Quote:

it is what happens when the marginal productivity of debt disappears.

Ding ding ding!!!!!!

Here ya go Karl.

North has used the rising equities markets as evidence for his thesis, i.e., massive govt monetization etc. flows into stock market which makes it go up , which it has (gone up) , ergo he is correct. He says they continue and will continue to print money and thus the equities markets will keep on going up and in this way get rid of the evaporation of personal wealth that occurred in late 08-early 09. Aside from cpi, I believe this is his major evidence.
(Not saying I agree, just putting this in to flesh out another point he uses to support himself)

North is a nutjob. Read his fantastic predictions of doom before Y2K for proof. I've come to the conclusion that he hates paper money because it isn't mentioned in the bible.

TPTB know that SO MUCH of our economy has been built around the bubble that without all the realtors, granite countertop-manufacturers, builders, appraisers, upholsterers, designers, hardware stores, utilities, appliance manufacturers, gypsum manufacturers, truckers for all the above, MBS, CDO's, ARMs, bankers, banker -lawyers, etc etc etc etc etc - there just 'aint much economy left. SO MUCH was tied to the debt-slavery of home-ownership and now, without any of that economic activity TPTB must understand we're FUBAR. I have had numerous friends in gvmt and they are NOT as stupid as they pretend in public. They have a gazillion scenarios running out decades with regards to every conceivable social, economic, military etc. situation. My guess is they're desperately trying to buy us some time until TSHTF. The avg American doesn't even have any cash on hand! If they let the deflation rip through us now it is lights out America. I hope the hot air coming from Ben and Timmy is just that or we REALLY are in DEEP ****E.

"There Is One Key Argument for Inevitable Deflation, and One Key Argument Against It. Choose Sides Now.
If you are confused about this debate, this should clear it up. If, after reading this, you are still confused, forget about it. Don't worry about what you don't understand. . . .
The resource you have requested is available only to current members.
(to read the remainder of this article, please log in below.)

You have to pay Mr. North $175.00 plus for the privilege of reading his arguments.

Scgary has flawless logic and often a very attenuated success as an outcome of his reasoning.

Of the three uses for borrowed funds, the one that worries me the most is number 1

>> Productive: The use of borrowed funds to purchase something such as a CNC machine that then produces more in output than it's acquisition cost (including interest) over the lending term. The net GDP contribution to such lending is positive.<<

Right now is there anything that we can make or manufacture in the US better-faster-cheeper than in China?

Ponzie money and consumption can dissapear and the economy would still be OK. But remove all production and the economy is dead as a doornail.

How do we fix that?

Monetarists are idiots. They don't realize that it is entirely possible for prices to rise even as the "money supply" contracts. The long-term stability of a currency has more to do with the perception of whether the promises backing it can be fulfilled in the future.

That's what happened in Japan. No matter how hard the govt tried, it could not generate inflation despite massive printing because Japanese never thought their government would blow up.

Karl,
Couple of comments:
1) Purchasing stock in the secondary market is not necessarily a Ponzi activity. Many investors (e.g., Warren Buffett) purchase partial ownership of corporations on the secondary market for the free cash flow the corporation generates (i.e., cash used to pay dividends, pay down debt, or buy back its own stock).
2) How can you criticize people for using a *consistent* definition of inflation? If the government and/or other analysts changed the definition when it suited them to do so, that would warrant criticism. However, in this case they've used owner-equivalent rent rather than housing asset price consistenntly. It wasn't counted as inflation during the bubble, and likewise it's not counted as deflation during the bust. Owner's-equivalent rent is a much more stable quantity because it's not sensitive to interest rates. Over the long term the two definition of housing inflation average out to the same thing.
- AAG

To win, one must ardently study history, especially those of one's opponents. People have always needed policing, but they have not always had policemen.

Funny, there's never been a true socialist state, either.

If we are to be successful as revolutionaries and save this country, we must learn from the best.

I will quote and paraphrase of one of most overlooked but effective revolutionary leaders of the 21st century, Felix Dzerzhinsky:

Quote (my Russian translation from the Checka document has some grammatical licensure)

"The best way to destroy our enemies is to give them disinformation they want to believe in desperately. Once they hungrily accept our carefully crafted disinformation and use it in analysis, we have won!"

Paraphrase

"Our task is to bring economics knowledge to the masses at a terrific speed."

We need a list of all of these rogues on the internet. Then we'll know who to "re-educate" once the people wake up and demand accountability.

Good ticker gen, my only question is: "Is it incompetence or malice?"

Quote:

1) Purchasing stock in the secondary market is not necessarily a Ponzi activity. Many investors (e.g., Warren Buffett) purchase partial ownership of corporations on the secondary market for the free cash flow the corporation generates (i.e., cash used to pay dividends, pay down debt, or buy back its own stock).

With the exception of dividends, nope. Purchase of stock on the secondary market for capital gains irrespective of how they happen requires that someone be willing to pay you more than you paid. That's the definition of a pyramid.

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2) How can you criticize people for using a *consistent* definition of inflation?

Because the government DID change it.

You can't claim that "inflation" occurred if you don't actually MEASURE INFLATION. If the definition you choose is "a generalized increase in consumer prices" you cannot leave out HALF of the average consumer's cash flow statement and then claim "it didn't happen."

Quote:

With the exception of dividends, nope. Purchase of stock on the secondary market for capital gains irrespective of how they happen requires that someone be willing to pay you more than you paid. That's the definition of a pyramid.

I have been waiting for YEARS for someone with a brain to mention this. Good lord - what a world of stupid we are in. Wasn't the whole idea of corporate ownership originally begun to partake in the profits of the company? Yeah - I thought so.

"Right now is there anything that we can make or manufacture in the US better-faster-cheeper than in China?"


Couple areas of production come to mind.

Food

Niche items, small runs of electronic equipment for example

Health care and related -some drugs, diagnostic equip, treatment infrastructure, etc

Building materials, most of them... [Most plumbing, etc, hardware is coming from China if you look at it in the stores]

Weapons

So, in 5 years, most anything could be coming from China if they are the lowest cost source. Their quality is generally OK to great.

I have previously said this somewhere in the forum, but I think of inflation as a time when just about anything can be purchased with a credit card or you can borrow a lot of money, say for a house. Deflation is a time when hardly anything can be purchased using credit and when you can't borrow much money. In deflationary times, most everything needs to be purchased via cash. Prices of things can go up and down, in both inflation and in deflation, but what is able to be borrowed on credit determines if you have inflation or deflation.

That seems to make sense...

Karl;
Why not make Gary a "friendly wager"? When he loses he can publicly apologize for his bad form.
Best
Photon314

Forgot to mention - I think Rothbard and the Austrians should be REQUIRED reading up until they start talking about hard money and gold standards. Just put the book down at that point.

Expy,

On weapons, I believed you until I got as a gift some Chinese 5.56mm armor piercing rounds to play with. They are better than any I've seen from the West.

They will, given the time, make anything better than anyone in the west can. That's primarily because they have no intellectual property restrictions to hold them back. Unfortunately, in our quest to keep large companies profitable, we are playing into their hads with our intellectual property law changes.

On the food side, you should see their lands, once they figure out and have the right work ethic, we'll be left behind in a dust bowl. The last to change will be agriculture, since they are in many respects an agrarian based culture. One could almost say there are two Chinas, the awoken urban one and the sleeping agrarian one...

Our current strength is their weakness. They seem to not desire to create new technologies or markets that put their current strong markets out of business. We have an inate ability to question the established and work around it. We champion the inventor in the garage, but we're even taking out garages out of homes now! Unfortunately, we are destroying it by not allowing or permiting innovation to up-end the established big companies, starting in the financial sector.

They are good at iterative scientific and engineering advancement. We are good at FOAK (First Of a Kind), ground breaking innovation and the initial market roll. However, we are destroying it.

Sunshine: My co has 25+ CNC machines. We also subcontract production to 20+ CNC machine shops throughout the Southwest. We had great sales and profits this year. There is the small matter that we are 80% Defense contracts.

"Our current strength is their weakness."


Exactly -but not for long.

The PTB here have no interest in changing things to stop this...

Do folks ever wonder why?

After reading both, it seems to me that you guys only really disagree on the ability (or maybe the intelligence) of the government and the FED to continue to increase debt to (try and) offset the private sector and households. Everything else just seems to be sematics.

I agree with you. There will be a wall somewhere. I also sgree that we may have already hit it. I also agree that economists that use the cooked numbers as some sort of "proof" need a hard copy list tatooed to their foreheads of all the "changes" that have been made to these numbers for political expediency.

(He really seems angry with you. Crazy angry.)

I have been having this argument over Inflation & CPI for YEARS.

Government loved the Inflation Bubble as it simultaneously Lowered the cost of Government Debt and allowed the silent Financial Pillage of the Populace through Inflated Property Taxes.

Throxx- What always amazes me is the sheeple's inability to grasp the incredibly simple concept that higher prices = BAD assuming your wages are stagnant. I can't tell you how many times I've argued with my parents that investment % return is all relative to the inflation rate of what you're buying. They just don't understand AT ALL. They think things go "up" in value as if they came home one day and noticed that their house GREW.

Quote:

After reading both, it seems to me that you guys only really disagree on the ability (or maybe the intelligence) of the government and the FED to continue to increase debt to (try and) offset the private sector and households. Everything else just seems to be sematics.

Not really.

I disagree with him on the EFFECT of such an action irrespective of whether the government can pull it off or not.

What I look first to is whether a desired impact can be obtained mathematically. If it cannot, the discussion and debate is over.

If it can, we next look at what the outcome would be of that policy.

In this case if we assume "yes they can" the next question is what happens if they do it. In that case it's simple - they displace private productive investment with (at best) 1:1 GDP contribution from redistribution.

But price inflation without wage inflation simply makes more and more people broke, which in turn forces more reliance on entitlements, which in turn forces more government borrowing. A vicious spiral that ultimately leads to destruction - if they don't stop.

In this case The Fed and banks go down with the government if they allow it.

This is why hyperinflation requires that the government TAKE BACK monetary authority - they'll print to destruction, but The Fed won't, when it all comes down to it.