"Generation Zero - The Inconceivable Truth" - the movie

[vincecate]

John: "The situation today is COMPLETELY DIFFERENT from the Weimar republic situation, and there is NO CHANCE WHATSOEVER that those scenes will be repeated."

Has there ever been a country with a fiat currency (not tied to gold or anything) that had any big deflation? I really think you underestimate the ability of Helicopter Ben to print money. He will print as much as is needed to keep the money supply going up. As already shown, he would buy up every mortgage if he thought that would help. I think you are wrong in thinking that deflation is anything more than a slight temporary problem in the face of fiat money printing. In the 1914 to 1933 "gold standard" with 40% backing while claiming fully backed by gold, you get deflation as people take out their gold. If all the gold came out there would only be 40% as much money. But in a full fiat currency inflation is the real danger.

[vincecate]

John, your comment that the situation is completely different reminds me of a book you should read. The title is "This Time is Different". Each time governments bailout banks and companies you end up devaluing the currency (inflation not deflation). I think they have more than 100 examples. Not once does government bailing out companies and banks result in the currency getting stronger. Yet each time people think "this time is different". You, of all people, should understand history!

http://www.amazon.com/This-Time-Differe ... 850&sr=8-1

[John]

> John, your comment that the situation is completely different
> reminds me of a book you should read. The title is "This Time is
> Different". Each time governments bailout banks and companies you
> end up devaluing the currency (inflation not deflation). I think
> they have more than 100 examples. Not once does government
> bailing out companies and banks result in the currency getting
> stronger. Yet each time people think "this time is different".
> You, of all people, should understand history!

> http://www.amazon.com/This-Time-Differe ... 850&sr=8-1

If you're going to use a "this time it's not different" argument, then
you have to explain why this time it's not different from the 1930s,
when deflationary spirals hit both creditor and debtor nations.

The Weimar and Zimbabwe super-inflations occurred during generational
Awakening and Unraveling eras, as did America's high inflation in the
1970s. Credit abuse and bubbles are common during Unraveling eras,
but they tend to come crashing down into deflation in Crisis eras.
This time it's not different.

John

[vincecate]

If you're going to use a "this time it's not different" argument, then you have to explain why this time it's not different from the 1930s, when deflationary spirals hit both creditor and debtor nations.
[...]
This time it's not different.
John

It is easy to say what is different from the 1930s. Back then the dollar was leveraged off gold by "reserves in gold of not less than forty per centum against its Federal reserve notes in actual circulation".
This means that when gold was in the Federal Reserve there was 2.5 times as much money as when gold was outside the Fed. So as people took their gold out there was less total money, which was deflationary. But today with a pure fiat dollar we don't have this mechanism at work. That is very different.

But after the temporary deflation there was inflation when they went off the gold standard. So at best you can say that example argues for a temporary deflation then inflation.

http://www.historycentral.com/documents ... serve.html

But what is really different from the 100 cases of currency devaluation and inflation in that book? When the US government is unable to borrow more, cut spending, or increase taxes why won't they be forced to print money and get hyperinflation like all the other such cases?

Japan's government was able to borrow from its own population, so I want another test case. Do know of any examples where a government with a pure fiat currency and deficits/borrowing/taxing such that it needed to print money and yet it got deflation?

-- Vince

[vincecate]

There is another big difference between now and back then. Ben Bernanke spent most of his life reading and writing Keynsian papers about the Great Depression that all say the Fed should have printed more money. Helicopter Ben was speaking before Milton Friedman once and said something like, "you are right, we caused the Great Depression but thanks to you we won't ever do that again". Back then the Fed was constrained by the 40% Gold reserves law, but now there is nothing to slow the Feds money printing. Given what Ben believes, he is printing money like crazy and will continue to do so till it is too late. And with the Federal deficits the government will not let him stop even if at some point he realizes he should.

[vincecate]

I think we are getting the Kondratieff Cycle type deflation if you view gold as the real money, which I think Kondratieff did. Measured in gold, things are getting cheaper these last 5 years and I expect they will keep getting cheaper for some time to come. So in "real money" we have deflation, but not in fiat dollars.

http://globaleconomicanalysis.blogspot. ... cycle.html
http://www.kondratyev.com/reference/the ... lained.htm

[vincecate]

Awakening and Unraveling eras, as did America's high inflation in the
1970s. Credit abuse and bubbles are common during Unraveling eras,
but they tend to come crashing down into deflation in Crisis eras.
This time it's not different.
John

Before Nixon in 1971 the world was still at least sort of tied to gold. Since then the world is on pure fiat money. The world has never been on pure fiat money before. So the deflation patterns seen under gold money may not exist any longer. This world fiat money thing is different.

I think one should either view things from a "only gold is real money view" and see prices in terms of gold going down or use patterns from fiat money to predict how our fiat money will work. The fiat pattern seems to be inflation, not deflation.

[xakzen]

I think one should either view things from a "only gold is real money view" and see prices in terms of gold going down or use patterns from fiat money to predict how our fiat money will work. The fiat pattern seems to be inflation, not deflation.

Even the highly suspect BLS had to admit that there was inflation last year:
ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt
This is with all their fudge factors included. Take out their heuristics and I'm sure it's even more. Counteracting the deflation has been the rise in taxes & gov fees which as Greece shows is unsustainable hence why most Greeks simply cheat and don't pay taxes.

I'm certainly no expert in macroeconomics, but one thing is for sure: the banks have lost so much money that all talk of having the gov take it off their hands quickly evaporated every time someone offered it up. Which tells me that the number is so large that even the elites are scared what to do. They haven't deviated from that plan to have the taxpayers pay it off, but they wont let us know what the actual number is and so let us know how long it will take, 10 years, 100 years? If it were something less, I think it would be out there. I think it was Paul Krugman you even said that 5 years of high unemployment would be politically destabilizing. If that is true, then you might see the destruction of currency via the loss of faith in the federal gov.

[Laustim]

The problem here are the actions are compulsive. This can not fail in the future. After he no longer will be a ruinous state. We are in a paradox. To Do in turn means that banks can be robbed without a reflection, a sum of money was spent, and can be lost, and there is no reason not to the detriment of the foot, the line anyway. Debt structure needs more debt continued.