Tuesday, June 30, 2009
Goodbye California
I liked the original better.
Friday, June 26, 2009
Sith Lord Unmasked
Washington Times:
Even more troubling for the senator is that the proportion of Keystone State residents who say he deserves re-election has declined to 28 percent in June from 40 percent in March.
Thursday, June 18, 2009
Suitcase With $134 Billion Puts Dollar on Edge
by William Pesek at Bloomberg.com via Drudge Report:
We messing about at the edge of a cliff. That cliff is the end of fiat currency.
Think about it: These two guys were carrying the gross domestic product of New Zealand or enough for three Beijing Olympics. If economies were for sale, the men could buy Slovakia and Croatia and have plenty left over for Mongolia or Cambodia. Yes, they could have built vacation homes amidst Genghis Khan’s Gobi Desert or the famed Temples of Angkor. Bernard Madoff who?
We messing about at the edge of a cliff. That cliff is the end of fiat currency.
Sunday, June 14, 2009
Show me the money
The money supply has been sharply increased in response to the recession, as shown in this chart from the St. Louis Fed.
This chart shows the 20% step-change upward in the money supply, and it is an underestimate of the "new money" available in the economy as we have massive increases in deficit spending and federal assumption of private debt releasing more money not measured in M1.
Since the economic output is flat or shrinking and the amount of currency around to purchase this output has been sharply increased, one would expect prices to rise, but they have not.
What's happening is this, the money the fed has created is not being spent. The so-called "velocity of money" has collapsed. Fear rules, people save, so the increased amount of money has not resulted in increased spending. Prices are falling because no one is buying. This is happening with houses, cars, and until the last few weeks oil.
So does deflation continue, or does the massive money-supply increase result in inflation? There are lot's of economists with predictions running both ways, but we can reach a sound conclusion without a PhD in economics.
The decision to have a inflation or not is a policy decision. Whatever the terminal velocity of money turns out to be, the fed can decide to supply more or less money than is necessary to buy the economic output of the country. So the question is what policy will we pursue? This is not hard to analyze. We have incurred and are incurring massive debt. There are two ways to deal with our years of recklessness, first is to cut government spending, increase taxes, and work our way out. That's not going to happen because we lack the national will for such sacrifice. There's only one alternative. We must have inflation to avoid default on the American debt. The fed cannot allow default. Congress cannot tame spending. We will get inflation, massive inflation, because we must have it to manage our debt.
This chart shows the 20% step-change upward in the money supply, and it is an underestimate of the "new money" available in the economy as we have massive increases in deficit spending and federal assumption of private debt releasing more money not measured in M1.
Since the economic output is flat or shrinking and the amount of currency around to purchase this output has been sharply increased, one would expect prices to rise, but they have not.
What's happening is this, the money the fed has created is not being spent. The so-called "velocity of money" has collapsed. Fear rules, people save, so the increased amount of money has not resulted in increased spending. Prices are falling because no one is buying. This is happening with houses, cars, and until the last few weeks oil.
So does deflation continue, or does the massive money-supply increase result in inflation? There are lot's of economists with predictions running both ways, but we can reach a sound conclusion without a PhD in economics.
The decision to have a inflation or not is a policy decision. Whatever the terminal velocity of money turns out to be, the fed can decide to supply more or less money than is necessary to buy the economic output of the country. So the question is what policy will we pursue? This is not hard to analyze. We have incurred and are incurring massive debt. There are two ways to deal with our years of recklessness, first is to cut government spending, increase taxes, and work our way out. That's not going to happen because we lack the national will for such sacrifice. There's only one alternative. We must have inflation to avoid default on the American debt. The fed cannot allow default. Congress cannot tame spending. We will get inflation, massive inflation, because we must have it to manage our debt.
Tuesday, June 02, 2009
North Korea provokes with impunity
from Mark Steyn:
We are building a world in which the wealthiest nations on the planet, from Norway to New Zealand, are all but defenseless, while bankrupt dysfunctional squats go nuclear. Even with inevitable and generous submissions to nuclear blackmail, how long do you think that arrangement will last?
