Mail 750 Tuesday, November 13, 2012
There is a great deal of mail on inflation, most of it very good, but far too much to post all of it. Here is a selection with comments.
Paul Krugman has discussed inflation on a number of occasions in the past few months. His view is quite different from your view, if I’m understanding you both correctly. Worth a quick google (there are a fair number of articles.)
Here is a short video and a very superficial overview which touches on hyperinflation fears.
The problem here is that I don’t really care to listen to the comments of a commentator even if he does have prizes in economics. I’d like to see his theories with data. To the best I can determine, Krugman’s critique of TARP and the Stimulus is that we didn’t put enough money into it. We should have borrowed/printed more, and spent more, and stimulated more, to get us out of this depression. The debt doesn’t actually matter.
That will result in inflation, but inflating our way out of the crisis is the right way to go.
Perhaps so; spending one’s way out of debt would certainly work if the spending resulted in great waves of new production. Once production ramps up you don’t have a paucity of goods, and having lots of money chasing those goods doesn’t rack prices up. So far this hasn’t worked, in part because the money tends to be invested in companies rather than technologies, and the companies picked by the government have not been successful. Stimulus resources tend to be allocated to political allies, not for economic reasons. This time for sure, of course; we will almost certainly see more of that.
Given the popularity of Dr. Krugman with liberals and the left, it is likely that we will see more attempts to implement his plan. We can only wait and see what that does.
Your fairy-tale themed corrector seems to be wrong, from a bit of poking around online; hyperinflation just means inflation that’s so big it needs to be distinguished from vanilla inflation.
One of the most famous examples of hyperinflation occurred in Germany between January 1922 and November 1923. By some estimates, the average price level increased by a factor of 20 billion, doubling every 28 hours.
I would guess that he’s using a specific definition from a specific theory.
I did not see the German inflation but I did see the Brazilian model. Incidentally, “what I tell you three times is true” is from The Hunting of the Snark (An Agony in Eight Fits) by Lewis Carroll, not precisely a fairy tale, and of course I have used the phrase many times myself.
I did like the tone of the Hyperinflation mail either, but I have been intrigued by this subject as it relates to computing for some time now. With our current computing power we should be able to represent every person and business and study any economic theory, before we implement it! Why have we not modeled our economy? I used sabermetrics back in the 90’s in little league and it does not give you a huge advance, but it does give you something. I read Paul Krugman book and thought it was the biggest pile of junk I ever read. Lots of statements, but no documentation backing it up. I’m an engineer and a programmer not an economist. I would like to some modeling and documentation as it relates to the economy. Not another WAG.
Economic Full Stop
Our congress critters have been very effective at changing how inflation is measured. As a result must of what impacts fixed incomes is not measured.
"Economic Full Stop" when googled results in Chaos Manor’s post from yesterday third from the top. The two above are referenced to Paul Krugman, the only economist the liberals like, and both reference this post from Krugman:
In my experience with liberals, if Krugman says something it is as good as a law of nature, and is not to be doubted or questions. To doubt or question just shows that you are a "regressive".
Alas. I confess to some doubt about the efficacy of the spend your way to success theory. Of course no one doubts the truth of “Invest your way to success.” Many politicians have asserted that as well. Invest in infrastructure seems to be one of the recommended investments. Generally the execution is a bit less than the intention, and the usual result is that the money simply vanishes. There are exceptions. One can make the case that TVA was a great success, and I certainly believe that if the US had spent the projected $300 billion cost of the Iraq War on domestic energy development the result would have been better than what we obtained, even if those investments had simply vanished without effect. When government chooses what to invest in, the results are not always predictable. The Manhattan Project certainly changed history, and Oak Ridge was not a likely private investment scheme. Generally, though, what government invests in does not directly make profits, and simply passing money out does not end depressions.
Your nasty commenter does have a point.
How does the money get into the hands of the people? With high unemployment, open borders, weak unions, workers don’t have much leverage to get higher wages. There is also a credit squeeze as banks sit on the money they are getting from the feds.
It seems likely that the actions of the Federal Reserve are merely staving off deflation.
* * *
Re:Inflation and hyperinflation
The flaw in your belligerent correspondent’s argument is that he assumes wages and salary to be the only source of income. Many if not most Americans receive some sort of Federal payment, the amount of which is set by Congress. When prices go up high enough the People will demand Congress Do Something. The Price-Payment spiral will be driven by an Act requiring monthly COLA adjustments, and possibly direct Economic Stimulus payments.
Regarding http://www.jerrypournelle.com/chaosmanor/?p=10601, Inflation and hyperinflation.
"Hyperinflation requires a wage-price spiral." — your unnamed correspondent
I am not persuaded by your correspondent’s repeated assertions that the above statement is true. It appears to be a thesis; that is, a hypothetical proposition put forth without proof. It needs support.
My guess is that your unnamed correspondent is young, studied economics in some college or university, and deludes himself that the answers to his exams map one-to-one with reality. In my experience, nothing credible has ever come from the sogenannte science of economics.
I note that in the Nobel Prize in Economics in 1974 was awarded to Friedrich Hayek for "pioneering work in the theory of money and economic fluctuations and . . . penetrating analysis of the interdependence of economic, social and institutional phenomena." In 1975 the Prize was awarded to Soviet economist Leonid Kantorovich for <http://en.wikipedia.org/wiki/Leonid_Kantorovich> his "contributions to the theory of optimum allocation of resources." Hayek was a classical liberal; he championed life, liberty, and property and a free economy. Kantorovich was a Communist; he championed a demand economy. The fact that these two won the Nobel Prize a year apart tells me that Economics is not a science. It is a political platform.
I recall the Carter years when inflation reached twenty percent a year. I did not and do not regard that as hyperinflation, but it was not a pleasant time.
I traveled through Brazil twenty years ago when the country was in the throes of ‘government managed’ hyperinflation. Every second Sunday, at the end of the evening news, the newsreader gave the inflationary rate to be applied beginning the following business day. During my stay, the rate varied from eleven to fourteen percent. Every other week. Set that up in a spreadsheet and see what you get as a yearly result. To say it was unpleasant fails to describe the experience.
What I saw in both cases was a decrease in the amount of capital available to lend for acquisitions, capital investments, and so forth. Small businesses suffered. That resulted in the generation of fewer new jobs. That meant unemployment rose.
I do not have any faith in college-educated economists. My father manned 8-inch rifles in France and Germany during the Second World War. After the war, he learned a trade while still in the Army. Over the years, he built a company that manufactured custom homes. By the early ’70s, he employed three four-man crews and subcontracted to numerous plumbers, masons, painters, roofers, electricians, sheetrockers, heating and air conditioning installers, and finishers.
I have never had a course in Economics. The hardest courses I ever took were Complex Analyses, Nuclear Physics, and Secured Credit Law. Maybe I am not smart enough to understand Economics. But on economic advice, based solely on the rate of return from the initial investment, given a choice between my father and the combined talents of Secretary of the Treasury Timothy Geithner and Chairman of the Board of Governors of the Federal Reserve Ben Bernanke, I shall choose my father.
Live long and prosper
h lynn keith
I was in Brazil in that period; it was fine for the rich who seemed to have ways to get new money as the indices rose. Not so good for those who had to stand in lines. And one learned not to convert many dollars since the local currency lost its value by the hour.
inflation, wages, gold, etc…
the value of money, any currency, be it fiat money or commodity-based, is what people expect to be able to buy with it later. tomorrow, in ten years, today’s value is an aggregate of immediate and expected value. how this is resolved depends on too many – fluctuating – factors for anybody short of Harry Seldon to determine.
In the case of fiat money it’s actually simpler: it’s what people expect the country who prints the money will produce in the future. Will this country make things people will want to buy?
Next there’s the problem of money supply vs the requirements of the economy. Is there enough money to go around? this is where fiat money is superior to commodity-based systems like gold. In a growing economy, you need more money every year. If your currency is commodity based, you may or not produce more money. In an ideal world of fiat money the central bank will print more money to fit the need of the economy. this is why inflation is unavoidable: you’ll have the central bank print a little more just in case so there’s no shortage. A little inflation is not a problem, a lot less a problem than money shortage. As long as inflation stays within reasonable bounds, say less than 5% a year.
A little inflation is also a good thing because it’s more productive to have people invest their savings in inflation-proof vessels like private companies shares than rent.
The catch, of course, is the Iron Rule: if government can print money to increase its power, it will.
Up to a point it’s not a problem. History shows that up to, say, 7% inflation, people have time to adjust.
Wages: the key point is that most people live from a salary, and on average economy works if and only if people on a salary can buy the things they make. So if wages are disconnected from inflation people will be able to buy less and less.
(making a big jump because it’s late)
the real problem is we now have the technology to supply most people’s basic needs with very little work. with robots and nuclear power 10% of the world’s population are enough to feed, house, water, etc… the rest of the people. The 50% below average are irrelevant. How do we manage this?
Depends on the people who are adjusting. Losing 7% of your income per year, which is what happens to those living off savings and annuities, soon leads to ruin. Cost of Living Adjustments to Social Security and other government payments never keeps up with the actual inflation rate. The squeeze can be excruciating. My mother lived with us during the big inflationary periods, and we could see what it did to her incomes; and my father was a prudent man who had left her savings.
As to the 50% below average, surely the best thing to do would be to design a system in which they are valuable and can know that they are? Being entitlement consumers is not a bracing occupation. But perhaps we can teach people that they also serve who only spend and consume?
given the tone, i really don’t want to respond either, but will note that we have an additional factor in (relatively) easily available consumer credit to meet the increasing prices. If eggs and milk for my family costs $50 and i do not have it…but do have $50 left on my mastercard, …Crying hungry children are so annoying. Of course,…bein’ as how consumers don’t typically have a printing press, paying off the credit creates yet another problem. The credit card people will certainly be helpful, they would prefer for everyone to be in hock to them up to the eyeballs and making minimum payments—The only thing that is really clear is that things are not as simple as the writer wishes them to be.
Inflation and deflation
I think your very rude correspondent has a kernel of truth going for him. It’s important to distinguish between a general inflation, like the stagflationary 70’s, and a deflationary hyperinflation. If you’ll forgive my layman’s understanding of the difference, I’ll give it a go.
Sorry for the length, but it’s a complicated subject.
A general inflation (such as the 1970’s) may be a monetary phenomenon, but it also features a decrease in the aggregate productivity of inputs–the ability of a man-hour or a quantity of iron ore to produce a dollar of economic output. If an industry wants to make a buck, they’ve got to shell out more bucks to get it. Thus, a positive wage-price spiral. This can be exacerbated by monetary policy (as it was in the 1970’s), but monetary policy is not the sole cause. The 1960’s were a period of general price inflation even before the mistakes of the 70’s.
For several reasons we are in a general period of deflation, characterized by increasing productivity of inputs. Industry does not need to shell out more dollars just to maintain profitability. They can actually spend less over time for a given output. All things being equal, that leads to a negative wage-price spiral. Note that productivity does not equal increased GDP–the Great Depression was deflationary.
So far so good. Inflation is one thing and deflation is another.
However, even in a deflationary environment it’s possible due to bad fiscal and monetary policy to break the relationship between a currency and its future value. The currency loses its value catastrophically, as people catch on to what is happening. My understanding is that this is what happened in Argentina, for example, when they broke the peso-dollar link. I’m not exactly sure which category Weimar fits under, although it has many hallmarks of a deflationary environment.
Note that Weimar and Argentina have a common feature–a parallel currency. Weimar had gold marks and Argentina had the dollar, and both were in general circulation as legal tender right alongside the paper mark and the peso. That’s something that is most emphatically NOT a feature of the U.S. economy, and if you try to run a business denominated in anything other than dollars then heaven help you; the IRS certainly won’t. The federal government has gone to great lengths in the tax code to make it difficult to maintain the value of one’s savings against a rapid increase in money supply.
My best guess at the moment is that the Fed will indeed simply print enough money to keep the government in clover. There will be some odd distortions to the economy, but not a general price increase at least for the next several years. Anything imported will likely start to get expensive, although other countries will be concurrently expanding their money supply to "defend" their export markets so that too is not easily predictable. The most predictable outcome is that the first recipients of the newly-minted money will do fairly well in this economy. Everyone else will see their buying power erode. Unless there is a drastic shift in fiscal policy, that I suspect that means government retirees, government employees, Social Security and Medicare beneficiaries, and government-subsidized corporations. "Nice work, if you can get it."
Now hopefully someone more knowledgeable can point out the flaws in my understanding.
If the problem is that productivity is too high, it is soluble. It is much easier to divide a large pie than a small one. The problem is that the entitlement economy leads to attitudes widely seen in Moscow toward the end of the USSR: “We pretend to work, and they pretend to pay us.” On my morning walk in Moscow I saw seven men filling a hole in a blacktop street. Two hours later I returned from my walk to the Russian Parliament building. The hole was still there and they were still ‘working’ on it. I asked the foreman why it took so long to fill a pot hole. “Ah, well, but there is always another hole…”
No one seemed particularly unhappy with the situation. They would spend the evening in a tavern. And my visit to the Writer’s Union lounge was instructive. The main complaint was the price of American cigarettes. I had thoughtfully brought a carton of Marlboro’s; the result was that many joined at my table, and I was told, with some laughter, that this was the first time the Jewish and Gentile Members had sat at the same table in weeks.
It is surprising how well one can adjust to situations. If productivity had been higher, the USSR would exist today.
on the end of entrepreneurship
Being a founder of a startup here in silicon valley, I can comment on Spengler’s essay. In the EDA business (Electronic Design Automation) everyone expects to get bought by one of the large EDA companies. No one expects to go IPO. Why? All of those wonderful laws the democrats passed after the fake energy crisis. Once you pass the small business threshold and enter big business, the cost of doing business goes up prohibitively. Further, the extra burdens placed on IPO’s in the last 10 years, make it much harder to go public. The net result is we all (if we are lucky) join the collective. We get paid for our stock or get new company stock, stay the minimum required time and leave. Those of us with the energy, do it all over again. The unintended consequence is we build bigger and fewer large companies. Just what the democrats like. As Amity Shales pointed out in "The Forgotten Man", bigger companies act more like the government and are easier to manipulate. Resistance is futile.
That of course appears to be desirable to the liberals, who do not care for all that independence which spoils the big plan. The obvious way out of a depression is a booming economy with great production of goods, so that the problem is distribution of goods, not unemployment. It is easier to divide a big pie than a small one. And of course to most of the world, the impoverished in the United States are enormously wealthy, and the temptation to divide THAT pie is great. If one we can get there and be part of it…
Dear Dr. Pournelle,
I have read your recent mail discussion with your somewhat impolite correspondent. His thesis seems to be that the result of inflation will not be hyperinflation but instead an economic full stop. He seems to believe this will be the case because wages will not rise as prices do, resulting in the economy grinding to a halt.
While this is possible, I do not believe it likely.
As prices rise, skilled workers such as lawyers will be able to negotiate for better wage packages, because they are needed and not easy to replace. They can hold a gun to their company’s heads and will do so.
Unskilled workers who are unionized will use the union club and their allies in government to push through wage increases as well.
That leaves the unskilled minimum-wage workers and the "shadow economy" of illegal immigrants. Given who’s in office, I assume it won’t be very long before Congress raises the minimum wage again. Shadow workers will still take money because even at inflated rates it’s still far better than they could earn at home.
So I don’t see the nightmare scenario your correspondent envisions. I think an increase in prices will result in an increase in wages as well. Wages are, after all, themselves a form of "price" — a price set on labor.
I do believe that inflation is a within-one-sigma possibility. I believe hyperinflation is an outside-two-sigma case but not impossible. But the most likely case, I think, is dramatically increasing debt with no attempt to pay it off either through inflation or through taxes. The can will be kicked down the road. Eventually, of course, the bill will become due but I’ll wager the government will do everything it can to prevent the bill coming due before 2016.
Those of us who have a life expectancy past that point would be well advised to inflation-proof our investments against when, not if , the bill comes due. For myself, I will also keep an eye out for opportunities in Singapore or HK or Australia or Switzerland et al. I don’t know what will happen when the hammer finally falls but I don’t want my family to be here when it does.
Beyond that, of course, I still have hope because the God who delivered Israel from famine in the time of Joseph is still alive and looking after his followers today. Still, God has a tendency to use natural phenomena like, say, a neighboring Egypt than dumping manna on people from the clouds. So I’ll keep my eyes peeled and watch for my chance.
I have not given up on recovering the nation, but I don’t expect to live to see it. I had a picture of the future in A Step Farther Out that I thought might happen in my lifetime.
Well, the left managed to disturb me once again:
Mr. President, please sign an executive order such that each American citizen who signed a petition from any state to secede from the USA shall have their citizenship stripped and be peacefully deported.
The disturbing part is not the request; one expect immature people to make idiotic statements. The disturbing part is the cognitive bias vis-a-vis executive orders, which seems to suggest the petitioners think that executive orders have the power of law or act as imperial decrees. Of course, Youngstown Sheet Company vs. Sawyer (343 U.S. 579) set the precedent that executive orders — as an attempt to make law — are illegal. Justice Black took the position that Presidents have no power to act except in those cases expressly or implicitly authorized by the Constitution or an act of Congress. This case presented a stinging rebuff to Harry Truman — another president that enjoys unfair popularity with the ignorant — and to the imagined authority of executive orders.
I came across this case when researching executive orders for my political science course. I wanted to know why presidents seemed to think they could write some of the strangest crap I’ve ever read on paper, call it an executive order, and put the wind up so many people’s butts. I learned that presidents really have no power with these executive orders, but the bureaucrats and most citizens do not seem to know that, which poses a problem. Still, we have the precedent of Youngstown Sheet Company vs. Sawyer and other interesting precedents. As an aside, martial law cannot — legally — occur while civilian courts are functioning — see Ex parte Milligan (71 US 2). The ignorant often remind me that Lincoln declared martial law, but they do not seem to know of Ex parte Milligan, which declared Lincoln’s action unconstitutional.
The left seems to have little understanding of how our government works. The left do not seem realize that our government is a polyarchy, as the left constantly refers to governance as a "democracy", which it is not and was never intended to be. The left do not seem to understand that our president is not a despot who rules by decree, that Congress makes laws and is the main branch of governance, and the left does not seem to understand the role of the courts. Unfortunately, the rest of the government seems to bend to the will of the ignorant as the Obamacare ruling underscored. Like Franklin said, "A republic, if you can keep it". The left is making that most difficult in 2012; perhaps we should put a petition that if you voted left that you should be exiled to a communist country? Or are we already in one?
Joshua Jordan, KSC
See the Virginia and Kentucky Resolutions. That period of American history was taught in 5th grade in Tennessee when I was growing up. Now it is hard to find anyone who knows what they were. I do hear about secession petitions.
Your point about executive orders is well made.
The original theory of these United States was that only the States had inherent sovereignty; the federal government was a government of specific and limited powers. It was supreme within its jurisdiction and all state and local judges had sworn allegiance to it as the supreme law of the land; but only within its limits. Sovereignty rested with the states. This guaranteed considerable competition among the states, and allowed all kinds of political experiments. That notion no longer seems to be taught in our schools.
FBI in the Sex Scandal!
This FBI agent seems to live in a porno movie. I say that because I saw a porno movie from my father’s collection when I was 13; two people were copulating in a bush and some other person came along and joined it. There was no surprise or objection from any of the original participants. This FBI agent seems to think that he can just join in on the extra-marital fun:
A federal agent who sent topless pictures of himself to the woman at the center of the Petraeus and General Allen scandals was told to ‘stay the hell away’ from the investigation but took it upon himself to ‘nose around’, it was revealed today.
After receiving a half dozen harassing emails from an anonymous account – but later linked to Petraeus’ mistress Paula Broadwell, Jill Kelley, the Florida woman who served as a volunteer social liaison officer at the Tampa military base, contacted a male FBI agent that she knew and had previously worked with.
During a prior exchange, when the agent was trying to establish a friendly relationship with the married mother-of-three, he sent her shirtless photos of himself adding to questions over his true intention behind going above-and-beyond his work duties to help her with the threats.
Joshua Jordan, KSC
I confess to both amazement and amusement as the melodrama unfolds. But there is the serious question of what happened in Benghazi and the timing of the release of this sex scandal. I don’t expect much to come of that. A spymaster brought down by the jealousy of a mistress: the stuff of novels. I am tempted to write one…
Subject: Inflation and business
"I have said that the prudent will prepare for inflation; that inflation is taking place now and will continue. I have also said that sometimes inflation has resulted in drastic hyperinflation "
Some of the things my family did in the ’70s suddenly seem to make a lot of sense. My mom and her preserves, my uncle and his huge pantry full of groceries. My dad buying a lifetime supply of stakes for his new stockade fence, to replace broken bits over the years.
Something you could touch on in the next few weeks might be how business will fare. My employer has a fair bit socked away in the bank, and we have as little in inventory as possible. And a lot of effort has gone into Just In Time systems and practices. We’re ‘product realization': we make other people’s electronics.
Not seeking specific advice, but a general sense of ‘what to expect’ for business in an inflation/hyper-inflation environment.
We will address specifics over time. And I invite suggestions. My income is reasonably inflation proof since the price of books is easily raised, and the market for entertainment is generally good in bad economic times. I am digging out some of my old survival essays. I am not sure how much expertise I have on predicting the future of small business.
I admit to having been a big fan of Petraeus…What he did in Iraq to get them back on track was amazing, as was his career in general. I find it difficult to forgive him for taking a mistress, and I’m sorry that he has fallen from the lofty level I had placed him at.
However, this issue seems to be all consuming in much of the press, much more so than the deaths of the four men in Benghazi. Could it be that it’s a distraction from some issues at hand, such as the big push in new regulations the President is pushing through, the tax raises, sequestration or another issue? Media is reporting that the government was aware of it some time ago….why did this and the Iraqi attack on our drone get suppressed until after the election?
There are just too many issues for there not to be some cover-up, and I cannot believe that the FBI would not have made the President aware of the issues about the Director of the CIA as soon as they came to light; it’s just too critical a position.
We now know that the Attorney General knew some time ago. He says he did not tell the President, who is said to be his best friend. You can believe as much of this as you want to.
I infer that the excitable correspondent maintains that hyperinflation is not possible without having wages indexed to inflation, creating a painfully obvious positive feedback loop. The correspondent then maintains that in the absence of automatic wage indexing, hyperinflation of prices results in an "economic full stop" at some point in the process before postage reaches three millard marks.
I will admit that I am not enough of a student of history to know if the Weimar republic had such an index, but I had certainly never heard of one. However, if employers want to keep employees in a hyperinflation scenario they have to index the salaries accordingly, which is the mechanism I had always assumed. In other words, indexing does not have to be codified to be effectively in place. Also, real property assets (real estate with improvements, precious metals, and other tangible commodities) sustain some level of value above the previous baseline and are available for sale or barter.
In any event, hyperinflation does NOT refer just to cases where price increases are measured in decibels or tens of decibels per annum (which seems to be another implicit assumption of the excitable correspondent). I would construe inflation rates of above about 30% per annum (sufficient to necessitate a more frequent than annual assessment of prices and wages) to fall into the category of hyperinflation, and I believe that’s close to the definition you were assuming. We are going to exceed that level, at least on a quarterly basis, in the first quarter of Calendar 2013 when the new taxes and Obamacare taxes kick in, and again in the first quarter after "cap and trade" become the regulatory basis under EPA rules. (Note: that does not necessarily mean that the official inflation rate will be recorded at those levels, since the federal government is fully capable of adjusting the formula basis for reporting — inflation has been understated for much of the past four years because increases in food prices have been offset in the numbers by the continued weak housing market.) Those changes are strictly due to the underlying changes in the fundamentals. The expansion in the money supply over the past four years probably represents the opportunity for another 30% correction but not necessarily on the same schedule. So in the absence of significant wage corrections, a near doubling of prices over the next two years seems likely; a wage correction will drive it higher and trigger the inflationary spiral.
I could probably add more but that’s about the limits of my erudition for this morning.
Related note: http://www.cnbc.com/id/49792979 Wealthy Dump Assets Amid Worries About Going Over ‘Cliff’
The financial cliff is quite real. Be prepared.
Hyperinflation on Russ Robert’s "Econtalk" and Ricochet.com
Dear Dr. Pournelle,
I do not know if you are familiar with Russ Robert’s "Econtalk," but it is a great source of information about everything economic. He is a professor at George Mason, and I believe now a Hoover fellow or some such. He does weekly, approximately 1.5-hour interviews with a wide range of economists, "ordinary" people, academics, authors, etc. A recent podcast on an economist who studied hyperinflations is here: http://www.econtalk.org/archives/2012/10/hanke_on_hyperi.html
I really appreciate your work here, you are a treasure. You do seem to turn up in many parts of my internet reading and podcast listening – TWiT, Instapundit, John C. Dvorak (although not on No Agenda…that is a fun, informative show, if wacky at times).
Do you know of Ricochet.com? It is a project of Rob Long and Peter Robinson and others with National Review ties – Mark Steyn and Jonah Goldberg turn up from time to time…along with conservatives celebrities such as Pat Sajak. They were aiming for something like a civil HuffPo of the Right. Membership is required for commenting, which, along with a code of conduct, keeps things civil even while arguing politics/culture. They are now generating a number of podcasts. "Law Talk" with John Yoo and Richard Epstein is one of my favorites. I just threw your surname into their site search and found 19 hits for you; people do like to quote the Iron Law.
Thank you for all you do.
I think inflation is going to be less of a worry than you think. I suspect that the various crazies out there, maybe starting with North Korea, are going to start testing. And going by the issue with the embassies in the middle east, I think those tests will be met with apologies from the US. Which will encourage more testing. As the only real losers in the Arab Spring were those dictators who had learned the hard way not to harass Israel, I can see things hotting up over there, plus Germany has got to be getting fed up with being guilt-tripped into paying for the welfare habits of Greece, Spain and Italy, a frustration which could increase hugely if Russia decides to start taking chunks out other countries, not just Georgia. And then the Brits could try buying better quality food at lower prices from countries in the Commonwealth rather than propping up a failing EU. And so on, and so on.
With the lid that’s been kept on the crazies since WWII, I think we’re heading into interesting times at a great rate of knots.
Interesting times. They can be made a bit less interesting if one has a large stock of non-perishable food acquired quietly and without drawing attention. You do not want your neighbors to believe you are hoarding. Hoarding is evil. Being prepared means protecting yourself from having the reputation of being a hoarder.
It’s been my experience that people who use copy & paste, then declare what they tell you three times is true, are generally belligerent assholes who ravings can be readily dismissed.
As several analysts have noted, the situation we’re in is unprecedented. Even during the worst of FDR’s excesses there was some semblance of adult supervision. There is something worse than hyperinflation, where there is at least a value attached to the currency. The worst scenario is, for lack of a better phrase, though economists might have one, is complete dehydration of the currency. This is the opposite of liquidity, where the money is utterly worthless. You can make a bill three feet wide to have room for all of the zeros and it won’t matter. If enough people stop believing it is just pieces of paper.
Part of the crisis in 2007 was that financial institution holding massive piles of Mortgage Backed Securities said they couldn’t act because they couldn’t find any functional mechanism to place a value on the MBS paper. This was nonsense, of course. A thing is worth what someone will pay you for it. They refused to ask the market what it thought of their product because they already knew what the answer would be. So instead they threw a tantrum and threatened to hold their breath until…, well, until the government became the worse kind of weak parent and gave the brats what they wanted. A smarter parent would know the kid would immediately start breathing again after losing consciousness. And if autonomic nervous action didn’t kick in there were plenty of other kids looking for a good home in Manhattan.
Breaking the money is the CTRL-ALT-DEL of global finance. It’s the only way you can really start over. How you do this without WWIII is the question.
It’s late and I’m not sure much of the above makes sense. But anyone who thinks bizarre scenarios are impossible when we’re already in a bizarre scenario is whistling in the dark. We can either back away from the cliff and absorb some hurt to get back to a rational policy or we can make history of the ‘interesting times’ variety. Rational policy isn’t a strong suit of our species, so I expect history it is.
And you might look into other nightmares. Indeed.
PLEASE RECONSIDER WRITING…
…a survival book. The election and your recent musings on preparing for inflation make me think you could do it with your eyes closed.
Surely some of your old research and columns are still relevant? I realize that nuclear war is much less likely (although I think an isolated event much MORE likely now) but you have plenty of material to pore over, edit, compile…
I know you have enough on your plate already, but I think people would pay attention now. Tuesday really was a game changer.
We will at least have discussions here.
Conservatives, don’t despair
While I don’t agree with a few things in there, especially the snarky remarks at the end, the article does contain some good information and a bit of realism on what just happened. We’ve seen worse time – depression and WWII come to mind – and we’ve seen better times – roaring 20s and Reagan years come to mind. We’ll see worse and better times again, hopefully tinier bits of the former and grander bits of the latter. It isn’t the end of history and conservatism is a more sound philosophy than liberalism, but we need both. In my opinion we got a little too much of the latter in the last election, but hope is not lost. When Obama first came into office his party controlled all branches of government and still barely managed to pass Pelosicare. We are not done yet by a longshot.
And we can end on that note. And despair is a sin.
We have sown the wind, and we will reap the whirlwind, but that has all happened before. And Moore’s Law works inexorably.