Comments on: Deflation Now, Inflation Later? http://baddeacon.com/journal/2009/01/deflation-now-inflation-later/ Notes and Errata from a *real* Internet Entrepreneur Fri, 23 Dec 2011 05:21:53 +0000 hourly 1 http://wordpress.org/?v=3.0.5 By: Dave Doolin http://baddeacon.com/journal/2009/01/deflation-now-inflation-later/comment-page-1/#comment-7 Dave Doolin Tue, 27 Jan 2009 06:17:44 +0000 http://seanneprud.com/wordpress/?p=26#comment-7 Credit isn't being destroyed, debt is being destroyed through the magic of deleveraging. Actually, credit is being destroyed as well, but that's not the same thing as the reduction in the money supply occurring as debt is destroyed. I do not believe there is a relevant measure or index for what is happening right now, which is why the Fed is mystified that the M1 is having no effect on the economy. What people don't get is what we could call the "banality of evil." Hitler, the middle class burgher with a chip on his shoulder. Osama bin Laden, the same, laughing and smoking around the typical middle class dinner table. How utterly mundane. This relates to the current situation: our financial "Masters of the Universe" aren't really all that smart, and they aren't all that wise. They think they are, and want us to think they are, but the results of their actions demonstrates otherwise. Some very foolish people got their hands on the reins of power, and now the world is going to pay. What is happening right now is not what happened in '29-32. Only the symptom of the credit bubble is the same. The underlying economy is different. Bernanke's folly is applying his academic theory of the Great Depression to the current situation. He would likely be better served using the 1873 depression as a model, or perhaps (*shudder*) the 1720 South Seas debacle. It took England decades to recover from that one, and they weren't in the natural resource bind that we're in today. But they are Keynesians one and all. Print money, kick the can down the road, get voted in for that next term. So, yeah, once the debt is finally cleared, watch interest rates get into the double digit range again, as the Fed attempts to cool off the coming inflation. No way of knowing when it will get here. An indicator is gold price, but I don't know if it's leading or trailing. Gold of course being absolutely "worthless" except that they aren't giving any of it away. My bet is another round of debt clearance as the last of the hedge funds give it up, more banks go under. My buy order is in for $750... fundamentals point to gold ~650... so if it starts to zoom up now, the feds program is working. Credit isn’t being destroyed, debt is being destroyed through the magic of deleveraging.

Actually, credit is being destroyed as well, but that’s not the same thing as the reduction in the money supply occurring as debt is destroyed. I do not believe there is a relevant measure or index for what is happening right now, which is why the Fed is mystified that the M1 is having no effect on the economy.

What people don’t get is what we could call the “banality of evil.” Hitler, the middle class burgher with a chip on his shoulder. Osama bin Laden, the same, laughing and smoking around the typical middle class dinner table. How utterly mundane.

This relates to the current situation: our financial “Masters of the Universe” aren’t really all that smart, and they aren’t all that wise. They think they are, and want us to think they are, but the results of their actions demonstrates otherwise. Some very foolish people got their hands on the reins of power, and now the world is going to pay.

What is happening right now is not what happened in ’29-32. Only the symptom of the credit bubble is the same. The underlying economy is different. Bernanke’s folly is applying his academic theory of the Great Depression to the current situation. He would likely be better served using the 1873 depression as a model, or perhaps (*shudder*) the 1720 South Seas debacle. It took England decades to recover from that one, and they weren’t in the natural resource bind that we’re in today.

But they are Keynesians one and all. Print money, kick the can down the road, get voted in for that next term.

So, yeah, once the debt is finally cleared, watch interest rates get into the double digit range again, as the Fed attempts to cool off the coming inflation. No way of knowing when it will get here. An indicator is gold price, but I don’t know if it’s leading or trailing. Gold of course being absolutely “worthless” except that they aren’t giving any of it away. My bet is another round of debt clearance as the last of the hedge funds give it up, more banks go under. My buy order is in for $750… fundamentals point to gold ~650… so if it starts to zoom up now, the feds program is working.

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