Monday, July 14, 2014
The Danger of Digital Hyper Inflation
The Danger of Digital Hyper Inflation The Banking System is One of the Most Computerized Digital Virtual Worlds in Real Life. when Government Creates Trillion Dollar Programs in Rapid Succession Watch Out.(further and later research after this article was written found that digital information services like the internet will make it possible to counteract hyper inflation by allowing prices to be reset by the 1/10 of a second or less to inflated prices so then the only problem is how the government puts that currency in circulation and again computers with digital technology can match supply and demand as inflation surges better than at any previous economic history.) Lex Loeb Contributor Network . The solution to the credit crisis is once again proving to be easy money. It is the same solution that caused most of the bubble troubles in most of world history. Computers now print most of the money without even using paper. The banking world is now one of the most developed virtual worlds on earth that in many respects sometimes corresponds to what we see happening in real life business affairs. The whole detachment of derivatives in the credit swap default market and in the sub prime mortgage markets was very much a a virtual computer world that lost its connection to the real world it was supposed to represent as the mirror image accounting for that real world of business. We all know what happened or we think we do since those who created these derivatives on derivatives and the markets they trade on seem completely at a loss to explain what a lot of that paper represents. Fraud on a massive scale may still be a possibility. Remember everyone says the time for pointing fingers and assessing blame is not now but later after the statute of limitations runs out. This attitude is very suspicious. Now some of the same companies that were over leveraged at the time of the crash and panics are leading the new bull run foreword. They already have the inside track having seemed to have influenced the secretary of the treasury. The reason we know this is that the words "public-private partnership" is being used to explain how private capital is going to get some advantage in the bad bank assets laundering process that will cost the US taxpayers at least a trillion dollars if not twice that or more. When government officials come out with a trillion dollar price tag for something it could just be a low estimate to get the new enabling legislation though the door. Later on the bad news comes and it gets doubled or tripled. This bad bank loan and money laundering process is actually likely to work because it will free up capital at a very low historic interest rate. Many Americans cannot wait to get access to that low interest cash. It is not that they really know what to do with it but that the fear of inflation and the creation of the expectation of coming double digit inflation means borrow everything you can as fast as you can , play the musical chairs game, get out before the bubble pops and wait for the next bust to get the next special interest rate deal. This is exactly what Alan Greenspan facilitated the last time. Greenspan says much of the easy credit was pumped out into the economy to help stabilize eastern Europe after the fall of the soviet union. A good deal of it probably also benefited Russia in it's previous default mode. This time things are different. This time the country already has a deep underlying pit of debt and the current debt situation is about a year's G.D.P. and still growing. With more programs by the administration and the congress promised including energy redevelopment and nationalize health care there is a great probability that it maybe twice the G.D.P or more that gets sucked into the engines of government. The projections of a 20 trillion dollar a year economy could be a 10 trillion dollar or more addition to the national debt each year with 100% taxation of the gross national product. Inflation will be compounding at a very fast rate if foreign countries do not absorb the excess dollars as fast as they did the last time around. Digital hyper inflation is possible. Government is already in the bad habit of spending money it has to create out of thin air to keep up with it's demands for goods and services. The dollar's fall against foreign currencies is not a good sign. Not after we just watched a number of countries working to help cause the value of the US dollar to rise in relationship to their own. That means trouble. If the dollar goes into rapid free fall then expect inflation to quickly kick in. It will once again cause the cost of oil and gasoline to skyrocket because international markets consume these products as even our own oil companies are happy to receive more highly valued foreign currencies in lieu of less valuable US dollars. Government is already proving to be unreliable. The nonsense that foreigners like the Chinese might sell their US government bonds is a misunderstanding. The can depress the value of the bonds selling them but that causes the interest rate the treasury pays to go up for the buyers. It actually makes more sense for the US treasury to offer the Chinese and others a premium to buy up their bonds and flood the world with cash in us dollars that has to be spent ultimately buying us product or more treasury bonds. That is a form of stimulus that is understood by the treasury and federal reserve but not offered to the Chinese and Japanese as it should be. The evidence from the Japanese experience holding these bonds long term is that it did Japan and the Japanese consumers no good at all holding them. It also did US citizens who may have been unemployed no good too. The government treasury game is not readily understood by many people save the more successful financiers. Those bonds getting cashed out represent money supply that already was in the system and exists there like water behind a dam with energy potential to recharge the economy. These are not inflation burdensome dollars necessarily because they already exist in the virtual banking world. This is not true of money created by a government in crisis. The federal reserve did announce it would buy back a trillion dollars of treasuries which was the same thing. It does not mater if the people who get cashed out want to buy more treasury bonds with the proceeds or not. Not sure where the myth comes from that government holders of US treasury notes are endangering the economy cashing them out because it has the same effect and maybe better than the fed reserve chief causing the same thing to happen on domestic holdings. The danger of digital hyper inflation is real because government has gotten into the habit of just supplying itself with money for all of it's needs. Taxation is a mystery thus since a good inflationary money printing program has the same effect with flat tax appeal. If the government finds it self compounding a double digit inflation rate it and goes to something like 30 percent compounded per month, the average home in the USA will be selling at over a billion dollars in a few years. It is so easy now for the government to use the virtual banking computer system to do this. The public might even get used to it. They already have that is why so many people can't wait to get on the 4% easy money to lend band wagon as soon as the government opens the flood gates. In hyper inflation the only way to survive and thrive is to borrow money like crazy and to buy hard assets including real estate that can be repriced every single day or every hour of the day to factor in the inflation. The interesting thing is that people who have computers can do well surviving by borrowing as much as possible and having a computer of their own track their real earning power. A huge transfer of wealth from lenders to borrowers instantly occurs in a hyper inflation so eventually the system runs out of lenders and everyone is trying to borrow. That is not exactly sustainable! American citizen voters are beginning to object to the huge trillion dollar transfer account spending proposals and are having Boston style tea parties. Its is possible if government were honest that we could have an annual 20% inflation rate in lieu of taxes. The problem is government wants 120 plus percent of the gross national annual product. There is no end to the good it can do. Everything government does is now considered 'an investment'! .