mugwump@Capt'n Hook -- trotsky, 12:09:50 04/25/07 Wed
"And even less people want to contemplate what?s coming down the pike as stagflation matures, that being hyperinflation."
this is downright bizarre - like so many other inflationistas, the good Captain seems unable to differentiate between what happened in Weimar (an inflation of printed banknotes - i.e., actual 'money') with what is happening now (an inflation of credit). the almost universal belief in Bernanke's helicopters is also quite amusing. yeah, sure - the Fed will do whatever it takes to destroy its own reserves base (which consists in the main of US government bonds). obviously, that will never happen, unless the Fed gets commandeered by politicians, i.e., loses its formal independence.
the Fed represents the banking system, its only function vis-a-vis the hoi polloi is to manage their 'inflation expectations' so that it can inflate without being detected.
as to 'stagflation', this is really a meaningless term, as it seems quite obvious that the central bank will go into accelerated inflation mode whenever the economy slows down. the question is whether it can 'succeed' in doing so (i hope no-one thinks getting prices to rise is a sign of monetary 'success' ). the BoJ did all it could when the Japanese real estate bubble burst, and yet, it failed to 'inflate' in the sense of producing rising prices. a central bank can create 'money' out of thin air, but it has no control over what happens with it. Japan's money creation was simply sitting there in the money markets, and no-one wanted to borrow it. later on, it got exported, a process that is still underway.
when people reminisce about the 1970's 'stagflation' and imagine we're in for a repeat, they regularly omit the stark differences between then and now - the most important one of which is the size of the total credit market debt. it was easy to get borrowers to step up in the 70's - in every respect the debt burden was only a fraction of what it is now (in every respect meaning not only in absolute terms, but relative to GDP, to incomes, etc.).
how is this going to work with debt-to-GDP at 360% or so?
and please, forget the helicopters. they will never leave their landing pads.
as an aside, we can already observe in real time what happens when a credit bubble gets kneecapped - the housing bubble is the example du jour after all. what happens is that loans go into default, all the 'money' disappears back into thin air, and the asset that was used as collateral for the bubble FALLS in price.
why should a future collapse of the wider credit bubble be any different?
# @pm sentiment -- trotsky, 11:42:16 04/25/07 Wed
incredibly, the cumulative Rydex pm fund cash flow ratio keeps hitting new lows. Monday night it ended at 127 points, yesterday it recovered slightly to 129 points.
since the highs reached in 2003, about $180m. have been withdrawn from the fund, representing almost 100% of its current assets of $185 m. (in short, the total fund asset base currently outstanding represents the fund's net profits - there are only $5 million of the originally invested money left in the fund).
it appears that speculative enthusiasm for the gold sector can't get any more subdued, but then again, i thought so already when the cumulative cash flow ratio reached its 2005 lows not too long ago, and since then another $30 million have deserted the fund.
i'm beginning to contemplate the idea that the fund's asset base will shrink even further on account of this long term downtrend in cash flows. the amazing thing is that the value of one fund unit stands at 58 points - which is only a hair below its all time high of about 62.
it's rare to see higher prices creating such abject bearish sentiment, but there it is.
MichaelH@peak oil -- trotsky, 17:21:09 04/24/07 Tue
the question isn't whether peak oil is 'real' - at least not for me (although the big worries about 'peak coal' back in the 1860's may be an instructive precursor in that regard); what i'm worried about is that it brings out all sorts of stupidity (to wit, the ethanol subsidies boondoggle and the Iraq war, to name two obvious examples).
every time the subject is discussed, mostly undefined 'remedies' are demanded. the only way in which such 'remedies' could be implemented is by force. this is totally unnecessary, as the market will signal to consumers and producers alike what they have to do. any state-imposed 'solution' is bound to make matters worse, or even end up creating the very problems everybody is afraid of by inhibiting a market based solution (the ethanol boondoggle falls into this category).
in this, 99% of the peak oil doom-sayers are of one mind with the global warming crowd - they want to impose their vision of 'how things should be' by the force of the State. the asylum is already run by a bunch of lunatics - which we need less of, not more.
mugwump -- trotsky, 14:47:55 04/24/07 Tue
"The wide range of peak oil forecasts makes peak oil policymaking particularly difficult."
i guess we should be grateful for that...let's give thanks that the doomsters aren't of one mind yet (such as with 'global warming').
"One option would be to await a consensus of forecasters..."
probably THE single worst option anyone could think of, since such consensus opinions are invariably wrong...
"Another option is to wait until the problem is obvious before taking action, particularly since there seem to be so many other public policy problems demanding immediate attention."
what action? what do these people want? raise taxes? (probably..). ration energy? (probably as well).
we don't need any of their 'action', even if the peak oil problem were imminent - the only solution that will work is a market based one.
"Mitigation actions initiated prematurely will be costly and could result in a poor use of resources. Late initiation of mitigation may result in severe consequences. Mitigation will require an intense effort over decades."
'mitigation actions' ...aha. consisting of? should oil prices continue to rise, every individual consumer of oil will take his very own 'mitigation actions' - they won't need the planners to tell them what to do. the same goes for producers of devices that currently run on oil based products as well as the energy industry itself - they will all adapt of their own accord. we don't need any 'mitigation by force' - which is what this whole diatribe aims for in the end. this is collectivism , and as F. Hayek reminds us, 'collectivism is slavery'. |
