Inflation Is Your Friend

I posted a transcript from Dan Ackroyd's parody of Jimmy Carter called "Inflation is your friend."

But reality is now a parody. A Bloomberg article points this out: 

Pretty soon, Harvard colleague Greg Mankiw was advocating higher inflation as a cure for slow growth -- and a preferable option to additional fiscal stimulus. In 2010, Olivier Blanchard, chief economist at theInternational Monetary Fund, put his imprimatur on the idea. In a paper examining the lessons from the financial crisis, Blanchard and his co-authors suggested that the benefits of a 4 percent inflation target, to minimize the risk of deflation in response to shocks, might outweigh the costs. 

Let's ignore for a moment that the government is cooking the books and inflation is higher than that right now. What effect will higher inflation have? 

First it will harm retailers as they struggle to replace inventory at a higher price. It will also artificially increase profits, but these profits are not real. But the taxes the higher profits cause are real. 

Next, interest rates would have to rise. Right now this would have a very negative effect on the economy. Most people do not buy a house, they buy a payment on a house. If interest rates rise, then payments go up and the price that a buyer can afford to pay goes down. The recent rise in in mortgage rates has already caused applications for loans to plummet. I read where one of the bigger mortgage companies layed off 10% of their staff. 

Finally the budget deficit will rise as the cost of borrowing money rises. This would force the Fed to buy even more bonds. While foreign government holders of US bonds are in a tough spot, my guess is that the dollar would fall as "hot" money went elsewhere. 

Investment would be impacted. Imagine that prices double in 10 years. So an investor buys stock in National Widget for $100,000 and 10 years later sells it for $200,000. No profit has actually occurred, yet a tax of $20,000 must be paid. Investment is already suspect, this will only get worse. 

I remember seeing the Ackroyd parody on TV and laughing, I am not laughing now. 

Mish Shedlock Interview on Currencies

"Where You From Boy?"

I remember reading a book decades ago called The Nine Nations of North America. The book did not predict the end of America so much as point out the obvious. America is rather hopelessly divided into rather obvious sections. This was self-evident to me at the time as I had not too long before moved from California to Missouri. I had been asked by a truck driver rather pointedly, "Where you from, Boy?" I was in northern Arkansas at the time. 

With that in mind here is one future map of a possible future US:

The breakup of many countries does seem inevitable. Spain is particularly vulnerable. One thing that is holding back such separatist fervor is the huge debt of these countries, but if that debt ends up repudiated ...

An interesting question that is not particularly important now but may be later is one that you may need to ask yourself. 

"Where you from Boy?" 

Mansa Musa

Some Ideas Are So Dumb They Can Only Be Believed By Religious People

Since religion according to dictionary.com is "a set of beliefs concerning the cause, nature, and purpose of the universe," I suppose we are all religious in some sense. But what I am more specifically talking about is the need for some people to justify themselves through religion. Some have the ability to put their brain into neutral, and believe what tickles their fancy or their ego. One such religious belief is British Israelism:

British Israelism (also called Anglo-Israelism) is a doctrine based on the hypothesis that people of Western European descent, particularly those in Great Britain, are the direct lineal descendants of the Ten Lost Tribes of Israel. The doctrine often includes the tenet that the British Royal Family is directly descended from the line of King David.

British Israelism is data mining at its "finest." While data mining is a legitimate term, I am using it to describe a very human process of selectively harvesting data that, with a little tweaking, can "support" a preconceived notion. In terms of the Bible a related term is "proof-texting." 

Let me give you an example. The British Israel advocate may start out with two true statements: 1. The word "brit" in Hebrew means "covenant." 2.The word "ish" in Hebrew means man. So what conclusion is drawn? The English word British therefore means "covenant man."

Argh. 

People do this all the time. The health field is particularly suspect. You find the health study that says what you want, and suddenly it is the most important study ever. But the way such studies work is that you can often find studies that say the opposite. I am not saying that better health is unknowable, but to be careful which dumb religious health idea you buy into. 

What makes me smile about British Israelism is that it is in one sense true. Since we are all related to each other, there are very few people alive today that do not have "Jewish" blood. Hitler would not be pleased. And of course the "De" in my last name means that I am a descendant of royalty and nobility. That, and 14 rubles, will allow me to ride the bus anywhere here in Murom, Russia. 

This video presents this idea well, and provides the additional information that I have one billion atoms that used to be in the body of the bard, William Shakespeare. That no doubt explains the excellent quality of this blog.