Economic Crisis Avoidance Deus ex Machina - Part I: Active Asset Price Inflation - Eric Janszen

[jk]

Re: EJ’s Secret Message

I think we're looking ultimately at the usd no longer being THE reserve currency, but A reserve currency, along with some other[s]. the sdr? maybe. or another neutral asset, gold but not at a fixed value, i.e. not a gold STANDARD. instead currencies can float against gold, but the u.s. will no longer have its exorbitant privilege.

my current notion of how things unfold:

i think there's a 2 step process.

step 1 - global recession, rates down [=>ust up], usd up, equities down.

step 2 - fed prints, NOMINAL rates up but real rates neg, usd down, high quality equities UP, gold up sharply

timing is hard but i think we're still in early step 1

[thriftyandboringinohio]

Re: EJ’s Secret Message

I think we're looking ultimately at the usd no longer being THE reserve currency, but A reserve currency, along with some other[s]. the sdr? maybe. or another neutral asset, gold but not at a fixed value, i.e. not a gold STANDARD. instead currencies can float against gold, but the u.s. will no longer have its exorbitant privilege.

my current notion of how things unfold:

i think there's a 2 step process.

step 1 - global recession, rates down [=>ust up], usd up, equities down.

step 2 - fed prints, NOMINAL rates up but real rates neg, usd down, high quality equities UP, gold up sharply

timing is hard but i think we're still in early step 1

That's a pretty reasonable and plausible scenario jk.
The US will likely be the last single nation to enjoy the exorbitant privilege of issuing the world's reserve currency. Other nations have long resented that privilege and will end it sooner or later.
If we are smart we will leverage our other institutional advantages and relationships to minimize any damage from losing the status of global reserve currency.
The last thing we want is all those dollars held abroad to become suddenly despised and flood back all at once.

[vt]

Re: EJ’s Secret Message

This clearly shows where the consumer is being taken advantage of:

http://www.aei.org/wp-content/upload...IChart2018.png


The items with the greatest price increases are those with the most government involvement.

[thriftyandboringinohio]

Re: EJ’s Secret Message

This clearly shows where the consumer is being taken advantage of:

http://www.aei.org/wp-content/upload...IChart2018.png

Thanks vt. EJ published that very same chart years ago in a piece explaining the difference between deflation and disinflation, as the words are used around here.

Back then economic analysts were having fierce arguments about whether or not the US was experiencing deflation. EJ and Mish Shedlock were engaged in a heated public debate on the topic, with Shedlock claiming deflation and EJ claiming disinflation. The huge extra manufacturing capacity in China was just coming online strongly at that time, so all importable manufactured goods were dropping in price. It was an easy mistake to think deflation was causing that price drop across so many goods.

But your chart shows goods that can't be imported from China, like person-to-person services, fresh food, and english textbooks, were still rising in price.
The conclusion is that the true monetary phenomenon of deflation was not really occurring. If the US dollar was actually in short supply and therefore rising in value, then all goods and services would be dropping in price, not just non-perishables from Asia.

The US consumer is not being "taken advantage of". We are seeing cheap goods flooding in from newer plants using cheap labor creating overcapacity.
We are paying market prices for child care and hospital services, but getting crazy low prices on flat screen TVs and clothing from new manufacturing capacity that is just not profitable.

Metalman would be able to dig up a link to that old posting in a blink, but I'm not good enough to find it.
.
.
.
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[seobook]

Re: EJ’s Secret Message

The US consumer is not being "taken advantage of". We are seeing cheap goods flooding in from newer plants using cheap labor creating overcapacity.
We are paying market prices for child care and hospital services, but getting crazy low prices on flat screen TVs and clothing from new manufacturing capacity that is just not profitable.
.

Perhaps true on the later part, but absolutely not true on healthcare.

Healthcare is so full off cost shifting, local monopolistic abuse, scams (you can keep your insurance - lie, your insurer cant drop you for a pre-existing condition - another lie), etc. that you can't even get prices in advance for many procedures from most providers.

Very hard to claim a price is market-based if it is both paid indirectly & almost impossible to see in advance.

Price transparency would drive competition & lower the rate of inflation in that category.

But then healthcare data entry jobs and shuffling paperwork between insurers and healthcare providers wouldn't be seen as a vital job engine
https://www.nytimes.com/2017/05/06/b...ys-engine.html

The New York Times "accidentally" forgot to link to Frédéric Bastiat in their job engine story.
http://bastiat.org/en/twisatwins.html

There is no market-based reason why technology improvements would lower prices in almost all categories while consistently raising the price in one particular category even for areas where there isn't heavy investment requiring higher prices to fund.

Healthcare costs are not increasing so dramatically due to
https://en.wikipedia.org/wiki/Baumol%27s_cost_disease
but due primarily to scams.

Improvements in software + hardware in computer systems should allow a single healthcare administrator or medical coding & billing systems employee far more efficient if the market was aiming at competing based on efficiency, but since it is not really a legitimate market that isn't a priority.
https://investingdoc.com/the-growth-...n-health-care/

It is also worth noting the health insurance companies are consistently off in the same direction on their Medicare part D bids.
https://www.wsj.com/articles/the-9-b...re-11546617082

If those big insurers were aiming to submit accurate bids, the probability that they would have overestimated costs so frequently and by such a large amount is less than one in one million, according to a statistical analysis done for the Journal by researchers at Memorial Sloan Kettering Cancer Center, who study pharmaceutical pricing and reimbursement.

If the bidder had the error taken directly out of their own salary I bet that error would be fixed immediately & permanently, but there's no real market feedback in non-markets.

[Chris Coles]

Re: EJ’s Secret Message

The New York Times "accidentally" forgot to link to Frédéric Bastiat in their job engine story.
http://bastiat.org/en/twisatwins.html

Thank you for reminding me that in my library I have an excellent first edition of CHATEAUBRIAND by Andre Maurois translated by Vera Fraser.

[thriftyandboringinohio]

Re: EJ’s Secret Message

Perhaps true on the later part, but absolutely not true on healthcare.

Healthcare is so full off cost shifting, local monopolistic abuse, scams (you can keep your insurance - lie, your insurer cant drop you for a pre-existing condition - another lie), etc. that you can't even get prices in advance for many procedures from most providers.

Very hard to claim a price is market-based if it is both paid indirectly & almost impossible to see in advance...

You'll get no arguments from me about that.

[jk]

Re: EJ’s Secret Message

you can't even get prices in advance for many procedures from most providers.

Very hard to claim a price is market-based if it is both paid indirectly & almost impossible to see in advance.

Price transparency would drive competition & lower the rate of inflation in that category.

.

the insurance companies/hmos negotiate their prices when contracting with providers. so they know the prices they've agreed to. otoh it's not clear that they're very interested in really minimizing those prices. their own pricing models are close to cost plus, like some defense contractors. so the lowest prices are not in their interest.

[dcarrigg]

Re: EJ’s Secret Message

If anyone tells you it's too complicated to explain, it's a scam.

[Lord_Keynes]

Re: EJ’s Secret Message

Welcome LK, I see you are new around here.
You might do well to plow through some old threads about gold, and read EJ' s early articles as far back as 1999.

Most of the folk around here have a deep and subtle understanding of the political nature of money, the nature of gold and fiat currencies, and the histories of the Bancor and SDR.
Threads around here were spirited and lively about gold and silver a few years ago, and some of us bought physical below $300 an ounce.

Gold has been money for more than 1,000 years, and central banks around the world continue to accumulate it.
I'll be keeping mine.

And I know basement dwellers who still horde comic books.

At the end of the day, gold is not legal tender. And if history is any guide, in the unlikely event gold hoarding negatively impacts the economy, possession of it will simply be banned as it was under Roosevelt as part of the New Deal.

If you have a "deep and subtle understanding of the political nature of money" that means you also have a deep and subtle understanding of the political nature of banking. That is, you should know that banks are not intermediaries of loanable funds.

https://www.bankofengland.co.uk/work...y-and-evidence

Banks create money from nothing with a future interest obligation attached, with the debt adjudicated and enforced in civil court.

Putting aside international flows of funds, even domestically - how exactly do you propose dealing with the exponential increase in demand for money to service existing debts when your monetary system is based on some garbage you dig up from the ground? I would be very interested in your answer.

[Lord_Keynes]

Re: EJ’s Secret Message

This clearly shows where the consumer is being taken advantage of:

http://www.aei.org/wp-content/upload...IChart2018.png


The items with the greatest price increases are those with the most government involvement.

Umm, the exact opposite is true. Everything that has declined in price is produced in foreign countries with slave labor purchased on the cheap because of an overvalued dollar imposed on the world as a form of imperialism.

Since the Clinton surplus years, which began at the beginning of that very misleading graph, interest free money has consistently lagged the exponential increase in demand for money to pay existing debts. For 3 years, Clinton and the Republican Congress sucked billions of dollars out of the economy. The only choice, in aggregate, was for borrowers to take out more loans to service existing debts. Hence, the housing bubble and the college debt bubble. The ruling class will not allow for the government to create interest free money in sufficient quantities to provide debt relief to the masses, for obvious reasons.

Anyone who believes anything from the American Enterprise Institute is misguided, at best. Worse, those who believe prices should remain stable over decades simply do not understand how money functions n a modern economy.

[Lord_Keynes]

Re: EJ’s Secret Message

I think we're looking ultimately at the usd no longer being THE reserve currency, but A reserve currency, along with some other[s]. the sdr? maybe. or another neutral asset, gold but not at a fixed value, i.e. not a gold STANDARD. instead currencies can float against gold, but the u.s. will no longer have its exorbitant privilege.

my current notion of how things unfold:

i think there's a 2 step process.

step 1 - global recession, rates down [=>ust up], usd up, equities down.

step 2 - fed prints, NOMINAL rates up but real rates neg, usd down, high quality equities UP, gold up sharply

timing is hard but i think we're still in early step 1

Roosevelt bans gold possession. Nixon bans convertibility to gold. Forex trading is banned shortly thereafter.

Why would you believe gold would be a safe speculation when the government has always targeted it, and the only reason it exists in your mind today is because of the British Empire? Did you know the American Revolution was almost exclusively about the British demand for taxes to be paid in gold, which the colonies did not have? Believing in gold in the modern age is just silliness.

The future is an international reserve currency unit that balances the political needs and realities of the world's nations. It will not be a neutral asset, but one that will be highly technical and will prevent competitive currency devaluation and imperialist exploitation.

We will have neither fixed nor floating exchange rates, but managed exchange rates.

[jk]

Re: EJ’s Secret Message

Roosevelt bans gold possession. Nixon bans convertibility to gold. Forex trading is banned shortly thereafter.

Why would you believe gold would be a safe speculation when the government has always targeted it, and the only reason it exists in your mind today is because of the British Empire? .

1. foreign cb's ceased increasing their usd treasury holdings in 2013. they have been buying gold in quantity. russia is the most extreme example, basically rid of all usd instruments and using the proceeds to buy gold. but also kazakhstan,hungary, china and a bunch of others. india sidestepped the last round of sanctions on iran by paying in gold via a turkish cutout. european gov'ts have been asking that the gold held in their name in nyc be shipped to them for their own domestic storage. why do you suppose all these cb's persist in buying and reclaiming the barbaric relic?

2. gordon brown established the bottom for gold by selling the uk's holdings. why does the us persist in holding gold?

3. in 2017 the comex moved 50 tons of physical gold. the shanghai exchange moved 50tons PER WEEK. please explain.

4. the uk looks to have a decent balance of payments in recent months. turns out their exports include a lot of physical gold, which is exported to switzerland and then on to asia. the uk has no gold mines. please explain.

[Lord_Keynes]

Re: EJ’s Secret Message

1. foreign cb's ceased increasing their usd treasury holdings in 2013. they have been buying gold in quantity. russia is the most extreme example, basically rid of all usd instruments and using the proceeds to buy gold. but also kazakhstan,hungary, china and a bunch of others. india sidestepped the last round of sanctions on iran by paying in gold via a turkish cutout. european gov'ts have been asking that the gold held in their name in nyc be shipped to them for their own domestic storage. why do you suppose all these cb's persist in buying and reclaiming the barbaric relic?

2. gordon brown established the bottom for gold by selling the uk's holdings. why does the us persist in holding gold?

3. in 2017 the comex moved 50 tons of physical gold. the shanghai exchange moved 50tons PER WEEK. please explain.

4. the uk looks to have a decent balance of payments in recent months. turns out their exports include a lot of physical gold, which is exported to switzerland and then on to asia. the uk has no gold mines. please explain.

You seem to be misinformed as to the purpose of central banks. Of course the holdings of USD have held steady and declined - as I said, we are transitioning to a Bancor system. It is insane to think that Central Banks are literally going to return to the original Bretton Woods System - because it didn't work for all the reasons Triffin predicted.Why would you possibly believe today, things are going to be any different than it was every other time a gold standard has been tried?

You won't find any serious news stories about China or Russia advocating a return to a gold standard. But you will find a number of articles like this one.

https://www.reuters.com/article/uk-c...-idUKKCN12Q0WJ

Your points are goldbug conspiracy theories, and have no relevance to exchange rates today or in the future. And they have no relevance to a speculator, except perhaps in the short term. And the proof of this is that you have no real end-game here with these purported facts. The only conclusion one can have is you want to return to a British Empire/Bretton Woods Gold Standard. But you do not explain to us how or why things will be different this time.

And that means you honestly don't know. You're repeating this nonsense because you are a gold speculator, and you think this means you can profit.

[jk]

Re: EJ’s Secret Message

You seem to be misinformed as to the purpose of central banks. Of course the holdings of USD have held steady and declined - as I said, we are transitioning to a Bancor system. It is insane to think that Central Banks are literally going to return to the original Bretton Woods System - because it didn't work for all the reasons Triffin predicted.Why would you possibly believe today, things are going to be any different than it was every other time a gold standard has been tried?

You won't find any serious news stories about China or Russia advocating a return to a gold standard. But you will find a number of articles like this one.

https://www.reuters.com/article/uk-c...-idUKKCN12Q0WJ

Your points are goldbug conspiracy theories, and have no relevance to exchange rates today or in the future. And they have no relevance to a speculator, except perhaps in the short term. And the proof of this is that you have no real end-game here with these purported facts. The only conclusion one can have is you want to return to a British Empire/Bretton Woods Gold Standard. But you do not explain to us how or why things will be different this time.

And that means you honestly don't know. You're repeating this nonsense because you are a gold speculator, and you think this means you can profit.

you obviously did not read my earlier post. i specifically said i did not think a gold standard, i.e. fixed values for currencies vs gold, could or would be created. instead i said the u.s.d. would lose the u.s.'s exorbitant privilege by no longer being THE reserve asset. i think it will continue to be A reserve asset. and i also think there will be a neutral reserve asset, perhaps the sdr, perhaps the sdr with a commodity or gold component, perhaps just gold but at a floating price. a floating neutral asset is not a STANDARD.

btw, you did not answer any of the questions i posed for you.

because you have not answered my questions, you are losing the respect i accord to all members here until they prove otherwise. please answer my questions instead of reiterating your ideology.

btw i have been investing over 40 years. i sidestepped the crashes of '87 and that of '00 and '07. i have traded commodities, currencies, indices, stocks, bonds and options. i didn't buy substantial gold position until about 2003 or 4, when i bought at $380/oz, so i have not always thought it a worthy asset. i have done fairly well over the years. so i'll add another question:

what is your experience in the way of investing, and how are you doing with it?

btw: ever hear of ray dalio?World's Largest Hedge Fund Manager Sees Dollar Losing Reserve Currency Status