Fri, 5 November 2010
Many of us know the proponents of hyperinflation; Marc Faber, Gonzalo Lira, the National Inflation Association, and maybe even Peter Schiff falls into this category. When we look to countries that have experienced hyperinflation in modern times we can see direct parrallels between their monetary policies and that of the US's in the past few years and we can draw a quick conclusion that we will experience hyperinflation as well. In this interview with Erik Townsend, enterpeneur and private investor, Erik argues that this conclusion is too simplistic and does not take into account the 'Five Fundemental' differences between the US Dollar and those currencies mentioned as examples of hyperinflation.
Direct download: Episode_69_-_The_Argument_Against_Hyperinflation_with_Erik_Townsend.mp3
Category:general -- posted at: 1:02 AM
Comments[16]
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Good to get some alternative views. But are they alternative? 40% inflation will decimate savers. Advice:get out of the dollar, either later or sooner, who knows? Loss of US Dollar as reserve status. Advice, see above. Not a lot new here accept arguments about semantics, I'm afraid. I do appreciate your efforts to educate us on these topics.
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I enjoyed the interview, it was interesting. But interesting is not the same as correct. While Mr. Townsend is smart to use history and logic in his analysis, his conclusions and interpretations are filled with with mistakes. I wish I could go into all of them, but then I would need to write a 5 page explanation. But I will give you a few things to study: One, hyperinflation requires a definition. The definition your using about 50 percent per month is only one definition in a long list. Two, the military angle (point four) won't happen that way. That is because the politicians and their global banking cohorts will sell the American middle class down the river withous a single tear, and if the people elect a dictator to take things to an extreme the rest of the world would join in against the country, hegemony dissolves quickly when your one country faced off against all others. If the nation could find some support and if many other nations decided to stay out of it, then push would come to shove because China and others would want the same deal and they do already have the power to see it through. Mr. Townsend should understand bluffing on the world stage is not the same as bluffing during no limit poker. Third, Mr. Townsend use of the word audit, is again based on 'his' definition of an audit. Arthur Anderson would be proud of the way he muddled through that one. Fourth, Mr. Townsend, in his point five, says the alternatives to the dollar won't be found because of a some specific reasons about the quantity of precious metals or how other commodities aren't practical or how the govt won't let it happen. All those points are entirely unfounded. There are plenty of things up for trade, black markets, pretty painting, fancy foods, energy, metals, all things can become a medium of exchange when there's a will to do so. I could go on and on, but I'm not here to write a book. Mr. Townsend needs to solidify his ideas line by line, because it seemed to me about one in four could be shot down easily. Nevertheless, my opinion is we will see a slower form of high inflation over time but not because it "can't" happen as Mr. Townsend says, but because it's not in the interest of global powers to have the deterioration of the dollar as the world's reserve currency unfold so quickly. That said, for the average worker, for the middle class workers of the USA and around the globe, it might as well happen as a sudden crises because in the end it will eventually feel like it. All around the globe, the silver has been removed from the coin. All over the world( with only one exception), people have had their right to self protection taken from them and they actually have come to believe that it was for the best. I don't believe this turns out well. Never has before and won't this time.
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Eric thanks for calling into FSN and mentioning the podcast. I’ve listened to a few now and it’s quite good - Thanks Steve! Two comments on your arguments. 1 – The fact the dollar is the reserve currency could mean that the spark that would start hyperinflation might come from anywhere in the world not just locally. So maybe in a way it makes it more likely in the US. 2 – Recently an economist (don't recall who) commented that the US should sell its gold reserves, that it would bring in 200 to 300 billion dollars at current gold prices. Compare 200-300 billion to the number of dollars in circulation and you see that the gold reserves don’t provide any meaningful backing of the dollars in circulation. Bob
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Hi Steve, I am listening to your show for a little over a year now and I really like your show. And I really should have thanked you already for what you do. I have learned so many things. From the talk with Kathy which brought me great insights about people’s reactions to "peakoil" to Nelson who saves me an hour a week because of the stirrup hoe. Then you have this relaxed way of talking and I like your "quest-for-insight" approach when it comes to subjects like "inflation/deflation" as opposed to other people that talk like they already have seen the future. Now, like everything, there are exceptions. Well, in this case, there is an exception. This interview with Erik was really bad. This guy is arrogant (the "you should stop and read a basic textbook"-message, I am not going to listen again to get the exact words), doesn't understand stuff himself (or else how can talk about gold backing the dollar? It isn’t. So for that matter it is perfectly possible for the dollar could go to zero FIRST and then the NEW currency may or may not be backed by gold. This would seem like a much more effective rip-off than reintroducing a gold backing when inflation spins out of control), he doesn't know how to debate (it is better to present 2 solid arguments than 2 solid and 3 easy-to-rebuff), has seen too many movies (Those with the secret protocols that describe when and how the almighty pentagon takes over control over the entire world. Wake up man, they cannot even control two ME countries, do you really believe they can get away with blackmailing the whole world for more than a few months or even a year? Is that the reason that the dollar cannot go into hyperinflation the next decade? Don’t you see this would unite all of US enemies that are now divided?) and last but not least he is a slime ball (an arrogant guy pretending to be so sweet like in the FSN Qcalls last week). Now, you can get Erik on as many times as you want, four times, five times, whatever you please, as long as I can his name in the title so I can skip it. I just ask you to consider not getting other people like Erik on your show. Cheers Peter
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Bob, I don't remember dismissing metals as a possible alternative to fiat money. I don't know if I made that comment. I would prefer not to go back to a PM backed currency for the reasons that Bill Still has stated in his film The Money MAsters. The Golden Rule is that those with the gold make the rules. The gold backed currency is very rigid and favors those in power. This is an overly simplistic statement but I have deeper feelings that accompnay these statements. I think there is a sustainable currency solution out there somewhere and I think that is probably what we will evolve to, hopefully sometime during my life. The current systme is in decline/collapse and I am prepared for that by holding PM's, but longer term I don't think I want to hold them (10-15 years from now). Steve
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Great podcast, listened to it 3 times to absorb it well enough to communicate the 5 points to others. I'm a little freaked out that the US will be going into a nuclear exchange with China to sort out the next empire builder. I just finished listening to Lindsey Williams 'Plans of the Elite' on youtube and he says China And Russia are the areas to watch, not the Middle East or Korea, so it kinda reinforced ET's inevitable nuclear war with China point. 20-40% inflation doesn't look so bad in comparison, since I live on the West Coast next to a nuclear power plant.
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Laura, The simplest way to look at this is from the 30,000 ft. flyover approach. For example, I always tell people to look at the trend of total credit market debt that is published quarterly from the Federal Reserve. We were on an exponential climb until the first quarter of 2009 where it topped out at $52.7Trillion. From that 'high water mark' we have been trending downwards slowly to $52.05 Trillion. So what this says is that even in the face of massive stimulus the credit market is in collapse. If it were not for government intervention you may have seen $10-14 Trillion (it's anybodys guess) disappear from the economy. To answer your question. Much of that lost M3 (what is called credit money) was replaced with M1 (what is called monetary base money). M1 and M3 are not the same. Steve
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Your show is one of the most thought provoking broadcasts on the internet. That was a great interview with Townsend. It is a waste of time reading print media now adays. Take this morning's headlines, for example. The print media is forced to deal with understandable Chinese and Russian anguish over the latest round of quantitative easing. Forced to explain QE, the print media would have you believe that paper money is being "printed" around the clock. "Timber"! You can almost feel the reporter's anxiety and his/her desire to move on to what is happening in the life of Britney Spears. Thank you for your work.
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First off, great podcast! It was the first I've listened to from you, and I promise to become a regular listener. I am not an expert on economics. As a matter of fact I'm working my way through my daughter's AP economics textbook. So please forgive my beginner question. During the interview Mr. Townsend said something that I understood to mean the Fed has not injected into the system as much money as deflation has taken away. I did a little math to try and figure out how much money (per person) was injected into the economy at 1.7 trillion + 600 billion divided by 308.4 million and then I compared that to some figures I found for M1, M2, and M3 (on an about.com article) That article listed M1 per person as $4,123, M2 as $18,556, and M3 as $26,804. This information was dated as using the data for 2001, and I haven't been able to find more recent data, probably because I don't know where to look. My question is. Did the US economy shrink so much during the decade from 2001 to 2010 that it lost approximately $7,400 dollars per person in the M3?
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Bill, that was true poetry. You are back in my good graces, hahaha. Very funny stuff. You don't have to like the show to make me happy, ya just gotta have an impressive sense of humor. I struggled with the 20-40% inflation comment, because I've had guests like Denninger say that we HAVE been in hyperinflation since the 1970's. By the time I thought it through we were already way down the road on the interview and Erik had more or less explained his statement very clearly. Steve
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Steve, I hope I'm not violating the show's rules but I'm rolling with "1 glass of Cabernet with Steve" tonight instead of two bottles of suds. That was a compelling interview with Mr. Townsend. He makes a great deal of sense in the way he distinguishes the American reality from that of third world nations and their worthless currencies. The show was perfectly timed given Geitner's recent announcement of another tidal wave of quantitative easing. This subject is highly complex and outside my loose grasp of macro-economics, but please hear the humor in my observation. You got me again. This time I was thankfully out on a hike in my local mountains listening to your TBWS podcast. With the sweet melody of birds in the background, I harmonized with your NPR sound as you and Mr. Townsend assured us that the Chilean prophesy of hyper-inflation is as unlikely as the Mayan doomsday vision for 2012. And then, in classic form, the TBWS guest "whispers sweet apocalypse" - you see we can only expect 20 to 40 percent inflation per annum. Townsend then completely pulled the security blanket from us by conceding that insidious hyperinflation IS, in fact, possible - a fate so horrible that the nation will collapse. But not to worry - while Townsend opposes violence, he sees potential salvation in our unholy national character. When the economic quake comes, the United States will act as a starving armed looter in the street. Hyperinflation or peak oil be damned, we will extort the Saudis by forcing them to take our worthless green backs under threat of nuclear annihilation! Kathy McMahon and I screamed "No blood for oil!" in harmony as the prediction passed from his lips. Just when Townsend tells us that our nightmare isn't real, that there really is no Chilean masked man with a chainsaw chasing me through the woods in my underwear - he casts a reassuring glance, offers a hot cup of tea and says: "Don't worry boyo, the lunatic chasing you won't have a chainsaw, it will only be an icepick." In all seriousness, a great show!
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