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Saturday, April 13, 2013

Inflation vs Deflation X

Nate posts his latest entry in the Great Debate:
I know I said I would finally be explaining Hyper Inflation here, and I will be.  But there are a couple of points that Vox has made that I simply cannot let stand.  So as much as I loathe the call and response style of written debate, it appears I must resort to it.  I beg your indulgence....

Given that Vox acknowledges that there was a period of time when credit was contracting... and prices were going up, the actual timing of that period, be it July of 08 or Q1 09 is irrelevant.  He acknowledges that it happened.   The rest of this is elaborate hand waving.  Vox here is suggesting that the fact that the federal government is spending the new money, and that it somehow doesn't count as inflation.   I am beginning to see the problem here.   Vox has literally just said, "Yeah but it doesn't matter because its government spending."  If we were arguing about the health of an economy... yes... we could certainly point to the distinction and say, "Its not real growth."   But we're not debating that.  We're debating inflation vs deflation.  Inflation is never real growth.  That's the point.  Of course its government spending.  Unless Vox wants to claim that inflation isn't possible in a communist regime, then he must acknowledge for the purposes of this debate, the sector the increase is happening in doesn't matter.  That just tells you who got to spend the money that was stolen from you.
Read the rest at his place.  My response, as usual, will be within one week.  At this point, all I will say is that in addition to the economics, the astute reader may also detect an aspect of the socio-sexual hierarchy in action.  I must certainly confess to an amount of wry appreciation for the irrational confidence of the alpha.

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82 Comments:

Blogger mmaier2112 April 13, 2013 11:14 AM  

"irrational confidence of the alpha."

Yes... this is noticed.

Blogger IM2L844 April 13, 2013 11:47 AM  

I must certainly confess to an amount of wry appreciation for the irrational confidence of the alpha.

Tricky.

Blogger Res Ipsa April 13, 2013 12:33 PM  

“irrational confidence of the alpha.”

It’s not irrational confidence when your opponent in the debate doesn’t bother to show up. There are a couple of problems I’ve pointed out to Nate, but face it Vox, you haven’t bothered to “debate” him in any meaningful sense of the word. Nate is a boxer in the ring throwing punches, you are the guy setting by the pool trying to phone it in and saying “damn I keep getting a busy signal”.

You might as well admit defeat. Call it a forfeit if that makes you feel better.

Blogger Positive Dennis April 13, 2013 12:41 PM  

I do not understand all the worry, inflation is our friend!
http://www.prophecypodcast.com/journal/2013/4/13/inflation-is-your-friend.html

Anonymous VD April 13, 2013 1:11 PM  

You might as well admit defeat. Call it a forfeit if that makes you feel better.

(laughs) Hold onto that thought. You're a smart guy, Res, but I don't think you've grasped the core concepts here. I know Nate doesn't know what I'm thinking; his attempts to summarize and anticipate my positions have been reliably incorrect.

His claim to have caught me out here is not only incorrect, but reveals a fundamental failure to grasp the primary benefit of inflation. But I'll explain that in my response.

Blogger Nate April 13, 2013 1:42 PM  

"(laughs) Hold onto that thought. You're a smart guy, Res, but I don't think you've grasped the core concepts here. I know Nate doesn't know what I'm thinking; his attempts to summarize and anticipate my positions have been reliably incorrect."

...

That's an odd statement. I would have had to have made some predictions about your position for them to have been inaccurate.

Anonymous Josh April 13, 2013 1:45 PM  

Vox, if there is a hammer, when are you going to drop it?

Blogger Nate April 13, 2013 1:52 PM  

"His claim to have caught me out here is not only incorrect, but reveals a fundamental failure to grasp the primary benefit of inflation. But I'll explain that in my response."

of course you will. Because under-estimating me has worked so well for you so far.


Blogger Nate April 13, 2013 1:52 PM  

"Vox, if there is a hammer, when are you going to drop it?"

We've been hearing about this hammer for some time... have we not?

Blogger Nate April 13, 2013 1:59 PM  

In fact... I do now note that when we look back we see that there are times that I have said, "I'm saying this even though it may actually help Vox..."

And then it turns out that it did in fact help you explain something... the nature of credit money for example.

Thus... it demonstrates that I did in fact anticipate you.

But where have you anticipated me?

Anonymous Salt April 13, 2013 2:03 PM  

Nate, ever thought Vox is simply operating on the old saying, "'Come into my web', said the spider to the fly"?

He's been known to do that.

Blogger Nate April 13, 2013 2:22 PM  

"Nate, ever thought Vox is simply operating on the old saying, "'Come into my web', said the spider to the fly"?"

Go back and read the older posts in the debate. You'll note that I actively refer to vox's questions as traps.

We've been at this for a long time. This is proceding exactly like a high quality MMA fight. There's testing.. and more testing... but over time... you realize your training and hardwork is paying off.

My confidence isn't irrational.

It stems from observable reality as confirmed over and over by plenty of commenters.

Confidence comes from the fact that I've pretty much already won.

All remains is for Vox to finally getting around to dropping his big hammer so I can demonstrate how he's only managed to smash his own foot.

Then history will tell us who was right and who is wrong. But right or wrong... the debate is pretty much over and its abundantly clear that I've won.

I mean ask yourself... have you ever seen Vox countered this many times this effectively by anyone? Ever?

Your question stems from your own disbelief. You can't believe what you're obviously seeing.

Blogger Nate April 13, 2013 2:31 PM  

By the way... None of this means I think I'm smarter than Vox... or that I think he's stupid or anything like that. I have tons of respect for him.

I figure I won because I put way more work into it than he did, because I knew if I screwed up in the slightest he would cut me to shreds and leave me looking like an idiot.

Anonymous VD April 13, 2013 2:34 PM  

Then history will tell us who was right and who is wrong. But right or wrong... the debate is pretty much over and its abundantly clear that I've won.

(laughs) History is the only judge that matters. If I was interested I could score cheap and silly points, like pointing to the falling price of gold as if it mattered. But it doesn't, so I'm not. Anyhow, as I mentioned, I'll make my points in my response, meta-debate doesn't hold much interest for me.

Vox, if there is a hammer, when are you going to drop it?

This next response is probably as good a time as any. And keep in mind it isn't something that has come out of the debate, it's something that will explain why some of you feel that I've been phoning it in. Which is not, in fact, the case, the problem is that some of you have been looking for objective metrics that only time can provide.

Anonymous Bobert April 13, 2013 2:58 PM  

OT but still important:

reason to homeschool #2.5*10^52 or so...

Anonymous Outlaw X April 13, 2013 3:08 PM  

Vox, I listened to Nates last ATF show and he was surely bragging. I kind of giggled to myself thinking you were going to throw up your arms and give up. Nate is a smart guy but I don't think he understands you as well as he thinks. I really haven't been keeping up, but it is fun to watch it unfold. I don't know and I know that I don't know. I like both of you, and JACIII tryed to get me to call into his show just to stop the giggling. I didn't but Nates show is better than a lot of stuff on blogtalk.

Anonymous Outlaw X April 13, 2013 3:09 PM  

By the way I call it the ATFHGTV show, Nate.

Blogger Nate April 13, 2013 3:12 PM  

"(laughs) History is the only judge that matters."

Agreed.

If we haven't had a hyper-inflationary collapse by the end of 2016 I will concede that its deflation is in fact correct.

Given the current state of things... I fail to see how you can still think the dollar is going to limp along until 2030. The average fiat currency lasts what.... 30 years? 40 years?

The Dollar became broad definition fiat around how long ago?

It will never make 2030.

Blogger Nate April 13, 2013 3:14 PM  

"By the way I call it the ATFHGTV show, Nate."

My co-host is a crisis gardener. Its not my fault. I can only butch him up so much.

Blogger Nate April 13, 2013 3:19 PM  

"Anyhow, as I mentioned, I'll make my points in my response, meta-debate doesn't hold much interest for me."

its not meta debate. Its testing the arguments. The arguments need testing and there aren't many better suited to do it than you and I.

Anonymous Outlaw X April 13, 2013 3:20 PM  

"My co-host is a crisis gardener. Its not my fault. I can only butch him up so much."

Rest assured I am not complianing, I find it highly etertaining, keep it up, never know and I would rather listen to it than Karl Deninger in need of anger management show any day.

Blogger Nate April 13, 2013 3:26 PM  

I can't stand Karl. I mean I know I'm out on a limb here saying by the end of 2016 it all goes bang.

But if lat 2016 arrives and it hasn't gone boom... I will be saying "I was wrong." and trying to figure out why. Something Karl never bothers to do.

Anonymous Outlaw X April 13, 2013 3:37 PM  

"But if lat 2016 arrives and it hasn't gone boom... I will be saying "I was wrong." and trying to figure out why. Something Karl never bothers to do."

Have you figue out as of yet what Karl thinks is what Karl is. He is an asshole, but this ain't about him. He is just a loudmouth trying to protect his own interests and plays head games. I ca spot them a mile off. Even though it is OT I will say of him and not mention it agin that If were the pricipal in the school where his daughter attended , I would always be out of the office when he showed up.

I don't think he even knows what a jerk he is, but I do. Imagine trying to have the same argument with him as you and Vox are having. Real men with real beliefiefs who can accept the the differences of opinion. Try to go to his place and talk about a Gold standard and you will be immediatly banned.

I think we need all kinds of people and God loves us, but that just aint my deal. Vox is the Man as far as I am concerned. At least he will lisiten.

I have found few people who is as generous as Vox.

Blogger Scott April 13, 2013 3:54 PM  

"Winners" don't exist in this style of "debate", the winner is in the eye of the beholder. As Vox points out only time will reveal the outcome of our sick economy and perverted political apparatus. Essentially Vox and Nate are arguing about which side of the tracks the train wreck will occur. Interesting, but it lost its luster about 5 seconds after it started.

Blogger Res Ipsa April 13, 2013 4:05 PM  

“Res, but I don't think you've grasped the core concepts here.”

Vox,

You are mistaken. . I can’t misunderstand an argument that you haven’t put forward.
The fact that I believe Nate has won the debate does not mean I believe Nate is 100% correct. I don’t. He has missed a very key aspect concerning money supply, which I’ve pointed out to him, and which he still hasn’t accounted for or discussed. At this point though he doesn’t need to. Frankly I’m surprised that you didn’t smack him around on it six weeks ago. It is possible to win a debate by delivering great arguments backed up by solid facts. It is also possible to win a debate because your opponent wimps out. I first posted my disappointment with your lack of effort back on March 18th. Today is April 13th and it would seem that almost a month latter you are still on the ropes. What I said back then was:


“For all I know Vox has some grand rebuttal all worked out and is waiting for proper planetary alignment to bring it forth and reshape the universal workings of economic theory, but somehow I doubt it. I'll withhold finial judgment for now, but it looks like Nate is winning, too bad its by forfeit.”

You haven’t posted anything that would cause me to change my mind

Anonymous VD April 13, 2013 4:15 PM  

You haven’t posted anything that would cause me to change my mind

I understand that. I just happen to find that amusing. If you genuinely believe that the Federal Reserve, or the US government, can print and deliver enough paper money to make up for the coming collapse in credit, you are certainly welcome to believe that. Many people do.

What I find so funny is that virtually no one seems to even grasp what happened in Cyprus or what that means for this debate. Perhaps when it happens here, you'll be able to connect the dots that I have already pointed out.

Blogger Nate April 13, 2013 4:31 PM  

" Perhaps when it happens here, you'll be able to connect the dots that I have already pointed out."

It won't happen here because you don't get to play that trick over and over. It will happen in Spain and Italy before it happens in the US and by the time it happens in the US... it will be to late because it will have already gone Boom.

Its just math man. Its just math.

Anonymous Josh April 13, 2013 4:32 PM  

It is manifestly un-Austrian to point to rising prices as inflationary, since inflation is a monetary phenomenon, not a pricing phenomenon.

Blogger Nate April 13, 2013 4:33 PM  

"If you genuinely believe that the Federal Reserve, or the US government, can print and deliver enough paper money to make up for the coming collapse in credit, you are certainly welcome to believe that. Many people do."

Mate... The second the dollar is rejected the credit collapse stops. In. Its. Tracks.

I'll be happy to explain how that works after your post.

Anonymous Josh April 13, 2013 4:34 PM  

Also, Gold has dipped, which is problematic for team Whiskey Zulu.

Anonymous Josh April 13, 2013 4:34 PM  

Mate... The second the dollar is rejected the credit collapse stops. In. Its. Tracks.

Rejected by whom and replaced by what?

Blogger Res Ipsa April 13, 2013 4:53 PM  

"If you genuinely believe that the Federal Reserve, or the US government, can print and deliver enough paper money to make up for the coming collapse in credit, you are certainly welcome to believe that."

I don't. They can't. That doesn't mean that they won't try. I think we are in for some form of one two punch that we aren’t currently anticipating. I believe that things that were once thought impossible, like stagflation are probable and in our future. My reason for thinking this is based on the fact that we don’t have a free market. The US economy is run by people who are tiring to manipulate outcomes that they don’t have knowledge or skills to achieve. It’s all going to blow up.

I believe that there are tangible steps that can be taken to “fix” things. None of those steps are under consideration by policy wonks. Thieves are going to steal. Politicians are going to lie and blame someone else. It’s going to be bad, perhaps one of the worst economic meltdowns in history.

I don’t know how its going to happen, and I doubt anyone else does either. The US of A is going to get its social and economic comeuppance and its going to suck.

Blogger Nate April 13, 2013 4:55 PM  

"It is manifestly un-Austrian to point to rising prices as inflationary, since inflation is a monetary phenomenon, not a pricing phenomenon."

It was Vox's metric. I rolled with it.

Anonymous Jack Amok April 13, 2013 4:57 PM  

I'm impressed with Nate's latest. I still hold to the Deflation camp, but our Inflationista makes a strong effort and a good point with his Collapse of Confidence argument.

To a certain extent though, I'm agnostic, as I think the coming train wreck will reset the financial clock, and inflation/deflation is intrinsically tied up that clock. We'll have one or the other, but I'm not sure it will actually matter for any practical purposes.





Blogger Nate April 13, 2013 5:02 PM  

"Also, Gold has dipped, which is problematic for team Whiskey Zulu."

No it isn't.



Blogger Nate April 13, 2013 5:03 PM  

"We'll have one or the other, but I'm not sure it will actually matter for any practical purposes."

You should have a plan for each.

Blogger Res Ipsa April 13, 2013 5:09 PM  

“Cyprus or what that means for this debate.”

I think it’s possible for financial markets to suffer tremendous deflation and/or confiscation of wealth while other sectors of the economy are suffering upward pressure on price. You don’t need Nate’s hyperinflation to kill the economy in that scenario. I don’t know what the percentage point of the inflation would need to be, but it could be comparatively low.

Blogger Giraffe April 13, 2013 5:12 PM  

Hyper-inflation starts with people rejecting their fiat money. Practically that means they stop saving and start spending. They spend as soon as they possibly can. This drives up prices and creates the unstoppable demand cycle that forces the government involved to simple change the rules and crank up the printing presses.

This sounds like you are saying hyperinflation is due to an increase in the velocity of money. Or at least triggered by it.

Blogger Nate April 13, 2013 5:47 PM  

Yes.

That is exactly it Giraffe. Hyper velocity kicks off Hyper inflation.

Blogger Giraffe April 13, 2013 5:52 PM  

That is exactly it Giraffe. Hyper velocity kicks off Hyper inflation.

Same deal with the repatriation of offshore money. In a way it is just a velocity increase.

Blogger Nate April 13, 2013 6:13 PM  

"Same deal with the repatriation of offshore money. In a way it is just a velocity increase."

The best example I can think to give is the Russian Platinum example I used in my post. The platinum existed but it had no velocity. Then it got dumped the effect was there for all to see.

Blogger Nate April 13, 2013 6:16 PM  

The key element of hyper-velocity is the shortages created. People are buying and hording as fast as they can and its driving up prices and causing shortages and the Government simply cannot sit by and pretend things aren't totally broken.

That's when the massive structural rules get changed.

Anonymous Josh April 13, 2013 6:50 PM  

Wouldn't hyper velocity mean that trading volumes in, say, equities, would be increasing?

Blogger Nate April 13, 2013 7:42 PM  

"Wouldn't hyper velocity mean that trading volumes in, say, equities, would be increasing?"

I doubt it. People won't be buying stocks... they'll be trying to buy food and gas.

regardless it isn't happening yet so there is no reason to look one way or the other.

Anonymous Richard April 13, 2013 8:05 PM  

I seem to recall Precther predicting that we would have severe deflation followed by a government-caused hyperinflation (trying to get us out of the deflation). Could it be that both Vox and Nate are correct and the only issue is which occurs first?

Blogger Nate April 13, 2013 8:25 PM  

"Could it be that both Vox and Nate are correct and the only issue is which occurs first?"

Hyper-inflation can explode out of both inflationary and deflationary environments. Much love for the Elliot Wave bit by the way. I'm not necessarily saying I buy it.. just that its fascinating.

Anonymous map April 13, 2013 8:39 PM  

You guys are not considering another element supporting Vox's deflationary scenario: the world is a mercantilist system where most nations focus on exports while restricting imports. The nation that imports those exports is the nation that wins. Which nation is that? the USA.

For a country to longer accept the US dollar as payment for goods and services rendered, means that nation must no longer export to the United States. But if they can't export to the US, then who is going to buy the output earmarked for the United States? If China decides that selling to US is no longer good, will Japan, Korea, the Phillipines or Europe decides to import that Chinese output and endanger their own businesses?

Of course not.

They will continue to sell to the US because the US is the importer of last resort, the only nation willing to import that output. This will cause a deflationary spiral.

Spain, Greece and Italy are not indicators of what can happen in America because none of these countries sell anything anyone wants and neither are they important markets to export to. These nations are simply bad sellers and poor customers so they have no future.

Exponential growth in debt ala Karl Denninger also does not matter because being a bottleneck for the movement of goods and services of the entire world is equivalent to being a government monopolist. Does the balance sheet even matter in this case?

Anonymous PC Geek April 13, 2013 9:06 PM  

@map

Although I am too ignorant of economics to do anything but repeat what others have said here, that is an excellent point that I don't recall anyone else having brought up.

It does seem to support deflation...every other nation in the world has tied their whole economic well-being to us, as our spendthrift ways created tremendous demand that simply could not be found anywhere else, thus enabling much of their economic development to have occured in the first place.

What would happen to China within days of them no longer accepting dollars? I am not perfectly sure but it would not be pretty.

Te rest of the world rises or (mostly) sinks with us nowadays, for better or worse...

Anonymous Vidad April 13, 2013 9:07 PM  

"Also, Gold has dipped, which is problematic for team Whiskey Zulu."

No it isn't."

Yeah. Actually, gold is heavily manipulated at this point. The "price" of gold on the markets is largely an outgrowth of paper instruments and will eventually de-couple from the metal itself. This has happened at a few notable points in recent history.

The price on the markets is ____

The amount you can buy - physically - at that price is ZERO.

Blogger tz April 13, 2013 9:13 PM  

I think there is something in the move in gold and bitcoin related to velocity. Those who want gold (physical) might have saturated, so liquidity has lessened. Bitcoin, with it entering the news provided more buyers, exchanges, places that would accept it, increasing the velocity.

Nate also makes a good point regarding the specific nature of hyperinflation v.s. inflation. If I have a pile of physical dollars, but don't trust the pile will be worth anything next week, I will spend them for something, anything I think will hold value better. That depreciation can be from default or devaluation. In 2008-9 people were dumping stocks simply believed they were going to be less valuable in the future (and are buying them for the opposite reason now). Since houses were bought with debt and illiquid, we didn't see the same effect.

Anonymous Vidad April 13, 2013 9:27 PM  

NATE: "My co-host is a crisis gardener. Its not my fault. I can only butch him up so much."

Says the giggler.

Blogger Nate April 13, 2013 10:03 PM  

"For a country to longer accept the US dollar as payment for goods and services rendered, means that nation must no longer export to the United States."

Given that US is broke and can't afford to actually pay for anything... it appears the point is entirely mute.

Anonymous Stilicho April 13, 2013 11:04 PM  

Nate shot a spitball with his last post and called it a tactical nuke.

Anonymous Stilicho April 13, 2013 11:07 PM  

I seem to recall Precther predicting that we would have severe deflation followed by a government-caused hyperinflation (trying to get us out of the deflation). Could it be that both Vox and Nate are correct and the only issue is which occurs first?

That's been my position for a few years now. The deflation will be abrupt and horrific as will the response of the monetary authorities.

Anonymous zen0 April 13, 2013 11:20 PM  

I still cannot believe that all these control freaks with their hands on every friggin' nickel in the universe will somehow lose control of a reserve currency without any contingency plans.

I just can't.

If necessary, they will have another in the works as a backup, like SDR's with a gold component.

The game is too far along. The control mechanisms are too sophisticated and interactive.

Preparing for Whiskey Zulu is like preparing for the last war, like the generals in WW1.

You may say I am foolish, but if they can manipulate gold like they do, which is the ultimate money, they can manipulate any money any damn way they please.

It all just depends on the stakes.




Anonymous map April 14, 2013 12:55 AM  

Nate -

"Given that US is broke and can't afford to actually pay for anything... it appears the point is entirely mute."

Yeah, but the whole world is broke. There is no nation operating in the black so arguing that the US is broke is par for the course.

Anonymous map April 14, 2013 1:08 AM  

PC Geek -

You need to understand that the US dollar's status as a reserve currency is not something that nation's agreed upon. The reserve status grew organically as a function of America being the world's biggest importer. Every foreign sale within the United States represents a dollar entering international markets. The bigger the foreign sales made in the United States, the greater the number of dollars that appear in international markets. The sheer number of dollars buoys the dollar's value and the sheer velocity of dollars entering transactions both here and abroad solidifies the dollars place as the currency of business the way English is the language of business.

The real question is, why did America become the world's biggest importer? By design. America rebuilt Japan and Germany as exporting nations that restricted imports and sold to the United States. Other nations followed suit and bottlenecked their economies toward selling to the United States.

Moving away from this position is almost impossible without incurring huge first-mover disadvantages.

Why did America turn Japan and Germany mercantilist? Because America was an exporting nation after WWI, and the result was the Great Depression. American firms went into debt to produce for the European market. When Europe recovered, the result was overcapacity and American firms could not compete on price with European firms because of the debt overhang. WWII was an attempt to correct that mistake.

Anonymous Jack Amok April 14, 2013 1:54 AM  

...without any contingency plans.

Contingency plans are a luxury available to people who haven't expended all of their design margin. I mean, when Plan A is "a freakin' miracle bails us out"*, worrying about contingency plans is a bit superfluous.

* though it is possible for some of these folks Plan A is "we die before it all goes to hell and it's all someone else's problem."

Anonymous Toby Temple April 14, 2013 6:54 AM  

And the high ground goes to Nate... again.

Vox, your IX did start with an obvious error.

Blogger Nate April 14, 2013 7:46 AM  

"Yeah, but the whole world is broke. There is no nation operating in the black so arguing that the US is broke is par for the course."

No. This isn't actually true. It appears superficially true because people have fallen for the notion that debt is money. it isn't. Ever dime of it can be erased, the structures can disappear, and the economies of the world will endure an acute disruption... then quickly stabilize and roll right along.

Take all government interference out...and what you'd see around the globe would be two years or so of hyper-inflation in some places and deflationary collapse in others but by about the 18th month most places would've already pasted the nadir and would be working their way back up.

Its also not true because everyone is not in fact broke. China is broke. America is broke. Most of the EU is broke.

Russia is far... far... from broke.

Qatar certainly isn't broke.

Anonymous Toby Temple April 14, 2013 8:36 AM  

With its current stock of gold, how can anyone claim that Russia is broke?

Blogger Nate April 14, 2013 8:59 AM  

"With its current stock of gold, how can anyone claim that Russia is broke?"

Not to mention that Russia is one the few countries that actually has low levels of sovereign debt.

There is a reason why Russia has been almost entirely immune to the global economic cancer.

Blogger Nate April 14, 2013 9:04 AM  

"Preparing for Whiskey Zulu is like preparing for the last war, like the generals in WW1."

What makes you think they would want a Whiskey Zulu situation? What makes you think they would even care?

Blowing up the currency deliberately, and being the first ones out, would be an extremely advantageous thing to do.

My God man... Don't you see you're faith in their control devices is actually a reason to think WZ is going to happen?

Vox's point is... if they could make it go Whiskey Zulu... They would!

Blogger Nate April 14, 2013 9:07 AM  

Also this business about refusing the dollar means not trading with the US is just non-sense.

Australia's biggest trade partner is China. The transactions take place, for the time being, in US Dollars.

When no one wants its money... if the US wants something.. its going to... for the first time in a very very long time... have to have reserves of someone else's money to trade with.

Anonymous NorthernHamlet April 14, 2013 9:22 AM  

Zen0:

"I just can't."

You and I have the same feeling. Even from my experience in the corporate world, I had more involved plans, and my line of work isn't overly complicated in and of itself. I suspect there is more afoot from a foreign policy perspective.

Nate:

Have you considered how the N. American shale reserves will figure in a broke, destabilized world?

Anonymous Go Titans April 14, 2013 9:41 AM  

Nate: It's Red Auerbach time - gimme a CAO!
Vox:DeSean Jackson anyone?

Blogger Nate April 14, 2013 5:07 PM  

"Have you considered how the N. American shale reserves will figure in a broke, destabilized world?"

Try not to think of it as a destabilized world. Think of it.. more like... total war. It makes things easier to predict.

Blogger Nate April 14, 2013 6:02 PM  

"Nate: It's Red Auerbach time - gimme a CAO!
Vox:DeSean Jackson anyone?"

oh good.

So at least I have someone left to still convince.

Anonymous NorthernHamlet April 14, 2013 7:22 PM  

Nate

"Try not to think of it as a destabilized world. Think of it.. more like... total war. It makes things easier to predict."

I keep assuming it won't come to that. Bad assumption of course, it always could and possibly will. I suppose this is the game we play.

Anonymous John Regan April 14, 2013 8:16 PM  

I've reluctantly come to the conclusion that Nate doesn't know what he's talking about. Lots of bluster, little substance.

This might interest some of the readers. I thought the interview with Carmen from the other day was pretty cool:

http://strikelawyer.wordpress.com/2013/04/14/a-glimpse/

Anonymous zen0 April 14, 2013 10:23 PM  

@ Nate

My God man... Don't you see you're faith in their control devices is actually a reason to think WZ is going to happen?

Jiminy Crickets, Nate, I would characterize it more that I have faith in their survival instinct coming into play. The world financial system is so interconnected that it has become a mechanism for mutually assured destruction.

Do you think China or Japan would benefit from hyperinflation in the U.S.? Would they not in fact do whatever necessary to help avoid that scenario?

The economic destruction of their biggest trading partner would not serve them well.

That being said, that they screw it all up somehow is not beyond imagining.

Anonymous John Regan April 14, 2013 10:33 PM  

From wikipedia:

"The cause of the immense acceleration of prices that occurred during the German hyperinflation of 1922–23 seemed unclear and unpredictable to those who lived through it, but in retrospect was relatively simple. The Treaty of Versailles imposed a huge debt on Germany that could be paid only in gold or foreign currency. With its gold depleted, the German government attempted to buy foreign currency with German currency,[9] but this caused the German Mark to fall rapidly in value, which greatly increased the number of Marks needed to buy more foreign currency. This caused German prices of goods to rise rapidly which increased the cost of operating the German government which could not be financed by raising taxes. The resulting budget deficit increased rapidly and was financed by the central bank creating more money. When the German people realized that their money was rapidly losing value, they tried to spend it quickly. This increase in monetary velocity caused still more rapid increase in prices which created a vicious cycle.[35] This placed the government and banks between two unacceptable alternatives: if they stopped the inflation this would cause immediate bankruptcies, unemployment, strikes, hunger, violence, collapse of civil order, insurrection, and revolution.[36] If they continued the inflation they would default on their foreign debt. The attempts to avoid both unemployment and insolvency ultimately failed when Germany had both.[36]"


So one key ingredient of the German hyperinflation of the 1930's was that the war debt could be paid only in gold or foreign currency. This raises two interesting points: first, that a hyperinflation was triggered by unpayable debt; and second, that the situation in Germany in the 1920's is ultimately inapplicable to the current situation in the US, because the US dollar is the world's reserve currency, a little like global "legal tender".

In the 1920's there was a genuine adversarial relationship between some immportant nations and others; whereas now it might be the case that the elites of all nations have more fealty to each other than any of them has to the unwashed masses of their own country, and international rivalries are more for show.

In any case, I don't think you would ever find a willingness on the part of the Fed, at least, to do what the German central bank did in the 1920's. Even if they could. Which I don't think they can.

Anonymous map April 15, 2013 1:22 AM  

Nate -

"No. This isn't actually true. It appears superficially true because people have fallen for the notion that debt is money. it isn't. Ever dime of it can be erased, the structures can disappear, and the economies of the world will endure an acute disruption... then quickly stabilize and roll right along."

WHAT??? Debt is not money? What are you talking about? Of course debt is money, simply because there are counterparties expected to be paid. Sure...it can be erased, but not without consequence and there is a first-mover disadvantage to repudiating your debts that no nation can survive.

Please tell me that this is not the basis of argument against Vox?

Anonymous map April 15, 2013 1:26 AM  

Nate -

"Australia's biggest trade partner is China. The transactions take place, for the time being, in US Dollars.

When no one wants its money... if the US wants something.. its going to... for the first time in a very very long time... have to have reserves of someone else's money to trade with."

What does Australia sell to China? Raw materials and natural resources. What does China do with that? Make finished goods for export. Where does the bulk of China's exports go? USA.

When China refuses to sell their output to the US, where do they move it?

Anonymous Roundtine April 15, 2013 2:25 AM  

Germany's fiscal deficit was larger than the Versailles Treaty debt. The treaty debt became a theme because Anglo-Americans believed Germany was mistreated after the war. A good book to read is Bresciani-Turroni's account of the German hyperinflation. He focuses on the economics, and some cultural and political issues come through.

Also, at that time, Wiemar Germany had paramilitary groups in action. Communists took over cities and executed the government, and then Freikorps came in and wiped out the Communists. The Ruhr was invaded and the Germans were printing money to fund a resistance. If you don't have a war scenario for German/Zimbabwe style hyperinflation, it's not going to happen because it would require a total societal breakdown, as happened in the wars of English and Northern Aggression. You would need to see something on the order of a Black Panther army invade LA and wipe out Mexican gangs, and then Mexican military cross the border to support them, followed by a militia made up of veterans following the Fallujah playbook.

Anonymous Toby Temple April 15, 2013 2:55 AM  

When China refuses to sell their output to the US, where do they move it?

Here is a clue: USA is not the only market for Chinese export.

Anonymous Toby Temple April 15, 2013 2:58 AM  

WHAT??? Debt is not money? What are you talking about? Of course debt is money, simply because there are counterparties expected to be paid. Sure...it can be erased, but not without consequence and there is a first-mover disadvantage to repudiating your debts that no nation can survive.

Debt is debt. Money is money. To claim that debt is money one must also accept that money is debt. And that would be ridiculous.

Anonymous Porky April 15, 2013 7:20 AM  

@Toby Temple

A banknote is a debt security. Money is debt.

Unless it's not.

Anonymous John Regan April 15, 2013 9:03 AM  

@Toby: circulating paper money is always a note of some kind, which is a debt of the maker of the note.

The question is not whether money can be debt. It can. The question is whether the debt is redeemable or not. It should be, but it isn't.

That's the essence of the problem.

Anonymous John Regan April 15, 2013 9:28 AM  

Ambrose Evans-Pritchard sees the problem:

>Quite so, and while we’re at it, lets seek an amicable divorce for everybody, for Portugal, for Ireland, for Spain, for Italy, and above all for Germany, since they are all being damaged in different ways by the infernal Project. All are victims of their elites.<

It's the elites v. the masses. National boundaries are secondary, if they matter at all.

Anonymous Boetain April 15, 2013 11:14 AM  

Why all of the player hating? I believe the debate is just now getting very interesting. I like the fact that Nate has made a concrete prediction that can be judged. Let's see what predictions Vox makes based on his theory and then we can all place bets.

All bets payable in gold of course.

Anonymous map April 15, 2013 5:00 PM  

Toby -

"Here is a clue: USA is not the only market for Chinese export."

Because nations do not protect their own industries from foreign competition.

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