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Archive for January, 2015

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[this pretty much says all that I wanted to say on the matter…]

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Deflation Bonanza! (And the Fool’s Mission to Stop It)   ~ Mike Shedlock (Mish)

[extracts – follow the link for the full story]
Of all the widely believed but patently false economic beliefs is the absurd notion that falling consumer prices are bad for the economy and something must be done about them.
“Conventional wisdom is that Swiss exporters will be crucified and importers will benefit. Certainly there is an initial shock. But long-term, look at it this way: The price of materials used in exports (metals in watches and Swiss-made machinery) will get cheaper. …
Guess What?
Shoppers are shopping! They are even booking extra trains to Germany to do so. Fancy that! Other travel is up as well. Gee who coulda thunk?  The widespread belief is that when prices fall, shoppers will wait and wait and wait.  I Have been mocking that view for years.

 Challenge to Keynesians

I challenge Keynesians and Monetarists to prove rising prices provide an overall economic benefit.

Sure, those with first access to money benefit (the banks, the already wealthy, and government bodies via taxation). But that is at the expense of everyone else.

The absurd underlying notion behind the battle cry for inflation is that if prices fall people will stop buying things and the economy will collapse.

Reality Check Questions

  • If price of food drops will people stop eating?
  • If the price of gasoline drops will people stop driving?
  • If price of airline tickets drop will people stop flying?
  • If the handle on your frying pan falls off or your blow-dryer breaks, will you delay making another purchase because you can get it cheaper next month?
  • If computers, printers, TVs, and other electronic devices will be cheaper next year, then cheaper again the following year, will people delay purchasing electronic devices as long as prices decline?
  • If your coat is worn out, are you inclined to wait another year if there are discounts now, but you expect even bigger discounts a year from now?
  • Will people delay medical procedures in expectation of falling prices?
  • If deflation theory is accurate, why are there huge lines at stores when prices drop the most?

Bonus Question

If falling prices stop people from buying things, how are any computers, flat screen TVs, monitors, etc., ever sold, in light of the fact that quality improves and prices decline every year?

Krugmanites Cheer Abenomics

The idea that falling consumer prices will lead to a downward spiral is absurd. Everyone in Japan would have died long ago if that was true.

Instead of accepting the gift of falling prices (a clear benefit to consumers), Japan fought it every step of the way with the Krugmanites cheering every step of the way.

Japan Deflation Fighting Results
Japan has gone from being the largest creditor nation in the world to being the largest debtor nation in the world

  • Japan now has the largest debt-to-GDP ratio of any developed country, roughly 250% of GDP.
  • Japan has totally and completely squandered every bit of its savings.
  • Keynesians cheered every step of the way, amazingly concluding, Japan failed because it did not spend enough!

Asset Deflation vs. Consumer Price Deflation

Central Bankers to the Rescue – Not.
The fear of falling consumer prices is absurd.

Ironically, by fighting routine price deflation, central banks create asset inflation, pent-up volatility (the Swiss franc is a prime example), speculative bubbles of increasing amplitude (housing is a prime example), and income inequality.

When those asset bubbles break, banks are inevitably in trouble over loans made on speculative assets (for example housing bubbles or more recently loans made on wells that need $90 oil to be profitable).

Then, the central bankers inevitably try to ease the shock, further encouraging moral-hazard speculation. The pattern repeats over and over creating bubbles of ever-increasing magnitude.

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There is ONE area where inflation is good.

It is good for governments – they can inflate their debt away.

And for that dubious pleasure – the rest of us bleed.

We are bleed to feed .govt

But hey, we are just the cattle class anyway, aren’t we…

That is our natural function for our overlords – right?

 

 

 

 

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Every now and then it is worth trying to “think Differently”.

Particularly if you have been inculcated/indoctrinated/raised in the Western Main Stream Narrative.

Here is an article from ‘ClubOrlov‘;  Peculiarities of Russian National Character

…    [follow the link to read the whole thing]

Quotes:

western sanctions against Russia, and, most recently, the attack on the ruble, have caused a certain phase transition to occur within Russian society, which, I believe, is very poorly, if at all, understood in the west…  Since this subject is of overwhelming complexity, I will focus on just four factors, which I find essential for understanding the transformation we are currently witnessing.

1.)   To a westerner, an insult can be resolved by saying something like “I am sorry!” To a Russian that’s pretty much just noise, especially if it is being emitted by somebody who has already been told to go to hell. A verbal apology that is not backed up by something tangible is … to the Russians … something of a luxury…  purely verbal apologies are worthless, restitution is not… because beyond a certain point words can only make the situation worse, taking it from the “Go to hell” stage to the even less copacetic “Let me show you the way” stage.

2.)   Because the Russians fight for the concept of Russia rather than for any given chunk of Russian territory, they are always rather willing to retreat—at first.   Russian adaptation for dealing with invaders is to rely on the Russian climate to do the job. A standard way of ridding a Russian village house of vermin is simply to not heat it; a few days at 40 below or better and the cockroaches, bedbugs, lice, nits, weevils, mice, rats are all dead. It works with invaders too.   The Russian winter is simply not survivable without cooperation from the locals, and so all they have to do to wipe out an invader is withhold cooperation. And if you think that an invader can secure cooperation by shooting a few locals to scare the rest, see above under “Taking offense.”

3.)   The Russians are not exactly known for refusing to sell their natural resources—even to their potential enemies. No, what Russia’s enemies wanted was to be able to tap into Russia’s resources free of charge(*). To them, Russia’s existence was an inconvenience, which they attempted to eliminate through violence. The calculus is simple: the foreigners want Russia’s resources; to defend them, Russia needs a strong, centralized state with a big, powerful military; ergo, the foreigners should be made to pay, to support Russia’s state and military. Consequently, most of the Russian state’s financial needs are addressed through export tariffs, on oil and natural gas especially, rather than by taxing the Russian population…  Thus, the Russian state is a customs state: it uses customs duties and tariffs to extract funds from the enemies who would destroy it…

Note that this policy is directed at foreign powers, not at foreign-born people. Over the centuries, Russia has absorbed numerous immigrants: from Germany during the 30 years’ war; from France after the French revolution. More recent…  from Vietnam, Korea, China and Central Asia. Last year Russia absorbed more immigrants than any other country except for the United States… Russia is a nation of immigrants to a greater extent than most others, and is more of a melting pot than the United States.

4.)   One more interesting Russian cultural trait is that Russians have always felt compelled to excel in all categories, from ballet and figure-skating to hockey and football to space flight and microchip manufacturing… for just about every thing you can imagine there is a Russian version of it, which the Russians often feel is better…  That was the pattern during the Soviet times, and it appears to be coming back to some extent now… After the Soviet collapse Russians became eager for western imports, and this was quite normal considering that Russia wasn’t producing much of anything at the time. Then, during the 1990s, there came the era of western compradors, who dumped imported products on Russia with the long-term goal of completely wiping out domestic industry and making Russia into a pure raw materials supplier, at which point it would be defenseless against an embargo and easily forced to surrender its sovereignty. This would be an invasion by non-military means, against which Russia would find itself defenseless.

Some people have been drawing comparisons between the period we are in now and the last time oil prices dropped—all the way to $10/barrel—in some measure precipitating the Soviet collapse. But this analogy is false… now Russia is resurgent, is one of the world’s largest grain exporters, and is being led by the defiant and implacable President Putin who enjoys an approval rating of over 80%. In comparing pre-collapse USSR to Russia today, commentators and analysts showcase their ignorance.

There is much more in the full article – recommended.

~R

(*)  Ain’t that the ‘truth/always the way’, with Robber Barons.

 

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… vs the “AngloZionist Empire”.

AngloZionist – That’s an interesting [and fairly accurate ] description of the current “Western” political-economy.

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So, if you are interested in a little light(sic) reading that is a counter-narrative to the current Western propaganda Main-Stream-Media, here are a couple of links for you.

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2014 – A Russian Viewpoint :  ~ Via The Vineyard Of The Saker blog

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The Imperial Collapse Playbook :  ~ Club Orlov

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Enjoy your reading  🙂

Happy New Year.

Cheers  ~R

 

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