In re: Weimar. It is my understanding that the hyperinflationary period was the result of a deliberate decision on the part of the government, which faced very steep reparation payments after WWI.
Given that the reparations in the Versailles Treaty were a fixed amount in marks, by destroying the value of the mark, the Weimar government could clear its war debt and allow the country to start afresh. It was a backdoor method of meeting the letter of the treaty, while subverting its intent.
I don't think this decision to hyperinflate was taken immediately, but only after it became clear how crippling the debt would be. This may account for the period of a strengthening mark in 1920-1921.
― Aimless, Wednesday, 12 November 2008 18:27 (fifteen years ago) link
some big heads could roll at ubs http://www.nytimes.com/2008/11/13/business/worldbusiness/13ubs.html
― SNAKES! (ice crӕm), Wednesday, 12 November 2008 20:35 (fifteen years ago) link
i mean like roll into jail
rollin rollin rollin
― Because it's a snow machine (deej), Wednesday, 12 November 2008 20:38 (fifteen years ago) link
I'm trying to square how a deflationary episode can occur at the same time as the base money supply continues to increase. Obviously credit is massively contracted at this time, and it is credit that acts as kind of multiplier of the base - meaning the inflationary aspects would always be delayed? Curious if anything similar happened pre-Weimar hyperinflation.
As for the UK I think it is much less likely - part of the deflationary scenario for the US is current comparative dollar strength and flight to 'safety'. Sterling does not possess this and if they continue down the current path the BOE may have to sharply reverse direction (again) to protect the currency to prevent a Krona like episode next year
― Kondratieff, Wednesday, 12 November 2008 22:25 (fifteen years ago) link
I have nothing to add but I read this thread religiously and would like to bump it up to the top
― Maria :D, Thursday, 13 November 2008 03:48 (fifteen years ago) link
I'm trying to square how a deflationary episode can occur at the same time as the base money supply continues to increase. Obviously credit is massively contracted at this time, and it is credit that acts as kind of multiplier of the base - meaning the inflationary aspects would always be delayed?
Because fiscal and monetary expansion aren't 'working', people aren't spending so prices are falling coupled with imported deflation due to commodity price falls.
― Ed, Thursday, 13 November 2008 06:23 (fifteen years ago) link
So wait, what's the new bailout thing? I only caught a brief bit on the news today. After they said the Dow was down 400 again, that car companies wanted money now, and then I swear to god someone said oil companies also. It was the NPR news hour..
― Adam Bruneau, Thursday, 13 November 2008 07:52 (fifteen years ago) link
Steve Forbes says "The worst of it is over" and "Emotions are your enemy"
― Fat Penne (Ned Trifle II), Thursday, 13 November 2008 10:34 (fifteen years ago) link
Or and any problems are nothing to do with him...
― Fat Penne (Ned Trifle II), Thursday, 13 November 2008 10:35 (fifteen years ago) link
He should be ok though, wiki says Forbes himself is quite wealthy, with a net worth upwards of $430 million.
"Quite".
― Fat Penne (Ned Trifle II), Thursday, 13 November 2008 10:37 (fifteen years ago) link
where does this break down as an analogy for naked short selling? okay: hey you hapless rube, how ya doin der der der how's the wife? hey! buy a georgia peach off of me. no, it's not ripe yet but eventually it will become near perfect in its propitious ripeness, athough of course its impossible to say when precisely the fleeting moment of optimal ripeness will occur. but when you think its getting there, you can have it to sell to the next person (the fool nudge nudge). but hey pay for it now while people aren't in a peach state of mind, friend, and whenever you decide you want it, i will personally go pick it and deliver it to you on a bed of cooled banyon leaves. except what you don't know is that i have limited knowledge about the unique challenges of finding and quickly picking this fruit when the time comes. also i live in Hartford, and do not personally know the peachfarmer, who haha LOL isn't expecting me. also, Georgia might secede from the union and burn all their trees for heat. but whatevs, this is 7000th peach i've placed an order for today because i'm motherfucking SHINTAR LORD OF THE FUTURE. what you don't know is that if all goes according to plan, these peaches will actually depreciate in value at which point i will swoop in like the harbinger of death's sweet respite to buy back your "peach" at 1/2 price and you'll never know that there wasn't ever any actual peach first or last. so i'll put you down for ten peaches then k thx bye click *unloads shotgun round into foot*
― negotiable, Thursday, 13 November 2008 13:03 (fifteen years ago) link
I can't wait until this fucking massive failure is declared all Bush's fault.
http://www.washingtonpost.com/wp-dyn/content/article/2008/11/12/AR2008111202846.html?hpid=topnews
Good luck, Barry.
― Dandy Don Weiner, Thursday, 13 November 2008 16:58 (fifteen years ago) link
I propose E PLURIBUS UNUM be replaced on our currency w/ FUCK DEFICITS
― Dr Morbius, Thursday, 13 November 2008 17:04 (fifteen years ago) link
According to the one McCain supporter I know, it's the democrats in congress's fault. I bet by the time Obama is in office they will be personally blaming him.
― Adam Bruneau, Thursday, 13 November 2008 17:43 (fifteen years ago) link
Bush on TV defending capitalism at the moment...
― Pete Scholtes, Thursday, 13 November 2008 19:17 (fifteen years ago) link
Capitalist at work:
http://www.secondtimearoundminifarm.com/images/shearing3.jpg
― Aimless, Thursday, 13 November 2008 19:22 (fifteen years ago) link
citigroup trading under 8 bucks??
― Because it's a snow machine (deej), Thursday, 13 November 2008 19:41 (fifteen years ago) link
http://www.forbes.com/opinions/2008/11/12/recession-global-economy-oped-cx_nr_1113roubini.html
uh, well, damn.
― Kerm, Thursday, 13 November 2008 22:39 (fifteen years ago) link
http://www.suntimes.com/news/politics/1275442,CEO-daley-layoffs-chicago-economy-budget-111208.article
― sofa king (deej), Thursday, 13 November 2008 22:42 (fifteen years ago) link
that roubini photo makes him look like some kind of kgb interrogator.
― circles, Thursday, 13 November 2008 23:13 (fifteen years ago) link
"your capitalist system, it is doomed"
― circles, Thursday, 13 November 2008 23:14 (fifteen years ago) link
Roubini: "Deflation also implies a debt deflation where the real value of nominal debts is rising, thus increasing the real burden of such debts."
Deflation would be bad, bad news. I say this, even though I would be a nominal 'winner' in a deflation scenario. I say this, even though I am certain that a policy of infinite economic growth will eventually kill the planet and deflation would first shrink the economy and then slow down growth to a crawl for as long as it prevails.
The problem with deflation is that is stifles innovation and promotes economic stagnation at a time when dynamism and innovaton are needed very much. It punishes the young and will give more power to the old and the ossified (like me) who hold assets.
― Aimless, Friday, 14 November 2008 01:45 (fifteen years ago) link
Thats only kind of true. It is inflation - a flat tax wealth transfer - that punishes the young and rewards asset holders. Deflation punishes the leveraged (most middle class asset holders) and rewards...well, anyone that manages to stay in employment. Depends whether you are a true asset holder or are leveraged to the hilt for it
My feeling is that this is not a true deflationary episode - well thats not entirely true, the dollars reserve currency means that for the US anything is possible and could make a deflationary episode in a debtor nation an option (however for the UK, Ireland, Austria and the others I would be much more suspicious about expecting deflation)
― Kondratieff, Friday, 14 November 2008 06:36 (fifteen years ago) link
BTW anyone here Canadian? How are things bearing up there? I read that comparatively Canada steered clear of the worst excesses of Europe, Australia and the US? Any truth in this?
― Kondratieff, Friday, 14 November 2008 06:39 (fifteen years ago) link
canadians avoiding excess? gtfo!
― velko, Friday, 14 November 2008 06:41 (fifteen years ago) link
http://www.mercuras.com/1008/bailout_economic_crisis_336x280.jpg
― velko, Friday, 14 November 2008 07:34 (fifteen years ago) link
We are going to get deflation because we will import it. however take a look at this logic: Government lets loose monetary and fiscal policy, people end up with more money, rather than spend they pay down large accrued debts, either on shore or to foreign creditors, then surely the money supply decreases and you get deflation. Your fiscal stimulus has allowed people to destroy money or at least destroy it as fast as it is created, which is surely deflationary. The credit crunch has forced a repayment situation on the economy so money supply is contracting so deflation is a possible result.
― Ed, Friday, 14 November 2008 11:02 (fifteen years ago) link
Fancy a pint this evening?
― Ed, Friday, 14 November 2008 11:03 (fifteen years ago) link
http://research.stlouisfed.org/fred2/data/BASENS_Max_630_378.png
This shows base money supply increasing even as deflation occurs (for the US). Haven't seen stats for UK
But the UK is not comparable to the US, the global flight to 'safety' is the flight to the dollar (however temporary this may prove - different question). There is no flight to sterling, but precisely the opposite. The UK is surely closer to Iceland than it is to the US
pay down large accrued debts, either on shore or to foreign creditors
And heres the rub. And why sterling is suffering. No one wants it
― Kondratieff, Friday, 14 November 2008 11:58 (fifteen years ago) link
The UK is surely closer to Iceland than it is to the US
A topic of conversation on the Today programme today about how close to Iceland the UK and Switzerland are.
― Ed, Friday, 14 November 2008 11:59 (fifteen years ago) link
and Austria and Ireland i presume
― Kondratieff, Friday, 14 November 2008 12:01 (fifteen years ago) link
probably.
― Ed, Friday, 14 November 2008 12:02 (fifteen years ago) link
So how does deflation occur if there is capital flight and a potential run on the currency. The US is acting as temporary high ground for many countries. The UK is not
― Kondratieff, Friday, 14 November 2008 12:05 (fifteen years ago) link
I think because a lot of the capital was use as collateral to raise debt so although capital may be leaving the leveraged positions are being wound up leading to deflation. I'm not necessarily suggesting that the UK gets Japan style deflation just a deflationary episode.
― Ed, Friday, 14 November 2008 12:10 (fifteen years ago) link
Does Iceland face deflation? Deflation is surely marked by a strengthening currency yet GBP is heading towards halving in value against the yen (and is falling against most everything else). Not a good look for a country reliant on imports
― Kondratieff, Friday, 14 November 2008 12:17 (fifteen years ago) link
Is it inflation if people aren't buying?
― Ed, Friday, 14 November 2008 12:18 (fifteen years ago) link
I believe there is falling consumption in Iceland. And price rises are a symptom not a cause (what is interesting is whether some of the hit taken by increasing import prices will be counterbalanced by decreasing commercial rent payments)
― Kondratieff, Friday, 14 November 2008 12:53 (fifteen years ago) link
Back to the US - what do you make of this graph?
― Kondratieff, Friday, 14 November 2008 13:03 (fifteen years ago) link
How about if you look at it like this
http://bigpicture.typepad.com/comments/images/2008/10/23/adjusted_monetary_base.png
― Ed, Friday, 14 November 2008 14:08 (fifteen years ago) link
Is there anything to say that this won't sawtooth like in 1999 as the amount credit in the economy declines?
― Ed, Friday, 14 November 2008 14:21 (fifteen years ago) link
That graph shows continued expansion with the only (shortlived) dip coming exactly one year after a 15% expansion...not really sure how that graph is different to the stlouisfed one. As the periods of these graphs are not deflationary they are as I would expect to see them. But now the US is in a deflationary period (which I accept as far as the US goes!) but monetary expansion has shot up. Curios on opinions as to what this means (not now - where there is no multiplier) - but 6,12,24 months down the line
― Kondratieff, Friday, 14 November 2008 14:23 (fifteen years ago) link
is inflation - a flat tax wealth transfer - that punishes the young and rewards asset holders.
This is just nonsense.
Inflation erodes savings and debt. Deflation increases savings and debt.
How on earth does the value of savings declining reward asset holders?
― Jamie T Smith, Friday, 14 November 2008 14:39 (fifteen years ago) link
And nobody is in a deflationary period yet. They are in a disinflationary period. Lets try and get things straight.
― Jamie T Smith, Friday, 14 November 2008 14:40 (fifteen years ago) link
Thats not entirely true. It also depends on the form of inflation. Only wage inflation erodes debt. Price inflation does not (a larger proportion of income going towards living costs doesn't help erode any debts taken on)
The rising cost of goods such as bread, gas or milk is a flat tax, the poor are disproportionately affected relative to income
As you suggest, inflation erodes the debt that asset holders took out. Those that follow face higher levels of debt to pay for the same asset.
Any decline in value of savings relative to assets benefits those that converted savings to assets early
― Kondratieff, Friday, 14 November 2008 14:51 (fifteen years ago) link
Also, re sterling. The estimate purchasing power parity exchange rate would be about $1.50 to the pound (sorry, no source), so we are finally where we should be. It was our relatively high interest rates keeping it artificially high before. Of course, we could fall a lot further, but a positive development so far, as we are also an exporting country, and it is probably a good thing if Chinese toy robots get more expensive and whisky gets cheaper for Chinese toy-robot-factory executives.
Sorry, I know the UK has its own shitbin thread. I should be using that.
― Jamie T Smith, Friday, 14 November 2008 14:55 (fifteen years ago) link
Of course it has been the asset price inflation of the last 25 years that benefits asset holders (rather than the next 10). But like any other price inflation its a symptom not a cause.
― Kondratieff, Friday, 14 November 2008 14:57 (fifteen years ago) link
You do know that ANY wage inflation erodes debt? It doesn't have to be above rate of inflation. (I know your quirky views on real wage inflation.)
I take your point re price rises on staples disproportionately affecting the poor.
― Jamie T Smith, Friday, 14 November 2008 15:00 (fifteen years ago) link
Agreed re: Sterling being highly overpriced over the last 5 years.
UK does not produce or save enough. A debtor country without sufficient productive or export capacity
― Kondratieff, Friday, 14 November 2008 15:01 (fifteen years ago) link
If my incomings rise 10% and my costs rise 25% my ability to service my debt is diminished. The proportion of my wage needed to pay my debts has increased
― Kondratieff, Friday, 14 November 2008 15:02 (fifteen years ago) link