Friday, April 12, 2013

The Great Debate: March to the Scaffold

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.

"Nate begins the eighth installment in the series by getting some things factually incorrect. To begin with, Z1 did not begin to decline in July 2008, as it peaked at $52.9 trillion in Q1 2009, a figure it did not reach again until Q3 2011, when it hit $53.8 trillion. 2008 merely served as the warning sign, as total credit growth ceased to keep pace with its 60-year historical rate, thus triggering two quarters of 10 percent growth in the federal debt sector in the latter part of the year. Gold and silver prices certainly did rise during that time, as did the stock market, but this was the result of the near-unprecedented increase in federal spending which was taking place at that time; even as the Household and Financial sectors contracted, the Federal sector expanded by $3.3 trillion.Tax expense:  455.00  820.00"

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.

Vox later reinforces this error.

"Nate is looking at Z1 - or to be more precise, L1 - as a whole rather than in its component parts. This is not unreasonable, but unless one looks at the component parts, one cannot understand the importance or the consequences of the shift in the nature of the credit market that has seen the federal element double from 10.3 percent of the entire credit market to the current 20.6 percent."

That's because for the purposes on inflation it doesn't matter who's spending the new money.  Its new money.  Government spending is merely the delivery method for injecting it into the economy.  That method is neither limited, nor temporary.   Nor is there a limit on how much money the Fed can "lend" the government to spend. Because when a federal reserve bank is lending money to its government it isn't lending.  It is straight up counterfeiting.  

Then... yet again... Vox reinforces his error... and even manages to compound it.

"What Nate sees as evidence of inflation, the modestly higher prices in the gold, silver, and equity markets, is largely limited to the areas of direct federal intervention.  This is why health care and higher education prices are still rising to new heights, while real estate prices are struggling to get back to where they were.  The areas that are reaching new heights are where the outstanding $11.6 trillion in government credit is flowing.  That is where the malinvestment is still being directed."

No.  It is not limited to any areas at all.  It is literally visible across the board.  It happened everywhere.  It even happened in the housing market where it was detectable by the fact that the housing values didn't sink nearly as much as they should have.  And again, Vox is suggesting that where the government spends the new money somehow matters.  It does not.  What matters is new money is being injected into the system.

All of this was bad enough but I nearly fell out of my chair when I read this:

"I note that each of these hyperinflationary scenarios were very short-lived and tended to be closely tied to serious political upheaval.  The longest period is two years, which happened twice in China during the 1940s.  Note, however, that these hyperinflations tended to take place AFTER the wars or major political upheavals; the frequency with which they take place after independence is gained by a nation is reminiscent of the high inflation that plagued the American colonial currencies and the Continental Dollar.  If any hyperinflation were to take place, history suggests it would likely take place after the collapse and political chaos; it would be a result of it, not a cause."

Setting aside the fact that Vox just argued that hyper inflation isn't likely because it follows war and political upheaval, and everyone with a brain is predicting war and political upheaval...  I cannot help but note that war and political upheaval are expensive.  Particularly for the losers.  The losers also suffer because their citizens lose faith in their governments.  So you have a massive amount of debt you'll never be able to pay back, and you have citizens that don't have any faith in their government.  What do we see in the United States right now?  We see more debt than can ever be paid back.  And at risk of sounding like a Cambridge economist it appears we've reached a point where America's faith in its government is at a perpetual all-time low.  I will be explaining why that matters shortly.

"Remember, it's not enough to merely print the money. The amount printed and distributed has to be greater than the continuing contraction of private credit and the evaporation of bank deposits.  And keep in mind that the combined $4.2 trillion decline in outstanding Household and Financial sector credit since 2009 alone exceeds, by a factor of nearly four, the ENTIRE AMOUNT of U.S. currency presently in circulation."

And by Vox's own metric, price, they have been and are doing, just that.  Excepting of course that private credit has nothing to do with it.  Deposits are all that matter.  As we have seen proven by the fact that prices went up while credit was declining.    Vox wraps it up with a bait and switch:

"Nate is correct to note that people are becoming increasingly drawn to holding cash in the hand, but he is forgetting that when cash becomes more valuable in this manner, it is strongly indicative of a deflationary environment, not an inflationary one.  In an inflationary environment, one wants to take on more debt and hold less cash. In a deflationary environment, one wants to avoid debt and hold more cash.  The intellectual gymnastics notwithstanding, one's true position on this matter can be ascertained by one's material preferences and actions."

I made no such claim about people in general.  People in general are not drawn to cash at all.  The point I made was that you, the newly enlightened reader, upon enlightenment were drawn to cash.   Vox knows full well that I have been telling everyone to get out of cash likely as long as he has.  This actually brings a question to mind.  I am hording gold and silver and suggesting you should be doing the same.  Does anyone here think Vox is hording cash?  

Enough of this.  Its abundantly clear that Vox simply doesn't understand how Hyperinflation is going to happen.  He looks at all these big numbers and and throws up his hands and says literally... Deflation is inevitable!  Come along folks.  Its time we left the cave.  Because right now you're still just like the people in the cave in that allegory of the people in the cave by that greek guy.

The first thing I want to make you understand is that hyper-inflation is not the same as inflation.  Inflation is an increase in supply.  Hyper inflation is a catastrophic event that happens in different ways in different economic systems.  Its like death.  There are really only a few ways humans die... but we can get to them in a near infinite number of ways.  You can drown or you I can stick your head in a bag.  Either way you die of a lack of oxygen to your brain.  Even if I slit your throat and you bleed out, the mechanism for death is still a lack of oxygen to your brain.  Drowning and having your throat slit appear very different but the mechanism of death is actually the same.

Hyper-inflation is like that.  Its a mechanism for death.  Currency death to be specific, and we can get there in a number of ways.  These ways vary depending on circumstances like the superficial structures men have constructed on top of the actual economy.

For example in controlled economies like the USSR hyper inflation's delivery method is easy to spot.  The government just keeps spending and spending and raising everyone's wages until things go boom.  But what is the "boom" really?  Is it really just an out of control train?  Why can't they just stop printing new money?

Remember back when I explained what money is?  Remember how I talked about how there is a constant commodity competition?  it never stops.  There is a constant struggle to decide what people will want.  The commodity people want the most, is the commodity that will be the easiest to trade in the future... and therefore becomes the money.  

Now... when a government intervenes and says, "You will use X as money." they they have short circuited this competition by giving an un-natural advantage to one commodity over the others.  However that comes with a cost.  People want something they would otherwise not want because the government says so.  This works as long as people have faith in the government.  They have faith in the government and that faith gets transferred to the paper slips or magic deposits.  If they lose faith in that government.. like after losing a war... or after a big political change...  they can also lose faith in their currency as well.  By that I mean, they no longer have faith that they will be able to exchange their paper slips for the things they want and need.       

Folks.  Hyper-inflation is not an increase of the money supply.

The rapid catastrophic increase in the money supply is a symptom.  It is not the cause.  

Hyper-inflation is what happens when people decide that the fiat money they have in their pockets and in their  accounts is no longer going to be honored in the future and start spending it as quickly as possible.  That is the unstoppable train of inflation.  The printing presses cannot be stopped because the people will not stop spending the money as soon as they get it.  They don't want the money.  There are other commodities that they have more faith in, but the government has interfered and forced them to use this crap that they don't want.   This is evidenced by their behavior.  The International Accounting Standards Board established this list of criteria to diagnose hyper inflation:

  • The general population prefers to keep its wealth in non-monetary assets or in a relatively stable foreign currency. Amounts of local currency held are immediately invested to maintain purchasing power
  • The general population regards monetary amounts not in terms of the local currency but in terms of a relatively stable foreign currency. Prices may be quoted in that currency;
  • Sales and purchases on credit take place at prices that compensate for the expected loss of purchasing power during the credit period, even if the period is short;
  • Interest rates, wages, and prices are linked to a price index; and
  • The cumulative inflation rate over three years approaches, or exceeds, 100%

What we see here is a clear pattern of people rejecting the cash (I say cash but it works for whatever is represented in the deposits as well, though generally the deposits disappear as folks stop bothering with banks entirely) their government is telling them they have to use.

This is why I was amused when Vox suggested that I was forgetting that in a deflationary environment people want their cash.  I am not forgetting it.  That behavioral difference is key to my case.

During the american great depression people horded cash.  They buried it in their backyard and hid it in mattresses.  In Wiemar .. people wallpapered their houses with it.  Literally.  The key is, American's retained faith in their government and therefore the purchase power of their money.  In Wiemar they had enormous debt, and had just lost a major war.  They did not maintain a faith in their government and therefore lost faith in their fiat money.

The reason hyper-inflation often follows war and political upheaval is because those are two excellent reasons for folks to lose faith in their governments.  As further evidence of this I point once again to Weimar.  Note that after the hyper-inflation a new leader emerged and restored faith in the government and the next decade was referred to as "The Golden Age of Wiemar".  This should also bring to mind FDR and the fact that in spite of his rampant stupid... people had faith that he was going to save them.  Thus they never rejected their fiat money.

That is why the broad definition of fiat is more important than the specific credit nature.  Because once people lose faith in the money... its not money anymore.  Once it stops behaving as money, what it represents or how it is created or how it gets delivered into the system doesn't matter.  Because no one wants it.  Forced to take it, they will get rid of it as soon as possible.

So... 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.

Did you catch that?   The important phrase there is "change the rules".

Vox and other deflationists are deflationists because at heart they are system guys.  They understand the system and how it works.  What they ignore, is that the system can be changed and will be changed.  They will have no choice in the matter.  Hyper inflation isn't a decision that is made by governments or central banks.  Its made by people.  Now in some cases governments can take actions deliberately to cause hyper inflation to happen but ultimately the mechanism is the same.  The people reject the fiat money that they are legally being forced to use.

That is one way we get to Hyper-inflation.  But there is another way as well.

Right now the dollar is the world's foremost reserve currency.  I say foremost because its not the only reserve currency out there.  Its just the one folks have the most of.  That creates and sustains enormous demand for US dollars.  If one looks at international activity during the financial crisis of 2008 we see that folks actually scrambled to get dollars.  Demand for US dollars world wide went up.  That in and of itself helped to disguise the inflation within the US internally.  This is because generally speaking folks internationally figured if anyone was going to make it through the collapse it would be the US.  I am trying not to laugh as I type that.  Its like saying, if anyone is going to make it through this nuclear blast it will be that guy standing at ground zero shouting about the bomb not really being a bomb at all.  Never the less...

Right now there is an unknown amount of dollars deposited in bank accounts and held by governments around the world.  The interesting bit?  The Fed has no idea how much.   I am going to repeat that.  The US Federal Reserve has no idea how many US dollars are floating around outside our borders.  Right now that money is mostly not doing anything.  Its just sitting in accounts.  It has no "velocity" as we call it in economic terms.  

Any ideas what happens when those folks decide they don't want US dollars anymore?  They spend it.  Ya know what happens when they all start spending it?

Right.   Kaboom.  Think back to what happened to the price of platinum when the USSR up and dumped tons of it on the market.  Now imagine if everyone else dumped their platinum too... and in response the USSR just kept dumping more and more platinum.  There is a finite supply of platinum in the world.  Dollars?  Not so much.

As the money that was just sitting around gets re-injected into the system the price of US dollars goes way down.  As that price goes down...  people lose purchase power.  As people lose purchase power... they spend more to get out while the getting is good.

And thus the cycle is born.

Again.. the credit nature of the money is irrelevant.  The money is rejected and new rules will be written.

That is why I rejected Mises' definitions and instead focused on what makes the money the dominant commodity in one going commodity competition.  Because if you have an artificial advantage like fiat... then once that advantage is taken away... you get a disturbance.  The people reject the former money and pick a new money.  This happens in different ways.  It can be relatively smooth in the case of a conquered nation switching to new money issued by the invader... or it can be ugly... as in hyper-inflation when the government tries to keep the dead currency alive via printing and spending.

So not only do we now see that deflation is not only not inevitable... its incredibly unlikely.  

We are seeing signs already.  The dollar is being rejected.  Right now china is negotiating a deal to trade directly with Australia without dollars.  This is a big deal.  

Iran is no longer pricing its oil in dollars.  This is also a big deal.

We have people rejecting the dollar here at home as they spend and spend.  We have celebrities who have suggested their contracts should be negotiated in Euros.   And think about it.. that was before the printing got good and started.  We now have several states considering passing laws making Gold and Silver legal tender.  These are behaviors associated with hyper-inflation people.  It is not only going to happen... it is going to happen sooner than you think.

So right now we have two separate mechanisms... an internal... and external.. pointing to the rejection of the US dollar.  Both lead to the same place.

We are entering what historians call.... interesting times.  In the immortal words of Admiral Josh Painter... 

This business will get out of control. It will get out of control and we'll be lucky to live through it.

ok well... you'll be lucky to live through it. 

I'll be fine. 

As for the debate... I suspect Vox now finally realizes how thoroughly the rug has been pulled out from under him.  We were never debating what he thought we were debating.  My case was never what he thought it was.


How does thy medicine taste?


Nate said...

wow. Format difficulties. Sorry. Should be fixed now.

patrick kelly said...

I knew I was screwed, but do you have to enjoy rubbing it in so much?

With my current finances and resources I'm going long in cheap whiskey, at least I can numb the pain and have something to barter with if I don't drink myself into oblivion first.

Nate said...

Its not the coming doom that I am rubbing in your face.

Its the fact that I have just kicked Vox's ass all over the internets.

The Internets said...


Flannel Avenger said...

I do believe that about settles it.

Didn't Vox link to a zerohedge article a while back that outlined how the Federal Reserve was playing games with the banks to keep the printed money from going into circulation and that those games couldn't be sustained past August or September? It would seem that that would explain why he could even still posit a deflationary scenario and a plausible scenario for how it starts.

Nate said...

Sure he can. It just won't matter.

Van said...

I'm also not in financial position to make major accomodations for future events. For about two years now, I've been stocking up on basics: food, medicine, bottled water and a water purifier, toilet paper, coffee, ammo. I'm likely to move soon (cheaper house further from the city). Should have money left from the sale to pay off debt and buy additional supplies. Insect repellent, fire starter logs, matches, charcoal and lighter fluid.

Res Ipsa said...

I’ve been disappointed with this debate. Vox did two things that I found disappointing. 1. He never showed up in any meaningful way. 2. He has stuck to his normal method of dealing with very narrow terms and concepts in an effort to piece together a “technical” win. He compounded his mistake on attack by not doing some very basic work on developing his own background for a logical counter scenario. To make matters worse his counter attacks to your points were weak and unconvincing.

Well done Nate! You deserve your win.

Nate said...

You're going the right thing. No matter who's right... me or Vox... you will be in better shape for the decisions you've made.

Nate said...

Thanks Res.

Hope ya get to catch the show tonight.

WaterBoy said...


Somehow, though, I can't help but have the feeling that Vox still has an ace up his sleeve....

Nate said...

That's because you're not used to seeing Vox kicked around like this

Van said...

Right now, I could go a few months without needing to leave the house. Except for one thing - I'm dangerously low on bourbon and other spirits.

Great work with this debate. I and many others have learned an amzing amount in a short time.

Eric said...

I know some people have suggested it before, but is there a way we (and by we I mean not me) could compile the debate into some singular document that I could share with everyone I know? Trying to tell people to see VD's blog then Nate's ad naseum is not the most efficient way to convince them that THEY NEED TO READ THIS DEBATE.

Also, well done Nate. Excellent post.

The thing is, I guess I tend towards Vox's position with regards to where the stock market is going (down, I don't think there are any fundamentals to supports 14k+ DJIA), but then I've been a perma-bear for a while.

But I understand the need for me to own PMs and while I haven't done so yet, I've been checking APMEX daily.

As an aside, I remember Krugman saying 4ish years ago that deflation not inflation was what we should be worried about. This makes me wonder why VD would want to side with such a position...

zen0 said...

Not only do the PTB know about Weimar and Zimbabwe, they know how each scenario played out. Zimbabwe's currency was destroyed, and foreign currencies became accepted.

Weimar tried new monies that people did not accept, until they went to the Rentenmark, which was backed by hard assets, hard assets being the only thing not affected by inflation or deflation.

Why would the Feds, if faced with hyperinflation (not simply high inflation) not go directly to the Weimar solution, given that it successfully ended the hyperinflation?

Res Ipsa said...

"Hope ya get to catch the show tonight."

I wish I could. I'm working tonight.

Van said...

How did they get the people to trust that the new currency was, in fact, backed by hard assets?

I think people would want proof they could trade their currency in. Could the uS (not a typo) actually posess enough gold/silver to back currency adequate for 315 million people without causing havoc in the currency's value?

Res Ipsa said...


The problem with your train of thought is that the stock market isn’t the economy. Imagine if you will some scenarios. 1.) retirees discover that there is no more social security checks coming and so to maintain their standard of living they sell off their mutual funds. 2.)Obama announces that he is going to raid (I mean tax) just this once, peoples IRA’s 401K’s etc and require them to purchase government bonds. What would happen to the price of stocks? Depending on how drastic the sell off and if there any willing buyers, my guess is that the markets would crash.

If that stuff happened and the markets tanked, we’d call it deflationary. What if, as that was happening, people started having to pay more $$ to get goods and services? What if because of corporate failures business quit delivering food, gas and power? In order to get those things people would have to pay more, that would be inflationary.

What I’m saying here is that its possible for one or more sectors of the economy to be in a deflationary constriction while other sectors are inflationary, or possibly hyper inflationary.

I know that sounds contradictory. Consider that at one time all the economic experts believed that it was impossible to have high unemployment and high interest rates and inflation. Then we got Jimmy Carter and stagflation.

Nobody knows how this thing is going to play out. I for one think its going to be worse than Vox or Nate is saying. This debate has been a academic exercise not a definitive prediction of future events.

Res Ipsa said...

"I can't help but have the feeling that Vox still has an ace up his sleeve...."

I thought he'd at least show up.

Eric said...

Haha Res,

So you're saying my instincts could be right on both counts, but I just didn't think through how. I guess I like that that's a possibility. Although, given the circumstances, I'm not sure I ought to be too pleased about being right given what it means for civilization.

Van said...

Don't feel bad. Much like the market, civilization's due for a correction.

Nate said...

It doesn't take a genius to predict future events.



Nate said...

Res... Worse than I am saying? mate I am talking about all out total war on scale not seen... hell maybe ever.

Res Ipsa said...


I've got no idea how or how bad. I don't know but it could be on the scale of Sodom and Gomorrah. Which is what we deserve, as a nation.

jack said...

Until this one I've been able to [sort of] highlight Nate's stuff, do a CtrlC then Ctrl V it into Word and save it for the debate cd. This time no go. Wondering what happened and wishing that Nate would provide a switch for Print.
I will read it of course but would like to save it. Unless you two are planning to combine this debate creature into a final something we can all save. For the children, you know.

Roundtine said...

Vox has said the U.S. dollar wouldn't last much past the early 2030s (I think he picked 2033 or thereabouts as a guess/estimate). If we go by the 1930s, the defense cuts started about 10 years before the war. If there's a multiyear global war in the 2020s and the U.S. sounds like it comes down to timing. Or, as often seems to be the case, the inflationists are betting on a political maneuver (which I grant them seems likely), but doesn't refute the current economic condition.

I agree that hyperinflation via fiat revulsion/currency devaluation is the most likely route, but if the U.S. hyperinflated, then the Chinese reserves are gone and the yuan blows up. Yen is done. European banking system: done. Thus, if you envision U.S. hyperinflation, you must also include the simultaneous hyperinflation of almost every fiat currency on Earth. Otherwise, if it happens in the opposite order (as I suspect will happen if it plays out financially/economically) foreign currencies blow up one by one and the U.S. dollar goes through the most epic rally, the biggest deflationary move in history, perhaps at the peak with US government debt exceeding global GDP on PPP. Pure insanity. And then, the deluge.

Porky said...

I've been waiting for someone to mention the key ingredient: Fear.

You can't make a big bowl of hyperinflation without it.

Athor Pel said...

I am now convinced.

Good job.

Bet on people being people rather than mere cogs in some system.

Salt said...

You make a good scenario. It's one I have contemplated. Such a possibility should be one one's radar.

But I'm not convinced it is inevitable.

The CASH to Digital money ratio / asset values is what gives me pause. Hardly anyone uses Cash, preferring plastic digital money. One can end in the blink of an eye. The other not so easily.

In all the past hyper-inflations you posted, how many were digitally driven, capable of being wiped out by the mere stroke of the keyboard that created them?

The day may come where no one will take your VISA, AmEx, or personal check as they are creatures of the banks.

Now Cash does flow through banks, but Cash is a creature of the US Treasury, not CITI, JPM or BoA. Cash can flow freely between consumers. No so for Plastic.

If you were to wipe out 50% (even 100%) of all the digital dollars in existence, what would be the effect upon Cash? Latest figure I saw was on the order of 1.2 Trillion in the US.

I see Cash as, potentially, the elephant in the digital banking room. Is it any wonder they hate it?

What would happen if people lost faith in VISA and JPM and decided to operate in Cash?

Nate said...

I have no idea what the deal is with this post. its a nightmare. After you copy it all... past it into a new document and then highlight the area you just pasted. It may be white text on a white background and you just can't see it.

Nate said...

The dollar isn't going to last until the 2030s. its going tits up in the next 3 years.

Nate said...

"In all the past hyper-inflations you posted, how many were digitally driven, capable of being wiped out by the mere stroke of the keyboard that created them? "

None of it will be wiped out. It will be transfered to either "good banks" or newly created banks... or to the checking accounts of the elite.

Nate said...

It doesn't all have to blow up at the same time... but it will.

Most likely Russia creates a new commodity currency and China opts to dump the dollar for it. Then everyone else dumps the dollar.

Then Kaboom. That's the metaphorical Kaboom before the very real Kabooms start.

tz said...

The first question is prices - What of houses, the $500k that can't be sold for $200k even today? "Prices going up" for some things but not others.

You are spot on in "it doesn't matter who is spending the [newly created] money". When reserve requirements are lowered, i.e. the fraction of reserves in fractional reserve gets smaller, a bunch of new "purchasing power" (credit which acts like money) is created.

Health care and higher education are highly regulated monopolies, are the prices something beyond monopoly rents? Obama will give me a loan to a university, but not a tiny amount to do Stanford or MIT courses on my computer - iTunes University or something similar.

We can repay the debt, but it might take a justice-a-thon where they have all the Banksters in a stadium, as soon as they get $1T in contributions, they take one and vent his spleen. Literally. And eviscerate him (see Braveheart) - slowly as long as money keeps coming in.

that the fiat money they have in their pockets and in their accounts is no longer going to be honored in the future Note that they do NOT have fiat money in their accounts, only an IOU from the institution where they have the account, as Cypriots have found out (and our grandparents around in the early 1930s did).

As to dollars in accounts held by foreigners, it might be like the virtual gold held by foreign governments - Portugal lost nearly all in the Lehman collapse, and Germany (and the UK) can't seem to retrieve it all, even having the Queen visit the first bank of Potemkin.

It is also worse than you point out. What happens if people won't accept dollars? What happens if things break down so it is obvious that no one - possibly including the creditor banks which might collapse and the bankruptcy courts have an unmanageable mass of accounts receivable - care if you pay back your credit card balance regardless of what it is denominated in. (And the Credit reporting agencies crash).

I've not read the comments yet. Saved for later :)

tz said...

I knew I was screwed, but do you have to enjoy rubbing it in so much?

With my current finances and resources I'm going long in cheap whiskey, at least I can numb the pain and have something to barter with if I don't drink myself into oblivion first.

Rubbing alcohol?

Anonymous Van said...
Don't feel bad. Much like the market, civilization's due for a correction.

Considering how uncivilized civilization has become, it has been in a correction for most of my life. It is due for a bounce, even a dead-cat bounce.

Somehow, though, I can't help but have the feeling that Vox still has an ace up his sleeve....

One ace will not help if you don't have any pattern and your opponent is holding the other three in a full house.

Porky said...

I'm curious about your opinion of the potential bitcoin as a hedge.

Nate said...

"The first question is prices - What of houses, the $500k that can't be sold for $200k even today? "Prices going up" for some things but not others."

Its mal-investment. People don't want them at hardly any price. But eventually the dollars will be so worthless that the amount owed will be insignificant enough to all the sale.

Nate said...

"I'm curious about your opinion of the potential bitcoin as a hedge."

I like bitcoin... I have some money in bitcoin. My thinking is.. its hard to make online purchases with Gold.

kawaika said...

I don't have any precious metals, but would like to. I know exactly what you mean when you talk about people not saving. I know we are going to get shafted somehow. I don't know the particulars, and since I don't make a lot of money, I have been spending on things I can afford that will help me make money--whatever that will be in the future. Things like a chicken plucker, various critters that I can breed, garden supplies, a smoker, etc.

Unfortunately, it's getting difficult to purchase the materials I need for critter related projects. OSB, for example, is going up. I'm not sure if it's just gas prices or a combination of things. My brother and I wanted to expand a chicken coop we have, but it was cheaper to simply build a new one in a different way.

tz said...

Toby Temple said...

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.

I was tempted to point that out as well after I ready Vox's IX post.

Nate said...


Yeah the 100 trillion dollar bill does seem to indicate that printing enough money won't be that big a deal.

I should point out, as insane as this seems to folks, the Trillion Dollar Coin was actually seriously suggested several times during the debt limit debate.

So while we are mocking Zimbabwe... morons are considering his course of action.

Peter Garstig said...

Nate, why don't you fill yourself up with debt till no end? It'll get hyper-inflated away the next 3 years.

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