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Tony Robbins, please watch this video

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April 13, 2012 – Comments (4)

Tony Robbins has a viral video going around. I think the video below by Cullen Roche is a significantly better / more accurate video in describing our monetary system and what the real and potential economic problems are (and which ones aren't).

I for one would much rather see Cullen's video go viral.

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TONY ROBBINS, PLEASE WATCH THIS VIDEO….
13 April 2012 by Cullen Roche

http://pragcap.com/tony-robbins-please-watch-this-video

There’s a viral video going around by Tony Robbins on the national debt.  Unfortunately, he makes the dreaded error of confusing a currency issuer with a currency user.  Of course, the two can never be compared since a currency issuer has no solvency constraint meaning that they can never “run out of” currency like currency users can.  So the national debt and having to “pay it back” is never a concern.  Rather, the concern is always inflation which is a very very different phenomenon than being unable to make payments.   See the following video for more and if you’d like to review inflation and the true constraint for a currency issuer then please see the other video attached below. And if your interest is really piqued or you’re really confused you might want to spend a few hours on my paper about the monetary system which can be found here and contains much more detail.

Oh, and if you know Tony Robbins get this to him….



Video on inflation and explaining the true constraint:


4 Comments – Post Your Own

#1) On April 13, 2012 at 11:16 PM, HarryCarysGhost (99.76) wrote:

Hi B-Man,

How did little binvette enjoy her Easter?

One qeustion I have, we all know it's a fiat currency so would'nt having ownership of solid corpartions be your best bet in the case of inflation. Much better than cash or bonds in my view.

I suppose I should look at how stocks reacted during the 70's...just thought you would know offhand.

Should add that if your answer is PM's I stand by my belief that Gold and Silver should not compose more then %10 of ones portfolio.

Cheers 

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#2) On April 15, 2012 at 1:30 AM, binve (< 20) wrote:

HCG,

Hey man! How are you. binvette had a great Easter, lots of egg hunting and good times :)

One qeustion I have, we all know it's a fiat currency so would'nt having ownership of solid corpartions be your best bet in the case of inflation. Much better than cash or bonds in my view.

If your outlook was that inflation is the predominate outcome, then yes I think stocks make much more sense than cash or bonds.

The question I would pose to you (or anyone) is: what do you forsee the inflation environment being like over the next 1,5,10,'long term' years?

I think in the relatively short term (1-5 years), the inflation environment will mild and perhaps even deflationary. There are serveral reasons why I think so:

the US economy is sluggish because aggregate demand is still weak because the private domestic sector is still paying down debt and saving (which they should) because they are still in a balance sheet recession. So far, the government has stepped in a run deficits that are large enough to support the savings desires of the domestic sector and support aggregate demand modestly all while we have a Current Account deficit. This has been enough to keep us on a 'modest' GDP growth path. But we still have a very large output gap and are GDP growth is basically just keeping pace (barely) with the previous trend and is not actually closing the gap. Which means that inflaton is low and is likely to stay that way for awhile. (these sources all show that recent inflation has been between 1-3% hereherehere). In fact we have several CPI basket components that are in deflation still and those that are related to energy (like food) are showing inflation. However this is due to cost-push inflation and not demand-pull inflation: see here.

So that is where we are now. But we still hear so much deficit reduction rhetoric and plans being put forth by both Democrats and Republicans. Both agree that the deficits needs to be cut now (which I completely disagree with) and simply differ by how much. Which means that I think the likelihoods of smaller deficits in the next few years is high and growing. Which means that economic growth will slow (since the government is the only party doing spending right now because the private sector is saving which it still needs to do desperately) which means the output gap will widen, which means that whatever small inflation we have now will go down and perhaps even go negative, like we saw in 2008.

So in the next 5 years, I don't think the risk is inflation. I think it is quite the opposite. And while I don't think this cyclical bull market is over (because we are still on the upside of this cycle for many reasons, see: http://marketthoughtsandanalysis.blogspot.com/2012/04/long-term-projection-macro-and-analysis.htmlp>I suppose I should look at how stocks reacted during the 70's...just thought you would know offhand.

I don't think comparing what we have now to the 1970s is applicable: http://caps.fool.com/Blogs/549887

Should add that if your answer is PM's I stand by my belief that Gold and Silver should not compose more then %10 of ones portfolio.

Like I have said before (such as here: http://marketthoughtsandanalysis.blogspot.com/2011/07/gold.html) the idea that gold is an 'inflation hedge' is wrong and I have rejected/discredited this idea for a long time. That post also gives all of my thoughts on gold.

But I would like to leave you with another one that I think is a good one. One of golds drivers is what real interest rates are, and why gold can continue to rise in a low inflation environment like we have right now: http://www.crossingwallstreet.com/archives/2012/04/reprise-the-elfenbein-gold-model.html.

Hope that was useful. Thanks!  .

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#3) On April 15, 2012 at 5:01 PM, HarryCarysGhost (99.76) wrote:

Thanks B-Man,that was very useful and I signed up to your T&A site via FB.(I was wondering where Tasty went)

I've been good, work has been busy (my leading economic indicator:)

The question I would pose to you (or anyone) is: what do you forsee the inflation environment being like over the next 1,5,10,'long term' years?

I've been thinking about that question, and my only answer is I don't know. That's why I've only been picking companies with huge moats that I could'nt imagine ever going away in any envionment (for RL, Caps anything goes).

A man's gotta know his limitations, and macroeconomics are mine. I'll stick with dividends from now on, and if I get tempted to try and time Mr. Market again someone slap me;)

Cheers.

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#4) On April 16, 2012 at 11:04 AM, binve (< 20) wrote:

>>Thanks B-Man,that was very useful and I signed up to your T&A site via FB

Thanks man!

>> I've been good, work has been busy (my leading economic indicator:)

Nice, same here :)

>> That's why I've only been picking companies with huge moats that I could'nt imagine ever going away in any envionment (for RL, Caps anything goes).

Good call, and I agree that for the long term that is the best and most sound strategy. Because whether we periods of inflation or deflation over any given time span, and whether we have another finanical crisis or not, the US economy is not going away because the US population is not going away (in any measure: will, resourcefulness, innovation, etc.). And good companies represent and spearhead those productivity gains that allow our economy to function and grow that we can all enjoy. That is the only long term call that I feel really confident in :)

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