Friday, February 25, 2011

Friday Bonus: The TSA Hunts for Terrorists in Savannah . . . After They Get Off The Train

The TSA is at it again: Here’s a video of them searching people, at a train station in Savannah, Georgia. 

The weird thing is, they are being searched after they’ve gotten off the train. 

Notice how the people don’t protest. Placid as cows heading to the slaughter . . .


Libya Now, Iran Then: How Close Are We to 1979?

Today, the UK’s Telegraph is reporting that British government drones in Whitehall are figuring out the legal means to seize Muammar al-Gaddafi’s assets in Britain, which are said to total some £20 billion. 

“Fire in Libya”: Oil fire in 2010.
Notice that’s pounds sterling—the equivalent of US$32 billion: Enough cash to plug up California’s and New York State’s deficits, and still have enough left over for a very respectable weekend at The Palms in Las Vegas. 

That these assets are going to be seized is, according to the story, a done deal: The only issue seems to be the legal means by which to do so—

—which means that the British government isn’t worried about pissing off Gaddafi—

—which means that Gaddafi’s days in power are numbered: Whitehall would never dare seize his UK assets, unless they were sure that Gaddafi won’t be around to exact revenge or retribution. After all, the Brits let the Lockerbie Bomber go in 2009, in order to shore up relations with Gaddafi. 

Now, for my patented History Flashback™ (All Rights Reserve, All Wrongs Deferred): 

Friday, February 18, 2011

“We Owe How Much?”: Waiting for The Big Splatter

Last week, a bit of news came out that—weirdly—didn’t garner the attention or the reaction one would have thought it would: 

The U.S. Federal government deficit for fiscal year 2011 was revised to $1.645 trillion. That revision was up from the previous estimate of $1.4 trillion, which itself was a revision just a couple-three weeks ago by the Congressional Budget Office from the White House’s earlier projection of $1.267 trillion in December. 

The additional $378 billion in deficit spending comes from loss of tax revenue: Both from the fall in tax receipts due to the ongoing depression we’re experiencing, as well as from the idiotic budget deal with the Republicans, whereby the Bush-era tax cuts were extended. 

These deficit numbers are huge. Huge. HUGE

Saturday, February 12, 2011

Inflation, Hyperinflation and Real Estate (or, The Lessons of The Great Hernán P.)

“Hyperinflation accompanied by a housing collapse is simply impossible—by definition.”
—None-too-clever financial blogger.
Most people in the advanced economies—including most economists—really don’t have any idea what inflation and hyperinflation is. They don’t have a clue because they haven’t lived through it, or were children when it happened in the States and in Europe during the Seventies.

Wrong metaphor.
They think it’s nothing more complicated than a rise in prices that ripples through the economy—like a spectator in a football stadium who stands up, obliging the people sitting behind him to also stand up, so that they too can see the action on the pitch, which in turn forces the people behind them to stand up too, until finally, the whole stadium is up on its feet.

That’s what these people seem to think: Inflation—and the more severe hyperinflation—affects all goods and services and asset classes equally, in a rippling effect. Sort of like a rising tide.

Because of this very foolish fallacy, many economists and interested observers think that real assets—commodities, land, buildings, factories & machinery—all rise in price equally during an inflationary spell, whereas financial assets—bonds, stocks—uniformly fall.

But this is wrong: It is at best sloppy thinking, at worst dangerously stupid.

Inflation—and hyperinflation—affects two things immediately: Near-term necessities (such as food and fuel), and credit.

The effects on basic necessities is obvious—but the effects on credit are more subtle and complex.

How does inflation and hyperinflation affect credit? By driving up interest rates—obviously. But what is the effects of rising interest rates in an inflationary/hyperinflationary environment?

Real estate price collapse.

Thursday, February 10, 2011

So There’s This Debate Tonight . . .

“The Morning After” is below.
So there’s this debate tonight—Deflation vs. Hyperinflation: Stoneleigh vs. Lira.

Click here to sign up. 
Nicole “Stoneleigh” Foss of The Automatic Earth is going to be arguing that we are experiencing a deflationary depression, while I will be arguing that this depression is hyperinflationary. 

We both agree that we are currently in a depression—a depression that is going to get worse. We just disagree on the road we will collectively be taking to hell. 

Stoneleigh was very prescient insofar as her call about the housing bubble and the 2008 crisis, but I think she is very wrong insofar as What It All Means. So I’ll be presenting my take on the period we are experiencing, and where we will be going in the future. 

Think of it as the Sugar Ray Leonard/Marvelous Marvin Hagler fight of the financial blogosphere. 

The debate is tonight, at 9pm EST. Go here to sign up

We did a bit of practice last night, and I think it’s going to be a lively debate. We will be taking your questions, which I’m very much looking forward to. 


“The Morning After”: 

The debate was a pleasure—Nicole is a lovely person, and as sharp as they come. And though there were a number of issues over which we spiritedly disagreed, the debate itself was a lot of fun—hopefully it will be repeated.

I think the best thing about it was, we both had clear visions as to where the economy is heading, and what to look for as the situation unfolds. I think that allowed the audience to really think over the situation, and decide for themselves what they think is going to happen.

The recording of the debate will be available next week. But for now, I just wanted to thank Nicole, Jay Carter for doing an expert job of moderating, and all of the attendees for having given us their attention.

‘Til next time!


Sunday, February 6, 2011

Ballsy or Crazy? Where Are We On Inflation and Hyperinflation

For better or worse, in the financial blogosphere, I’m Hyperinflation Boy.

You decide.
I haven’t actually written that much on the subject: Only five posts from a total of 82 over the last year. I posted the most recent one back in late October—over three months ago—where I made a series of concrete predictions about inflation and hyperinflation of the U.S. dollar.

The predictions were either really ballsy or really stupid—even I can’t quite decide. But be that as it may, it’s only fair and right to revisit the subject, recapitulate my arguments, and then check to see if I was on the money, or full of shit.

To begin: Last August 23, I posted an article called How Hyperinflation Will Happen. I guess the piece must’ve struck a nerve, because between my site and a couple of other places where it was reprinted, it got over half a million page views.

My basic thesis was simple: If there is another financial crisis, I argued that capital would not flee to Treasury bonds—instead, it would flow to commodities. And this spike in commodity prices would lead to dollar hyperinflation.