By Monty Pelerin, on February 16th, 2010 These three articles are must reading for anyone interested in the future of the economy. No investor or citizen should be ignorant of the possibilities raised in these articles.
Ponzi Scheme by Puru Saxena
Editor, Money Matters
Let’s face it, the government-bond market in the West is a gigantic Ponzi scheme. Most governments in the ‘developed’ world are drowning in debt, they are running mind-boggling budget deficits and printing money like there is no tomorrow. Furthermore, under the guise of quantitative easing, their central banks are buying their own newly issued debt!
US debt will keep growing even with recovery by Tom Raum
For the U.S., the crushing weight of its debt threatens to overwhelm everything the federal government does, even in the short-term, best-case financial scenario — a full recovery and a return to prerecession employment levels.
Sovereign Default: Stuck Between Dire and Disastrous by John Mauldin
Our economic future is more and more a product of the political choices we make, and those are increasingly difficult. We have no good choices. We are left with choosing the best of bad options.
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By Monty Pelerin, on December 31st, 2009
Inflation or Deflation?
For investors, the critical question is are we headed toward Inflation or Deflation. How you answer this question and prepare for what you believe is coming, will be the single most important factor in your investment outcomes over the next five or so years.
There are plenty of smart people on both sides of this argument. Listen to their positions and rationale and then make up your own mind.
Saturday, December 26, 2009
Part 1: The Deflationists
RealPlayer WinAmp Windows Media MP3
Robert Prechter, author and CEO of Elliott Wave International (September 5, 2009)
Harry Dent, author of The Great Depression Ahead: How to Prosper in the Debt Crisis of 2010–2012 (September 26, 2009)
Part 2: The Inflationists
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Peter Schiff, President of Euro Pacific Capital (September 12, 2009)
Marc Faber, Editor of The Gloom, Boom & Doom Report (September 19, 2009)
Part 3a: The Inflation/Deflation Debate
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Daniel R. Amerman, CFA, author, speaker, consultant & Michael (Mish)Shedlock, “professor” at Minyanville (September 19, 2009)
Part 3b: Inflation/Deflation: Summary & Conclusion
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By Monty Pelerin, on November 28th, 2009 Prices do not all move in the same direction or at the same time. That is pointed out in the quote below:
“Investors who believe we are living in a deflationary period should ask themselves a simple question: why are grocery prices and gas prices and hairdressing prices and insurance costs continuing to rise? What investors fail to understand is that price deflation is very different from asset depreciation. Asset depreciation (stock and real estate prices falling) has a negative wealth effect, but no effect on purchasing power. Price deflation, on the other hand, has a positive purchasing power effect. None of us can say our purchasing power is increasing, despite the recent negative CPI numbers. Price deflation is nowhere to be seen at this point. Since 1971, when the world went to a pure fiat monetary system controlled by central banks, currency in all countries has lost purchasing power. In Canada and the US it is down over 80 percent.”
To read more, see The Next Crisis – Nick Barisheff who presents an argument for Inflation.
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By Monty Pelerin, on November 15th, 2009
“We’ve heard nothing but convincing rhetoric on the debt for a decade, so what we’re lacking is more of the same? Does the White House read the current polling and focus-group data? Deficit anger among voters has grown from ‘palpable’ to ’seething’ in the last 24 months, yet fancy elocution will calm our protestations?
Democrats will be slaughtered next Fall if they don’t respond with a comprehensive plan of government belt-tightening, which they won’t. And then sadly, we’ll get 2 years of no-action on the deficit from Republicans. Sound familiar?”
From the Daily Bail. To read full article, Obama’s Secret Plan For Deficit Reduction: Talk A Lot, Dr. Doolittle
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By Monty Pelerin, on November 4th, 2009
Image via Wikipedia
Image via Wikipedia
Below is today’s press release from the Fed. I have emboldened a couple of key statements.
“With substantial resource slack likely to continue to dampen cost pressures and with longer-term inflation expectations stable, the Committee expects that inflation will remain subdued for some time.” While this statement may be true (probably less so than we are led to believe) at the moment, ignore it. It is a “CYA” statement that provides cover for the Fed to continue pumping the economy. This statement or its equivalent will probably be in the Fed’s statement until a month or two before rampant inflation is obvious to everyone.
“The amount of agency debt purchases, while somewhat less than the previously announced maximum of $200 billion, is consistent with the recent path of purchases and reflects the limited availability of agency debt. In order to promote a smooth transition in markets, the Committee will gradually slow the pace of its purchases of both agency debt and agency mortgage-backed securities and anticipates that these transactions will be executed by the end of the first quarter of 2010.” This statement is inconsistent with the prior statement. It is either untrue or a diversion. There is no “smooth transition in markets” possible. While it might be possible that the Fed does actually honor this statement in a strict sense, they will merely shift their pumping to a different vehicle. To stop
Continue reading The Great Oz er Fed Has Spoken – Go To The Bunker
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Friedrich von Hayek
Friedrich von Hayek founded the Mont Pelerin Society.
“Monty Pelerin” is a pseudonym chosen by this blogger to convey general agreement with the philosophy, goals and spirit of the Mont Pelerin Society. No other connection exists between the blogger and the Society.
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