Gary North Oldie - Inflationary Depression

verfasst von CRASH_GURU, 10.10.2005, 19:10

-->Interessanter Gedanke: Depression geht einher mit verringerter Arbeitsteilung, gleich geringere Produktivität gleich mehr Gold notwendig zum überleben, also doch besser Farm kaufen:

BEST OF GARY NORTH

November 23, 2004

"The Federal Reserve Will Prevent Another Great Depression"


This widely promoted falsehood is based on a definition of"depression" that
misrepresents reality: depressions as always deflationary. People think of
economic depressions in terms of falling prices, bankruptcies, and
foreclosures. This is incorrect. A depression results when the division of
labor shrinks. More specialized jobs disappear.

A depression is marked by high unemployment. People lose their jobs and
cannot afford to buy basic commodities. It is marked by falling real income.
An inflationary crack-up boom has all of these features. In a deflationary
depression, people cannot buy things because they have no money. In an
inflationary depression, people cannot buy things because there is so little
offered for sale. The results are the same in each case: bankruptcies, high
unemployment, and falling real income.

In the German inflation of 1921-23, there was high unemployment. It cost
more in pounds sterling to live in Berlin in 1923 than it cost in London.
That was because people with foreign currencies could not find ready sellers
of most goods. The disruption caused by the inflation had put manufacturers
and middlemen out of business. The division of labor had collapsed. You
could buy a few luxury goods that were being sold by desperate citizens, but
you could not buy basic items of commerce. These had to be imported from
abroad. The supply chain grew ever-more chaotic because the common currency
was no longer trusted. There was no alternative currency in use by all
participants. It was possible to buy items in someone's private inventory,
but not newly manufactured items.

A central bank can sometimes prevent a deflationary depression by creating
fiat money. But when people lose confidence in the national currency, they
seek an alternative means of exchange. This produces confusion: Which
currency unit is the right one? This confusion increases the cost of doing
business. People then must pay more for the things they want. Their real
income falls, i.e., their range of choices falls.

Gold coins can preserve your capital after the inflationary period is
replaced by currency reform. But gold cannot preserve you from losses during
a mass inflation, when supply lines break down because the nation's payments
system has broken down. If you own gold coins to sell, you will not find
many people on the street who recognize gold's value or who know what prices
ought to be in gold. Coin dealers charge high commissions because
information costs rise. There are not many coin dealers. You are better off
with gold coins than with paper money, but like a nation with a treasury
full of gold when a war breaks out, you will find your gold reserves
depleted rapidly. You, like that mythical nation, must replace what you
consume. This means that you must be productive. In a mass inflation, most
people's productivity falls because the division of labor shrinks.

If you spend all your gold coins during the mass inflation, you will not own
capital after the currency reform. Gold's main function in a wise person's
portfolio is to provide capital for reconstruction, not to provide consumer
goods during the mass inflation. This is why people in a mass inflation are
better off with a cache of semi-durable consumer goods, such as stored food,
than they are with a few extra gold coins that they bought instead of food,
when food was cheap.

I have been speaking of mass inflation. We are not facing mass inflation in
the near term. We are instead facing the possible collapse of a series of
bubbles that have been created by the Federal Reserve System's on-and-off
monetary inflation since early 2001, and by the central bank monetary
inflation of Asian countries, which are running huge trade surpluses with
Americans, and whose central bank officials are buying U.S. Treasury debt
with the dollars earned by trade. This has lowered interest rates in the
U.S., thereby producing bubbles in capital markets. What the Nasdaq
experienced in 2000, the Dow can experience next year, and housing has now
begun to experience in some cities, such as Las Vegas: more sellers at
yesterday's prices than buyers...

The economic purpose of capital markets is to provide a nexus between savers
and borrowers for the financing of productive investment. Financial
entrepreneurs, such as venture capitalists, traders, and speculators, are
essential in forecasting the best uses of available savings and bearing the
risk in an uncertain world. But a society cannot prosper by printing
ever-increasing quantities of paper tickets representing claims for real
goods and drawing more of the population into trading these tickets back and
forth among themselves. We cannot all be day traders: someone must produce
the goods that are consumed.

Warburton calls the recent period"an excursion into the realm of financial
fantasy." The fantasy is that central bankers have found a way to inflate
without any negative consequences. While the effects of money supply growth
can be confined to stocks and bonds, inflation is hidden in plain sight. The
adjustment of relative prices between financial assets and consumption goods
cannot be postponed indefinitely. The unwinding will not be easy or
painless. Surely central bank follies now threaten economic disaster.

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gesamter Thread:

• Gary North Oldie - Inflationary Depression - CRASH_GURU, 10.10.2005, 19:10
  • Re: Gary North Oldie - Inflationary Depression - weissgarnix, 11.10.2005, 11:45
    • Inflationary Depression & Gold - politico, 11.10.2005, 16:06