Sunday, December 16, 2007

The Word Inflation

Most people use the word inflation in a way that helps perpetuate a con/ruse. They use it to mean rising prices of real economic goods and services. They do not even use the word to describe rising prices of financial assets or housing. This is an effect of inflation. It is not inflation. Inflation is as increase of the "money"[**] supply. If people do not know this, then they do not know who to blame for a deep recession/depression that hurts them because they can not figure out the cause of the deep recession/depression that hurts them.
Therefor those that hurt them do not get the blame of those that got hurt. Who hurt them? Those that control the supply of "money": governments treasuries and central banks. The supply of money and currencies should be a completely private business phenominum. A study of monetary history shows this. Read Laissez-Faire Banking by Kevin Dowd. It is a study of the beginning of banking in the western hemisphere. It started in Scotland and was going well till the British government got involved.

["money" is what most people refer to government fiat digital bits and paper. Today's "money" is not money. Gold, silver and other things are money. Another word, the meaning of which has been perverted to obfuscate/hide what governments and their central banks have been doing.]

Henry Ford, the inventor of the Model T Ford and the assembly production line, has said that if people really understood the banking system, there would be a revolution the next day.

The connection, thus the discipline on supply, between gold and "money" was completely broken in 1971. Inflation, historically, really took off after that point in time. For most of that time, excess fiat digital bits went into financial assets and more recently housing, in the western world. The Dow index rose from 776 in 1982 to over 14000 in 2007. Somehow that was not viewed as "inflation". That is all changing now. Fiat bits are going into real economic goods for protection from the decline of financial assets. This is going to be happening for a good number of years to come.

Banana Republics

Since 1971, when the US broke its promise to redeem US dollars for gold, a new group of banana republics has been developing. The increase of the supply of digital bits of fiat "money" needs the banking system to create more credit/debt because no increase of the supply can happen otherwise. The increase of debt, and thus "money" supply, has finally gotten out of hand. Using current account deficits over the past year(borrowing to maintain a certain standard of living that has not been earned by an equal production of economic goods and services), here is a list of the new top 7 banana republics in the world:

United States: $US 793 Billion
Spain: $US 126 Billion
Britain: $US 87 Billion
Australia: $US 50 Billion
Italy: $US 48 Billion
Greece: $US 42 Billion
Turkey: $US 34 Billion

There is a big general difference between the western world and the eastern world. It's basically that one does more unearned consumption than the other. The unearned consumer is borrowing from the earned excess producer. Guess which one's standard of living is going down. The net consumer or the net producer of real wealth?

Another measure of the top banana republic, debt to GDP ratio:
1929: 260%
2007: 343%
That is not the only aspect of the US economy that is worse than it was in 1929. It looks like the top banana is in for another Great Depression, worse than the one that started back in 1930 and lasted about 15 years. Can you imagine what is going to happen to the purchasing power of the US dollar?

Inflation is a world wide practice

The top 7 are not the only countries inflating their supplies of fiat digital bits on hard drives. The broad "money" quantity gauges in the US, UK, Eurozone, and the BRIC group (Brazil, Russia, India and China) have increased by $11.5 TRILLION, just over the past 2 years!!!!!!!!
Now, that is inflation!!!!!!!!!!

No wonder a weight of gold is what is required to buy a house in Vietnam. No wonder a mortgage is a borrowed weight of gold. No wonder a mortgage payment is a monthly payment of a weight of gold.

"Gold is absolute objectivity. It is blind, like justice. It has no politics and ideology, no likes or dislikes, no friends or enemies. All it recognizes is its possessor, whom it serves faithfully so long as he has it." -- British historian Paul Johnson quoting Charles de Gaulle

"When plunder becomes a way of life for a group of men living together in society, they create for themselves in the course of time a legal system that authorizes it and a moral code that glorifies it." - Frederic Bastiat, 'The Law'

"It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight! It is no trick at all to be right on the market. You always find lots of early bulls in bull markets and early bears in bear markets. I've known many men who were right at exactly the right time, and began buying or selling stocks when prices were at the very level which should show the greatest profit. And their experience invariably matched mine - that is, they made no real money out of it. Men who can both be right and sit tight are uncommon." - Legendary speculator Jesse Livermore, "Reminiscences of a Stock Operator" by Edwin Lefevre, 1923

No comments: