Coming inflation and currency devaluation

The Bread and circus’s continues. Adair Turner – chairman of Britain’s Financial Services Authority advocates giving central bank money directly to the public. This of course is incredibly inflationary. Britain’s ponzi banking system must be near implosion for such a drastic need to inflate now and inflate fast. For the uninitiated central bank money is usually lent to banks where they can in turn loan it out to businesses and the public many times over. The problem at the moment is that banks are to afraid to lend this central bank money out. Knowing too well that a) the majority of the public are debt saturated and b) a majority of the public are not far away from default on their mortgages.From Reuters:

That such economic fatalism is nonsensical is the key message of a truly historic speech delivered on Wednesday by Adair Turner, chairman of Britain’s Financial Services Authority and one of the most influential financial policymakers in the world. Turner argues that a virtually surefire method of stimulating economic activity exists today and that politicians and central bankers can no longer treat it as taboo: Newly created money should be handed out to the citizens or governments of countries that are mired in stagnation and such monetary financing of tax cuts or government spending should continue until economic activity revives…

…John Maynard Keynes proposed burying money in disused coal mines to be dug up by unemployed workers, while Milton Friedman suggested dropping money out of helicopters for citizens to pick up. Friedman also argued in a 1948 paper that governments should rely solely on printed money to finance their regular cyclical deficits. More recently, as conventional policies to revive growth have faltered, with widespread disappointment about the impact of zero interest rates and quantitative easing, proposals for distributing money directly to citizens have been quietly gaining traction among critics of orthodox central banks. I discussed this trend, sometimes described as “quantitative easing for the people,” in several columns last year.

Despite its obvious effectiveness – or perhaps because of it – public discussion of helicopter money has been taboo among economic officials. The one exception was a speech by Ben Bernanke in 2002, before he became Fed chairman. This speech offered the most detailed and eloquent justification of monetary financing prior to Turner’s, and it earned Bernanke the Wall Street nickname “Helicopter Ben.” Since then, however, helicopter money has never been seriously mentioned by any senior official in any advanced economy.

Until this week. Ten years after the Helicopter Ben speech, Turner has broken the taboo about monetary financing. The effect on economic debate around the world could be irreversible and profound. Turner’s 70-page paper presents the arguments for the many variants of helicopter money with unprecedented academic sophistication, financial detail and historical context. Even more important, his paper systematically and rigorously rebuts all the standard objections to helicopter money.

He shows that links between monetary financing and hyperinflation are theoretically dubious and historically unjustified. In fact, the most serious objections involve politics, not economics. The key risk is that governments will abuse their ability to print money, treating helicopter money not as an emergency measure but as a tool for distributing political largesse. But this risk is best handled by engaging in open and rational debate about the appropriate rates of money creation, not by pretending that monetary financing will never happen and then covertly conducting such operations without proper public accountability or rational economic analysis.

In other news Venezuelan has devalued its currency 46%, the first of many currency wars. Note the law of unintended consequences in the clip below.

While the rest of the developed world is scrambling here and there, politely prodding its central bankers to destroy their relative currencies, all the while naming said devaluation assorted names, “quantitative easing” being the most popular, here comes Venezuela and shows the banana republics of the developed world what lobbing a nuclear bomb into a currency war knife fight looks like:

  • VENEZUELA DEVALUES FROM 4.30 TO 6.30 BOLIVARS
  • VENEZUELA NEW CURRENCY BODY TO MANAGE DOLLAR INFLOWS
  • CARACAS CONSUMER PRICES ROSE 3.3% IN JAN.

And that, ladies and gents of Caracas, is how you just lost 46% of your purchasing power, unless of course your fiat was in gold and silver, which just jumped by about 46%. And, in case there is confusion, this is in process, and coming soon to every “developed world” banana republic near you.

Apparently Argentina hasn’t had enough hyper-inflation.

Argentina tries freezing prices to break 30 percent annual inflation spiral:

Argentina announced a two-month price freeze on supermarket products Monday in an effort to stop spiraling inflation.

The price freeze applies to every product in all of the nation’s largest supermarkets — a group including Walmart, Carrefour, Coto, Jumbo, Disco and other large chains. The companies’ trade group, representing 70 percent of the Argentine supermarket sector, reached the accord with Commerce Secretary Guillermo Moreno, the government’s news agency Telam reported.

Economic growth has stopped benefiting the middle class, at least to the degree it used to. So the Obama administration has tried to craft a response: Redistribution now and education later.

The commerce ministry wants consumers to keep receipts and complain to a hotline about any price hikes they see before April 1.

Polls show Argentines worry most about inflation, which private economists estimate could reach 30 percent this year. The government says it’s trying to hold the next union wage hikes to 20 percent, a figure that suggests how little anyone believes the official index that pegs annual inflation at just 10 percent.

Economist Soledad Perez Duhalde of the abeceb.com consulting firm predicted on Monday that the price freeze will have only a very short term effect, and noted that similar moves in Argentina had failed to control inflation. Consumers shouldn’t be surprised if the supermarkets are slow to restock their shelves and offer fewer products for sale, she added.

I remember a decade ago, right before Argentin’s hyperinflation in 2001, it was being compared economically to Australia. Similar industries, minerals, agriculture, both were situated in the southern hemisphere. After having the first hyperinflation, Argentina it appears is going to suffer a second one.  A Documentary below of the Argentinian hyperinflation.

 

About Avadoro Worden

Iconoclast
This entry was posted in Corruption, Finance and Economics, HyperInflation and tagged , , , , , , , , . Bookmark the permalink.

4 Responses to Coming inflation and currency devaluation

  1. lone champ says:

    This really answered all my worries. Now I’ll borrow some more.

  2. hallowino says:

    Nice read, I just passed this onto a colleague who was doing some research on that.

  3. Nope Arthur says:

    They’ll just print more money, never fear.

  4. Fleytec says:

    Yes, but when?

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