10:43 – Still working heads-down, writing, shooting images, and doing lab work. I have about 8.5 weeks left to get this book finished, and I’ll use every minute of it.
Thursday, 8 December 2011
3 Comments and discussion on "Thursday, 8 December 2011"
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A good summary of the Eurozone crisis for those that don’t understand it. (Most here probably do, but it might help explaining it to your friends and family.)
http://keithhennessey.com/2011/12/07/three-layers/
Chuck, I’m wondering what your take is on this:
http://www.abc.net.au/news/2011-12-07/kohler-bond-vigilantes-buy-the-silence-of-our-banks/3716528
Well, they do not actually say it, but I assume the ‘vigilantes’ are institutional investors.
You know, I would not put anything past the banking systems in the world. When guys like Jon Corzine can ‘lose’ $1.2 BILLION dollars of government money, right under the supposedly watchful eyes of bankers, accountants assigned to track the money, and government regulators and oversight groups, then the probability of collusion throughout the system soars. I am sure misappropriation of large amounts of money occurs FAR more often than we imagine — and many do not even get discovered, let alone caught.
Regarding the inflation that article claims the ‘vigilantes’ want, I think that is also EXACTLY what the economists and bankers in control of the countries want. So I do not see that the ‘vigilantes’ are forcing anybody to do anything. But it certainly looks like they are leading the cheers on the sidelines.
Here are a few things we can piece together. Something like 99% of all the debt in the world is denominated in US dollars. Credit is tight — regardless of what anybody says. I eat lunch with guys who are developers, and they cannot get money from banks for ANYTHING, anymore. A good friend who sells real estate, tells me that only if you have a really good income and a nice personal balance sheet, will banks around here loan you money to buy a house. So loans are not being generated at anything near the rate they were prior to 2007. And I suspect that is true everywhere. My developer friends are finding money from other sources, though; so they are able to keep working.
In fact, everybody I know, says that although business is way off from 2007, people are able to make a living. Businesses are able to survive, but not thrive. The ones that could not, are already gone, and for the last year or so, we have been left with the survivors. Therefore, we know that debts are being paid off. There is no crisis in the area of debt repayment.
Now when that happens — debts are paid off because business is decent and products are sold, — that is acutely deflationary. When debts are paid off, that money is retired by the banking system and removed from the economy, leaving fewer dollars left, and making what is left more valuable. If such deflation is occurring, then the price of gold should sink — in other words, the dollar becomes more valuable. But that has not been happening. In fact, during the last year, gold has risen — the value of the dollar has fallen — dramatically.
That means to me that whatever the government is doing, is terrifically inflationary. Not only is it compensating for the deflation that should be occurring (and as I indicated, new loans are not being floated at anywhere near the rate old ones are being retired), but the US dollar is actually being devalued by significant inflation, year over year.
Don’t ever let anyone tell you that one penny of inflation is necessary to an economy. Inflation is the liquidation by governments of YOUR hard-earned wealth. It is a Keynesian delusion that most people swallow whole. People on this board rail against social welfare because it is somebody else spending YOUR money, but then they completely excuse the liquidation of YOUR wealth via government caused inflation, all the while telling me inflation is absolutely necessary to an economy. It is NOT necessary, — not one penny of it, — unless you want the government to convert all your wealth to government ownership, which the US government has been doing with remarkable success since Tricky Dick Nixon removed the last impediment standing in the way.
So to recap my opinion, no government needs ‘vigilantes’ to coerce it to inflate the economy. Governments worldwide have been doing that with super success for several decades, and seem to be doing it at an increasing rate. I kind of doubt the reporting in that article. It is just an inflammatory way to say that both government and institutional investors want inflation.