Hyper-Inflation Has Arrived

reply to post by kwakakev


I am not sure what you mean exactly. Can you go deeper in detail with your question?

There really are no "implications". Think about it like this.

Leverage can be a double edged sword. It can benefit you greatly, or you can blow up. Just like the housing market.

For example. You get leverage from a bank when you buy your home, no? You put down $50,000 on a $500,000 hours. You are getting 10 : 1 leverage in this example.

We need leverage in these markets because speculators are providing liquidity for commercial entities. But let's use another example, such as the 30 Year T-Bond.

If you were really thinking ahead, and had a home loan for this length you could perform an arbitrage ( this is a weak example ) of sorts. Lets say you have an adjustable home 30 year mortgage @ 5%. You are thinking that the rate is going to rise. You can sell the contract "ZB" ( 30 Year T-Bond ) with only $5500 in margin to open a position of $100,000.

You guess correctly, rates are rising and the price of ZB goes down. Remember, yields go up - prices go down. Congratulations, you have just made your adjustable rate mortgage into a fixed @ 5%.

A better example of an arbitrage would be selling the 10 year and buying the 30 year / or any combination of such.

Lets take the housing loan for example. In the past the bank use to have the assets to cover the housing loan through the savings of the people. As long as there was enough savings to cover the debts things where fine. As personal savings went down and personal debt went up this banking system failed to work. Leverage was introduced to fix the problem. Now when someone wants a house loan, a 10% deposit is made and the bank makes the other 90%. The bank did not have this 90% before the loan was approved and essentially makes it up from the debt. So is leverage a way to introduce new money into the system?

Originally posted by kwakakev
Lets take the housing loan for example. In the past the bank use to have the assets to cover the housing loan through the savings of the people. As long as there was enough savings to cover the debts things where fine. As personal savings went down and personal debt went up this banking system failed to work. Leverage was introduced to fix the problem. Now when someone wants a house loan, a 10% deposit is made and the bank makes the other 90%. The bank did not have this 90% before the loan was approved and essentially makes it up from the debt. So is leverage a way to introduce new money into the system?

I don't believe you are correct, but there is also a possibility I am wrong. I am pretty sure that the definition of fractional reserve banking is such that they (the bank) never had to have reserves equal to the outstanding amount of the loan.

Do you think the bank would ever be able to finance anyone if this was the case?

Regardless, what this all boils down to is lax regulation from congress. They of course will point the finger to the banks (not sure why..). Probably because they need to be re-elected I am assuming though. Never their fault . That is also why I am a big believer in leaving the Fed independent of congress, IMO that would be a catastrophe.

reply to post by Dance4Life

Do you think the bank would ever be able to finance anyone if this was the case?

The economic system was different before WW2 based on assets instead of debt, finance was still available but there was a demand for more finance and a few other things going on. This was when the Fed was first introduced around the great depression. Now when it comes to the Fed, the problem I see is with the generation of money, how it enters the system and the repercussions. The Fed makes some new money or bonds and passes it onto a bank. The bank adds its cut and passes it onto the government. The government now has to pay interest to the bank and Fed to use the new money that enters the system. This is getting to the point where the government is having difficulty just meeting the interest payments. The management of money has generally been a government responsibility. It is now the responsibility of a private corporation with any government over site meet with great resistance. Billions of dollars is getting siphoned off with what should be originally owned by the government, that is the introduction of new money.

I agree that politicians should not be able to touch the sensitive levers of the economy, but they should have clear over site and general accountability. The US government is in a no win situation with the current financial structure with a few private interests making heaps. I recommend to replace the Federal Reserve with a Beuro of Economy. The economy is an issue of national security and it is in serious trouble.

With all the current finger pointing going on I would like to send in the army, DHS, FBI and other alphabet organisations and clean up the mess. I know this is a bit extreme but other methods are failing to get to the causes and problems. Lies, deception, corruption, double books and a lot of other difficulties are finding it hard to nail down the problems, when you follow the money the rich people have it and there is a lot of pressure and resources getting applied for them to keep it. The latest example of how the government found the credit rating agency was not to blame for these bad investments getting good credit ratings just shows how messy things are.

reply to post by kwakakev

And that is where inflation comes in to secure a fair trade among the increasing amounts of money. Security does break down when too much money enters the market suddenly as peoples expectation and access to money is outstripped by its supply.

You missed the basic point.

WHERE does the VALUE of the "new money" come from? WHO gets the benefit of that "New Money" In other words who get the value of that "new money" and WHO gave it value.

New money does not appear magically in equal percentages in all people's bank accounts or under their mattresses. Money spreads unevenly, and this process has varying effects on individuals, depending on whether they receive early or late access to the new money.

It is these losses of the groups that are the last to be reached by the variation in the value of money which ultimately constitute the source of the profits made by the mine owners and the groups most closely connected with them. Mises on Money: www.lewrockwell.com...

In other words there is absolutely no difference in a thief counterfeiting new money, the banks counterfeiting new money or the government counterfeiting new money. The VALUE of that money is stolen from the ordinary people and put into the pockets of the thieves and fraudsters who had first use of the "new money"

Creating fiat new money is theft no matter who does it. The only reason people do not recognize it as theft is because 80% of the population are victims while 20% of the population are thieves, and the thieves, who are those in power aren't talking and have no wish to end the system lining their pockets with YOUR WEALTH.

"The few who could understand the system will either be so interested in its profits, or so dependent on its favours, that there will be no opposition from that class, while on the other hand, the great body of the people, mentally incapable of comprehending the tremendous advantage that capital derives from the system, will bear its burdens without complaint, and perhaps without even suspecting that the system is inimical to their interests." John Sherman's quote about Rothschild

Let's see...it's been about a week since this thread started. We can discuss hypotheticals and academics and economic theory....lots of smart folks here...I applaud you, but the hard reality is this:

At the farm supply store I help manage, all of our gates and fencing just went up...again... a 47" x 330 ft roll of field fence went from 149.99 to 159.99.

Our hardware, tack, anything with steel and rubber...all went up...faster than we can stock the shelves.

We use scanners to find the price and location of items...as we stock, we noticed that the prices are all higher than the shelf tags... frankly, our cashier that also does price changes can't keep up... we're getting more price changes everyday...and they are all up.

Many of my customers are talking of herd reduction or completely selling off their herds of beef cattle, goats, or horses. Others are talking, like me, of growing most of their own feed to cut costs.

On craigslist, it is taking longer and longer for folks to sell horses and livestock... seems we keep seeing repeat posts for animals...or even tractors and equipment.

All across our region, sales are down...prices are up..and all of my customers are pinching pennies.

Even the "hoidy toidy" horse folks whose horse manure don't stink are switching to budget brand feeds.

On the other hand, we have many new customers raising animals and gardens like never before. We will be selling chicks soon and the inquiries already outweigh last year... it's kinda fun sharing tips on how to build a good chicken coop or a chicken tractor...or that you don't need a rooster to get eggs and such...

Anyway, I know all of this is anecdotal...but it is as real as it gets outside of the class room....

Oh, by the way...last I checked maccaroni was $1.19 a lb....off sale....sale price was .89 a lb. If you notice, most sales on groceries are soft drinks...4/$5 or pork n beans...3/$2.50....I gues they think we can't do the math and see how food is steadily climbing.

We all might want to review some of the survival threads on raising food and growing gardens...lol

reply to post by AlreadyGone

We all might want to review some of the survival threads on raising food and growing gardens

Good call, your post show hyperinflation is happening out in the community. At least your resources keep you better positioned to overcome the worst of it. Heads up and good luck.

reply to post by crimvelvet

WHERE does the VALUE of the "new money" come from? WHO gets the benefit of that "New Money" In other words who get the value of that "new money" and WHO gave it value.

The value of new money comes from the community. Who is the Fed. The benefit is those behind and linked into the fed. The introduction of new money only shifts the balance of worth from those who already have worked for their money to those who produce it. There is only so much social worth at any one time, a production of more paper bills does not change this, it only changes how much the paper bills are worth.

reply to post by kwakakev


The problem is they do not have accountability ( congress ). Also, would you really seriously want some of these goofs running anything other than their little state's scam? Seriously?

I am not sure how it all went down before WW2 - not a real history buff. Really not interested in Economics either to tell you the truth, although earlier in my career was inundated with a lot of this.

In the end, I don't think there is a perfect financial system. I do really believe though we have something workable currently, and it is better than any other available option that is realistically implementable in the year 2011.

reply to post by Dance4Life

Really not interested in Economics either to tell you the truth,

I can understand this position, you have to look after yourself and this is this the game you have been presented with. It is complex with many competing forces going on. I am just calling it as I see it with the history I know. There are a lot of issues going on and I do care about the national interest. A lot of people in the position to make a difference do care about their position. Maybe my comments here make a difference, maybe they do not. Here on ATS is the best platform available to at least try. May the best ideas win over the strongest interest at the end of the day.

reply to post by kwakakev

The value of new money comes from the community. Who is the Fed. The benefit is those behind and linked into the fed. The introduction of new money only shifts the balance of worth from those who already have worked for their money to those who produce it. There is only so much social worth at any one time, a production of more paper bills does not change this, it only changes how much the paper bills are worth.

Let me try again. You seem to be confusing worthless fiat money with wealth (the results of your labor)

I am a farmer. I raise my animals and sell the wool and meat in return I get fiat currency. In other words I traded real wealth, the results of my production for $$$. Therefore in an honest system those dollars represent something of value.

Now lets look at the Central Banker.

Some of the most frank evidence on banking practices was given by Graham F. Towers, Governor of the Central Bank of Canada (from 1934 to 1955), before the Canadian Government's Committee on Banking and Commerce, in 1939....

Q. But there is no question about it that banks create the medium of exchange?

Mr. Towers: That is right. That is what they are for... That is the Banking business, just in the same way that a steel plant makes steel. (p. 287)

The manufacturing process consists of making a pen-and-ink or typewriter entry on a card in a book. That is all. (pp. 76 and 238)

Each and every time a bank makes a loan (or purchases securities), new bank credit is created — new deposits — brand new money. (pp. 113 and 238)

Broadly speaking, all new money comes out of a Bank in the form of loans.

As loans are debts, then under the present system all money is debt. (p. 459)

Q. When $1,000,000 worth of bonds is presented (by the government) to the bank, a million dollars of new money or the equivalent is created?

Mr. Towers: Yes.

Q. Is it a fact that a million dollars of new money is created?

Mr. Towers: That is right.

Banks typically have 3% of their assets in cash in order to meet customer needs. Since 1960, banks have been allowed to use this “vault cash” to satisfy their reserve requirements. US banks operate without Reserve

I honestly can no figure out how you can consider "making a pen-and-ink or typewriter entry on a card in a book" that produces a 10 million dollar loan out of thin air as a moral way of making money. The money did not exist and then suddenly the banker waves his magic wand and hands you a contract that states you must pay him 10 million dollars and interest from your WEALTH that is your labor.

reply to post by crimvelvet

Let me try again. You seem to be confusing worthless fiat money with wealth (the results of your labor)

Money is use as a transaction of wealth, be that assets, labour, goods or services. There is only so much wealth in the nation at any one time. Fiat money losses its value as more is introduced into the system to cover the fixed wealth of the nation. As nations grow more money (fiat or otherwise) is needed to cover all the transactions of trade. As nations shrink less money is needed to cover these trades.

I honestly can no figure out how you can consider "making a pen-and-ink or typewriter entry on a card in a book" that produces a 10 million dollar loan out of thin air as a moral way of making money.

We are on the same page here. The quote of mine you presented was my representation of how the system currently is. As a nation grows and more money is needed it has to be introduced some way. A Bureau is a body that has its management accountable to the government, yet operates independently based on its own science and investigation. If you have a better recommendation for how the economy should be managed I would like to hear it.

Originally posted by Dance4Life

Originally posted by kwakakev
Lets take the housing loan for example. In the past the bank use to have the assets to cover the housing loan through the savings of the people. As long as there was enough savings to cover the debts things where fine. As personal savings went down and personal debt went up this banking system failed to work. Leverage was introduced to fix the problem. Now when someone wants a house loan, a 10% deposit is made and the bank makes the other 90%. The bank did not have this 90% before the loan was approved and essentially makes it up from the debt. So is leverage a way to introduce new money into the system?

I don't believe you are correct, but there is also a possibility I am wrong. I am pretty sure that the definition of fractional reserve banking is such that they (the bank) never had to have reserves equal to the outstanding amount of the loan.

Do you think the bank would ever be able to finance anyone if this was the case?

Regardless, what this all boils down to is lax regulation from congress. They of course will point the finger to the banks (not sure why..). Probably because they need to be re-elected I am assuming though. Never their fault

. That is also why I am a big believer in leaving the Fed independent of congress, IMO that would be a catastrophe.

100% reserve banking is quite simple.

You put your money into a time deposit account, the bank lends it out and gives you a share of the interest return.

If you want to keep your capital liquid, you don't put it into a time deposit account, you put it into a checking account, in which case you don't get interest payments and have to pay a small administrative fee for the holding of your capital.

Of course banks would continue to lend in a 100% reserve system, they have every motivation to do so considering they can make money off of the interest charged.