I think you should revisit your own article here.
http://www.itulip.com/forums/showthr...3-Eric-Janszen
It is very, VERY GOOD. I think you lose sight of it too often. I think you had it EXACTLY correct in that article. (And present day circumstances seem to provide AMPLE evidence towards it's validity).
If you take what Bill Black says, and what you say in "Everyone is wrong again, 1981 in reverse" and do a little thought experiment, where does that leave us?
Well, for MY MONEY (My GOLD and SILVER Money err, currency, that is). This guy completes your thoughts and takes the thought experiment to it's logical conclusion.
I Highly recommend that you all give this a read (for what it's worth).
(I know, I know, can't happen, won't happen, blah, blah, blah)
For all of you arguing the above, Give me a cogent argument why it WON'T HAPPEN, given what we observe in government policy action today.
C'mon, GO AHEAD. TELL ME. What exactly is going to stop this train wreck BEFORE the onset of hyper-inflation? Not a failed bond auction, certainly. Not a failure to monetize bad assets and debts. And there is no political will to reform the system or rein-in BLATANT criminal activity and accounting fraud (on ALL levels, I might add). So, come on, do your best. Prove Nassim Taleb and the hyper-inflationists wrong.
I Dare you to DO IT! (Because I don't think that it is possible)
And THAT my friends, leaves ONLY THIS:
Gold: The Ultimate Hedge Fund
http://fofoa.blogspot.com/2010/05/hair-of-dog.html
There are some clever deflationists that will tell you that the dollar is going to rise in value giving Ben, Tim, Barack and the entire DC gang a lengthy free lunch, all because of the giant debt overhang in the economy that backs the US dollar. The thinking goes something like this. The world is full of debt. The dollar is backed by this debt, and is therefore balanced by it. As long as the debt remains, it must be serviced with dollars which drives up the demand for dollars, and therefore the value of dollars. If the service of the debt starts to fail then the dollar will start to fall making the service of the debt easier (with cheaper dollars) and the service will then resume, raising the dollar back up. I call this the see-saw theory...
The problem is, you see, the biggest debtor of all is the very printer of the currency all that debt is denominated in. And this debtor is now picking up ALL of the slack left behind by everyone else. Only his debt service will never fail, because he can print that service with the click of a mouse. And since he doesn't have to seek dollars on the open market, his debt has the OPPOSITE effect of all other debt. Instead of driving up demand for the dollar, it drives it down (and drives up supply at the same time)!
Normal debt = dollar demand up, dollar supply down.
US Fed Gov't debt = dollar demand down, dollar supply way up!
As the dollar starts to fall in value, this has no effect whatsoever on the ability of the world's biggest debtor's ability to service it, and therefore has no see-saw-leverage effect that raises the value of the dollar back up. Instead, it has the exact OPPOSITE effect... once again. Because now this biggest debtor must print even MORE dollars to suck in the same SUBSTANTIAL AMOUNT of the real economy at ZERO cost.
And here is another way I illustrated this effect in pictures...
This first diagram shows how private debt service, private reinvestment and productive enterprise normally act as a counter-cycle to credit-based inflation. But the only way it works under the global dollar reserve system is for the debt hole to grow infinitely deeper while the accumulation of paper bonds and bills is piled infinitely higher. There is no balance or reset mechanism in place. Only catastrophic collapse:
This next diagram shows in a simple picture what happens when the private debtor fails to keep up with infinite expansion. This is Greece as well as your neighbor that lost his house. Once you remove the private counterbalance the Fed must pick up the slack. Notice that there is no longer a counter-rotational flow:
This next diagram shows about where we are today. We are monetizing the failing debt. We are replacing credit money with base money, and the US federal deficit is the enabler of this process. As FOA said:
My friend, debt is the very essence of fiat. As debt defaults, fiat is destroyed. This is where all these deflationist get their direction. Not seeing that hyperinflation is the process of saving debt at all costs, even buying it outright for cash. Deflation is impossible in today's dollar terms because policy will allow the printing of cash, if necessary, to cover every last bit of debt and dumping it on your front lawn! (smile) Worthless dollars, of course, but no deflation in dollar terms!"
At some point soon, in between the above diagram and the next one, the markets are going to repudiate any more dollar debt in recognition of what is unfolding. This event will propel us into this last diagram as the Fed will be forced to print every last dollar spent by the US federal government, and that's a lot of dollars. This diagram represents Weimar Germany in the 1920's, Zimbabwe in the 2000's and the USA in the 2010's:
(The above diagrams came from my post Greece is the Word)
A little "hair of the dog" I'd say. Or maybe a little too much "hair of the dog".
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