Great, happy you read the article. Be sure to read it again...
oftwominds.com
To me, the charts on Argentina and the entire first half of the article are not the key points/issues. All the key points are in the second half of this article.
Mish and others argue that the US cannot devalue the US$ because it is a free floating exchange rate currency. This article suggests that the US can best determine when and how to IMPLODE itself to devalue its currency. The US$ will be free floating until such time as the US determines otherwise, at a time suiting the US own best interest.
The US can wait for another 9/11 type event, wait for China/other nations to default on their derivatives, increase its budget deficit to $4 trillion per year, get into a war, declare a bank holiday, and/or any other numerous scenario that the US figures will work. The key is to make sure it is seen as an "accident/Act of God" rater than the US being at blame.
"you pull the plug not on them but YOURSELF. Implode your own middle class as above. Kill the bond markets, cause a run on your own currency, and default on the debts you owe them. Hey, it's the only thing you could do, right? Americans are just stupid, right? It's all an accident, an act of God really. No one's to blame. It's classic Judo."
"But the US$ is not the Peso. You need to make sure it goes down on demand. You aim straight for $2+ Trillion yearly deficits for 70 years and threaten more if necessary...Hey, is this enough to insure a collapse, even of the world’s reserve currency?... Is this enough to force China to cut us off and play the role of the bad guy we have planned for them? Funny how convenient that is, no?...Then, knowing you'll never repay, you jack up national spending beyond anything anybody's ever seen and go do what you want all over the world, in any country you want, with impunity."
"Use the 5 owners of nearly all media to keep up the drumbeat of the “other”: left, right, black, white, famous, religious, atheist, straight, gay, immigrant, commie, Muslim--whatever the people will buy--to insure confusion and infighting when the time comes...And here we are. Eye of the storm, explosives primed, waiting to pull the detonator...Any reason the US could not do this, and that everything these incredibly smart, ruthless, immeasurably connected people have been doing is actually not stupid but smart? And what if they believe what they're doing is all for the good of the country and are willing to take any measure, any action no matter how awful or unprincipled, because it will put America back on top again?"
Then the system resets after a few short years of pain, rather than decades:
"In a single stroke you:
a) lose the burden of external debt
b) by devaluation lose your internal debt
c) make the nation competitive as a manufacturing power.
d) scare the people back into compliance, even exultation with their low wages.
e) with the renewal of manufacturing, re-cast the power that your military rests on
f) during a time of Peak Oil, radically reduce unnecessary consumption while insuring strategic (military) supply.
g) by doing that, suck in the oil powers of Russia, Iran, and Venezuela enough to knock them off-base, first with high prices, then low prices.
h) club China into submission to the G-8 money powers again"
I agree with Mish and you that we will have more deflation/pain in the short term. But Mish expects deflation to last decade(s). This is not going to happen, IMO. The US and American people will not be saving their money and reducing debt slowly over the next 20 years (to get the US total credit market debt as % of GDP from 376% to a more reasonable and sustainable level of about 175%.) I believe it will take a few short years under this scenario to get all the excess credit out of the system.
This scenario seems plausible, even likely to me. And certainly no offense meant to Mish. Mish has explained deflation better than anyone else I have read with the possible exception of Steve Keen.
Just my opinion... |
