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Message: from BullionBuzz enewsletter Sept 7, 2010
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The Ethics of Gold
Ron Robins

Gold’s rising price indicates that the yellow metal is reverting to its historic role of imposing order on chaotic monetary and currency systems, because it is the ethical barometer of fiscal mismanagement. Governments and central banks around the world, which held out fiat currencies and fractional reserve banking as the only option, have been weakened and our trust in them eroded. Now, as developed countries sink and their economies submerge, they bail out their banking friends first. The world’s monetary and currency systems and the organizations responsible for them are failing because they lack ethical standards. They implemented policies that that would benefit them but eventually lead to great financial and economic hardship for their customers, such as encouraging debt creation that could not be sustained. This failed policy led to tens of millions of people losing their jobs, millions losing their homes and retirees losing their savings as interest rates were reduced to near zero. Unfortunately, banking is a cut-throat business; rising to the top requires subservience to the base instinctual values of status and greed. When bankers, financiers and politicians are motivated primarily by greed, unethical behaviour asserts itself. So until humans can be relied upon to heed their internal moral compass, some sort of firm control in regard to credit and debt creation has to be in place. Gold is ideally suited to act in this controlling capacity. Unfortunately, many economists today follow the thinking of John Maynard Keynes, who referred to gold as a ‘barbaric relic’. It is perceived wisdom today that we are capable of managing our monetary and currency affairs wisely, and do not need the hard discipline of a gold standard. That perceived wisdom is false; monetary conditions are increasingly calling for the kind of control that only gold can offer.

http://www.gold-eagle.com/editorials_08/robinsr082410.html

MONEY

How Hyperinflation Will Happen

Gonzalo Lira
The US is currently experiencing a deflation; the Fed and the Administration are taking extraordinary steps (massive deficits and stimulus spending) to avoid a deflationary spiral. Unfortunately, they have been unable to offset the fall in consumer spending, and the money printing has been overwhelmed by credit contraction. Yields are low, unemployment is high, CPI numbers are down – every indicator screams ‘deflation’. So the notion of an impending hyperinflation seems bizarre; and yet that is what Lira predicts. Hyperinflation is not an extension or amplification of inflation; inflation and hyperinflation are two very different things. They look the same – in both cases the currency loses its purchasing power – but they are not the same. Inflation occurs when the economy overheats, when consumables (labour and commodities) are so in-demand because of economic growth, coupled with an expansionist credit environment, that consumables rise in price. This forces all goods and services to rise in price as well, so that producers can keep up with costs. It is essentially a demand-driven phenomenon. Hyperinflation is the loss of faith in the currency. Prices rise in a hyperinflationary environment just as in an inflationary environment, but they rise not because people want more money for their labour, but because people are trying to get out of the currency. They don’t want more money – they want less of the currency, and they will pay anything for goods that are not the currency. Lira discusses why the recovery is not going to happen; why Treasuries are the new toxic asset; how hyperinflation will happen; why commodities will be king; why the US government cannot stop the runaway train; the parallels to Japan; when to expect America’s hyperinflation; and what to do about it. The current situation cannot long continue, says Lira. The Global Depression is being exacerbated by the very measures being used to fix it – stimulus is putting pressure on Treasuries, which are being shored up by the Fed. There can be no happy ending. The smart money will prepare for what is going to happen next. Lira thinks that will be hyperinflation.

http://gonzalolira.blogspot.com/2010/08/how-hyperinflation-will-happen.html
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