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Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: Bearcatbob who wrote (147961)	3/22/2011 8:15:57 PM
From: ChanceIs	4 Recommendations Read Replies (1) \| Respond to of 206166

>>>inflation is a quality way out of our problem. I see it as a default approach to the issue<<< Several thoughts: 1) Good post - indecision is a decision, 2) The pundits say there are three choices: a) default, b) restructure, and c) inflate. We seem to agree that (c) is a subset of (a). Doing (c) is very impersonal. Just who decided to print all of that money?? Oh. It was Keynes. We were just doing what we were taught in school. 3) I believe that the banks are driving the decision to print. This is not a clear winner for them in my mind. On the one hand, those who owe debt (e.g. homeowners) get to wiggle out because the real value of the debt service shrinks with time and inflation. Those who own a lot of debt (e.g. the banks) get hammered because they get paid back with monetary units of less purchasing power. I suppose that the tradeoff - real or imaginary - for them is that with the inflation they don't get as many outright defaults and that compensates for the losses post inflation. They also get to suck off of the steep yield curve. Borrow short and lending long. The big problem with that is when rates rise, then the debt they own gets hammered in the market place. That is not a problem if the banks intend to hold to maturity. They also have to roll over the short term borrowings at higher rates - whacking profit margins or perhaps even creating a negative carry. Remember they made now long loans in this very unusual low rate environment. From a quantitative viewpoint it is by no means clear to me that the banks win. The hope or rationale, and I think it desperate, is that the economy recovers quickly and real organic revenues, corporate profits, etc recover. 4) I think that we passed the tipping point already. Someone earlier in the day cited Reinhart and Rogoff (I haven't read the book but I heard Reinhart speak) who drew a line at 90% debt/GDP(?) as a Rubicon. I don't see employment up. I see several tri$$ions of new debt each year for the last three and extend out at least three. None of that is set against productive means. Chris Martenson has been posting these last few weeks that we have indeed crossed the line. 5) The question is whether the body politic ends it now - always the smart thing because we can have a quasi-controlled crash - or whether we let the system crash on its own - which it certainly will do if left in its current state. 6) Gold is good. One might advance one's position or tread water (lose less) then his neighbor, which is winning given that all economies are relative.