Posted in Finance, History, tagged debt, default, George Soros, Gerald Celente, hyperinflation, max kaiser, monetary system, Nassim Taleb, paul kedrosky, Peter Schiff, ponzi on June 12, 2010|
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Just requoting Paul Kedrosky’s post today:
What people don’t get about sovereign debt is that countries are sharks when it comes to debt and default. That is the real lesson of research and writing and history in this area – that countries have been messing around, defaulting and restructuring in debt markets for hundreds and hundreds of years. Defaults, busted banks and the like is what happens when you lend to countries that have much more experience and cynicism about their use of debt than you think they do.
This blogger through firsthand experience in a commercial bank’s risk and asset division, is witness to the financial wizardry the modern financial system employs to build the mountain of debt on which our capitalist societies exist on. In the news we are also witness to the horrors that mismanagement of debt and currency can create.
Kedrosky is not a lone voice here. We’ve captured the sentiments of others
like Gerald Celente, Max Kaiser, and Peter Schiff all of whom have put up credible arguments about how tentative and fragile a system based on debt is.
Not all who understand the system are speaking up vehemently against it. Our favorite speculator George Soros certainly understands the goings-on but is content to “game” the system for profit (and successfully too).
What this blogger finds interesting is despite all these critiques, the system continues unabated–notwithstanding the ever increasing magnitude of crises that recur. The arguments put forth by the pundits are actually dated–these sentiments have been around for as long as a monetary system has been around. Our favorite skeptical empiricist, Nassim Taleb, blames moral hazards for perpetuating the flawed system, but even the question of moral hazards isn’t new.
After all isn’t rewarding someone for “bad” behaviour the crux and aspiration of prosperity and decadence? The whole system is rigged to feed on itself! So far the common alternatives to the flawed system, barring a return to primitive times, propounded by the pundits range from a form of “modified capitalism” (shades of the Austrian School) to more “radical socialism” (e.g. Zeitgeist, Venus Project).
Which is why it far from surprises this blogger that “experience and cynicism” are the placeholders that Kedrosky chose to describe what underpins the motive of governments regarding debt. There are those who complain and those who game, but the last bucket are those who still choose to participate in the system–maybe in a fit of realism, maybe fatalism.
Meanwhile someone please buzz this blogger when and if we decide to let go of this monetary system and its sydstem of debt.
“Sent from my BlackBerry® wireless handheld”
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In Zimbabwe, where money has been reduced to worthless paper due to hyperinflation, citizens are forced to panning for gold to pay for bread to stave off hunger.
Hyperinflation is an economic phenomenon, the root of which can be complex–but generally blamed on an increase in money supply, which consequently reduces the value of the money in stock. In Zimbabwe, as of 2008, the inflation rate is estimated at 516,000,000,000,000,000,000% (516 quintillion).
The sordid history of how great increases in money supply led to hyperinflation is chronicled in the wiki entry for Hyperinflation In Zimbabwe, which started with the government printing new currency to pay off international debts in 2006.
We previously featured Glenn Beck’s hockey stick presentation of potential US inflation. Are the US and European bailouts simply another Zimbabwe?
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Doing his impression of Al Gore’s Inconvenient Truth, journalist Glenn Beck illustrates the looming danger of hyperinflation due to the ongoing government bailouts:
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Posted in Critical Thinking, Finance, Politics, tagged economy, financial crisis, hyperinflation, Iceland, inflation, U.S., UK on October 22, 2008|
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Iceland is now in the grips of what can only be termed as “hyperinflation”. We talked about Iceland recently in light of the ongoing global financial crisis, and as it turns out the near-full-collapse of Iceland’s financial system is connected to the the turmoil in both the US and the UK. It can be considered a microcosm in fact, which we should all study.
Global Europe Anticipation Bulletin (GEAB) wrote recently:
Studying the case of Iceland can give an idea of the upcoming stages of the crisis. That is what our team has been doing ever since the beginning of 2006. This country indeed provides a good illustration of what the US and the UK should be expecting. It can be considered – and that is what most Icelandic people do today – that the collapse of Iceland’s financial system came from the fact that it was disproportionate to the size of the country’s economy.
The interesting point is how the situation in Iceland can be a good indicator of what lies ahead for the US and UK. GEAB lists the following key points:
- The recent upward trend of the US Dollar is a direct and temporary consequence of the collapse of stock markets
- Thanks to its recent « political baptism », the Euro becomes a credible « safe haven » value and therefore provides a « crisis » alternative to the US dollar
- The US public debt is now swelling uncontrollably
- The ongoing collapse of US real economy prevents from finding an alternative solution to the country’s defaulting
- « Strong inflation or hyper-inflation in the US in 2009? », that is the only question.
Check out more of GEAB’s illuminating write-up here.
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The financial bailout has been disapproved just recently, contrary to what the article which I have included will say. When a better one finally does get approved (assuming any bailout will be approved), it’s best to check out this article for the events which may occur.
ANALYSIS and PREDICTIONS*:
* See financial disclaimer at the end of this article…
1. The financial bailout will be approved
Lawmakers are privately being warned that if they do not pass this bill, the entire global financial system will collapse. Publicly, they only say we “might have a recession,” but behind closed doors, they realize the whole system is at stake. That’s why a bailout bill will ultimately be approved.
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