Rat-pucking as the new public works solution for Berlin? Yes, read about it here.
Alas that voice-over guy who was famous for lines starting with "In a world where..." died not too long ago. This is really too bad because he was fairly young, only in his 60s. Anyway, I have to give credit where it's due, because I say this: In a world where rat-pucking can even be suggested as a solution for rodent infestation and under-employment in a modern western country, anything, I mean anything, is possible.
Folks, I am really sporting tinfoil these days, aren't I? Or am I? I am going to say that the next Big Shock, aside from anything else that is too hard to definitely predict (natural or man-made disasters, etc.), is the "Big I Word": Inflation. We are headed to nasty levels of inflation. Are we looking at Wiemar Germany or modern-day Zimbabwe inflation? Probably not. But ask yourself this: if your buying power were effectively half what it is now this time next year, what would life be like for you? Not nearly as pleasant as it is now. And I think we may be looking at that kind of scenario.
Why is this? Because the government has few options but to run the presses. The solutions to the current loan mess are few. In fact, to keep more people from becoming homeless than the government can deal with, they must come up with a way to keep them from going into default on their loans. They can do this by ordering the banks not to foreclose on properties, and this would effectively be the final straw as far as our financial system goes. But they cannot allow 5% of the population to be wandering the streets. That is a recipe for chaos. So they will order the refinancing of all these bad loans to fixed rates (under 6% I predict, probably 4-5%) and tell the banks to suck it up. When they complain, the gov't will give them the money to pay their many obligations that they currently cannot meet. The result of all this is inflation. If we double the money supply, what happens? Today's dollar is worth half of what it was the day before the money supply was doubled.
But wait, it isn't that simple. If we were a nation of Vulcans, that is how things would go. But we are not a nation of Vulcans. We concern ourselves mostly not with what is but what could be. That "could" in times like this is driven largely by fear. It will not take a doubling of the money supply to cause a 50% drop in the value of the currency. Between the actual mechanical effects of supply v. demand, there are the psychological factors. As confidence in a currency erodes, the value of it also erodes. Simple example: if I print up $15,000 in "Matt Money" that has a picture of yours truly on it and go out and try to spend it, no one of course will take it. That is because there would be no confidence in my custom-made currency. So even if there is only a mere $15k of this new money around, thus it being much scarcer than US dollars, it would still be worthless. That is because it has no confidence put into it by the public. So you see what I mean here.
The key to planning for yourself and others when all this stuff is going on is not to worry too much about specifics, because these are determined by too many things that will happen that are not really predictable. What is predictable, though, is trends. The trend is toward inflation. The exact details and sub-mechanisms are to be determined but the basic driving laws around politics and economics are not different for the US as compared with anyplace else at any other time in history. People are people, money is money. And inflation is a-comin'!
Alas that voice-over guy who was famous for lines starting with "In a world where..." died not too long ago. This is really too bad because he was fairly young, only in his 60s. Anyway, I have to give credit where it's due, because I say this: In a world where rat-pucking can even be suggested as a solution for rodent infestation and under-employment in a modern western country, anything, I mean anything, is possible.
Folks, I am really sporting tinfoil these days, aren't I? Or am I? I am going to say that the next Big Shock, aside from anything else that is too hard to definitely predict (natural or man-made disasters, etc.), is the "Big I Word": Inflation. We are headed to nasty levels of inflation. Are we looking at Wiemar Germany or modern-day Zimbabwe inflation? Probably not. But ask yourself this: if your buying power were effectively half what it is now this time next year, what would life be like for you? Not nearly as pleasant as it is now. And I think we may be looking at that kind of scenario.
Why is this? Because the government has few options but to run the presses. The solutions to the current loan mess are few. In fact, to keep more people from becoming homeless than the government can deal with, they must come up with a way to keep them from going into default on their loans. They can do this by ordering the banks not to foreclose on properties, and this would effectively be the final straw as far as our financial system goes. But they cannot allow 5% of the population to be wandering the streets. That is a recipe for chaos. So they will order the refinancing of all these bad loans to fixed rates (under 6% I predict, probably 4-5%) and tell the banks to suck it up. When they complain, the gov't will give them the money to pay their many obligations that they currently cannot meet. The result of all this is inflation. If we double the money supply, what happens? Today's dollar is worth half of what it was the day before the money supply was doubled.
But wait, it isn't that simple. If we were a nation of Vulcans, that is how things would go. But we are not a nation of Vulcans. We concern ourselves mostly not with what is but what could be. That "could" in times like this is driven largely by fear. It will not take a doubling of the money supply to cause a 50% drop in the value of the currency. Between the actual mechanical effects of supply v. demand, there are the psychological factors. As confidence in a currency erodes, the value of it also erodes. Simple example: if I print up $15,000 in "Matt Money" that has a picture of yours truly on it and go out and try to spend it, no one of course will take it. That is because there would be no confidence in my custom-made currency. So even if there is only a mere $15k of this new money around, thus it being much scarcer than US dollars, it would still be worthless. That is because it has no confidence put into it by the public. So you see what I mean here.
The key to planning for yourself and others when all this stuff is going on is not to worry too much about specifics, because these are determined by too many things that will happen that are not really predictable. What is predictable, though, is trends. The trend is toward inflation. The exact details and sub-mechanisms are to be determined but the basic driving laws around politics and economics are not different for the US as compared with anyplace else at any other time in history. People are people, money is money. And inflation is a-comin'!
posted by Matt Campbell at 12:23 PM
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