Denninger: deflation

Belatedly, I refer you to Karl Denninger's end-year review and forecast. He sees continuing deflation, and makes a number of other plausible and worrisome predictions - scroll to the end of his post for the horrid gallery of prognostications.

In short:

...rallies are to be sold, cash is to be raised and prudence is to be practiced in your own personal financial affairs. Don't get creative in all things finance, get stingy and prudent. Your personal financial survival could well depend on it.

So instead of staring at the low interest on your cash balance, think of the real capital appreciation of your money as measured by what big-ticket items it will buy. And for once, the government can't easily tax your capital gain.

You may also want to hold more cash away from a bank ("Round #2 of severe bank instability gets served up on us in the second half of 2009").

And maybe diversify your currency holdings:

The Dollar will not collapse. This is not because we're in great shape or will truly recover, it is because the rest of the world is in worse shape than we are... The rest of the world is literally on the precipice of a full-on collapse. European banks are more-levered and less-transparent than our banks as just one example... I see the potential for the pound and euro to both reach par with the dollar.

I think Denninger on the one hand, and Faber/Janszen on the other, may both be correct. It's a matter of timing - deflation now, debasement of the currency later. Because nominal debt gets relatively bigger as assets and incomes decline in value, something will have to give.

Satire

A very clever essay from the rec.gambling.poker newsgroup:

The Amazing Stimulus Package.

Join us for an enjoyable night of illusion brought to you by Uncle Sam the Magnificent and Fed the Enabler. Sit back, relax while this magical duo performs feats of magic so astounding that they will have you reaching for your wallet, even while knowing neither of them ever left the stage.

Their world famous "Creating Money Out of Thin Air" will have you rubbing your eyes with amazement. Watch closely as they transfer that "Created Money" to the Wall Street elite, third world dictators, and ultimately out of the pockets of the audience. Try not to be caught as they captivate the audience with the hypnotizing phrase "Too large to fail". Try to follow their logic as they magically convince you and most of the rest of the audience that spending your future earnings today will turn their bumbled (or was it intentioned?) handling of the economy from crisis to stability.

Marvel as they nightly obfuscate their positions and purposes while they plunge the world economy into recession, and then depression.

You'll be astonished when they reward each and every member of the audience Gift cards, checks, or direct deposits worth many times their ticket price. You'll leave the auditorium scratching your head wondering how they can continually perform these feats of magic and financially return to continue the show night after night.

But most important be sure to buy tickets for their closing night. You won't want to miss their amazing final show as they make your money shrink and disappear right before your eyes, making even most wealthy people poor as they create a two class economic structure composed of the super rich and the poor. Watch as they finally render the U.S. Constitution a worthless piece of paper while magically converting hundreds of millions of American citizens to citizens of the WORLD with little resistance from a weakened, powerless middle class.

Robert Ladd

Blowing bubbles

Nobody has made economic depression and its consequences seem so inevitable and at the same time so colourful and even attractive, as Jim in San Marcos.

It's a shame that I was counting on my State pension to eke out retirement income. Looks like many of us will be using Hamburger Helper instead.

Denninger demystifies "the Fed"

You tend to get a clear and concise explanation from somebody, when they either blow their cool or are in a hurry to get somewhere else. Here, in a very crisp and useful post, Karl Denninger blows away the conspiracy theories surrounding the Federal Reserve.

He explain that his beef with them is that they are acting ultra vires (very damagingly), and notes that there is, unfortunately, no statutory penalty for their doing so. The caning will, he thinks, have to be administered by the bond market instead.

Some, like Eric Janszen of iTulip, would say that's exactly what the government intends.

Is it officially permissible to be a Christian? Or indeed, anything?

Here in the Daily Mail is a sample of the hoo-ha about nurse Caroline Petrie, who was suspended for offering to pray for an elderly patient. (She also used to leave a mildly evangelical Christian pamphlet.) The patient says, "I have Christian beliefs myself, but it could perhaps be upsetting for some other people if they have different beliefs or thought that she meant they looked in such a bad way that they needed praying for."

Both parties seem reasonable and decent. What's worrying is what happens when officialdom gets involved, as the rest of the story shows.

But I'd love to see a Philadelphia lawyer let loose on the "Nursing and Midwifery Council code" (full text here) which Mrs Petrie is deemed to have breached. By implication, this code regulates not merely conduct, but opinions and even religious faith.

The code commands nurses to "Be open and honest, act with integrity" and straightaway gives a very contentious clarification of the term "integrity": "You must demonstrate a personal and professional commitment to equality and diversity." The managers at the health organisation for which Mrs Petrie works clearly understand "equality and diversity" to cover religions. The logic of this is that Jews, Muslims and Christians (among others) cannot work as nurses - for note the word "personal" in that order. It may be that atheists would also be precluded.

All this results from two things: the State getting too big for its boots; and in attempting to govern every aspect of our lives has delegated insanely wide-ranging powers to quangos, who make and apply rules with a whim of iron. The professions and semi-professions - doctors, teachers, nurses and so on* - all have their own little councils to terrorise them. Such prodnosing easily magnifies a "storm in a teacup" into an issue that could affect your job, wealth, family life and physical liberty.

We need a Constitution to limit the powers of would-be tyrants, even if they are now soft-handed, well-dressed ones. Resist the Red Armani Choir.
_______________________
* ... even foster parents.

Janszen, Faber: hyperinflation is government policy

(Graph reproduced by iTulip from NowAndFutures.com)

In an extended "Titanic" analogy, Eric Janszen describes what he sees as the government's response to the crisis: "send rescue", "boil the ocean" and if terrified investors refuse to relinquish the security of Treasury bonds, "sink the rafts" by devaluing the currency. Around the world, he sees a policy of inflation and even hyper-inflation. So does chipper doomster Marc Faber, who now thinks we must eventually have 200% inflation in the USA. 1974 - 82, here we come again?

Inflation bubbling up

Richard Daughty, aka The Mogambo Guru, comments on the sharp rise in raw materials prices.

Further to my recent post on whether gold is overpriced, it's worth pointing out that gold can remain for long periods above trend. Those who mock new buyers of gold may have overlooked this.

UPDATE

Marc Faber: "If I look at government debt in the US, and debt in general, I think the only way they will not default physically on their debt is to inflate." (htp: Michael Panzner)