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    Marc Faber: The Perils of Money Printing’s Unintended Consequences

    by Adam Taggart

    Saturday, March 17, 2012, 3:05 AM

Marc Faber does not mince words. He believes that the money printing policies of the Federal Reserve and its sister central banks around the globe have put the world's currencies on an inexorable, accelerating, inflationary down slope.

The dangers of money printing are many, in his eyes. But in particular, he worries about the unintended consequences it subjects the populace to. Beyond currency devaluation, it creates malinvestment that leads to asset bubbles that wreak havoc when they burst. And even more nefarious, money printing disproportionately punishes the lower classes, resulting in volatile social and political tensions.

It's no surprise, then, that he's feeling particularly defensive these days. While he generally advises those looking to protect their purchasing power to invest capital in precious metals and the equity markets (the rationale being that inflation should hurt equity prices less than bond prices), he warns that equities appear overbought at this time.

On Inflation

First of all, I do not believe that the central banks around the world will ever, and I repeat ever, reduce their balance sheets. They’ve gone the path of money printing, and once you choose that path you’re in it and you have to print more money.

If you start to print, it has the biggest impact. Then you print more it has a lesser impact, unless you increase the rate of money printing very significantly. And, the third money-printing has even less impact. And the problem is like the Fed: They printed money because they wanted to lift the housing market, but the housing market is the only asset that didn’t go up substantially.

In general, I think that the purchasing power of money has diminished very significantly over the last ten, twenty, thirty years, and will continue to do so. So being in cash and government bonds is not a protection against this depreciation in the value of money.

On His Love for Central Bankers

Basically the U.S. had a significant increase in the average household income in real terms from the late 1940s to essentially the mid-1960s. And then inflation began to bite, and real income growth slowed down. Then came the 1980s, and in order not to disappoint the household-income recipients, you essentially printed money and had a huge debt expansion.

So if you have an economic system and you suddenly grow your debt at a very high rate, it's like an injection of a stimulant of steroids. So the economy grew at a relatively fast pace, but built on additional debt. And this obviously cannot go on forever, and when it comes to an end, you have a problem. But the Fed had never paid any attention.

The Fed is about the worst economic forecaster you can imagine. They are academics. They never go to a local pub. They never go shopping or they lie. But basically they are a bunch of people who never worked a single day in their lives. They’re not businessmen that have to balance the books, earn some money by selling goods, and pay the expenditures. They get paid by the government. And so these people have no clue about the economy.

And, so what happens is they never paid any attention to excessive credit growth and let me remind you, between 2000 and 2007, credit growth was five times the growth of the economy in nominal terms. In other words, in order to create one dollar of GDP, you had to borrow another five dollars from the credit market. Now this came to an end in 2008.

Now the Fed never having paid any attention to credit growth, they realized if we have a credit-addicted economy and credit growth slows down, we have to print money. So that’s what they did. But believe me, it doesn’t take a rocket scientist to see that if you print money you don’t create prosperity. Otherwise, every country would be unbelievably rich, because every country would print money and be happy thereafter.

On the Unintended Consequences of Money Printing

In the short term, it has been working to some extent, in the sense that equity prices are up and interest rates are down. And, so companies can issue bonds at extremely low rates. But every money-printing exercise in the world leads to unintended consequences at a later point. And this is the important issue to remember. We don’t know yet for sure what the unintended consequences are.

We know one unintended consequence, and this is that the middle class and the lower classes of society, say 50% of the U.S., has rather been hurt by the increase in the quantity of money in the sense that commodity prices in particular food and energy have gone up very substantially. And, since below 50% of income recipients in the U.S. spend a lot, a much larger portion of their income on food and energy than, say, the 10% richest people in America and highest income earners, they have been hurt by monetary policy. In addition, the lower income groups, if they have savings, traditionally they keep them in safe deposits and in cash because they don’t have much money to invest in the first place. So the increase in the value of the S&P hasn’t helped them, but it helped the 5% or 10% or 1% of the population that owns equities. So it's created a wider wealth inequality, and that is a negative from a society point of view.

Click the play button below to listen to Chris' interview with Marc Faber (runtime 40m:45s):

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Dr. Faber publishes a widely read monthly investment newsletter, The Gloom Boom & Doom Report, which highlights unusual investment opportunities, and is the author of several books including Tomorrow's Gold Asia's Age of Discovery, which was first published in 2002 and highlights future investment opportunities around the world.  Tomorrow's Gold was on Amazon's best seller list for several weeks and is being translated into Japanese, Chinese, Korean, Thai, and German. Dr. Faber is also a regular contributor to several leading financial publications around the world.

Between 1970 and 1978, Dr. Faber worked for White Weld & Company Limited in New York, Zurich, and Hong Kong. Since 1973, he has lived in Hong Kong. From 1978 to February 1990, he was the Managing Director of Drexel Burnham Lambert (HK) Ltd. In June 1990, he set up his own business, MARC FABER LIMITED, which acts as an investment advisor and fund manager.


Our series of podcast interviews with notable minds includes:

 

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66 Comments

  • Sat, Mar 17, 2012 - 3:47am

    #1
    Davos

    Davos

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    This should be another excellent listen!

    Hope he tells his Greenpan tale...

    "Mark Faber, Hong-based investor and author of the monthly Gloom, Boom & Doom Report, could see far enough ahead to move to Asia in the 1970s.  He remembers his meetings with Alan Greenspan (when Faber still worked in New York): I was put in charge of research liaison for White, Weld’s overseas offices…My job entailed…attending the monthly economic presentations [by Alan Greenspan]…When Mr. Greenspan first came on board at White, Weld as a consultant, 30 or 40 people from the firm’s various departments would attend the meetings.  Within a few months, however, attendance had dropped to just a handful of White, Weld employees.  By then I had also learned that the easiest way for me to communicate the (to me) incomprehensible remarks of [Greenspan] to our overseas offices was smply to summarize the previous day’s news from the front page of the Wall Street Journal”.

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  • Sat, Mar 17, 2012 - 8:33am

    #2

    Arthur Robey

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    Slamming around.

    I am with Dmitri Orlov backed by Chaos theory. The down-slope is not smooth. The situation will flicker back to the old stability for a while and then Wham, back again to the new reality.

    Each return to the previous reality will be shorter and less robust than the last until we stabilise in the new reality. Ennui will be the signature that we have arrived at last.

    A way to test this idea is to identify self-similarity. Events at a finer scale that mimic the larger Chaotic flickering.

    At the moment things look like the old reality. With less oil.

    Those Folk and their Rognarok! A little poem for your amusement and pleasure Mr Faber.

    The needle drills, is extended
    Draws the substance from our bowels
    Crack the fluid, make it potent
    Find a vein, and inject it in.
    Our logic's certain, The Model trusted.
    The Money, friend, is the only thing.
    The model's wrong, the poems all busted.
    And this my friend is our last fling.

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  • Sat, Mar 17, 2012 - 4:47pm

    #3
    KugsCheese

    KugsCheese

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    Unintended Consequences?

    How about another world war???

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  • Sat, Mar 17, 2012 - 4:51pm

    #4
    KugsCheese

    KugsCheese

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    Unintended Consequences?

    Civil war???

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  • Sat, Mar 17, 2012 - 5:00pm

    #5

    RJE

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    Faber lives life, is

    Faber lives life, is entertained by life in spite of all he sees. I gravitate (again) to these type folks. Very important Podcast Chris. Tigers start in 15 minutes (radio and 70 degrees in Michigan during March!!! Love it!).

    BOB

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  • Sat, Mar 17, 2012 - 5:30pm

    #6
    RodgerMitchell

    RodgerMitchell

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    Money "printing" causes inflation?? Not according to the data

     Debt hawks forever fret about inflation. Their typical logic is:  "If the government prints too much money, there will be too many dollars chasing too few goods, and that is inflation."

    Wrong on several counts.  First, the U.S. federal government does not "print" money.  Those greenbacks in your wallet are not dollars.  They are titles to dollars, similar to the titles on your house and your car.  Dollars do not exist in any physical form.  They strictly are numbers in balance sheets, having no more substance than the number 6.

    Second, the government creates dollars by paying bills.  You and I first must have a source of dollars with which to pay our bills.  We are monetarily non-sovereign. By contrast, the U.S. government is Monetarily Sovereign

    The U.S. government became Monetarily Sovereign on August 15, 1971.  Here's how it pays bills and creates dollars:  It sends instructions (not dollars) to creditors' banks, telling those banks to increase the numbers in the creditors' checking account. Those increases in numbers are what create dollars.  The federal government can send instructions endlessly, without taxes or borrowing.

    Third, inflation is a general rise in prices, not just a rise in the price of a few items.  In this new, world economy, there no longer can be "too few goods."  Since the U.S. became Monetarily Sovereign, there has been zero relationship between federal money creation and inflation. 

    Most people find this surprising, but the reason is clear: If one supplying nation runs short of a product or service, a dozen other nations are ready to step in. I live in Chicago. During the winter, we obtain fresh fruit from Chili and seafood from Australia.  That was not always the case.  The world has changed. No longer can too many dollars chase too few goods -- with just one exception:  Oil.

    Oil is the one product that influences the prices of all other products and services.  Oil price increases are the cause of inflation -- not too many dollars and not too few goods.

    The author also said, " . . . if you print money you don’t create prosperity. Otherwise, every country would be unbelievably rich, because every country would print money and be happy thereafter."

    Three reasons why this is wrong:

    First, not all nations have the unlimited ability to pay bills and thereby create dollars. The euro nations, for instance, are monetarily non-sovereign, which is why they are suffering for lack of euros.

    Second, the Monetarily Sovereign nations seem to have the "Tea Party Syndrome," in which they do not recognize their own Monetary Sovereignty.  They think their governments need to tax and borrow, and government debt is a burden on taxpayers.  They are wrong on all counts, which I would be glad to explain, but not in the narrow confines of this blog.

    Third, there is a strong relationship between federal money creation and economic growth.

    In short, the author of this post does not understand the differences between Monetary Sovereignty and monetary non-sovereignty.  Because Monetary Sovereignty is the basis for all economics, those who don't understand it, don't understand economics.

    Rodger Malcolm Mitchell

    www.nofica.com

     

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  • Sat, Mar 17, 2012 - 6:04pm

    KugsCheese

    KugsCheese

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    Money "printing" causes inflation?? Not according to the data

    You may get fruit from many countries but what about the cost of bringing from port and storing it and displaying it.   Chicago is full of nonsense too. 

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  • Sat, Mar 17, 2012 - 6:36pm

    #8
    Doug

    Doug

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    Rodger Mitchell

    First, welcome to the blog.

    Second, I suggest you take the Crash Course, particularly chapters 6-12.  You have a few misconceptions of what money is and how its created.  I'll just mention the first and most obvious.  The gov't doesn't create money, the Federal Reserve (and other banks) do, and they loan it into existence.

    Happy listening.

    Doug

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  • Sat, Mar 17, 2012 - 7:49pm

    #9
    Davos

    Davos

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    Rodger Mitchell

     When I came back to CM I promised myself I'd limit the use of the word moron.

    After reading that "post" I'm going to go out and garden, since the garden is at least a football field's lenght from the m key on my keyboard.

    [Moderator's note:  This post is a violation of the forum guidelines. Personal attacks and name calling are not allowed.  Appropriate corrective action with the user has been undertaken.]

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  • Sat, Mar 17, 2012 - 8:23pm

    Doug

    Doug

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    Davos wrote: When I came

    [quote=Davos]
     When I came back to CM I promised myself I'd limit the use of the word moron.
    After reading that "post" I'm going to go out and garden, since the garden is at least a football field's lenght from the m key on my keyboard.
    [/quote]
    What a coincidence.  We spent part of the day at a local nursery and came home and planted a bunch of fruit and nut trees and bushes.  I can't believe its the middle of March and its 70 and sunny.
    Doug

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  • Sat, Mar 17, 2012 - 8:59pm

    dps

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    Doug wrote:Davos

    [quote=Doug]
    [quote=Davos]
     When I came back to CM I promised myself I'd limit the use of the word moron.
    After reading that "post" I'm going to go out and garden, since the garden is at least a football field's lenght from the m key on my keyboard.
    [/quote]
    What a coincidence.  We spent part of the day at a local nursery and came home and planted a bunch of fruit and nut trees and bushes.  I can't believe its the middle of March and its 70 and sunny.
    Doug
    [/quote]
    Gents:
    The bees are flying!!!  I saw a fruit tree in bloom this morning!!!  That's one full month ahead of last year.  Maybe a bumper crop of honey?  ... dons

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  • Sat, Mar 17, 2012 - 9:24pm

    RodgerMitchell

    RodgerMitchell

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    Full of nonsense

    I assume you did not look at the data  references I supplied.  As for the cost of bringing from port and storing it and displaying it -- So??? There are transportation costs, storage costs and display costs from California, too -- not to mention lower foreign labor costs.  But, what's your point?And as for your comment that Chicago being full of nonsense, you have just reminded my why I so seldom visit this site. The frequent combination of insults plus lack of data and informed comment, make this blog essentially a time-waster.  
    There are several good, informative economics sites, in which people not only understand economics, but discuss actual data.  In addition to my site at www.nofica.com, I suggest moslereconomics.com/ and www.nakedcapitalism.com/.
    All are far more informative.
    Rodger Malcolm Mitchell.
     

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  • Sat, Mar 17, 2012 - 9:39pm

    RodgerMitchell

    RodgerMitchell

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    Crash Course

     You are correct that banks create dollars by lending. That is incorrectly termed "fractional reserve" lending (It actually is "fractional capital" lending.) You too, create dollars by lending, if you obtain a legal note in exchange for your dollars.The federal govenment creates dollars by paying bills.  For instance, if you receive Social Security benefits, the Treasury will wire instructions to your bank to increase the numbers in your checking account.  When the numbers in your checking account are increased, dollars come into existence. All dollars merely are numbers.
    Because the dollars are created by your bank, at the instruction of the Treasury, one can have endless and useless debates about whether it was the government or your bank (which probably is part of the Federal Reserve System), that actually created the money.  I opt for the government, because Congress ordered it and the Treasury instructed in.  Your bank was just a conduit, doing as it was told.
    Notice that the Treasury did not sent dollars to your bank.  It sent instructions -- an important point.  The federal govenment, being Monetarily Sovereign, has the unlimited ability to send instructions, without collecting taxes or borrowing or having any other source of income.
    You and I, the states, counties and cities, and the euro nations, being monetarily non-sovereign, do not have this ability. To understand economics, one must understand the differences between Monetary Sovereignty and monetary non-sovereignty.
    Rodger Malcolm Mitchell.
     
     

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  • Sat, Mar 17, 2012 - 10:27pm

    #14
    Davos

    Davos

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    Manure

    It is beautiful.  Feels great to be away from the soapstone stove and digging dirt!

    Roger: You should bundle what you write, I’d buy it in place of the horse $hit I usually get for the garden ---it would grow tomatoes Garrison Keillor would be envious of.

    The dollar has lost 86% of its value since 1966. 

    The dollar---by BLS admission---has lost 96% of its value since the Federal Reserve Act of 1913.

    You can try to obfuscate that all you want, though you’ll probably have better luck on a blog high in moron content, of which CM’s lacks. 

    [Moderator's note:  This post is a violation of the forum guidelines. Personal attacks and name calling are not allowed.  Appropriate corrective action with the user has been undertaken.]

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  • Sat, Mar 17, 2012 - 10:41pm

    #15
    Doug

    Doug

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    Rodger Mitchell

     [quote] You are correct that banks create dollars by lending. That is incorrectly termed "fractional reserve" lending (It actually is "fractional capital" lending.) You too, create dollars by lending, if you obtain a legal note in exchange for your dollars.[/quote]

    That is incorrect.  When I loan money to someone, it comes out of my pocket or checking account.  It is money that has already been created.

    [quote]The federal govenment creates dollars by paying bills.  For instance, if you receive Social Security benefits, the Treasury will wire instructions to your bank to increase the numbers in your checking account.  When the numbers in your checking account are increased, dollars come into existence. All dollars merely are numbers.[/quote]

    Again, incorrect.  When the fed. gov't. spends money, it is money that they have already either raised in taxes or borrowed from someone.  That's why they have a kerfuffle everytime they hit the debt ceiling.  They don't have the money in their accounts to pay out if they can't borrow it.  They don't create it.

    [quote]Because the dollars are created by your bank, at the instruction of the Treasury, one can have endless and useless debates about whether it was the government or your bank (which probably is part of the Federal Reserve System), that actually created the money.  I opt for the government, because Congress ordered it and the Treasury instructed in.  Your bank was just a conduit, doing as it was told.[/quote]

    It is true that something like 97% of US dollars are merely digital entries, but money transferred into my bank account by the US gov't. is on its books and was either borrowed or raised in taxes.  When a bank loans me money, they create it out of thin air.  When the Fed loans money they create it out of thin air.  if it's money that eventually passes to the treasury, it is loaned to a dealer bank (i.e., Fed buys treasuries) who in turn buys treasuries from the US Treasury (i.e., loans them money).  It is true that my bank is just a conduit, but they do not create that money.

    [quote]Notice that the Treasury did not sent dollars to your bank.  It sent instructions -- an important point.  The federal govenment, being Monetarily Sovereign, has the unlimited ability to send instructions, without collecting taxes or borrowing or having any other source of income.[/quote]

    Call it what you like, the money in digital form is transferred to your account.  The gov't does not create money.  They do create treasuries which they then use to borrow money.

    Monetary sovereignty is not a difficult concept and most people on this forum understand the concepts.  It's just that Congress has transferred the money making power to the Fed.

    I should be a little more circumspect.  If anyone thinks I've got it wrong, please let me know.

    Doug

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  • Sat, Mar 17, 2012 - 10:58pm

    #16

    RJE

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    Roger, Roger, Roger...

    ...boring.

    Hey, the weather is just great here in Michigan, just beautiful. My Mommy used to say, " non-sense is after all non-sense , so give it no more time than it requires. So, respectfully, but your thread gets no more time.

    Go Tigers

    BOB

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  • Sat, Mar 17, 2012 - 11:23pm

    Davos

    Davos

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    Roger

    (_?_) 
    I’m thoroughly amazed to read something so un-E=mc2 on a blog like this.  This drivel is what you read when you pour over the FOMC minutes or read Turbo-Timmy’s bee-s.
    Roger: The one thing I heart about your posts are your post #'s.
     
     

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  • Sat, Mar 17, 2012 - 11:25pm

    Dogs_In_A_Pile

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    robert essian

    [quote=robert essian]...boring.
    Hey, the weather is just great here in Michigan, just beautiful. My Mommy used to say, " non-sense is after all non-sense , so give it no more time than it requires. So, respectfully, but your thread gets no more time.
    Go Tigers
    BOB
    [/quote]
    Completely off-topic, but that is my signature approach.
    I lived in Detroit and the UP for a few years when I was a kid - Game 1 of the 68 World Series was the first baseball game I ever went to.  Too bad I was too young (6 years old) to appreciate Bob Gibson's gem.
    Was thrilled that the Tigers won and have been a Detroit fan since.  High hopes for this year.....
    That is all....

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  • Sun, Mar 18, 2012 - 12:31am

    #19

    RNcarl

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    A quick question

     If the gooberment has the power of "Monetary Sovereign-ity" then why is there a "National Debt?" 

    If they can  "will" digits into existence then why do they need to create "gooberment bonds?"

    I know, I know, that was two questions. Not one...

    C.

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  • Sun, Mar 18, 2012 - 1:01am

    Davos

    Davos

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    RNcarl wrote: If the

    [quote=RNcarl] If the gooberment has the power of "Monetary Sovereign-ity" then why is there a "National Debt?" 
    If they can  "will" digits into existence then why do they need to create "gooberment bonds?"
    I know, I know, that was two questions. Not one...
    C.
    [/quote] RNC are you assuming that the jet propulsion engineer can count to 2?
    If not you might want to ask him just why our kids are on the hook for a 10.4 trillion dollar "bailout', or why we have over 80 trillion NPV off balance sheet liabilities, or why we borrow 54 cents of every dollar we spend, and since there aren't enought lenders we actually "print" most of that.  And I don't give a rats (ehem) if it is electronic printing or vis a vis the treasury.  Debasement is debasement.
     [Moderator's note:  This post is a violation of the forum guidelines. Personal attacks and name calling are not allowed.  Appropriate corrective action with the user has been undertaken.]

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  • Sun, Mar 18, 2012 - 1:39am

    #21
    Peter Smith

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    Faber

    Unintended consequences?  Not in a thousand years!   Get it!  The intention IS to cause a long term, painful collapse so that the people will clamor for at least accept some "reform" that further centralizes power, takes more liberty and eventually creates a condition of complete subservience to not national but a world cartel of bankers (IMF, etc.) and politicians, One World Government.  This is and has been the "progressive/socialist/Fabian/elitist" goal for many years.  Go back to US history after the civil war and understand that the purpose of the many "money panics", engineered by the banks, was to create so much pain that a new central bank could be birthed.   

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  • Sun, Mar 18, 2012 - 2:59am

    RJE

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    Dogs-in-a-Pile

    ...these are thrilling times we live in now. As far as being off topic, it's the weekend and are allowed a few of these because of the total and complete bullshit we must hear each and every day from those we vote to look out for our common interests (yet always bamboozle us in all important matters). Or from those who believe they are enlightened beyond that of mere pheasantry like Roger the dodger here (his rhetoric not perhaps the man in any account).DOG, You cut your teeth on the first game of the 68 world series, Gibson against McClain!!! It gets no better than that. 1.12 seasonal era (Gibson) against a 32 game winner (McClain), WOW!
    BOB

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  • Sun, Mar 18, 2012 - 3:07am

    Mark_BC

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    Peter Smith

    [quote=Peter Smith]Unintended consequences?  Not in a thousand years!   Get it!  The intention IS to cause a long term, painful collapse so that the people will clamor for at least accept some "reform" that further centralizes power, takes more liberty and eventually creates a condition of complete subservience to not national but a world cartel of bankers (IMF, etc.) and politicians, One World Government.  This is and has been the "progressive/socialist/Fabian/elitist" goal for many years.  Go back to US history after the civil war and understand that the purpose of the many "money panics", engineered by the banks, was to create so much pain that a new central bank could be birthed.   
    [/quote]
    Mostly agree. When people are desperate they will be willing to allow any remaining environmental / social / constitutional safeguards to be axed, thereby granting the elites full unfettered access to the little remaining wealth available for the taking, wealth that once belonged to everyone via the government. It is a way of turning the populace against itself, to get the average person to equate private banks with the government. To the average person those two are the same, but it is the government that is owned by the private elites, via the private banks. The government no longer serves the people. So rather than railing around cutting government, maybe we should be railing around taking back the government.
    This is definitely not socialism. This is the antithesis of socialism. US Federal spending has been going down for the last 25 years and it is now near the lowest in the industrialized world. The number of poor people is increasing dramatically, while a very elite 0.000001% of the population that is well connected to the upper eschelons of the corruption are living like kings while they steal from everyone else. That is extreme wealth concentration, and definitely not socialism. It is crony capitalism taken to its inevitable end. And some people actually believe that increasing taxes to the wealthy is going to hurt the economy???

    This "socialism" meme is one perpetrated by the private banks to provoke the free market idealogues to argue for the complete deregulation of everything, to eliminate any remaining protection from the mafia the average person currently enjoys, via some deluded belief that free markets are efficient.
    For an example of moderate socialism / mild capitalism look to Sweden, and they're doing very well compared to almost every other industrialized nation, humming along with a transition to renewable energy infrastructure.
     

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  • Sun, Mar 18, 2012 - 9:16am

    #24
    crazy horse

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    Thanks

    Chris

    Thanks for a great interview. Such indepth discussions with Marc Faber are as illuminating as they are rare.

    I have also  just finished relistening to your interview with John Williams from Shadowstats from about a year ago. Providiing access to these minds is a wonderful service and your interviewing style by way of constant clarification and lateral links makes them all the more enjoyable.

    Ross

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  • Sun, Mar 18, 2012 - 11:04am

    #25

    RJE

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    It's about Oil Preservation for me, always will be, and use...

    ..every darn thing

    http://www.zerohedge.com/news/march-17-here-are-17-charts-summarizing-us-energy-situation

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  • Sun, Mar 18, 2012 - 11:08am

    #26

    jonesb.mta

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    Rodger

    Why would Rodger waste his money(2 years and 26 weeks) becoming a member of this group with his mind set? He has to be a plant of some sort, is Chris shaking things up that much? Chris must have upset somebody who doesn't mind wasting money or Rodger wouldn't be spewing this nonsense that only an idiot or ignorant person could believe. Davos, that # is the best thing about his post, lets hope it stays below 5.

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  • Sun, Mar 18, 2012 - 1:25pm

    RodgerMitchell

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    Just learn the difference

     The U.S. became Monetarily Sovereign on August 15, 1971. Prior to that it was monetarily non-sovereign.  What actually changed? If you learn the many differences between Monetary Sovereignty and monetary non-sovereignty, you will understand economics.  But first, you need the desire to learn.Swearing, sneering and sarcasm will not help you understand economics.
    Your focus on the Fed is misplaced. The Fed, federal taxes and all T-securities all could disappear tomorrow, and this would not change the federal government's ability to pay its bills. 
    Rodger Malcolm Mitchell

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  • Sun, Mar 18, 2012 - 2:51pm

    KugsCheese

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    Doug wrote:First, welcome

    [quote=Doug]
    First, welcome to the blog.
    Second, I suggest you take the Crash Course, particularly chapters 6-12.  You have a few misconceptions of what money is and how its created.  I'll just mention the first and most obvious.  The gov't doesn't create money, the Federal Reserve (and other banks) do, and they loan it into existence.
    Happy listening.
    Doug
    [/quote]
    And then there is the fractional re-loaning.  Here is where the non-linear aspect occurs due to VELOCITY.   The FED thinks it can control it, but it cannot.   As Marc stated, the FED has never lived in the real world where lines of credit are pulled for no reason and etc other then the GOD of FED.

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  • Sun, Mar 18, 2012 - 3:06pm

    KugsCheese

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    Mark_BC wrote:Peter Smith

    [quote=Mark_BC]
    [quote=Peter Smith]
    Unintended consequences?  Not in a thousand years!   Get it!  The intention IS to cause a long term, painful collapse so that the people will clamor for at least accept some "reform" that further centralizes power, takes more liberty and eventually creates a condition of complete subservience to not national but a world cartel of bankers (IMF, etc.) and politicians, One World Government.  This is and has been the "progressive/socialist/Fabian/elitist" goal for many years.  Go back to US history after the civil war and understand that the purpose of the many "money panics", engineered by the banks, was to create so much pain that a new central bank could be birthed.   
    [/quote]
    Mostly agree. When people are desperate they will be willing to allow any remaining environmental / social / constitutional safeguards to be axed, thereby granting the elites full unfettered access to the little remaining wealth available for the taking, wealth that once belonged to everyone via the government. It is a way of turning the populace against itself, to get the average person to equate private banks with the government. To the average person those two are the same, but it is the government that is owned by the private elites, via the private banks. The government no longer serves the people. So rather than railing around cutting government, maybe we should be railing around taking back the government.
    This is definitely not socialism. This is the antithesis of socialism. US Federal spending has been going down for the last 25 years and it is now near the lowest in the industrialized world. The number of poor people is increasing dramatically, while a very elite 0.000001% of the population that is well connected to the upper eschelons of the corruption are living like kings while they steal from everyone else. That is extreme wealth concentration, and definitely not socialism. It is crony capitalism taken to its inevitable end. And some people actually believe that increasing taxes to the wealthy is going to hurt the economy???

    This "socialism" meme is one perpetrated by the private banks to provoke the free market idealogues to argue for the complete deregulation of everything, to eliminate any remaining protection from the mafia the average person currently enjoys, via some deluded belief that free markets are efficient.
    For an example of moderate socialism / mild capitalism look to Sweden, and they're doing very well compared to almost every other industrialized nation, humming along with a transition to renewable energy infrastructure.
     
    [/quote]
     
    Please provide reference where found and context for the graph.  

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  • Sun, Mar 18, 2012 - 3:19pm

    KugsCheese

    KugsCheese

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    RodgerMitchell wrote: The

    [quote=RodgerMitchell]
     The U.S. became Monetarily Sovereign on August 15, 1971. Prior to that it was monetarily non-sovereign.  What actually changed? If you learn the many differences between Monetary Sovereignty and monetary non-sovereignty, you will understand economics.  But first, you need the desire to learn.
    Swearing, sneering and sarcasm will not help you understand economics.
    Your focus on the Fed is misplaced. The Fed, federal taxes and all T-securities all could disappear tomorrow, and this would not change the federal government's ability to pay its bills. 
    Rodger Malcolm Mitchell
    [/quote]
    What was Bretton Woods 1944?   The US had just kicked arse in WWII and could dictate to the world the new money system.   How sovereign is that?  Unfortunately, the US decided to cede financial leadership and became debt whore.

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  • Sun, Mar 18, 2012 - 3:28pm

    Davos

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    KugsCheese wrote:Doug

    [quote=KugsCheese]
    [quote=Doug]
    First, welcome to the blog.
    Second, I suggest you take the Crash Course, particularly chapters 6-12.  You have a few misconceptions of what money is and how its created.  I'll just mention the first and most obvious.  The gov't doesn't create money, the Federal Reserve (and other banks) do, and they loan it into existence.
    Happy listening.
    Doug
    [/quote]
    And then there is the fractional re-loaning.  Here is where the non-linear aspect occurs due to VELOCITY.   The FED thinks it can control it, but it cannot.   As Marc stated, the FED has never lived in the real world where lines of credit are pulled for no reason and etc other then the GOD of FED.
    [/quote]VELOCITY is Bee-S.  Has nothing to do with it.  I'm way too busy today to post the link, Google Sprott +Baker +Unintended Consequences and then do ctrl-f or command-f on macs and type in china.
    Spooking the 900# gorilla has replaced velocity.  Google Krasting+Zerohedge +China Oil Imports (they are up 39% YOY).

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  • Sun, Mar 18, 2012 - 3:42pm

    #32
    Grover

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    TANSTAAFL

    Rodger,

    I've used a variant of your argument to convince people that inflation is a form of taxation. If government were to just print (use the "print" word very loosely) and spend money rather than impose taxes, could they do such? What would the consequences be? Most people immediately agree that the US government could supply funding this way. Apparently, at some level, they inherently understand monetary sovereignty. They also realize that the consequence of such action would be inflation. Taken to an extreme, they come to the conclusion that the currency would lose respect and become worthless.

    Zimbabwe had and still has monetary sovereignty. They abused the privilege. Their government relied on the seignorage associated with printing as a funding source. Was this abilitity to print, a long term, positive result for anyone in Zimbabwe? A saw a picture of a $100,000,000,000,000 Zimbabwe Dollar Note a few years back. The caption noted that it would only buy 3 ordinary chicken eggs. Other than at a purely academic level, they had lost their monetary sovereignty due to abuse.

    Greece was monetarily sovereign before joining the EMU. For years before Greece joined, bond buyers punished them (with high interest rates) for their profligate spending. The EMU looked attractive to Greece because they could resume spending the way they always had, but at a lower interest rate. They were piggy backing on the northern European good will. They continued their borrowing at the lower interest rate. Now, northern Europe wants Greece to pay with austerity and higher taxes. It will be interesting to see how this resolves.

    In both cases, the governments chose the easy route. There are many examples of failure in economic history. Monetary sovereignty makes abuse easier to hide, but the end result is the same. Wouldn't it be better to have a currency that had no sovereign who could abuse it? Why wouldn't a gold standard be a better choice?

    There ain't no such thing as a free lunch.

    Grover

     

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  • Sun, Mar 18, 2012 - 4:47pm

    #33

    Jim H

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    Grover and Rodger..

    Grover.. you nailed it so succinctly I think.. Modern Monetary Theory, which Rodger's ramblings are based on, basically posits the "free lunch" as it's basis.  Zimbabwe is a great example, and I myself always carry a Zim $10Trillion in my wallet for those times when an object lesson is needed.   

    I appreciate that Rodger posts and does not hide behind a pseudonym... and while I have taken other monetarists, like 2OldtoOkeyDoke, to task in a big way on the CM.com boards, I think we can all benefit by talking this through with Rodger... he is out there in the open with his ideas.  Personally, I find this conversation much more interesting than the Faber interview, because it forces us to really think.

    Rodger's ideas are here;

    http://rodgermmitchell.wordpress.com/

    Rodger actually attends to the question of MMT vs. his "MS" approach;

    http://rodgermmitchell.wordpress.com/2012/01/07/preventing-and-curing-inflation-modern-monetary-theory-vs-monetary-sovereignty/

    In this piece, Rodger very clearly points to the theoretical alternate universe that he and other MMT economists have created;

    http://rodgermmitchell.wordpress.com/2012/02/20/its-everywhere-its-everywhere-the-debt-myth-touches-you-and-everyone-and-everything/

    "Neither coins nor paper bills are money. They merely are receipts representing money, which itself has no physical existence. And because money has no physical existence, the government never can run short. In fact, the government, contrary to popular usage, does not print money. It can’t. You can’t print something that does not exist in the physical world.

    Because of the universal belief that the federal government is “broke” (Thank you Mr. Boehner), or cannot “afford” to pay for the various things Americans want, Americans must be inconvenienced (heavy coins in the pocket) or worse (lack medical care, retirement funds, etc.) I see that false belief touching every facet of our lives, just like the most restrictive religion you can imagine.

    Everything you do, and everything you want to do, and everything you want, is colored by that massive superstition. It influences what you eat, what you wear, where you live, how you live. That false belief affects everything in your world.

    And you think religious extremists are nuts???"

    So again... how did Zimbabwe go wrong Rodger?     

     

     

     

     

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  • Sun, Mar 18, 2012 - 4:56pm

    #34

    Jim H

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    Davo's... great post on the history of Fiat currencies...

    Maybe Rodger can tell us how all of these Government issuers you reference got it wrong....

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  • Sun, Mar 18, 2012 - 4:59pm

    Davos

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    Grover wrote:Rodger,I've

    Rodger & Phyllis Mitchell, 2007
    [Moderator's note: Removed a personal photograph depicting Rodger Mitchell and his wife standing together on a vacation, her head rested upon his shoulder.]
    Do you think they have their hands in the Social Security $15.4+ Trillion/ Medicare $81+ Trillion / Prescription Drug $20.4+ Trillion handout till?
    It has been my past experience over the last 10 years since uncovering these off balnace sheet liabilities that this gang is the gang who defends the ponzi scheme the loudest.  When you ask them how their standard of living would change if this [email protected] was oblitereated you'd be amazed to hear how they'd live.
    What kills me is this isn't the gang that can't get by without it.  This is the gang that would have to move out of the gated community, trade in their leased Jag for a 5 year old car, give up their golf membership at "the club" and forgo their nice vacations.
    I find it amazing how the people who want their cake and the ability to eat it come out with absolute drivel that condones us being robbed of 86% of the value of our dollar since [our] birth.
    Jim Quinn calls them the Free $hit Army.  I call this [email protected] inter-generational-tyranny.
    I'm usually pretty quick to spot that gang.  ✓ Golf cap, ✓ casual, not cheap but not dressy clothes, ✓good teeth, ✓decent eyewear, ✓vacation smiles ✓golf|tennis|or boat tan ✓retired ✓professionally done hair.  If I had to go out on a limb I'd even take a few guesses at their past employment.
    We all know there have been 3,800 Fiat Currencies that have tanked. What many of us aren't up on is that the average life span of a Fiat currency is 39 years.  We're at gold minus 40 today. Here is the SHORT list of mostly recent currencies who went south.

    Country
    Year
    Old Dollars Needed To Buy New Dollars

    Angola
    1991-1999
    1 New Kwanza = 1,000,000,000 1991 Kwanzas

    Argentina
    1975-1991
    1 New Peso = 100,000,000,000 1983 Pesos

    Belarus
    1994-2002
    50,000 = 100,000,000 2000 Rublei

    Brazil
    1986-1994
    1 Real = 2,700,000,000,000,000,000 1930 Reis

    Bosnia-Herzegovina
    1993
    Massive hyperinflation

    Bulgaria
    1991-1997
    Defaulted on its debt, food shortages, reduced the number of zeros that were added to its currency.

    Chile
    1971-1973
    500%+ Inflation military overthrew the democracy.

    China
    1939-1950
    1937 3.4 Yuan traded $1.00 USD. By May 1949, $1.00 USD = 23,280,000 Yuan

    Ecuador
    2000
    Pegged to USD after 70-80% drop in its dollar

    England
    1100s
    1455-1485
    1543-1551
    1100s silver in coins fell.
    Coins were clipped.
    Henry VIII debased the coins to raise money

    Greece
    1944-1953
    1 1953 Drachma = 50,000,000,000,000 1944 Drachmai

    France
    1789-1797
    Death sentence on anyone selling the notes at a discount to gold and silver livres. 1795 a new currency was issued, the mandat, which promptly lost 97% of its value. 1797, both paper currencies recalled new monetary system backed by gold.

    Georgia
    1995
    1 new lari = 1,000,000 laris.

    Germany
    1923-1924
    1945-1948
    See chart above.

    Hungary
    1944-1946
    Forint 400,000,000,000,000,000,000,000,000,000 = 4 × 1029 Pengõ

    Israel
    1979-1985
    Price freezes

    Japan
    1944-1948
    5,000%++ Inflation. Issued military currency, anyone caught with Honk Kong currency was tortured.

    Krajina
    1993
    Country folded became part of Croatia.

    Madagascar
    2004
    1 Ariary = Madagascan Francs - Riots persisted.

    Mexico
    1993-1994
    Defaulted 1982. 1 Nuevo Peso = 1,000 Old Pesos.

    Nicaragua
    1987-1990
    1 Gold Cordoba = 5,000,000,000 1987 Cordobas.

    Peru
    1984-1990
    1 Nuevo Sol = 1,000,000,000 1985 Soles de Oro.

    Poland
    1990-1993
    1 new Zloty.10,000 old Zlotych

    Romania
    2000-2005
    1 new Leu = 10,000 old Lei

    AncientRome
    270AD +/-
    Took the Romans 300 years to do what the Fed did in 84 years - debase the currency by 95%. The Roman empire fell, they welcomed the Barbarians.

    Russia
    1992-1994
    100 Rubels = 1 USD 1991 30,000 Rubels = 1 USD 1999.

    Taiwan
    1940-1950
    1 New Taiwan Dollar = 40,000 old Taiwan yuan.

    Turkey
    1990-2005
    1 New Turkish Lira;= 1,000,000 old Lira.

    Ukraine
    1993-1995
    1 Hryvnya =100,000 Karbovantsivi

    United States
    1812-1814
    Continental Currency - Failed

    United States
    1861-1865
    Confederation Notes - Failed

    Vietnam
    1981-1988
    Gold trading was outlawed.

    Yugoslavia
    1989-1994
    1 Novi Dinar = 1,300,000,000,000,000,000,000,000,000Dinars.

    Zimbabwe
    1999 - 2010
    Ongoing mess.

    So Rodger, do tell us.  Are you part of the Free $hit Army?  And in the interest of full disclosure I'm not in it. I'm not part of that 49% crowd.  And, if you are in it, why don't you share with us just how your life would change if you didn't collect SS, Medicare, Prescription Drugs etc.
     
    [Moderator's note:  This post is a violation of the forum guidelines. Personal attacks, invasion of privacy, and name calling are not allowed.  Appropriate corrective action with the user has been undertaken.]

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  • Sun, Mar 18, 2012 - 5:40pm

    #36

    Jim H

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    Customer reviews for Rodger's book, "Free Money"

     

    Worth reading all the reviews.  One in particular I found interesting (the first one);

    The author of the review said this (highlight mine)

    "A small group of economists, known as chartalists or MMT-ers (after Modern Monetary Theory) have figured out the fiat (non gold-related) money. The author of the book is not among them, he discovered this by himself, a true genius. His book is definitely recommended, if you want to understand why some countries go bankrupt and others can run 200% debt-to-GDP ratio and manage to sell massive amounts of bonds despite offering near zero interest."

    I think the obvious reference here is Japan... and Chris has discussed this much recently since Japan is mathematically closest to their (fiat) endgame... they are in the tightest box when it comes to remaining degrees of freedom to sustain any increases in borrowing costs.  I find it interesting that the MMT'ers attribute Japan's success thus far to something they are doing right.. while I think Chris' observation that the carry trade, which created significant demand for Yen via international borrowing, is the thing that sustained the strength of the Yen over the previous years.  The Yen is now weakening as the carry trade unwinds, as Chris has pointed out.  For a (manufacturing) nation that imports almost all of it's resources, a weak Yen will bring about the endgame very quickly... ability to print more "free" Yen notwithstanding.  We will see how well Japan's exercise of it's monetary sovereignty plays out.. though I am sure Rodger and the other MMT'ers will explain to us that Japan just didn't do it "right".     

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  • Sun, Mar 18, 2012 - 6:25pm

    Davos

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    Jim H wrote:Maybe Rodger

    [quote=Jim H]Maybe Rodger can tell us how all of these Government issuers you reference got it wrong....
    [/quote]Jim, you can go inside that book at Amazon and scroll to page 207.  Sounds like Rodger did well turning compnaies around, but like his old boss used to tell him, we can also say to him: "Rodger, You're wrong."
    So now Rodger, please tell me if you are that 49% of the upper middle with your hand in the Free $hit's Army's cookie jar.
     
    [Moderator's note:  This post is a violation of the forum guidelines. Attacks of a personal nature are not allowed.  Appropriate corrective action with the user has been undertaken.]

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  • Sun, Mar 18, 2012 - 8:36pm

    Mark_BC

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    KugsCheese wrote: Please

    [quote=KugsCheese] 
    Please provide reference where found and context for the graph.  
    [/quote]
    Hey Kugs, I wrote a piece about it in my blog. I made it from taking this graph of federal receipts / spending and dividing by population. Now, I admit that I do not subscribe to Shadowstats (maybe I should) so I had to very carefully measure the numbers off the graph and enter them into Excel myself. I would actually really appreciate if someone would take the raw data from Shadowstats and redo the graph, because mine isn't perfect due to me eyeballing the line. But my eyeball measurements are probably pretty close.
    http://nowandfutures.com/inflation_long_term_log.html#spend
     

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  • Mon, Mar 19, 2012 - 12:51am

    RodgerMitchell

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    So again... how did Zimbabwe go wrong Rodger?

    So again... how did Zimbabwe go wrong Rodger?Robert Mugabe stole farm land from people who knew how to farm, and gave it to people who didn't.
    Next question.
    Rodger Malcolm Mitchell
     

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  • Mon, Mar 19, 2012 - 1:02am

    RodgerMitchell

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    The Yen is now weakening as the carry trade unwinds

    Simply cannot satisfy the debt hawks.  They complain when the balance of trade is negative (caused by strong money) and they complain when the balance of trade is positive (caused by weak money).  Which do you prefer, a positive balance of trade or a negative balance of trade?Japan, with almost zero natural resources, and just recently one of the more devastating natural (and man-made) disasters in recent history, is in no danger of not being able to pay its bills, and is one of the world's great economies.  It is Monetarily Sovereign.  Contrast that with France, Spain, Greece, Ireland and Portugal, which do have abundant natural resources and have not suffered the tsunami/meltdown, teeter on the edge of bankruptcy, and require repeated loans (which merely delay the invitable).  They are monetarily non-sovereign.
    Which nations will come to the so-called "endgame" soonest? And what will that "endgame" be? 
    Now, do a bit of research. Find out WHY the U.S. is Monterily Sovereign, and what would have happened if we didn't make the switch.
    Rodger Malcolm Mitchell

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  • Mon, Mar 19, 2012 - 1:13am

    RodgerMitchell

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    Rodger, please tell me if you are that 49% of the upper middle

    Yup. I hope you too will get there.But, I assume you wish to opt out of receiving Social Security and Medicare, right?  
    Rodger Malcolm Mitchell

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  • Mon, Mar 19, 2012 - 1:14am

    joemanc

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    RodgerMitchell wrote:<i>So

    [quote=RodgerMitchell]
    <i>So again... how did Zimbabwe go wrong Rodger? </i>
    Robert Mugabe stole farm land from people who knew how to farm, and gave it to people who didn't.
    Next question.
    Rodger Malcolm Mitchell
    [/quote]
    I think Davos is getting ready to use the M-word...

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  • Mon, Mar 19, 2012 - 1:16am

    #43
    joemanc

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    Tough Interview

    I really like Marc...but was it me or did Mark get an early start to St. Patty's Day?  Marc was off his game, it was very hard at times to listen to him. Unless Chris was talking to Marc at an odd hour of the night/morning in Asia?

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  • Mon, Mar 19, 2012 - 1:41am

    #44

    Jim H

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    Monetary Sovereignty...

    So Japan prints their fiat own money.. I get that.  But it is still debt money.. backed by a huge and growing pile of JGB's.  As the carry trade unwinds, and Japan's currency weakens, it will further stress their economy, lowering GDP even more (they are in recession now) and lowering tax revenues.  Everyone understands their negative demographics, and the fact that they are not the savers they used to be, meaning that there will be a waning internal demand for the bonds.  The endgame for Japan will be much like the endgame for every other monetarily sovereign nation... with the central bank monetizing 100% of the new debt on an ongoing basis.  Either that, or the big central banks will work with each other through swaps (much like US --> ECB now) to make it seem like there is outside demand for the bonds... just a shell game.  

    So the question really is.. what happens after that?  What happens when exogenous demand for bonds of the big economies dies and the dead bodies are kept alive by the printing press "machines" ?  Does the money die, or do we all simultaneously agree to a do over?  This time is not different.  Money will die... PM's will reassert themselves as money again.. and their "prices" will go sky high as the bad (fiat) money drives the real (PM) money out of circulation and into vaults around the world.  There will be nothing left for sale... those who did not lose faith in their currencies in advance, and think they still have savings, will be royally screwed.     

    Your ideas make no intuitive sense to me Rodger... in order for fiat currency to work, it's scarcity integrity must be carefully attended to.  Governments won't do any better at this than the current spate of central banks.  Scarcity integrity must be systematic (an interesting aspect of Bitcoin)... and I think the question of how our next monetary systems will work is of greatest interest.  

    Chris' ideas make much more sense as they relate to the here and now.  There is a certain amount of real wealth in the world... what Chris calls primary and secondary wealth... stuff that is dug from the ground, and stuff that is made from it.  The amount of money has now grown way out of proportion to the amount of real wealth... and the denouement is upon us.  The free lunch is what many of us have been eating for the last 30 years... it is not ahead of us.. it is behind us.   

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  • Mon, Mar 19, 2012 - 2:43am

    Davos

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    RodgerMitchell

    [quote=RodgerMitchell]Yup. 
    I hope you too will get there.But, I assume you wish to opt out of receiving Social Security and Medicare, right?  
    Rodger Malcolm Mitchell
    [/quote]

    "Yup."

    I'll be G*d dammed if I'm going to commit inter-generational-tyranny so I can chase some effing white ball around 18 holes.
    I'll live within my means.  
    I think I pegged you, the "net worther" of 1.3-1.9MM with a house mortgage of 500K, in the gated community, with the leased pretend-I'm-rich car [Moderator's note . . . .], playing golf at the club.  
    If your better off than that and sucking on the tit of social welfare you should really be ashamed of yourself.
    There---your grandkids>>>>>>>>>>>>>>>>>
    Tied to a debt ball paying for your golf pro.  And don't even tell me the usual line of [email protected] I hear, "Gee I paid into it."  
     
     

     Medicare is the mastodon in the kitchen. And it doesn’t matter whether you call it Obamacare or Elvis-Presley care or I-don’t-care care, it can’t possibly work. 
    ...
     
     And if a guy gets a heart operation, it could buy half your radio station and cost 150,000 bucks and he doesn't even get a bill. 
    Come on. Wake up, America. [7:51]
     

     
    But the problem is, America doesn't want to wake up.  Waking up equates to paying your own way.  Why do that when you can shackle your kid and their kids to a debt ball?
     Psychopathy is measured by the psychopathy ✓  checklist which breaks into four different aspects.
     ✓  Being a manipulative person or a liar. (includes lying to yourself so you can live the good life and sleep at night).
    ✓  Callous, kind of a lack of empathy towards others.
     ✓ Impulsivity, or more specifically a lack of impulse control. (includes not living within your means when you know you are hurting others to do so.)
    ✓  Antisocial behavior, some kind of breaking rules, whether it be social rules or legal rules.
    So, how many ✓  marks would you give yourself?????
     
     [Moderator's note:  This post is a violation of the forum guidelines. Personal attacks and name calling are not allowed.  Appropriate corrective action with the user has been undertaken.]
     
     

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  • Mon, Mar 19, 2012 - 3:02am

    #46

    RJE

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    Davos...

    I love Golf and you discribed my wardrobe to the T. My hair, not so much, it's long, near a small pony tail as I rebel against my youth as my body is aging me now. I am considered a senior at many courses, and golf are at reasonable prices. I love the time spent with 7 of my other brothers hitting that little white thing about. 5 sisters too.

    OK, that said, I have worked extremely hard during my lifetime, did my country proud during the Vietnam Conflict, played by the rules, and have a balanced retirement that has made me neither rich nor poor. Would I accept Social Security, Medicare, and whatever it was I paid into with my employer (I was self employed) ? Yes I would, and most likely I would use what I had too much of to pass along to those I love, more of what they have very little of. Honestly, I spend very little time on the haves and have nots. I just want it nice and easy personally. It's time now, for me anyways.

    BOB

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  • Mon, Mar 19, 2012 - 3:30am

    #47
    Davos

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    robert essian

    God.  You got it bad don't you?

    The Dark Triad is made up of the Machiavellian, the Narcissist and the Psychopath.  You should read up on this and do some introspection.

    In some instances, 2 out of 3 is bad.

    [Moderator's note:  This post is a violation of the forum guidelines. Personal attacks and name calling are not allowed.  Appropriate corrective action with the user has been undertaken.]

     

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  • Mon, Mar 19, 2012 - 4:01am

    #48
    RodgerMitchell

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    Deficit spending causes inflation

    Everyone knows federal deficit spending causes inflation, and we're right at the tipping point.

    O.K., so there has been zero relationship between federal deficit and inflation since the Unites States became Monetarily Sovereign in 1971 -- 41 years!. See: rodgermmitchell.wordpress.com/2010/04/06/more-thoughts-on-inflation/

    And gosh, there has been zero relationship between federal deficits and inflation since 1952 -- 60 years! See: research.stlouisfed.org/fredgraph.png 

    But surely, with the massive deficits we've had, and the big ones projected, those deficits will cause inflation in the near future. Everyone knows that.  Oops: See: www.clevelandfed.org/research/data/inflation_expectations/index.cfm

    Well, what will you believe, 60 years of data plus projections based on data -- or intuition?

    Yes, what?  

    Rodger Malcolm Mitchell

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  • Mon, Mar 19, 2012 - 4:04am

    Mark_BC

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    Davos wrote:If your better

    [quote=Davos]
    If your better off than that and sucking on the tit of social welfare you should really be ashamed of yourself.
    There---your grandkids>>>>>>>>>>>>>>>>>
    Tied to a debt ball paying for your golf pro.  And don't even tell me the usual line of [email protected] I hear, "Gee I paid into it."  
     

     Medicare is the mastodon in the kitchen. And it doesn’t matter whether you call it Obamacare or Elvis-Presley care or I-don’t-care care, it can’t possibly work. 
    ...
     
     And if a guy gets a heart operation, it could buy half your radio station and cost 150,000 bucks and he doesn't even get a bill. 
    Come on. Wake up, America. [7:51]
     

     
    But the problem is, America doesn't want to wake up.  Waking up equates to paying your own way.  Why do that when you can shackle your kid and their kids to a debt ball?
    [/quote]
    There's lots of money available for medicare. It's just that 0.00001% of the population owns most of it.
    "Living within one's means", in the current kleptocracy, merely makes more wealth available for the elites to steal.

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  • Mon, Mar 19, 2012 - 4:10am

    RodgerMitchell

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    Zimbabwe is Davos economic authority

     Yes, Zimbabwe is a great authority for you. I suggest you listen to everything Robert Mugabe's bank tells you.  And also believe him if he tells you he didn't steal farm land from farmers and give it to people who had no clue about farming, and that didn't cause the collapse of his agrarian economy. He's a great source of information. It's been fun. Not informative, but fun.  See you in a few years. Meanwhile, if you want to learn economics, try: moslereconomics.com/2012/03/16/inflation-expectations/
    Rodger Malcolm Mitchell
     

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  • Mon, Mar 19, 2012 - 8:47am

    Grover

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    Next questions

    [quote=RodgerMitchell]
    <i>So again... how did Zimbabwe go wrong Rodger? </i>
    Robert Mugabe stole farm land from people who knew how to farm, and gave it to people who didn't.
    Next question.
    Rodger Malcolm Mitchell
    [/quote]
    Rodger,

    I'm rather disappointed in your responses. There is an expectation on this site that extraordinary assertions need extraordinary support. I agree that Mugabe stole farm land, but was that his only crime against his people? Am I to assume that had he not stolen farm land, that everything would be okay? Do you really believe that to be the case? What about all the other examples that Davos cited?
    [quote=RodgerMitchell]
    Everyone knows federal deficit spending causes inflation, and we're right at the tipping point.
    O.K., so there has been zero relationship between federal deficit and inflation since the Unites States became Monetarily Sovereign in 1971 -- 41 years!. See: rodgermmitchell.wordpress.com/2010/04/06/more-thoughts-on-inflation/
    And gosh, there has been zero relationship between federal deficits and inflation since 1952 -- 60 years! See: research.stlouisfed.org/fredgraph.png 
    But surely, with the massive deficits we've had, and the big ones projected, those deficits will cause inflation in the near future. Everyone knows that.  Oops: See: www.clevelandfed.org/research/data/inflation_expectations/index.cfm
    Well, what will you believe, 60 years of data plus projections based on data -- or intuition?
    Yes, what?  
    Rodger Malcolm Mitchell
    [/quote]

    I read through some of your articles, trying to understand your point. I saw "monetary" and "sovereign" many times, but no real explanation of what exactly your theory entails. Would you be so kind as to post a link to a site that explains your theory? The Wikipedia site wasn't too helpful http://en.wikipedia.org/wiki/Monetary_sovereignty. I'm interested in how it works and particularly where it has worked in history. It would also be interesting to see where the regimes that Davos cited went wrong.
    As flawed as the Fed's CPI calculation is, at least they have data presented in many forms to see how the index has progressed over time. Your link shows year on year changes for federal government debt versus CPI. Since there isn't a correlation between these 2 graphed series, you assume that there isn't any correlation between government debt and inflation. Let's look at a longer time scale to see if any correlation becomes evident.
    This link just shows the cumulative effects of the inflation index over time: http://research.stlouisfed.org/fred2/series/CPIAUCSL. Note the change in slope that occurred a few years before Nixon closed the gold window in 1971. This link shows the cumulative federal government debt: http://research.stlouisfed.org/fred2/series/GFDEBTN. Sorry that I couldn't find a link at the fed site that contained both these graphs together. It would also be nice to see it on a semi-log scale so that small perturbations at the beginning of the rise become evident.
    From my understanding of your theory, the amount of debt that the government carries is of no concern. How will the debt get repaid (without rolling it over to more debt)? How do you avoid the "Zimbabwe Syndrome"? Which demographic groups benefit most and which get the least benefit from this arrangement? (I'm generally looking at how fair this system is for the poor, middle, and rich classes for each of the generations it impacts from inception until its ultimate demise in the future.)
    [quote=RodgerMitchell]
     Yes, Zimbabwe is a great authority for you. I suggest you listen to everything Robert Mugabe's bank tells you.  And also believe him if he tells you he didn't steal farm land from farmers and give it to people who had no clue about farming, and that didn't cause the collapse of his agrarian economy. He's a great source of information. 
    It's been fun. Not informative, but fun.  See you in a few years. Meanwhile, if you want to learn economics, try: moslereconomics.com/2012/03/16/inflation-expectations/
    Rodger Malcolm Mitchell[/quote] 

    You've generated quite a bit of heat, but not too much illumination with your posts. To be fair, some of the posts directed at you were less than respectful. Nonetheless, I'd like to continue the conversation on this thread. If your theory has merit, I'd like to know more about it. Right now, I'm not convinced that it is more than a grand deception.
    I hope you will treat me with as much respect as I give you.
    Grover

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  • Mon, Mar 19, 2012 - 1:00pm

    #52
    Davos

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    Baked

     1. Federal debt must be paid back by taxpayers. (But, because the federal government has the unlimited power to create the money to pay its bills, there is no need to ask taxpayers to do it.)

    2. Federal debt adds to the government’s interest paying burden. (Again, interest is no burden to a entity having the unlimited ability to create money.

    3. Federal debt uses up lending funds that otherwise would go to private needs. (But, federal spending adds money to the economy, making more, not less, funds available for private lending.)

     4. By increasing the money supply, federal deficits reduce the value of money, thereby causing inflation. Readers of this blog have seen the graph (below) which shows no relationship between federal deficits — even large federal deficits — and inflation. Note how the peaks and valleys of deficit growth do not match the peaks and valleys of inflation growth:

    Rodger: I went to your website.  I'd ask my late dog Copper for economic advice before believing any of the above drivel.  You should watch CM's Chapter 16.  CPI, where they back out food and gas from inflation.  You sound as moronic as Ben Bernanke saying "we don't have inflation."

    Good luck buddy, you are going to need it.

    Oh, and one more thing: Every country that tried this wound up in hyperinfaltion. (Again, interest is no burden to a entity having the unlimited ability to create money.

    real cost of living

    And FTW:  According to the government, who back out oil and food from "inflation" the dollar has lost 82% of its value since Nixon slammed the gold window.

    So there you go genius.  They create more money and YOU pay more.  Why?  Because your dollar is worth less than 2 dimes.  And I'm not talking about what you may or maynot have smoked when you wrote that trash.  And God, I hope you do get high and were high, because if not, I'm going to have to use the m-word.  

    This blows all that drivel you wrote ---- including your book --- out the door.  You should name your blog Monopoly Money & Why It's Valuable.  I hope you golf better then you "econ."

     

    Some people fail to understand that the law of supply and demand applies directly to the value of our money.

    When wages inflate it is harder to notice this.  Now, with globalization and wages that have been flat since the 1970s as we compete against workers makeing 2 bucks a day one would have to be an utter moron not to grasp that this is a serious problem.

    [Moderator's note:  This post is a violation of the forum guidelines. Personal attacks and name calling are not allowed.  Appropriate corrective action with the user has been undertaken.]

     

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  • Mon, Mar 19, 2012 - 2:14pm

    Jim H

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    Rodger and MS.

    The tipping point has no correlation to deficit spending..  it arrives when the debt servicing costs finally become such a drag, due to absolute size,  interest rate, or both, that they disable growth.  The truth is, we have always grown out of our problems in the recent past.  As you know, our present debt-based monetary system needs constant, exponential growth in order to be healthy.  Most of us here believe that this growth will be forced on us in the future.. but that it will be nominal (read inflationary) growth.. not the organic kind (which is now impeded by the debt servicing costs, runaway socialism, and peak cheap energy, among other things).  As well, the tipping point can be historically correlated to debt:GDP as per our friends Reinhard and Rogoff; http://www.amazon.com/This-Time-Different-Centuries-Financial/dp/0691152640/ref=sr_1_1?s=books&ie=UTF8&qid=1332166138&sr=1-1
    As I said before, I think this conversation is interesting in the context of possible future monetary systems... I would in fact like to see the FED ended, and the monetary creation mechanism back in truly "sovereign" hands.  The mechanisms that enforce scarcity integrity, be it ties to PM's, energy, or a basket, will be of utmost importance.  Other than this context, your ideas are, in my opinion, nothing but magical thinking.   

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  • Mon, Mar 19, 2012 - 3:21pm

    #54

    SingleSpeak

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    Darn it ....

     

    I've been trying to rationalize a way to collect Social Security and Medicare in the not too distant future, in the unlikely event that it still exists. Since being robbed by someone (government) doesn't justify stealing from someone else, I need some help here. 

    SS

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  • Mon, Mar 19, 2012 - 9:35pm

    #55

    Moderator Jason

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    Recent comments in this thread

    We were very impressed to read the polite and informative posts of several users on this thread.  They endeavored to present facts and data in the context of a civil conversation with a new user who had a differing viewpoint.  Here at CM.com we have intense pride at the fact that we are a cut above the crowd.  This type of civil, educational debate is the most productive way to increase knowledge and be persuasive to others who hold different opinions.
    On the other hand, we were disappointed to read some of the other comments on this thread - written by more than one user - which used prying personal attacks, insults, degrading commentary, and crude characterization against a person whose only crime was holding a contrary opinion.  Not only is this a completely ineffective means of persuading others, but fundamentally this is not what we are about.

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  • Mon, Mar 19, 2012 - 11:10pm

    Davos

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    Moderator Jason wrote: On

    [Hidden] 
    [quote=Moderator Jason]
    On the other hand, we were somewhat disappointed to read some of the other comments on this thread - written by more than one user - which used prying personal attacks, insults, degrading commentary, and crude characterization against a person whose only crime was holding a contrary opinion.  Not only is this a completely ineffective means of persuading others, but fundamentally this is not what we are about.
    [/quote]Is it a personal attack, an insult, and degrading to place our children in debt---before they are born---or before they can even vote?
    Is it a personal attack, an insult, and degrading to advocate that the system that has stolen from my grandparents, parents, ourselves and our children "just" and "good" system?

    Evil is bad sold as good, wrong sold as right, injustice sold as justice. Like the coat of a virus, a thin veil of right can disguise enormous wrong and confer an ability to infect others.” ~John G. Hartung

    Is it a personal attack, an insult, and degrading to sate, to the effect, that people on this blog don't know what they are talking about adn it isn't a good economic blog---but come over to my blog, I know what is right?
     

    The frequent combination of insults plus lack of data and informed comment, make this blog essentially a time-waster.  
    There are several good, informative economics sites, in which people not only understand economics, but discuss actual data.  In addition to my site at www.nofica.com

     
    Two quotes come to mind Einstein's and Hawking's:

    “The world is a dangerous place. Not because of the people who are evil; but because of the people who don't do anything about it.”~Einstein

    'The greatest enemy of knowledge is not ignorance, it is the illusion of knowledge.'~Stephen W. Hawking:

    While I sincerely admire the "high road" at CM, I have to really question if being "politically correct" is correct when it entails slapping an iron debt shackle and chain to an unborn baby?

    Not only is this a completely ineffective means of persuading others...

    I'd encourage you to consider reading "Steve Jobs"  Jobs kept it simple.  There were two sides of the ledger.  People were Gods or, as FSN edited my last article ****heads.
    He didn't tolerate $*** work.  He didn't sugar-coat $*** work.
    I really question how we got to where we got to.  Do you ever wonder how this happened?
    We work from January until mid August to pay taxes.  With circa 1970s wages because CEO's wanted cheap labor and now we compete against workers making 2 bucks a day.  Someone walks in our collective living room and takes a proverbial on the carpet by saying this is a good system, a just system, a system by which we're really not working 8.5 months of the year paying taxes and going into debt trying to get by on 3.5 months of 1970s wages and I'm hearing that we should be uber polite?
    Funny, I didn't call the guy a moron, I thought I was being polite.
     
     

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  • Mon, Mar 19, 2012 - 11:51pm

    #57
    giulist

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    I agree Jason ....

    ...almost as disappointing as the fact that no one from CM has come on here to address Rodger's points.

    I don't post bc I'm here to learn, but I keep coming back to this thread and am disappointed to see no substantive replies to his point-by-point attacks.

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  • Tue, Mar 20, 2012 - 12:35am

    Doug

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    giulist wrote:...almost as

    [quote=giulist]
    ...almost as disappointing as the fact that no one from CM has come on here to address Rodger's points.
    I don't post bc I'm here to learn, but I keep coming back to this thread and am disappointed to see no substantive replies to his point-by-point attacks.
    [/quote]
    Hmmm, actually I thought that Jim H and Grover made some very good points.  If you go to Rodger's blog there are a number of articles, and he linked some here, that explain his pov.   www.nofica.com
    The most of value I've been able to glean from the posts on his site is that fiat money is essential to his view of monetary policy.  That's what he means by "economic sovereignty".  As to why he thinks that's the ideal system, and why he isn't tickled pink now, since that is our monetary policy, I haven't quite figured out.  If I do, I'll let you know.
    Doug

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  • Tue, Mar 20, 2012 - 1:21am

    giulist

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    Thanks Doug

    I have read the guy's summary of monetary sovereignty - it seems silly that he suggests that people don't understand such a simple concept: We can "create" money to pay off debts without anyone else's permission, the Euros can't - therefore they can default and we can't(or shouldn't have to, in his mind).   His entire thesis seems to be based on some graphs that he claims show no correlation between deficit spending and inflation.  How these figures came about or their validity is not something I would know.Instead of seeing other graphs to show inflation through the years and instigate some sort of "graph-off", I'd like to understand why his data may or may not be correct and/or why some other data would be more reflective of our financial history.
    So, if the U.S. were to simply press a few computer keys and credit all of it's debtors with their balances, that would cause mass inflation in the U.S.?  Why, because they now have so much USD on hand that they would buy up American goods and/or investments, forcing a rise in prices?
    I apologize if this seems amateur - I just really want to understand both sides.
    Thanks

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  • Tue, Mar 20, 2012 - 1:19pm

    #60
    marcmayor

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    Allocated & numbered bars at Comex part of the MF liquidation

    Chris, 

    The claim that allocated & numbered bars at Comex were part of the MF liquidation, is this something you were told privately by a client or has it been in media stories?

    If it's been in the media, could you please post one or several links?

    Thanks in advance

    Marc

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  • Wed, Mar 21, 2012 - 1:41am

    #61

    nickbert

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    Getting back to the subject

    Getting back to the subject of the interview, my ears picked up on the bit where Marc says he has been seeing the growing wealth inequality everywhere.  I wish it were otherwise, but so far I have to agree with him when it comes to what I've seen in Mongolia.  Generally speaking, most people are a little more prosperous than they were 10 or 20 years ago, but there are some that have become incredibly wealthy compared to the norm, and the norm is still pretty poor.  It's hard to pin down any one cause.  Governmental corruption, lack of opportunities outside of the city, a society adjusting to a relatively new free market system, and sometimes simply exceptional cleverness & ability on the part of some entrepreneurs and businessmen..... I think all play a part to varying degrees.  And unfortunately, many of the wealthy think flaunting their wealth in an extravagant manner is a good thing.  One of several cultural differences I'm trying to adjust to.  I have no problem with people succeeding on their own merits, but the examples of people getting rich through corruption and growing levels of wealth inequality (and flaunting it) are definitely unhealthy from a societal point of view. 

    I don't have much personal experience about China, but one of my wife's extended family who works in Beijing says the gap between rich and poor is worse (or at least more visible) there than in Mongolia.  Also, the driver who took us to and from the airport in Beijing during our recent layover there queried us both times on prices of luxury cars in America.  Apparently, there is a huge demand for luxury cars in Beijing even despite import taxes that he says amount to roughly the full value of the cars themselves.  I can't imagine myself paying full price for a brand new BMW or Lexus in America, but the idea of paying twice that much seems truly crazy.  But the status symbol is just that important apparently. 

    - Nick

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  • Wed, Mar 21, 2012 - 2:29am

    RJE

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    Roger....

    I've been told by the moderator (I hate getting scolded) that my approach in #16 thread was rude, and that I should foster a more delicate response. So, if offended then my apology.Please understand however that I have seen many posters on many sites over the years who's testosterone levels move them to another site where they post to get all the bumble Bea's riled up a bit. It is my determination that this was your intention when I read your thread, and so I responded as I did (I expected the responses that followed, and was unfortunately subjected to them too). Obviously your intentions have worked as planned because you have received some responses that have been over the top (again, byproduct of your intentions). I frankly am not a fan of yours after researching your material. Nothing personal but economists by trade bore me. It isn't you per se just the group as a whole. You know the crowd, they are hungry, and expect a sandwich to appear, for a price of course.
    BOB

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  • Wed, Mar 21, 2012 - 3:46am

    RJE

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    Doug...

    I totally agree that Jim H. and Grover took the time to patiently respond to Mr. Mitchell. I just went short in my posting (#16) because I spent a quick research on Mr. Mitchell, and didn't like the read or his communication skills. Plus I'm on meds after surgery and am apt to be sloppy with my commentary.Davos, you haven't a clue about me my brother, and if hitting a white ball around the course makes me something out of a frankenstein movie then I suggest anger management classes for you. I suspect that you worry about things that you couldn't possibly understand unless you had intimate knowledge. For the record, we have never met, have spent zero time together. Many millions of low lifes such as myself do golf you know. On the cheap too. What amazes me now as I look back is you didn't scream and yell at Erik T. because he spent $57 bucks on a pot pie, and $31 bucks on a salad (you're his hero you know), plus had to leave a 20% tip, another $16 bucks and change. I could have played 4 rounds w/beer for that kind of coin. Just priorities my man, that's all. Some like to eat and some like to golf... Go Tigers
    Bob

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  • Wed, Mar 21, 2012 - 5:22pm

    Dogs_In_A_Pile

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    robert essian

    [quote=robert essian]Davos....
    [/quote]
    Like a steam locomotive, rollin' down the track,
    He's gone, he's gone
    And nothin's gonna bring him back.

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  • Thu, Mar 22, 2012 - 6:24am

    Damnthematrix

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    Really....?

    [quote=Dogs_In_A_Pile][quote=robert essian]
    Davos....
    [/quote]
    Like a steam locomotive, rollin' down the track,
    He's gone, he's gone
    And nothin's gonna bring him back.
    [/quote]
    Is this sarcasm Dogs......  or has he really left us again?
    Shame if he has, I was just enjoying outing morons again...
    Mike

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  • Thu, Mar 22, 2012 - 6:40am

    Gado

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    robert essian wrote:On the

    [quote=robert essian]On the cheap too. What amazes me now as I look back is you didn't scream and yell at Erik T. because he spent $57 bucks on a pot pie, and $31 bucks on a salad (you're his hero you know), plus had to leave a 20% tip, Bob
    [/quote]
    A 20% tip in Australia What a Galah.

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