GMO's James Montier Debunks A Big Myth About Hyperinflation

James Montier never disappoints.  This time he discusses how hyperinflation is “not just a monetary phenomenon” (if that doesn’t sound familiar to readers, it should).  His latest note out of GMO covers the subject of hyperinflations and he’s obviously been reading MMT.  He writes:

“However, there is an alternative view of hyperinflations, one that I find much more credible than the quantity-theory based argument outlined above. This alternative viewpoint recognizes that money supply is endogenous (and hence that interest rates are exogenous), and that budget deficits are often caused by hyperinflations rather than being the source of hyperinflations.

If simply “printing money” really did lead to hyperinflations, then we should expect to see hyperinflations all of the time. Any government that issues its own currency under a floating exchange rate effectively spends by printing money (as a matter of logic, if the government is the sole issuer of currency, it has to spend before it can collect any taxes at all, otherwise there is nothing to pay the taxes with). Yet, rather than two-a-penny, hyperinflations are thankfully rare events, representing occasions when populations lose complete faith in their currencies.”

Obviously, I have a bit of a beef there (though I came to many of the same conclusions on hyperinflation several years ago – see here).  It’s important to understand that the money supply is almost entirely endogenous as Montier states.  That is, money is created almost entirely by banks and used by everyone else.  The money supply has been outsourced by the government to private banks who rule the monetary roost.  This requires a more in-depth understanding than the simple idea of a “currency issuer”.  As JKH has noted in the Contingent Institutional Approach, the US government, for instance, is a strategic currency issuer.   In essence, the US government harnesses the banking system in what is essentially a system that bribes them to bid at auctions.  The government basically leverages its enormous ability to tax the output of the private sector to have the banks do their bidding.   So, banks issue the money and the US government chooses to use this bank money.

This doesn’t mean the US government is not susceptible to hyperinflation just because it has the power to tax its output.  In fact, the loss or even reduction in the power to tax this output base has been the foundation for many hyperinflations. A sovereign government that cannot tax its output is essentially bankrupted (even though it will never technically “run out of money”).  But again, the money supply is truly endogenous.  It comes almost entirely from INSIDE the private sector.  So the key here is really understanding how BANKS issue almost all of our money.  In a balance sheet recession the odds of hyperinflation are extremely low because the money supply cannot expand substantially.  When you combine this with an extremely advanced nation with a powerful productive base and a sovereign that can tax that output the odds of a hyperinflation are extremely low.

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Presidents Day Pop Quiz: Funny Money Facts About the Men in the Oval Office

--> Presidents day money one dollar billEven when it comes to U.S. presidents whose faces aren't on bills and coins, discussions about America's commanders in chief frequently come back down to money. Whether the question is campaign donations or advances on memoirs, shady deals or funding for libraries, and of course, economic ups and downs (I'm looking at you, President Hoover!) it's hard to separate White House occupants from their money connections.

In honor of Presidents Day, we've compiled a list of some fun and surprising financial facts about the men who control -- and sometimes end up -- on the nation's money. Take a peek!

Bruce Watson is a senior features writer for DailyFinance. You can reach him by e-mail at bruce.watson@teamaol.com, or follow him on Twitter at @bruce1971.


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Cisco?s Earnings Were Solid Despite Macro Challenges

Despite a challenging macroeconomic environment, the networking giant continued to perform better than rivals such as Juniper Networks - a good sign that its turnaround efforts in shoring up key routing and switching businesses are paying off.

Source: http://www.forbes.com/sites/greatspeculations/2013/02/14/ciscos-earnings-were-solid-despite-macro-challenges/

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Should You Get a Bigger Refund This Year?

Most of us realize that we spend a portion of our working day paying taxes. At tax time, millions discover they could have kept more of what they earned throughout the year ? if they?d only known they were overpaying their taxes in the first place.

So, obviously, it?s difficult to know how much you?re supposed to pay, but it can be even more of a challenge to know how much you should get back. Should you get a bigger refund this year?

From One Baby Step to the Next

Rebecca M. recently discovered her income tax refund will be much larger than she expected.

With the help of her tax professional, Rebecca increased her tax refund by $1,100. She worked with one of Dave?s Endorsed Local Providers (ELPs) to help her find all the deductions she was eligible for. She said that Sara, her tax ELP, found an error that three other tax people couldn?t figure out. The extra money means she and her family will be debt-free by the end of the year.

?Originally, it would have been one or two months into the new year before I could write the last check to Sallie Mae,? Rebecca said. ?I can?t even begin to explain how thankful I am that we found Sara. This money makes the difference. I?m so excited!?

Service You Can Count On

Even though Melissa M. prefers to do her own taxes, she still wanted to work with a tax professional who could answer her questions and make sure she was on track with her return.

Her ELP, Allan, reviewed her forms and pointed out a few entries she should recheck. ?When I made the changes he suggested, I saved $1,200!? she said.

After their consultation, Allan told Melissa she was doing a great job on her taxes. She was surprised that he didn?t try to convince her to have him complete her tax returns for her. Allan?s honesty and trustworthy advice won him a dedicated client.

?I?ll definitely be calling Allan again,? Melissa said.

Find a Tax Pro You Can Trust Today!

With every dollar of your income you recover from Uncle Sam, you increase your ability to improve your family?s finances. Like Rebecca and Melissa, you can trust your tax Endorsed Local Provider to find all the deductions and credits you qualify for so you can keep the money that?s rightfully yours. Your ELP can also help you put an end to big tax refunds by showing you how you can bring home more money in your paycheck all year long. Find your tax ELP today!

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Source: http://www.daveramsey.com/article/should-you-get-a-bigger-refund-this-year/lifeandmoney_taxes

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Joining Together Credit Card Bills The Correct Way

Bringing together consumer debt comes into play a new range of shapes and forms. Absolute confidence the things your overall pacificdebt.com|pacificdebt consolidation|pacificdebt|pacificdebt loansoverall credit score is therefore how very good involving credit debt you have, you’ll be able to obtain a lending product which can suit your specifications. The following are some frequent strategies that [...]

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Source: http://www.legaldebthelponline.com/2012/06/27/joining-together-credit-card-bills-the-correct-way/

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Govt Insured Program For Senior Home owners

Reverse mortgages are an progressively preferred way for seniors to dwell off the equity from their residences and cease creating mortgage payments. This government application for seniors is assisting them give a method to combat the slowing financial system. This federal government application was developed from the Division of Housing and concrete Advancement (HUD) in [...]

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Source: http://www.legaldebthelponline.com/2012/06/27/govt-insured-program-for-senior-home-owners/

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Learn The Value Of Canny House loan Research

There is certainly zero hesitation produce that propane is a wonderful long-term expense. We have actually peaked within our power to increase creation meaningfully, just as we now have with gentle essential oil. I do think in order for there to become an increase in long-term propane supply, you have to supply incentive to producers [...]

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Source: http://www.legaldebthelponline.com/2012/06/27/learn-the-value-of-canny-house-loan-research/

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Boeing Won't Give Up On The Batteries Keeping Its Dreamliners On The Ground

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Boeing has no plans to give up on the lithium-ion batteries that have caused so much trouble for its Dreamliner jet, it said today.

The batteries are at the center of ongoing investigations into the safety of the Dreamliner, after two fires on different aircraft last month.

Boeing's statement came after Airbus announced this morning it will not use lithium-ion batteries in its new A350 XWB passenger jet, a Dreamliner competitor, as it had planned.

Instead, it will use more proven nickel cadmium batteries, hoping to avoid mandated changes that could result from investigations into the Dreamliner fires, so it will keep to its delivery schedule. The change will not affect how the aircraft operates, a spokesperson said.

Boeing has already warned airlines it will likely miss deliveries of the Dreamliner, but it is standing by the new technology. The especially powerful batteries allow the aircraft to be lighter and more fuel efficient, a key selling point.

Here's Boeing's statement:

Boeing is confident in the safety and reliability of lithium-ion batteries. Our years of experience and deep expertise confirm that, like other technologies, when the appropriate battery, system and airplane protections are in place, lithium-ion batteries deliver significant benefits.

We are deeply involved with the appropriate investigation authorities in developing a full understanding of two recent battery events on 787s and are working tirelessly to create the solutions that will allow the 787 fleet to return to full flight status.

There's nothing we've learned in the investigations that would lead us to a different decision regarding lithium-ion batteries.

SEE ALSO: Photos From The Dreamliner Investigation Reveal Major Damage To The Jet's Battery

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AD OF THE DAY: Marc Jacobs Takes His Clothes Off For Diet Coke

Diet Coke recently hired fashion designer Marc Jacob as its new creative director. He replaces Jean Paul Gaultier, who acted as the CD for 2012. 

One of Jacobs' first jobs was to create three new can designs, one for every decade Diet Coke has been around: the 80's, 90's and 2000's. 

In Jacobs' first ad, three women come across a photo booth that keeps spitting out pictures of an attractive, shirtless man. What the women don't initially realize is that the "Diet Coke" hunk is Jacobs.

Here's the ad:

SEE ALSO: AD OF THE DAY: These Storefront Robots In Japan Mimic Customers

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