Inflation or Deflation?

email wrote:Hello Michael,

Thank you so much for the reply.

1. Most of the posts on goldwetrust.forumotion.com are mine. I used to own
GoldWeTrust.com (but no more). I have written extensively on numerous
financial sites, and jot down my developing thoughts there at that
informal forum. I am mainly a software programmer (and little bit of a
mathematician and self-taught economist). I am currently working on a
decentralization solution from the technical side (a radically new
computer language named Copute.com). I've pretty much given up on
educating people, because even those who say they want to end the current
problem (i.e. Ron Paul supporters), want to do it from the center. This
means they don't really want to decentralize (they are playing right into
the status quo and eventual NWO), they want the leaders to do it for them.
You may disagree with me. Or you may prefer a purely data-centric
exposition and I am in support of your effort in that regard.

2. Agreed % of national income is a more meaningful relative measure. I
had visited your site many times over the years (before you got your own
domain), and just recently read that you knew Dr. Milton Friedman.

3. If I come across any useful data that I think you might not have, I
will email it to you.

4. So just guesstimating, as of 2010 government spending could be roughly
67% of national income, and that is not including mandated spending of
Obamacare, the Fed's ownership of income producing assets (i.e. the
spending is going into the Fed), the accrual accounting of long-term
entitlement spending, and probably doesn't include government
nationalization (ownership) of most real estate via Freddie&Fannie,
General Motors, etc..

So to put it bluntly, the government is probably responsible for more then
3/4 (75%) of the economy.

I think your 50% chart does not make the point strong enough, and the
correlation of that probability is spread out across too many pages, and
people may not interpret how close we are to the fascist tipping point
where we are so close to government being 100% of the economy, that the
system eats itself. Typically what happens is the society will use
eugenics (rationing, etc) as it tries to rid itself of its fat, e.g.
Hilter's Germany believe it or not, was really about the Utopian health
care system and the desire to purge the "misfits" ("who were causing all
the economic problems"). This delusion creeps in when the government
reaches too large of a share of the economy (and no one wants to blame
themselves, i.e. fuzzy centralized "solutions", e.g. Ron Paul). The only
solution is for the individuals to come out of the system and
decentralize. There is no longer any way to fix the system from the
center. It is a mathematical fact of entropy and thermodynamics.

> Hello Shelby,
> Thanks for writing. You are to be complimented on your thrust.
> I viewed your URL you sent containing one of my graphics, and read most of
> the comments of others RE Buffet. I found many very good, and in some
> cases spot-on - - revealing some sharp people involved with thinking caps
> on.
>
> From my visit to your site GoldWeTrust.com I gathered you are its
> moderator. Although I'm unfamiliar with that, perhaps you might fill me in
> on its makeup, objectives, etc. - - since I found you appear to be leading
> valuable discussions on important subjects.
>
> You asked savvy a question.
> Regarding your 'about Buffet', I will not comment on what Buffet says on
> that subject or his motivation. Certainly, like most and which is natural,
> Buffet has his own agendas and self-interest, which is his right.
>
> In my own thoughts, I prefer data and data trends over rhetoric-only, in
> my work try to display said data on various critical subjects and then
> provoke the reader to form own views based on said data or present
> reliable data to the contrary.
>
> Hoping its helpful to you, I will take some time with my morning coffee to
> provide some response to your questions. Since I'm unsure how much of my
> works, the Grandfather Economic Report series, you have explored, other
> that part from which you copied your graphic of govt. spending ratios,
> below I will try to anticipate what might be pertinent to your questions
> from my own work - - point you various places and hope its helpful.
>
> Regarding your question as to what might be missing from the govt.
> spending numbers in my graphic, allow me first to state the numbers which
> comprise Federal and state&local spending in that graphic for 2010:
> $3.8 trillion federal govt. spending - 32% nat income
> $2.1 trillion state/local govt. spending - 18% nat income
> Sum = $5.9 trillion
>
> [said data are direct from appendix tables of latest annual Executive
> Branch's Economic Report to Congress]
> (Keep in mind the graphic states said spending as a percent national
> income, not of GDP. If related to GDP, which my late mentor Noble Laureate
> Dr. Milton Friedman advised me against for reasons you will find elsewhere
> in my work, the ratios would be somewhat lower).
>
> I will attach a few graphics to this email to enable you, if you wish, to
> review quicker later.
>
> Attached is a historic progression graphic ('Expanded Govt. Spending Share
> of Economy') of said govt. spending ratio data as shown in the chapter
> Govt. Spending
> Report, being the 3rd graphic on that page. It tells quite a dramatic
> story, over time, reaching all-time highs lately. You might also find
> helpful info from several graphics in the 2 chapters: Govt. Growth Report
> and the Federal Govt. Spending Report [a 2-web page report]
>
> Now to your quest for info RE what is not included in my graphic you
> displayed in your
> https://goldwetrust.forumotion.com/t9p540-inflation-or-deflation under the
> Buffet section.
>
> 1. Regulations - Add $2 trillion > Let's first respond to your point on
> regulations, where you said > 'And that doesn't include regulatory
> compliance (which is increasing radically now under Obama).'
> Again, I offer you some info, in case you have not yet found, from another
> of my chapters, called The Regulation Compliance Cost Report [a 3-web page
> report] You might scan a few graphics there and note said regulatory
> compliance costs (of course) are not included in reported govt. spending
> data because no attempt is made to collect, report and budget.
> From that chapter you will note my estimate (and this chapter says just
> that, my estimate from studies found and there referenced) is that fed +
> state/local govt regulatory compliance costs passed on to the private
> sector exceeds $2 trillion (another 17+% of the economy's nat income) - -
> which one should add to the above stated $5.9 trillion spending, thereby
> expanding the share of the economy impacted by govt all levels.
> (Shelby - let me here ask you, which in that chapter I ask all readers, to
> please let me know if in your endeavors you find more relevant studies on
> this subject than referenced and reported in that chapter, as such
> unfortunately are few and far between).
> Attached to this email is one of the graphics from that chapter ('Free
> Private Sector with spending & regulations 2010 vs 1947).
>
> 2. You mentioned possibly the mandated healthcare add-on. I have no data
> yet on that add-on, but if it is upheld such will be a huge biggie
> addition. So far I have not found (to me) creditable data as to what it
> might cost the private sector - - which, unfortunately, is typical of all
> govt. regulations issued - - as I cover in the regulation report chapter.
> While on this HealthCare subject, you might find the time to scan another
> chapter, called The HealthCare Report, which soon will be further updated,
> time permitting.
>
> 3. In your web report also you said, 'I would suppose the above chart also
> doesn't include Fannie and Freddie, which are pseudo-government agencies
> (feds backstop them), and now the government owns General Motors too, I
> wonder if that is in the above chart?'
> Very good points, Shelby. Although I do not have proof with hard data
> backup, until I do have such it would be savvy to assume such is NOT
> included. One simply needs to say > 'show me the data.'
>
> 4. Another biggie, of course, is that unlike most private sector
> accounting govt. does NOT accrue for future expenses - - such as Social
> Security, Medicare, Medicaid, government pensions and health care
> insurance federal and state/local. These are huge. I try to quantify some
> of such liabilities in a simple chapter you might find interesting, called
> Debt Summary Table. Additionally, for sure, spending does not incl.
> on-going and needed accruals for losses in GM, or in AIG, or in the TBTF
> banks, and on and on.
>
> 5. In general, you are correct that not all govt. spending is captured in
> published data. Therefore, reported governmental impacts certainly are not
> over-stated, rather under-stated.
> Just as companies, individuals, and governments oh so often love to
> over-state asset values - - for sure they NEVER overstate debt values and
> more often than not purposely understate their debts.
> Thus - - when we put together a 3-web page extensive chapter about debt,
> called America's Total Debt Report, such reports debts revealed, therefore
> understating all debt.
>
> Just in case it stimulates, I include two other graphics of major trends
> used by PTB to date to prop up things >
> trend US dollar internationally (from chapter called Foreign Exchange
> Report ) and trend dollar internally (from chapter called Inflation
> Report). Note the similar, long-term trends.
>
> There can be little doubt America, and much of the developed west, have
> extended and pretended so long by debt and trade deficits and government
> growth and currency depreciation that limits are now rapidly on top of us
> - - producing a huge runaway threat to my children's and grandchildren's
> generation.
>
> --------------------------------------------------------------------------------
>
> Let me stop here.
> You are invited to explore more of the Grandfather Economic Report series.
>
> I hope above is responsive and useful.
> I encourage you to continue your probing.
> When you have a chance let me hear about your takeaway and possible uses.
>
> very best regards,
>
> Michael Hodges
> Grandfather Economic Report
> http://grandfather-economic-report.com/
>
> Each generation hopes their children and
> grandchildren will have more security,
> education quality and economic opportunity.
>
> Certain trends threaten their future -
> compared to the past. Here's the proof.
> --------------------------------------------------------------------------------
>
>
>
> From: Shelby Moore
> Sent: Tuesday, August 16, 2011 10:11 PM
> To: michael-hodges@comcast.net
> Subject: Does your govt % of GDP include health care mandates, etc?
>
>
> I am trying to figure out what is the error in Warren Buffet's otherwise
> sound logic, and it appears to be he is not paying attention to the govt
> as a% of GDP. And as I state at following link, I wonder if you are
> missing many big factors in your calculation?
>
> https://goldwetrust.forumotion.com/t9p540-inflation-or-deflation#4521

Finally, let's deal with the "but the poor!" crap and the truth about your W2 income.

Unlike most of the hacks who attacked this proposal I've run a business and made payroll.  I'm well aware of exactly what the payroll account actually looks like, what's withheld and what you never see as an employee.

First, you have deducted from your check 6.2% and 1.45% of your gross hourly (or salary) wages.  The 6.2% caps off eventually, but the 1.45% does not.  Most people do not hit the cap - unless you're in the top quintile, you pay this on every dollar and see it in every check.

But in fact you pay twice that much, because the employer is required to send the same amount in although they are prohibited by law from itemizing it on your pay stub and telling you the truth - you were, in fact, offered and paid 7.65% more than your wage.

I don't care what the government says I can tell you.  All I care about are facts.

Oh, but that's not all!  Employers are also required to pay FUTA.  That's the unemployment tax, and it's presently 6.2% on the first $7,000 in wages.  There's an offset if you pay into a state fund, but you still pay - it's just who you pay.  The working poor and lower-middle class - that is, someone making $10/hour or $20,000 a year for a standard 2,000 hour work-year (50 weeks of 40 hours) in fact is paying about 3% of his wages in that tax as well - and it's federally illegal to itemize that on the employees pay stub and disclose exactly how much is stolen from him in the form of that tax.  Since this tax caps out at $7k in annual wages it is extremely regressive, even more so than Social Security.

There are other employment taxes as well, but those are the big federal ones, and pretending they don't exist is intentionally dishonest.

So is ignoring unemployment insurance that must be maintained along with Workman's Comp.  Both are legally required and both are also extremely regressive, given that lower-income people tend to be more mobile when it comes to paid unemployment (it's a fact, like it or not) and thus tend to ramp your unemployment insruance rates (at least until you cap off.)  The latter two are state-specific and so I'll ignore them - in other words, I'm understating the common worker's actual compensation in my example.

Excellent detective work.

This is ratcheting step of the bankster model, where it kills off the community banks and gets all the securities into bankster control:

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

This will provide the stagflation hell I am expecting in 2012.

Yeah people will get more money, but prices will go up, so the people lose, the govt's share of the economy continues to increase, and the negative marginal-utility-of-debt will continue to increase (the more stimulost, the faster the "REAL" GDP is shrinking, i.e. nominal GDP minus the true inflation rate, not the liar CPI stats).

This is an attempt by the banksters to rewrite all the notes and get borrowers to sign fresh.
Dont forget the robocop and MERS fiasco.
This would turn any non recourse loan into a recourse loan in the states allow such.
Major CYA
The banks love it because it creates the documents that may needed in the future to foreclose on borrowers.
Ben gets TARP II
The FED slims down
Fannie & Freddie takes on more shit loans.
Once upon a time on Christmas Eve past, there was a treasury secretary named Tiny Tim, who in the stillness of the night, raised the limit of toxic coal that F/F could swallow.
Unlimited.
Well Tiny Tim says it is time to make F/F swallow.

In Bernanke we bust & In Geithner we doubt

No doubt Hank is on speed dial for both.
What a freakin cartoon!
And they're gonna get away with it.
Unfucxing real

Shelby wrote:Andy it is very interesting to ponder how the debasement of the dollar is going to play out at the end game.

I had reasoned and asserted in 2010, that global HYPERinflation would be impossible for any extended period of time, because hyper-inflating commodities would shut down production globally and it would quickly crater into global depression and chaos.

When there is a single country that is HYPERinflating its currency, then production only stops within that country. The production of commodities and services continues on indefinitely in the vast majority of the world, so the HYPERinflation can continue in that country for some time.

[...]

So yes, we will get a hyperinflation, but it will be nearly instant. You will either have gold and silver or you won't. Most westerners won't.

The other way it works is a stampede to gold & silver (and not commodities), with supply constrained by the globalists themselves, thus most westerners won't get any that way either. Which is what I think would happen if the westerners woke up and tried to buy gold & silver in massive quantities too soon. I wanted to test this theory by trying to find a way to market gold & silver at an exponential rate to westerners. I think it probably is just a pipe dream though.

anonymous wrote:Shelby,
Agree it will be nearly instant, travelling like a shock wave, agree it will probably be set off by something in Europe, then a short delay before the shock wave appears.

I think it will all happen very quickly, a game of musical chairs with 2 billion or so people and very few chairs to buy, it can’t last long once it starts.

Shelby wrote:Note that this chart if used the correct ShadowStats.com data, it would look much worse. It would instead show the fall continuing straight down off cliff after 1975 and not slowing down and down to less than $0.01 (1 penny) already. Also the historic volatility between $0.40 and $1.00 would look much smaller and be squeezed to the top the chart (due to the correct logarithmic scaling). Logarithmic scaling is the only way for humans to correctly visualize the exponential function (proportional change):

Shelby wrote:http://armstrongeconomics.files.wordpress.com/2011/09/armstrongeconomics-swiss-devalue-franc-090711.pdf

Essentially he said that the Swiss action redirects capital inflows from transient franc-denominated financial assets which pay 0% (thus are not attractive if franc will not be allowed appreciate relative to Euro) to devalued hard assets within Switzerland. Either way, Switzerland will experience stagflation, now instead of consumers holding a bunch of imported cheap goods in exchange for hot money inflows, the Swiss central bank will hold a boatload of Euros and Swiss consumers will pay higher prices for imported goods.

Armstrong says this is brilliant because it reduces the risk of sudden hot money outflows, and again Martin shows that he is not a free market thinker.

It is better for the govt to not intervene and let the Swiss consumers have ownership of their capital than central bank centralizes the ownership of the imported capital. Armstrong is wrong.

He is correct that this will drive more safe haven capital to gold. He doesn't make the point that it also exports the capital of Switzerland to support the Euro bailout.

The main point is that Switzerland has joined the EU monetary union. That is massive bullish for gold long-term (not necessarily short-term), because one-by-one every country that was not a disaster, is joining to become a disaster.

The most impressive capitalist moment I had was seeing a store built in a day. As in, the first day, the street corner was empty. Second day, construction. Third day, a free standing, fully staffed and operational cosmetics store.

I am very curious what this entire report says?

http://www.shadowstats.com/article/no-396-3rd-quarter-gdp-october-confidence-september-durables-orders-and-home-sales

Denninger has some similar comments:

http://market-ticker.org/akcs-www?post=196634
http://market-ticker.org/akcs-www?post=196699

It is important to know if the government is cooking the numbers, or what is actually going on, so we can determine if this rally has long-term legs or is just a quick deadcat bounce as Denninger is implying below:

http://market-ticker.org/akcs-www?post=196679

yellowcaked wrote:
http://armstrongeconomics.files.wordpress.com/2011/11/armstrongeconomics-financial-armagedon-110411.pdf

Armstrong has so many errors in this paper. I find it to be one of his worst, e.g.

There will be only two
possible solutions; (1) MONETIZE the debt or (2) DEFAULT on the debt.

The govt can also force retirees to hold the debt as their retirement investments.

This problem is a political one, where no one wants to give up their govt benefits, thus monetizing is not a solution either, because the demand for benefits will always increase (Iron Law of Political Economics).

Thus monetization and default are the same, the only potential difference could possibly be how the pain is distributed.

Bottom line is that everyone who sucks the tit of govt, and does not get their savings out of paper, is going to lose.

The pertinent timing indicator for gold is that when the monetary system is backed by gold, interest rates will climb, and that is the time to sell gold for equity investments.

Some people will prefer to buy bonds at that point, but saving-at-interest is the same as encouraging debt and pooling capital, and is how society ends up where it is now. It is also severely underperforms equity investment:

https://goldwetrust.forumotion.com/t124p30-theory-of-everthing#4640

I am hopefully going to make an online academy, and there one of the subjects I will teach is Economics. Adam Smith was wrong, Martin Armstrong is wrong, etc (Jason Hommel is correct):

https://goldwetrust.forumotion.com/t182-technology-that-changes-everything#4645

As for silver, when the world has moved to default stage where interest rates will be allowed to climb, then silver will collapse too, because there will be very little capital (paper will be destroyed) and thus growth in China will slow down to maybe 3% or negative for a while.

Some people think the great default is as soon as 2012. The central banks can keep printing money for as long as inflation is not out-of-control.

So the first thing we need to see is silver going crazy $75+ (probably $150+), before the central banks are out of ammunition.

The rollercoaster gyrations between QE and pause, are accelerating and shortening in cycle period, and this keeps people out of silver especially due to the volatility.

I think the govts and central banks are going to pause and delay as long as they can, but ultimately they will QE everything. And silver is going to rocket higher, probably sometime in 2012.

It will be a very volatile ride. Because the politics is much more fractured, and the inflation bomb fuse is very short now. The central banks and govts are trying to not have their hand forced, but they soon have no choice but to light that fuse.

Some people argue that Germans will never allow it, but of course all those retirees with their life savings in bonds, they want higher interest rates, but the system of saving-at-interest is a theft system that encourages debt formation. Thus there is no way they are going to get what they want. Instead the default will fall on their backs, as it should, because they did an evil thing their whole life.

Another factual error by armstrong

Armstrong wrote:

In Germany, two thirds of Germans surveyed in recent
polls believe that their parliament should NOT ratify more money for the euro-zone bailout fund and
agree with former chancellor Helmut Kohl that Angela Merkel's government is undermining Germany's
influence abroad. Chancellor Merkel is facing a revolt in her own party within parliament over a
September 29 vote to ratify more money and powers for the euro rescue fund. She is being publicly
criticized even by her ex-mentor Helmut Kohl who was the architect of German reunification. The real
danger is that Merkel’s refusal to restructure the euro-debt threatens far more than Greece. The
German people cannot be suppressed forever. They will get to vote one day and Merkel will be kicked
out the back door. Germany will turn inward and far more isolationist and the trade barriers will rise in
Europe

But he is wrong. Former chancellor Helmut Kohl is calling for more money printing:

http://www.spiegel.de/international/germany/0,1518,782757,00.html

Kohl. In recent years, he said in an interview this week with the magazine Internationale Politik, Germany "has not been a reliable power -- neither in domestic policy nor in foreign policy." He claimed to often wonder "where Germany stands today and where it is heading."

Halting Efforts

Kohl, who originally plucked Merkel out of obscurity to make her a cabinet minister in 1991, was referring primarily to trans-Atlantic relations and to concerns that the US no longer sees Germany as a vital foreign partner.

Kohl provided the hard place. His criticism of the chancellor in the Internationale Politik interview was not limited to her foreign policy profile. The committed European also repeated his vociferous critique of Merkel's halting attempts to prevent the euro zone from crumbling. He said that "we have no choice" but to provide aid to Greece. Europe, he feels, needs "energetic action and a package of forward-looking, intelligently thought-out measures free of ideology with which we can get Europe and the euro back on track and secure our future."

http://www.spiegel.de/international/europe/0,1518,775085,00.html

You can clearly see that the people of Europe want the "discipline" of a political union:

http://www.spiegel.de/international/europe/0,1518,775085,00.html

Europeans are collectivists! They will always opt for collectivity over efficiency! Anyone who has worked with anyone from Europe will know this is true!

Even the "populist" parties in Germany, are not calling for less government. In fact, one of them calls for free education for everyone. And they were angry at Merkel for not joining the "liberate Libya" war.

Soros on EU

Read this together with my prior 2 emails on Armstrong, then I think you will see what is coming is the "bazooka" as I had expected:

http://www.nytimes.com/2011/11/11/world/europe/11iht-letter11.html?_r=2&partner=rss&emc=rss


Holding silver for $75+. Govts will massively QE again. They have no other choice. The people want govts to fix the problem. They don't want their retirement accounts (in Germany for example), i.e. their investments in debt, to decline in value.

Everybody has a vested interest to see interests rates continue to decline. Remember when interest rates rise, then bond investments lose value, i.e. retirement plans will implode.

Europe is mostly retirees.

People get this logic backwards, they think rising interest rates are good for retirees. No! The opposite actually. Rising interest rates means the economy is imploding and the retirees are being wiped out.

Actually retirees should stay away from bonds entirely, but that is my bigger point about that people are too stupid and want debasement.

re: Soros on EU

I simply don't view it as force. The Germans want their cake and eat it too. Europeans are hypocrites. The German retirees want to be able to buy bonds of the PIIGS, then sell them manufactured goods and take all the money back, then expect their retirement plans to be solvent. That is a collectivist model and not capitalism. The Germans don't want capitalism. And so they will not get it. Soros is not forcing socialism on them.

No I was expecting a crash of S&P to about 950, not as massive as 2008. I expect the next massive crash after 2012 (when inflation brings the global economy to its knees).

On Oct 2010, I wrote an article published at marketoracle (when silver was $22), predicting it to go to $45 - $47 before summer of 2011, then to drop to $25 - $27.

That is exactly what happened.

I don't think the drop in the S&P is done yet. ECRI is still expecting another wave of recessionary forces.

I expect EU, USA, and China will be back in stimulating monetary mode before summer 2012. And that is why I am speculating on a double of the silver and oil price before end of 2012.



>
> Not surprising hardcore globalist Soros wants to force Germans onto the EU
> Titanic. Thanks for the link, I wasn't familiar with his "bazooka"
> metaphor.
>
> Weren't you expecting a massive PE crash (and I assume an economic crash)
> this November?

78% of Germans want what Soros wants

Soros is not forcing EU integration on them, they want it:

http://finance.yahoo.com/news/poll-78-percent-germans-see-102232348.html

Refer to my prior post "re: Soros on EU".

Globalists prepare to replace the national govts of EU

http://market-ticker.org/akcs-www?post=197378
http://www.infowars.com/super-globalist-to-replace-italys-berlusconi/

France will want the Eurozone to bail out their banks, and that means the ECB. If France gets such a deal, Ireland will certainly demand – and get – one, too.

But the choice is print or let the euro perish. I see no other realistic solution, aside from massive austerity, willingly accepted by Europeans everywhere, along with the nationalization of their banks, etc., as described above. I think there is even less willingness to endure all that.

It is a hard choice, I know. If you held a gun to my head and asked, “What do you think they will do?” I would have to say, “I think the ECB prints.” But not without a lot of rancor and solemn pledges and maybe a rewriting of the treaty in order to get Germany to go along.

yellowcaked wrote:nice quote from Armstrong:

http://www.martinarmstrong.org/files/Speak-See-Hear-Nothing%2011-09-2011.pd

The assumption that the ECB can save the day is up there with Santa Claus.

yellowcaked wrote:My guess is the EUR market this week feels some shakedown because the ESEF cannot attract buyers for their bonds to backstop Italy.

Could be some real volatility ahead:

http://www.zerohedge.com/news/european-ponzi-goes-full-retard-efsf-found-monetize-itself

I think countries who vote 'no' or 'yes' will get scorched at $200 oil.

Shelbylook wrote:
China is nearly bankrupt:

http://www.financialsense.com/contributors/michael-shedlock/2011/11/16/chinese-banking-system-nearly-bankrupt

Since the beginning of 2011, nearly one out of every four purchasers of real estate in the Phoenix area has been a foreigner. Wealthy Chinese and Indian investors, among others, regularly visit the area, sometimes in “real estate investment tours.”

It’s not hard to see why foreign real estate investors find Phoenix attractive. The weather is near-perfect most of the year, and prices are 50%-70% below their 2007 peaks. I’ve confirmed from contacts in southern California, Las Vegas, and Atlanta that foreign buyers are very active in those real estate markets as well.

So just why again is it that anyone accuses the ECB of doing nothing? When all is said and done under the current regime, the ECB balance sheet will be just under €2 trillion, and that is without any incremental printing, courtesy of the farce that is "sterilization" with banks which exist only due to the ECB, thereby making said sterilization about the most idiotic thing ever conceived. Yet that is what spin is for...

The Germans would like the rest of Europe to get their budgets and deficits under control BEFORE they have to accept those costs. Not getting those agreements means that there will be no end to the amount of money Germany will have to pay. It will all too soon be enough that it would put their own credit rating at risk. They can envision how that works out. Without real spending controls, what disciplines a nation to not spend as much as it can get away with?

What Germany wants is for some mechanism to insure (and assure their voters) that the rest of Europe will control their deficits. And that means some type of European-wide control on spending and for governments to give up their sovereignty in exchange for the backing of Germany and/or the ECB. Otherwise, go ahead and default and see how that works out for you.

That is a perfectly rational position. But it is a huge gamble, as allowing the crisis to go a “bridge too far” would mean an economic crisis of biblical proportions, from which the recovery would be long and brutal.

While I think that eventually Germany allows the ECB to print, that is not a foregone conclusion.

Hold that thought as we look at a rather sensationalized article in the London Telegraph, in which we learn that “Angela Merkel, the German chancellor, is today expected to tell David Cameron that Britain does not need a referendum on EU treaty changes, despite demands from senior Conservatives for more powers to be repatriated to Britain. The leaked memo, written by the German foreign office, discloses radical plans for an intrusive new European body that will be able to take over the economies of beleaguered eurozone countries.

“It discloses that the EU’s largest economy is also preparing for other European countries, which are too large to be bailed out, to default on their debts — effectively going bankrupt. It will prompt fears that German plans to deal with the eurozone crisis involve an erosion of national sovereignty that could pave the way for a European “super state” with its own tax and spending plans set in Brussels.” ( http://www.telegraph.co.uk/news/worldnews/europe/eu/8898044/Germanys-secret-plans-to-derail-a-British-referendum-on-the-EU.html)

Germany has a plan D, however: exit the Eurozone and start a mini-Eurozone of like-minded states who believe in the exotic concept that a currency shouldn’t lose its value. The ECB could monetize the debt of the 12 or so remaining members. The mini-Eurozone with Germany at its center would issue its own currency. The 27-member European Union would remain in tact, trade would continue, and life would go on after some tumultuous times in the markets. But that solution doesn’t have any support among my German contacts, who dread the unknown and don’t want to switch currencies again.

Shelby (remember me?) linked to this fofoa article.

http://www.marketoracle.co.uk/Article31926.html

Gold-to-house Price Ratio May Plunge

At that site, I published an article Oct. 2010, that predicted silver would drop to $22, then rise to $48 before summer 2011, then drop to $25 - $27.

It did exactly that.

If there is any hyperinflation, it won't last more than a year. The point I was trying to make before is that when all currencies hyperinflate in unison, then the global economy implodes. Contrast this to when only one country hyperinflates, it can go on and on for years, because the global economy is not threatened.

Make sure you read this:

Understand Everything Fundamentally

Cheers to all.