Inflation Follies

ΩΩBernanke is hesitating before taking on a trillion in inflationary dollars via buying up tremendous US debts created by a desperate government that is terrified of taxing the rich or putting tariffs on the tsunami of imports pouring into our country.  If we taxed all imports, we would have no government and probably, no trade deficit.  But this isn’t being done because the importers are the very rich who got this way doing this thing to us.  Ergo: we are defenseless even as unemployment is very high and pay is dropping.

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ΩΩA warning shot across the prow of the Federal Reserve from the Germans who won’t forget the 1920’s hyperinflation there:  Political Economy – No love for Bernanke in Germany or Wall Street

  • Over the weekend, Germany’s economy minister Rainer Bruederle said that an excessive, permanent increase in money is, in his view, an “indirect manipulation” of the value of the dollar, according to the Globe and Mail.

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ΩΩBernanke is getting cold feet about his latest threat to helicopter another trillion dollars into the floating fiat currency system.  So, the Fed Asks Dealers to Estimate Size of Debt Purchases (Update4) – Bloomberg.com

  • The New York Fed survey, obtained by Bloomberg News, asks about expectations for the initial size of any new program of debt purchases and the time over which it would be completed. It also asks firms how often they anticipate the Fed will re- evaluate the program, and to estimate its ultimate size.

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ΩΩWell, if we imitate Zimbabwe, the ultimate size of this latest money printing game will be infinity.  Only if he stops doing this, does it stop. Since he can no longer palm off our rising debts onto China, he has to see if it is OK to palm it off onto the American people directly.  The form this takes is called ‘inflation’.  Now, the inflation of rising expectations of profit is good inflation.  Inflation caused by destroying the value of the currency is bad inflation.

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ΩΩHe knows this perfectly well, people have known about this for generations, perhaps, since the Roman Empire days.  All money creators have known since money was first made, even before paper money, that if you debase the currency by making it smaller or using baser metals, for example, the value of the number on the coin, its monetary significance, falls rapidly and if it falls below the value of the metal itself, the coins suddenly cease circulating as everyone hoards the metal.  We see this today in the metals markets.  Gold goes up and up as threats to all the currencies dropping values gets more serious.

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ΩΩThat is, currencies going up see no change in gold value but currencies that are falling show a rising value so people take dollars including most importantly, trade dollars, and turn these into gold coins or bullion.  We might even call this ‘the giant sucking sound of dollars ceasing to circulate’.  For no one is going forth to circulate gold!  No, they are hoarding it.

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ΩΩIf Bernanke produces another trillion dollars not backed by a rising industrial output system, he is feeding the gold frenzy.  Much of this loot will vanish into such markets and then the hard core thing that is bought (that is, rare metals of various sorts) will sit there, doing absolutely nothing to create economic wealth via capitalist production and this inertia will make the depression which now has a debased currency to boot, even worse.

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ΩΩCanada’s Dollar Gains Versus Greenback, Falls Against Euro, Yen – Bloomberg.com

  • Canada’s currency rose for the first time in three days amid advances in global equities and raw materials prices as the U.S. dollar weakened versus all of its 16 most-traded counterparts.

 

  • The loonie fell against the euro and the yen and is the fourth-worst-performing major currency today after the greenback and Taiwan’s dollar. Speculation about another round of monetary stimulus in the U.S., so-called quantitative easing, suggested it won’t succeed in boosting the economy.

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ΩΩI have ‘Money, Banking and the United States Economy’ by Professor Hutchinson, the 1980 edition, on my lap here.  This is what he had to say about monetarist expansion as a way to stop recessions: page 447

  • ‘And how about monetary policy’s so-called wealth effect?…Given a pessimistic outlook, wealth holders may choose to hold a large proportion of their wealth in idle money form (thereby reducing velocity).  And given the typical performance of the storck market during recession, it is difficult to conceive of a very substantial rush to purchase stocks and drive up the market value of equities.

 

  • All f this must not be carried too far. …to achieve recovery, reliance on monetary policy alone may require an an unacceptably long time period to do the job. ‘

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ΩΩThis book is pretty old and was updated several times and was a major textbook for college for a while.  Reading it these days reminds me how far we have fallen apart over the last three decades.  That is, the triumph of paper monetarist floating fiat currency systems meant ditching 90% of previous economic knowledge down this very deep hole.  The utter collapse of the entire floating fiat currency system is the major news this decade and it is very much a part of the growth of global trade and how it was balanced nearly entirely upon profitable one-way trade with the US.

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ΩΩThe US, not the rest of the planet, is entirely responsible for this insane form of floating fiat currency monetarism.  We deluded ourselves into believing this will balance trade.  It did not, it absolutely did not do this.  Just as military spending has weakened, not strengthened the US (driving us deep into debt is weakening us) so has monetarism only hurt us, not helped us.  True, it permitted us to buy a lion’s share of world resources but this came at a very steep price: deeper and deeper debt to the world.

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ΩΩNow we have the farce of Bernanke trying desperately to get a consensus from the international dealers and traders who have become total leeches on our economy as we drown in debt, to find out how much further he can dare go in ladling on more debts.  The collapse of the currency will be sudden because this is always the case.  Debasing currencies works in the short run but only if the government stops after a little of it.  But it is a narcotic: it is laughably easy to do and with paper money, ridiculously easy, just add more zeros.  So the lure is tremendous and the only restraint here is history: we know how this works and what happens next.

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ΩΩFear of Zimbabwe/Weimar Republik outcomes is the restraining part but fear of enraged Americans screaming for more debt, more imports coupled with the desire of all our rivals and allies to flood us with even more imported goods propels us towards infinity.  That is, we can please our trade partners by pumping out more and more money into the world’s systems and to hell with inflation.  With ZIRP borrowing costs, the government can and will go to infinity and a right wing victory in Congress merely means this day will come sooner, not later.

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ΩΩThat is, the right wing in the US is totally pro-free trade even while whining about the loss of jobs.  They intend to restrict government spending at home as much as possible while leaving the trade door swinging wide open.  A fatal combo and one that dooms their enterprise of being a global bully boy.

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ΩΩAs I figured some time ago, the key country to watch in all of this isn’t China, it is our ‘ally’ Japan:  asahi.com(朝日新聞社):U.S. demands complicate Japan’s plans for regional trade pact – English

  • Members of Prime Minister Naoto Kan’s Cabinet and the ruling Democratic Party of Japan have raised concerns that entering the TPP could hurt Japanese farming households through an influx of cheaper agricultural produce from abroad. The debate related to the TPP has also brought to the fore trade issues with the United States.

 

  • Washington, which plans to double U.S. exports to shore up its economy, is calling on Japan to remove its beef-import restrictions.

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ΩΩHAHAHA…for years and years and years and years, as Japan cheerfully exports cars and cameras to the US, we couldn’t even ship over one cow in return.  Did we slam the door in Japan’s face?  Nope!  We left it wide open and now Japan controls half of the US auto production systems and so half of our profits from auto making flows to Tokyo which as the world’s #2 FOREX dollar holdings as well as Japan is the #1 holder of US debts (sometimes surpassed by China’s huge holdings of our debts).

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ΩΩIt is obvious that the Japanese traders fight with katana swords while we slap them with wet spaghetti.  We are bleeding all over the place and dying and Japan’s corporations are world class and run the US economic system pretty much at will including owning many of our retired politicians who switch from bellyaching about the trade deficit to widening it as much as possible, all so they can line their own stupid pockets.

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ΩΩHere are two headlines that illustrate US delusions about our trade allies and rivals:  ASEAN to bring in US as counterbalance to China is a hopeful headline.  The story being, the Asian partners in this group are worried about a very strong China and no one is more worried than Japan since China has expressed a bit of annoyance at Japan and Japan found itself nearly totally outgunned.  Unlike the US fighting with wet spaghetti, the Chinese use a machine gun when fighting the Japanese wielding katana swords.  Here is the real headlines in China which are much more honest:  ASEAN extends EAS invitation to Russia, US leaders.

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ΩΩThe Japanese and Chinese are playing a game here and Japan laid its dog-eared US card on the table but the Chinese trumped it with a new Russia card.  Russia and China grow closer and closer as the US struggles to keep up the fictitious NATO and SEATO systems which are collapsing as the US and other G7 nations in these alliances collapse due to the failure of the floating fiat currency trade system.

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ΩΩAnd China scores another massive hit on the US:  China Claims Fastest Supercomputer Title – ABC News.  Once upon a time, the US thought we had China over this barrel: they were behind us in technology areas.  HAHAHA.  They would have to buy our stuff or send people here to learn about technology.  They did all of this and now are racing ahead of the US.  As we export jobs, we export knowledge.  I know a former IBM employee in the sector of hard core research who spent much of his last two years there, going to China to train people.  IBM is now pretty much dead when it comes to computer technology and all of our Silicon Valley jobs are now in China and are NOT COMING HOME.

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ΩΩThe problem isn’t how many dollars to print nor how to get spending to revive, the problem here is why we are turning our economic system from a production system to a debt/spending black hole.  And eliminating the Fed won’t fix this.  We had protectionism with the Fed existing!  We need to understand the essence of capitalism and the reality of trade and how to manage both is the key.  Money is the outcome, not the cause.  The attempt at using money to control trade FAILED, big time.  Total failure as far as the US is concerned.

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ΩΩWe have to denounce the entire idea of monetarism as a trade tool.  And the people who want to eliminate the Fed and print money directly via Congress are insane, too.  Congress is owned by lobbyists working for foreign powers and this gets worse by the hour.  They will cheerfully cut taxes and double our debts as they have done mostly since Reagan.  And they don’t care if foreigners own this country.  They are owned already by foreigners!  Which is why Israelis can waltz into Congress with a list of demands and above all, demands for more money and no one says a peep.

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7 Comments

Filed under .diplomacy, .money matters, Free Trade, gold

7 responses to “Inflation Follies

  1. JT

    “It is obvious that the Japanese traders fight with katana swords while we slap them with wet spaghetti. ”

    Katana swords or VAT.
    VAT is 23% here in the Nordics.
    And petrol is taxed 50%.
    That is one way of controlling imports.

  2. emsnews

    Absolutely correct. Over the years, I mention the VAT and oil tax as ways of stopping madcap US imports but taxes are ‘evil’ here. So we have debts instead.

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  4. Christian W

    There is no ‘we’ or ‘us’. In one sense there is, ofc the US is one entity and responsible for it’s actions. But the gullible US public has been sold various myths and official narratives by the Elites and now the waking up is extremely painful for a lot of people. The honest ones will, and do, face the truth, the ones that find it too painful will take refuge in the Tea Party and other alternative narratives.

    Elaine, you were one of the very first ones to point out where things were heading and to your credit you have always placed yourself on the outside of all these machinations. I see a lot of people are getting extremely angry now, but so many of them are people who were playing the system while the going was good and profiting personally from the dollar hegemony system and only now, that the shit has hit the fan, are they angry and complaining.

    For so long the US has skimmed off this dollar printing for resources scam and a lot of people have skimmed their little take from all this dollar creation, so much so that it was the main ‘wealth’ creation tool (illusory but still, that was the game) for the masses. Only the real profiteers ofc were the Elite with their inside information and the their control of the systems. The public has always been sheep to sheer and ballast to throw overboard when things got hairy.

    That is why the US, like any ‘civilized’ nation, needs to have a constitutional system that works and protects the majority of the people. To have war criminals in charge of the political system, judges that are bought and bent to be part of the Elite system instead of the populace at large, economic oligarchs, imperial generals etc etc in a sort of neo-feudal system where the King (president) is weak and the vassal lords fight over spoils and loot under his nose and over the bones of the people just will not do.

    The US will have to take a 25% haircut and naturally the ones who should pay for that is the Elites who actually DO own that 25 extra % of the world’s rescources. But ofc they want to toss the peasants overboard instead.

    The US elites are waging a war of Divide and Conquer with it’s own population. Keep the Blacks in the ghettos, flood them with drugs, give them menial work for a pittance, keep feeding them to the jail systems for profit. Flood the system with illegal hispanics, free labour is always useful. Keep the whites disoriented and distracted with various political games, disinformation and caught in a debt struggle for “dollars” so they can provided shelter (housing), food for their families, medical care and to pay their debt to the public purse (taxes). When people are too focused just to survive day to day they don’t have time to pay attention to political games but swallow the fast narratives presented in 10 second sound bites by pretty presenters on TV…

    But this game is up anyway now, too many people are ‘waking up’. What is important now, and what will ultimately fail unfortunately, is that the Elites don’t manage to sell a new improved narrative to disappointed people but that the people take power back within a constitutional lawful system.

  5. p h

    The Yen is advancing and forcing China to eat more and inflation — daily.

    The US and Japan have agreed to strangle China with liquidity… until China rolls.

  6. Aussie

    @ Elaine
    Re: ..The Japanese and Chinese are playing a game here and Japan laid its dog-eared US card on the table but the Chinese trumped it with a new Russia card. …

    I agree with the thrust of your argument with one minor reservation.

    The China – Russia relationship is an “alliance of convenience” based on comments from my Russian friends in both China and Russia.

    Most Russians for historical reasons and cultural affinity feel more comfortable with Europe. Russian leaders are warm to closer China relationship for Geo-economic strategic reasons but wary of China’s powerful economy and population size.

    Vietnam for historical reasons are wary of China was a protege of Russia during their War of liberation against the US occupation.

    It is in your scheme of things a minor point because Asean + Australia + Japan + Korea benefit from participating “concert of outside powers” to moderate China hegemony.

    Personally, I think the “concert of powers” is a transitional phase because the China civilizational state will be so overwhelming for the region. This does not mean China will be the Middle kingdom because now their need for resources is global.

    It simply means both China and the region will co-acculturate to become sinicised with western nuances. Similar to what has happened in the Mediterranean world where both western and middle eastern cultures have co-mingled…be it food, music etc.

  7. Ali

    “And the people who want to eliminate the Fed and print money directly via Congress are insane, too.”

    Elaine,

    As you’ve touched on this subject, can you shed some light on whether the Fed is owned privately and the debt-based money issue.

    I have read up on this subject and cannot see the need for the Fed. That is, taking out of the equation corruption at the senate. Why do we we need to pay interest on loans for money that we ourselves create?

    When I say ourselves I mean you, because I live in the UK. I think we have the same situation as you though.

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