Mish: Simultaneous Games Of Chicken Article

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Nichoman's picture
Nichoman
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Mish: Simultaneous Games Of Chicken Article

Mish Shedlock has written an outstanding article "Simultaneous Games Of Chicken".

Consider this one of the best posts I've seen of...where were at...why and what possibly will unfold in quite a long time.

WARNING: This is a long, serious post...but delves into many of the subjects discussed here and at other sites.

Offer this thread as an opportunity for information, education discussion and further understanding.

I do agree with the majority of his points and why we need to better understand what is happening in other countries and why.  It overlaps with many points of Chris (and others)...most recently his "It's Coming...From The Outside In".

For those who thirst for understanding and useful application of ways to better deal with our situation...would be interested in what others think of his views. Most notably, why he is on or off track.   My take:  His main points on the numerous countries I find reasonable.

Thanks in advance for those who provide their thoughts to this thread.

Nichoman

SagerXX's picture
SagerXX
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Re: Mish: Simultaneous Games Of Chicken Article

Thanks for pointing me to this articule, Nicho.  I read Mish, but not all the time and I would've missed this very chewy post.

A few thoughts (by a guy who's a rank amateur compared to many here):

1.  Mish needs somebody to edit his posts for typos.  Cheap shot, I know, but...dang.  You're too big a cheese for superfluous apostrophe's, brah!!!

2.  Mish (in the "A Bit About Hyperinflation" paragraph) states yet again that hyperinflation (or at least "rampant" inflation) is a Chinese problem, not a US problem.  Seems to me that with a command economy and approximately a trillion in foreign reserves, China has a lot of wiggle room.  Whereas it seems like the US only has Bennie Bananas pushing on his string...

3.  Parenthetical thought related to PM prices and the omnipresent deflation-or-inflation-in-the-US debate:  I expect the rise in PM prices is more a fear effect than an inflation effect.  Whether or not we are or will experience inflation (high or hyper) in the US, generalized fear about the future (not only buyers in the US but worldwide -- especially in Europe, if the stories about safe-deposit boxes in Germany are true) is what's pushing PM prices higher these days.  IMO.

4.  Then follows an overwhelming list of the various Games O'Chicken (personally I would've called "Yuan Chicken" General Tso's Chicken, but that's just because I love that stuff!) currently underway.  I say "overwhelming" because at some point in the list (around "Chicken Japanese Style") my brain went from trying to parse the various interrelations ("yep...yup...mm-hm, still with ya...yep...") to simply repeating "oh man it's just a matter of time."

It's just a matter of time.  The chickens are cooked.

Viva anyway -- Sager

JAG's picture
JAG
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Re: Mish: Simultaneous Games Of Chicken Article

Posts like this from Mish is why I put my money where Mish's mouth is

Incredible piece.

SagerXX's picture
SagerXX
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Re: Mish: Simultaneous Games Of Chicken Article

AWESOME new avatar, Jag!   Laughing

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agitating prop
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Re: Mish: Simultaneous Games Of Chicken Article
SagerXX wrote:

Thanks for pointing me to this articule, Nicho.  I read Mish, but not all the time and I would've missed this very chewy post.

A few thoughts (by a guy who's a rank amateur compared to many here):

1.  Mish needs somebody to edit his posts for typos.  Cheap shot, I know, but...dang.  You're too big a cheese for superfluous apostrophe's, brah!!!

2.  Mish (in the "A Bit About Hyperinflation" paragraph) states yet again that hyperinflation (or at least "rampant" inflation) is a Chinese problem, not a US problem.  Seems to me that with a command economy and approximately a trillion in foreign reserves, China has a lot of wiggle room.  Whereas it seems like the US only has Bennie Bananas pushing on his string...

3.  Parenthetical thought related to PM prices and the omnipresent deflation-or-inflation-in-the-US debate:  I expect the rise in PM prices is more a fear effect than an inflation effect.  Whether or not we are or will experience inflation (high or hyper) in the US, generalized fear about the future (not only buyers in the US but worldwide -- especially in Europe, if the stories about safe-deposit boxes in Germany are true) is what's pushing PM prices higher these days.  IMO.

4.  Then follows an overwhelming list of the various Games O'Chicken (personally I would've called "Yuan Chicken" General Tso's Chicken, but that's just because I love that stuff!) currently underway.  I say "overwhelming" because at some point in the list (around "Chicken Japanese Style") my brain went from trying to parse the various interrelations ("yep...yup...mm-hm, still with ya...yep...") to simply repeating "oh man it's just a matter of time."

It's just a matter of time.  The chickens are cooked.

Viva anyway -- Sager

Sager, I just posted on another thread that 80% of the manufacturing capacity in the U.S. is devoted to the military. How is this not a "command economy"?  When the govt backstops large banks, how is that not a form of command economy, too? Foreigners, particularly, will eventually abandon the dollar, and other major fiat, Mish's viewpoint not withstanding.

The fed will inject money into the economy, if they have to drop it out of helicopters, just as Bernanke has stated. Deflation is what politicians hate most. It means pain right now and no more biscuits for a lifetime, starting...now. Woof! It's a basic Skinnerian stimulus response reaction. Would a fed chief rather have a poke in the flank with a hot poker right now or a biscuit (okay, a lobster bisque--that's better)? How about a bisque and a raise? There...the Pavlovian drooling response just kicked in. Nice Ben. Go to your bed now....lie down, LIE DOWN, I said, Ben!Wink

Inflation is stealthier and the effects lag into future political cycles. In order for me to alter my opinion, Mish would have to convince me that human nature has changed radically recently.  Beyond that I would have to think that politicians aren't morally reprehensible, for the most part, that they actually strive to do "their best", even if it hurts them. Mwahahah!

PM prices could be rising for any number of reasons. It could have to do with the edginess about the euro and might not be as much of a dollar story. However, if this were the case, the price of gold, silver in U.S dollars wouldn't likely be as strong. Look at the price of oil if you want to get another fix on how much confidence the international community has in fiat currencies and the dollar. In spite of the fact that it appears we are entering a true global recession now, the commodities are performing miraculously well. Of course, this is not a strong commodity story as much as an internationally weak fiat story--peak oil aside.

All major fiat currencies are closely entwined and central banks the world over, including and maybe particularly China have  made the same mistakes and they're going down together. I see national fiat currencies as a handful of men who can't swim, tossed overboard, scrambling over each other, trying to stay afloat. The American, due to it's military, it's massive economic base,may be able to out climb the others, but he'll drown too. It'll just take a little longer.

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patrickhenry
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Re: Mish: Simultaneous Games Of Chicken Article

Mish's definition of hyperinflation is questionable, if not incorrect.

Bear in mind that hyperinflation is a complete loss of faith in currency. Political, not monetary events kick off hyperinflation.

 

On the contrary, hyperinflation recently occurring in countries has been caused by monetary policy, not a complete loss of faith in the currency.  In other words, from an unchecked increase in the money supply (a definition of hyperinflation).  In Argentina,  e.g., hyperinflation resulted when the outstanding debt became larger than domestic financial markets could be persuaded to hold.  from  http://en.scientificcommons.org/32994523    With Brazil's hyperinflation, the source of the hyper inflation was also the expansion of the money supply.   Perhaps Mish's extreme political view of hyperinflation is why he is so adamently against its' possibility.

He also goes on to write...

Given that the US is one of the most politically stable countries in the world, with large gold reserves, with the world's strongest military, and with an increasingly conservative Congress, the idea that hyperinflation will hit the US anytime soon is preposterous.

Large gold reserves in the U.S. ?   Where?

Increasingly conservative Congress ?   In the history of the U.S., Republicans taking more power in Congress or the Whitehouse has never resulted in smaller or more overall conservative government.  More to the point, history shows us the GOP, like the Dems, are unwilling to take away the helicopter keys from the Ben Bernanke (or Greenspan before).  Indeed,, quite the opposite (need to pay for those tax cuts)

Considering the purpose of  the current QE2 is to monetize the U.S. budget for the next several months, hyperinflation in the U.S. due to an expansion of the money supply is looking more and more likely to me.  Preposterous ?  Not so much.   Especially as Congress and the Fed will need QE3, QE4, etc.

.

 

 

 

 


Jager06's picture
Jager06
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Re: Mish: Simultaneous Games Of Chicken Article

Is there a historical example of a nation who experienced hyperinflation and was NOT monetizing their debt?

Anyone? I think the implications would be obvious if there is not such an example of currency debasement. I would consider "cutting" coins in ancient times with less precious metals and more base metals (Rome) the equivalent of debt monetization. Does not the decrease in metal value of the currency then create excess liquidity that normally would not exist?

Regardless. Name the country that experienced hyperinflation without monetizing their debt in some way. Thanks.

Crickets?

Is the Fed not monetizing the Debt? Inflation, maybe hyper, then is my position.

Jager06

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