What Tim Geithner and Ben Bernanke Can Learn From 19th Century France

Wednesday, May 19, 2010 , , , 0 Comments

 Suffer from premature inflation much?

Gasp. Inflation Destroys Savings (via Mises.org)

The great unrest that is today characteristic of everything that is going on in Europe, the revolutionary ideas of the masses, especially of the sons of the middle classes who are studying at the universities, are due to the fact that the European governments, with the exception perhaps of the government of the little country Switzerland and other such very small countries, have in the last 60 years again and again embarked upon a policy of limitless inflation.

When talking about conditions in France, one should not overlook what inflation actually means. The French were right when, in the 19th century and in the beginning of our century, they declared that the social stability and the welfare of France is to a great extent based upon the fact that the masses of the French population are owners of government-issued bonds and therefore consider the financial welfare of the country, of the government, as their own financial advantage. And now this has been destroyed.

Frenchmen who were not in business themselves, i.e., the majority of the population, were fanatical savers. All their savings were destroyed when the tremendous inflation reduced the value of the franc to practically nothing. The French franc may not have declined completely to zero, but for a Frenchman, who had $100 before and then had only $1 — for such a Frenchman, the difference was not very great. Only a very few people can still consider themselves owners of some property when their property is reduced to 1 percent of what it was before.
China must be incredibly proud of the United States, or at a minimum has an incentive to assure it does not fail and therefore default on its debt to them. For some reason, those red bastards are buying Treasurys again after a 6 month hiatus in which they tried to quietly unload a few (apparently that worked). We'll see how long they keep that up. From September to October 2009, they didn't move. Tricky tricky.

Don't get too giddy, Timmy, the last several months could have been little more than a test run and the Chinese just want to see you sweat. I think they've figured out that whole crap about running an endless trade deficit was the biggest bluff of them all. The dollar's status as world reserve currency is going to backfire (as we're learning, along with the Chinese) and suddenly it dawns on China that they don't actually have to park their dollars in Treasurys, they can park them in just about anything. It's the DOLLAR! Who doesn't take dollars? Have at it.

We run such a huge public debt balance so we don't have to turn to inflation to get the job done. What happens when public debt is no longer an option?


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Some say he’s half man half fish, others say he’s more of a seventy/thirty split. Either way he’s a fishy bastard.