The article
HERE… that this was refuting, has disappeared.
Unfortunately, the author with their charts and graphs lives in a
world of rules. They do not realize there are no rules/law for the
CBs. These deflationary arguments are written by people who
are fighting the last war. Walking backwards into a future based on
the constraints of their personal experience.
The best argument against it - is really that
there can be no deflation UNLESS there is a Gold Standard... ie. In
a Deflation (ex. The Great Depression) the price of gold wants to go
higher but the central planners have it in a fixed rate box. It’s this that
causes the deflation. The value of money goes up because the price
of gold can’t - and they usually confiscate to remove any natural
value increase – they, essentially, freeze it.
How many periods of deflation have we had since 1971? You can’t find
any. This date to the present day is the current life of the US
Dollar as a purely fait unbacked exchange mechanism.
Currency has been pretending to be gold ie store of value. However,
gold /silver has a 5000 year record as a store of value. The Central
banks would like to think that their manipulation can confuse these
roles. Don't fall for it. Follow what they do… not what they say…
stack stack and stack….
Deflation on a gold standard comes about because bankers fix the
price of gold at a certain artificial rate - say $20 an ounce. This
means, in a proper classical gold standard, that the $20 note is
really acting as a warehouse receipt for an ounce of gold. What’s
really happening is that the price of gold wants to go higher and
the value of currency goes up because the price of gold can’t.
The banksters have to fix the rate because if that let normal price
discovery occur, they would be a run on the physical backing leaving
the banksters with no gold. Once the banksters have no gold then the
currency backing is gone. At this point the currency becomes
worthless because it can no longer be credibly considered as a
receipt for gold. This means a loss of confidence and a rapid
hyperinflation ending at zero buying power.
Because the banksters fix the rate for gold you get deflation in a
hard currency because you can’t have a loss of confidence in gold if
the gold continues to sit in the warehouses. The deflation means the
people have to buy necessities and pay their bills instead of taking
delivery of their gold because they earn less and less the deeper
the deflation goes although they can still buy things at a lower
price but they can’t buy gold because the $20 bill they have buys
too many other things they need to survive and the $20 bill takes
progressively more labor to earn.
In an unbacked system you don’t get this dynamic. Price stability
depends on prudent management by the banks. It’s the prudent
management that keeps prices stable. If you have mismanagement then
the system is threatened by a loss in confidence. Because it a debt
based system that’s unbacked it easy for bubbles to cause a crash
but this erodes confidence. The answer it to use inflation to
inflate the debts away and cure the overhang.
The best possible pretext for QE or increasing the money supply out
of thin air is to fear monger deflation. You point to the dangers of
deflation which isn’t really there. This brings inflation which they
try to hide. In the end they can’t hide it.
If you price the stock market and commodities in gold over the last
ten years the chart shows a deflationary depression right the way
through to today. In fact this chart would be what the market would
look like if you were on a classical gold standard. The reason
things look as they are is constant currency debasement. All the
inflation is hiding in stock market asset prices and commodities.
When this crashes all the excess cash charges out en masse. There’s
now far too much money compared to the real assets after the mega
correction Then you get a dam break of inflation which at a certain
point leads to a loss of confidence leading to hyperinflation. All
unbacked systems eventually go to zero and always have. This is
because value is subjective and the currency is only backed by the
subjective confidence of its users.
I don’t know why deflation would ever be allowed in a fiat scheme
unless the Central Bankers were suicidal and wanted to give up
power. Even if asset markets completely fail and deflation becomes a
threat people can be forced to play, as it were, by driving them out
of the currency via money printing.
These Deflationists never talk about the effects of a global
rejection of the Dollar as the world’s reserve currency? Because it
never happened before and therefore these people can’t comprehend
it. Would that be hyper-inflationary? Of course it would because it
represents a wholesale loss of confidence in an exchange medium. The
velocity of money would sky-rocket. The smoking gun evidence would
be trillions of unwanted paper flooding the US like a deluge. See
what happens when the Chinese, Arabs and Russians start dumping
their dollars, folks – that snowball has just started down the hill. |