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Austerity or Money Printing?

Wednesday, February 10, 2010, 9:42 PM

I was asked to write a once-a-month Market Observation for Financial Sense.  Here's the first one (posted today, Feb 10): 


From time to time, I think it's a good idea to stop squinting at the short-term market wiggles and pull our heads back for a wide-angle view.  Now would be a good time, so that's what we're going to do.  For the record, I also happen to believe that close-up market analysis loses some of its potency during times of immense official intervention.  As with any subsidy program, prices become distorted and often fail to tell the real story, which is absolutely true with respect to interest rates and, by extension, the risk premium for stocks.

Back to the story.  Where the current crisis has been described using millions of words in thousands of articles packed with arcane acronyms (such as TALF, CDO, and CMBS), perplexing regulatory lapses and with a degree of complexity that dwarfs the Apollo moon mission, I can explain why the whole thing happened using just three words.

Too.  Much.  Debt.

Total credit market debt in the US doubled between 2000 and 2008, while incomes stagnated and jobs were not created.

When your debts are skyrocketing, but your means of servicing those debts are not, you are on a path to a credit crisis.  And that's exactly what we got.

That's all there is to it, and we'd have a better shot of crafting an enduring recovery if we better understood the difference between causes and symptoms.  Too much debt was the cause; virtually everything else was either a symptom or a contributory factor.  The main contributory factor was Alan Greenspan's monkeying around with interest rates between 2002 and 2004 to create ultra-cheap money to fight the effects of his prior monetary and regulatory mistakes.

Which entirely explains why I am so dismissive of world efforts to stoke an economic recovery by deploying even cheaper money and even more debt.  As earnest as these efforts are, they spring from the very same flawed thinking and practices that got us into the mess in the first place.  Plus, they've never worked before.

I've analyzed this situation nearly to death, and I arrive at this one very simple conclusion:  The US is insolvent (and so are many other governments around the world).

We all know the numbers.  The US government has over $12 trillion in direct debt obligations, but another $40 to $60 trillion in unfunded liabilities.  Collectively, the nation has $52 trillion in credit market debt, up from $26 trillion in 2000, but also many more trillions in unfunded pensions scattered throughout various corporations and state and local governments.  Taken together, including all liabilities, debts, and other obligations, the US has a total shortfall that exceeds GDP by more than 1000% (not a typo; I meant one thousand percent).

In short, we're broke.

The Way Forward

At this point, all investment strategies must align themselves with the proposition that the nation is fundamentally insolvent.  Either by rejecting the idea, hopefully with sound analysis and evidence beyond mere belief that the situation must be otherwise, or by accepting it.  Ignoring the 5,000 pound elephant in the room is not really an option, especially for long-term or generational investors.

Assuming one comes to the conclusion that our debts and liabilities cannot be paid back out of future production, then investing becomes easy; all one has to do is select between one of two possible official responses and tailor their holdings accordingly.

Option #1:  Austerity

Option #2:  Money printing (inflation)

Under option #1, austerity, the government trims expenditures by a third, the economy shrinks by the amount that it was supported by excessive debt growth (roughly 30% or so), and powerful and politically well-connected holders of debts take massive losses.  Such a program continues until the entire credit bubble is unwound, which means roughly another $25 trillion of deleveraging.  At the end, we get the chance to rebuild from a solid base.  I personally assign this option a 0.1% chance of being selected and followed.

Under option #2, money printing, a determined government seemingly gets out of its self-inflicted economic predicament by printing money.  Such a program appears bold, creates the illusion of (temporary) prosperity, protects the assets of the wealthy and well-connected, and provides interventionist bureaucrats with unlimited employment.  By simply understating actual inflation (to lower entitlement COLA increases) while collecting inflated tax receipts, the fiscal gap can be closed up.  At the end, it is all revealed to have been a sham, one can't actually print true prosperity out of thin air, and we get to rebuild from a shattered base.  I assign a 99.9% probability to this course of action being chosen.

Of course, I am cheating here, because we have been pursuing "option #2" for a year and a half already.  It is really not a terribly bold 'prediction' to suggest that we're going to continue on that path.

More tellingly, as I recently wrote in a recent article entitled The Emperor Has No Clothes, when we examine the 2010 federal budget, we discover that 94% of all revenues will be consumed just by the mandatory entitlement and interest-payment categories.  Ninety-four percent.  Think about that for a minute.

No matter how earnest our current politicians might be about controlling spending, there's really not a lot of maneuvering room left in that equation.  Not when there's only 6% left over to fund the entire rest of our government operations.

(Pro tip:  Your future taxes are going to go up.  A lot.  Count on it.  A 15% capital gains tax rate is going to seem like a distant dream before too long.  Please take that into consideration if you find yourself hesitant to lock in current capital gains because of the potential tax bill.)

For austerity (option #1) to have any hope at all, there has to be some way for the story to work out, but given our budget/fiscal realities, that path is amongst the most painful that can be envisioned. Spending would have to be cut, taxes raised, and dreams dashed.  Everybody would feel like a loser on that path, so I just don't think it has any chance at all of being seriously considered.

Which leaves us with money printing as the preferred course of action.

For investors, then, the main decisions rest on guessing the market impacts of continued stimulus, bailout, and monetary printing.  Which markets will benefit most?  Where will the vast pools of distorting money flow first?

Disturbingly, the best way to answer these questions over the past year and a half has been to ask which companies have had the best lobbyists and best connections to high-level politicians.

Making matters worse, many companies, especially financial institutions, have been allowed to fudge their income statements by using mark-to-fantasy asset models.  So we often don't really know the true financial condition of many companies or where the risks remain.

Which means that a good investor today needs to be part cynic, part prosecutor, and part forensic accountant.

Conclusion

We experienced a massive, obvious, and ill-advised credit bubble that is in the process of bursting.  Rather than rip the band-aid off quickly, our fiscal and monetary authorities are pulling it off as slowly as possible.  Along the way they are actually compounding our problems by offering even cheaper money and running up massive public debts.  Nothing is being solved, only deferred.

If all goes well, we can expect an anemic economic recovery.  If not, we face the prospect of a massive public fiscal crisis and/or a currency crisis.  That is, the risks and rewards are completely asymmetrical.

Because I am the type of investor that hates losses more than I fear missing out on gains, I routinely counsel that "better safe than sorry" is a viable investment strategy, and that keeping one's investments in highly liquid forms makes a lot of sense.  Further, given the currency risks involved, keeping some money entirely out of fiat money is a prudent course of action.   Physical gold is my preferred investment of choice, both because it is a monetary asset and because it is not simultaneously somebody else's liability.  That's a hard combo to replicate.

Yes, there are some signs of economic life out there, but we are not out of the woods, by any stretch of the imagination.  While I fully expect our financial markets to bounce up and down in response to the massive walls of liquidity being routinely thrown at them, I remain troubled by the obvious disconnect that exists between our fiscal condition ('insolvent') and current prices for far too many financial assets, especially those that represent somebody else's debts.

A fair number of people out there think that we'll simultaneously experience both money printing and austerity, which will be brought on by deflationary forces.  I don't completely discount this possibility (or any possibilities for that matter), but so far the lesson seems to be that there's no line our fiscal and monetary authorities are unwilling to cross, so I wonder how much more can be swept under the rug.  My guess is "a lot more."

So, that's my investment outlook made easy.  Will it be austerity or money printing?

Your faithful information scout,

Chris Martenson




For a complete view of how we got here and where we are headed, please take the time to watch The Crash Course, a free 20-chapter explanation of how our economic system operates and the challenges it will face in the coming years due to macro trends in energy and other depleting resources.  

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44 Comments

SteveS's picture
SteveS
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Re: Austerity or Money Printing?

Congrats on writing for FSN! That should give the CC some good exposure.

Nice piece - I see you aren't holding back! Good. Too many are (choosing to be?) blind about what's going on. Once again what I like best is your simple number crunching; in this case the fact about revenues and funding. It really clarifies the problem we have.

Keep it coming!

 

 

 

 

pinecarr's picture
pinecarr
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Re: Austerity or Money Printing?

Congratulations, Chris, for the once-a-month Financial Sense gig!

That is where I first saw this article...I was checking out FinancialSense.com, and all of a sudden I realized that was your name associated with the headline article (Market Observation).  Very cool!  I've thought for a while that it would be great if more of your analyses could be made publicly available to people there.  I think you'll get a big audience.

By the way, excellent article!  Great clarity; way to bring the message home hard and clear for those folks who still need help connecting the dots!

best,

pinecarr

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Re: Austerity or Money Printing?

Dr. M,

Your recommendation to invest in gold should be well received by the FSN crowd. Is it more accurate to say that the Fed is "printing" credit rather than money? 

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Re: Austerity or Money Printing?

The Fed will only be printing credit if they unwind their balance sheet by selling their purchased debts back out to either the original owners or the open market at the original purchase price.

To the extent that the Fed will hold some of the purchased debts to maturity I happen to think "printed money" is the right term.  It's only credit if you have to pay it back.

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Re: Austerity or Money Printing?

Nice report! No plan B & not much of a plan A....below.

Looks like the whole world might go Japanese style.

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Re: Austerity or Money Printing?

Congratulations Chris. FSN's articles are a daily stop, Jim and John's News Hour is a weekly staple for me. Another group who like this site, make the world a better place.

Cheers.

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Re: Austerity or Money Printing?

Dr. M, thanks for helping me understand that. Your answer makes me wonder if the unwinding of QE will be inflationary (instead of deflationary), since credit seems to fuel inflation in our monetary system.

Thanks again...Jeff

 

Part 2 to iDoc's video:

Kudos to Mr. Hendry

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Re: Austerity or Money Printing?

Chris  Nicely stated and your article makes the case for much higher tax rates in the future.

This would seem to be an argument to convert an ordinary IRA to a Roth and pay the taxes now.

But, what is your take on whether this bankrupt government would honor its pledge to let you take the money out of the Roth tax free in the future?  If not you might be doubly taxed (in addition to whatever additional dollar devaluation ensued).

 

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Re: Austerity or Money Printing?

You can tell from part 2 of the Coming Euro Collapse that the only solution on Politician's minds is PRINTING LOL. We have had different currencies collapse with different stresses as one country gets itself in a bind. But all these countries with similar problems in unison trying to wiggle [print] their way out at the same time has got to be a first one would think? Looks like a VERY hard landing at some point.

You have to love Hendry here IMHO.

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Re: Austerity or Money Printing?

Dr. Martenson, you wrote:

"Under option #1, austerity, the government trims expenditures by a third, the economy shrinks by the amount that it was supported by excessive debt growth (roughly 30% or so), and powerful and politically well-connected holders of debts take massive losses.

Unfortunately, that isn't the way things work under austerity programs. Under asterity programsm the people who take the losses are not the powerful and politically well-connected. The losses (just as in the socialized losses we've seen in the bank bailouts) are borne by the masses. That is to say that the people will pay. In every asterity program that has been implemented in every developed or developing country over the last 30-40 years, that is what happens. And that is what will happen here.

I wish I saw a good way out. I don't. I believe our system is fundamentally out of balance and has reached (or is in the process of reaching) a tipping point. When a supposedly liberal* president justifies bonuses for banksters that are like once in a lifetime lotto jackpots for 99.95 percent of the populace and tells us how these are "savvy businessmen" and how we shouldn't "begrudge" them (apparently for their success at taking effective ownership of the government and getting taxpayers to write checks so that they can get their "moderate" bonuses), we are well and truly through the looking glass. I don't think that FDR would have said such a thing as this "liberal" president just did. But I digress...

Anyway, it will be the masses of people who take it in the shorts under an austerity program. Better to inflate away the previous debts. That is what will really hurt the banksters and Wall Street.

*President Obama is not a liberal. He is a crony corporatist/crony capitalist. He will not bite the hand of the benefactors who put him in the position he is in today.

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Re: Austerity or Money Printing?
JAG wrote:

Dr. M, thanks for helping me understand that. Your answer makes me wonder if the unwinding of QE will be inflationary (instead of deflationary), since credit seems to fuel inflation in our monetary system.

Thanks again...Jeff

 

Part 2 to iDoc's video:

Kudos to Mr. Hendry

When it comes to regulating banks and investigating them Joseph Stiglitz is nothing short of pure genius. When it comes to advising Greece they would have been much better off with Hugh. Good watch!

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Re: Austerity or Money Printing?

I ran across this new flash this morning. Interesting. http://www.bloomberg.com/apps/news?pid=20601087&sid=aSn2_iDKbl1g&pos=4

 

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Re: Austerity or Money Printing?

Love it.

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Re: Austerity or Money Printing?

a different set of choices from David Merkel: (excerpt)

Default, Inflation, Higher Taxes — Choose One - The Federal budget is hopelessly out-of-whack, with 4-5% of GDP deficits out as far as the eye can see.  So, what do we do about it? 1) Raise Taxes.  I don’t like this idea, because the US Government has entered many areas where it should not be....  2) Inflate the currency.  Ugh.  Oppress the elderly, who cannot work to make up the difference?  Create a new inflation mindset that has all of us focusing on the short-term.  Inflationary economies by their nature become more and more short term.... 3) Default on obligations.  There are several forms of this:

  • a) Total default: anyone with a Treasury Note is a sucker.  Global depression ensues.
  • b) External default: we do not honor external obligations, but honor internal ones.  Global depression ensues, but the US does relatively well.
  • c) Internal default: what, are you joking?  Why do we pay off the losers who lent to us?
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Re: Austerity or Money Printing?

Please someone who has followed CM investment advice for longer than a few months....when he say's "physical gold"- does he mean he is entirely out of paper?

We are in the process of cashing in IRAs, money market account, but also have an annuity...afraid to do nothing. Also afraid to own all gold.  Anyone else in this boat?

 

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Re: Austerity or Money Printing?
Romans12.2 wrote:

 Also afraid to own all gold.  Anyone else in this boat?

 

Yeah, so I bought silver too!! LOL

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Re: Austerity or Money Printing?

Thanks Earthwise...

funny thats what my husband is doing!

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Re: Austerity or Money Printing?

Hi Romans12.2-

   I can't speak for Chris, but I believe when he says physical gold he means as in "the real thing": coins, bullion (bars, rounds), and such.  Not something that (supposedly?) represents the real thing.  A lot of people on the site have real concerns about paper gold and silver.  I won't go into it here, but if you do a search for GLD on this site or COMEX gold futures, you'll find threads that discuss concerns. 

   Best of luck (sounds like you're already making your own! good luck!)

   pinecarr

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Re: Austerity or Money Printing?

Failed 30-Year Auction Closes Rough Week; Treasurys Fall

http://www.cnbc.com/id/35348388

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Re: Austerity or Money Printing?
idoctor wrote:

Failed 30-Year Auction Closes Rough Week; Treasurys Fall

http://www.cnbc.com/id/35348388

If interest rates creep north the d in deficit is going to be a big D!

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Re: Austerity or Money Printing?

Here is an interesting article presenting the same theme as Chris:

 

SOVEREIGN ALCHEMY WILL FAIL

governments like the US and the UK and many others will not abandon further credit expansion. They are committed to printing increasing amounts of worthless paper money in order to finance the growing deficits and the rotten financial system. Therefore there is no chance of Quantitative Easing ending but instead it will accelerate in 2010 and after. The consequence of this will be a hyperinflationary depression in many countries due to many currencies becoming worthless. No economy in the world, including China, will avoid this severe economic downturn which is likely to have a major impact on the world economy for many, many years to come.

 

 

The chart below shows the US Federal Debt per person. In the last ten years it has gone from $ 20,000 to $ 40,000. Total US debt, including private and corporate debt as well as unfunded liabilities, comes to $430,000 per individual. It is an absolute certainty that every man, woman and child in the US cannot pay off almost half a million dollars with normal money. Only massive money printing will take care of that.

Greeting from Iceland

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Re: Austerity or Money Printing?

 

I was just listening to a podcast of David Walker speaking at the Commonwealth Club.  He is the former comptroller general Chris references in the Crash Course. 

http://www.commonwealthclub.org/archive/?filter=audio&sort=releasedate

He said the biggest problem is the unfunded future Medicare liabilities, and the math says not only can we not grow our way out of this debt, we can't inflate our way out either because Medicare inflates even faster.

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Re: Austerity or Money Printing?

Thanks Woodman!

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Re: Austerity or Money Printing?

Marc Faber on Bloomberg 2-11-2010

Interesting last night watching HDTV on current Argentina. They have been thru hell & back in their economy but the cities were busy with people dressed nice & clean & nobody looked underfed LOL. Life goes on but the reset that happened to them had to be really ugly.

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Re: Austerity or Money Printing?

Romans 12.2

In addition to actual in your hand possession of gold and silver you can also add a bit of platinum.  Beyond that you might consider buying what you will consume in the future that has a long shelf life.  It becomes a bird in the hand rather than one in the bush.  This can be simple little things like kitchen sponges, aluminum foil, soaps, and long life canned foods like grains.  Some food related items like Tabasco sauce will keep for many years.  You might take a look through your pantry and see what you use, and then estimate what a 10 year supply would be.

The disadvantages are that you have to store the stuff, and you do not earn interest on the money.

The advantages are that you for sure have the stuff, it is fairly safe as people do not normally steal 12 bottles of Tabasco sauce, you will earn the inflation rate without taxation.  These items could be real barter goods in a crisis.

You can probable park $10,000 or more like this.  Maybe $25,000 if you have the space, money and energy to think through your future needs, and do the shopping now.

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Re: Austerity or Money Printing?

Thank you Lionel - love your suggestions!  I get it - have been stocking up on tradeable items...we are still confused about whether or not we should be totally out of our retirement investments.

I'm thinking yes and maybe we are already too late.

Love the kitchen sponges and tabasco!  Shopping tomorrow.

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Re: Austerity or Money Printing?
Romans12.2 wrote:

We are in the process of cashing in IRAs, money market account, but also have an annuity...afraid to do nothing. Also afraid to own all gold.  Anyone else in this boat?

Chris does recommend to buy little at a time every month, something like 1/10 of the amount you feel comfortable owing in gold or other metals... if it feels uncomfortable, you can stop your purchases at any time :)

Samuel

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Re: Austerity or Money Printing?

Chris,

Just checked the official government dictionary. The word "austerity" does not appear.Wink

Larry

 

 

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Re: Austerity or Money Printing?

idoctor:

I'm from Argentina and go back to visit family about once a year. Argentina is getting ripe for another crisis. They seem to come once a decade or so. 1989: hyperinflation, 2001: run on the banks, default, 3:1 currency devaluation. You are right that people are busy again. The thing is, it's people who make a country run, not the banking sector. The banks will try to CONvince you that they are indispensable, but I think that if the banking system suddenly exploded one day, the people would get out of bed the next day and resume life.

One comment regarding Argentina crisis versus USA crisis: people in Argentina traditionally carry very little debt (in large part because credit is so expensive). Most people either rent or own their house outright. And low or no credit card debt. What I'm getting at is that people there, as well as in many other third-world nations, are much more capable of hunkering down for a crisis than the debt-laden Americans. Also Americans are so used to a multi-decade honeymoon, that it's more difficult to snap into "hunker down" mode.

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Re: Austerity or Money Printing?

Romans 12.2

Another thought is saving money by buying case lots of things which would in effect give you the savings as a return on investment.  Might get yourself and others to think about what might have the highest barter value in a really long and tough economic let down.  Probable things that are not locally produceable and have long distance transportation issues.  Spices were hugely valuable during the dark ages due to the long freight cycle by camels and many intermediaries in the process.

I think it may be simple things like garden tools and garden seed and canning jars.  When the herd runs in mass to the store to buy the shelves will be empty.   If you have some spare land you might plant a variety of orchard tree seeds and have some small plantable fruit trees to barter.

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Re: Austerity or Money Printing?

Lionel, had a crazy day with work and sick kids - but as I was flying through grocery to buy cookies for Valentine party - I thought of you!

Imagine there it was Tobasco on sale!  I bought two cases!  Then I saw the Ketchup - bought 36!

The best was when the checkout girl and bagger made a joke about my purchase.

I just smiled and calmly shared how valuable tradable items will be when TSHTF....they smiled nervously and were confused.

Thanks again....shopping for kitchen sponges at the dollar store tomorrow.

 

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Re: Austerity or Money Printing?

Too.  Much.  Debt.

What else would anyone expect when all the money is created as an interest bearing debt owned to the banking system?  Add to that the fact that once time and interest kick in the debt grows but not the money supply.  The for the grand finale when the debt is extinguished so is the money, making it impossible for there to be anything but Too. Much. Debt..

with a degree of complexity that dwarfs the Apollo moon mission

I don't understand what is so hard to understand about the fact that money is created when loans are issued and debts incurred; money is extuinguished when loans are repaid, and that once time and interest kick in on that borrowed money the debt grows but the money supply does not making it impossible for everyone to get out of debt.

This whole money system is really easy to understand if you're just willing to take the time to sit down and study the whole process of how money is created and destroyed.

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Re: Austerity or Money Printing?

Here is a very interesting discussion about current economic conditions, world wide and the likely near future scenarios, and what investments are likely to benefit.  Marc Faber, Nassim Taleb, Hugh Hendry and four others.  Hit the "Eng" button unless you want to hear it in Russian.

http://2010.therussiaforum.com/news/session-video3/

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Re: Austerity or Money Printing?

There is no mystery to projecting the pattern of failure engendered by any purported economy subject to interest.
As interest multiplies debt in proportion to a circulation, ever more of every existing dollar is dedicated to servicing multiplying debt, and ever less of every existing dollar can be dedicated to sustaining the commerce which is obligated to service the multiplying debt. Everything around you can be understood from the obvious consequences.

We advocate real solution:

Mathematically Perfected Economy (MPE)

www.perfecteconomy.com

http://endtheecb.ning.com/video/mathematically-perfected

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Re: Austerity or Money Printing?

Thomas,

That is precisely Chris's point! Hence his use of the three short words - Too, Much. Debt.

DavidC

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Re: Austerity or Money Printing?

The one point that you mention in passing is HOW inflation is measured by governments. I must confess, I am deeply worried about how it is calculated. I have been looking at the numbers on bloomberg and they say that the US is currently in a deflationary state of 0.1%. Only 0.1%! How is that possible?! The government is printing money faster than the presses can go yet there is still (albeit minor) deflation!

The only answer to such preposterous numbers is the lack of true market bellweather goods in the CPI basket. CPI in times like these is completely unhelpful because governments just make sure that the excess liquidity doesn't go to the markets that contribute heavily to CPI increases. But it doesn't mean its not there! If the government we're a firm, they would be sitting in the same cell as bernie madoff for investor fraud. Although I can understand why they are taking this action (to try prop-up the markets temporarily) this action is heavily damaging the functioning of the markets and creating enormas market failures. It would be wrong for me to stand on the moral high ground and judge the government on something I only have limited information about (and I'm only 20 years old on top of that) but I can't help but sympathise with people who say the capitalist system is flawed. We are just playing a game of smoke and mirrors, and although I don't see the catastrophic government collapse coming that many others do, I do feel abit heart-broken. I fell in love with the capitalist economic system because it provided a platform where all are equal and anybody with the will to succeed can do so. But that dream is proving to be just that, a dream. This is a system governed by higher powers (not just governments, but lobbyists etc.) that mantains the status quo. I find that a bit sad.

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Thomas Hedin
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Re: Austerity or Money Printing?

The government is printing money faster than the presses can go yet there is still (albeit minor) deflation!

The government creates no money.  Only private banks create money at this time and they do it when they issue new loans.

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fiatagogo
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Re: Austerity or Money Printing?

What is so complicated for me to understand is what the ultimate landscape (economic) will look like.  How money is created and extinguished doesn't really matter. 

It is difficult to know what to do with things like IRAs and leveraged assets.  It's possible that fiscally conservative politicians will be elected and try to minimize the damage.  It seems that many of you are predicting complete currency collapse.  Isn't it probable that we will come to our senses before that?

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strabes
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Re: Austerity or Money Printing?
Quote:

What is so complicated for me to understand is what the ultimate landscape (economic) will look like.  How money is created and extinguished doesn't really matter.

Actually that's all that matters if you're concerned with the "ultimate landscape (economic)" because there's no way to change that if we don't change how money is created.  I recommend revisiting the 1st E problem in the Crash Course. 

Quote:

It is difficult to know what to do with things like IRAs and leveraged assets.  It's possible that fiscally conservative politicians will be elected and try to minimize the damage.  It seems that many of you are predicting complete currency collapse.  Isn't it probable that we will come to our senses before that?

In your analysis of the fiscal condition of the US and the hyper-leverage overhanging the floating debt instrument called the US dollar, how would you propose a couple fiscal conservatives (as if there's ever been one) could fix the situation since the government currently doesn't govern that aspect of the country?  I recommend reading this:

http://canadafreepress.com/index.php/article/20180

 

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Thomas Hedin
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Re: Austerity or Money Printing?

How money is created and extinguished doesn't really matter.

My gosh, if that doesn't matter then what does!?

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guardia
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Re: Austerity or Money Printing?
fiatagogo wrote:

It is difficult to know what to do with things like IRAs and leveraged assets.  It's possible that fiscally conservative politicians will be elected and try to minimize the damage.  It seems that many of you are predicting complete currency collapse.  Isn't it probable that we will come to our senses before that?

The thing you have to realize is that even if some sensible guy (like Chris :) comes into a position of power, we're still screwed. "Minimize the damage" would look something like the Great Depression. What we have to do is figure out how to get through it...

Samuel

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Thomas Hedin
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Re: Austerity or Money Printing?

What we have to do is figure out how to get through it...

And I agree and the only way we are going to get through this is to switch our monetary system from an evidence of indebtiness to an evidence of wealth.  It goes right back to understanding the very basic concepts of how money is created and put into circulation, and the consequences there of.

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fiatagogo
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Re: Austerity or Money Printing?

Thanks for the article strabes.  It was well written and it seems that these points (ideas) keep becoming more and more main stream see today's MSN lead story: http://www.msnbc.msn.com/id/35504954/ns/business-the_new_york_times

The money printing is of course a huge factor in what is going on, but what matters to me is what can we do about it.  How can someone protect the small gains that they've made?  How can we help others get educated and start wading through the tidal wave of crap that appears to be coming (here)?

Fear is a funny emotion.  It makes it so easy to lose sight of objective reality (as close as I get any way).

Can anyone recommend a thread or website with concrete suggestions?

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