Thursday, 20 December 2012

Almost everyone is wrong

The euro is the state of the art, in currency systems.

The ECB and their euro touch the non-monetary real world at just two points:

  1. The HICP index
  2. Gold

The first they can only watch passively, the second they can actively intervene in the market for.

The ECB have one mandate and one mandate only:

  1. Price stability

This means inflation will not be left to run unchecked. It also means deflation absolutely will not be allowed to unfold.

In a past age of mega-leverage, where general prices naturally felt the pressure to rise, the only thing the Central Banks could do to act against that tendancy was to intervene in the market for gold and suppress it's price, hoping that this would be noticed in other markets and put a brake on the rises within those also.

In an age of deleveraging today, where prices naturally would fall as the deflationists rightly determine, but where the Central Banks positively will not allow general prices to fall without taking some action to prevent it … what else can they do but actively support gold and hope the other markets, which they can only passively monitor, take their cues from this signal and see their own falls arrested?

This is why silverbugs don't understand how silver will underperform gold. They are scared about inflation still, despite the clear evidence the world has turned and they are focused on the wrong bogeyman.

The deflationists are absolutely right. Except for assuming it will simply be allowed to play out. It won't.

So to summarize my point: almost everyone is wrong. Just as it should be, right?


DP said...

Semi Precious Weapons - Magnetic Baby

GoGoGadget #Maglev!

Ein Gast said...

Hi DP,
I am just wondering, why FG-bugs give such a crap about the HICP. It is just made up, just as needed. The basket of goods considered is changed every year just before the "official numbers" are released. Even BennnyB's CPI is more honest, since he simply states: "This is my personal index I'm telling you morons." At least that's honest and visible for everybody.
As fuel and energy skyrocketed this year, suddenly the EU-crooks decided, nay, nobody needs fuel, energy and food anyway, we simply underweight it in the basket. Oh, telecommunication fees and LCDTVs are cheaper?.. Hmmm, so we weight those more...
Greets, AD

DP said...

Hi AD,

I'm given to understand (Weights) that Eurostat look at what people actually spend money on. Whether it's just bullshit or not, I couldn't possibly say.

Best wishes to you for a Free 2013! ;-)

Ein Gast said...

Hi DP,
let's just assume for a second that those numbers are not made up and let me show you, that even this approach so somewhat nonesense:
In 20yrs. average people will be so f*cking poor due to €-inflation/stagflation that nobody can afford fuel, not talking about cars.... inflation? no, no inflation, since now nobody is using fuel, not talking about cars, where's the problem? Hail to the EU(ro)!!!111

see the problem with such measurement?
Greets & all the best too you for ANOTHER year as well, AD

Ein Gast said...

so who needs electricity anyway. 600000 german households are fine without, we can skip that one out of the HICP...

DP said...

The deflationists are absolutely right. Except for assuming it will simply be allowed to play out. It won't.

Ein Gast said...

As you noticed probably by now, I dont necessarily consider myself "a deflationist". I'd say, TPTB already killed the concept of money by now. The best and highest tool of the superorganism to optimize the physical plane had been flushed down the toilett. So what will happen to the physical plane is just up to random central planning of nepotism over the herd of serfs. The monetray plane has become a joke, regardless of the material the tokens are made of, or if they print or they dont.
Greets, AD

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