Financial topics

[Higgenbotham]

My focus in answering Vince was not to try to make a determination as to how likely hyperinflation is, but to lay out the scenario that I think will be required to get to hyperinflation within his 2 year timeline.

Paradoxically, in my opinion, a quick and and severe Weimar-style deflationary collapse that is not really as deflationary as it appears on the surface would be a reasonable step 1. because it would provide the impetus for a series of blunders by the current cast of characters, who are clearly capable of making such.

In answering Vince, the approach taken was similar to what I hear Richard say from time to time: Instead of deciding whether something can or can't happen, try to determine what would need to happen or not happen to bring about a certain outcome.

Having said that, given the record of the past 2 years, nothing would surprise me, and this in a nutshell is the reason why:

These are difficult times, no doubt, but we are under the influence of the most corrupt politicians our country has ever known, a Fed chairman that is making deals with countries, bailing out banks and businesses, and is accountable to no one.

[aedens]

The Gosplan is not even starting to warm up yet. These idiots are so far removed from reality you have to pump sunlight in.
I cannot convey the removal from reality they live in. Some market participants do have increasing orders and this pretext
will be all they need to push it to finality. I have never seen the likes of this kind of vapid thinkers since the fall of the eastern
empire we read about. They are ruthless and will destroy anything to achieve there normalcy. They make the Soviets look like pussy's.

[jdcpapa]

They make the Soviets look like pussy's.

Greetings all,

Soros reports that the fix is in. Putin who? Ha! Aedens, too much! We all will have even more time on our hands real soon! Brother, can you spare an oz of gold (a dime)!?

John, you are right on!

Regards,

[aedens]

By that time, the market was already turning against Solyndra, because the price of a key material used by its Chinese competitors was falling sharply. That was clear to a Goldman Sachs research analyst, Michael Molnar, who in October 2008 warned clients that the risk of oversupply in the market would "soon become a reality" as subsidies shrink and financing tightens. Further clarification jd
Again the taxpayer gets screwed without even a kiss. In my opinion just buy the photovolatic paint that is on the market. The bureaucrats will say wow, what a investment in value for the taxpayer in research we provided. There idiots. It was already obsolete tech.
Even better http://www.forbes.com/sites/stevedennin ... gulations/
The public feels safer now lol

[vincecate]

Once again, folks, a Weimar-like hyperinflation is absolutely
impossible. I don't mean it's unlikely - I mean it's impossible.
That was a generational unraveling era, and this is a generational
crisis era.

In the Revolutionary War crisis era and the Civil War crisis era America had hyperinflation. If America had not outlawed owning gold it would have soon been clear in the 1930s that the Fed did not have enough gold and they would have had hyperinflation in paper money then too. So 2 and almost 3 of the last 3 American crisis eras had hyperinflation.

It seems these are counterexamples to your claim it is impossible to have hyperinflation in a crisis era. So what exactly do you mean? Are you claiming it can only happen if there is a war and you no longer think there will be a war? But just days ago you were expecting war, so that can't be it. Why could America have hyperinflation in previous crisis eras and yet you claim it impossible this time? Please explain. Please do not ignore this reasonable question.

[OLD1953]

Vince: Owning gold for private citizens was not illegal, the rules only applied to circulating gold as money. If one claimed gold as a coin collection, as jewelry, as art or as necessary to produce anything, the rule did not apply. Morgenthau's rules under the act of 1934 were (IIRC) a good bit more relaxed than Roosevelt's, but I can' t find a copy of them because some quote purportedly from his diary is all over the conservative blogs now and makes any search involving his name almost impossible. (/rant WHY do people think they need to copy someone else's post verbatium over and over and over? And never a fact check anywhere, he took office in 34, this quote is from 38 or 39 and talks about eight years of doing the wrong thing. Ahem, so he was in office four years, Roosevelt was in office 6 or 7 years, so where and what was he talking about? Apart from that, if he thought unemployment was higher then than at the start of the GD, he was an idiot. They had a bump up when SS came online, and we could discuss why, but that was in 36. It's highly educational to examine the GNP during the GD. /rant off)

Also, no one had any vested interest in the continental dollar after the war, so given the limited powers of the Continental Congress, there was no means to save it from debasement. A government with those restricted abilities could not govern. The hyperinflation during the Civil War was on the Confederate side, and that's fairly common among the losers of a major war, including Germany, we might add. Victors seldom have this problem.

Aedens, I'm honestly not sure just how much of the apparent tie ins to corruption are real, and how many are due to the fact that CEO's and the like are hired only if they have a degree from one of a half dozen universities in the US. Given the limited number of applicants you'll accept if you are restricting the top spots to only MBA's from those institutions, and you wind up with the incestous dogpile we have today. And like the ol' hillbilly said when he divorced his virgin wife "if she ain't good enough for her kin, she ain't good enough for us". Pretty much the same attitude towards the top spots prevails in the business boardroom today. Given the limitations of that pool, it's hard to be surprised if they all know each other, even have financial connections. It's a fair bet you can take any five random top corporate executives and at least 3 of them will have close ties to all the top people in one or both (probably both) parties. Plus close ties to a goodly number of their competitors. Those nondisclosure agreements that "build a wall of silence" between companies? Anyone ever notice they are trying to "build a wall" in someone's BRAIN? Good grief. Interlocking board memberships should be outlawed.

[John]

> > Once again, folks, a Weimar-like hyperinflation is absolutely
> > impossible. I don't mean it's unlikely - I mean it's impossible.
> > That was a generational unraveling era, and this is a generational
> > crisis era.

> In the Revolutionary War crisis era and the Civil War crisis era
> America had hyperinflation. If America had not outlawed owning
> gold it would have soon been clear in the 1930s that the Fed did
> not have enough gold and they would have had hyperinflation in
> paper money then too. So 2 and almost 3 of the last 3 American
> crisis eras had hyperinflation.

> It seems these are counterexamples to your claim it is impossible
> to have hyperinflation in a crisis era. So what exactly do you
> mean? Are you claiming it can only happen if there is a war and
> you no longer think there will be a war? But just days ago you
> were expecting war, so that can't be it. Why could America have
> hyperinflation in previous crisis eras and yet you claim it
> impossible this time? Please explain. Please do not ignore this
> reasonable question.

If you like, there may be hyperinflation if the war devastates the
United States, completely destroying the financial infrastructure in
New York and Washington, causing loss of civil control across the
country. However, that bears no resemblance to the Weimer
hyperinflation, in a peace time unraveling era. Once again, a
Weimar-like hyperinflation is absolutely impossible.

As for your statement about the 1930s, it proves that you're wrong, as
it shows how the government will take whatever political steps it can
to avoid hyperinflation. In today's political climate, there are
numerous steps that will be taken before there will be any risk
of hyperinflation. So there are many reasons why you're wrong.

And if I don't always answer your questions, it's because I've
answered the same questions dozens of times already, and have
nothing new to add.

John

[aedens]

Old, I agree to the extent that change is underway. As alluded to before the transitions to zones have been underway for some years.
I have spent time as many have also reading the extremes underway. Our team is moving forward in given landscapes. There have been times that opinions have been obscured and forwarded under dire circumstances and over the last decade we have moved to a better position from our leveraged diversity.
The teams in various zones have been afforded the tools to effectively serve the Customer. The format has evolved effectively to an open campus
mindset to bring down barriers. Some maxims will always apply since capital is tolerated by policy managing scarce resources. The intellectual
policy's are reflections of the times. There are a number of observations being addressed from briefing's which are ongoing in our field of expertise.
This is an employee driven aspect from decades of serving the customer. Even we we agree to disagree the net effect is positive to the scope of
real time solution's. I am not ruthlessly pragmatic to some realities we all witness but we must persist. Given the decades some areas we have made progress.
In some areas outside our ability to cope we do what must.

[vincecate]

If you like, there may be hyperinflation if the war devastates the
United States, completely destroying the financial infrastructure in
New York and Washington, causing loss of civil control across the
country. However, that bears no resemblance to the Weimer
hyperinflation, in a peace time unraveling era. Once again, a
Weimar-like hyperinflation is absolutely impossible.

Most people think that if Germany had not lost the war they would not have ended up with hyperinflation.

In the Revolutionary war America won and still had hyperinflation.

Do you think the hyperinflation in the Revolutionary War was or was not "Weimar-like"? There are 100 other examples of hyperinflation and the key thing seems to be debt over 80% of GNP and deficit over 40% of spending. Sometimes war gets government into such a condition but I think like 1/3 to almost 1/2 the time there was no war involved. I don't understand how you would count these other 100 cases as Weimar-like or not. To me hyperinflation is hyperinflation.

War is one way to get the debt and deficit levels that lead to hyperinflation, but the USA is already at these levels. So it does not take a really bad war to get it into position for hyperinflation. Something as simple as the price of oil doubling would probably do it.

As for your statement about the 1930s, it proves that you're wrong, as
it shows how the government will take whatever political steps it can
to avoid hyperinflation. In today's political climate, there are
numerous steps that will be taken before there will be any risk
of hyperinflation. So there are many reasons why you're wrong.

If inflation starts going up and interest rates start going up the value of bonds will start dropping. People will not want to hold bonds. I think the Fed will buy more and more and you will get hyperinflation. Historically governments that can print money and have debt over 80% of GNP and who spend about twice what they get in taxes get hyperinflation. What steps do you think they could take that would prevent hyperinflation? If they raise interest rates the economy will die and people will be pissed. I don't see budget cuts or tax increases happening that are nearly enough to help. What can they do to not end up like all the historical examples?

And if I don't always answer your questions, it's because I've
answered the same questions dozens of times already, and have
nothing new to add.

I keep pushing because it is the one area that I disagree with you on and I think it is a really important thing to get right.
I really think there is more to talk about. Think about it like Higgie said, what would have to happen to get hyperinflation or what would have to be done to avoid hyperinflation? What can really happen? If they keep trying to kick the can down the road, then by your can kicking theory, they won't take the decisive action to prevent hyperinflation till it is too late to prevent.

[jwfid]

Hi everyone,

I haven't visited the forum in awhile, but I just read something written by Karl Denninger that I thought you all should know about. I have for some time believed that the FDIC will be way in over its head as some point as the economic collapse continues. Karl believes that the MF Global collapse shows what might happen to customer's insured accounts. Apparently, a law passed in 2005 made derivitives claims a higher priority than depositor's cash, and this is what JP Morgan using to claim what is left of MF Global's assets (including their customer's cash!). Karl is also saying that there is a clawback risk too if you try to pull your funds out of the bank in the nick of time.

Karl Denninger is applying what we have learned in the MF Global fiasco to the current situation at Bank of America. As you may know, BOA has a huge pile of derivitives that they moved from one part of the company that was not FDIC insured to the FDIC insured banking part. Maybe the company did this to ensure its survival somehow ( in a sick kind of way).

I wonder what you guys think about this development. I do have funds in FDIC and SIPC insured accounts, but my level of faith in each of them just continues to get lower and lower, while a hole in the backyard now seems a little bit safer.

Good luck,

Joe