The 'Crack up Boom' approaches.

smeagold

This first stage of the inflationary process may last for many years. While it lasts, the prices of many goods and services are not yet adjusted to the altered money relation. There are still people in the country who have not yet become aware of the fact that they are confronted with a price revolution which will finally result in a considerable rise of all prices, although the extent of this rise will not be the same in the various commodities and services. These people still believe that prices one day will drop. Waiting for this day, they restrict their purchases and concomitantly increase their cash holdings. As long as such ideas are still held by public opinion, it is not yet too late for the government to abandon its inflationary policy.

But then, finally, the masses wake up. They become suddenly aware of the fact that inflation is a deliberate policy and will go on endlessly. A breakdown occurs. The crack-up boom appears. Everybody is anxious to swap his money against ‘real’ goods, no matter whether he needs them or not, no matter how much money he has to pay for them. Within a very short time, within a few weeks or even days, the things which were used as money are no longer used as media of exchange. They become scrap paper. Nobody wants to give away anything against them.

It was this that happened with the Continental currency in America in 1781, with the French mandats territoriaux in 1796, and with the German mark in 1923. It will happen again whenever the same conditions appear. If a thing has to be used as a medium of exchange, public opinion must not believe that the quantity of this thing will increase beyond all bounds. Inflation is a policy that cannot last.

http://crackupboom.net/2009/03/what-is-a-crack-up-boom/

More QE anyone?

reweird

Hardly. That article is 2.5 years old. Nice try at scaremongering though.

smeagold

reweird wrote: »

Hardly. That article is 2.5 years old. Nice try at scaremongering though.

Austrian economic theory goes back over 100 years.

"There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.", Ludwig Von Mises

Perhaps you should try and read and understand the diff between keynesianism and the austrian school then maybe you just might have some idea of what is happening to the global economic system (you know those nasty headlines on the beeb about economic collapse and 'the worst crisis since 1930s if not ever'-merv) Then again X factors on tonite no?

HAMISH_MCTAVISH

smeagold wrote: »

Austrian economic theory goes back over 100 years.

Austrian economic theory.

Wrong for over 100 years.:cool:

smeagold

HAMISH_MCTAVISH wrote: »

Austrian economic theory.

Wrong for over 100 years.:cool:

I'd be surprised Hamish of you even know what it is. It's being proved right, right now, right infront of your eyes but you can't see it. Just like when you called the gold crash, the 'end of the bubble' back in Jan when gold was at $1300. You said it would crash. I said that was the bottom. What happened? gold went up $600 in 8 months.You don't understand the dynamics and thats why you get it wrong. You don't know what austrian economics is so how can you call something wrong that you don't understand?

BTW Now would be a good time to buy too, gold will go up another $600 in the next 6 months. You gonna call the end of the bubble again and make it 2 out of 2? The lows in gold are in the $1500s no lower. We may retest but within a month gold will sky rocket again. $2200 within 6 months.

reweird

Nah, you're just a gold ramper.

Generali

HAMISH_MCTAVISH wrote: »

Austrian economic theory.

Wrong for over 100 years.:cool:

Tell that to the Germans, Hungarians (twice), Zimbabweans, Brazilians, Argentinians, Chinese, Belarusians, Greeks, Mexicans, Poles (twice), Ukrainians and US Confederate states among others.

Where the Austrians are wrong IMHO is seeing a panacea in a Gold or Silver Standard. Neither were particularly successful either in stopping speculative bubbles or as a stable monetary system. The current system of fiat money in the UK has lasted almost as long as the Gold Standard did (79 years and counting for fiat money, 93 years for the Gold Standard). The Silver Standard was an utter disaster for the UK. Prices of Gold and Silver should no more be fixed than prices for anything else.

Bullfighter

Generali wrote: »

Tell that to the Germans, Hungarians (twice), Zimbabweans, Brazilians, Argentinians, Chinese, Belarusians, Greeks, Mexicans, Poles (twice), Ukrainians and US Confederate states among others.

Where the Austrians are wrong IMHO is seeing a panacea in a Gold or Silver Standard. Neither were particularly successful either in stopping speculative bubbles or as a stable monetary system. The current system of fiat money in the UK has lasted almost as long as the Gold Standard did (79 years and counting for fiat money, 93 years for the Gold Standard). The Silver Standard was an utter disaster for the UK. Prices of Gold and Silver should no more be fixed than prices for anything else.

Fundamentally the economic system is diverging from the theoretical models of both Keynes and Mises.

Why? Both are predicated on growth. Keynes requires growth to build balance sheets during the good times and Mises assumes growth as the prime mover of business.

Growth isn't going to be the paradigm of the 21st century. Mark my words. Any assessment of our global situation, whether it is based on Galbraith or Peter Schiff is fundamentally flawed if it is based on exponential growth.

A gold standard would have avoided the worst excesses of the multi-decade credit boom, however I agree that it isn't a panacea.

Deflation, then depression.

Generali

Bullfighter wrote: »

Fundamentally the economic system is diverging from the theoretical models of both Keynes and Mises.

Why? Both are predicated on growth. Keynes requires growth to build balance sheets during the good times and Mises assumes growth as the prime mover of business.

Growth isn't going to be the paradigm of the 21st century. Mark my words. Any assessment of our global situation, whether it is based on Galbraith or Peter Schiff is fundamentally flawed if it is based on exponential growth.

A gold standard would have avoided the worst excesses of the multi-decade credit boom, however I agree that it isn't a panacea.

Deflation, then depression.

I agree that this time it's different but it's also differently different.

Rich people (income of say $15k+ a year) are likely to start living a lot longer and so will have to work a lot later in life. I would be surprised if my kids die before the age of 100 unless they smoke or drink to excess or die in an accident.

The Digital Revolution means that exponential growth is possible for a lot longer as consumption no longer necessarily means consuming anything much physical.

I bought an app at the weekend. It cost me about 60 seconds of work to finance and perhaps 2-3 coulombs of charge to transmit to me. 25 years ago a similar quality computer game would have taken me an hour of work to finance and goodness knows how much in energy to produce a physical copy.

A._Badger

Generali wrote: »

I bought an app at the weekend. It cost me about 60 seconds of work to finance and perhaps 2-3 coulombs of charge to transmit to me. 25 years ago a similar quality computer game would have taken me an hour of work to finance and goodness knows how much in energy to produce a physical copy.

And therein lies the refutation of the Schumacher-derived 'Green' nonsense we keep seeing posted here about 'resources', claiming continued growth is impossible because we will run out of water/oil/food/copper etc.

It's ironic how 19th century, self-styled 'progressive' thinkers can be.

Generali

A._Badger wrote: »

And therein lies the refutation of the Schumacher-derived 'Green' nonsense we keep seeing posted here about 'resources', claiming continued growth is impossible because we will run out of water/oil/food/copper etc.

It's ironic how 19th century, self-styled 'progressive' thinkers can be.

I predict we won't run out of electrons!

Having said that, I still reckon farmland is the investment for the future.