A debate rages among the Austrian school cognizanti as to whether the present state policies will bring hyperinflation or not. Mish Shedlock has said no, so far, given how people are miscalculating credit.
Almost every single American citizen equates credit with money, and that is the heart of the scam, and subsequent bubble we are in. Almost no one knows what we are looking at. The stock market rises on this confusion.
Mish has an excellent little article graphing out the difference. There are only large 3 or 4 companies in USA that will survive the next stock market crash. Without another bailout anyway. Check it out.
When calculating your odds in business, it is extremely important to know the difference between money and credit. (Currency is credit).
The sad thing is the worst run companies, like GE, whose CEO is advising President Obama, will get bailed out for their malfeasance. Apple will have to compete against taxpayer-backed business. It is astonishing madness. But what can one do?
Start working now as though the system is going down.
Feel free to forward this by email to three of your friends.
Almost every single American citizen equates credit with money, and that is the heart of the scam, and subsequent bubble we are in. Almost no one knows what we are looking at. The stock market rises on this confusion.
Mish has an excellent little article graphing out the difference. There are only large 3 or 4 companies in USA that will survive the next stock market crash. Without another bailout anyway. Check it out.
When calculating your odds in business, it is extremely important to know the difference between money and credit. (Currency is credit).
The sad thing is the worst run companies, like GE, whose CEO is advising President Obama, will get bailed out for their malfeasance. Apple will have to compete against taxpayer-backed business. It is astonishing madness. But what can one do?
Start working now as though the system is going down.
Feel free to forward this by email to three of your friends.
20 comments:
Much of what you write is very much worth considering. What do you mean by currency is credit?
I'm not sure what to believe about the economy - for every article that says hyperinflation and economic collapse are imminent, I can find an article online that says hyperinflation/economic disaster in the U.S. is unlikely - both seemingly plausible and logical explanations, but I'm not an economist. I think economic professor L. Randall Wray says that hyperinflation is not likely, even not very possible. Can I just invest in blue chip stocks long-term (an S&P index fund)? Are stocks the best hedge against inflation? I have a lot of money locked up in my 401k - I have to invest it somewhere, either a money market fund, total market bond index fund or s&p index stock fund.
Currency is not money. Since little, if any, is backed by money, it is probably not even a warehouse receipt. It is a note that says you are owed something, and you can pass it on. (Legal tender, for all debts, public and private. Until it is not, such as a silver certificate I carry in my wallet.)
Since it is not money, what is it? Among other things, since it is just a promise to pay, it is credit.
The Cypriot banks issued too much credit. So they have to steal it from depositors to reduce their exposure. In this case it looks like credit.
If hyperinflation occurs, wouldn't that be good for debt-laden companies (and people with debt, mortgages? - assuming their salaries would inflate as well)? (inflation would make the debt easier to pay off?).
How likely is hyperinflation? Check out these links:
http://slant.investorplace.com/2012/11/hyperinflation-the-nightmare-that-will-never-happen/
http://www.newfamilyeconomics.com/featured/why-hyperinflation-will-not-happen/
http://seekingalpha.com/article/923411-hyperinflation-won-t-happen
http://theautomaticearth.com/Finance/us-hyperinflation-is-a-myth.html
Wray gives an interesting presentation on money:
http://www.youtube.com/watch?v=i35uBVeNp6c
L. Randall Wray - Modern Money: the way a sovereign currency works."
Thanks for the explanation John and anonymous for the lecture by L. Randall Wray, very interesting.
Some other good links on the monetary system:
http://wfhummel.cnchost.com
http://wfhummel.cnchost.com/misconceptions.html
http://wfhummel.cnchost.com/sleepwell.html
As to wfhummel, the links might be good, and the explanations are good, but the problem is it is of pure keynesianism which is a deplorable system.
Those who follow his "sleepwell" advice will find themselves losing sleep in the not too distant future, I'll wager.
Much better that one invests in one owns business than pursue the risky advice of investing in business one knows nothing about and the damnable practice of making money off interest.
Here is a link:
Are these fallacy explanations valid?
http://www.columbia.edu/dlc/wp/econ/vickrey.html
Check Warren Moslers's web site and his book:
http://moslereconomics.com
http://moslereconomics.com/wp-content/powerpoints/7DIF.pdf
Is MMT the same or related to Austrian economic theory?
They are valid as pro-demand-side arguments, but they are not reliable economic science. It's a list of both sides of the demand side thesis. The Austrian school arguments tend to be valid and reliable, that is, science.
Is The Austrian School Wrong About Inflation?
http://seekingalpha.com/article/651641-is-the-austrian-school-wrong-about-inflation
Well, hang on... as to inflation, the Austrian School has adherents on both sides of the current debate.... North says current actions will bring us hyperinflation, Mish says no, for his insights as to the effect of credit.
The Austrian school is correct as to what causes inflation, but variance adepts are debating what is happening in the current situation.
Mike Norman says the Austrians are wrong - and MMT is right. And My confusion continues.
http://mikenormaneconomics.blogspot.com/2012/11/schiff-austrians-got-everything-wrong.html
Peter Schiff is an investment adviser, not an economist, and my portfolio outperformed his, so it is a straw man argument to equate Schiff with Austrian economics. MMT simply celebrates government intervention, of a sort that benefits certain inclinations.
Austrians argue no government intervention. The two sides talk past each other.
It is impossible for the United States to become insolvent. Check out this link:
http://mikenormaneconomics.blogspot.com/2012/09/more-unbridled-stupidity-from-rating.html
Is this accurate?
In the game as conceived by Mike Norman, this is quite true:
there will always be a market for U.S. government debt at home because the U.S. government has the only means of creating risk-free dollar-denominated assets
Just like it is quite true in, say, North Korea. We all love a system that is restricted to where we win. You can study Mike Norman to learn how the economics he advocates benefits one group, or you can take time to study free markets which benefit all groups. Your choice.
But does MMT describe the present U.S. monetary system (whether one likes it or not)? It may not be the best system or one that one agrees with ideologically.
It is one of many ideologically skewed descriptions of our system, there are others that get it better, like the austrians. Wray is touting a system that looks good to politicians, be he has to define money incorrectly to get there. His thesis is there is just not enough government control. Music to every politicians ears. No wonder he is getting a wider audience. We have a crisis. A different bad idea will win the politicians. Who knows, it could be Wray's bad ideas, but he has lots of competitors.
What every monetary system features, except the free market, is the system is grounded in force and fraud. The system is illegitimate.
The good news is if you understand that, you can do better than if you comply with the illegitimate system. It's called conscientious objection.
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