Financial doomsayer Schiff still grim on future

AP via Forbes ^ | 2008-12-03 | Dave Carpenter

[Pelham]

The Fed can offer cheap money to the banks but if they won’t or can’t lend then you don’t get the growth of the money supply that is necessary to fuel inflation. It’s the old pushing on a string analogy. If lending and the velocity of money pick up dramatically then it’s a whole different story. But right now debt destruction and low velocity are the name of the game.

[Freedom_Is_Not_Free]

And that is my point. This $64 Trillion question appears to be “unknowable”. The fed will print and attempt to reflate but they may or may not succeed. IF they succeed, we get double-digit inflation. IF they don’t succeed, we get a deflationary depression or something like Japan’s “lost decade” of 18 years of economic stagnation, without a hint of inflation.

I follow a handful of people only because they have been predicting the collapse of America’s credit bubble for years and years. I trust them to know more than those who couldn’t see any of this coming. The frustrating thing is, among them, they cannot agree if we deflate or inflate.

So I’m concluding for now that it is unknowable and we will have to actually experience the outcome before we know the outcome. There is no way to hedge for both and no way to prepare without knowing the unknowable.

Even if we do have a deflation, it does not mean we will not have a snap-back double-digit inflation if the government’s attempt to reflate eventually works.

All this is my way of saying, I won’t be figuring this out and it looks like nobody else will either. The best we can hope for is to assume deflation for now, since that is the current direction, and pray we get enough warning of impending double-digit inflation should it come, to change gears in time to prepare for it.

This one is a doosey! Buckle up and pray.

[Travis McGee]

Absolutely true, but they never learn.

[Freedom_Is_Not_Free]

You are absolutely right. That is how things stand today. But things can change quickly. Like you, I can’t see them changing quickly but then, I expect people to behave rationally, and they don’t. It is not as though banks will never lend again. The question is, does the existing condition, which is worsening, go on for years or does it end abruptly with the government printing presses. Deflation is not a foregone conclusion.

There is a very real possibility that the government will be able to print enough money to stabilize the drop in asset values. That is Bernanke’s Mission. Again, I agree with you that this may not work, but I want you to consider that it may work. And if it does, if the Fed and Treasury printing stabilizes the disinflation a year or two from now, we could see the banks get greedy again. Banks that refuse to lend any money will go out of business. Banks can’t even generate fees if they don’t lend.

So IF we stabilize, you will see some greed from the banks and they will have a ton of government supplied money with which to work. Let that money flood the FIRE economy, and you don’t think that will cause inflation?

Again, I can’t take a position here because I am deeply confused which way we are going, but I recognize the possibility of severe inflation if financial stability occurs, the economy bottoms, and that war chest the government is going to print starts finding its way into the real economy.

[VOA]

bump

[Freedom_Is_Not_Free]

It’s that “insanity” definition — doing the same thing over and expecting “this time it’s different”.

I think most of us never learn. Human nature never changes and we seem to repeat the same mistakes given the same conditions. You couldn’t use stock market charts to predict market behavior if we didn’t see the same people doing the same things under the same conditions. Maybe the term “they never learn” should be “we never learn”.

Human nature never changes. Yes, there are some outside the norm, but for the most part, the crowd always behaves like the crowd has always behaved. Pick any crowd, from bankers to brokers to politicians. The crowd always behaves like the crowd has always behaved.

[Golddigger3]

I’m waiting for reports of companies laying up tankers just like container ship owners have done.

2 weeks later your prediction has come true.

[Golddigger3]

can't continually listen to doomsayers.....like Glenn Beck...when no meaningful or practical solutions or preparations are given..... if they don't have anything useful to say, then they should keep their thoughts to themselves..

Schiff has a lot of action steps you can take that he says will make you a lot of money. See his book: "The Little Book of Bullish Moves in a Bear Economy"

[Golddigger3]

If it was easy for a central bank to stop a deflation the Japanese wouldn’t have been limping along for nearly two decades. Many of the factors that triggered their deflation are present in our present troubles.

Schiff makes the powerful point that our slow down will be a lot worse than the Jap's because they had a real economy that made things; had huge reserves from exports; and their people had lots of savings.

[Golddigger3]

I’ve always been an optimist and always will be. I feel no shame in this. I don’t remember “laughing” at Schiff, but I do remember posting I don’t care for those seem to relish gloom and seem to cheer for the demise of the US and our system. The US has seen dark times before and always finds a way out. Why? Because despite all the problems with our system of government, we are still the most free country in the world. This too shall pass, and I’ll bet you dollars to doughnuts I won’t need to live off of canned goods while huddled in a bunker in the desert.

I think an American can have legitimate optimism in eternity, but not in this life. We've become inured to the stunning downturn in our culture, with the economy being just one element, and by far not the most important:

1) Murdering 50 million unborn children in the fetus stage by our neigbors, friends, family.

2) Murdering untold number of children in the embryo stage.

3) Murdering children who are actually born.

4) 50% divorce rate

5) Families being niggardly about how many children they are willing to welcome into their homes. Three kids is a big family, with parents thinking they're lives would be richer with material things that their parents saved their whole lives for.

6) Not worshipping God.

7) Accepting homosexuality.

8) Rooting for military casualties and failure.

9) Extremely high crime rates when compared to pre-1955.

10) Most people having almost no understanding of why pre-marital sex makes it a crap shoot when making marriage decisions. Marinating our kids in sexuality. 11) On and on and on.

[Golddigger3]

That said, I find no consensus among them. They is why I have my radar up and am constantly reading to see if a consensus begins to emerge among them on the $64 Trillion question, whether deflation or high inflation ultimately wins out here.

I say inflation for these reasons:

1) I can't think of any examples of deflation since the 30's, but plenty of examples of out-of-control inflation.

2) The government has shown they will do everything they can till the economy inflates.

[Pelham]

I suspect that Schiff has that right. Japan also had other economies to sell to since the rest of the world wasn’t crashing along with them.

[Pelham]

“I can’t think of any examples of deflation since the 30’s, “

You’re witnessing one right now.