Thursday, April 7, 2011

Relying On The Gods From The Machinery: The Weird and Disturbing Teleological Approach to Discussing Macro-Economics

It’s funny how, in the middle of a street fight, you can come across a diamond.

“Please, O Great God of the Golden Calf!
Please don’t take away my 401(k)!”
Last Monday, Rick Ackerman wrote a fairly fatuous deflationary rant which caught my eye, obliging me to respond on Tuesday with a dissection of Ackerman’s . . . “argument”.

Actually, I didn’t so much dissect it as give it an autopsy—the thing was dead on arrival.

Then on Wednesday, Ackerman started Round 2 of our little street fight, with a post titled “Here’s Why Hyperinflationist Lira Is Wrong”.

Well . . . how could I put it: Ackerman’s Monday piece at least had an argument—an invalid, unsound argument, as I think I pretty much showed. But at least Ackerman pretended to some semblance of rationality.

However, Ackerman’s Wednesday piece? Boy, where to begin—

—and here’s where I discovered my diamond:

You know the expression deus ex machina? It’s the modern Latin version of the Greek theos ek mēkhanēs, which means literally “the god from the machinery”. The phrase was used to refer to how, in ancient Greek plays, actors playing the gods would be lowered down onto the stage by way of pulleys, levers and rope.

The phrase has come to mean an explanation that relies on the appeal to “the gods” to save the day—an unpredictable, enormous, inscrutable power that will come on stage at the twelfth hour, and determine our fate at their whim.

In Wednesday’s piece, that’s the “argument” Ackerman was laying out and passing off as “logic”: He was saying essentially, “The Gods won’t allow hyperinflation! That’s why it won’t happen!”

Consider this, from his Wednesday piece:
I could dismiss Lira’s entire argument with a wave of the hand, invoking the killer question that blogger Charles Hugh Smith has asked of overheated inflationists, to wit: Why would the rich and powerful men who control the Federal Reserve, and who would be wiped out by hyperinflation, allow such a thing to happen? The obvious answer is that they wouldn’t. And won’t. I’ve made this point myself many times before and in many ways. [emphasis added] 
Then he goes on:
It was this book [ie. The Great Reckoning], and a subsequent dialogue that I had with Jim Davidson, that hardened my deflationist ideas, convincing me – as they likely would many of you, though perhaps not Lira — that a deflationary path would at least be less ruinous than a hyperinflationary one. To be sure, vast amounts of real wealth would be destroyed in either case. But deflation would have the virtue of inflicting pain on debtors more or less in accordance with their sins, bankrupting those who most deserved it. That said, one needn’t drag in moral baggage to explain why the powers that be are extremely unlikely to pursue a hyperinflationary course. [emphasis added] 
And then concludes:
We need only consider the catastrophic consequences of hyperinflation to understand why such a scheme is so very unlikely to be promoted and effected by the Masters of the Universe. [no emphasis needed]
All of Ackerman’s arguments boil down to the same thing: The “rich and powerful” won’t let X happen, X being whatever Ackerman doesn’t believe will happen. Since he doesn’t have an argument that’s based on logic, he calls on the “Masters of the Universe” and “The Powers That Be”—in other words, the deus ex machina—to carry out what he believes will happen.

And the things he believes will happen? They’re not based on logic—rather, he believes things based on “instincts”. As he himself says in his Wednesday piece,
“My instincts concerning deflation were hard-wired in 1976 after reading C.V. Myers’ The Coming Deflation.” [!]
“Hard-wired in 1976”—good grief.

This is why Ackerman himself isn’t worth debating. It was fun to mess with his head once—but mess with him again? I mean really, why bother? Back in 1976 when you were in school, you didn’t go pick on the retarded kid in the playground two days in a row, now did you? Of course not. Once was enough—twice would’ve been just mean.

But poor Slow Ricky’s Wednesday blubberings did highlight something I’d been thinking about, and which troubles me deeply—

—something I think we should all find troubling and disconcerting:

There is this weird, rather obsessive insistence on blaming “The Powers That Be” among a fairly large segment of people following the markets and the current situation. Whatever happens, expressions like “TPTB” or “the rich and powerful” get tossed around to explain all sorts of events, often mutually contradictory.

Often, clear and rather obvious policy mistakes—like for instance QE-2—rather than being analyzed at face value and deemed mistakes qua mistakes, are meta-analyzed and re-analyzed, until finally someone of this particular worldview claims that the “mistake” is actually not a mistake at all, but rather a cunning move by The Powers That Be which will aid these shadowy “powerful forces” in their attempts to gain control—control of the entire world!

I wish I were kidding, but I’m not.

Notice the aforementioned Charles Hugh Smith: All due respect to the man—whom I do not know, and who seems like a very nice person—but glancing through his blog, I came across a paragraph of his which was practically a Joycean epiphany:
My problem with the "hyper-inflation is inevitable" school of thought is that I cannot identify what powerful interests would gain from the destruction of the currency and all financial wealth. 
This is a classic example of a teleological argument: It’s an argument from design. It refutes the chaos and contradiction of capitalism, and tries to impose order and meaning by appeals to the existence of “powerful interests” or “The Powers That Be” that control the wider economy—and more importantly, control our individual destinies.

This isn’t limited to Mr. Smith or to Slow Ricky—this weird teleological explanation of macro-economics seems to be pervasive among a wide swath of the financial blogosphere.

Glance through the discussion sections of most financial blogs—Zero Hedge, Business Insider, naked capitalism—and you will easily find commentators who refer to these shadowy powers who “Pull ze strings! Pull ze strings!”, as Bela Lugosi famously said.

In this worldview, figuring out the macro-economic future does not depend on analyzing policy decisions, measuring economic indicators, and then drawing reasonable inferences or deductions that can be proven or disproven. Rather, to figure out the macro-economic future in this worldview, you have to tease out the intentions of “The Powers That Be”—much like pagan priests used to tease out the intentions of The Gods, whenever They sent a flood or fire in the direction of the community.

We civilized people of course know that neither floods nor fires are caused by The Gods—they’re caused by naturally occurring events that we all fully understand.

But some people honestly and truly seem to think that their economic fate is decided by these shadowy “powerful interests”—no different from pagans who believed the success of their crops depended on the whim of The Gods. 

As far as I’m concerned, this teleological explanation of finance and macro-economics is a bunch of bullshit.

First of all—and most important of all—it is a denial of the intrinsic chaos and disorder of capitalism. It is a worldview that is anti-capitalist. This worldview implicitly holds that everything in the markets is controlled, controlled and directed, no different from a Soviet managed economy—and that therefore, there is no freedom in the market, or choice for market participants: A supremely anti-capitalist worldview.

Second, it allows people who subscribe to this worldview to meakly accept their fate, like sheep—or like pagans cowed by the high-priests who claim to speak for The Gods. Sure: “If The Powers That Be control your fate, then why bother doing anything to change your fate? The ‘powerful interests’ will only bring you down in the end—so go on! Accept your fate! Lay down like sheep! Resistance is useless!”—this is what the teleological macro-economic worldview is telling you.

Third, and most despicably of all, it implictly raises “the high and mighty” into some sort of special class, above ordinary human beings, a special class based on money, as opposed to some true quality of talent or condition.

I’m a snob—and make no bones about it. We’re all equal, sure, but some of us are more equal than others—and some of us in particular are most equal of all. But money is certainly not the criteria for people of quality—far from it, as anyone who’s ever known rich people can tell you. Merely because someone is rich, merely because someone is powerful, does not mean that they have awe-inspiring brains, insight or cunning, much less some sort of “secret plan”. 

Finance and macro-economic policy are—by definition—the product of human interaction. That is, every single player in the game is a human being. Exterior factors and natural events very much influence the game—but the game itself is determined by us, by human beings. And as everyone knows, human beings are fallible. Not only fallible, they are also stupid, short-sighted, impulsive, self-defeating, selfish, wrong-headed, irrational, willfully blind, arrogant, smelly, and most especially _______ [insert favorite derogatory adjective here]. 

“The rich and powerful” are no different in this regard. They are not some deities pulling the strings from on-high. They are merely human beings. They are not even particularly clever human beings, for the most part—trust me on this, I’ve met real Masters of the Universe on three continents: Some are quite clever, but most are fucking idiots who fell into their money by birth or dumb luck, while a few—mostly traders—are blinkered robots who consider “long term planning” what they’ll be doing next week.

They aren’t special.

But of course, believers of this teleological approach to macro-economics, such as Slow Ricky, believe that “the rich and powerful” are special—so very, very special! Purveyors of this intellectual dross believe that “The Powers That Be” have perfect foresight, are perfectly clever, and never ever fail—

—and most important of all, these people believe that the chaos we are going through is all part of A Plan.

These people actually believe that the mess we are currently experiencing was deliberately brought about—that is, that it was consciously, intentionally brought about. The Global Financial Crisis of 2008, the Mortgage Mess, QE and its iterations, everything—it was all intentionally carried out by The Powers That Be, and is being carried somehow for the benefit of these shadowy, inscrutable, unknowable group of people. They have complex theories as to how they benefit—each theory more absurd than the last.

The people who believe in a teleological macro-economics cannot believe—refuse to believe—that this mess we’re in, and the imminent bankruptcy of the United States, was caused by nothing more sinister than stupidity and incompetence.

You can’t argue with someone who thinks this way—but then again, why bother having a discussion with anyone who thinks this way? These people do not truck with logic—to them, it’s all what they believe that matters, the facts be damned. Why bother having a discussion with someone who will always appeal to The Gods of the Machinery? In their minds, they will always win.

In your mind, you’ll know they always lose.

Now, if you’re really interested in a serious debate about deflation and hyperinflation, then check out the recorded debate I had with Nicole “Stoneleigh” Foss from The Automatic Earth. Stoneleigh argues from reason and logic—she has no need to appeal to The Gods of the Machinery to prove her point. 


  1. Ok, Nobody Special, here's your chance to chastise GL for descending to name-calling.

    GL, I think you are going to throw a lot of your readers for a loop with this piece (that's good btw).

    One question though - you call the teleological macro-economic worldview anti-capitalist because it posits a central soviet style control. But you just recently called Greenspan a Soviet goon. Is there a correlation to thinking that the economy is run by central soviet style control and thinking that the leaders of our central bank are Soviets? Seems that if you think the Chairman of the Fed is a Soviet, you might thing that there is a central soviet-style control going on - at least of monetary policy.

  2. GL,
    I agree with you about Ackerman's arguments but you seem to contradict yourself to a degree.

    Are you not setting up a false premise yourself?

    Just because you and I believe no one had a "grand plan" to bring about this economic mess does not automatically mean that someone is not doing everything within their power to shape it to their benefit. As I see it, now that everything has unravelled and is further unravelling, the owners of the Federal Reserve would have to be altruistic not to use their power over the Fed to rescue themselves.

    I for one do not believe in altruism, especially among bankers.

  3. Always the best blogs! A funny 'coincidence' of novelty. Last night I tuned into rawdogs youtube channel, I see that Keiser occasionally posts his videos so I was browsing through. I came across his video 'Last Illuminati Post' and watched it last night, then I read your blog just now. I'm happy that you took the time to dissect, err conduct an autopsy of Ackerman. I had read his article the night before and was more confused than anything by it. Terence McKenna sums your point up exactly..

    The real truth that dare not speak itself is that no one is in control, absolutely no one. This stuff is ruled by the equations of dynamics and chaos. There may be entities seeking control, but to seek control is to take enormous aggravation upon yourself. It's like trying to control a dream.

  4. I'm a big fan GL and I also feel RA brings a lot to the table. The financial meltdown is coming in maybe the 'form of a pig wearing lipstick' and I feel you two gentlemen are arguing over the colour of the lipstick.
    Anyway, thanks again for your great insight!

  5. Hyperinflation can't happen(Even if the fed/banks wanted it to happen).

    The digital dollar requires computer programs.

    It would take too long to rewrite the needed code to allow for hyperinflation. The fed/banking system would fail way before the worlds computers could handle hyper-inflated numbers.

    -Hyperinflation requires significant change over short time.
    -Computer programs take long time to rewrite.
    -Digital money requires computer programs.
    -Therefore dollar can't change significantly over short time.
    -Therefore hyperinflation cant occur.

    Inflation can and will occur, but it will lead to failure first.

  6. @anonymous 1:29PM

    -Computer programs are generally scalable
    -Financial programs are especially so
    -These programs would not require rewrite
    -Your logic falls apart
    -hyperinflation occurs

  7. @Doug: I was going to do just that, but realized how pointless it would be. GL is a total asshole. Ackerman's response to Lira was very respectful, almost like he was making a deliberate effort to de-escalate, and this right here was way, WAY over the top. After reading Ackerman's response yesterday, I've been waiting anxiously for GL's next piece to see where he would go next - would he tone it down or take it up another notch? I was almost shocked that he took it up not one notch, but two. The only reason I'm going to keep reading GL's blog is because I think he's right and I appreciate his insights.

    As an aside, attacks (personal and otherwise) on Bernanke, Krugman, their minions and fluffers, and almost any politician of any stripe are well-deserved, right and proper.

  8. Doug
    You mean the IRS has Hyperinflation compliant software?
    Are all the Point of Sale devices, ATMs, Online bill pay, accounting software, payroll systems,and utility billing systems Hyperinflation compliant?

    I don't know, but my bet is they are not.

  9. I think that there's going to be a separation between the technical definition of inflation as increases in the money supply and what us "common folks" see as inflation but is really price increases in retail purchases.

    I tend to agree with Vox Day that M3 will crash: there is too much bad debt that still needs to evaporate. In technical terms, that means eventually we will see deflation. If the Treasury goes into complete default, which I think is possible, we will even see hyperdeflation.

    However, I don't think this will translate into price decreases for a time, or possibly ever. M3 is 7 times M1, and almost double M2, by Shadowstats' count. The Fed is monetizing Treasuries, which pump directly into M1 or M2 without technically touching M3. Also, the Chinese are taking money that used to get pumped into M3 and are using them in the commodities markets (again, M1 and M2). We are just now seeing the price impacts of the 2000s explosion of the money supply in the retail market.

    If (When) the world abandons the dollar as the reserve currency, then its value will drop and banks will run for the doors. This floods M1 and M2 and kills the exchange rate, a double whammy for prices. We get Weimar-style price explosions for a period of time, all while the currency "technically" deflates due to loan destruction and the collapse of M3.

    The question is the response by the Fed. If they pull a Volcker, we would suffer an Iceland-like blaze of glory followed by a stabilization into a weak but functional economy. OTOH, any attempt to print money to stabilize the issue or keep the government afloat would IMHO completely destroy the USD. Given that we're monetizing half of the US Government budget right now, I lean towards the second option.

  10. @ Nobody Special - use your name. Secondly, do you want accurate information, or prefer what you deem 'respectable' but inaccurate information? There are no rules here man. Why has human consciousness chosen blogs as its medium of information exchange? Because it's doesn't have to be tied up in a bullshit plastic facade of in your definition "respectability" It's ok to skewer Bernake, but not Ackerman according to you, why? Because you define Bernake as "the bad guy" but Ackerman is on your side and "the good guy"? I don't see the logic..? Please explain..

    and to that anonymous guy..woahhhhhh, what are you doing on here man?

  11. Ehm, Gonzalo: actually there is something that is deflating big time in the US economy since the seventies: just look at real wages.

    That is why I would speak of inflationary depression, or stagflation 2.0, or something like that.

  12. The author has alot of confidence that the rich and powerful know what the hell they're doing. I'm not convinced that they, with their extremely narrowed point of view, do.

  13. "Why would the rich and powerful men who control the Federal Reserve, and who would be wiped out by hyperinflation, allow such a thing to happen?"
    I had a good friend of mine, who is a brilliant trader, tell me the same thing.
    Quite simply: there is no other way out.
    1. There is no way to pay the debt.
    2. The politicians will not change their deficit spending unless there is a financial catastrophe.
    3. The US population needs to experience a hyperinflation to cure themselves from freeloading.

  14. Couple of problems here:

    1) All of the fraud, deregulation, Ponzi schemes, asset bubbles, zirp, tarp and every other financial ripoff bleeding the middle class dry has nothing to do with "the powers that be"?

    2) Record bonuses for the excutives at totally insolvent banks (casinos) have nothing to do with "the powers that be?

    3) The rich getting richer than ever before and the remainder being poorer than ever before have nothing to do with "the powers that be"?

    4) The mountains of gold in the vaults of generational of banking dynasties won't protect the "powers that be" from fiat currency devaluation?

    5) The willfull destruction of the dollar now underway, being revealed in the trillions upon trillions lent by the FED while Congress was sweating out the pimple on its ass known as TARP, followed by QE1, QE2, QE.x.x is all circumstantial and has nothing to do with the powers that be?

    Quite frankly, they are NOT Gods, but they ARE craftier than you, Gonzalo, and inferring that a fellow blogger is "retarded" is simply bad form.

    We WILL experience hyperinflation in America, exactly as you described it, and the 2% that thinks it's a God, and desires to rule the 98% will not be impacted by this event, as they have already stolen more than enough to compensate for it.

    There are at least a hundred quotes about the Trilateral, Bilderberger, CFR, IMF, Globalists like Rockefeller and his ilk regarding their "plan for the world" and to see that plan unfold before your very eyes -- their coming Global Monetary Union - and deny it - is really naive at this point.

    No, they are not Gods, but the monied powers DO have a plan, and they do have similar interests and whether you see the coordination of similar interests as a conspiracy or not, you WILL see that a global, corporatist-fascist central authority which intends to rule the former sovereignnation states under global economic governance is forming out of the IMF, UN, World-Bank and all those other nameless powers.

    That doesn't mean they'll triumph. But that doesn't mean they don't exist. Get real.

  15. If the monied power elite, as you say, Gonzalo, have no conspiratorial aspirations and organizational skills for world dominance, why then are they so successful in concentrating wealth and power in their greedy hands while the rest of the world goes to hell with an empty handbasket?

    Considering that they have accelerated their accumulation of wealth and power during this ongoing financial crisis without the intersession of the gods or secret society powers of manipulation, then one can logically deduct that they are damn clever in thinking on their feet during chaotic times.

    As they have proved when faced with a worldwide implosion due too much unrepayable debt, I suspect that when faced with inflation that runs out of control the monied power elites, without synchronized international manipulations due to their secret ancient organizational powers or their gods, will maintain their elite stature while the masses cannibalize each other.

    Personally, I think that the exponential laws that govern increasing interest on debt which leads ultimately to the economic implosion of deflation - Is counter balanced by the ability of Central Banks worldwide to print credit and distribute it to the "chosen ones", who just happen to be the monied power elites.

    This dynamic tension can be maintained indefinitely until an ominous shadow of a back swan is cast upon the debate of whether inflation or deflation will be victorious. Until such time, let's all argue.

  16. You earned your biscuit today Lira.

  17. Ackerman's piece is a good example of "normalcy bias" in action: It can't happen because it never has. In his case, he reinforces this bias by reference by reliance on Powers That Be. Oh, and a little name calling never hurt anyone.

  18. >Quite simply: there is no other way out.
    >1. There is no way to pay the debt.
    >2. The politicians will not change their deficit spending unless there is a financial catastrophe.
    >3. The US population needs to experience a hyperinflation to cure themselves from freeloading.

    That says it all!

  19. GL,
    Agree with your stance in this debate--as for RA, I'm not sure he actually has a stance--

    Would highly recommend watching RA's recent interview on Max Keiser's show:

    The entire purpose of these infl vs defl debate is to figure out WHAT TO DO WITH YOUR MONEY. RA says holders of gold will do fine. I find this somewhat of a contradiction. You can't be a "deflationist" but think gold is going to do well--that's as backwards as a "gold bug" looking for gold to rocket skyward, but say the USD is going to "do fine".

    Anyone who knows anything about anything knows we're in for a massive deflationary collapse---the argument surrounds what base currency will emerge in such a collapse. HINT: It doesn't come from a printing press

  20. At some point, views on money policy and the motivation's of people in regards to money both now and throughout history drawn on a spiritual component within each one of us. The love of money while not possible to be analyzed and measured statistically does not mean it can't be allowed or should not be allowed to influence our own opinions into the motivation's of decision makers. If the end-game of a one world currency can occur via a deflationary or inflationary model, we should be open to both viewpoints and try to prepare accordingly, as I see it the desires of the powers that be to establish control of a monetary system for the entire world even if it means the loss of their fiat wealth is something they are willing to do. Do not forget that those same powers that be could also be better prepared for the ''new world order'' in ways we don't understand so crashing the fiat money system worldwide isn't as crazy if the end game is to bring out something entirely different.

  21. @Anonymous - yes I think that IRS has software that can account for a 15%-30% annual increase. POS software? It's a matter of raising prices - POS software seems to handle this pretty well. ATM? The bigger problem with ATMs is not the software but getting enough bills into the thing. By the time we are at a point where we are adding zeros to the currency to try to keep up, we've already experienced hyperinflation. Will the software eventually break? sure. Hyperinflation will already be here. The breakdown in logic is that software has to be "re-written" to account for higher prices. If a fundamental function of the software is to create/read/update/delete price specific data, it's not fundamentally changed because prices are higher.

  22. It’s happened to other countries, and it can happen in the USA.

    I looked up what countries have experienced Hyperinflation, and there seemed to be a common theme, for the below, I just changed dates and country names, the outcome remained the same.

    Were the "Masters of the Universe" not concerned with these countries, or TPTB just too stupid to realize what was happening!!


    Shortly after the ascension to the office of president, Socialist President Barack Obama, decreed that many of America’s leading industries would be nationalized. Owing predominately to management problems (with bureaucrats overseeing the market) this government soon began hemorrhaging money, and in order to subsidize the loss, the Federal Bank began printing unbacked currency at an alarming rate. This resulted in an inflation rate of 600% by the end of 1972; inflation eventually skyrocketed to 1200% by the end of 1973.


    After unprecedented annual growth rates and record trade surpluses, panic and political unrest broke out between Democrats and Republicans and Tea Party loyalists, in the wake of the 2011-12?? oil crisis. Conflict came to a head in 2014, when another sharp recession looked inevitable. The American government then exacerbated the situation by refusing to borrow in order to cover its budget and trade deficits.



    During the 1980s, America, like many countries introduced a number of trade liberalization polices. At the same time, government increased public spending, privatized enterprise, and neglected to service the nation’s external debt. As a result, by the end of 2013, America’s economy – which once had been enticing avenue for foreign direct investment – was experiencing not only negative economic growth, but also deficits of all types, as well as hyperinflation.



    America’s story is an unfortunate one, and while it is today one of the fastest growing economies in the world, the country was plagued by numerous war from 1990 to present. This conflict placed a large strain on the nation’s economy, as well as its currency, the dollar.

  23. When the Soviet Union collapsed, the rich and powerful did not stop their society from crumbling. They just pulled up stakes, moved their money overseas, and continued to be happy elsewhere. Not only that, in some cases they ransacked and ravaged the infrastructure of Russia in the process - so they could make a profit from its demise.

    There's no reason to think that the same thing could not happen to the USA. I hope it doesn't, but it would be naive to imagine that it couldn't happen here.


  24. GL

    You and Mish have something in common. He does not believe that the Powers are planning destruction either.

  25. How can you possibly convince yourself that the banksters, having full control over money creation, full control of the government along with full control of the largest military the world has ever known, can somehow be defeated by the little people. I do not see our current level of corruption as a "naturally occuring event".

    "We civilized people of course know that neither floods nor fires are caused by The Gods—they’re caused by naturally occurring events that we all fully understand."

    I wouldn't call them Gods, but they sure as hell are pulling the strings.

  26. Thanks so much for addressing this issue GL, it's the thing that irritates me the most. You see it all over the prepping movement (the new PC 21'st Century term for what used to be called the survivalist movement). All our problems are caused by the New World Order/Illuminati/Bilderbergers/Black Helicopters/Jewish Banking Cabals(though they often don't come out and actually use the "J" word)/Alphabet Soup Government Agencies/Any Church Except Mine/Gray Aliens/Shape-Shifting Flesh-Eating Reptiles From Outer Space/Orbiting Mind Control Lasers and on and on and on...
    Hell, just look at some of the posts in the comments section of your blog.

  27. GL has, in his aphorisms section, this piece of wisdom that I think he is applying here:

    6. Never ascribe to malice what can be explained by incompetence. (Basically, Hanlon's razor)

    To which you could add:

    Any sufficiently advanced incompetence is indistinguishable from malice. (Clark's Law)

    So "TPTB" may not be in control and pulling the strings but to many it sure looks that way.

  28. Does anyone else think that our current financial problems will very likely lead to a cashless society.? debit cards or implanted chips.

    Could gold and silver trading be banned as a result? With trading restricted to the black market with all it's implications.?

    The last few weeks seem to be shaping up just like it was in 2008, rising commodities, strong canadian dollar, oil through the roof, could we be approaching another major dip in the world economy?


  29. Dear Anonymous:
    We no longer have to worry about leaving this economic mess to our grandchildren, the poop is about to hit the fan.
    The US is currently being bailed out (counterfeiting) by the Federal Reserve each and every month of the year.
    Meanwhile our politicians have their heads up their butts.
    The current "debate" about the deficit is lunatic.
    The Democrats say that only $6 Billion can be cut from a $1.7 TRILLION deficit, or the world ends!
    Pelosi, an embarrassment to human beings, claims that 3 million seniors will go hungry if any budget cuts are made!
    Ryan's "get well plan" plans to reduce a $1.7 Trillion deficit by $0.6 Trillion.
    What about the remaining $1.1 Trillion deficit?
    I predict that ONLY an economic disaster is going to bring the US back to reality.

  30. I've read that it was Lyndon B. Johnson who put the SS trust fund into the general fund. Now I can't judge his soul only God can do that, but I wonder if he is in hell right now? He broke a significant fiduciary obligation for all Americans and as a leader I think he might be held to a higher standard.


    ya know what's really annoying about this website is having to wait for it to load and then hitting the "read more" button to finish the article and comments. Then you have to hit the "post comment" button like three times and wait for it to load inbetween each time before it finally asks you to type in the scripted text. If I read this blog my entire life how hours/days will be wasted waiting for the page to reload?

  31. My sole qualification for posting here is being a graduate of Econ 101 45 years ago.

    That said, I have one of those Bush "gut feelings" that both sides of this argument have some justification.

    My faith in the greed of the super-rich guys is unwavering. And at this moment somebody sure has an iron grip on the US money mechanisms, and I haven't seen any poor guys in the public lineups.

    Mr. Ackerman's belief the super-rich have nothing to gain from hyperinflation seems to me to be "faith-based". I've read how a good number of the savvy wealthy did very well in the post-Great War hyperinflation in Germany. In the event a select few knew what was going to happen and when, I can imagine a situation where they'd make out like bandits in today's US of A. From Mr. Lira's February article about hyperinflation and real estate:

    "Thus, in an inflationary environment, real estate prices either remain static or indeed fall on a nominal basis, even as inflation is debasing the currency, because real estate sellers will not find buyers willing to take on usurious debt in order to buy the property."

    Imagine an "engineered" situation where falling real estate prices were the goal of some evildoing plotters with the influence to push things that direction. Timing would be critical, but at some point those evildoers (with endless amounts of hyperinflated money) could buy up just about everything worth having for a very few cents on the dollar. (Any residual wealth which escaped this first round could be taken by altering the tax situation of the lucky holdouts - especially individuals.)

    A few years ago I'd have sneered at this kind of tin-foil hat stuff, but when a person has seen this kind of 'engineering' with his own eyes, attitudes change.

    The place where I was employed for many years went through a succession of ownership changes, and at each stage the business got bled a bit more. Finally only a husk remained, and it was discarded. In retrospect I can see everything followed a pre-written script.

    THAT left me susceptible to the conspiracy notions. :)

  32. Good Grief, of course there is a Powers That Be, of course they want complete control of the world, of course no-one knows who they are, and of course they believe they are utterly superior to the rest of us and yes, they are also, of course capable and have made monumental errors ( I guess when you are that brilliantly clever you tend to be blinded by your own cleverness). But to say you cannot avoid becoming serfs to them is totally bizarre,

    All you have to do is the following - accumulate as much silver and gold as you can afford, emancipate yourself from medical science and the horrors of "Sick-Care', and develop a thoroughly grounded spiritual practice - and teach others how to do these three (especially the second one, because that is where everybody is thoroughly trapped in web of deception and error, inclusive of medical science itself)

  33. Part I:


    I respect your recent analysis in your recent skirmishes with Rick Ackerman, but I think that you are both talking past each other. It is possible for both of you to be even mostly right in your chosen spheres of logic and still miss the larger point and direction of the economy.

    In short our current troubles are mainly caused neither by conspiracy, nor by stupidity, but by cupidity. The Ancient Greeks (of which I am a descendant) long recognized in their plays the notion of character, virtue and vice, competing with ignorance and power. They maintained a lofty, even superior, position for character in their philosophy and in their drama. The Greeks also emphasized the foolishness of hubris, pretending one is a god (Icarus, etc.), and took great delight in rendering the inevitable smackdown that hubris invokes.

    Therefore, your analogy is a little misplaced. The powers that be (TPTB) are not gods; they are the hubristic god-pretenders. All but a tiny minority of the blogosphere already agree on this. Almost everyone, including you and Rick, think there will be a reckoning beyond the capacity of TPTB to control. However, that does not stop TPTB hubris from harming others, nor utilizing their considerable power to insulate themselves from consequences, nor does it stop their excessive desire (corrupted character, greed, cupidity) from seriously distorting the whole system of capitalism in the meantime.

    Zeus Yiamouyiannis

  34. Part II:

    From an investment standpoint, short to medium-term, empirical evidence shows that the super wealthy and well-connected have indeed been able to effectively control governments, monetary policy, etc. in such way as to suspend what might be considered the normal principles, if not "laws" of capitalism. To fail to recognize this is to invite poor investment decision-making. The classic rules and consequences of cause and effect, risk and failure, in the short to medium term, have been pushed aside.

    Examples have been gratuitous and unprecedented in the modern age in terms of scope and coordination (if not conspiracy). The world over, banks are bailed out and not a single major investigation of any crime of any note in the financial meltdown has occurred. There has been no investigation or prosecution of fraudclosure even though hundreds of thousands of concrete forgeries, assignments, and simply making-shit-up have already been entered as evidence. Companies like JP Morgan with impunity unload silver short positions into unregulated companies, as they, in cohort with other large banks, unload their liabilities and busted risks on global taxpayers.

    These instances have, at least temporarily, turned the whole notion of capitalism into a joke. As I wrote on that self-same Charles Smith's blog, it is not so much "them" controlling "us" as it is a hubristic bunch of jerks subverting any norm of fairness and price discovery to benefit themselves. We are not talking ego here, we are talking pure, blind, unreflective id coming out of a corruption of character and reason. To extend the mythology analogy, they are the King Midases without an appreciation of the bad consequences of getting their way, both for themselves and others. (If you recall, King Midas's own daughter was turned to gold when he touched her, in a morality lesson extremely apt for today-- "We reaped record profits, but our planet is now a toxic stew!")

    Here was my observation: "Historical economics are premised on observations of human behavior converted into “natural” laws and forces, given certain conditions. Those conditions are being actively and systematically subverted. We are now seeing human institutions and behavior operating as purely synthetic phenomena. There is no Adam Smith’s “hidden hand,” no collective rational self-interest, but rather devolution to leveraged control and power".

    Now this won't and cannot last forever, and almost no one is claiming it will. You are arguing over what may happen when the breakdown occurs, when the hubris falls off a cliff. I've already outlined what I think is going to happen in the short to medium-term (benefits accruing to the super-wealthy and well-connected:, and the longer term (civic refusal to play the game anymore, and a transition to local economies and communities that begin to progressively emphasize the non-material roots of the good life:

    I'd like to see a return to a discussion of what might lead up to a fall and what might happen after it, and less pissing and moaning about how trite "the other guy" is. Sure this stirs debate and talk show-style lather, but it's not that productive.

    Zeus Yiamouyiannis

  35. Not being able to fathom how something unthinkable can be beneficial to the powers that be doesn't mean that it doesn't benefit them. The Great Crisis of 2008 was a period when people though surely the powers that be would not let the big banks fail because of the chain of derivative problems that would occur as a result. Witness that it did happen even though the thought of it happening was unplatable and unthinkable.

  36. GL,

    Chaos only reigns in traditional Capitalism. The straight up kind of Capitalism where there are no bailouts and the gov't does not pick winners/losers. The US currently is not a capitalist system, it is a Crony Capitalism/Quasi Socialist system where the incestuous relationship between K St. and Wall St. dictates the economy.

    If we utilized a true Capitalist system, the gov't would not pull monetary strings or provide bailouts and the economy would have fallen into a severe deflationary depression in 2008 (Well sort of, we wouldn't have had TBTF, ZIRP, Fannie/Freddie, etc which led up to 2008, but I digress.) In true Capitalism, bankruptcies happen, creative destruction ensues which means the seeds from that failure can sprout into something new, individuals move up and down the wealth ladder, lean companies eat fat companies, and countries go through boom/bust business cycles without Keynesian assistance. Under a capitalist system, these are the chaotic events which you are referring to.

    But we don't exist under a true Capitalist system, we have the Crony kind, where the gov't will do everything in it's power to prop up the status quo institutions (possibly at the expense of the republic.) This is why the Fed is inflating away the dollar, hence your theory about hyperinflation.

    Which is why I can't understand why someone such as yourself who rightfully sees the hyperinflation coming, but then denies the very existence of the Cronyism (which is necessary to bring about that hyperinflation.)

    (FYI, I also think Rick is backwards as well when he says Cronyism will lead to deflation. but again I digress.)

    Regardless, I would like to focus more on what is going to happen and not get distracted by these sidebar discussions. We are running out of time before the SHTF.

    I just want to know how to prepare for the coming storm (if that's even possible.)

    I just want to know if I should hoard dollars or hoard gold?

    I see deflation and hyperinflation almost happening simultaneously which is a complete mindfu*k to me, and I'm sure a few others who are trying to wrap their head around the same possibility.

  37. jack in the philippinesApril 8, 2011 at 8:44 AM

    GL, you're doing it again. You rail against what you claim is 'deus ex machina' argument by Ackerman and then you resort to the same thing via ad hominem. So I guess (1) "Slow Ricky" is a "retarded kid", (2) He thinks hyperinflation is unlikely, therefore (3) hyperinflation is likely? Is that your argument here?
    Because I notice you haven't actually answered Ackerman's point, which is that it seems as though a lot of powerful folks would lose a lot if hyperinflation actually happened. You repeat over and over that they have no ability and/or are too stupid to prevent it, and take a few more ad hominem shots against anyone who might think differently. But you haven't, for example, explained how it is that certain Wall Street investment bankers, who seem to have a great deal of influence over both the Treasury and the Fed, have so far managed to make quite a lot of money manipulating the system while everyone else lost.
    The problem with the ad hominem is it leaves the careful reader wondering -- if you have answers to Ackerman's objections, why don't you give them, instead of engaging in puerile name calling?
    I would bet a month's pay that if hyperinflation occurs, those same Wall Street investment bankers will profit handsomely from it. The hole in Ackerman's logic, it seems to me, is his assumption that the "powerful" would lose from hyperinflation. I can think of lots of ways they could make money, and you can too, obviously, since you're giving out advice on how to do exactly that.
    I don't disagree with your conclusion that hyperinflation is more far more likely than hyperdeflation. But your argument would be a lot more persuasive if it were accompanied by more logic and less bluster.

  38. Convince me that wage inflation (let alone wage hyper-inflation) is on the way.
    As Ackermann says, without wage inflation, there's no hyperinflation.

  39. Excellent post "jack in the philippines". You hit the nail on the head. When so few have so much power, anyone would be a fool to bet against their ability to come out on top of any possible financial scenario.
    Where they get their comeuppance is through the following social unrest. It will not be a good time to be uber wealthy.

  40. The whole The Powers That Be (TPTB) thing seems pretty crazy. And I dismissed it until about a year ago where after further research it started to be the only way of looking at the financial / political world that proved consistent.

    Listen to some Alex Jones and Lindsey Williams. Read The creature from Jekyll Island. Research the Bilderberger group. Does it make more sense that Bernanke is incredibly stupid and incompetent, or that he is acting smartly with ulterior motives? Does it make sense that Obama was an anti war anti Guantanamo candidate that suddenly changed his mind once in office and decided to go after Libya too? When you pull back to get some perspective, does it really look like our military occupation are the result of events thrust on us, or part of a long term strategic play? Are we really free or are we duped serfs content in a debt based financial system that always keeps a select few rich and in charge?

  41. "Almost everyone, including you and Rick, think there will be a reckoning beyond the capacity of TPTB to control. "

    "Where they get their comeuppance is through the following social unrest. It will not be a good time to be uber wealthy. "

    IMO this is akin to the belief there will be a nasty "afterlife" (Hell) for those who misbehave with their lying and stealing and boozing and whoring. It is about the only comfort the 'righteous' have as they follow all the rules and still wallow in miserable poverty.

    We've got to examine the possibility the super-rich might see things differently. That they're bright enough to foresee the risks of backlash from the peasants.

    Again an opinion, but their prospects for success aren't a bit bad. Look at the way the Tea Party-types have been manipulated to agitate against their own interests. Flat taxation to increase their own taxes and decrease those of the wealthy. Down with Unions. Etc. This kind of stuff goes back a long ways - the Southern Elites convinced the dirt-poor whites to fight a bloody Civil War for them - one which was in every way against their own interests.

    The US Supreme Court is a reliable ally (or employee? - witness Justice Thomas) of the super rich. That outfit has allowed unlimited outside money to be used to buy elections by bigfooting election ad purchases. Like it or not, these work, for the typical BillyBobs of the Tea Party are pretty dim bulbs. So are the generic apathetic voters who pay no attention to events except for the few weeks before an election. In the event the propaganda doesn't work, there's always the Computer Voting apparatus. And if THAT doesn't work, we get back to the Supreme Court. Bush vs Gore, anybody?

    Scapegoats for the crisis are another option. It worked for the Nazis! This time it might be Filthy Liberals or Dirty Mexicans - with complete control of the media it could be just about anybody.

    But let's say that for some reason all the above fails - that the Peasants finally Revolt. What then? Time for a quote from Isaac Asimov's first Foundation novel.

    "And there isn't a factory, not a trading center. not a shipping line that isn't under my control; that I couldn't squeeze to nothing if Sutt attempts revolutionary propaganda. Where his propaganda succeeds, or even looks as though it might succeed, I will make certain that prosperity dies. Where it fails, prosperity will continue, because my factories will remain fully staffed."

    Transport to the revolting areas would suddenly slow to a dribble. It might be on account of some key bridges which got destroyed by the 'rebels'. It might be a threat from a fake (or real) disease situation. Communications of all kinds would fall to nothing. Especially internet access, for I expect preparations for control of US internet Hubs has been in place since 2001. When people start going hungry while they're shivering in the dark, their attention will turn from revolt to finding food and fuel and electricity.

    Finally, there are mercenaries. The wars in Iraq and Afghanistan have swollen the numbers of these characters enormously. US police or soldiers might not fire on the peasants, but you can bet your sweet bippy Blackwater et. al. would.

  42. Your "About me" wikipedia link is broken.

  43. Dear Fellow Posters:
    Illuminati, Knights Templar, TPTB, ... created this economic mess.
    What a bunch of crap.
    You want to know who created this mess?
    Go to the nearest mirror.
    It's the American people, the European people, the Japanese ...
    You've got the government that you deserve.
    You are all a bunch of whining and pissing freeloaders.
    You ask for more and more benefits from your governments.
    You group with some to steal from others.
    The seniors from the young, the unions from the corporations, the farmers from the non farmers, the minorities from the majorities ...
    It's never ending: you all want something for nothing.
    I live in Florida.
    Just got back from lunch, and you know what I saw in the streets?
    People complaining about cuts in the Florida budget.
    Are you stupid?
    What is it that you don't get about that we are all broke?

  44. Crap post tbfh, especially with the sideshow critcism. Seriously, if you think the financial problems are a result of mere incompetence then you're Ricky Retardo's equally retarded buddy in the playground. Sating massive greed on the backs of millions under the nose of regulators with little or no personal repercussions requires massive competence, complicit/pussy regulation, and ignorant millions. This truth does not need a tin foil hat to be obvious nor is it contingent upon deus ex machina bullshit. You don't have to accept any conspiracy thoery to see the hand of very compentent, unbridled greed in the economy.

    Yes, your site is hella laggy to load for some reason and posting is a pain in the ass too. Irritiating, but you do provide a lot of information between the short-guy personality ranting.

  45. We need to fix some ideas here. A lot of people hold an idea in their head that hyperinflation is just an advanced form of inflation. That is not true. High levels of inflation are just that ... times when the value of money is falling pretty rapidly. It is caused by a rapidly growing money supply, and to people on the street it appears as though the price of milk, eggs and bread is rocketing upwards by maybe 20% per year. That's pretty bad, but it's not hyperinflation.

    Hyperinflation happens when your "cash is trash". Your currency is rejected. Nobody wants it.

    Let's take an example. Suppose you go to buy a car, and inflation is running at 20%. The guy selling the car wants $10,000 for it. But he tells you that it will take one year to clear all the paperwork for the sale. So you offer to give him $10,000, but he figures by the time the deal is completed your cash is only going to be worth $8000. He would prefer for you to pay him $12,500 now, because this will degrade to $10,000 in one year (with 20% loss). Long-term deals become a really big hassle when high monetary inflation exists. Nobody wants to lose their share of the value. So there is more pressure to close deals quickly.

    But in a hyperinflationary environment ... you go to buy his car and he just laughs at you. He throws the dollars back in your face. What are they worth in one years time .... maybe $1000, or $500, or $20. Who knows.

    The US dollar can go into hyperinflation if - and when - people around the world see it as useless money. This means that there is a stampede for people to get their holdings out of US dollars. And this typically happens when people feel that US bonds are worthless. If we get to the point where the ONLY buyer of US bonds is the Fed, and nobody will want them in the future, then we are getting into risky territory. People no longer trust the "good faith" of the US currency. It is backed by nothing.

    You can jump to hyperinflation at any point ... if a currency loses all credibility. You don't have to move through progressively higher levels of normal inflation (although that is one road). When hyperinflation happens, the only thing left is to be self-sustaining, and to barter whatever you've got. Valuations in dollars would be meaningless.


  46. So VERY much enjoy your columns. Informative and fun, full of passion and delicious sarcasm and insults and fascinating ideas. And the comments are equally riveting. Also, thank your for leading me to your nemesis Rick Ackerman, whose columns are also fascinating.

    My take on the TPTB is to recall that my grandfather retired in St. Louis around 1950 after 40 years of steady employment with a big corporation and was given a generous pension which, within ten years time due to inflation, was barely adequate to keep him and my grandmother living above the poverty level.

    My impression is that the hypothetical TPTB coordinate loosely and behind closed doors to keep the bulk of the population who are in their prime years working as hard as possible with the promise of decent reward, while TPTB steal as much as they can with without getting caught red handed.

    Seems to me it always works out that way. Now can it really be just chance and incompetence that so successfully and so regularly robs the large majority of the population of their wealth? IMHO, the answer is no. So I also must posit a TPTB factor.

  47. All this conversation may be moot.

    As we stand on the eve of a government shutdown, our politicians are pointing fingers at each other. Based on current spending projections the US government will bump up against its debt ceiling limit on May 19.

    Perhaps the question is not whether the Fed will kick in QE3 in June, or whether the tin hat crowd is right about The Powers That Be, or whether Rick Ackerman is dead wrong. Methinks this is all a distraction.

    Perhaps the question is -

    As we hurl at breakneck speed toward the financial abyss on the Crony Capitalism Gravy Train, and our politicians argue about reducing the speed to either 99 miles per hour or 97 miles per hour, and the World Bank/IMF/Central Bank/Government Gansta partnership convenes in Bretton Woods to disseminate the new wealth extraction vocabulary designed to convince all of us to stay on the train, how long do we wait before we grab our families and jump off?

    Bill Gross has already jumped. PIMCO Total Return, the world’s biggest bond fund, dumped all its US debt last month.

    As the train speeds toward the abyss I think it is a waste of time deciding whether to acquire dollars or gold.

    I think my time is better spent acquiring the things that will provide for the health and safety of my family.

    Oh - and lots of popcorn.

  48. This comment has been removed by the author.

  49. In a sense, Rick Ackerman is right: it is not in the interest of the Powers That Be to create a worldwide hyper inflationary depression. Where he goes wrong is in thinking that the PTB’s are in control of events and can prevent one. Ben Bernanke seems to think this.

    What Ben, Rick and the PTB’s forget is that they have labored hard on the circumstances which will produced a hyperinflation. They have build up the equivalent of gasoline stocks which will explode when a spark reaches the fuel. These economic fuel stocks are the world’s long term bonds and dollars in foreign hands. The sparks are the short term fiscal policies of the FED and the G-7 nations.

    The US government has a fiscal problem: it has long been running deficits and relying on the fact that the Dollar is the world’s reserve currency. This has allowed US politicians to create unsustainable “Entitlements.” Those politicians use the FED to finance Social Security, Medicare and Medicaid. These three social institutions are growing at a rate which will consume the Federal Tax Revenues in less than a decade. The FED has been inflating the money supply in order to decrease the Entitlement’s impact, but this is destabilizing its long term debt. The people who hold this debt have been rolling it into ever shorter terms. Eventually, that debt will become equivalent to cash. That cash will start chasing goods. This will incite inflationary fears which will lead to a hyperinflation.

  50. PeteCA
    You are right that high inflation is not hyperinflation(which is exponential inflation), but the collapse of the dollar is also not hyperinflation. Hyperinflation may lead to the dollar collapsing, but the dollar can collapse without hyperinflation.

    The reason hyperinflation can't happen in America is that hyperinflation requires complicity in both sides of the economy, e.g. lender-borrower, seller-buyer, business-employee.

    Both sides must have access to 'new' hyper-inflated dollars.

    The US fed can only feed money to one side of the economic equation. The Fed has no way to get hyper-inflated money to the middle class. So a inflation to hyperinflation spiral can't exist.

    I would like to hear how the fed/government can get hyper inflated dollars to the borrower, consumer, and employee?

    The fed will cause BAD inflation which will lead to default/collapse. No hyper is needed.

    Nacho Libre

  51. First time I've read this blog; not a good start for you: knowing nothing about you, and based solely on this article, I would have to come to the exact opposite conclusion about the "Powers that be," and I would have to assume you are stumping for them. "They don't have a plan"? [They are essentially a rag-tag, unorganized group that can think to serve themselves?] [Their ability to lobby and create legislative structures to suit their needs are irrlevant?]
    Yes, in blocks to denote a paraphrase of your sentiments.

    You've got some glaring contradictions going on here--which I'm sure you could care less about.

    I won't be back to pick on the village idiot again...

  52. You seem confused about the economic terms, Nacho Libre. We can have monetary inflation or deflation as well general price increases or decreases, also know as inflation or deflation. The later is the delayed result of the former.

    The pattern which follows in a hyper inflation that you have price increases until the public loses confidence in a currency as a store of value. Capital goods or nonessentials may decrease in price while necessities skyrocket. This is because people have limited funds and must prioritize. They can’t eat iPads. They may also hoard goods which they know they will need in the future, thus, creating shortages.

    There are huge amounts of US dollars and Treasury notes overseas which can be repatriated. This is especially true of Japan, the third largest holder of US debt, which needs money to rebuild after the recent earthquake and tsunami. That debt will likely be rushing home.

    The FED will still need to fund over 50% of the federal budget, Tax revenues decrease in a hyperinflation because people start trading on the untaxed black market.

    The FED’s leadership are Keynesian’s who believe they can inflate themselves out of their troubles. They believe they must inflate the money supply to avoid a monetary deflation, which they fear excessively.

    There is usually a time delay with the introduction of new currency and price increases, but that time decreases as people come to expect prices to go up. One could hope that the FED’s management wakes up to the fact that they are producing the price increases, but this is unlikely. Every hyperinflation is originated by central bank leaders who think, “This time it is different.”

    Ben Bernanke is unlikely to stop inflating the money supply, until too late. Once price increases exceed 50% per year, we are officially in a hyperinflation. We could hope that the FED stops increasing the money supply, but we are more like to get Wage and Price Controls which will make matters worse. That is when we get empty store shelves.

  53. Great piece. In fact best so far. This was the gorilla in the room.

    I do think though that we are on a knife edge of deflation or hyperinflation. If Bernank does not print enough, we can still have a deflationary collapse. Highly unlikely at this point. It is amazing that people can believe that the Bernank will get this just right. Cannot happen.

  54. Jesus christ you guys. The whole point is that there are/is no group "TPTB". What is so hard to understand for you people. Like GL says, we cannot argue with you. You believe there is a TPTB. There isn't. This mess is total world dynamics. Some will gain, some will lose. Be a winner and by gold and silver. If you understand money, you know that is the answer. If you do not understand money you do not believe what i just said. If you become enlightened you will understand it. If you do not, your odds are much higher you will be a loser.

  55. GL
    They just don't get it and waste their time dissecting phrases or words, But at the end don't have the brains,nor the guts to mention it, that the "Power That Be" Are the right-wing-jews.
    They control the masses using the media/internet and the puppets in government.

  56. Lira and Ebag, exactly.

    It looks like Brazil basically had the same situation as us: The taxpayers voted for entitlements that the country couldn't afford and the politicians enacted them to keep their jobs (like in the US for babyboomers' Social Security, Medicare and Medicaid), the government ran out of revenue and got too scared to renege or tax the taxpayers, banks lent the government money to pay the entitlements, the government couldn't keep up with their bills and started printing money. Yada, yada prices rose, they had hyperinflation.

    They fixed it by making it illegal for the banks to loan to the government. Banks went bankrupt. And they told the businesses and special interests to shut up.

  57. Gonzalo is a pompous ass.

  58. GL,

    We are all human whether rich and powerful or not, and as such fall to human weakness!

    This mess we are in is caused by human greed, from top to bottom!

    I could not agree with more.

  59. I sometimes feel sorry for the uber-rich. I think that most of them miss out on many of the joys of life.

    Remember, money can't buy: happiness, health or heaven.

  60. Anonymous@1:55 PM said:
    "Jesus christ you guys. The whole point is that there are/is no group "TPTB”. “

    Not so fast, Anony, there are plenty of people who want to be TPTB. The question whether they really are. Can they control events as Rick Ackerman says? I think they can’t. That a hyperinflation is in the works.

    Gonzalo Lira refuted the contention that TPTB would prevent a hyperinflation because it would not be in their interest. But, a Deflation would not be in TPTB’s interest either. The FED’s actions have been promoting hyperinflation through expanding the money supply.

    Adam Smith said a few hundred years ago, that whenever industrialists or merchants get together they plotted a cartel. Why should bankers and wall street types be any different? The fact is that the bankers do have a cartel; It is called the Federal Reserve bank or the central bank in other countries. They are all in each other’s pockets.

    "You believe there is a TPTB. There isn't. This mess is total world dynamics. Some will gain, some will lose. Be a winner and by gold and silver. “

    It is not that simple. Central bankers are monopolists; this means that they offer poor services at high prices. Fractional Reserve Banking is fraud and, sooner or later, banks using it fail. If they inflate the money supply too little, then we get a deflation, too much a hyperinflation. The Central Bankers try to oscillate between the two extremes to rip off the public. The bankers are in cahoots with the politicians to cheat us. They provide the politicians with easy money to buy votes with.

    "If you understand money, you know that is the answer. “

    If you understand money, then you know that the end of the dollar is near. Things can’t go on like this. The FED is printing money like it is going out of style and the US government is spending money like a drunken sailor. I believe the FED is just competent enough to avoid a deflation, so that means a hyperinflation is ahead of us.

    Actually, since you did not say what you believed, I think you will be the loser. Where are you coming from? Are you saying the world wide monetary crisis is an accident? Get real.

  61. Screw you GL and your analogy about picking on kids on the playground. With your immense powers of reasoning this was the best you could come up with - that's probably what you actually did for fun back in the day . . .

  62. To be the devils advocate - what exactly is discussed at Bilderberger meetings? And why the secrecy?

  63. About the computer systems not being able to handle hyperinflation. I was in Zimbabwe about 6 years ago, and you could still use a credit card, but the problem was it had to be swiped multiple times just to pay for a few simple groceries. The machines simply didn't have enough digits!

  64. 1) TPTB, Banksters - whoever they are, seem to be at odds.
    2)Buffet and Munger; Bernanke, Obama, Krugman and 90% of Congress are arguably TPTB - they hate gold, love common stocks and deficit spending.
    3)Ron Paul, Kyle Bass, John Paulson, Paul Tudor Jones, George Soros, Steven Einhorn et al are TPTB and love Gold and common stocks fro the most part. That is an odd group by the way.
    4)One of these groups will benefit more than than the other group
    5)Not saying who is right and who is wrong only that TPTB are not on the same page
    6) Therefore they are not monolithic.
    7) Read Ferguson's Weimar book - Some people in the know benefited BIG TIME and some were royally screwed.
    8)Me, I just keep accumulating gold and silver
    9) I could be wrong.

  65. OT, but I have to laugh at the ad from Stealth Stocks at the top of this site where he says the market is going to crash by the end of this month... each month for the past three, or is it four? ;-)

  66. The system is so complex and interconnected that the consequences of any controlling actions are not always predictable. TPTB include governments trying to bamboozle their citizens into overlooking the obvious truths around them, and bankster types looking for a big score. Neither really have a grand overarching world plan. They are creating economic hurricanes, but have no control over where they are turning up.

    Money is being created to prop up housing and other leveraged assets. But it is going into commodities instead. You can lead a horse to water, but you can't keep him from pissing in the pond.

  67. To My Regular Readers:

    Does anyone else get the feeling that a lot of the comments here were written by sock-puppets?

    Feel free to identify who you think is a sock-puppet—I'm curious to see if there is agreement among regular readers.


  68. Maybe you are the sock puppet....

  69. Sock puppet: Used to describe a person who has no original thoughts, opinions, or ideas of his/her own. Instead they regurgitate the "party-line" or talking points of others; usually of their particular political party.
    Unfortunately that describes the majority of the American people.
    To be fair, of the majority of the world.
    Therefore, the majority of the postings.
    I expected that less sock puppets read this blog.
    Maybe the discussions here will help them.

  70. Funniest Post:

    -Hyperinflation requires significant change over short time.
    -Computer programs take long time to rewrite.
    -Digital money requires computer programs.
    -Therefore dollar can't change significantly over short time.
    -Therefore hyperinflation cant occur.

    Pure hilarity! I mean by that logic the Hyperinflationary events that happened in the Weimer Republic, Argentina, and more recently in Zimbabwe couldn't have possibly happened. After all, it takes time to build calculators with excess digits, cut more trees down, and add digits to analog cash registers or . . . dare I say it . . . build the worlds largest abacus? You see, because the Weimer republic couldn't print the Marks fast enough or build machines to properly count them - well it never happened! That's right, Hyperinflation in the Weimer Republic never happened! To hell with what Wikipedia and the history books tell you!


  71. To: April 7, 2011 1:29 PM,

    I work with computer programs every work day and have done so for 32 years. It does NOT take a long time to adjust the computing environment to handle all those extra zeroes. (Many large private companies could pull off adding 20 zeroes in less than a week.) Getting everybody that processes plastic to coordinate the change would be the biggest challenge.

    This is nothing like the Y2K problem, where two years were gobbled up making the changes to computer programs. One month, tops, and businesses would have the problem solved.

    Hyperinflation could happen in ONE HOUR because of computerized trading! The Dodd/Frank law requires that bonds be traded in the same way as stocks. I fully expect to see a flash crash in bonds within a few years. We might not recover from it.

  72. Usually, I read your blog with pleasure, - not tonight. I personally did not like how you treated Rick ( I disagree with Rick completely ), and that too, of course is my own problem, but I am telling you that you're not a gentleman.

    I think your problem is that you have had few successes, and elevated your own self esteem a bit too much and a bit too early, for you still have more machismo than brain. I think I have done the same when I was younger, so, it's not like it is something you couldn't fix, but you probably wouldn't be proud of this particular post years later.

    Anyway, besides the fact that you have offended my warm feelings for Rick Ackerman, who I never agreed with, I was trying to focus on your own logic and it is not very convincing, if at all.

    Take myself for instance. I like and want capitalism. Currently, however, to my great displeasure, I would have to agree that there is NO capitalism in USA. According to your "logic", I then harbor "anti-capitalist view", and this is because I point out that the current system isn't good enough, and that it is not capitalistic?

    I am from what was called "Soviet Union". The Party always told us that we do live in the "freest of all countries". Yet, I always believed that we lived in slavery. Now, if I apply your logic to that experience, then because I was saying that we lived in slavery, then, my view was "anti-freedom". I hope I did not twist your words around too much?

    And where exactly did you see freedom lately? You think that requiring car manufacturers to lower power consumption has anything to do with freedom or capitalism?

    Or, may-be the fact that I am forced to participate in a scheme called "social security" is your definition of freedom?

    Income taxes, gold taxes, absence of privacy, mandated lunches and breaks, overtime pay without considering my own opinion, police death squads, imperial wars, healthcare legislation and drug prohibitions, anti-foreclosure legislation, bankruptcy laws ( I could go on), all that to you are the examples of freedom and chaotic action of free markets, capitalism? This is how you define capitalism and free market?

    I could of course bring more criticism of your piece, point by point down to last line, but it is going to be a comment number 101 or something like that, and I know no one is going to read it.

    No one, but yourself, and we both know that you screwed up big time writing this piece. Not only you allowed yourself to disrespect your opponent, but you also did not think through your arguments, and had an unlucky urge to boast about your smarts and the logic contained therein, all at the same time.

    Sucks to be you tonight, Gonzalo. Tomorrow, though, is another day, so don't do anything dramatic. I am going to count this as your bad day.

  73. GL,
    I don't understand why it concerns you that sock puppets are commenting here, and that you feel the need to identify them.

    Their presence here is a huge compliment, a ringing endorsement of the popularity of your blog. Sock puppets ration their valuable time at the most popular blogs in an attempt to influence the most people.

    Sock puppets, comment away - and may you forever be unidentified.


  74. Just askin...who are the power that be?

    Wall Street?
    Congress/Senate/Executive Branch/Supreme Court?
    Huge corporations with lobbies?
    Federal Reserve?

    I personally think any and all of the above. Do you think that they are all incompetent and do not talk to each other? They have no plan? It is all random?


  75. It's so nice to finally see this low life sack of crap Hack-er-man get the kind of recognition he deserves. Especially from the most well respected writers like Dr. Willie and the brilliant Mr. Lira among others recently.

    If you've ever met this punk in real life you must appreciate this.

    I was one of his early "students" who paid him $1000 to talk to us like we were dirt and deride our every comment. He alienated almost all of the members of his early classes and created whole chat rooms full of ackerman haters. (previous students). TWO STUDENTS ACTUALLY WALKED OUT OF THE CLASS AFTER HAVING PAID ALL THAT MONEY. One of them was a respected financial writer from the hard money crowd who had had enough of his smart mouth and the other was a guy who really felt like he had been ripped off.

    He seems to have realized how badly that has backfired has tried to correct that somewhat.

    You pay ackerman $1000 to piss in your face! (After he has a temper tantrum with the poor lady who works at the convention room trying to get things the way he wants it.) He has a 100% zionist jewish loathing and revulsion towards his customers.

    It is seriously hard to understand how someone can be this BACKWARDS from normal.

    Just ask some of his previous students.

  76. People who believe in conspiracy theories (in this case TPTB) think they are showing how bright they are.

    In fact they are showing how gullible they are.

  77. Going back to my example of the guy selling the car ... let's look at the hyperinflationary scenario specifically.

    The guy selling the car wants $10,000 now, or if the deal takes 1 year then he's asking $12,500. Meanwhile, you're standing there scratching your head and wondering if he's serious. But at that very moment a Chinese guy walks up and offers $20,000 cash for the car. Now you're saying to yourself "You've got to be kidding - is this guy for real?". But yes - it's real. The Chinese guy needs to unload his dollar bills. That's all he cares about. His concern is that those dollars will be worthless tomorrow. So he might was well get something useful for them today. And a good car is pretty useful - almost a necessity for a lot of people.

    But before the Chinese guy completes the deal, a Japanese guy walks over and offers $30,000 for the car. Why??? Same reason - he already sees that the Chinese guy is dumping his dollars, and that means all dollars are going DOWN in a big time. So the Japanese guy wants to unload his money before his wallet is worth nothing. Hence a $10,000 car just jumped to a $30,000 car, when dollars are crashing in value.

    If foreign holders of dollars unload them in a major stampede, we've got a real problem. In reality, it happens if the Chinese and Japanese (and others) unload US bonds in a massive rush, and the Fed has no choice but to fund the purchases. Very likely many other foreign investors would immediately shift their wealth to hard assets - if necessary by buying them at exorbitant prices. Otherwise, all dollar-valued assets will crash in value. It is ugly.

    Hyperinflation does not have to happen, just because the dollar takes a signifcant drop. Bernanke and Co. are trying to engineer a drop in the dollar, without causing a crash. But a crash happens if there is a major loss in confidence in the USA. And you have to admit - when we've got a Gov't that won't solve any real problems, and acts as though it will take a catastrophe just to implement common sense - then we're setting up for a financial disaster.


  78. Dear Born Into Slavery:
    Many people in the US confuse "Freedom of Speech" with "Freedom from responsibility and consequences".
    For example, Al Gore and fellow lunatic Amory Lovins, promoted ethanol as a substitute/enhancer for gasoline.
    They were exercising their "Freedom of Speech".
    Later on "Big Al" confesses that he was promoting ethanol to win the Iowa primaries (you gotta get those corn farmer votes to win there).
    Ethanol causes more CO2 than gasoline and costs more.
    Huge pissing away of taxpayer money and starving people in third world country, because of "Big Al"
    Well, he certainly doesn't feel responsible. No public apology.
    And there is been no consequence to his fraud.
    So, should we respect "Big Al"?
    Same with Ackerman, he made an insulting dare.
    So, should we respect Ackerman?

  79. GL,
    I said it before and I'll say it again...I like you. You push the envelope to the edge of discomfort. That zone where most people just pack it up..AND GO HOME.
    AND yet as I read through your post-autopsy report, I find some elements that leave some bad flavours swirling, distasteful aromas lingering....some inconsistencies in your argument and incompleteness in your conclusions.
    Firstly, the inconsistencies...
    Part of your critique and analogy you highlight an observation that for "a fairly large segment of people there is this weird, rather obsessive insistence on blaming “The Powers That Be” .
    Aren’t you being hypocritical here...after all don’t you belong to that very same group...ones that blame the "Powers that be" (Bernanke and the Fed) for the mess (path to Hyperinflation)that we are in...hmmmmmmmm ?? Troubling and disconcerting indeed Mr L !!!!
    After all, if we admit or contest that mistakes are made ...then obviously "someone pulling the strings" is making them. Generally the string pullers are the so called "Powers that be".
    Don’t you even consider for one minute that these same string pullers are intentionally pulling /pushing...isnt QE I & for that matter QE II ...simply a means to an end. Sure it looks and feels like one gigantic fuck up. But, it can also be viewed, by someone sitting on the sidelines, as merely biding time, getting so called houses in order (because if we are to believe you, HYPERINFLATION is a no brainer). After all, if we didnt have QE then there would have been a helluva lot of instantaneous lost wealth and pain for EVERYONE (fact...not hearsay). At least with this premise, we are seeing that there are elements of intentional policy (controlled) with unintended consequences (uncontrolled).
    Teleological thesis, as you so pointedly crucify, does cater for half of the argument, that markets are controlled. Analyze your argument for Hyperinflation.....don’t you yourself determine that this scenario is achievable because of elements of control by Governments / CB's even though the same could be construed as being malfeasant. Sure free markets operate in a capitalist society, but are very much dictated by policies ("strings")good , bad or indifferent. Inadequate policies leaves doors open.
    As for your attack on the "poor" rich masters. Out of place...uncalled for...over the top. One thing they possess, which the majority obviously dont have, is influence. To say most are F.I.'s hmmmm, on an intellectual level I could accept that, but just because they're "blonde" doesn’t mean they cant exert pressure/influence. (No offence to any blondies).
    As far as being a deliberate mess.....I cant accept that the teleological philosophy is necessarily the ideal explanation/approach.

  80. This leads me to the second part of my blog response ..that relating to your conclusion.
    "Stupidity and incompetence" nothing more.
    Well GL ....well...well...well. This is very profound and insightful. BUT is also clearly a complete and utter Retort to your whole argument against Mr A.
    These two characteristics that you elect to
    denounce the "Game/Power players" as possessing in the destruction of the currency and formally the entering of bankruptcy of the USA are but subjective and callous nouns.
    An act of stupidity is the result of an absence of mental capacity. While incompetence, is a lack of an ability to perform. We can hardly say that either or both are entirely the absolute destroyers. One would need to mix rocket fuel with gasoline to get the desired effects...or perhaps alcohol with pure ethanol !!!!!
    Your whole argument rests on denouncing or denying that the Power Brokers are just plain stupid enough to not be able to call the shots.....falls the seams.
    If you were to throw in FEAR, GREED and POWER then the whole argument would be more cohesive.
    Nothing is as simple as an "argument from design". You need to go deeper into the woods...Mr GL. (Make sure that you leave a trail because the woods are very deceptive. One can easily lose their way, or become confused and blinded. Some additional words of advice ...don’t use bread crumbs, they tend to get eaten up).
    Other than that...I think you got it generally covered.

  81. @ those who think it unfair that GL respond/attack/etc Ackerman, and let sleeping dogs lye, I would post the following:

    1. Truth is knowable, graspable, and obtainable in a place called the Arena of Ideas.
    2. The Arena of Ideas is where people use their intellectual passion for the spoils of the human mind and soul and spirit!
    3. Everyone is qualified to enter the Arena.
    4. The Arena is a rough-and-tumble place. (Enter at your own risk.)
    5. Sacred cows get grilled. (No idea gets a pass because of who said it.)
    6. Ideas are not created equal. (Just because you have an idea doesn’t mean you have a clue.)
    7. People who place their ideas in the public forum are a fair game for evaluation. This includes GL and Ackerman.

    Not defending GL here, but the public arena of ideas to which each has willingly entered (me included).

    I for one enjoyed Ackermans reprise (however faulty and empty) and GL’s reposte.

  82. I suggest that you look at what is going on in Argentina. A hyperinflation is getting started there.

    Argentina went through this back in 2001, so the population knows what to expect, unlike the US public. It’s hard to tell how soon the US will get to the same point, but I’m guessing several years.

    Who are TPTB’s in Argentina? Statists and Militarists, but Yale Keynesian economists are calling the shots. These are the same type of people in control of the FED and Wall Street. They also ran Chile into the ground during Salvador Allende’s regime in the early 70s. With such a poor track record, why are Yale Keynesians employable? It is because TPTB need someone to do the dirty work. TPTB keep pursuing the same bad economic policies while expecting different results. This is one definition of insanity.

  83. Sorry, Marshal, the arena of ideas has been rigged by the interventionists. They have the money, influence and institutions to temporarily push events in a Keynesian direction. They want to do the impossible. They cannot to change the world or alter human nature. We are all captives of what is rational and possible. Bad ideas lead to worse results. There is no Heaven on Earth and people are only partly programmable.

    The world has a way of imposing its own results on the interventionists. They, too often, are able to use violence to make other people do the suffering for them.

    The world revolves around the Sun no matter what the church says.

    Inflating the money supply dilutes the value of the currency, ultimately ruining it.

    Politicizing society leads to extreme dislocations.

    Socialism leads to death.

    The Enlightenment, Civil Society, Limited government and the Rule of Law are rare in history. TPTBs always act to snuff them out, often while paying them lip service.

    People vote with their feet away from coercive regimes. This is why the Soviet Union needed strong fences to keep people in.

    Partial Collectivization, as promoted by the Progressives, leads to total Collectivization, then privation and slavery for the masses.

  84. Andrew not the SaintApril 21, 2011 at 7:23 AM

    Here's a frivolous post I made on a finance forum about a year ago:

    I am looking at this dilemma from a primarily political / social angle (IMHO academic economics tends to be just a tool for political means). Let's just focus on the US for now to keep the complexity down (as opposed to e.g. the EMU).

    Premise 1: both parties (the Dem's and the Rep's) are have mainly got the elites' interests in mind, after their own interests of getting re-elected and staying alive.

    Premise 2: due to the current systemic instabilities, it's highly likely that the US will have to go through a period of either deflation of inflation.

    Premise 3: let's not kid ourselves, no decent politicians will be able to gain any significant power.

    So, the Govt-Fed have got two ways to further enrich the elites because after all that's their mandate:

    1) Deflation aka the austerity game plan - the government (run by the Republicans of course - they were born for this role) defaults on the public debt, slashes the budget by 30%, the real interest rates go up, the Fed stops printing money. The elites have beforehand moved their cash to low-leveraged banks in the Cayman Islands, but 95% of the mainland banks fail. The treasury has no money to bail out cash depositors either. The real unemployment surges to 40-50%, equities, assets and to a certain extent commodities crash too. Almost all debtors are driven into bankruptcy or lose their homes. After a job well done and the dust settles, the cash returns to the mainland with massive purchasing power... The evil Republicans lose the elections for next 20 years.

    2) Inflation aka the Keynesian game plan - the government (this time run by the Democrats of course) runs into a brick wall and can't raise cash through treasuries. No problem - the Fed starts printing like mad and soon the $ is worth 1/100 of what it used to be. However, almost nobody loses their home (on the contrary - all loans are wiped out!) or their jobs, although their salaries are quite pathetic. Before the whole thing happens, the elites have taken on enormous loans and of course as soon as the hyperinflation starts nobody wants to give any more loans in $$$. Any baby-boomers with no homes commit suicides as they have nothing left (and the ones that have homes are killed by their kids / grandkids who don't have one). A new dollar is created, backed on gold (or something similar), the dust settles, the evil Democrats lose the elections for next 12 years, as opposed to 20 (all the baby boomers will have died by then anyway).

    So there are 2 extreme scenarios, probably too simplistic - you could have a deflation->inflation combo, or different countries going in different directions, which would cause some interesting international political games. The inflation pitch would be easier to sell after the people have got a bitter taste of deflation, and I think this is probably what's happening right now.

    Anyhow, to keep it simple, both scenarios are entirely within the control of the elites and both with pretty much the same outcome for them (acquiring more assets after the economy resets). Which one would you pick? I'd definitely choose number 2 because it's socially less risky. Massive unemployment is BAD. Not only people have no money and they've lost their houses, they would have all this extra time at their disposal to think about how miserable their lives are. The unemployed would resent the employed. There would be massive riots and a significant chance of a total regime collapse - I don't see the interest of buying up lots of scorched earth even if it's cheap, especially if there's also a high risk of getting lynched by the survivors.

    In contrast, if you let the masses keep their houses and jobs and impoverish them more or less equally, they'll swallow the hardship much easier. In a way, this has already been going on for 40 years at a slow pace.

  85. It all comes down to, nobody knows nothing.

  86. I read today (Apr28/11) that Rick Ackerman has now abandoned his deflationist belief system:

    Sorry to say, GL, but he credits another with his "conversion".

  87. thank you for your blog, it help me with букмекеры and was interesting to read

  88. Very interesting blog, it really helped me learn a great deal!too many interesting things Puppy training tips


Whether you agree with me or not, thank you for your comment.

If you liked what I wrote—or if it at least made you think—don’t be shy about making a payment. The PayPal button is there for your convenience.

If you have a question or a private comment, do feel free to e-mail me at my address