zero hedge - on a long enough timeline, the survival rate for everyone drops to zero Fri 2010-10-08 19:33 EDT

Will We Have Hyperinflation In America?

I have been reading a lot lately about the coming hyperinflation in America. Among those I've read are Mr. Shadowstats John Williams, John Hussman, Jim Quinn, commentators on Zero Hedge, and Mr. Gloom Doom and Boom himself Marc Faber. My favorite philosopher, Nassim Taleb has also taken up the hyperinflation case. And I didn't forget Jim Rogers, Peter Schiff, and others...Will hyperinflation happen here? It is possible but unlikely and improbable...There are economic and political reasons why I don't think hyperinflation would occur...none of the economic or political factors required to set off hyperinflation are present. A careful analysis of theory, fact, and history leads me to conclude that inflation/stagflation is our future. It is quite a leap of fancy to say we are certain to have hyperinflation.

America; dropped; Hyperinflation; long; survival rate; Timeline; zero; Zero Hedge.

Sat 2010-09-25 11:02 EDT

Where is the World Economy Headed?

Michael Hudson

...financial maneuvering and debt leverage play the role that military conquest did in times past. Its aim is still to control land, basic infrastructure and the economic surplus -- and also to gain control of national savings, commercial banking and central bank policy...Indebted ``host economies'' are in a similar position to that of defeated countries. Their economic surplus is transferred abroad financially, while locally, debtors lose sovereignty over their own financial, economic and tax policy. Public infrastructure is sold off to foreign buyers, on credit and therefore paying interest and fees that are expensed as tax-deductible and paid to foreigners. The Washington Consensus applauds this pro-rentier policy. Its neoliberal ideology holds that the most efficient path to wealth is to shift economic planning out of the hands of government into those of bankers and money managers in charge of privatizing and financializing the economy. Almost without anyone noticing, this view is replacing the classical law of nations based on the idea of sovereignty over debt and financial policy, tariff and tax policy...Bankers in the North look upon any economic surplus -- real estate rent, corporate cash flow or even the government's taxing power or ability to sell off public enterprises -- as a source of revenue to pay interest on debts...The original liberals -- from Adam Smith and the Physiocrats through John Stuart Mill and even Winston Churchill -- urged that the tax system be based on the economic rent of land so as to keep down the price of housing (and hence labor's cost of living). The Progressive Era followed this principle by aiming to keep natural monopolies such as transportation, communication and even banks (or at least, free credit creation) in the public domain. But the post-1980 world has encouraged private owners to buy them on credit and extract economic rent, thereby shifting the tax burden onto labor, industry and agriculture -- while concentrating wealth, first on credit and then via the enormous recent public bailouts of this failed financial debt pyramiding and deregulation...At issue is the concept of free markets. Are they to be free from monopoly and special privilege, or free for the occupying financial invaders and speculators?...

World Economy Headed.

Mish's Global Economic Trend Analysis Mon 2010-09-13 15:53 EDT

Debating the Flat Earth Society about Hyperinflation

Michael Shedlock

Over the past few weeks, many people have asked me to comment on John Hussman's August 23, 2010 post Why Quantitative Easing is Likely to Trigger a Collapse of the U.S. Dollar. Most wanted to know how that article changed my view regarding deflation. It didn't...I was asked about a guest post by Gonzalo Lira on Zero Hedge. I had seen the article and I made an off-the-cuff statement that the post was so silly it was not worth commenting not...Commenting on the above is tantamount to debating the flat earth society. The premise is so silly it's not worth discussing, yet here I am trapped into discussion by a mischaracterization of my statement "Hyperinflation Ends The Game"...The commonality between Zimbabwe and Weimar is they are both political events. In Zimbabwe a political event triggered capital flight, in Weimar a political event started massive printing, triggering hyperinflation...To understand how powerless the Fed is, one needs to understand the difference between credit and money, how much the former dwarfs the latter...Hyperinflation could theoretically come from massive sustained political will to bail out the little guy at the expense of the banks, the wealthy, and the political class. However, unlike Mugabe and Zimbabwe, neither the banks nor the Fed nor the political class wants to bail out the poor at the expense of the wealthy. Indeed, Bernanke's, Paulson's, and Geithner's actions to date have done the exact opposite!...

Debate; Flat Earth Society; Hyperinflation; Mish's Global Economic Trend Analysis.

PRAGMATIC CAPITALISM Mon 2010-08-23 19:11 EDT

SAY IT AIN'T SO JOHN....

TPC

I am saddened to say that John Hussman is worried about inflation and default in the USA. I guess the inflationistas and defaultiastas have made a substantial mid-season pick-up. Unfortunately, however, Mr. Hussman makes all the same claims that have driven these worrywarts astray for so many years. Specifically, Mr. Hussman is now discussing the inevitable ``collapse'' of the U.S. dollar due to Quantitative Easing...There is substantial historical evidence showing that QE is nothing more than an asset swap and has little to no impact on the real economy, inflation rates or currencies. Japan is again the best historical precedent...there is a long-term threat of inflation or that we have attempted to paper over many of our mistakes, however, there is very strong evidence showing that QE will not be the cause of a collapse in the dollar...

ain't; John; PRAGMATIC CAPITALISM; says.

Mon 2010-08-23 11:11 EDT

Hussman Funds - Valuing Foreign Currencies: Currency is both a means of payment and a store of value. [2000-09-22]

John P. Hussman, Ph.D

Any currency is both a means of payment and a store of value. So when you try to determine what it's worth, you have to consider both what it can buy in terms of goods, and what it can earn if you hold it as an asset. An exchange rate is just the price of a currency...If you look at a currency as a means of exchange...you can get a reasonable idea of the "long term" tendency of the currency by tracking the movements of price indices in two countries. This is what traders refer to as the "Purchasing Power Parity" (PPP) value of the exchange rate...But PPP is only a tendency that holds loosely over the long term. Over the short term, there's another important factor: interest rates...anytime long term interest rates, after inflation (i.e. real interest rates) are expected to be higher in the foreign country than in the U.S., the foreign currency will be above PPP...

2000-09-22; currency; Hussman Funds; meaning; payment; store; valued; Valuing Foreign Currencies.

Mon 2010-08-23 11:04 EDT

Hussman Funds - Weekly Market Comment: Why Quantitative Easing is Likely to Trigger a Collapse of the U.S. Dollar - August 23, 2010

John P. Hussman, Ph.D.

A week ago, the Federal Reserve initiated a new program of "quantitative easing" (QE), with the Fed purchasing U.S. Treasury securities and paying for those securities by creating billions of dollars in new monetary base. Treasury bond prices surged on the action. With the U.S. economy predictably weakening, this second round of quantitative easing appears likely to continue. Unfortunately, the unintended side effect of this policy shift is likely to be an abrupt collapse in the foreign exchange value of the U.S. dollar...

2010; August 23; Collapse; Hussman Funds; likely; Quantitative Easing; triggered; U.S. dollar; weekly market comments.

Social Democracy for the 21st Century: A Post Keynesian Perspective Thu 2010-07-22 16:08 EDT

Money is not a Neutral Veil

Lord Keynes

Neoclassical economics has the erroneous belief that money is neutral...Neoclassical analysis sees economic life in terms of a moneyless, ideal barter system. In this system, money exists but has been introduced merely to make trade easier...[however] John Maynard Keynes' General Theory of Employment, Interest and Money (1936) argued that modern capitalist economies are pre-dominantly monetary systems. The starting point for any sensible economic theory must recognise that monetary factors are crucial to modern economic activity...

21st century; money; Neutral Veil; Post Keynesian Perspective; social democracy.

Fri 2010-07-16 18:30 EDT

On Pelosi's Duplicity and Apparent Sandbagging of Elizabeth Warren <<; naked capitalism

Yves Smith

Despite her longevity as a California pol, house speaker Nancy Pelosi is looking like every bit as much of a dyed-in-the-wool financial services industry backer as the Congressmen on the New York-Boston corridor...So why are we pointing a finger at Pelosi in particular? The next chapter is her appointment of one Richard Nieman to the Congressional Oversight Panel...Nieman is the New York Superintendant of Banks. He helped Goldman set up its bank holding company...Nieman fell out with the other Democrats and wrote a joint opinion with John Sununu...to anyone with a passing acquaintance with the facts, the dissenting views are absurd...I can't imagine that Nieman would have fallen in with the Republicans without at least as a courtesy informing Pelosi in advance...So Pelosi is at a minimum sitting this one out (which I deem unlikely) or on board with the program to undermine Warren. And let us not kid ourselves, the knives are coming out...[2009-04-26]

Apparent Sandbagging; Elizabeth Warren; naked capitalism; Pelosi's Duplicity.

naked capitalism Tue 2010-06-01 20:06 EDT

When Will Europe Have Its Wile E. Coyote Moment?

...The current program instead is ultimately about protecting Eurobanks from losses, and is destined to fail. John Mauldin, in his newsletters, has been featuring the work of Rob Parenteau, as featured first here on Naked Capitalism (and a source of much reader ire): that deleveraging the public sector and the private sector at the same time is impossible absent a big rise in exports. Pretty much every major economy is on a ``reduce government debt'' campaign. Many are also on a ``deleverage the private sector'' program too (which is warranted, given the amount of profligate lending that occurred). The problem, however, is that these states can't all increase exports, particularly to the degree sought...Rob Parenteau drew out the implications in an earlier post: ``...if households and businesses in the peripheral nations stubbornly defend their current net saving positions [continue to reduce debt levels], the attempt at fiscal retrenchment will be thwarted by a deflationary drop in nominal GDP. ''...This feels like 2007 all over again, with the authorities insistent that Things Will Be Fine, when a realistic assessment suggests the reverse.

Europe; naked capitalism; Wile E. Coyote Moment.

Mon 2010-05-24 10:11 EDT

Hussman Funds - Weekly Market Comment: Don't Mess with Aunt Minnie - May 24, 2010

John P. Hussman

...Last week, we observed an Aunt Minnie featuring a collapse in market internals that has historically been associated with sharply negative market implications....Treasury Secretary Eddie Haskell/Timothy Geithner has scheduled a trip to Europe this week to urge European leaders "to pay better attention to potential market reactions to policy moves, and to accelerate the European rescue program." This promises to be a fiasco. What could European leaders possibly find more arrogant than to be lectured on bailout policy - not simply by the U.S., but specifically by a one-trick pony bureaucrat whose chief trick is the ability to smoothly talk the language of prudence while simultaneously pillaging the fiscal stability of an entire nation for the benefit of bondholders who made bad loans?...Providing Greece (and possibly some of its neighbors) a graceful exit from the Euro requires greater courage but lower ultimate cost - particularly to the citizens of Greece itself - than a policy of forcing heavy austerity, dislocations, and internal deflation within Greece. The effect of austerity policies will be to damage the revenue side of the Grecian economy enough to leave the deficits little changed in any event. One would like to go back a decade in time and choose different policies that would have allowed Greece to maintain the Maastricht deficit limitations, but it is far too late to push a full-grown genie back into an itty-bitty bottle...

2010; 24; Aunt Minnie; Hussman Funds; Mess; weekly market comments.

zero hedge Sun 2010-05-09 09:46 EDT

John Taylor: "Dead Man Walking...The Euro Is Finished"

John R. Taylor, Jr.

One of the incidents that I remember from my youth was the first time I saw a chicken slaughtered and running around headless for quite a few minutes before it keeled over and died. The euro is at that stage. Its life is finished, but it will be around for some time before it becomes a subject of historical analysis...

Dead Man Walking; euro; finished; John Taylor; Zero Hedge.

mcclatchydc.com: Politics Thu 2010-05-06 14:10 EDT

Financial bill has big loophole for Wall Street, expert warns

A Columbia University expert in securities law urged Congress Tuesday to patch "a fundamental hole" in financial regulatory revamp measures by imposing a legal requirement that investment banks act in the best interests of their clients. "Conflicts of interest played a key role in causing and intensifying the 2008 financial crisis," law professor John Coffee told a panel of the Senate Judiciary Committee chaired by Pennsylvania Democratic Sen. Arlen Specter...

Big Loophole; com; experts warn; financial billed; mcclatchydc; political; Wall Street.

THE PRAGMATIC CAPITALIST Wed 2010-04-07 18:22 EDT

THE ENRON BANKING SYSTEM

TPC

``Panics do not destroy capital -- they merely reveal the extent to which it has previously been destroyed by its betrayal in hopelessly unproductive works'' -- John Mills ...We should draw a distinct line in the sand between banks and diverse risk taking firms. There are always going to be Enron's in the economy, but why should we allow our entire banking sector to mirror Enron? Taking a 30,000 foot risk management view I say something must be done to ensure these banks can never do this again. Turn banks into true banks. Hedging and exotic business models are fine. Just don't commingle them under the same umbrella as a deposit taking ``bank''. With that, a few ideas come to mind: * Our banking system should be aligned with the goals of the nation to help ``grease'' the wheels of the economic growth engine of the United States. Banks should be more like utilities and less like hedge funds. Otherwise, banking becomes counter-productive and potentially destructive. * Banks should not be allowed to exact onerous fees on the public or enact a business model which is inherently dependent on driving their customers deeper and deeper into debt. This undermines the entire goal of productive economic growth. * ``Banks'' should be true lending institutions. Non-traditional banking operations and products such as CDS, ``off balance sheet'' finance, derivatives as collateral and such would be deemed illegal unless performed only by non banking/lending institutions (such as hedge funds) so as to insulate the public and true lending institutions from the risk taking, ``hedging'', and ``financial innovation'' of firms such as Lehman Brothers.

ENRON BANKING SYSTEM; pragmatic capitalists.

zero hedge Fri 2010-01-29 16:36 EST

Guest Post: Government Spending, Bank Lending And Inflation

Submitted by Kletus Klump In his latest weekly commentary, Inflation Myth and Reality, Dr. John Hussman makes the argument that changes-in federal government spending dictate the future path of inflation. As shown below, his data set covers the period from 1951 through 2008 and there appears to be a decent correlation. However, his data set is incomplete in 2 respects: 1. It does not include the Great Depression years and 2. It does not include data on bank lending. The relationship between government spending and future inflation was vastly different during the years of 1932 to 1941. The correlation between the 2 series for this time period is negative 0.25. The factor causing this is change in mortgage-loan growth...fears of government-spending-induced extended inflation in terms of time and magnitude are not a concern until the lending mechanism improves.

bank lending; government spending; Guest Post; Inflation; Zero Hedge.

Thu 2010-01-07 19:54 EST

Conversation with John Rubino <<; Phil's Favorites -- By Ilene

John Rubino is the co-author, with GoldMoney's James Turk, of The Collapse of the Dollar and How to Profit From It (Doubleday, 2007), and author of Clean Money: Picking Winners in the Green-Tech Boom (Wiley, 2008), How to Profit from the Coming Real Estate Bust (Rodale, 2003) and Main Street, Not Wall Street (Morrow, 1998)...``This is the end of a long era and the beginning of another that is not going to be nearly as nice.''...go to a coin dealer and buy some gold and silver coins and then store them in a safe place. And gold and silver mining stocks will go up if the dollar goes down...Clean tech is interesting...which of the twenty different possible clean tech sectors do you want to focus on first? ...The best of them is called smart grid....

conversations; Ilene; John Rubino; Phil's Favorites.

zero hedge Thu 2009-12-31 11:52 EST

Shadowstats' John Williams: Prepare For The Hyperinflationary Great Depression

John Williams, who runs the popular counter government data manipulation site Shadowstats, has thrown down the gauntlet to deflationists, and in an extensive report concludes that the probability of a hyperinflationary episode in America over the next year has reached critical levels. While the debate between deflationists and (hyper)inflationists has been a long and painful one, numerous events set off in motion by the Bernanke Fed (as a direct legacy of the Greenspan multi-decade period of cheap and boundless credit) may have well cast America as the unwilling protagonist in the sequel of the failed monetary policy economic experiment better known as Zimbabwe.

Hyperinflationary Great Depression; John Williams; prepared; ShadowStats; Zero Hedge.

The Guardian World News Wed 2009-11-25 10:31 EST

What was really behind the crash?

John Cassidy

In an exclusive extract from his new book, John Cassidy explains why the huge salaries of Wall Street bosses created a culture that helped trigger the financial crisis...In the wake of last year's crash, even some top bankers have conceded that Wall Street remuneration schemes lead to excessive risk-taking...But without direct government involvement, the effort to reform Wall Street compensation won't survive the next market upturn. For although the financial sector as a whole has an interest in controlling rampant short-termism and irresponsible risk-taking, individual firms have an incentive to hire away star traders from any rivals that have introduced pay limits. Compensation reforms, therefore, are bound to break down. In this case, as in many others, the only way to reach a socially desirable outcome is to enforce compliance. And the only body that can do that is the government.

Crash; Guardian World News; really.