Quote of the day–Antal E. Fekete

The newly created money will follow the laws of gravity and flow downhill to the bond market where the fun is. Risk-free bond speculation will further reinforce the deflationary spiral until final exhaustion occurs: the economy will collapse as a pricked balloon. Instead of hyperinflation and the destruction of the dollar, you’ve got deflation and the destruction of the economy.

Denninger says that the “death spiral” will lead to fire sales of assets in a mad liquidation dash and, ultimately, to the collapse of both the monetary and political system in the United States as tax revenues evaporate. He opines that probably not one member of Congress understands the seriousness of the situation. Bernanke is risking something much worse than a Depression. He is literally risking the end of America as a political, economic, and military power.

Indeed, the financial and economic collapse of the last two years must be seen as part of the progressive disintegration of Western civilization that started with government sabotage of the gold standard early in the twentieth century. Ben Bernanke, who should have been fired by the new president on the day after Inauguration for his part in causing irreparable damage to the American republic may, in the end, have the honor to administer the coup de grâce to our civilization.

Antal E. Fekete
Professor of Money and Banking
San Francisco School of Economics
March 30, 2009
Why Obama’s Stimulus Package Is Doomed to Failure
[No. This isn’t an April Fools joke. But I don’t know for certain that he knows what is talking about either.

Have a nice day.–Joe]


3 thoughts on “Quote of the day–Antal E. Fekete

  1. IANAE, but from my studies the worst thing that can happen to an economy is spiraling deflation. Inflation is self limiting – at a point when people can no longer afford your product you have to lower your price. Deflation is limited by literally the bottom – when you cannot lower your price enough.

    Expanded to the macro level, deflation is very, very serious. We’ve seen examples of people in other countries having to cart around wheelbarrows full of cash (foreign NRA members?) to simply buy a loaf of bread. That’s what happens when you simply ‘print’ more money.

    We could very well be in for a rough time. I don’t think it will be the end of America because we’ve still got a lot of capitalists left who will take advantage of the situation and it is upon their shoulders we ride as it is. Unfortunately, the indoctrination kids receive about how bad capitalism is means less capitalists to pull our collective chestnuts out of the fire in the near future.

    The biggest failures of capitalism always come from a lack of capitalists, not too many.

  2. “…the honor to administer the coup de grâce to our civilization.”

    Not everyone would lament that. For some, it would be a wonderful, wonderful thing, and I believe some of those people are in the current administration, or have close ties to it. If so, could we say that Obama’s policies are failing, or that they are succeeding, if America is severely damaged? “Failure” or “success” of his policies would depend on his desired outcome, not ours.

  3. Fekete is one of the “Gold Standard” nuts. That’s not to say we aren’t in a lot of trouble with our current fiat dollars and the FedGov printing bills as fast as the presses will run…

    He makes a number of assumptions that may not pan out.

    He assumes that economic output is tied to debt in a linear relationship, so that as we go deeper in debt the economy will be that much worse off. That sounds reasonable to me, but it’s just an unproven theory. Now, don’t get me wrong, I despise large governement, and believe in a tightly restricted (in the constitutional sence) government being the best kind, but there have been historical examples of debt spending for a limited amount of time making the economoy stonger. The War between the States and 2nd World War both come to mind. Now both those examples had many additional circumstances that don’t apply in our current situation, so this is all relatively new. I just don’t want folks to run around parrotting that the sky is falling because a “Gold Standard” nut is trying to sell bullion or shares in a mine somewhere. If the country really does collapse what are you going to do with that gold, eat it? I’m not selling or trading my canned / dried goods or firearms / ammunition for gold that looks pretty, but can’t feed or protect my family. Yes the Obamassiah administration is screwing up by the numbers, but thier constant changing the rules, firing and threatening to loot bankers and industrialists, and failure to let the market sort itself out are much more likely to drive the economy into the ground than any decision to leave the gold standard seven decades ago.

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