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| 2009/1/20-26 [Politics/Domestic/Election, Politics/Foreign/MiddleEast/Iraq] UID:52424 Activity:moderate |
1/20 BAC -29%, WFC -24%, JPM -21%, C -20%, GS -19%, MS -16% BCS -42% STT-59%
\_ The Obama Administration begins!
\_ Hope!
\_ Yes, clearly today's decline is the market reacting to Obama
suddenly and unexpectedly becoming President.
\_ The Death Star bursts into a supernova, creating a spectacular
heavenly display. </sorry>
\_ We've had three consecutive months of massive DEFLATION (CPI
decrease). Expect it to continue at least a few more months,
followed by hyperinflation (as the Fed injects as much cash into the
system as it can).
\_ If you think we are really going to have hyperinflation
you are either too stupid to breathe or don't know what
hyperinflation means.
\_ Hyperinflation means Weimar. Granted, it may only be as bad
as the 70s, but the money supply has grown over 70% since the
bailouts started. The current annualized rate of deflation is
between 12% and 23%. See here for what happened in
Yugoslavia.
http://www.rogershermansociety.org/yugoslavia.htm
\_ Umm, are you trying to say that we're going to have that
kind of inflation here, or not? -!pp
\_ Umm, are you trying to say that we're going to have
Weimar inflation here, or not? -!pp
\_ I think it's about 50/50 either 70s or Weimar.
\_ In that case, you should borrow lots of money
and buy solid assets. I personally think 70's
is as bad as it is likely to get.
\_ That's about what I'm doing. But I certainly hope
you're right and I'm wrong.
\_ I cannot name even one country with a
functioning military that has suffered
hyperinflation. It is usually defeated
countries and occasionally a total basket
case with no friends and no army like
Zimbabwe.
\_ Rome circa 300 AD, and the Confederacy
are two examples.
\_ The Confederacy is a great example of
how a country that is losing a war or
has just lost a war often suffers
hyperinflation. Rome is a good
counterexample, I have to admit.
\_ What cause hyperinflation in Rome?
Wasn't it a change in coinage or
something?
\_ Yeah, good point. Rome kept
debasing the currency.
\_ I'm not sure what a military has to do with
it. It seems to happen in places with
unusally destructive economic policies.
ie Zimbabwe destroyed the main engine
of its economy.
I'm not terribly worried about it here
because Bernenke is very anti-inflation.
While I think Obama's economic policies
seem a little hare-brained, they aren't
THAT wacky.
\_ It depends on what you define as "money supply." If you
include credit (and most economists these days do) the
overall money supply has actually gone down.
\_ occam's razor: news has leaked to the big brokerages that govt is
amenable to wiping out equity in a de facto nationalization. arthur
levitt (former sec chair) did two bloomberg podcasts on this
yesterday and today.
\_ Also, observe what happened in England.
\_ hell, even Krugman wrote a piece on this a couple days ago
\_ Which one, the bad bank one? "Wall Street Voodoo?" He
doesn't exactly mention nationalization, just says that
the TARP is a bad idea. |
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| www.rogershermansociety.org/yugoslavia.htm Get immediate cash in seven days What Happens When A Paper Currency Fails? The Worst Episode of Hyperinflation in History: Yugoslavia 1993-94 Thayer Watkins, PhD Between October 1, 1993 and January 24, 1995 prices increased by 5 quadrillion percent. Thayer Watkins is an instructor and graduate advisor in the Economics Department of SAN JOS STATE UNIVERSITY. Thayer Watkins Under Tito, Yugoslavia ran a budget deficit that was financed by printing money. This led to a rate of inflation of 15 to 25 percent per year. After Tito, the Communist Party pursued progressively more irrational economic policies. These policies and the breakup of Yugoslavia (Yugoslavia now consists of only Serbia and Montenegro) led to heavier reliance upon printing or otherwise creating money to finance the operation of the government and the socialist economy. By the early 1990s the government used up all of its own hard currency reserves and proceded to loot the hard currency savings of private citizens. It did this by imposing more and more difficult restrictions on private citizens' access to their hard currency savings in government banks. The government operated a network of stores at which goods were supposed to be available at artificially low prices. In practice these store seldom had anything to sell and goods were only available at free markets where the prices were far above the official prices that goods were supposed to sell at in government stores. All of the government gasoline stations eventually were closed and gasoline was available only from roadside dealers whose operation consisted of a car parked with a plastic can of gasoline sitting on the hood. Most car owners gave up driving and relied upon public transportation. But the Belgrade transit authority (GSP) did not have the funds necessary for keeping its fleet of 1200 buses operating. These buses were overcrowded and the ticket collectors could not get aboard to collect fares. Thus GSP could not collect fares even though it was desperately short of funds. Delivery trucks, ambulances, fire trucks and garbage trucks were also short of fuel. The government announced that gasoline would not be sold to farmers for fall harvests and planting. Despite the government's desperate printing of money it still did not have the funds to keep the infrastructure in operation. Pot holes developed in the streets, elevators stopped functioning, and construction projects were closed down. The government tried to counter the inflation by imposing price controls. But when inflation continued, the government price controls made the price producers were getting so ridiculous low that they simply stopped producing. In October of 1993 the bakers stopped making bread and Belgrade was without bread for a week. The slaughter houses refused to sell meat to the state stores and this meant meat became unvailable for many sectors of the population. Other stores closed down for inventory rather than sell their goods at the government mandated prices. When farmers refused to sell to the government at the artificially low prices the government dictated, government irrationally used hard currency to buy food from foreign sources rather than remove the price controls. The Ministry of Agriculture also risked creating a famine by selling farmers only 30 percent of the fuel they needed for planting and harvesting. Later the government tried to curb inflation by requiring stores to file paperwork every time they raised a price. This meant that many store employees had to devote their time to filling out these government forms. |