is what's currently going on a classic example of the u.s. government 'priming the pump'? (2011, debt)

[SouthCali4LifeSD]

Originally Posted by jimhcom

I think the OP's timeline is a bit off. First of all if you look at the wealth/money destruction, it is easily 10X what governments can print to replace it guaranteeing that deflation will continue until prices come into alignment with actual cash. Secondly unemployment will not begin in earnest until a year after the initial financial crash. After that, count on about 2 more years of declines in all markets, followed by 6 to 9 years of sideways movement.

how is it a bit off? during the crash of 1929 and the months to follow, there was hyperdeflation because of the lack of cash on hand. isn't that what our credit crisis is all about? our money supply is so restricted due to tighter lending, that we're practically going through another deflationary depression... now, just like the new deal, today, the fed has dropped the prime rate once again to historic lows and may continue to drop them lower, and congress is passing bill after bill and the fed is bailing out one major financial institution after the next in order to preserve shareholder trust, jobs, and economic confidence... the fact of the matter is, these three constituents are only being sustained for the short term... it is clear that in the long run, our economy will get much much worse through hyperinflation before anything starts to get better, and the stock market will continue to crash just as it did through the 1930s.

[gwynedd1]

Originally Posted by SouthCali4LifeSD

how is it a bit off? during the crash of 1929 and the months to follow, there was hyperdeflation because of the lack of cash on hand. isn't that what our credit crisis is all about? our money supply is so restricted due to tighter lending, that we're practically going through another deflationary depression... now, just like the new deal, today, the fed has dropped the prime rate once again to historic lows and may continue to drop them lower, and congress is passing bill after bill and the fed is bailing out one major financial institution after the next in order to preserve shareholder trust, jobs, and economic confidence... the fact of the matter is, these three constituents are only being sustained for the short term... it is clear that in the long run, our economy will get much much worse through hyperinflation before anything starts to get better, and the stock market will continue to crash just as it did through the 1930s.

Hi SouthCali4LifeSD,

There was no hyper inflation during the depression. That happened in Germany because they were essentially isolated with a huge indemnity. This also happened in the 20s inflationary expansion before the depression. As the world has so far gone in lock step with the US this is following the 1930 model. Only economic isolation is likely to do this along with complicity of the Fed. This could only happen after a protracted time of losing national assets. If for example no more native auto manufactures existed in the US productive capacity would be foreign owned for cars and inflation would go way up. You can't sell what someone already owns. Near term hyper inflation is not likely at all. Who will go into debt? People are paying down debt .

[TexianPatriot]

Originally Posted by gwynedd1

Hi SouthCali4LifeSD,

There was no hyper inflation during the depression. That happened in Germany because they were essentially isolated with a huge indemnity. This also happened in the 20s inflationary expansion before the depression. As the world has so far gone in lock step with the US this is following the 1930 model. Only economic isolation is likely to do this along with complicity of the Fed. This could only happen after a protracted time of losing national assets. If for example no more native auto manufactures existed in the US productive capacity would be foreign owned for cars and inflation would go way up. You can't sell what someone already owns. Near term hyper inflation is not likely at all. Who will go into debt? People are paying down debt .

The government. That's who.

[gwynedd1]

Originally Posted by TexianPatriot

The government. That's who.

How will that cause hyper inflation?

[TexianPatriot]

Originally Posted by gwynedd1

How will that cause hyper inflation?

A run on the dollar when this nation's creditors stop financing our debt and trade all the paper they are holding for real assets.

[gwynedd1]

Originally Posted by TexianPatriot

A run on the dollar when this nation's creditors stop financing our debt and trade all the paper they are holding for real assets.

Why would that cause hyper inflation? Why would they not just buy up cheap American assets that are deflating quickly. What would you do if you were China? If I lived in a big house and drove a nice car would you just stop lending to me or buy me out? Do you really think China just wants to declare its dollar holdings worthless? Sure if the banks could loan out their fractional reserves with 700 billion in new treasuries it would cause inflation but not with leveraging unraveling it will not. "Hyper inflation" is like some sort of chant that people insist will happen as if it is not a deliberate act of monetary policy. If it does not occur everyone will be told see, no "hyper inflation". You will have nothing, with half your salary but bread will still cost the "same", which in real terms will have doubled. Taxes and interest rates to the rescue. The game now is clear to me. Let deflate a trillion and inflate the bankster a trillion. See, its even.

[TexianPatriot]

Originally Posted by gwynedd1

Why would that cause hyper inflation? Why would they not just buy up cheap American assets that are deflating quickly. What would you do if you were China? If I lived in a big house and drove a nice car would you just stop lending to me or buy me out? Do you really think China just wants to declare its dollar holdings worthless? Sure if the banks could loan out their fractional reserves with 700 billion in new treasuries it would cause inflation but not with leveraging unraveling it will not. "Hyper inflation" is like some sort of chant that people insist will happen as if it is not a deliberate act of monetary policy. If it does not occur everyone will be told see, no "hyper inflation". You will have nothing, with half your salary but bread will still cost the "same", which in real terms will have doubled. Taxes and interest rates to the rescue. The game now is clear to me. Let deflate a trillion and inflate the bankster a trillion. See, its even.

Demand for treasuries is eventually going to fall off a cliff. When the federal reserve becomes the sole purchaser of US debt, China's holdings all of a sudden become alot less valuable.

[gwynedd1]

Originally Posted by TexianPatriot

Demand for treasuries is eventually going to fall off a cliff. When the federal reserve becomes the sole purchaser of US debt, China's holdings all of a sudden become alot less valuable.

All I am asking is for people to stop comparing hyper inflation to the Great Depression, a depression is precisely the opposite.

However none of the above implies hyper deflation It does not matter what China does or anyone else. The money supply(excess) is solely controlled by the Federal Reserve. If China stopped buying treasuries then higher interest rates would follow if the Fed sold them. If they don't sell they raise the rates aka Paul Volker. At a high enough rate they will sell. If they don't then we will have inflation because with out open market operations it will inflate. They can just raise the reserve in that case or just tax. Its completely up to them. Money loaned into existence is easily curtailed with the flick of a pen. Nothing could be simpler. Inflating the supply is more difficult as we can see since it requires people to go against their interest. "Let see, I could lose my job and interest rates are lowering , should I go into debt at a high rate now?". What are people with no job and no money going to buy up?


If the dollar is dumped it will devalue because imports could not be purchased without a hard currency. It has nothing to do with money supply, just price. See Argentina. It may happen but do not think its not intentional. It all depends. They can make any law they wish and any monetary policy they like. I don't think they even listen to us anymore. Medicare for people older than a hundred. What are we going to do about it?

[SouthCali4LifeSD]

Originally Posted by gwynedd1

Hi SouthCali4LifeSD,

There was no hyper inflation during the depression. That happened in Germany because they were essentially isolated with a huge indemnity. This also happened in the 20s inflationary expansion before the depression. As the world has so far gone in lock step with the US this is following the 1930 model. Only economic isolation is likely to do this along with complicity of the Fed. This could only happen after a protracted time of losing national assets. If for example no more native auto manufactures existed in the US productive capacity would be foreign owned for cars and inflation would go way up. You can't sell what someone already owns. Near term hyper inflation is not likely at all. Who will go into debt? People are paying down debt .

hi gwyne, if you go back to my post, you will see thati did not say that there was hyper inflation during the great depression. i said that there was hyper deflation. what i am saying is, in our world today, our money appears to be of little interest to the fed and the government it controls. with all these bailouts and the constant printing of money, hyperinflation will make our nations debt seem smaller. it's all in the best interest of the government, not the people. anyway, as i said, i didn't say hyperinflation was a problem during the great depression. i said that the new deal can be compared to todays bailouts.

[texdav]

Originally Posted by jimmyP

I believe the dollar is not strengthening as much as the other currencies are weakening. Other countries, I.E China are in much better position to handle a recession than we are with our 10 trillion dollar deficit and 70 trillion dollar contingent liabilities. We also produce very little in this country as the economy is 70% based on consumption. That fact alone makes the recession much more difficult to for US.

We produce alot in this nation 'but we don't produce the old manufacturered goods as much.Manufacturing is just the start of getting goods to market and only part of the cost and profit. Especailly in this global market place. The dollar is always measured in relation to the other currencies. In fact the chinese have always under valued their own currency to make their goods cheaper. I disagree on China ;they have such vast manufacturing industrial areas that having them slowdown so much because of a lack of demand will really hurt.Unless they are abandoned they have fixed continuing cost.Look at GM'Ford and Chrysler now .That what happens to manufacturing when sales fall;they start losing millions besides the loss of sales at some point. Goods start stacking up called inventory.