Ben Bernanke Beats Deflationists Into Submission With His Money Stick

We've got a new slogan for deflationists.  Deflationists: Wrong Since the Advent of Fiat Currency.

It's been the never-ending, battle royale of the economic world ever since the looming end to this financial system became starkly clear in 2008.  Will the western governments, almost all completely incapable of paying the gargantuan debts enabled by democracy, central banking and fiat currency, allow the system to collapse (deflation) or worm their way out of it via inflation, until we live in a hyperinflationary apocalypse?

We've always stated the same thing and continue to state it.  Deflation IS possible but highly unlikely in a system where a man who goes by the moniker, "Helicopter Ben", can print unlimited amounts of currency units to keep the anti-capitalist western monetary system limping along for just a little while longer... just long enough for a bunch of thieves and murderers with names like Obama, Sarkozy, Merkel and others to get out of dodge before the collapse.

The deflationists have now been wrong, at least in the US, since 1938.  That was the last time there was actual deflation.  Our chart of the US True Money Supply dating back to 1959 show that only for fleeting moments is there any hint of that line going south.

Inflation is defined as an increase in the money supply.  Deflation is a decrease in the money supply.  Prices are a SYMPTOM of increases or decreases in the money supply.  This is very, very basic stuff.  Unfortunately, in world-improving, highly socialist "institutions" such as Harvard, Yale and Princeton the last few sentences may as well have been written in Nepalese.  They speak a language called Keynesian and have a religious belief that drawing pictures on pieces of paper can make everyone rich.  They probably also stomp up and down on a bag of chips to make more chips, too.

For months the Germans and Europe had everyone on edge.  Would a western nation actually default, have its entire banking system collapse, impoverish almost all middle class savers and reduce the size of their monstrous socialist welfare governments by a massive amount, throwing millions into the streets unemployed and penniless?  The answer, once again, was no.  It was no surprise to us here, as we have always stated that was the much more likely route chosen.  Every other time in history when a democratic overindebted government with a fiat currency was faced with collapse or hyperinflation they always fire up the choppers.  The reason is simple.  It's the easiest way out for the politicians.  Obama would much prefer the dollar goes into hyperinflation - something he can blame on greedy corporations, or China, and whip the rich-haters into a frenzy - than to walk up to the Presidential podium and go down in history as the President "in charge" when the US empire collapsed.

They've been doing this for millennia.  They weren't fiddling as Rome burned because the government took responsibility and undertook a self-imposed discipline.  Rome was alight because the government overspent massively on military excursions, bread and circuses and used coin-clipping and other means to devalue the currency.  That all might sound familiar to Americans today except coin-clipping has been replaced by computerized fiat note creation.

And so, today along with the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank and the Swiss National Bank, the Fed announced it is cutting the penalty that it charges over a basic rate from 100 basis points to 50 basis points.

It sounds innocuous enough.  But what that statement really means is that every major western money-printer will do whatever it takes to ensure that capitalism is never allowed to take place.  It's no longer "too big to fail", it is "to fail is not allowed".  Entire legions of zombie banks and nation states will continue to lurch forward, completely dead on the inside, but animated by endless amounts of fiat money that will only ensure a hyperinflation of all western fiat currencies.

It is possible they could keep this game going for a few more years.  Probably not much longer than 3 or 4, however.  And it could happen much sooner than that, so to not prepare now is the height of risk-taking.  We've been preparing by owning precious metals and the companies that mine or explore for gold and silver.  As all the western central banks have shown their outright commitment to printing money we believe that it will ignite a gold & silver stock bubble that will be one for the ages.  And, as we've outlined for subscribers over the years, we will then hope to "cash" in our stocks at ludicrous gains and look to get into hard assets once again in preparation for the final hyperinflationary crack-up collapse.

It won't be easy... and that's why we try to provide subscribers with as much information and analysis as possible to survive The End Of The Monetary System As We Know It (TEOTMSAWKI).  But, yet again, and for the thousandth time in a row, the deflationists have been proven wrong and the inflationists have been proven right.

The December issue of The Dollar Vigilante is coming out on December 1st with a plethora of information, analysis and actionable info on surviving and prospering TEOTMSAWKI.  Senior Analyst, Ed Bugos, will also have more analysis of today's central bank announcements coming up in this weekend's Interim Update to subscribers.  Subscribe today to become a part of our community of dollar collapse survivors.

Comments

[Bill Lodderhose]

That's quite a cool little moniker "TEOTMSAWKI", I'll tell my friends in some of the various Rock Groups I do CD cover art for, they should do a little drum circle and chant that "American Indian" style so perhaps the Austrian Spirits can save us all from the doom and gloom that this perfect storm is going to bring down on all of our heads.

[#6]

You just gave me an idea for my economics class next semester.

I'm going to stomp on an actual bag of chips in class and then toss out a fistful of fiat fake prop money I use in the class as a way to demonstrate Keynesian madness! I love it!

Then I will show them a real silver coin and how you can't hit a button to make more of it.

[Jay]

Jeff, thanks for the article. I remember that in the late '70s in the US we had double-digit price inflation. Buying gold and silver was a no-brainer and those that bought early made fortunes. But then Paul Volcker raised interest rates and mopped all the excess dollars up very rapidly. Gold and silver prices fell in dollar terms for the next 20 years. Holding precious metals was a fools errand till a few years ago.

The Japanese had a tremendous real-estate bubble burst. They've tried all the money printing gimmicks in the Keynsian books, but I would not describe the Japanese economy as suffering from a hyperinflation or even an inflation (at least in price terms). I think deflation more nearly describes it. How are we not like Japan now? I think this inflation/deflation stuff is more complicated than you allow.

[Jeff Berwick]

Jay: Japan, ever since their bubble burst, has had very low levels of inflation. Most people wrongly say they've had deflation... they haven't... but they've had mild inflation. Even today, look how much less they are expanding their money supply vis a vis the US or Europe: http://blogs.forbes.com/michaelpollaro/austrian-money-supply/

[taco]

Jeff... Nice material. I do ask that you go the extra 10 feet and begin educating your readers on communitarianism and UN Agenda 21. Not all of your readers are oblivious to the big picture. Some of us are trained investigative journalists with a financial focus..
If you get my drift. Gracias amigo.

[Opperdienaar]

If you look at the silver content of the Roman coinage, you can see it happen. It also has to accelerate as the tax subjects anticipate inflation, they also go into debt to the printing presses, to retain the material benefit the government has to borrow more than it's servants.
I do think gvts will put on the monetary breaks once in a while, so the subject is on the wrong foot, that way his counterfeit gets him more real wealth. When the tax subject is deep into debt and inflation pauses, the anticipated devaluation stops and prices fall while his debt stays equal. He goes into bankruptcy and only then does gvt turn on the presses again and buys everything on the cheap. Just linearly expanding money supply is to predictable and tax subjects would defend themselves.

[gary leibowitz]

Deflation is a given. There is a natural cyclical nature in a boom/bust economy. The advent of free credit, credit cards, and the FED's intervention since the 1930's, has created the gretest imballance where credit has now replaced cash as the promary means of trade. It is axactly this reason why we will experience one of the greatest deflationary trends ever. When creditors refuse to beleive they will be paid back the whole ponzi scheme is broken. It is already happening. Bond holders need to see high rates of retunrs in order to continue to play the game. In the last 3 years housing problem is actually worse now. No sign of recovery. 1 in 4 homeowners are in negative equity. With the debt contagion hitting the EU and Chhina showing signs of contraction it is all over. no bailout is possible.

Your definition of inflation has to be revised given the last 3 years of huge increase in Money supply, and Government buybacks of bonds. It simply is not working. The bond market is THE most accurate barometer of futre trends and they are screeming deflation.

The world is awash in debt. The only way it gets resolved is thru austerity measures. You can't have inflation in that environment. Just look at wages. Govenemtn austerity will not create inflation pressure, just the opposite.

I can't believe after 3 years of PROOF that deflation is here the debate still rages on. The FED can no longer lower rates, or spend money to stimulate this economy. they tried and failed. The only reason we are holding up so well is becuase that excess cash Uncle Ben created went to Wall Street. It will not hold.

[mava]

gary,

You're cracking me up, man.

"Your definition of inflation has to be revised given the last 3 years of huge increase in Money supply, and Government buybacks of bonds. It simply is not working. The bond market is THE most accurate barometer of futre trends and they are screeming deflation. "

So, you're saying that:
-you are aware of huge money supply increases in the last three years, not arguing against that
-you want to find the deflation somewhere, but you can't

Therefore, you offer to solve this "problem" of non-existent deflation by "revising the definition of inflation",
....and just calling this money supply increase a deflation?

Truly, if Mohamed isn't coming towards the mountain, then it's the mountain that has to come towards Mohamed!

ROTFLMAO