Fw: [Peace-discuss] Don’t Be Fooled by Inflation

Sun May 10 21:51:51 CDT 2009

----- Original Message ----- 
From: unionyes 
To: n.dahlheim at mchsi.com 
Sent: Sunday, May 10, 2009 8:01 PM
Subject: Re: [Peace-discuss] Don’t Be Fooled by Inflation

I also disagree with the articles over emphasis on stock market performance, as well as the over emphasis on hyper inflation.
I also disagrre with the analysis of the stimulus. The problem with the stimulus is not the size, it should be TEN TIMES as large, BUT the poblem is that it has not been used strategicly. IE. the money has been " Thrown down a bottomless rat hole" . The bank's depositers and pension funds should have been protected, but the rest should have been allowed to fail !

HOWEVER, I also disagree with your analysis. What you state has traditionally been the case, but the times are a changing.

China has hardly been effected by the recent downturn and Brazil ( as well as the majority of the South American Economies ) have been slowly but systematically focusing more of their trade amongst themselves, ie. regional independence from the U.S. in particular and the world markets in general.

What I see happening soon, that will cause major shifts in past assumptions and fall backs, will be a re-negotiation of the 60 - year old Bretton Woods agreement, which will end the role of the U.S. dollar as the world reserve currency, and replace it with a new international currency based on a " basket " of the current major currencies ( U.S. Dollar, Chineese YUAN, The Euro, British Pound, Swiss  Franc, etc. ).

When that happens, here in the U.S., our standard of living is going to have a downward push. 

It won't be pretty !

Major economic suffering, and subsequent social / political turmoil.

Unlike the French, who will fight back at the slightest assualt on their standard of living, Ameican's typically will accept and endure and ignore until their backs are pushed so far to the wall that they will explode into an uncontrollable rage.
This will be very bad news for the ruling class and the phoney Obama, but unfortunately there will be a great danger that instead of a populist revolution, there will be a fascist / racist assualt that will be very ugly and harmful for all of us.

David Johnson

  ----- Original Message ----- 
  From: n.dahlheim at mchsi.com 
  To: E. Wayne Johnson 
  Cc: Peace-discuss at anti-war.net 
  Sent: Sunday, May 10, 2009 7:36 PM
  Subject: Re: [Peace-discuss] Don’t Be Fooled by Inflation

  Schiff is largely correct, but his analysis fails to capture the political dynamic of the current financial crisis---and why I don't see hyperinflation as a near-term risk much less even significant inflation such like that seen in the 1970s.  The reason: the world will invest in US T-bills for the forseeable future.  Why?  As Niall Ferguson notes, the US, as badly as this depression has hammered its economy, is hurt far less when compared to the EU nations (especially those in Central and Eastern Europe), China, Russia, Japan, and Taiwan.  Other emerging market countries such as Brazil will also begin to feel the effects of the crisis very acutely because of the heavily export-driven economic model that drives their economy.  The US is also more politically stable than these other economies, so it is likely that the US will be looked to for the political solution to the current economic downturn.  Therefore, expect continued investments in US debt because of the political dynamics alive and well in the world economy today.

  Best,
  Nick

    -------------- Original message from "E. Wayne Johnson" <ewj at pigs.ag>: -------------- 

    Peter Schiff is one of the Austrian school (which is not the "Chicago School") economists who predicted this current economic collapse.

    He writes for lewrockwell.com today:

    Don’t Be Fooled by Inflation
    by Peter Schiff

    Strike up the band, boys, happy days are here again! Recently released short-term economic data, including unemployment claims, non-farm payrolls, home sales, and business spending, which had been so unambiguously horrific in February and March, are now just garden-variety awful. With the Wicked Witch of Depression now apparently crushed under the house of Obamanomics, the Munchkins of Wall Street have sounded the all clear, pushing the Dow Jones up 25% from its lows. But the premature conclusion of their Lollipop Guild economists, that the crash of 2008/2009 is now a fading memory, is just as delusional as their failure to see it coming in the first place.

    Once again, the facts do not support the euphoria. Over the past few months, the government has literally blasted the economy with trillions of new dollars conjured from the ether. The fact that this “stimulus” has blown some air back into our deflating consumer-based bubble economy, and given a boost to an oversold stock market, is hardly evidence that the problems have been solved. It is simply an illusion, and not a very good one at that. By throwing money at the problem, all the government is creating is inflation. Although this can often look like growth, it is no more capable of creating wealth than a hall of mirrors is capable of creating people.

    We are currently suffering from an overdose of past stimulus. A larger dose now will only worsen the condition. The Greenspan/Bush stimulus of 2001 prevented a much-needed recession and bought us seven years of artificial growth. The multi-trillion dollar tab for that episode of federally-engineered economic bullet-dodging came due in 2008. The 2001 stimulus had kicked off a debt-fueled consumption binge that resulted in economic weakness, not strength. So now, even though the recent stimulus administered a much larger dose, we will likely experience a much smaller bounce. One can only speculate as to how much time this stimulus will buy and what it will cost when the bill arrives.

    My guess is that, at most, the Bernanke/Obama stimulus will buy two years before the hangover sets in. However, since this dose is so massive, the comedown will be equally horrific. My fear is that when the drug wears off, we will reach for that monetary syringe one last time. At that point, the dosage may be lethal, and the economy will die of hyperinflation.

    As always, the bulls fail to understand that investors can lose wealth even as nominal stock prices rise. As a corollary, the bearish case is not discredited by rising stock prices. While there are some bears that mistakenly cling to the idea that deflation will cause the dollar to rise, those of us in the inflation camp understand that the opposite will occur.

    In the meantime, stocks are not rising because the long-term fundamentals of our economy are improving. If anything, the rise in global stock prices is due to investors realizing that cash is even riskier then stocks. The massive inflation that is the source of the stimulus is essentially punishment for those holding cash. To preserve purchasing power, investors must seek alternative stores of value, such as common stock.

    It is important to point out that despite an impressive rally, U.S. stocks have substantially underperformed foreign stocks. In the past two months, while the Dow Jones has risen 30%, the Hang Seng and the German DAX have risen by over 50% in U.S. dollars. Commodity prices are also rising, with oil hitting a five-month high. And gold is shining as well, with the HUI index of gold stocks up 30% during the past two months, and 2/3 of those gains occurring in the past month. If this rally really were about improving economic fundamentals, gold stocks would not be among the leaders. Further, during those two months, the U.S. dollar index fell by 7%, with commodity-sensitive currencies such as the Australian and New Zealand dollars surging 20%.

    To me, the relative strength of foreign stocks and currencies indicates that perhaps the global economy is not as impaired as many have feared. It has been my view all along that after the initial shock wears off, the world will be better off – once it no longer subsidizes the American economy. The shrinking U.S. current account deficit is evidence of this trend in action. Renewed strength in foreign stocks and weakness in the dollar may indicate that not only is the world decoupling from the U.S., but benefitting as a result.

    So let the Munchkins dance for now. But remember, the Witch is not dead; only temporarily stunned by an avalanche of fake money.

    May 10, 2009

------------------------------------------------------------------------------

  _______________________________________________
  Peace-discuss mailing list
  Peace-discuss at lists.chambana.net
  http://lists.chambana.net/cgi-bin/listinfo/peace-discuss

------------------------------------------------------------------------------

  Internal Virus Database is out-of-date.
  Checked by AVG. 
  Version: 7.5.557 / Virus Database: 270.12.11/2089 - Release Date: 4/30/2009 5:53 PM
-------------- next part --------------
An HTML attachment was scrubbed...
URL: http://lists.chambana.net/mailman/archive/peace-discuss/attachments/20090510/f1eca8f6/attachment.html