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Posterity's Debt To Me
Coping with Deflation
Heavenly Sex

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hat Fools, We Mortals
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Hucksterism Gone Wild
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February 7, 2016

     "What kind of crank economics contends that brutally punishing two of the great, historically-proven economic virtues——-thrift and prudence—-is the key to economic growth and true wealth creation?"
~David Stockman

   "An old man stands at any one of Starbucks’ 24,000 barista counters on any given morning. He can afford one cappuccino. He pays for it with the entire daily return from his savings account where he prudently stores his wealth.

   "After a working lifetime of thrift and frugality his certificates of deposit now total $250,000. Yes, the interest at 30 bps on a quarter million dollar nest egg buys a daily double shot of espresso and cup of milk foam."  WAR ON SAVERS

   David Stockman reminds us of the rotten deal prudent savers are getting in this era of near zero interest rates,  A guy with a quarter-million dollars collects enough in one day to buy one cup of pricey coffee from Starbucks.  A discouragement to savers, to say the least.

   And what about those interest-bearing checking accounts? Maintain a balance of $15,000.00 or so and the best one can hope for may be $11.00 interest for the year. Many banks pay no interest on checking account balances at all and the latest worry is depositors will be required to pay a fee to banks for holding their spare cash.  As Mr. Stockman points out this is a war against thrift and prudence.

HYPERINFLATION! Venezuela Orders Bank Notes by Planeloads

   It's past tila to call "the money doctor."  But, the famous money fixer of the early 20th century has no modern counterpart to call upon.  

    Dr. E. W. Kemmerer gained his fame by advising some eleven nations, which had allowed their monetary systems to fall apart, on methods of setting their money standard on something more reliable than a printing press.  

     Robert Wenzel cites the Venezuelan problems with the runaway bolivar which is beginning to resemble the now defunct Zimbabwean dollar.  The price of a restaurant dinner in Venezuela requires payment in a brick sized pile of bank notes.     

   "Three-dozen 747 cargo planes have arrived in Venezuela, all stuffed with newly printed money. This is what hyperinflation looks like.   Venezuela’s central bank’s own printing presses in the industrial city of Maracay don’t have enough security paper and metal to print more than a small portion of the country’s bills.

   "This is what happens when massive amounts of new money are printed, the desire to hold cash [bank] balances shrinks to near zero."  Money Crisis

Living With a Debt Bomb
(Too dangerous a topic to talk about.)

    Who in his right mind would go to the polls in November to vote for a candidate foolish enough to promise to balance the federal budget immediately and and run budget surpluses as soon as possible to start paying down the public debt?  That candidate would be labeled a whacko and, if lucky, might get 1 or 2 percent of the vote.  Since FDR's administration introduced the fallacy that federal debt was not a problem ("we only owe it to ourselves") the problem of ballooning debt has been shoved to the back burner.  

   The U.S. Treasury Departed reported on January 29th the public debt had topped $19 trillion.  That's a substantial chunk of change for Americans to owe, but owe it we do and we may not be able to rely on a storm of monetary hyperinflation to lessen the impact of the debt.  

   When the basketball and football games are over perhaps a brave TV network will set aside an hour or so in which presidential candidates will address the vexing problem of the U.S. Public Debt. We wouldn't surprised to hear at least one politico say "Hey - we only owe it to ourselves!"

Iowans Choose - - Senator Cruz.

   The GOP in Iowa gave Ted Cruz the nod, with The Donald bringing up the rear in second place. Over in the Democrat camp Clinton edged out Sanders, barely. The candidates, and the kit and kaboodle of media people, pack up and head for New Hampshire to continue the contest.  

   Veteran commentator Pat Buchanan says, "The next president, be it Trump, Cruz, Clinton or Sanders, either will be the last president of an old era, or the first president of a new era."

   Change seems to be afoot, that's for sure. Buchanan and others see it as a resurgence of an age of populism.

   "Populism, patriotism, nationalism, defying political correctness and dissing the establishment and the elites that monitor PC are where it’s at. And there are reasons for such populist rage.

    "Put bluntly, the nation seems almost everywhere on an unsustainable path. Mass immigration, legal and illegal, continues to alter the face of America. Obama doubled the debt, and the deficits are rising again."

Another Plea for Honest Money

   "Janet Yellen, the head of the Federal Reserve, says that we should have two percent inflation, which in her mind is seeing the prices rising two percent a year. If you take a typical American family making fifty thousand bucks a year, that means their costs would go up a thousand dollars a year, two percent of fifty thousand. Who gave her the authority to raise the cost of living, which is an effective tax, a thousand dollars on a typical American family? Yet Congress, they just nod their heads. It’s a travesty."  Fed Recklessness < Steve Forbes points out that the Fed's Janet Yellen is hell-bent on getting the nation's price inflation rate to 2 percent, annually.  Forbes has also been trying to attract attention to the notion of sound money for years  with disappointing results.  But with all the monetary systems of the world in disarray more people are beginning to ponder some of the fundamental questions generated by years of relying on debt-based currency.  The subjet has even been mentioned in the presidential campaigns.  Ted Cruz, for instance, has said some consideration should be given to re-attaching the dollar to a gold standard.  

Universal debt forgiveness and the imminent global debt jubilee.
Oh, joy! The jubilee will relieve the world of debt.
(But don't let your hopes run too high.)

   Our eagle-eyed friend, Boiling Ed, sent us to a link describing the cure-all for the world's un-payable debt.  It's not a new idea, nor is it a panacea for individuals and nations up to their eyeballs in debt.  The history of civilization offers no evidence that eliminating debt by official decree is the best way to escape crushing debt. The ancients understood that. In fact, Publilius Cyrus's remark on the subject would make a fine bumper sticker:  ALL DEBT MUST BE PAID, EITHER BY THE DEBTOR OR THE CREDITOR.  

 • "You cannot solve the debt problem by issuing more debt. You solve the debt problem by cancelling, completely, all national, corporate and personal debt. You do this simultaneously across the planet, and you do it permanently."

     This is the gist of it. It's true that issuing more debt will not solve the debt problem, but declaring all existing fincncial debt null and void isn't the answer either, although debtors would welcome it.  Imagine the holders of trillions of dollars worth of U.S. bonds suddenly discovering the IOUs have been canceled! 

   However, there are lots of interesti1ng points made in this article about debt.  Have at it! DEBT FORGIVENESS

Do Curmudgeons Ever Retire?

We recently mentioned that operating a low key personal site such as this blog is much like taking to one's rocking chair each day. It gives you something to do but doesn't get you anywhere. 

We don't mean to denigrate rocking chair enthusiasts, to be sure. But we and the Missus will celebrate sixty-eight years of marriage this year and we have lots of loose ends to tie as the shadows grow longer. We have music to make, stories to write, and boxes of photographs still in need of identifying for future generations. The faces familiar to us will be strangers to our grandchildren and great-grandchildren. Many of the faces belong to our offspring's direct ancestors. We feel obliged to tell our descendants who these people in old fashioned clothing were. (And what on earth will we do with those wonderful old home movies that date back to the mid-1940s? Too costly to digitize for possible viewing by posterity.)

There is also our impatience with the vagaries of digital gadgetry. And the constant barrage of scams and cons that beckon from the email pane are increasingly annoying. We got an email earlier this week from an acquaintance who has been dead two years. "Hi! Have you seen THIS?" the message said. We didn't click on the link. 

We'll probably pull the plug at the end of April. That's when our contract ends with the website hosting company. In the meantime, we'll treat our slow-motion exit as somewhat like easing out of an addiction. We'll continue to update Wrisley.com with comments and links that strike us as important to battered members of America's Middle Class. 

Global Unraveling
Predictions abound, but but surely the 'experts' will prevent it.

    "No one knows precisely how and when the global unraveling will impact their corner of the planet, but we do know one thing with absolute certainty: central banks are out of tricks."  OUT OF TRICKS < Charles Hugh Smith does a good job of explaining the bind the central banks find themselves in.  Think: "Pushing on a String."

An argument favoring a debate on sound money.  

   What a mess civilization would be in if there were no universal standards of measurement. Could there be civilization in the first place? 

We take for granted that 16 ounces constitute a pound and that 8 furlongs (5,280 feet) equal one mile. No one questions there are 2 pints in a quart or 60 minutsees in an hour. Weight, distance, time - there are precise standards for measuring almost everything. Except money.

   "Strangely enough, people are willing to measure their economic transactions with something that is based on no fixed standard at all! The U.S. dollar." 
(Link repaired)

      No one expects this important topic will enter into the presidential campaign this year.  On the other hand, most thoughtful people have a growing suspicion that something is seriously wrong with economics fundamentals, particularly with respect to the untrustworthiness of our currency.  Even the powerful central bankers can't make it behave.  

      Once upon a time money was wealth and contained precise intrinsic value.  Now it's only a claim on wealth...a place holder, as it were, and has no intrinsic value at all.  Except for the minor value of metal in coins.  Quite mysterious, but it's hard to find anyone who wants to think about it, let alone DISCUSS what to do about it.  

       Ignoring the issue of debt-based currency won't solve the problems it causes


       such as. . . 

  • Global debt exceeds $200 Trillion. (Can’t be repaid.)
  • Income disparity between the wealthy and poor is huge and rising.
  • Much of the world is mired in poverty and debt.
  • The U.S. has nearly 50 million people on food stamps (SNAP).
  • The U.S. government is in debt nearly $19 Trillion, not counting the $100 – $200 Trillion in off-balance sheet liabilities and unfunded liabilities such as military pensions, Social Security and Medicare. (Can’t be repaid.)
  • Politicians pay an inordinate amount of attention to the legislative needs of the major banks and are usually compensated accordingly.
  • The political system in the U.S. seems obsessed with keeping the banking cartel, military contractors, “Big Ag,” and “Big Pharma” profitable, at the expense of the citizenry.
  • Congressional approval ratings (U.S.) are about 10%.

     Gary Christenson asks us to "Imagine a world where money was honest, backed by something real, not the promises from bankers and politicians, could not be created by politicians or bankers, and where money was a reliable store of value! It won’t happen next month, but it could happen."

     We had a discussion on this very topic at lunch today with the Missus and our oldest daughter. whose eldest grandchild is in second grade.  We discussed the physical and legal distinction between coins and paper notes.  Not a routine table topic, to be sure, but it arose from a remark she made about youngsters and piggy banks.  We concluded it might be useful to include some practical (and interesting) instruction in the history of coin and currency in public schools starting in the third grade.  

      For adults, who never were exposed to the subject in school, Mr. Christenson's short article on the problem of paper money might help.  Dishonest Money


Really? Sure. Recall the Great Depression of the 1930s. It was a DEFLATIONARY economic depression and dollars were as scarce as hen's teeth. With only fone dollar a person could buy ten loaves of bread. Today, after decades of inflation, a dollar will buy less than a half-loaf of good bread. When inflation prevails one gets less for a dollar. When deflation strikes dollars are harder to get and consumers are forced to slow their buying pace. 

The Federal Reserve fears deflation and aims to keep price inflation running at about 2 percent each year. The person with lots of cash and no debt won't mind his/her dollar buying more. (Deflation.) The person overloaded with debt is usually pushed into a corner under deflation because the stronger (scarcer) dollar makes it harder to clear debt. 

Will the struggle between the desire for moderate inflation and the possibility of a deflationary crunch be resolved by the Federal Reserve and the U.S. Congress? Not much is said on the subject in the political "debates" and it's likely the prevailing wish is the problem will be resolved - - in time. This is likely. But the unwinding of problems caused by some 45 years of persistent inflation will likely be painful. 

More on deflation, first posted here in November, 2014.

ITEM: With U.S. inflation weak, the European economy stumbling and the dollar on the rise, the big question is to what extent Fed officials acknowledge risks to their expectations that the U.S. recovery will continue to strengthen and allow them to raise rates around the middle of next year.   

              Fear of DEFLATION is the boogeyman lurking just offstage.

     It's really beginning to look like the US is slipping into a Japanese style malaise.  With so many Harvard and Yale economists at the helm one would think this could be avoided. <insert smiley face>

    The deserving poor vs. the non-deserving poor.

     "Conservatives understand that people sometimes need help. We are in favor of feeding the poor and housing the homeless, although we believe that is more appropriately managed by extended families, churches and non-profits rather than government. What we cannot support is a culture of ever-expanding welfare that removes any incentive for families to take responsibility for themselves, and work to improve their own situations." 48 percent of Americans get Gov't Assistance.

    Once upon a time a distinction was made between the non-deserving poor and the folks who are poor because of bad luck and lack of opportunity.  The so-called "deserving poor."  Taxpayers paying the bills may demand the distinction be revived!


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