Inflation OR Deflation? I suspect we are going down the 'other' road to Hell. I'm convinced that Hell is hell and how we arrive at Hell doesn't really matter. All that matters is this: Bernanke and our political leaders have been driving us there and they will continue to drive us there.
Hell is our destination. No matter where they think, or where they claim to be taking us we are going to Hell.
The majority of articles I have read on inflation discuss the growing money supply and the Fed's balance sheet.
The majority of articles I have read on deflation discuss imploding credit, imploding asset demand, demand destruction, usually with rightful emphasis on housing sector asset prices. Many deflationist are quick to point out that there can't be inflation until the banks, who are sitting on the money, begin to loan the money out. And yes: Velocity. There can be no inflation minus this phenomena called 'Velocity'. They make a good and strong argument.
Definitions: The definition of what inflation is further complicates the debate --- since by definition there are two definitions and both are different.
No small wonder why 99% of our economist and economic community never saw this train coming.
One definition of inflation is: The overall general upward price movement of goods and services in an economy, usually as measured by the Consumer Price Index.
And the other definition of inflation is: The increasing size of the money supply.
Which Definition is Correct? Since I'm convinced we are beyond the problem phase (as www.ChrisMartenson.com points out: Problems have solutions, predicaments don't) and into the predicament phase I keep a dead cow in our freezers, I have a large garden and I raise chickens. In short, I'm relatively confident that if there was an unsolvable credit crisis or hyperinflation or deflation that I could feed my family for 12 months. If we don't all die from cholesterol induced heart attacks, I can have faith that 12 months is enough time for the powers that be to come to their senses and create a new dollar and move on.
But, from raising chickens I can assure anyone of one certainty: Chickens come from eggs. I don't profess to know where or how the first egg came about, but I do know that the egg comes before the chicken and the chicken comes from the egg.
Inflation comes from an egg.
Inflation doesn't just happen itself into existence.
Therefore: No matter what definition of inflation is your religion you need to accept that' "The overall general upward price movement of goods and services..." has to have a genesis!
That genesis is the VALUE of money. Not where the money is parked or how fast it is or isn't moving.
Supply & Demand: I think the law of Supply & Demand is the most important economic law and many people DON'T realize that it applies to money as well as goods and or services.
Too much money and money is worthless.
The Other Road To Hell: I'd add to the minority voice to the chorus already singing the road to Hell song. The one that says that it is paved with deficits and inflation wil come about as the direct result of a currency crisis.
Deficits that our revenues (of about 2 trillion) no longer cover.
Deficits that our borrowing (of about 2 trillion a year (less it's debt service of about 1 trillion a year)) - no longer cover.
Deficits that our combined government revenue and borrowing (put together) no longer cover.
Deficits that are compounding exponentially.
When you spend well north of 1.5 trillion dollars of money you don't have - there ARE ramifications.
Serious ramifications.
First let's define our predicament: An entity, any entity, (personal, business or governmental), is bankrupt when that entity can't pay their obligations and a deficit (difference between what is taken in and what is owed out) results.
That entity then has four choices that it can and must take if it wishes to exist. It can:
- Reduce it's spending by making drastic cuts thus bringing spending in line with revenues (this can be done with or without a bankruptcy court).
- It can borrow the difference between what it takes in and what it owes out and hope that in the near future things will get better. The added debt always dictates that they must do better than they were doing before things went to Hell.
- Any combination of 1 and 2.
A government that can create money and has a 4th option: Counterfeiting.
The Secret Service (a branch of the Treasury) is in charge of upholding one of the only two crimes listed by name in our Constitution - Counterfeiting. They do this so that our money supply isn't debased and made worthless.
It is evident that our government and every other government who can counterfeit, is, and will continue to counterfeit. This one chart, probably THE most important chart today, clearly proves that every Fiat currency is and has been headed down "The Other Road To Hell" and will wind up with an intrinsic value of 0 vis a vis a currency crisis.
All 3,800 or so Fiat Currencies that have ever existed have made the journey to their intrinsic value of 0.
Make no mistake, a currency crisis of this magnitude will have one and only one outcome - the dollar made totally worthless which will lead to inflation/hyperinflation - a monetary event where everyone rushes to trade paper dollars for anything other than a paper dollar (food/grain, land, cars, gas, you name it) as to avoid holding something that had a value and now doesn't have a value.
The banks may not be lending, but well over a one point six trillion dollars a year has velocity and is making its' way out into the world. And figure that is just from our nation.
Other nations have massive deficits other nations are counterfeiting.
Counterfeiting of this magnitude WILL debase all the currencies, whether it is done "legally" by Benjamin Shalom Bernanke, some foreign Central Banker.
Legal counterfeiting will make every law abiding citizen poor. There is no difference between stealing with a counterfeited dollar and stealing the value of YOUR saved dollars by counterfeiting. Ben Bernanke has the identical effect of the biggest crook performing the most destructive heist on our wealth. He will not benefit financially, he probably is too stupid to even realize that his help and well meaning intentions are really nothing more than a destructive hindrance. We have 535 clowns in Congress and the Senate (with the exception of a handful of financially responsible adults like Ron Paul and Paul Ryan) who are and have been enabled by a failed system (the Federal Reserve) and it's moronic and very mislead leaders couldn't find their rear-end with both hands and the lights on.
Final Word: The deflationist are quick and correct to point out that 1.5 trillion in subprime losses wipe out or even out the 1.5 million in counterfeiting that is done to pay our deficit. What the deflationist might not be taking into account is that the 700 billion dollar "bailout" caused by the 1.5 Trillion dollar subprime stupidity crisis put us out 11 trillion dollars (borrowed dollars we don't have) and put us on the hook for another 13 trillion dollars we don't have.
In Summary: My faith in the 5Gs: (G*(religious edit)d, Gold, Guns, Grub & The Government Will Continue to Screw It Up) remains strong.
