Why fiat paper money is always trashed in the end

January 7, 2010 2 comments

Because govts can.  So they will.

Which is why gold and silver are God’s money, real money, honest money, money to have in a crisis like today, money to hold in your own hands secure in the knowledge no embezzling shyster is going to take it away from you or counterfeit it or overprint it.

As Jeff Clark explains here:

Bottom line: after all the bailout programs, housing initiatives, rescue efforts, stimulus schemes, bank takeovers, wars, unemployment benefit extensions, and numerous other promises, the biggest financial deception of the decade is what the U.S. government is doing to the dollar. Nothing else even comes close.

This reckless activity has spooked our foreign creditors, weakened our global standing, diluted our currency, is punishing savers and retirees, and ultimately sets us up for a level of inflation this country has never seen before.

Yet, what is the guardian of our economy and money telling us now?

“Will the Federal Reserve’s actions to combat the crisis lead to higher inflation down the road? The answer is no; the Federal Reserve is committed to keeping inflation low and will be able to do so. In the near term, elevated unemployment and stable inflation expectations should keep inflation subdued, and indeed, inflation could move lower from here.” (Ben Bernanke, December 7, 2009).

This is pure rubbish. If inflation could be controlled by just thinking stable inflation thoughts, then Ben should be able to grow a full head of hair by just thinking scalp follicle thoughts. This is so ridiculous, it’s insulting.

Government actions make a mockery of their words; what they say and what they do are diametrically opposed. It’s clear that inflation is not a question of if, but when.

Any level-headed individual has to conclude that there will be a steady – and likely accelerating – decline in the dollar’s purchasing power. It’s inevitable.

The great masses don’t quite understand it yet, but they will. There will be no escape from the cold, hard slap in the face citizens will receive when a high level of inflation arrives. And when it does, it will make a mockery of any opposing viewpoint.

So the question before you is simple: Will you be a prepared survivor for what lies ahead, despite what our government leaders tell us, or will you be a complacent victim of the biggest financial deception of the decade?

For me, there’s only one solution. Don’t kid yourself into thinking a man-made asset will protect your purchasing power. This is the time to be overweight gold and silver. I advise letting them serve their purpose for you.

I don’t like the term “man made”.  Everything is man made, and valued by man.  I prefer this expression: “Don’t kid yourself into thinking an easily debased paper asset will protect your purchasing power.”

Because in the end, it never has.  Ever.  In the history of paper currencies every single one has eventually ended up worthless.  Every.  Single.  One.

Think about it.

“All serious economists agree…”

January 7, 2010 Leave a comment

I love this phrase: “All serious economists…”

Are there any “funny” economists? 

If so, I’ve never met them.  So what does this phrase mean?  It means “the narrow set of mainstream economists who agree with my point of view at this time”.  The little qualifier “serious” is intended to convey to the reader that there are “serious” economists on the one hand and “wacky” “non-serious” economists on the other whose views should not be treated “seriously”.  Like, say, Murray Rothbard or Ron Paul.

The Baseline Scenario quotes a commentator who uses the phrase in the context of regulating  the TBTF institutions that privitise profits and socialise losses.

Let me use the phrase in a slightly different context:

All serious economists believed there would be no GFC in 2006.  All serious economists were wrong.

All serious economists believed the housing crisis would be confined to sub-prime in 2007.  All serious economists were wrong.

All serious economists predicted continued declines in stockmarkets worldwide at the beginning of 2009.  All serious economists were wrong.

All serious economists think stimulus spending works to “cure” an economy languishing after years of too-cheap credit and debt.  All serious economists are wrong.

All serious economists believe the global economy has turned a corner in 2009 due to the trillions in govt spending.  All serious economists are wrong.

All serious economists in the USSR believed only serious economists studied Marxist-Leninist thought.  All serious economists in the USSR were wrong.

All serious economists in the UK and Australia believe Keynesian economics holds the answers to the major economics questions today.  All serious economists in the UK and Australia are wrong.

All serious economists in the West think paper money backed by nothing can last as real money, instead of gold.  All serious economists in the West are wrong.

Categories: Mainstream failure

What the Hell happened to “Swine Flu”?

January 7, 2010 Leave a comment

Remember the ads?  The govt’s warnings about this being potentially catastrophic “pandemic” (the formal UN classification)?  The millions wasted on contingency plans?

What the Hell happened?

Should we just ignore similar UN-issued warnings in the future if this one was such a joke, such a non-event, such a complete waste of time?

I suspect it’s a dry run, but who knows what the world’s governments are up to?

Jack Douglas says what I just said: Retiring baby boomers = fiscal Armageddon

January 6, 2010 Leave a comment

I just spent a whole blog post talking about Old People!  And now Jack Douglas has exactly the same thoughts! 

Amazing.  Perhaps I’m not as mad as the doctors say I am?  I hope no one is copying my stuff out there in the blogsphere!  Give me attribution if you’re going to copy my stuff, please!

James Quinn’s predictions for 2010: Double dip by year’s end

January 6, 2010 Leave a comment

James Quinn (he of TheBurningPlatform.com) has some interesting predictions for 2010 here at MarketOracle.

Essentially, he’s predicting a double dip. higher unemployment, broken ARMs blowing up all over America, a massive CRE bust, higher interest rates and a surge in gold and silver as the US dollar tanks.  He also predicts the fringes of Europe will be on fire by the end of the year and the big EU banks will start to melt in the heat. 

I also predict a Japanese boa-constrictor-style double dip and a CRE bust in Oz and the US, but don’t see a big hike in interest rates coming up in the US, where the bond market is controlled as tightly as the price of milk in the old Soviet Union.  I suspect the Marxist central planners at the Fed would prefer to let go of the US dollar rather than kill the economy through a spike in real interest rates.  They’ve shown themselves to be completely gutless on controlling growth in the money supply over the past decade.  What will give them the requisite courage this year?  I doubt they’re going to get religion and allow the market for bonds for fall freely without intervening to save at least the short end of the market.

Let’s see what happens.  I thought it couldn’t get any worse than the last two years, but the blindness, the short-termism, the venality, the stupidity, the plain madness of govt can never be underestimated, and it looks like we’re in for another downdraft from the idiot-savant govt’s “good intentions” this year.  The only thing this idiot-savant is good at is lying and displaying extraordinary amounts of chutzpah.

There is no God.

How can Peter Schiff see simultaneous hyperinflation and high unemployment?

January 6, 2010 Leave a comment

To pick up a brilliant point made by Peter Schiff in the video to the previous post below (but not understood by those on the brain-dead panel):

Inflation is simply debasement of the currency, or increases in the money supply.  Inflation is occurring, just not where you expect it.  It’s occurring in govt pork and govt employee numbers and in govt contractors making big bucks off govt spending.

Banks are lending massive amounts of new money – to governments around the world.  They are the only entities the banks can find who will pay them back (even if it has to be in worthless paper currency – ha ha ha!).

Therefore, the “de”-flation that we should have seen occur to “cure” the credit bubble has been deferred – by way of an increase in brain-dead govt employees! 

This is unlikely to “cover” for the loss in private sector activity because govt spending is generally unsustainable and therefore has a lower “velocity of money” than genuine private sector investment.  However, these ridiculous “heroin stimulus packages” do cover up (temporarily and only to some degree) the deflation we should have had, coming out of the “credit boom” years.

Because of the massive distortions and misallocations caused by (1) the classic ABCT credit-fuelled Ponzi-boom and (2) now the ridiculous unsustainable govt spending, crowding out the private sector’s access to cheap capital for real sustainable projects that the public actually wants, we are now going to get (at the end of the day) much higher unemployment. 

Higher unemployment is baked into the cake because of the massive stimulus spending.  Take any specific “stimulus” measure, be it “Cash for Clunkers” in the US or the “First Home Buyer’s Grant” or incentives for home insulation or solar panels.  Now, simply ask yourself:

What happens when the “stimulus spending” stops? 

Most of the “stimulus spending” simply brings forward future consumption patterns – it re-allocates inter-temporal spending patterns, but doesn’t actually increase the total consumption over time.

I explained all of this in much more detail several months ago here.  I see the balance of the forces being slight deflation rather than hyperinflation, but the dynamics are the same.  I see possible inflation (possible hyperinflation) in 2012-2015, but that’s a long way off – and I mightn’t even be alive then (here’s hoping!).

Only Austrians such as the brilliant Peter Schiff understand that you can have very high inflation and very high unemployment because of preceding bad investments and unsustainable economic activity, leading to an economic dead-end rather than to ongoing economic activity.

When you build on Ponzi-quicksands, you fall into Ponzi-quicksands.

Peter Schiff’s predictions for 2010: The worst is yet to come!

January 6, 2010 1 comment

Peter Schiff’s predictions for the U.S. economy in 2010: higher unemployment, higher interest rates, and higher inflation (oil and gold higher, possibly much higher).  A dollar crash (a drop of 50-70%) is inevitable and will possibly occur in 2010 rather than 2011.

Nice.

[Note: You can watch the full video here if the embedded video below doesn’t work due to blocking by YouTube.com]