Friday, March 17, 2006

 

Ok it clicked -- deflation THEN inflation

So I've been trying to figure out the plan for a while now. Its obvious that the USA debt needs to be wiped out and the solution to that is hyperinflation. But theres also an asset bubble happening with housing -- which you can't apply hyperinflation after you've just put a whole bunch of people into overvalued homes since they'll be able to pay off the loans real easy in that situation. So, and duuuh this should have clicked a long time ago, first you have to have a deflation. You need to dry up money supply (and jobs as a direct result) and take back the properties when people are made to not be able to pay for the loans. Then only after enough deflation can you begin the hyperinflation. So it all makes so much sense now, and with the M3 going away nobody should be any wiser. Given that the asset bubble _IS_ beginning to burst, its clear that a) easy credit is going away and visibly b) house prices are starting to go down. So I would wager that the deflation has in fact begun but nobody will really catch on for a while because of the interwoven economic dynamics of the situation and the bullshit numbers that are given for things like GDP, CPI, unemployment and other indicators.

Now cost of living is still going up because of increasing cost of oil to manufacture and transport all those chinese manufactured goods, but asset prices are going to go down with the money supply. Manufactured goods should stay somewhat the same price for a while as the value of dollars temporarily increases. I would guess that once the forclosure numbers get high enough the hyperinflation will begin and then thats the shit really hitting the fan.

Maybe I'm all wrong on all of this, but something makes me feel like I've got it.

Comments:

While I certainly agree that the current state of the US Debt is both terrifying and destabalizing, I don't understand why the debt needs to be wiped out. I think it needs to be paid, not just wiped out (we don't even let third world countries off the debt hook that easily). Since the interest payments on their debt are tied to the bank rate, periods of deflation & hyper-inflation will end up having little effect on the real cost of debt repayment.
 
The thing is that the debt cannot be repaid legitimately. The amount is simply too much. I dont even think the interest payments can realistically be paid. When I say wipe out the debt I mean by using the modern day equivalent of printing the money -- monetizing the debt. Thats how the hyperinflation scenario happens, the supply of money explodes over a short period of time so that the debt can be repaid but it has the side effect of wiping out the value of the currency. So the debt is repaid, but at the same time the debt becomes worthless to those who hold it. To me it seems its the only logical conclusion to the current situation but the details of how it will play out are sketchy of course, though I think the USA will end up like a 3rd world country as a result. And I dont know what that will bode for Canada but it can't be good.
 
Someone dropped off "The Michael Journal" at my house the other day (http://www.michaeljournal.org/home.htm) I have a problem with some of the points it glossed over, but it seems like it would be of interest to you, even if it is a religious publication.
 
Hrmm Interesting. Actually I recognize this site and some of the pictures, I must have been across it at some point in my travels. Social Credit sounds good on the surface. And I just love those political cartoons that tear central banking apart. I shall have a deeper read, thanks for the link.
 
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