knows how much you have and where it is stored. I have knowledge of those who think that physical gold and silver investors who will profit from the derivatives fraud should thus not have their property rights respected. These people may think they are for the rule of law, but if they succeed they will cause anarchy. I think there was one Treasury or Fed official who promised that those who hoard gold will have "their hands burned up their armpits". They want us to be impoverished relative to Chinese people's increasing accumulation of physical gold.

Disclaimer: consult your own investment advisor, some deflationalists even duplicate the performance (50±6%) of flipping a coin.


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Inflation or Deflation? - Page 13 Empty Re: Inflation or Deflation?

Post  Jim on Mon Jan 04, 2010 5:42 am

Looks good to me, Shelby. Thanks for writing it.

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Inflation or Deflation? - Page 13 Empty Negative Real Interest Rates...

Post  dz20854 on Mon Jan 04, 2010 6:44 pm

...are shown in this Shadowstats.com chart to have gone negative (and stayed negative) since 1990, which is a longer period of being negative than occurred in the 1970's. Also note that since 2001 the rate has generally been more negative than in the 1970's as well.

View chart (scroll down near the bottom): http://neuralnetwriter.cylo42.com/node/2307

The chart covers the period Jan. 1970 thru March 2009. In March 2009 the real interest rate was bouncing back from having reached its lowest level on the chart (reached in late 2008), and was just catching up with the 1970's higher low. Since then the rate probably leveled off and should now be dropping back down as CPI is starting to firm up a little. So this chart is even more bullish for gold than the McClellan Financial chart linked in your article.

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Inflation or Deflation? - Page 13 Empty Think like a banker

Post  Shelby on Tue Jan 05, 2010 1:36 am

Very important to understand the banker's repeating business plan:

http://www.silverbearcafe.com/private/01.10/thinklikeabanker.html

And understand that Deflation is really Inflation, when on a debt money system:

https://goldwetrust.forumotion.com/economics-f4/inflation-or-deflation-t9-300.htm#2526

Fed plan to drain liquidity is really a plan to let it add liquidity for itself so it can feed the bailouts:

http://www.silverbearcafe.com/private/01.10/moremoney.html

Jesse 2 more shows out:

https://www.youtube.com/watch?v=Qp4UQVK7NyA (Big Brother)
http://www.silverbearcafe.com/private/01.10/societies.html (Part 5, COMPULSORY VACCINATIONS and alleged killing 90% of population coming soon in USA)
https://www.dailymotion.com/video/x50j7f_jesse-ventura-debates-the-911-consp_news (interesting side of Jesse's personality)

I don't believe they will attempt that in USA, because they certainly can not achieve it in these rural 3rd world countries yet (unless they plan to nuke these or other means) and thus they would set off a massive resistance outside the USA. Nevertheless, I certainly see many plausible signs that this sort of plan is underway.


dz20854 wrote:...are shown in this Shadowstats.com chart to have gone negative (and stayed negative) since 1990, which is a longer period of being negative than occurred in the 1970's...

Yes (had written about that in past) the liars were able to hide that from the public which allowed the bond bubble and problems to get worse, which will mean the payback will be more of a beaach.

That was one of the sources of Pretcher mistakes:

https://goldwetrust.forumotion.com/economics-f4/inflation-or-deflation-t9-285.htm#2218


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Inflation or Deflation? - Page 13 Empty Here is a copy of my post from SILVERSTOCKFORUM

Post  SRSrocco on Tue Jan 05, 2010 3:23 am

THE US DOLLAR is getting ready to GET CLOBBERED

The weekly COT REPORT came out today a day late because of the HOLIDAYS last week. Not much changed in SILVER, but GOLD did liquidate over 4,000 short contracts. Look at the figures below:

COT REPORT DEC 29

SILVER COMMERICALS

LONGS +378 @ 27,360 or 22% of open interest
SHORTS +568 @ 84,710 or 68.1% of open interest

GOLD COMMERCIALS

LONGS +2,204 @ 98,841 or 19.3% of open interest
SHORTS -4,519 @ 373,783 or 76% of open interest


Even though there has been some liquidation of the COMMERCIAL SHORTS in GOLD and SILVER, the relative SHORT open interests in both precious metals are still very high. Gold has a much higher short open interest at 76% compared to silver at 68%. When SILVER hit its low in NOV 2008, the COMMERICAL SHORT open interest was at 49%, in GOLD it was 50.7%. Even though this may seem BEARISH for GOLD and SILVER, things are much different today than they were in NOV 2008.

Lets take a look at the US DOLLAR COT REPORTS over the past several weeks:

US DOLLAR COMMERCIAL COT POSITIONS 2009

NOV 17 REPORT

LONGS +372 @ 14,790 or 35.4% of open interest
SHORTS +3,642 @ 12,394 or 29.3% of open interest

DEC 8 REPORT

LONGS +651 @ 10,141 or 20.9% of open interest
SHORTS +11,087 @ 25,222 or 51.9% of open interest

DEC 15 REPORT

LONGS -4,704 @ 5,437 or 10.6% of open interest
SHORTS +7,507 @ 32,729 or 63.8% of open interest

DEC 22 REPORT

LONGS +311 @ 5,748 or 9.6% of open interest
SHORTS +9.015 @41,744 or 69.8% of open interest

DEC 29 REPORT

LONGS +18 @ 5,766 or 9.1% of open interest
SHORTS +5,049 @ 46,793 or 74.1% of open interest


If you look at the figures above you will see that the COMMERICALS are getting ready to CLOBBER the US DOLLAR. On NOV 17 the COMMERICALS only had 12,394 SHORT positions on the US DOLLAR. They have added some 34,000 SHORT POSITIONS and have increased the short open interest from 29.3% to a whopping 74.1% (these are highlighted in RED)

This is good for the GOLD and SILVER INVESTORS, but it is only part of the story. As I mentioned above, the net SHORT POSITIONS in GOLD and SILVER are still quite high compared to the low of NOV 2008. But the difference today, we have the US DOLLAR SHORT POSTIONS at a record high the same as it was in NOV 2008. Look Below:

US DOLLAR COT POSITIONS

NOV 11 2008

LONGS 12,691 or 32.8% of open interest
SHORTS 33,891 or 87.9% of open interest

DEC 29 2009

LONGS 5,766 or 9.1% of open interest
SHORTS 46,793 or 74.1% of open interest


When SILVER and GOLD were ready to take off from their EXTREME LOWS in NOV 2008, the US DOLLAR was heavily SHORTED. Today, on JAN 4, we still have GOLD and SILVER relatively high short positions compared to NOV 2008, but the US DOLLAR is extremely SHORTED again. We are going to see the US DOLLAR head lower in the next several weeks-months.

This goes along with the DOLLAR CARRY TRADE, not allowing the US DOLLAR to rally all that much. Too many hedge funds, large investors and banks borrowing DOLLARS at a zero percentage and buying GOLD and etc. As the US DOLLAR rallies off its lows the past month, it allows those in the US DOLLAR CARRY TRADE another opportunity to buy DOLLARS at an even higher rate, making money as the DOLLAR gets crushed when it goes much lower.

The US DOLLAR is heading lower with this kind of extreme COMMERICAL SHORTING. With the tightness of the physical bullion markets and the still relatively high net short positions in GOLD and SILVER, looks like we will see fireworks in 2010.

Shelby...if you want to make money on this trade....you may want to SHORT the US DOLLAR.

Steve

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Inflation or Deflation? - Page 13 Empty Shorting Treasuries is still a bad idea

Post  Shelby on Wed Jan 06, 2010 2:42 am

Hope you saw my other post today about the coming war between gold and the PTB, with a technology explosion as the winner:

https://goldwetrust.forumotion.com/economics-f4/peak-oil-nonsense-t102-15.htm#2538

Here follows an email I sent to David Galland who writes the Daily Dispatch and is the chief editor of CaseyResearch.com.

===========================
http://www.caseyresearch.com/displayCdd.php?id=302

"levels of debt involved, we can anticipate that interest rates must rise in either scenario"

Agree there is no doubt that NOMINAL interest rates have to rise (eventually). But REAL interest will be negative until the gold bull market ends:

http://financialsense.com/fsu/editorials/moore/2010/0105.html

That is why I tried to tell you a few months ago that betting on interest rates is a losing strategy, because your gains can't outpace the rate of debasement (not to mention the counter-party, sovereign, capital controls risk of any paper bet now). Of course, if you leverage your bets, you might win, but leverage adds risk and have a sharp cutting edge in both directions.

I know you said that you ran my thesis by your top analyts internally and I appreciated that. But I think they are missing the point that REAL interest rates must remain NEGATIVE during the gold bull market.


Last edited by Shelby on Thu Jan 07, 2010 2:13 am; edited 1 time in total

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Inflation or Deflation? - Page 13 Empty Analysts have figured it out, QE is unstoppable spiral now

Post  Shelby on Thu Jan 07, 2010 2:10 am

After I was published making that point (and emailed it to all the top writers in the industry):

https://goldwetrust.forumotion.com/economics-f4/inflation-or-deflation-t9-300.htm#2526 (nearly 2000 reads in 2.5 days at marketoracle!)

(note I will be sending my 25,000 Cool Page owners a link to that "How Deflation Is Inflation" article, as it shows savers gained 33,900% more on a gold standard)

Several are now writing similarly:

https://goldwetrust.forumotion.com/precious-metals-f6/gold-as-an-investment-t60-105.htm#2547
http://financialsense.com/fsu/editorials/clark/2010/0105.html
http://financialsense.com/fsu/editorials/willie/2010/0106.html
http://www.kitco.com/ind/Clark/jan062010.html

Not saying I influenced them or vice versa, but the community is coming to the realization.

2010 is the last year to get out before the capital controls, because the dollar is cornered. When I say it is cornered, what I mean is the developing nations could careless about their own fiats, they are accumulating gold and using their own paper to play ball with the dollar until it is finished. Read Jim Willie's comment about China's secret deal to convert their Tjunk to land in USA (something I had also speculated might happen):

Willie wrote:The Chinese crisis then ignites a global sale of USTreasurys. As an offshoot to the chaos, the colonization of America then begins, as China cashes in on its USAgency Mortgage Bonds. It exploits it cut deal of Eminent Domain conversion of bonds into property. (chance: 20%)

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Inflation or Deflation? - Page 13 Empty QE is unstoppable, but first a stock market crash scare?

Post  Shelby on Sun Jan 10, 2010 5:24 am

http://www.kitco.com/ind/Summers/jan082010.html

Also Mr. Copper could give a signal, but hasn't yet:

http://www.gold-eagle.com/gold_digest_08/hamilton010810.html

I have been keeping some of my powder dry.

It is very hard to call this one short-term. Of course within a year, Gold will be much higher than it is now.

But gold can not be held back too long, so don't hold that powder too long:

http://www.gold-eagle.com/editorials_08/degraaf010810.html

My guess is we get one more test under $1100, might even get to $1050 or so, and then up, up, and away. Which is supported by this:

http://www.gold-eagle.com/editorials_08/radomski010810.html

This prediction seems to jive most with mine expectations:

http://www.gold-eagle.com/editorials_08/banister010710.html

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Inflation or Deflation? - Page 13 Empty Also dont forget they have another place to go steal the money they need in 2010

Post  Shelby on Sun Jan 10, 2010 8:14 am

http://market-ticker.org/archives/1830-401kIRA-Screw-Job-Coming.html

CAPITAL CONTROLS!

Get your money where you want it to be now. Don't risk it.

I have been warning about the 401(k) scam since 2007:

https://goldwetrust.forumotion.com/economics-f4/urgent-warning-iras-401ks-are-a-govt-scam-t39.htm

And as I have been saying, I expect rising rates to drive people into stock temporarily for a 5th wave blowoff in stocks, before bringing them back into bonds with a stock crash in later 2010 or 2011:

http://market-ticker.org/archives/1826-Here-It-Comes-You-Were-Just-Warned-Folks.html

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Inflation or Deflation? - Page 13 Empty When Yuan is depegged, a mad stampede to dollar exits, and hyperinflation??

Post  Shelby on Mon Jan 18, 2010 2:07 pm

http://www.gold-eagle.com/editorials_08/nielson011710.html

I think the one point he is missing is the percentage of the Chinese economy which is still driven by exports. Seems to me it will take more years for China to grow it's non-USA export market to avoid riots at home. I don't buy the decoupling argument. The USA was not able to decouple from Europe's monetary implosion in early 1900s without a Great Depression and WW2. But those would have been unnecessary if FDR had not confiscated the gold. But the Yuan is not a gold backed currency and can not become one. Also he is missing the likely fact that there is massive overproduction in China, and wasteful duplication due to easy credit policies.

The USA will not go down in isolation. The world will not transistion from the dollar reserve currency bubble without massive global pain and tumult.

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Inflation or Deflation? - Page 13 Empty Which real interest rates are negative?

Post  Shelby on Wed Jan 20, 2010 4:47 am

http://www.kitco.com/ind/GoldReport/jan192010.html

...Given the U.S. dollar's role as the world's reserve currency, I look at U.S. interest rates. The gold price starts to rise when three-month real rates go negative (when rates are positive, you're getting paid to hold dollars whereas gold doesn't pay anything). However the gold price really takes off when 10-year real rates go negative. That's what happened in 1979 and very briefly at the end of 2007. The 10-year real rate is positive right now, around 1.6%. As the three-month rate is negative, it's positive for the gold price but if the 10-year real rate goes negative and stays in negative territory, look out. The gold price could really spike...

As someone pointed out to me recently, and I had also pointed out as early as 2007, that real interest rates on 3 month (90 day or 13 week) Treasuries actually went negative in 1992 (and about 1996 for 10 and 30 year Treasuries), if you use non-liar inflation data:

http://www.shadowstats.com/alternate_data/inflation-charts
http://chartsrus.com/#FOREX

Thus the only thing that has to change is that people realize the truth about their bond holdings in negative real interest rates. I repeat again from my prior article, this is why the Fed is so concerned about "inflation expectations". They are trying to cook the frogs slowly, with most people unfocused on the fact that their 401(k)s and retirement plans are invested in bonds. The bond market has just peaked with a massive H&S pattern and there is talk of confiscating this money when the people wake up and try to stampede, which IMHO coincide with the big jump over the financial cliff in 2010 to 2011 or so.

I am telling you that all the doors are closing in 2010 or perhaps 2011/12 at latest, and we are headed for the massive realization and stampede and the govt measures to control it. Get the H&*^% out before it is too late.

See also the prior article I wrote about the correlation to negative real interest rates:

https://goldwetrust.forumotion.com/economics-f4/inflation-or-deflation-t9-300.htm#2526

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Inflation or Deflation? - Page 13 Empty Base metal stockpiles too high? (Gresham's Law)

Post  Shelby on Sun Jan 31, 2010 3:26 pm

Inflation or Deflation? - Page 13 Zeal0110Inflation or Deflation? - Page 13 Zeal0111
Inflation or Deflation? - Page 13 Zeal0112Inflation or Deflation? - Page 13 Zeal0113
(click images for article)

This is gresham's law in action. PTB manipulated the prices of commodities lower via future's (paper) markets, in order to keep the value of dollar (and the fiat system pegged to it...yeah even floating currencies are basically pegged to dollar) from collapsing. So what did people do with their dollars l(and fiat in general)? They stockpiled the undervalued money: base metals (and gold and silver and guns and bullets).

Greshman's Law says bad (overvalued) money drives good (undervalued) money into hiding (stockpiles). Examples are the fact that USA silver coins and pre-1982 90% copper pennies have been hoarded.

But there is problem that will cause waves of volatility in the above action. The world has a huge amount of fiat debt. If the debt is not paid (it can't be! QE just kicks the can up the worse road), the fiat system (contract law, i.e. rule of law and desire to do business) will stop working. If the fiat system stops working, then there will be no one (business) to consume to those stockpiles, and thus stockpiles become liabilities (incur storage expenses and opportunity cost for alternative investments) and need to be sold at lower prices unless they can be spent as money themselves. This is why gold (and to greater or less extent silver) could outperform other commodities. Or let us say that those commodities which are less like money, will be more volatile. Silver is less like money than gold (e.g. higher spreads, higher mass per value, more demand from consumption than money, etc), and thus will be more volatile than gold. However, remember the silver stockpiles are very low, and if ever this becomes known widely in the market or let us say if ever fiat system dies since the 2 statements can (and will!) cause each other, then the monetary demand for silver is unfathomable. China doesn't buy silver instead of the base metals, because the entire annual supply of silver is only about $15 billion, stockpiles are gone, and driving the price of silver up would destroy the fiat system and implode China into chaotic depression. Which is also perhaps why nickel is in counter-trend to other cheaper base metals in charts above, because nickel is primary used in stainless steel, which is a luxury item and nickel is a much smaller market cap.

Until the stimulost and QE liquidity spigots open (or are expected by market to) again, we will probably see some volatility to downside prices now.

We are riding a death star of the fiat system and rule of law. Final stop are infinite gold and silver prices, with interim volatility stops along the way.

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Inflation or Deflation? - Page 13 Empty Crisis imminent

Post  Shelby on Wed Feb 03, 2010 7:00 pm

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/7095818/Funds-flee-Greece-as-Germany-warns-of-fatal-eurozone-crisis.html
http://johngaltfla.com/blog3/2010/01/21/

Remember March is when Fed has promised to stop QE (purchasing toxic crap).

"In January 2009, a stunning 356,000 jobs were removed from the overall count because of the birth/death model. That resulted in a much larger- than-expected loss of jobs during the first month of the Obama administration. The panic was palpable.

"Without a change, the Labor Department will subtract a similarly large number of jobs this January. And when that month's labor figures are reported on Feb. 4, watch out! The stock market will not like this. "

But will they change the rules of the game again before this jobs data release? Well guess what I looked it up and yes there is a new format for the jobs data, see this link to the US gov site: http://www.bls.gov/cps/ "IMPORTANT Upcoming Changes to the Employment Situation News Release on February 5, 2010"

I don't know if this will mean hiding the number or not but it would not surprise me. (5th of Feb, not 4th as started by the Daily rec.)

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Inflation or Deflation? - Page 13 Empty Refuting the $660 gold theory

Post  Shelby on Fri Feb 05, 2010 2:17 pm

http://www.investophoria.com/2010/01/inflationists-worst-nightmare.html?showComment=1265379278686#c4846906421201035635

Shelby wrote:Deflation is good for savers, especially when they save in gold, when the govt is determined to fight deflation by pushing on a fiat string:

Google "How Deflation Is Inflation"

Business is declining ad Govt is losing tax revenue at a -8% per year rate!

Inflation or Deflation? - Page 13 Partic10

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Inflation or Deflation? - Page 13 Empty Dollar is dying against Gold, not against other fiats (which are just a proxy for the dollar)

Post  Shelby on Mon Feb 08, 2010 10:16 pm

Inflation or Deflation? - Page 13 Alert_11Inflation or Deflation? - Page 13 18207910 <- click for article

I wish the chart on right was logarithmic. It is thus not showing the relatively (as percentage) large decline now.

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Inflation or Deflation? - Page 13 Empty Deflation and Inflation have no meaning at this stage

Post  Shelby on Tue Feb 09, 2010 1:40 pm


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