11-Dec-10 News -- Violence continues for fourth day in Haiti

[John]

11-Dec-10 News -- Violence continues for fourth day in Haiti

Al-Qaeda changes strategy in Yemen

** 11-Dec-10 News -- Violence continues for fourth day in Haiti
** http://www.generationaldynamics.com/cgi ... 11#e101211


Contents:
"Violence continues for fourth day in Haiti"
"Additional links"
Al-Qaeda changes strategy in Yemen
Afghanistan public opinion turns sharply against US forces.
Pakistani media publish fake WikiLeaks cables attacking India
Sarkozy and Merkel join forces to oppose the euro-bond
China's 'neutrality' in Korea dispute damages China's strategic interests
Taiwan begins production of a long-range cruise missile
China's inflation high because of food prices
China to shift to prudent monetary policy next year
US Treasury bond interest rates surge
Pretty women far less likely than plain women to get interview

[vincecate]

This week's debates between the administration and congress over taxes makes is clear that the US deficit is going to continue to skyrocket, no matter which side "wins," increasing the likelihood that the US will default at some point. This is causing a selloff of US Treasury bonds, causing yields (interest rates) to rise. This will make it even harder to get credit, and more expensive to get a home mortgage.

I am not aware of a single case where a government that had debt in a currency they could print defaulted on that debt. Anyone here know of such a case? There are around 100 cases where a government felt compelled to print money till it became worthless. Seems like historical statistics for the US situation favor printing, not default.

Now the US state and local governments can not print money and so default is a reasonable prediction. Would expect these rates to have a spread above treasury rates like problem European countries over Germany, or even bigger.

The US dollar is still on the path to hyperinflation. The foundation of debt/GDP and deficit/total-spending has been cast and had time to harden. The opening act is bond sales failing. So the government has to print money to cover the deficit and bonds they can not "roll over". We are already printing for the full deficit and now bond sales are getting harder. The Obama tax deal makes it clear everyone is planning on printing.

In the 30s the Fed had printed so much money that it was only 40% backed by gold and people were taking out their gold. The currency would have been ruined if they did not outlaw gold. The lesson Bernanke learned is that the Fed should have printed more money. Fail.

[John]

What about a historical example in the other direction?

All the examples of hyperinflation that I know of occurred during
Awakening and Unraveling eras.

Are you aware of any major nations, debtor or creditor, that succeeded
in using inflation to escape default during the Great Depression or
World War II, or any other Crisis era?

John

[vincecate]

What about a historical example in the other direction?

All the examples of hyperinflation that I know of occurred during
Awakening and Unraveling eras.

Are you aware of any major nations, debtor or creditor, that succeeded
in using inflation to escape default during the Great Depression or
World War II, or any other Crisis era?

John

I contend that the last 3 crisis eras in America all should count as hyperinflation. Revolutionary war had "continental", Civil war had 1 or 2 cases of hyperinflation depending on if the North counts, and in the Great Depression the only reason the paper money did not hyperinflate is that they outlawed gold.

It does not look to me like any case of hyperinflation was ever planned or done on purpose. It is just that things get out of control in the crisis. If people stop buying the bonds of a country with a 40% deficit they have to print tons of money to cover the deficit and all the previous bonds coming due. This causes trouble.

[John]

So you don't really have any historical examples to support
your claim.

John

[vincecate]

So you don't really have any historical examples to support
your claim.

Not sure what you mean. Do you agree there was hyperinflation in America as part of the Revolution? Do you agree there was hyperinflation in the South in the Civil War? You do count those as crisis periods, right? Do you agree that debts were paid off with worthless money, not defaulted? I can understand dismissing my unorthodox claim that "the depression really should count as hyperinflation as the paper money would have become worthless if they did not outlaw gold". Not read anyone else who thinks that.

Are you aware of any major nations, debtor or creditor, that succeeded
in using inflation to escape default during the Great Depression or
World War II, or any other Crisis era?.

The US clearly used inflation as part defaulting on their gold debts. Remember a "federal reserve note" was a gold debt back then. They defaulted on that debt and inflated the currency. They even put out propaganda videos saying how inflation was going to save the day. Really. In the video they say they are making $3 billion new dollars to cause inflation, on purpose. Today we are getting close to $3 trillion new dollars in this crisis.

http://www.youtube.com/watch?v=GDHTvtkFZug

[John]

Vince, I don't know why I keep doing this, since the same argument
keeps going around. Examples from previous centuries are irrelevant
because the only form of money was physical money. That was also true
in the Weimar and Zimbabwe examples. But today only a tiny proportion
of money is physical, so any theory from the 18th century is
completely irrelevant. So yes, you really don't have any historical
examples to support your claim.

John

[vincecate]

Vince, I don't know why I keep doing this, since the same argument keeps going around. Examples from previous centuries are irrelevant because the only form of money was physical money.

Last time your claim was that since the US dollar is the main world reserve currency it could not hyperinflate. Countries are working hard to "diversify their reserves" and work out trade that does not depend on the dollar. So this argument will not last forever.

Earlier in this thread your argument was that hyperinflation does not happen in the crisis period. But in America that seems to be exactly when it does happen. Oh well.

Now your argument is that since we keep track of money in computers and much of the money in the Fed computer is never even printed on paper, we can't have hyperinflation. You have bought into Bernanke's claim of "we are not printing money we do it on computers". Remember, anytime you agree with Bernanke, the odds are you are wrong. If you look at Argentina you will find that they too had computers and most of their money was on computers, but they still got hyperinflation. Computers don't prevent hyperinflation.

In fact, hyperinflation pre-dates paper money. England used tally sticks as money before paper money. The King made too many sticks and then they became worthless in 1671. It was not exactly the same as today's standard hyperinflation. The sticks were like bonds and like money, where today these are more separate. But really it is the same thing.
http://pair.offshore.ai/38yearcycle/#1671

The "this time is different" arguments are tricky. Every time is unique, so it is always true that this time is different. It can be hard to tell if the difference really changes things. Like maybe "doing it on computers" means we won't see wheelbarrows full of money or people burning money to stay warm, but is that the important part?

I say give it another round John. But get your arguments in before the hyperinflation starts or they will be already falsified by events.