Debt Rattle January 21 2015


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    DPC Cab stand at Madison Square, NY 1900 • All Empires Die By Deflation – Not Inflation (Martin Armstrong) • Global Dollar Economy Hits ‘Deflationary
    [See the full post at: Debt Rattle January 21 2015]

    Ken Barrows

    Point out my foolishness later, but I don’t see interest rates rising (short to long) very much. If interest rates across the board spiked, the Federal Reserve would be, incredibly, the most insolvent institution on the planet.

    I understand that view that higher rates are needed for bank profitability, but QE is all about overpaying for said banks’ assets. Even keeping ZIRP requires the Fed to intervene, it’s not just “we decree the Fed Funds rate is zero.” So, with all due respect, more QE is more likely than the Fed Funds rate above 1% and a 2 yr UST significantly higher than now.


    I call bull on Anderson’s property tax rant. Property tax is the ONLY common tax that penalizes false value and bubbles. If you’re benefitting from false value acquired through speculation, you deserve to pay a price for violating the basic natural law that Value = Labor.

    A capital gains tax does the same thing to some extent, but it only affects the ‘middling rich’ types who invest in stock and don’t own an army of accountants to rig the system.

    Property tax places a bubble-damper on just about everyone.


    There is definitely some deflationary forces at work when a real currency (swiss franc) unpegs itself from communist fiat confetti (Euro, dollar, yen, etc.). So yes, there will be a deflationary end game in Switzerland, and hyperinflation everywhere else.

    M1, M2, and shadowstats version of a continued M3 are all up over 5% yoy, and M1 is up almost 10% yoy. So much for dollar ‘deflation’. And the USA govt. is still running deficits of about 40% gdp, if measured using gaap accounting. So, the M’s are virtually guaranteed to start rising by double digits, yoy, within a couple of years, and by triple digits, yoy, within 10 years.

    No chance of deflation, if you define that as a decline in the money supply. They might call some sort of emergency action to fight ‘terrorism’, or similar, together with a bank holiday. Hard to see them shrinking the money supply in this case, though.

    Where I think you are making your mistake is that you have to realize that all govt. handouts are ‘money’, because they can (and are) converted to money sooner or later. Whether it is food stamps that are immediately spent upon arrival, or someone’s perception of future social security benefits. Any attempt to redefine these benefits as being other than ‘money’ will cause the savings rate to skyrocket. In this scenario, I will concede there would be a brief period of ‘deflation’. But it will be so short if you blink you miss it, and anarchy will take its place.

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