Friday, Nov 21, 2008
"the world economy has been used to using $4 to $5 of credit for every $1 of GDP growth."
Time: The Global Economy's Big Fear Becomes Real: Deflation
The deterioration of the global economy in the wake of the ongoing U.S. housing bust and subsequent credit crunch is accelerating at a frightening pace.
Posted by whostolemyendowment @ 05:52 PM (702 views) Add Comment
11 Comments
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1. planning4acrash said...
So, what you are saying is, that printing money has a negative affect on GDP, given that $5 in the growth of money increases the face value of GDP by $1.
Another way of putting it is, that $5 of inflation creates $1 of nominal growth. That clearly is negative growth.
So, inflation reduces growth and redistributes (involves theft of) wealth.
What you should know about inflation
2. stillthinking said...
http://ukhousebubble.blogspot.com/
According to this, Alice's house crash blog, which I recommend highly but can't post as a news article (just a single identifier for the page), the UK cannot monetise debt !!!!
Which changes a lot. The UK government, despite having their own currency (our currency), are in an arrangement with Europe to never run a Bank of England overdraft. So if this is true, then our control of our currency is a fiction, and there is no way that the UK government can reflate, because they will just run up against a total lack of interest in government bonds.
3. stillthinking said...
The UK can't print money basically, unless we renege on our agreements with Europe, our largest trading partner.
The plot thickens !!!!!
4. debtfree said...
well said p4ac,
if we still had the gold standard you couldn't mine enough gold to keep up with the amount inflation, hence, we wouldn't be in this situation.
but, instead the printing press bails out banks and government billions of dollars.... but this is not inflation.
'Deflation would be very damaging to the United States economy and with nominal interest rates already very low, quantitative easing may be needed to keep it at bay, a top Federal Reserve official said on Thursday.'
so what is quantitative easing ?
Quantitative easing is what non-economists call turning on the printing press.
In extreme circumstances, governments flood the financial system with money, easing pressure on banks by giving them extra capital.
Under quantitative easing, the central bank conducts open market operations aimed at increasing the money supply and reducing long-term interest rates.
Yes, welcome to Zimbabwe or aka... Weimar Republic economics.
1. Hyperinflation takes birth and is currency-visible during major economic upheavals. There is NO historical truth that business recovery is a necessary criterion to transmute massive increases in money supply into hyperinflation.
2. What has been the major cause of the transmutation of massive liquidity into hyperinflation has been one form or another of Quantitative Easing combined with a loss of confidence in the inflator.
Quantitative Easing does not sterilize its offspring - violent inflation. We will see this offspring not in the far future but in 2009, 2010, 2011 and maybe much further.
It is akin to the Japanese Sci-Fi out of the 70s titled The Green Blob That Ate The Earth. It just grew and grew until it consumed everything.
For the moron financial TV hosts claiming that major inflation is well down the road because inflation requires a business recovery to occur, tell them to review:
Angola 1991-1999
Argentina 1981 1992
Belarus 1993 2008
Bolivia 1984 1986
Bosnia Herzegovina 1992 1993
Brazil 1986 -1994
Chile 1971 1981
China 1948 1955
Georgia 1993 -1995
Germany 1919 -1923
Greece 1943 1953 At the high point prices doubled every 28 hours. Greek inflation reached a rate of 8.5 billion percent per month.
Hungry 1944 1946
Israel 1971 1985 (price controls instituted)
Japan 1934 1951
Nicaragua 1987 1990
Peru 1987 1991
Poland 1990 1994
Romania 1998 2006
Turkey 1990 2001
Ukraine 1992 1995
USA 1773 not worth a Continental
Yugoslavia 1989 1994
Zaire 1989 present (now the Congo)
Zimbabwe 2000 to present. November of 2008 inflation rate of 516 quintillion percent
Thanks to Jim Sinclair for some of the information provided
5. debtfree said...
gold @ 801.
deflation my 4rse.
6. planning4acrash said...
More importantly, gold up £30, to £530 today!!
But, in truth, deflation and inflation are occuring concurrently. Bad debt (arguably all debt is bad) is being destroyed by what remains of the free market (deflation) via bankruptcy, then, counteracted and exceeded by inflation from government. So, our only hope, is that government falls apart. As suggested, we already have the mechanism for this, Wales, Scotland can go their own way, England has Westminster, Europe can fall back to country's and states within country's. The system can fall without anarchy.
7. debtfree said...
More importantly, 1oz krugers or maples now £611.
nice to stay ahead hey.
was thinking of getting the new imac, will cost less than 1 1/2 coins. which cost £412. but, of course, if i held cash, would cost £799.
oh, the irony.
8. debtfree said...
edit : 2 coins cost £412.
1 1/2 coins cost £309.
BLIMEY !
doesn't holding cash devalue fast !
9. last_days_of_disco said...
Goldbugs: The UK is not going to choose hyper-inflation. Deflation is happening. Acquiring and getting rid of gold is a costly time consuming activity that enriches middle men. Gold will come down like everything else. Or is it "different this time". The UK is not going to choose to destroy all its wealth through hyper-inflation. I think there is a big enough chunk of the people of this country that are welcoming deflation to hold the line on this. Additionally those people are going to soon be in a position of power. The "fleecing of the flock" will proceed on schedule. Holding gold is a safety measure which I agree with, a wealth preservation tactic if you will. But if you bought gold at 900, you have lost money, its as simple as that.
10. paul said...
I thin you might be right, disco.
If its true that the BoE can't print their way out of this.
11. debtfree said...
disco,
But if you bought gold at 900, you have lost money, its as simple as that.
WRONG !
The £ is lower against the $ now and priced in £ its higher than when it was $900.