THIS is M.A.D.

.

M.A.D. = Mutually Assured Destruction

WARGAMES 1983

Deflation??

"...a debt is a saleable commodity, or chattel; and ...it may be used like money; and produce all the effects of money." --John R. Commons, Legal Foundations of Capitalism, (New Brunswick, NJ: Transaction Publishers 1995), p.246 Originally published in 1924 by The Macmillan Company

But what happens when more than 95% of the money supply is debt -- that is, I.O.U.s of one kind or another?

Hi Jake!

There's monetary deflation and price deflation. They're related. The law of supply and demand applies. The supply of money constantly grows most of the time. The only time it shrinks is when the supply of I.O.U.s shrinks. I.O.U.s such as fiat paper money, megabyte money, the note on the back of Bill's airline sleeve that promised you $10,000 for your Backgammon BR, T-bills, corporate bonds, etc.

As long as the supply of these I.O.U.s doesn't increase (or, rarely, decrease) quickly, nobody cares or notices much. When gold circulates, because of the small amount that can be mined each year, production usually slightly lags the need for more money caused by always increasing trade. Additionally, technological innovation and market competition cause the prices of things to go down. Under those stable money conditions, prices "deflate" slightly despite the slight inflation in money supply. No problem!

The problems happen when the supply of fiat or credit suddenly shrinks or grows a bunch. If the supply balloons, that's hyperinflation, if it shrinks a bunch, that's MONETARY deflation. Both lead to the economy shrinking or "deflating." For the same reason but by different paths. That doesn't happen to any great extent with gold circulating because the supply of gold remains RELATIVELY constant.

Deflation is scarier because it becomes self-feeding. Sellers are forced to drop prices because people have less money. If you have money, though, that's good because supply and demand means the value of the money goes up. After price drops, you can buy more for less. So, what's wrong with that?

The problem is that debt doesn't get smaller. If you owe $100, it doesn't shrink to reflect the fact money is relatively more valuable -- and while the price you get for what you sell goes down, the amount you have to pay for that I.O.U -- or interest on it -- doesn't shrink.  So, for all intents and purposes, during monetary deflation, debt gets relatively larger for those in debt. So I can't pay you so you can't pay Wally so he can't pay Bill and all those IOUs we wrote become instantly worthless -- or at least severely discounted -- because people don't trust them anymore and won't readily accept them in trade or for debt payments -- or they want big discounts -- or a lot more interest to off-set the greater percieved risk of default.  Even banks across the road from each other don't trust each other's I.O.U.s  I saw this happene in Moscow in 1998.  As a result, fewer loan/I.O.U.s are written and circulated. 

That shrinks the defacto money supply and the monetary deflation becomes self-feeding. So the biggest problem is that after deflationary shrinkage, money isn't available to service or roll-over other debt. Like, for example, Greek government debt. Or Uncle's debt. That in itself is bad enough but then Governments get desperate, and unlike the rest of us, if there isn't a gold standard or circulating gold, they run the presses to take care of their debts, special "projects" like wars, etc.

If they get it just right, the bankster-government axis prints up the same amount that's been destroyed by debt deflation. Fat chance. Remember Keynes' Follies, or, Prediction: The Limits of Economic Control Keynes' follies. But, to the extent they create money, it steals from everyone holding money and money demominated I.O.U.s and enables them to transfer that stolen money to their friends, neighbors, campaign contributors -- and their special projects. In the case of the U.S. government-bankster axis, wars for example.

Even if they're well intentioned, they can't return the money to the people -- the part of the existing economy -- who lost it and so that disrupts the whole rest of the economy. It shifts spending from the rest of the economy to the interests receiving the newly created debt-money from the government and Federal Reserve.  Usually, the banks. 

Duck & cover,
Rick

P.S. And, of course, this reverse Robin Hood effect makes the rich richer and the poor poorer. And so you get increasing wealth disparity.

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--"The End Game: 2012 And 2013 Will Usher In The End" - The Scariest Presentation Ever? | ZeroHedge
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--The End Game

C:\USR\WP_DOCS\TROLLEY\TRIBES~1\WK\TE_THEEV.WK |cm: BIG PICTURE: Inflation & deflation *****

IRAN: A Medley Against the MIC (MilitaryIndustrialComplex)

U.S. Defense Sec. Leon Panetta: Are they [Iranians] trying to develop a nuclear weapon? "No." --Panetta Admits Iran is Not Trying to Develop a Nuclear Weapon, CBS's "Face The Nation" Jan. 8, 2012

NOAM CHOMSKY: The Brookings Institute just a few months ago released extensive polls of what Arabs think about Iran. …They show that Arab opinion …”holds that the major threat in the region is Israel, that's 80 percent; the second major threat is the United States, that's 77 percent. Iran is listed as a threat by 10 percent. With regard to nuclear weapons, rather remarkably, a majority, in fact, 57 percent, say that …it would have a positive effect in the region if Iran had nuclear weapons.  --Iran: Parallax view

Notice Iran has no nukes while U.S. has 8,500 and Israel has an estimated 80. Unlike Iran, Israel didn't sign the Nuclear Non-proliferation Treaty and won't allow ANY inspections of it's nuclear facilities.

The Buried Lead on Iran: All Nuclear Sites Routinely Inspected, No Violations  --Antiwar.com

Iran to Allow Nuclear Inspectors Into Secret Military Complex
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Iran has announced it will allow international nuclear inspectors to visit its secret Parchin military complex. Iran has long said its nuclear program is for civilian purposes only, but some international analysts have speculated Iran may be using the Parchin complex to do research relevant to nuclear weapons. It is not clear when inspectors from the International Atomic Energy Agency will visit the site.  --Democracy NOW! HEADLINES, March 06, 2012

Retired Generals Sign Open Letter Opposing War With Iran
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Eight retired U.S. military and intelligence officials have signed an open letter to President Obama urging him to say no to war with Iran. The letter was published as a full-page ad in the Washington Post on Monday. Signatories included Col. Lawrence Wilkerson, who served as chief-of-staff to former Secretary of State Colin Powell, and Paul Pillar, a former CIA national intelligence officer.  --Democracy NOW! HEADLINES, March 06, 2012

U.S.: Iran Unlikely to Start Military Conflict
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A top U.S. intelligence official said Thursday that Iran is unlikely to provoke a military conflict but would respond if attacked. Defense Intelligence Agency Director Lieutenant General Ronald Burgess made the comment in testimony before the Senate Armed Services Committee. --DemocracyNOW! HEADLINES, February 17, 2012

U.S. Intelligence Analysts: No Hard Evidence Iran Is Building Nuclear Bomb
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In a front-page article published on Saturday, the New York Times reports U.S. intelligence analysts continue to believe that there is no hard evidence that Iran has decided to build a nuclear bomb. According to the article, recent assessments by U.S. spy agencies are broadly consistent with a 2007 intelligence finding that concluded Iran had abandoned its nuclear weapons program years earlier. --Democracy NOW! Headlines | Monday, February 27, 2012

Is there a covert war against Iran? --Chris Matthews' Hardball<

WHO'S RUNNING COVERT OPS AGAINST IRAN? --The Race for Iran


So, what's this REALLY all about?

Is Israeli Prime Minister Mr. Netanyahu really this misinformed -- or is he just running a war-scam?

What do YOU think - - - 

Panetta says Israel could strike Iran in spring: report.  --Yahoo

Report: Israel Won’t Warn U.S. Before Striking Iranian Nuclear Sites
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The Associated Press is reporting Israeli officials have privately told the Obama administration they will not warn the United States if they decide to launch a preemptive strike against Iranian nuclear facilities.  ...Both Netanyahu and Obama are scheduled to address a conference organized by AIPAC, the American Israel Public Affairs Committee. The Wall Street Journal is reporting Obama is considering using his AIPAC speech on Sunday to more forcefully outline potential military actions against Iran. ...  --Democracy Now, HEADLINES, Tuesday, February 28, 2012

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P.S. MICC? That's President Eisenhower's "MilitaryIndustrialCongressional Complex."

Your comedian wasn't funny.

After recording the  Peter Schiff vs James Galbraith interview on CNBC 4/26/10 , it seemed appropriate to post the following email to CNBC:

Subject: 4% interest rates for 20 years???? Your comedian wasn't funny.

Hi CNBC!

It doesn't matter whether Prof. Galbraith is right about interest rates remaining at 4% for 20 years (like drawing 10 blackjacks in a row in Vegas. -- OK, 20), it's the "off balance sheet" unfunded liabilities that everyone so glibly dismisses with a single sentence.

The minimum estimates of the cost of those (Social "Security" and Medicare -- before Obamacare) was somewhere around $66 trillion.

The debt clock currently shows them at about $108 trillion.

Health, happiness, & long life,
L. Reichard White

P.S. OK, like drawing 100 blackjacks in a row. And as Prof. Galbraith suggested in a backhanded manner with his "U.S. controls its currency" comment, inflation is the nearly inevitable outcome.

Medicare - - - The BIG Picture

At somewhere between $44 trillion (with a "t") and $85 trillion in unfunded liabilities, the 800 pound animal in the room is Medicare. 

About half the health "care" in the U.S. is delivered by Medicare. It isn't the tail, it's the dog.  And it wags so-called "private" health care like Lash LaRue wags the tip of his bullwhip.

The only way to fix the system is to "reform" Medicare. Mostly by eliminating it.

No, I'm not heartless, see, I just understand that the alternatives to markets aren't just worse, they're deadly.

According to "OUTCOMES RESEARCH," only 20% of the people in US hospitals absolutely belong there.  The other 80% are either receiving scientifically unproven procedures or are being treated for non existent conditions.  --William F. Buckley interview with Dr. Robert E. Weinberg of Dartmouth, Firing Line aired 25 April, 1993 in Las Vegas. (Video tape available. Call 803 799-3449.)

lrw

P.S. Lacking such radical reform, USA Corp will follow the Greek path. In fact, the path of all fiat-currency nations. 

Except it can't happen here of course.