FinancialAdvisor's College Class (FACC)

[SilverSurfer]

flota, other than the fate of crooked cronies who led us here, the deflation debate is most important.

http://www.hussmanfunds.com/wmc/wmc101025.htm

"One of the most fascinating aspects of the current debate about monetary policy is the belief that changes in the money stock are tightly related either to GDP growth or inflation at all. Look at the historical data, and you will find no evidence of it. Over the years, I've repeatedly emphasized that inflation is primarily a reflection of fiscal policy - specifically, growth in the outstanding quantity of government liabilities, regardless of their form, in order to finance unproductive spending. Look at the experience of the 1970's (which followed large expansions in transfer payments), as well as every historical hyperinflation, and you'll find massive increases in government spending that were made without regard to productivity (Germany's hyperinflation, for instance, was provoked by continuous wage payments to striking workers).

Likewise, real economic growth has no observable correlation with growth in the monetary base (the correlation is actually slightly negative but insignificant). Rather, economic growth is the result of hundreds of millions of individual decision-makers, each acting in their best interests to shift their consumption plans, saving, and investment in response to desirable opportunities that they face. Their behavior cannot simply be induced by changes in the money supply or in interest rates, absent those desirable opportunities."

This perspective on the Japan example >>

Peaking in 1991 "it was a matter of pride that the land around the Imperial Palace in Tokyo was at one point worth more than California", the Financial Times said. Today the government’s official land price index is stuck at one-quarter of its level in 1974."

And that was a pretty isolated R.E. / debt bubble so Japan could not possibly dilute the yen enough in a few years to inflate away that problem. It has had debase gradually trying to hang on to the still robust export mfg base. Japan will RACE the U.S. to DEBASE now , youbetya !!

This 'crisis' is world wide so, unlike Japan in 1991 our Central Bank will have co-conspirators adding zeros with no limit. We have a monster at the helm, just re-examine some of Ben's proclamations from the 2002 speech and keep in mind he is now the Money Diety.

"some observers have concluded that when that key rate stands at or near zero, the central bank has "run out of ammunition"--that is, it no longer has the power to expand aggregate demand and hence economic activity."

"However, a principal message of my talk today is that a central bank whose accustomed policy rate has been forced down to zero has most definitely not run out of ammunition. As I will discuss, a central bank, either alone or in cooperation with other parts of the government, retains considerable power to expand aggregate demand and economic activity even when its accustomed policy rate is at zero."

"U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can ALWAYS generate higher spending and hence positive inflation."

"Thus, as I have stressed already, prevention of deflation remains preferable to having to cure it. If we do fall into deflation, however, we can take comfort that the logic of the printing press example must assert itself, and sufficient injections of money will ultimately ALWAYS reverse a deflation."

So we know that, without some Government intervention to stop or oust him, Ben will not relent. It will not work, but that will only motivate his zero adding efforts. imho hge