TPS Posted November 21, 2008 Author Share Posted November 21, 2008 We need to be very careful about our current delationary recession...it can very easily "jump the shark" to become a hyperinflationary depression that rivals Weimer Germany. Anyone who tells you this is not possible has no idea what they are talking about. Curious to know your thoughts on how the current deflationary recession could become a "hyperinflationary depression"? Since demand for everything is falling, which is bringing prices down, how exactly can we "jump the shark"? Link to comment Share on other sites More sharing options...
TPS Posted November 21, 2008 Author Share Posted November 21, 2008 Thank you sir. My apology to criticizing you on this... Link to comment Share on other sites More sharing options...
SDS Posted November 21, 2008 Share Posted November 21, 2008 Thank you sir.My apology to criticizing you on this... Not to mention, how can it be "classic Bush" when he extended benefits back in 2002? Link to comment Share on other sites More sharing options...
Dante Posted November 21, 2008 Share Posted November 21, 2008 The left has two months to wait until you can throw all the money they want at all the world's ills. Part of me looks forward to seeing how THAT is going to work out for everyone. The acronym DFI has arrived just in time. C'mon don't be so negative. How can't you be caught up in the euphoria??? Oparah is still on a high so whats your problem? We got a leader who is a cross between JFK and Jesus with just a touch of MLK for flavor.. He can do anything to solve problems, even throw tons of cash at them. And you know, when it all goes for a $h1t it will all be the previous admins fault. Media will cover for him. Link to comment Share on other sites More sharing options...
bills_fan Posted November 21, 2008 Share Posted November 21, 2008 Curious to know your thoughts on how the current deflationary recession could become a "hyperinflationary depression"? Since demand for everything is falling, which is bringing prices down, how exactly can we "jump the shark"? There are two ways we could end up in a hyperinflationary state... 1- The Fed has injected approximately $1.5 trillion (and growing) into the banks as "M1" capital, meaning base capital. Banks have a reserve ratio of 10%, meaning 90% of that $1.5 trillion (and growing) can be lent out to individuals, businesses or other banks. That money can then be lent again and again, by a factor of ten. This velocity of money will accelerate in proprotion to the amount in system. Right now, bank are not lending, but if they start, we could get inflation very quickly as more moeny is "pursuing" the same good and services, driving prices much higher. The solution here is for the Fed to jack up reserve levels just as things are about to turn positive. This will likely force us back into the depression, but it will be necessary and painful. 2- Devaluation of the dollar. The dollar is the world's reserve currency, if that changes or if foreign governments stop buying US debt, or seek to maintain reserves in something other than dollars, the game is over. Then the US would be like any other nation, except with a massive debt that could only have been sustainable because of artificial demand for the dollar (as the reserve currency). The US would have to pay higher and higher interest to attract investors to its debt, cauing more and more of the Federal budget to be used for interest on the debt. Causing higher taxes to maintain the same level of services. Causing workers to demand higehr wages from employers. Causing employers to raise prices on everything. Causing workers to demand higher wages...etc. The solution here is to maintain the dollar as the world's reserve currency by any means necessary. Link to comment Share on other sites More sharing options...
StupidNation Posted November 21, 2008 Share Posted November 21, 2008 I think the real problem is with dollar hegemony. The US dollar has been the world's reserve currency since the Bretton Woods agreement. Thats why we can run big deficits and still have a market for US Gov't debt. I don't have the answers, and am still trying to figure out if I am asking the right questions. It's actually pretty simple. After LBJ not everyone jumped on the welfare disability bandwagon. The train got larger and larger. Add to that the issue of government spending on military endeavors in the 80's to topple the Soviets and that helped spiral the issue. Add the major neo-con agenda of war-mongering and there you have it. We created a non-sustainable system unless the population growth from income producers grew to sustain current levels. The people who produce and earn aren't populating to replacement income numbers, which is usually double those below them in the current system. Income producing citizens are shrinking, manufacturing is leaving (and if auto goes we are screwed even more), the drain from war and illegals is choking us, we have millions on welfare and disability who should be productive, and you have an amazing blend of the end of the U.S as a superpower becoming a 2nd world country and soon thereafter a 3rd world nation in 50 years or less. Sad, but true. Many of us clamored for the easy life and voted for no working. They will reap what they have sowed. Link to comment Share on other sites More sharing options...
TPS Posted November 21, 2008 Author Share Posted November 21, 2008 There are two ways we could end up in a hyperinflationary state... 1- The Fed has injected approximately $1.5 trillion (and growing) into the banks as "M1" capital, meaning base capital. Banks have a reserve ratio of 10%, meaning 90% of that $1.5 trillion (and growing) can be lent out to individuals, businesses or other banks. That money can then be lent again and again, by a factor of ten. This velocity of money will accelerate in proprotion to the amount in system. Right now, bank are not lending, but if they start, we could get inflation very quickly as more moeny is "pursuing" the same good and services, driving prices much higher. The solution here is for the Fed to jack up reserve levels just as things are about to turn positive. This will likely force us back into the depression, but it will be necessary and painful. 2- Devaluation of the dollar. The dollar is the world's reserve currency, if that changes or if foreign governments stop buying US debt, or seek to maintain reserves in something other than dollars, the game is over. Then the US would be like any other nation, except with a massive debt that could only have been sustainable because of artificial demand for the dollar (as the reserve currency). The US would have to pay higher and higher interest to attract investors to its debt, cauing more and more of the Federal budget to be used for interest on the debt. Causing higher taxes to maintain the same level of services. Causing workers to demand higehr wages from employers. Causing employers to raise prices on everything. Causing workers to demand higher wages...etc. The solution here is to maintain the dollar as the world's reserve currency by any means necessary. The key is that money has to be put into the hands of people who will spend it. You don't get inflation because the FED has injected $1.5 trillion into the banking system. In addition, once things "settle down" (if they ever do), the FED can always take the liquidity back. It is true that inflation occurs because there is too much demand relative to supply, and with businesses and consumers cutting back spending, there is no danger of that at the moment. As to your second point, if a dollar sell off caused interest rates to increase, that would push the US further into recession, with a slight counter-effect that whatever we still produce will be cheaper to foreigners. Also, I don't know too many workers who can demand higher wages when unemployment is rising. The cause of hyperinflation has been governments spending on goods financed by printing money when resources (capital, raw materials, and labor) are scarce. We're currently in a situation where resources are becoming "more plentiful." Link to comment Share on other sites More sharing options...
GG Posted November 21, 2008 Share Posted November 21, 2008 The key is that money has to be put into the hands of people who will spend it. You don't get inflation because the FED has injected $1.5 trillion into the banking system. In addition, once things "settle down" (if they ever do), the FED can always take the liquidity back. It is true that inflation occurs because there is too much demand relative to supply, and with businesses and consumers cutting back spending, there is no danger of that at the moment. As to your second point, if a dollar sell off caused interest rates to increase, that would push the US further into recession, with a slight counter-effect that whatever we still produce will be cheaper to foreigners. Also, I don't know too many workers who can demand higher wages when unemployment is rising. The cause of hyperinflation has been governments spending on goods financed by printing money when resources (capital, raw materials, and labor) are scarce. We're currently in a situation where resources are becoming "more plentiful." Never mind the availability of alternative investments that would fund that dollar sell off. Will the Chinese start buying euros to kill the dollar? Perhaps, but without the tax, economic and military heft behind it, the euro is much more vulnerable to a collapse. That will be exacerbated even more due to an artificial increase in the euro value as China would want it to replace the dollar reserves. The FX market makers will profit in the short term by selling all the euros to China, and then will sit back & wait for the euro to collapse and gladly buy it back from China at a steep discount. Link to comment Share on other sites More sharing options...
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