This was recently lifted from jsminset.com.

Dear Jim,

The economic strategy you have aptly dubbed Manipulation Of Perception Economics (MOPE) is moving full speed ahead. The more common forms we see are "spin" that turns bad news into good and "green shoots"-type projections timed specifically to divert our attention away from troubling statistics or developments.

There is another more subtle tool I would call "setting the agenda" that seems to be cropping up more and more frequently. The idea is that if you can get people focused on a particular debate, you can steer them away from looking at other issues that are more relevant and more worrisome.

I believe that the recent prolonged debate over whether China is "trapped" by its large US dollar holdings is an example of this tactic in practice. The truth is that China is by no means the biggest holder of US dollars; it is simply one of the more identifiable holders. The last thing the Fed and US Treasury want people to focus on is who else is holding huge dollar positions and what that means to the Fed’s ability to drain liquidity from the system in the future.

None of the trillions of dollars that disappeared from the financial sector in recent years has gone away. The last decade saw the transformation of the banking and investment community into the world’s largest casino. Gambling is a zero sum game. What one player loses goes straight into the hands of the winner.

The Fed and Treasury have been busy creating trillions of new dollars to (1) make sure all the losers can pay off the winners and (2) allow the financial institutions to recapitalize so the banking system doesn’t collapse. We know there is a group of winners out there sitting on trillions and trillions of dollars. We just don’t know who they are.

It’s safe to say that at this point, these "winners" are engaged in a high stakes game of liar’s poker with each other. None of them wants to see their dollar holdings destroyed, but even more to the point, none of them wants to be the last one at the table holding onto their dollars when the other players start creeping to the exits.

It’s also safe to assume that every one of these major players is in the process of doing what we see China doing, namely, diversifying and hedging their dollar holdings, and that none is eager to increase its dollar holdings. That is why the Fed has been forced to buy up the lion’s share of US Treasuries and Agency debt.

This points to another major topic of discussion in which the MOPEers are working overtime to control the agenda. The debate over whether inflation can be contained has been cast in terms of whether the Fed will be able to drain liquidity from the system once business conditions improve. This serves to steer people away from thinking about the more pertinent concern that neither the Fed nor the Treasury can make the winners give back the money they took from the banks, municipalities, pension funds, etc.

All of the major dollar holders are now in the same predicament. No matter what they do the value of their US dollar holdings is being diluted. This is because there is no way on earth the US Government can stop creating trillions of new dollars each year. It is going to be cranking out this money to keep any other big financial player from folding, keep the FDIC alive, keep big corporations alive, keep huge pension funds from imploding and fight un-winnable wars on at least two different fronts.

Inflation (most likely hyperinflation) will be forced upon us as the major dollar holders get tired of seeing their holdings steadily diluted and start tripping over each other grabbing for hard assets. Things will get very ugly fast as the all the major players start heading for the exits at the same time. This will happen in the context of poor business conditions domestically, just as it has throughout history in every major hyper inflationary event.

These are lessons that are being taught daily and repeatedly by the contributors to this site. CIGAs are not going to see them discussed anywhere else. The MOPErs are firmly in control of the agenda. Few see through the spin and even fewer call the official spokespersons on their ridiculously over-optimistic projections.

I’d like to encourage my fellow CIGAs to stay focused on the lessons being taught here and spend less time listening to the disinformation that is being so freely disseminated through official channels. There is only so much time in the day each of us can dedicate to navigating our way through these uncharted waters. It is difficult to listen to the constant din of carefully choreographed disinformation and not be affected by it. Our time is much better spent focusing on the issues that matter and planning our lives accordingly.

Respectfully yours,
CIGA Richard B

He makes a good point. Deliberate distraction can be an enemy of truth.

P.