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speedybure (< 20)

Deflation Unmasked: Why It Can't Exist a Fiat Money System



September 22, 2009 – Comments (8)

For all you deflationists out there.. I'm calling you out! Please keep your ignorance to yourself, there is already enough throughout the economy:

Deflation - A drop in consumer prices is the deflationists definition, fair enough. But hold on... Most rely on doctored government statistics, which is just ignorant to say the least. Even so, look at your healthcare and insurance costs thus far this year, up about 18%. Not to mention the inclusion of gas and food argument as this is nonsense. Prices fluctuate, which is part of the market mechanism, so deflation could only occur if the scarcity for these two goods came to an end.. I highly doubt that.

Before fractional reserve banking was abused to the point it is today, the 19th century showed constant deflation  as it was was part of a free market economy as that what causes the standards of living to increase. Now for the kicker... The dollar index was at 90 towards the end of 2008, now it is about 76 (and dropping). Deflation manifests itself in rising dollar. I don't understand why that is so hard for people to grasp.  

Now to the credit and loan losses just don't dissappear into thin air, there is no blackhole for dollars to be sucked into. Deflationists must also assume massive money printing doesn't lead to inflation but rather deflation, but should this be the case then the FED should print money 24/7 forever as it would drive down the cost of living.

I can;t wait for the day the USD is worth nothing and there are still cried of deflation...who's gonna have the last laugh? 


8 Comments – Post Your Own

#1) On September 22, 2009 at 8:38 AM, russiangambit (29.49) wrote:

Whatever  your definition of inflation/ deflation, what is the end result?

I am guessing you think the doillar will fall signifianctly? Why? Because of QE and low itnerest rates? How far?  Do you think the FED will go all the way to the dollar's collapse or will try to pull ut of it eventually? When?

If so, where do you see the prices of commodities? The prices fo imported goods? The prices of education and other services? Wages? The people reaction to the imported inflation?

If oil goes back to $100 FED might be foreced to defend the dollar due to popular uproar. So how far can the dollar really slide?

The deflation/ inflation argument is not that simple when you go further into details. There is hardly anyone completely cluesless and ignorant on the CAPS boards, so I am not sure who the post refrers to.

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#2) On September 22, 2009 at 9:51 AM, XMFSinchiruna (27.97) wrote:

speedy, this is a hugely disappointing post!

Although I agree that the inflation/deflation debate is muddied by rampant misunderstanding and, yes, the joke of government-issued statistics, your decision to shape the argument as a personal attack against any who may hold a different view is not part of what makes this CAPS community such a great place to share ideas.

Enjoying the thought of having the last laugh, or otherwise delighting in the potential misfortune of your fellow CAPS members who may have much riding on their alternate views on the topic, is a case of Schadenfreude.

Your post suggests that you're looking forward to the demise of the dollar so that you can have the last laugh. I'm sure that deep down you don't really feel that way. I'm sure that you still care about this country and the welfare of its citizenry more than you care about being right. The potential for a currency calamity is no laughing matter, and no matter how you slice it it portends an immense amount of suffering for people when it occurs. I think that something must have made you mad today, and it came out through your post. My gut tells me that you're reading this right now and realizing you crossed a line. 

I understand your frustration ... it's a seemingly endless debate that seems to have people locked into their positions with little room for adjustment. Consider that those expecting deflation may be just as frustrated with your insistence to the contrary. Either way, the expression of frustration through insults is hardly constructive to fostering a common understanding nor a respectful conversation, so with all due respect I think an apology would be great so we can move on with a more respectful debate of this crucial topic.

We're all in this together. Motley though we may be, we're a community.

Fool on!

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#3) On September 22, 2009 at 12:04 PM, tomatoflu (< 20) wrote:

Quote: "Now to the credit and loan losses just don't dissappear into thin air, there is no blackhole for dollars to be sucked into".

Hmm, it seems you do not know much about 'fractional reserve banking'.

You see, when the money is created out of thin air, 'cheque book money' it disapears the moment it is used to pay down any loan, like a mortgage for instance.

It is quite bizare that fiat is uncreated or destroyed in this way. I must admit, it took me a while to comprehend the implications, and i did get help. 

 I could not have done it on my own.

 So here, to counter your uninformed argument since the process of 'fiat destruction' or 'un-creation' takes place when the loan is payed down.

Furthermore, because the banking system is "NOT"making as many loans out of thin air available to people etc, the money actually in circulation is evaporating at an allarming rate.

(For example, the money in circulation is STILL being used to pay down loans Thus uncreating or shrinking the money supply.)

 I hope you get it. This is one of the lesser known aspects of the 'fractional reserve banking system'.

 SO THERE!! is your "black hole".

 Google "money creation destruction", That should get you there.

 Oh!!, an don't forget!!, when banks create money out of thin air, the fiat to pay for the interest is NOT created. Another black hole sir.

 See what you can come up with before getting all excited with respect to critizing those who may know a bit more than you.

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#4) On September 22, 2009 at 12:33 PM, leohaas (35.73) wrote:

"Your post suggests that you're looking forward to the demise of the dollar so that you can have the last laugh"

Speedy must be a pseudonym for DWI...

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#5) On September 22, 2009 at 12:34 PM, tomatoflu (< 20) wrote:



I will pray to the great "Mogambo Guru" for the salvation of your reason. The angriest guy in economics lol.

 And to "Ellen Brown", a woman who's reason shines. Very well informed woman.


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#6) On September 22, 2009 at 1:46 PM, booyahh (< 20) wrote:

"I will pray to the great "Mogambo Guru" for the salvation of your reason. The angriest guy in economics lol."

I believe the award for angriest guy in economics goes to Alstry !

Now, Robert Prechter and Mogambo Guru are just as dark in their forecasts, but I they don't seem so angry anymore, probably because of the pot and alcohol they consume - it's a recession after all.

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#7) On September 26, 2009 at 12:00 AM, speedybure (< 20) wrote:

Of course I don't want the USD to collapse but that is what we are in serious danger of. It is everyone's responsibility to keep the government in check, but all that happened in the last decade, shows we have become not only complacent but hold so little disregard for the consequences of every new government policy. I just think the deflation argument is bogus, if your talking about consumer prices as well as asset prices in terms of USD's. Look at the the Dow Jones measured in real money (GOLD) since Greenspan began inflating the next bubble. It has lost 70% of its value.

-Again my apologies is anyone was offended, it has just become extremely frustrating watching our government ruin whatever future we have left to salvage. As far as the banks go, Bernanke won't raise rates because it will cause another round of bank failures, precisely the reason the current inflationary policy is in place. We will never get out of this let alone save the dollar if we don't let these businesses fail, that is how a market works. 

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#8) On December 04, 2009 at 8:03 PM, LiveOakGrey (< 20) wrote:


I really enjoy your blogs, especially the ones evaluating precious metal miners.  You haven't posted for months, since so many people came down on you like so many tons of bricks.  

I appreciate your frustration with the stupidity and self-indulgence of so many people, spending beyond their means while some of the rest of us carefully sacrificed for years and invested their capital with an eye towards a responsible and sustainable future.  I'm in that last group, and I've felt the same frustration that everyone else craters the economy, and then demands bail-outs, or the right to loud indignation and pushing for punitive taxes against some targetable minority (usually those who became rich by disciplined self-denial and prudent investing!).

We need you writing more blogs about analyzing companies, I'm still waiting for the update chapters of 4,5,6... etc!  




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