Worthless Money, Worthless Economy

[LargoWinch]

Mega's best friend: *Peter*Schiff* is even quoted in this article...gotta be worth something no?

Got PMs? Energy? Maybe 5% of your total assets (not 60...huh Jim) is good for ya...



Worthless Money, Worthless Economy

---

"The worst part is that this is also true: worthless money, worthless economy. I wish I could find a laugh in there, but I can't. Plenty to weep about, though! And plenty of time to repent at leisure, too!"

---

by The Mogambo Guru
There comes that "Kodak moment" (elsewhere referred to as that "Wile E. Coyote moment" when he has run off the cliff and is surprised to see himself momentarily suspended in mid-air) when burgeoning governments and the dysfunctional economies that grow up around them have grown and evolved into their final, grotesque, bloated maximum by constantly expanding their spending via debt and taxes to the maximum, and then one day they suddenly cannot do that silly crap anymore.

I know that the audience is dying to ask, "Why not, oh Wonderful Mogambo Master (WMM), when it is you who counsels that with a fiat currency, it will always be possible to finance infinite amounts of spending?"

I look at them with pity, as the answer is simplicity itself; they literally run out of money because money is being lost so fast! Unfortunately, I can't say anything, as my guts are churning so badly at the prospect of universal bankruptcy that it is all I can do NOT to puke my guts out in fear, which I prevent only with Heroic Mogambo Control (HMC) so that I will not get a lot of angry people demanding their money back, which they paid for this stupid seminar, as I already lost most of it in a crap game with the kitchen staff before we even got started. Oops! Damn!

So I say nothing, but smile hopefully enigmatically and point them to Bloomberg.com, where they can read for themselves the horrible news that "Wall Street's mortgage losses have grown so large that some firms may pay little or no taxes for years, widening New York City and state deficits and challenging their ability to provide services, Mayor Michael Bloomberg said." Gaaaaahhhh!

The one industry that makes most of the money, the financial services industry, will pay no taxes! And even worse, "Some companies are seeking refunds from the city on taxes they prepaid, saying losses have cut their tax liability to zero."

So not only are they not going to pay any taxes, but they want the city to send them some money back! They can do this because they already paid too much, as, "The banks pay tax on 110% of earnings in advance as a 'safe harbor,' protecting against penalties for underpayment."

The mayor dryly admitted, "I think it will be a number of years before Wall Street starts paying taxes again" because "They will carry forward all of those losses" and not pay any tax for a long, long time.

And, as if you need something else to worry about, ditto federal tax revenues going down because massive losses will result in zero tax due. No wonder Obama is proposing all these higher tax rates!

And if you think it won't happen, then I laugh in scorn at your misplaced optimism, because it is already happening! The federal budget deficit tripled in July to a record $102 billion, taking government spending up by a massive 27% from this time last year, which is bad enough, but then everything is made Much, Much Worse (MMW) by the stunning news that revenue was down 6%! Gaahhhh!

After $150 billion borrowed, put into stimulus checks, sent and spent, tax revenue was still down 6%? Staggering! The economy is so bloated, indebted and dysfunctional that $150 billion of additional raw spending produces 6% less taxable income? Hahaha! We are so freaking doomed!
And it is not just here, either, as Mega's pet monkey of Euro Pacific Capital reports that we Americans are "defaulting on hundreds of billions of dollars of existing loans underwritten by lenders around the world."

This may have something to do with the Wilshire Trust Universe Comparison Service reporting that, according to Bloomberg.com, "The return for all institutional investment portfolios turned negative for the 12 months ended June 30", and "the median contraction for master trusts, which includes pension plans, foundations and endowments, was 4.49% during the year."

And you still think that you can fund a retirement by investing all your money into the stock market? Hahaha!

And this does not even take into account, according to Agora Financial's 5-Minute Forecast, that the Federal Reserve opening the bank to any and all borrowers resulted in the eye-popping news that the "Fed's TAFs and TSLFs have now dedicated over $1.6 trillion to quelling the credit crunch"! $1.6 trillion dollars! My God! We are freaking doomed!

Perhaps Junior Mogambo Ranger (JMR) Len M. sums it up best when he says, "Honest government, honest money. Dishonest government, dishonest money. Worthless government, worthless money."

The worst part is that this is also true: worthless money, worthless economy. I wish I could find a laugh in there, but I can't. Plenty to weep about, though! And plenty of time to repent at leisure, too!

Unless you have gold, silver and oil, of course, but don't get me started on their virtues or how obnoxious I will be when I am rich, rich, rich from owning them and how far, far, far away the kids will be in some boarding school, and how much fun, fun, fun life can be again, as I never tire of thinking about it and I have far, far, far too much work to do.

Thanks.

Link to article: http://www.dailyreckoning.com/Writer.../MG082508.html

[Guest]

Re: Worthless Money, Worthless Economy

May be of some peripheral interest to this topic:
________________________________________


Dollar Bulls : Meet Prof. Robert Triffin - Jeff Poppenhagen

I believe that it is time for us all to become (re)acquainted with Robert Triffin. Triffin was an economics professor at Yale University in 1960, when he exposed a gaping flaw in the Bretton-Woods monetary system:

If the United States stopped running balance of payments deficits, the international community would lose its largest source of additions to reserves. The resulting shortage of liquidity could pull the world economy into a contractionary spiral, leading to instability. If the U.S. deficits continued, a steady stream of dollars would continue to fuel world economic growth. However, excessive U.S. deficits (dollar glut) would erode confidence in the value of the U.S. dollar, it would no longer be accepted as the world's reserve currency. The fixed exchange rate system could break down, leading to instability.

- Robert Triffin,1960

Triffin was referring to the dilemma (later referred to as the Triffin Dilemma) that the U.S., as the issuer of the world's reserve currency, was always going to be required to run a current account deficit to ward off a global contractionary spiral, but constantly running such a deficit would lead to an undermining of the dollar itself, also setting off global economic instability. In short, there was no way for the Bretton-Woods system to find any way to sustain itself in the long-run.

As most know, Bretton-Woods was a fixed rate monetary system where countries held dollars as the reserve currency and the U.S. promised to exchange those foreign held dollars at the fixed rate of one ounce of gold per $35. As the U.S. ran current account deficits, dollars began to pile up in the vaults of foreign central banks. By 1960, when Triffin recognized the dilemma, foreign central banks held nearly $19 billion in short-term dollar based assets. The U.S. gold stock at the time, valued at $35 per ounce, was worth just under $18 billion. Speculators quickly recognized the problem and gold began trading at a premium to this $35 per ounce price. By 1971, the charade of $35 gold could no longer be maintained by the U.S., and Bretton-Woods died, replaced by the fiat dollar standard. Currencies would be allowed to float in value, while the fiat U.S. dollar would be adopted as the world's reserve currency.

This adoption of the fiat U.S. dollar as the reserve currency was a grave error. The one lesson that should have been learned from the failure of Bretton-Woods is that any monetary system that adopts the currency of a single country (or region) as the reserve currency is doomed to fail. Adoption as the reserve means that demand to hold that currency is very high outside the country or region of issue. This strong demand pushes the value of that currency higher relative to the currency of other countries, making businesses in the issuing country uncompetitive on the global stage. Unless the reserve issuing country is willing to live with the attendant economic weakness and unemployment engendered by the high valuation of its currency (and the U.S. never is), the issuing country will be tempted to meet the high demand for its currency by issuing large amounts of debt denominated in its currency for goods until demand is satisfied, the value of the currency falls and economic weakness is arrested. This will lead to trade and current account deficits.

Differences between the Fiat Dollar Standard and Bretton-Woods

What made Bretton-Woods unique was that dollars were worth more to foreigners than they were to Americans. Foreigners could exchange their dollars for goods and services that were denominated in dollars or they could acquire gold from the Federal Reserve at $35 per ounce. The latter option was not open to Americans. The option to acquire gold at $35 per ounce made it simple calculate whether the dollar was over or undervalued in the market since it was easy to see how many dollar based assets foreigners were carrying compared with the value of the gold stock held by the U.S.

Today, no such simple calculation can help us with the dollar's value in the marketplace. Instead, we first need to understand what all of these dollar based assets really are. Certainly the majority of dollar based asset holders retain their paper because they expect to be able to exchange it for as many, or more, goods and services in the future as they could exchange it for today. The question then becomes, is this expectation a valid one?

Without question, holding dollar based assets is a "sucker's bet." If we look at the Fed's Z.1 report, which is a summation of debt outstanding and its rate of growth, we can see that non-financial debt in the U.S. has been growing at more than $2 trillion per year since 2005, and for 2007 and through the first quarter of 2008 that figure has been closer to $2.3 trillion per year. All of this debt represents a claim on output in the U.S. If we were to balance that figure against normalized output growth (real GDP growth) plus savings we might come up with about $600-700 billion dollars (we include savings here because saved output that is lent out is not inflationary as the debt created by this lending process is backed up by the saved output itself). That is, claims against output and savings are growing more than 3X faster than output and savings itself. Why investors are willing to accept low coupon U.S. dollar based debt in exchange for their own output and savings is beyond me, but this is clearly a situation that cannot go on forever. Dollar based debt issuance of this magnitude constitutes a glut and will erode confidence in the dollar per Triffin.

Unfortunately, slowing down the rate of credit growth isn't much of an option either. Clearly, new credit growth of more than the recent run rate of credit growth is required in order to keep the system solvent. Debts of the magnitude of those racked up in the U.S. over the years clearly cannot be serviced out of GDP and require fresh credit growth to service the old debt (in short, a Ponzi scheme). Slowing credit growth in the U.S. now will lead to a massive recession and the wiping out of most of the equity in the global financial system. For instance, if credit growth were to slow to the rate of GDP growth plus savings so that those accepting dollars could feel confident in not losing purchasing power, we would see credit growth collapse some $1.6 trillion per year. At an interest rate of 6.5%, this would require wiping out about $25 trillion in net worth somewhere. Given that the banking system itself has only slightly more than $1 trillion of equity I think that we could safely assume that there would be precious few survivors. Again, Triffin's insight into our present dilemma was rather prescient.

Conclusion

Just as Triffin correctly identified the end of the Bretton-Woods system long before its collapse, I think that it is now fairly obvious that the dollar is going to fail as the reserve currency of the world. Any reserve currency issued by a single country or region is doomed to fail. Protecting the currency requires economic pain of a magnitude that is not tolerable in the issuing country while meeting demand for the reserve currency undermines the currency itself as issuance will dwarf the issuers output of goods and services. Today, we are clearly staring at the dilemma that Triffin warned about nearly fifty years ago while many remain "bullish" on the dollar. This is folly.

[metalman]

Re: Worthless Money, Worthless Economy

May be of some peripheral interest to this topic:
________________________________________


Dollar Bulls : Meet Prof. Robert Triffin - Jeff Poppenhagen

I believe that it is time for us all to become (re)acquainted with Robert Triffin. Triffin was an economics professor at Yale University in 1960, when he exposed a gaping flaw in the Bretton-Woods monetary system:

If the United States stopped running balance of payments deficits, the international community would lose its largest source of additions to reserves. The resulting shortage of liquidity could pull the world economy into a contractionary spiral, leading to instability. If the U.S. deficits continued, a steady stream of dollars would continue to fuel world economic growth. However, excessive U.S. deficits (dollar glut) would erode confidence in the value of the U.S. dollar, it would no longer be accepted as the world's reserve currency. The fixed exchange rate system could break down, leading to instability.

- Robert Triffin,1960

Triffin was referring to the dilemma (later referred to as the Triffin Dilemma) that the U.S., as the issuer of the world's reserve currency, was always going to be required to run a current account deficit to ward off a global contractionary spiral, but constantly running such a deficit would lead to an undermining of the dollar itself, also setting off global economic instability. In short, there was no way for the Bretton-Woods system to find any way to sustain itself in the long-run.

As most know, Bretton-Woods was a fixed rate monetary system where countries held dollars as the reserve currency and the U.S. promised to exchange those foreign held dollars at the fixed rate of one ounce of gold per $35. As the U.S. ran current account deficits, dollars began to pile up in the vaults of foreign central banks. By 1960, when Triffin recognized the dilemma, foreign central banks held nearly $19 billion in short-term dollar based assets. The U.S. gold stock at the time, valued at $35 per ounce, was worth just under $18 billion. Speculators quickly recognized the problem and gold began trading at a premium to this $35 per ounce price. By 1971, the charade of $35 gold could no longer be maintained by the U.S., and Bretton-Woods died, replaced by the fiat dollar standard. Currencies would be allowed to float in value, while the fiat U.S. dollar would be adopted as the world's reserve currency.

This adoption of the fiat U.S. dollar as the reserve currency was a grave error. The one lesson that should have been learned from the failure of Bretton-Woods is that any monetary system that adopts the currency of a single country (or region) as the reserve currency is doomed to fail. Adoption as the reserve means that demand to hold that currency is very high outside the country or region of issue. This strong demand pushes the value of that currency higher relative to the currency of other countries, making businesses in the issuing country uncompetitive on the global stage. Unless the reserve issuing country is willing to live with the attendant economic weakness and unemployment engendered by the high valuation of its currency (and the U.S. never is), the issuing country will be tempted to meet the high demand for its currency by issuing large amounts of debt denominated in its currency for goods until demand is satisfied, the value of the currency falls and economic weakness is arrested. This will lead to trade and current account deficits.

Differences between the Fiat Dollar Standard and Bretton-Woods

What made Bretton-Woods unique was that dollars were worth more to foreigners than they were to Americans. Foreigners could exchange their dollars for goods and services that were denominated in dollars or they could acquire gold from the Federal Reserve at $35 per ounce. The latter option was not open to Americans. The option to acquire gold at $35 per ounce made it simple calculate whether the dollar was over or undervalued in the market since it was easy to see how many dollar based assets foreigners were carrying compared with the value of the gold stock held by the U.S.

Today, no such simple calculation can help us with the dollar's value in the marketplace. Instead, we first need to understand what all of these dollar based assets really are. Certainly the majority of dollar based asset holders retain their paper because they expect to be able to exchange it for as many, or more, goods and services in the future as they could exchange it for today. The question then becomes, is this expectation a valid one?

Without question, holding dollar based assets is a "sucker's bet." If we look at the Fed's Z.1 report, which is a summation of debt outstanding and its rate of growth, we can see that non-financial debt in the U.S. has been growing at more than $2 trillion per year since 2005, and for 2007 and through the first quarter of 2008 that figure has been closer to $2.3 trillion per year. All of this debt represents a claim on output in the U.S. If we were to balance that figure against normalized output growth (real GDP growth) plus savings we might come up with about $600-700 billion dollars (we include savings here because saved output that is lent out is not inflationary as the debt created by this lending process is backed up by the saved output itself). That is, claims against output and savings are growing more than 3X faster than output and savings itself. Why investors are willing to accept low coupon U.S. dollar based debt in exchange for their own output and savings is beyond me, but this is clearly a situation that cannot go on forever. Dollar based debt issuance of this magnitude constitutes a glut and will erode confidence in the dollar per Triffin.

Unfortunately, slowing down the rate of credit growth isn't much of an option either. Clearly, new credit growth of more than the recent run rate of credit growth is required in order to keep the system solvent. Debts of the magnitude of those racked up in the U.S. over the years clearly cannot be serviced out of GDP and require fresh credit growth to service the old debt (in short, a Ponzi scheme). Slowing credit growth in the U.S. now will lead to a massive recession and the wiping out of most of the equity in the global financial system. For instance, if credit growth were to slow to the rate of GDP growth plus savings so that those accepting dollars could feel confident in not losing purchasing power, we would see credit growth collapse some $1.6 trillion per year. At an interest rate of 6.5%, this would require wiping out about $25 trillion in net worth somewhere. Given that the banking system itself has only slightly more than $1 trillion of equity I think that we could safely assume that there would be precious few survivors. Again, Triffin's insight into our present dilemma was rather prescient.

Conclusion

Just as Triffin correctly identified the end of the Bretton-Woods system long before its collapse, I think that it is now fairly obvious that the dollar is going to fail as the reserve currency of the world. Any reserve currency issued by a single country or region is doomed to fail. Protecting the currency requires economic pain of a magnitude that is not tolerable in the issuing country while meeting demand for the reserve currency undermines the currency itself as issuance will dwarf the issuers output of goods and services. Today, we are clearly staring at the dilemma that Triffin warned about nearly fifty years ago while many remain "bullish" on the dollar. This is folly.

it's 'peripheral' in that you were quoting some other guy a few days ago that said the dollar bottomed and you're gonna buy his newsletter or whatnot.

well... which one is it?

[Jay]

Re: Worthless Money, Worthless Economy

Mega's best friend: *Peter*Schiff* is even quoted in this article...gotta be worth something no?

Got PMs? Energy? Maybe 5% of your total assets (not 60...huh Jim) is good for ya...



Worthless Money, Worthless Economy

---

"The worst part is that this is also true: worthless money, worthless economy. I wish I could find a laugh in there, but I can't. Plenty to weep about, though! And plenty of time to repent at leisure, too!"

---

by The Mogambo Guru
There comes that "Kodak moment" (elsewhere referred to as that "Wile E. Coyote moment" when he has run off the cliff and is surprised to see himself momentarily suspended in mid-air) when burgeoning governments and the dysfunctional economies that grow up around them have grown and evolved into their final, grotesque, bloated maximum by constantly expanding their spending via debt and taxes to the maximum, and then one day they suddenly cannot do that silly crap anymore.

I know that the audience is dying to ask, "Why not, oh Wonderful Mogambo Master (WMM), when it is you who counsels that with a fiat currency, it will always be possible to finance infinite amounts of spending?"

I look at them with pity, as the answer is simplicity itself; they literally run out of money because money is being lost so fast! Unfortunately, I can't say anything, as my guts are churning so badly at the prospect of universal bankruptcy that it is all I can do NOT to puke my guts out in fear, which I prevent only with Heroic Mogambo Control (HMC) so that I will not get a lot of angry people demanding their money back, which they paid for this stupid seminar, as I already lost most of it in a crap game with the kitchen staff before we even got started. Oops! Damn!

So I say nothing, but smile hopefully enigmatically and point them to Bloomberg.com, where they can read for themselves the horrible news that "Wall Street's mortgage losses have grown so large that some firms may pay little or no taxes for years, widening New York City and state deficits and challenging their ability to provide services, Mayor Michael Bloomberg said." Gaaaaahhhh!

The one industry that makes most of the money, the financial services industry, will pay no taxes! And even worse, "Some companies are seeking refunds from the city on taxes they prepaid, saying losses have cut their tax liability to zero."

So not only are they not going to pay any taxes, but they want the city to send them some money back! They can do this because they already paid too much, as, "The banks pay tax on 110% of earnings in advance as a 'safe harbor,' protecting against penalties for underpayment."

The mayor dryly admitted, "I think it will be a number of years before Wall Street starts paying taxes again" because "They will carry forward all of those losses" and not pay any tax for a long, long time.

And, as if you need something else to worry about, ditto federal tax revenues going down because massive losses will result in zero tax due. No wonder Obama is proposing all these higher tax rates!

And if you think it won't happen, then I laugh in scorn at your misplaced optimism, because it is already happening! The federal budget deficit tripled in July to a record $102 billion, taking government spending up by a massive 27% from this time last year, which is bad enough, but then everything is made Much, Much Worse (MMW) by the stunning news that revenue was down 6%! Gaahhhh!

After $150 billion borrowed, put into stimulus checks, sent and spent, tax revenue was still down 6%? Staggering! The economy is so bloated, indebted and dysfunctional that $150 billion of additional raw spending produces 6% less taxable income? Hahaha! We are so freaking doomed!
And it is not just here, either, as Mega's pet monkey of Euro Pacific Capital reports that we Americans are "defaulting on hundreds of billions of dollars of existing loans underwritten by lenders around the world."

This may have something to do with the Wilshire Trust Universe Comparison Service reporting that, according to Bloomberg.com, "The return for all institutional investment portfolios turned negative for the 12 months ended June 30", and "the median contraction for master trusts, which includes pension plans, foundations and endowments, was 4.49% during the year."

And you still think that you can fund a retirement by investing all your money into the stock market? Hahaha!

And this does not even take into account, according to Agora Financial's 5-Minute Forecast, that the Federal Reserve opening the bank to any and all borrowers resulted in the eye-popping news that the "Fed's TAFs and TSLFs have now dedicated over $1.6 trillion to quelling the credit crunch"! $1.6 trillion dollars! My God! We are freaking doomed!

Perhaps Junior Mogambo Ranger (JMR) Len M. sums it up best when he says, "Honest government, honest money. Dishonest government, dishonest money. Worthless government, worthless money."

The worst part is that this is also true: worthless money, worthless economy. I wish I could find a laugh in there, but I can't. Plenty to weep about, though! And plenty of time to repent at leisure, too!

Unless you have gold, silver and oil, of course, but don't get me started on their virtues or how obnoxious I will be when I am rich, rich, rich from owning them and how far, far, far away the kids will be in some boarding school, and how much fun, fun, fun life can be again, as I never tire of thinking about it and I have far, far, far too much work to do.

Thanks.

Link to article: http://www.dailyreckoning.com/Writer.../MG082508.html

This guy spews this same message every day of the year and it never changes. He spices things up by concocting a zany persona to keep readers listening to his drivel. It doesn't mean he doesn't have valid perspective on some things, just that he's a broken record and hasn't added anything new to his repertoire since I last read him a few years ago. I don't see any real analysis in most of what he prints.

[phirang]

Re: Worthless Money, Worthless Economy

The problem with fundamentals is that they can change while CB's use repos, swaps, reserve ratios, and interest rates to keep the FX markets intact. The CB's seek to outrun a calamity using any means necessary until the fundamentals turn more innocuous.

Will the fundamentals outrun the CB's efforts? THAT is the question!

edit: Does this shiff guy understand what he's up against? There are some SMART people in these CB's, and they have an arsenal at their disposal...

[metalman]

Re: Worthless Money, Worthless Economy

This guy spews this same message every day of the year and it never changes. He spices things up by concocting a zany persona to keep readers listening to his drivel. It doesn't mean he doesn't have valid perspective on some things, just that he's a broken record and hasn't added anything new to his repertoire since I last read him a few years ago. I don't see any real analysis in most of what he prints.

corroded monkey brain (cmb) says... 'read the mogambo guru too long! brain mush and die now horrible death as watching one gilligan's island episode 1000 times! learn more about investing in the bargain!'

[metalman]

Re: Worthless Money, Worthless Economy

shiff's a punter. did they let him in on their little plan to prop up the dollar?

where's his 780 gold call, hmmmmm??????

[nitroglycol]

Re: Worthless Money, Worthless Economy

Here's a link to the Poppenhagen article (is this the original source?)

http://www.gold-eagle.com/editorials...gen082608.html

[Guest]

Re: Worthless Money, Worthless Economy

Nitro -

Don't have an original source to confirm here. It was carried by a lot of websites. Seemed like related background to the thread topic. But we did not make "iTulip primetime" with this topic evidently. The critics panned it.

Here's a link to the Poppenhagen article (is this the original source?) http://www.gold-eagle.com/editorials...gen082608.html

[FRED]

Re: Worthless Money, Worthless Economy

Nitro -

Don't have an original source to confirm here. It was carried by a lot of websites. Seemed like related background to the thread topic. But we did not make "iTulip primetime" with this topic evidently. The critics panned it.

Not true. The topic has been prime time here since 1998. It's just that we prefer Mayer's and Hudson's explanations of what happened over data dug up on the Internet; they were both involved in the decisions at the time, not merely writing about it. Hudson, for example, working for the White House in the early 1970s, wrote a paper warning of a self-reinforcing cycle of dollar recycling that developed, which the Nixon administration took as a blueprint for a bond plan rather than a warning. Mayer continues to write on the topic and is in contact with Volcker and others. Triffin was a minor player, and he did not understand how Burns' decision to allow foreign central banks to keep foreign exchange earnings on account at the Fed as Treasury Bond holdings launched the reinforcing cycle he described.

[Guest]

Re: Worthless Money, Worthless Economy

Well actually I was being a little lighthearted here FRED. I am certainly disposed to defer to Mayer and Hudson for having been more central to this early warning. It's an interesting article nonetheless, as it touches upon a topic which is very macro, and engaged both Mayer and Hudson's lively concern. That Triffin was a "minor player" whilst iTulip has a "hot line" to two of the principal players is certainly appreciated.

My mention: << But we did not make "iTulip primetime" with this topic evidently. The critics panned it. >>

This was intended as a lighthearted remark, as obviously it has little more meaning than that. No need to "man the barricades", to defend iTulip's "early adopter of the idea" stature here. "Triffin was a minor player". Well frankly I am not overly concerned as to his minor stature. The issue raised is sufficiently interesting. A mere mention that "iTulip's conversations with Mayer and Hudson lead to their coverage of these issues in considerably more depth" would have been sufficient?

Not true. The topic has been prime time here since 1998. It's just that we prefer Mayer's and Hudson's explanations of what happened over data dug up on the Internet; they were both involved in the decisions at the time, not merely writing about it. Hudson, for example, working for the White House in the early 1970s, wrote a paper warning of a self-reinforcing cycle of dollar recycling that developed, which the Nixon administration took as a blueprint for a bond plan rather than a warning. Mayer continues to write on the topic and is in contact with Volcker and others. Triffin was a minor player, and he did not understand how Burns' decision to allow foreign central banks to keep foreign exchange earnings on account at the Fed as Treasury Bond holdings launched the reinforcing cycle he described.

[The Outback Oracle]

Re: Worthless Money, Worthless Economy

When you first start to read Mogambo he is reasonably entertaining. Certainly the articles from a few years ago were more extensive, funny and informative (?). So my opinion has always been if it got someone to START reading about these matters, while at the same time providing a laugh, then he was, in general, a good influence.
In particular, his strident stance against ALL inflation (AKA as theft from savers which ought be a crime punishable by a prison sentence) over the years, seems to me to be important. He is about the only writer I have seen who has taken such a stance. Even within the pages of iTulip runs a theme that a "little bit" of inflation is necessary. It is a bit like having a little bit of cancer. Please correct me if I am wrong but the generally held stance on interest rates in Itulip would seem to indicate so.

[c1ue]

Re: Worthless Money, Worthless Economy

Outback,

You might have missed the flurry of posts concerning the definition of inflation - price inflation vs. other forms.

In general, if you subscribe to the monetary theory of inflation - i.e. money supply increases over population/productivity growth constitutes the only "inflation" a la Mish.

iTulip takes a much less straitlaced stance - at least to my understanding.

But I don't believe anyone on iTulip advocates inflation per se - it is just likely the least painful (for those in charge) and most likely outcome.

If, on the other hand, you were to phrase the choice as being between Great Depression II and inflation, then I for one would welcome our inflationary overlords. After having moved my money out.

[The Outback Oracle]

Re: Worthless Money, Worthless Economy

You're right CU1E. Sometimes I do forget the correct definition! Old habits die hard! Also I don't see inflation as measured by the CPI. As per Itulip, asset inflation is still inflation! Nevertheless one follows the other as sure as night follows day. It's just sometimes the days are a little longer.
I'm always just very amazed by the thinking we can avoid a depression by inflating. We can maybe postpone a depression for a little while by inflating but it is a postponement only and the final outcome will be somewhat worse! The other factor of course is the total abandonment of any sense of morality whatsoever. We are consciously ripping off the thrifty, the builders, and the careful, in our society in order to reward the spendthrifts, the gamblers and the wreckers. How anyone thinks a civilisation can survive with that principle as its fundamental premise is beyond me. I'd have thought the evidence was pretty clear on that score.

[FRED]

Re: Worthless Money, Worthless Economy

When you first start to read Mogambo he is reasonably entertaining. Certainly the articles from a few years ago were more extensive, funny and informative (?). So my opinion has always been if it got someone to START reading about these matters, while at the same time providing a laugh, then he was, in general, a good influence.
In particular, his strident stance against ALL inflation (AKA as theft from savers which ought be a crime punishable by a prison sentence) over the years, seems to me to be important. He is about the only writer I have seen who has taken such a stance. Even within the pages of iTulip runs a theme that a "little bit" of inflation is necessary. It is a bit like having a little bit of cancer. Please correct me if I am wrong but the generally held stance on interest rates in Itulip would seem to indicate so.

EJ writes in:

Important to not confuse a forecast for rain with approval of rain. We have consistently forecast inflation in 2001 when when others said it was impossible. We continue to do so because the conditions which have caused the inflation not only remain but have intensified. We do not approve, but it is not hard to find many who do.

Had dinner the other day with a friend visiting from Europe. He owns a fair amount of property in the US and has since the 1980s. He remarked how much inflation had reduced his mortgage interest payments to insignificance.