Quote from: cypherdoc on October 05, 2011, 04:40:39 PM

my feeling is that if Ben is going to do anything he will try to stem a disorderly deflation and engineer it into a "controlled deflation". you heard it here first.

Yet again, boasting more brazenly than Al Gore: controlled deflation is not a new concept. I'm no angel myself, but if you're going to claim exclusive credit as if you're the only expert in existence, be sure to acknowledge the reality of independent discovery.

From about 2 months ago:

Quote from: miscreanity on August 09, 2011, 05:43:28 PM

Since gold is held by central banks a form of reserve, wildly fluctuating prices for the metal in USD suggests one or the other is unstable, thus controlling the inevitable rise of gold is critical for the US to maintain an appearance of stability.

...

It bears repeating that the dollar is in a managed decline with gold naturally rising in direct opposition. This balance is rapidly growing beyond control of the forces that are attempting to make this a gradual transition because the global economy is far greater than any one nation. These things also take years to unravel, if not decades. A parabolic rise is only beginning to build.

The archives strike again.

Quote from: cypherdoc on October 05, 2011, 04:40:39 PM

slow rise in the USD with everything else including bonds slowly deflating much like a Japan over years time.

How? Deflate too fast and the result is at least civil unrest, at worst global war. Deflate too slow and there's a risk of pressure accumulating to a point where it simply overwhelms all efforts at controlling it, more likely arriving at the latter outcome. The pressure from deflation is strong enough that there is no way to maintain control without inflation, which brings its own set of problems.

The Fed isn't the only institution with a "self-preservation" incentive. Natural write-downs will be fought as financial entities have their own mechanisms that will oppose Fed efforts. Politicians have a self-preservation goal of maintaining office at the expense of all else. Other nations have their self-preservation plans that involve cutting Europe and the US loose, leaving them to sink or swim lest they drag the world down - inflationary effects coming from the EU and US will be retaliated for from those countries damaged by them (as we've seen from even the Swiss, the choice will be independent inflation methods).

It may have its own internal dynamics, but America is only one piece of the pie. As Jim Sinclair puts it: there is no practical solution. I'd like to add that there is also no timely solution.

Quote from: cypherdoc on October 05, 2011, 04:40:39 PM

we have entered the Age of Deleveraging and the debt has to be written off for the ~~global economy~~ [western economies] to move forward.

i think if we do go to a new monetary standard of some sort it has to involve something digital like Bitcoin.

(emphasis and bracket section added)

A reminder to keep the previous section in mind. Deeply indebted western nations are not the entire world. In fact, decentralization is creating pockets of independent, autonomous regions within the official lines on maps. Enforcement of rejected national laws within these regions rapidly escalates costs - the benefit shifts to the defiant entity.

Bitcoin is not a viable solution yet. It isn't universally recognized and there are certain structural concerns that still need to be addressed. That is certain to change over the course of a few years, but today it is unrealistic.

Quote from: hugolp on October 05, 2011, 05:20:51 PM

What better way for banks and governments to deleverage through inflation that the citizens pay? Why would Bernanke engineer something that goes against the interests of the people that put him where he is?

Bingo. Tax rates have already begun to see diminishing returns, so the "invisible tax" has to be ramped up. And again, dead on: Bernanke holds a pseudo-political position. He could be discredited and replaced in an instant if he bites the hand that feeds him. Dominique Strauss-Khan, anyone?

Quote from: hugolp on October 05, 2011, 05:46:54 PM

Btw, even the people at the Fed are admiting that price inflation is starting to get out of control: http://www.clevelandfed.org/research/commentary/2011/2011-20.cfm

So is this a form of legitimate concern from the Fed, mere lip service to keep the reins of control taught or a political effort to maintain relevancy? Will it matter five years from now?