RTG-42-2009-07-10

Podcast: Play in new window | Download (Duration: 12:26 — 5.7MB) | Embed

Subscribe: Apple Podcasts | Android | RSS

Answers to questions about Inflation With Gary North Or Deflation With Mish.

Your article kinda reminds me of the bullfight with the matador and the bull.
Trace being the matador of course.
After sufficiently proving his prowess as a game bull, he is eventually worn down by the matador and the picadores until finally he is dispatched in a tired and weakened state with a swift but exact plunge of the sword.
This happens repeatedly to ALL the bulls as very few are ever prepared for El Matador !
Nice article and thanks for reminding the intellectually deficient that name calling is indeed a sign of confusion and defeat.No matter who you THINK you are.
Jay

Trace:

Thanks for the excellent article. I’ve recently discovered your free “runtogold” podcasts on i-tunes, and I enjoy listening to your well-spoken perspectives on economic and monetary reality. Yes, the timing of the strange phone interference was quite, er, coincidental.

Mish says hyperinflation is unlikely because the banks cannot be forced or coaxed into lending. But since when does fractional reserve lending (legalized counterfeiting) cause hyperinflation? It surely causes an inflation of currency supply leading to distortions, malinvestments, and the Business Cycle, but isn’t hyperinflation distinctly different from credit expansion? I thought hyperinflations were caused only by Central Banks and Government Treasuries printing money to pay for Government deficits.

Is Mish attacking a straw-man, or am I wrong about the cause of hyperinflation? Are you aware of any hyperinflations caused by banks creating credit as opposed to government printing presses?

Confused in Baraboo,

-Pete

‘Hyperinflation’, whatever that is, is a currency event; what people generally think of as hyperinflation – wheelbarrows of currency like 1923 Germany. I do not think it takes bank lending to trigger this event.

For example, if the banks decided to rapidly move their reserves down the liquidity pyramid from FRN$ illusions into physical gold then ‘hyperinflation’ would likely be the result as the FRN$ evaporates just like when banks moved capital down the liquidity pyramid from Auction-Rate Securities into T-Bills; the Auction-Rate Securities ‘hyperinflated’ or in other words rapidly evaporated. I do not see why capital has to go up the liquidity pyramid into less safe and more risky loans in order to cause the evaporation of a lower layer in the liquidity pyramid. Consequently, ‘hyperinflation’ is actually a very deflationary phenomena because it evaporates the value when measured in gold of a large layer in the liquidity pyramid. I am probably a bigger deflationist than Mish! Michael Mross, one of the leading financial commentators on MM News (their CNBC equivalent; Google Translator does a decent job), picked up on this.

See why I think this is an ‘epic deflationary credit contraction’? Because digital commodity currencies remove two giant layers of the liquidity pyramid by allowing holdings of cash to remove two giant risks to their cash balances: payment risk and counter-party risk by using a commodity currency without fractional reserve banking.

Anyway, I already wrote a persuasive article (not even sure if I even convince myself) that the FRN$ Is In Hyperinflation. It ties in directly with this article about Dr. North and Mish.