Inflation Rate Quotes

Thank you. Since we decided a few weeks ago to adopt the leaf as legal tender, we have, of course, all become immensely rich. [...] "But we have also," continued the management consultant, "run into a small inflation problem on account of the high level of leaf availability, which means that, I gather, the current going rate has something like three deciduous forests buying on ship's peanut." [...] "So in order to obviate this problem," he continued, "and effectively revalue the leaf, we are about to embark on a massive defoliation campaign, and...er, burn down all the forests. I think you'll all agree that's a sensible move under the circumstances.

Bond holders have to account for a variety of risks including interest rate risk and inflation risk.

To try to cure unemployment by inflation rather than by adjustment of specific wage-rates is like trying to adjust the piano to the stool rather than the stool to the piano.

If," ["the management consultant"] said tersely, “we could for a moment move on to the subject of fiscal policy. . .” “Fiscal policy!" whooped Ford Prefect. “Fiscal policy!" The management consultant gave him a look that only a lungfish could have copied. “Fiscal policy. . .” he repeated, “that is what I said.” “How can you have money,” demanded Ford, “if none of you actually produces anything? It doesn't grow on trees you know.” “If you would allow me to continue.. .” Ford nodded dejectedly. “Thank you. Since we decided a few weeks ago to adopt the leaf as legal tender, we have, of course, all become immensely rich.” Ford stared in disbelief at the crowd who were murmuring appreciatively at this and greedily fingering the wads of leaves with which their track suits were stuffed. “But we have also,” continued the management consultant, “run into a small inflation problem on account of the high level of leaf availability, which means that, I gather, the current going rate has something like three deciduous forests buying one ship’s peanut." Murmurs of alarm came from the crowd. The management consultant waved them down. “So in order to obviate this problem,” he continued, “and effectively revalue the leaf, we are about to embark on a massive defoliation campaign, and. . .er, burn down all the forests. I think you'll all agree that's a sensible move under the circumstances." The crowd seemed a little uncertain about this for a second or two until someone pointed out how much this would increase the value of the leaves in their pockets whereupon they let out whoops of delight and gave the management consultant a standing ovation. The accountants among them looked forward to a profitable autumn aloft and it got an appreciative round from the crowd.

So just out of curiosity, what do you think I'm worth?" he asked when he just couldn't help himself. "I mean, it isn't often a person's put on the open market. What is the going rate for presidents' sons these days? Is it more or less than what you guys were going to get for my mother? Accounting for inflation, of course.

You have the legs and other also have it; they have the brain and you have it! Stop thinking you can't transact the business that others can. If you do, you are raising your inflation rate!

We’re not in control. So we learn to pretend, all the time, about our jobs and our marriages and our children and everything else. We pretend we’re normal, that we’re reasonably well educated, that we understand ‘amortization levels’ and ‘inflation rates’. That we know how sex works. In truth, we know as much about sex as we do about USB leads, and it always takes us four tries to get those little buggers in. (Wrong way round, wrong way round, wrong way round, there! In!)

For individuals whose only capital is a small balance in a checking account, the return is negative, because such balances yield no interest and are eaten away by inflation. Savings accounts often yield little more than the inflation rate.

If ordinary citizens knew or ever really [understood] how our political leaders have allowed unemployment to be used as a tool for fine-tuning the inflation rate, they would throw the rascals out and demand a thorough purging of the ranks of government economists.

So much of what we hear today about courage is inflated and empty rhetoric that camouflages personal fears about one’s likability, ratings, and ability to maintain a level of comfort and status. We need more people who are willing to demonstrate what it looks like to risk and endure failure, disappointment, and regret—people willing to feel their own hurt instead of working it out on other people, people willing to own their stories, live their values, and keep showing up. I feel so lucky to have spent the past couple of years working with some true badasses, from teachers and parents to CEOs, filmmakers, veterans, human-resource professionals, school counselors, and therapists. We’ll explore what they have in common as we move through the book, but here’s a teaser: They’re curious about the emotional world and they face discomfort straight-on.

One of the worst results of the retention of the Keynesian myths is that it not only promotes greater and greater inflation, but that it systematically diverts attention from the real causes of our unemployment, such as excessive union wage-rates, minimum wage laws, excessive and prolonged unemployment insurance, and overgenerous relief payments.

Almost every Fed chairman in the past 60 years has manipulated interest rates to brighten the economic outlook for incumbent presidents or newly elected presidents who won by large margins. The purchasing power of the U.S. dollar has fallen 94 percent in the past 100 years. The only way you can create inflation is by creating more money that is backed by the same reserve assets; the Fed is the only entity that can create more money. Ben Bernanke’s quantitative easing (QE) programs have pumped billions of unfunded dollars into the economy, thereby setting us up for massive inflation in the very near future. If this isn’t a form of financial terrorism, it is incompetence of the highest order.

How often does it occur that information provided you on morning radio or television, or in the morning newspaper, causes you to alter your plans for the day, or to take some action you would not otherwise have taken, or provides insight into some problem you are required to solve? For most of us, news of the weather will sometimes have consequences; for investors, news of the stock market; perhaps an occasional story about crime will do it, if by chance it occurred near where you live or involved someone you know. But most of our daily news is inert, consisting of information that gives us something to talk about but cannot lead to any meaningful action...You may get a sense of what this means by asking yourself another series of questions: What steps do you plan to take to reduce the conflict in the Middle East? Or the rates of inflation, crime and unemployment? What are your plans for preserving the environment or reducing the risk of nuclear war? What do you plan to do about NATO, OPEC, the CIA, affirmative action, and the monstrous treatment of the Baha’is in Iran? I shall take the liberty of answering for you: You plan to do nothing about them. You may, of course, cast a ballot for someone who claims to have some plans, as well as the power to act. But this you can do only once every two or four years by giving one hour of your time, hardly a satisfying means of expressing the broad range of opinions you hold. Voting, we might even say, is the next to last refuge of the politically impotent. The last refuge is, of course, giving your opinion to a pollster, who will get a version of it through a desiccated question, and then will submerge it in a Niagara of similar opinions, and convert them into—what else?—another piece of news. Thus, we have here a great loop of impotence: The news elicits from you a variety of opinions about which you can do nothing except to offer them as more news, about which you can do nothing.

To accumulate any wealth, you must invest at a growth rate higher than inflation.

short-term interest rates above long-term rates (which was called “inverting the yield curve”). Every time that happened, inflation-hedged assets and the economy went down. But Bunker

Because there’s such an unbelievable amount that we’re all supposed to be able to cope with these days. You’re supposed to have a job, and somewhere to live, and a family, and you’re supposed to pay taxes and have clean underwear and remember the password to your damn Wi-Fi. Some of us never manage to get the chaos under control, so our lives simply carry on, the world spinning through space at two million miles an hour while we bounce about on its surface like so many lost socks. Our hearts are bars of soap that we keep losing hold of; the moment we relax, they drift off and fall in love and get broken, all in the wink of an eye. We’re not in control. So we learn to pretend, all the time, about our jobs and our marriages and our children and everything else. We pretend we’re normal, that we’re reasonably well educated, that we understand “amortization levels” and “inflation rates.” That we know how sex works. In truth, we know as much about sex as we do about USB leads, and it always takes us four tries to get those little buggers in. (Wrong way round, wrong way round, wrong way round, there! In!) We pretend to be good parents when all we really do is provide our kids with food and clothing and tell them off when they put chewing gum they find on the ground in their mouths. We tried keeping tropical fish once and they all died. And we really don’t know more about children than tropical fish, so the responsibility frightens the life out of us each morning. We don’t have a plan, we just do our best to get through the day, because there’ll be another one coming along tomorrow.

Perhaps the creeping effort to restrict civil liberties wouldn’t have brought people into the streets, at least not immediately. But Allende’s economic programs hit them directly. His announced policy of “first consumption, then accumulation” was an economic disaster waiting to happen. In 1971, the inflation rate was 20 percent, kept somewhat in check by the expenditure of the government’s foreign reserves, but in 1972, with the government spending lavishly to support its social and economic policies, it jumped to 78 percent, and in 1973 to an unprecedented 353 percent. No country in the world had a higher rate. Then the attempt to rein in prices through government controls led to shortages of basic consumer goods and the rise of black markets. People were waiting in line to buy toothpaste.

It is not the poverty of individuals and the community, not indebtedness to foreign nations, not the unfavourableness of the conditions of production, that force up the rate of exchange, but inflation.

If not interest rates or monetary policy, then what? Most research on the origins of the bubble has focused on three factors: mass psychology; financial innovations that reduced the incentive for careful lending;

Where did this whole thing begin? If what we think of as reality is just a pattern that somebody brought Outside, and the universe just popped into bring, then whoever it was is probably still wandering around giving off universes wherever she goes So where did she come from? And what was there before she started doing it? And how did Outside come to exist, for that matter?” That's Inspace thinking,” said Olhado. “That's the way you conceive of things when you still believe in space and time as absolutes. You think of everything starting and stopping, of things having origins, because that's the way it is in the observable universe. The thing is, Outside there's no rules like that at all. Outside was always there and always will be there. The number of philotes there is infinite, and all of them always existed. No mater how many of them you pull out and put into organized universes, there'll be just as many left as there always were” But somebody had to start making universes.” Why?” asked Olhado. Because-because I-“ Nobody ever started. It's always been going on. I mean, if it weren’t already going on, it couldn’t start. Outside where there weren’t any patterns, it would be impossible to conceive of a pattern. They can’t act, by definition, because they literally can’t even find themselves.” But how could it have always been going on?” Think of it as this moment in time, the reality we live in at this moment, this condition of the entire universe-of all the universes-” You mean now.” Right. Think of it as if now were the surface of a sphere. Time is moving forward through the chaos of Outside like the surface of an expanding sphere, a balloon inflating. On the outside, chaos. On the inside, reality. Always growing-like you said, Valentine. Popping up new universes all the time.” But where did this balloon come from?” OK, you’ve got the balloon. The expanding sphere. Only now think of it as a sphere with an infinite radius.” Valentine tried to think of what that would mean. “The surface would be completely flat.” That’s right” And you could never go all the way around it” That’s right, too. Infinitely large. Impossible even to count all the universes that exist on the reality side. And now, starting from the edge, you get on a starship and start heading inward toward the center. The farther in you go, the older everything is. All the old universes back and back. When do you get to the first one?” You don’t” said Valentine. “Not it you’re traveling at a finate rate.” You don’t reach the center of a sphere on infinite radius, if you’re starting at the surface, because no matter how far you go, no matter how quickly, the center, the beginning, is always infinitely far away.” And that’s where the universe began.

The “German problem” after 1970 became how to keep up with the Germans in terms of efficiency and productivity. One way, as above, was to serially devalue, but that was beginning to hurt. The other way was to tie your currency to the deutsche mark and thereby make your price and inflation rate the same as the Germans, which it turned out would also hurt, but in a different way. The problem with keeping up with the Germans is that German industrial exports have the lowest price elasticities in the world. In plain English, Germany makes really great stuff that everyone wants and will pay more for in comparison to all the alternatives. So when you tie your currency to the deutsche mark, you are making a one-way bet that your industry can be as competitive as the Germans in terms of quality and price. That would be difficult enough if the deutsche mark hadn’t been undervalued for most of the postwar period and both German labor costs and inflation rates were lower than average, but unfortunately for everyone else, they were. That gave the German economy the advantage in producing less-than-great stuff too, thereby undercutting competitors in products lower down, as well as higher up the value-added chain. Add to this contemporary German wages, which have seen real declines over the 2000s, and you have an economy that is extremely hard to keep up with. On the other side of this one-way bet were the financial markets. They looked at less dynamic economies, such as the United Kingdom and Italy, that were tying themselves to the deutsche mark and saw a way to make money. The only way to maintain a currency peg is to either defend it with foreign exchange reserves or deflate your wages and prices to accommodate it. To defend a peg you need lots of foreign currency so that when your currency loses value (as it will if you are trying to keep up with the Germans), you can sell your foreign currency reserves and buy back your own currency to maintain the desired rate. But if the markets can figure out how much foreign currency you have in reserve, they can bet against you, force a devaluation of your currency, and pocket the difference between the peg and the new market value in a short sale. George Soros (and a lot of other hedge funds) famously did this to the European Exchange Rate Mechanism in 1992, blowing the United Kingdom and Italy out of the system. Soros could do this because he knew that there was no way the United Kingdom or Italy could be as competitive as Germany without serious price deflation to increase cost competitiveness, and that there would be only so much deflation and unemployment these countries could take before they either ran out of foreign exchange reserves or lost the next election. Indeed, the European Exchange Rate Mechanism was sometimes referred to as the European “Eternal Recession Mechanism,” such was its deflationary impact. In short, attempts to maintain an anti-inflationary currency peg fail because they are not credible on the following point: you cannot run a gold standard (where the only way to adjust is through internal deflation) in a democracy.

firms do not borrow as much to invest when rates are higher and individuals stop buying durable goods against credit and, instead, turn to save. Lower demand growth leads to a better match between demand and supply, and thus lower inflation for the goods being produced.

The history of black workers in the United States illustrates the point. As already noted, from the late nineteenth-century on through the middle of the twentieth century, the labor force participation rate of American blacks was slightly higher than that of American whites. In other words, blacks were just as employable at the wages they received as whites were at their very different wages. The minimum wage law changed that. Before federal minimum wage laws were instituted in the 1930s, the black unemployment rate was slightly lower than the white unemployment rate in 1930. But then followed the Davis-Bacon Act of 1931, the National Industrial Recovery Act of 1933 and the Fair Labor Standards Act of 1938—all of which imposed government-mandated minimum wages, either on a particular sector or more broadly. The National Labor Relations Act of 1935, which promoted unionization, also tended to price black workers out of jobs, in addition to union rules that kept blacks from jobs by barring them from union membership. The National Industrial Recovery Act raised wage rates in the Southern textile industry by 70 percent in just five months and its impact nationwide was estimated to have cost blacks half a million jobs. While this Act was later declared unconstitutional by the Supreme Court, the Fair Labor Standards Act of 1938 was upheld by the High Court and became the major force establishing a national minimum wage. As already noted, the inflation of the 1940s largely nullified the effect of the Fair Labor Standards Act, until it was amended in 1950 to raise minimum wages to a level that would have some actual effect on current wages. By 1954, black unemployment rates were double those of whites and have continued to be at that level or higher. Those particularly hard hit by the resulting unemployment have been black teenage males. Even though 1949—the year before a series of minimum wage escalations began—was a recession year, black teenage male unemployment that year was lower than it was to be at any time during the later boom years of the 1960s. The wide gap between the unemployment rates of black and white teenagers dates from the escalation of the minimum wage and the spread of its coverage in the 1950s. The usual explanations of high unemployment among black teenagers—inexperience, less education, lack of skills, racism—cannot explain their rising unemployment, since all these things were worse during the earlier period when black teenage unemployment was much lower. Taking the more normal year of 1948 as a basis for comparison, black male teenage unemployment then was less than half of what it would be at any time during the decade of the 1960s and less than one-third of what it would be in the 1970s. Unemployment among 16 and 17-year-old black males was no higher than among white males of the same age in 1948. It was only after a series of minimum wage escalations began that black male teenage unemployment not only skyrocketed but became more than double the unemployment rates among white male teenagers. In the early twenty-first century, the unemployment rate for black teenagers exceeded 30 percent. After the American economy turned down in the wake of the housing and financial crises, unemployment among black teenagers reached 40 percent.

As we’ll see, the 4% Roman rate of return is about the same as the aggregate return on capital (when stocks and bonds are considered together) in the U.S. in the twentieth century, and perhaps even a bit more than the aggregate return expected in the next century. (The 4% Roman rate was gold-based, so the return was a real, that is, after-inflation, return.) The

Early on in the top, some parts of the credit system suffer, but others remain robust, so it isn’t clear that the economy is weakening. So while the central bank is still raising interest rates and tightening credit, the seeds of the recession are being sown. The fastest rate of tightening typically comes about five months prior to the top of the stock market. The economy is then operating at a high rate, with demand pressing up against the capacity to produce. Unemployment is normally at cyclical lows and inflation rates are rising. The increase in short-term interest rates makes holding cash more attractive, and it raises the interest rate used to discount the future cash flows of assets, weakening riskier asset prices and slowing lending.

An American home has not, historically speaking, been a lucrative investment. In fact, according to an index developed by Robert Shiller and his colleague Karl Case, the market price of an American home has barely increased at all over the long run. After adjusting for inflation, a $10,000 investment made in a home in 1896 would be worth just $10,600 in 1996. The rate of return had been less in a century than the stock market typically produces in a single year.

The fact that new coins are produced means the money supply increases by a planned amount, but this does not necessarily result in inflation. If the supply of money increases at the same rate that the number of people using it increases, prices remain stable. If it does not increase as fast as demand, there will be deflation and early holders of money will see its value increase. Coins have to get initially distributed somehow, and a constant rate seems like the best formula.

Since we decided a few weeks ago to adopt leaves as legal tender, we have of course all become immensely rich. . . . But, we have also run into a small inflation problem on account of the high level of leaf availability. Which means that I gather the current going rate has something like three major deciduous forests buying one ship’s peanut. So, um, in order to obviate this problem and effectively revalue the leaf, we are about to embark on an extensive defoliation campaign, and um, burn down all the forests. DOUGLAS

The depressives, far from seeing themselves through dark lenses as we had presumed, were cursed by twenty-twenty vision: compared with other groups, their self-ratings of positive qualities most closely matched how the observers rated them. In contrast, both the nondepressed psychiatric patients and the control group had inflated self-ratings, seeing themselves more positively than the observers saw them. The depressive patients simply did not see themselves through the rose-colored glasses that the others used when evaluating themselves.

Most of the crime-ridden minority neighborhoods in New York City, especially areas like East New York, where many of the characters in Eric Garner’s story grew up, had been artificially created by a series of criminal real estate scams. One of the most infamous had involved a company called the Eastern Service Corporation, which in the sixties ran a huge predatory lending operation all over the city, but particularly in Brooklyn. Scam artists like ESC would first clear white residents out of certain neighborhoods with scare campaigns. They’d slip leaflets through mail slots warning of an incoming black plague, with messages like, “Don’t wait until it’s too late!” Investors would then come in and buy their houses at depressed rates. Once this “blockbusting” technique cleared the properties, a company like ESC would bring in a new set of homeowners, often minorities, and often with bad credit and shaky job profiles. They bribed officials in the FHA to approve mortgages for anyone and everyone. Appraisals would be inflated. Loans would be approved for repairs, but repairs would never be done. The typical target homeowner in the con was a black family moving to New York to escape racism in the South. The family would be shown a house in a place like East New York that in reality was only worth about $15,000. But the appraisal would be faked and a loan would be approved for $17,000. The family would move in and instantly find themselves in a house worth $2,000 less than its purchase price, and maybe with faulty toilets, lighting, heat, and (ironically) broken windows besides. Meanwhile, the government-backed loan created by a lender like Eastern Service by then had been sold off to some sucker on the secondary market: a savings bank, a pension fund, or perhaps to Fannie Mae, the government-sponsored mortgage corporation. Before long, the family would default and be foreclosed upon. Investors would swoop in and buy the property at a distressed price one more time. Next, the one-family home would be converted into a three- or four-family rental property, which would of course quickly fall into even greater disrepair. This process created ghettos almost instantly. Racial blockbusting is how East New York went from 90 percent white in 1960 to 80 percent black and Hispanic in 1966.

Five simple truths embody most of what we know about inflation: Inflation is a monetary phenomenon arising from a more rapid increase in the quantity of money than in output (though, of course, the reasons for the increase in money may be various). In today’s world government determines—or can determine—the quantity of money. There is only one cure for inflation: a slower rate of increase in the quantity of money. It takes time—measured in years, not months—for inflation to develop; it takes time for inflation to be cured. Unpleasant side effects of the cure are unavoidable.

It should be immediately clear that this could be brought about more directly and honestly by a reduction in unworkable wage rates. But the more sophisticated proponents of inflation believe that this is now politically impossible. Sometimes they go further, and charge that all proposals under any circumstances to reduce particular wage rates directly in order to reduce unemployment are “antilabor.” But what they are themselves proposing, stated in bald terms, is to deceive labor by reducing real wage rates (that is, wage rates in terms of purchasing power) through an increase in prices.

The answer, in short, is that the expectation that work will always be fulfilling can lead to suffering. Studies show that an “obsessive passion” for work leads to higher rates of burnout and work-related stress. Researchers have also found that lifestyles that revolve around work in countries like Japan are a key contributor to record-low fertility rates. And for young people in the United States, inflated expectations of professional success help explain record-high rates of depression and anxiety. Globally, more people die each year from symptoms related to overwork than from malaria.

But we have also,’ continued the management consultant, ‘run into a small inflation problem on account of the high level of leaf availability, which means that, I gather, the current going rate has something like three deciduous forests buying one ship’s peanut.’ Murmurs of alarm came from the crowd. The management consultant waved them down. ‘So in order to obviate this problem,’ he continued, ‘and effectively revalue the leaf, we are about to embark on a massive defoliation campaign, and . . . er, burn down all the forests. I think you’ll all agree that’s a sensible move under the circumstances.

A “beautiful deleveraging” happens when the four levers are moved in a balanced way so as to reduce intolerable shocks and produce positive growth with falling debt burdens and acceptable inflation. More specifically, deleveragings become beautiful when there is enough stimulation (i.e., through “printing of money”/debt monetization and currency devaluation) to offset the deflationary deleveraging forces (austerity/defaults) and bring the nominal growth rate above the nominal interest rate—but not so much stimulation that inflation is accelerated, the currency is devaluated, and a new debt bubble arises.

Who could I turn to? Around that time, a colleague in another office told me about some weird digital currency called Bitcoin, which Argentines were using to get around this problem. I decided to write about it. The people I talked with for my article had been living with some form of inflation and/or currency controls all their lives and so had their parents. They understood right away how significant it was to be able to buy a currency that’s not controlled by anyone and, therefore, can’t be stopped or seized. Its issuance rate was dictated by algorithms and computer code, not by the whims of politicians and central bankers.

The key to this process,” Sanchez said, “is to speak up when it is your moment and to project energy when it is someone else’s time.” “Many things can go wrong,” Julia interjected. “Some people get inflated when in a group. They feel the power of an idea and express it, then because that burst of energy feels so good, they keep on talking, long after the energy should have shifted to someone else. They try to monopolize the group. “Others are pulled back and even when they feel the power of an idea, they won’t risk saying it. When this happens, the group fragments and the members don’t get the benefit of all the messages. The same thing happens when some members of the group are not accepted by some of the others. The rejected individuals are prevented from receiving the energy and so the group misses the benefit of their ideas.” Julia paused and we both looked at Sanchez who was taking a breath to speak. “How people are excluded is important,” he said. “When we dislike someone, or feel threatened by someone, the natural tendency is to focus on something we dislike about the person, something that irritates us. Unfortunately, when we do this—instead of seeing the deeper beauty of the person and giving them energy—we take energy away and actually do them harm. All they know is that they suddenly feel less beautiful and less confident, and it is because we sapped their energy.” “That is why,” Julia said, “this process is so important. Humans are aging each other at a tremendous rate out there with their violent competitions.” “But remember,” Sanchez added, “in a truly functional group, the idea is to do the opposite of this, the idea is for every member’s energy and vibration to increase because of the energy sent by all of the others. When this occurs, everyone’s individual energy field merges with everyone else’s and makes one pool of energy. It is as if the group is just one body, but one with many heads. Sometimes one head speaks for the body. Sometimes another talks. But in a group functioning this way, each individual knows when to speak and what to say because he truly sees life more clearly.

In a similar study conducted at Yale University, undergraduate participants were offered the opportunity to use the same kind of casuistry to maintain the occupational status quo. The students evaluated one of two applicants (Michael or Michelle) for the position of police chief. One applicant was streetwise, a tough risk-taker, popular with other officers, but poorly educated. By contrast, the educated applicant was well schooled, media savvy, and family oriented, but lacked street experience and was less popular with the other officers. The undergraduate participants judged the job applicant on various streetwise and education criteria, and then rated the importance of each criterion for success as a police chief. Participants who rated Michael inflated the importance of being an educated, media-savvy family man when these were qualities Michael possessed, but devalued these qualities when he happened to lack them. No such helpful shifting of criteria took place for Michelle. As a consequence, regardless of whether he was streetwise or educated, the demands of the social world were shaped to ensure that Michael had more of what it took to be a successful police chief. As the authors put it, participants may have ‘felt that they had chosen the right man for the job, when in fact they had chosen the right job criteria for the man.’21 Ironically, the people who were most convinced of their own objectivity discriminated the most.

One can even imagine that inflation tends to improve the relative position of the wealthiest individuals compared to the least wealthy, in that it enhances the importance of financial managers and intermediaries. A person with 10 or 50 million euros cannot afford the money managers that Harvard has but can nevertheless pay financial advisors and stockbrokers to mitigate the effects of inflation. By contrast, a person with only 10 or 50 thousand euros to invest will not be offered the same choices by her broker (if she has one): contacts with financial advisors are briefer, and many people in this category keep most of their savings in checking accounts that pay little or nothing and/or savings accounts that pay little more than the rate of inflation.

Michael Ward knows. Ward loves railroads. His loves his own railroad company, CSX, which traces its origins to 1827 when the Baltimore & Ohio Railroad was formed as the nation’s first common carrier. He traces his own origins at CSX back thirty-seven years, when he took an analyst job as a newly minted Harvard Business School M.B.A., rising to become chairman, president, and CEO in 2003. And he loves the whole American freight rail industry. “Railroaders are like farmers,” Ward declares. “You heard about the farmer that won the lottery? They said to him, ‘Oh my gosh, you won the lottery; what are you going to do with all that money?’ He said, ‘I’m a farmer and I love farming, and I’m going to farm until every penny of it is gone.’ And I say railroaders are like that. When we make more money, we’re going to invest more back into the infrastructure, so we can strengthen the railroad and grow the business.” Ward may sound like a press release, but that’s exactly how he talks, and why he’s a major industry spokesman. He lavishes praise on industry performance: “While we’ve improved the profitability of the industry, we’ve also cut rates in half of what they were in 1980 for our customers, on an inflation-adjusted basis. We’re providing a more economical product to them, and it’s safer and more reliable. Over the years, as an industry, our train accident rate is down 80 percent; our personal injury rate is down 85 percent; and we’re doing this with about one-third of the workforce we had in 1980.” He calls the industry “the envy of the world.

found myself constantly drawn to the subject of narcissistic personality disorder (NPD), which I have concluded is inextricably linked to psychopathy, although this link is rarely mentioned in medical papers or among the psychiatric profession generally. As with psychopathy, people with NPD make up approximately 1 per cent of the population with rates greater in men. Another direct comparison between those suffering with NPD and psychopathy/sociopathy is that both types are characterised by exaggerated feelings of self-importance. In its moderate to extreme forms these people are excessively preoccupied with personal adequacy, power, prestige and vanity; mentally unable to see the destructive damage they are causing themselves and others. Symptoms of the NPD disorder include seeking constant approval from others who are successful in positions of power in whatever form it may be. Many are selfish, grandiose pathological liars; their egos and sense of self-esteem over-inflated, while at once they are torn between exaggerated self-appraisal and the reality that they might never amount to much.

So it needs saying from the outset that it’s always very easy to declare that other people are idiots, but only if you forget how idiotically difficult being human is. Especially if you have other people you’re trying to be a reasonably good human being for. Because there’s such an unbelievable amount that we’re all supposed to be able to cope with these days. You’re supposed to have a job, and somewhere to live, and a family, and you’re supposed to pay taxes and have clean underwear and remember the password to your damn Wi-Fi. Some of us never manage to get the chaos under control, so our lives simply carry on, the world spinning through space at two million miles an hour while we bounce about on its surface like so many lost socks. Our hearts are bars of soap that we keep losing hold of; the moment we relax, they drift off and fall in love and get broken, all in the wink of an eye. We’re not in control. So we learn to pretend, all the time, about our jobs and our marriages and our children and everything else. We pretend we’re normal, that we’re reasonably well educated, that we understand “amortization levels” and “inflation rates.” That we know how sex works. In truth, we know as much about sex as we do about USB leads, and it always takes us four tries to get those little buggers in. (Wrong way round, wrong way round, wrong way round, there! In!) We pretend to be good parents when all we really do is provide our kids with food and clothing and tell them off when they put chewing gum they find on the ground in their mouths. We tried keeping tropical fish once and they all died. And we really don’t know more about children than tropical fish, so the responsibility frightens the life out of us each morning. We don’t have a plan, we just do our best to get through the day, because there’ll be another one coming along tomorrow. Sometimes it hurts, it really hurts, for no other reason than the fact that our skin doesn’t feel like it’s ours. Sometimes we panic, because the bills need paying and we have to be grown-up and we don’t know how, because it’s so horribly, desperately easy to fail at being grown-up. Because everyone loves someone, and anyone who loves someone has had those desperate nights where we lie awake trying to figure out how we can afford to carry on being human beings. Sometimes that makes us do things that seem ridiculous in hindsight, but which felt like the only way out at the time.

Jacques Ellul has a word for this instrumentalizing attitude: technique. His analysis helps us to appreciate just how deep and wide the n-shaped dynamic runs in our society. He defines technique as “the totality of methods rationally arrived at and having absolute efficiency in every field of human activity.”14 It is “never anything but a collection of means and the search for the most efficient means” in any given situation,15 with its origin in Cain’s city-building and Lamech’s polygamy.16 Up until the eighteenth century, Ellul argues, technique was largely absent from all areas of society apart from the mechanical, but in the industrial revolution, technical progress suddenly exploded and began to reconfigure every area of life, from industrial production through politics to the family. The result is that today technique is not a thing out there in the world; it is how we do everything we do in the world: “The Third World, Europe, militarization, etc., are all political matters. Inflation, exchange rates, standards of living, and growth are all economic matters. Yet technique has a part in all of them. It is like a key, like a substance underlying all problems and situations. It is ultimately the decisive factor.

Here are the main facts:1 Between 1980 and 2016, average national income per adult, expressed in 2016 euros, rose from 25,000 euros to just over 33,000 euros, or a rise of approximately 30%. At the same time, the average wealth held derived from property per adult doubled, rising from 90,000 to 190,000 euros. Yet more striking: the wealth of the richest 1%, 70% of which is in financial assets, rose from 1.4 to 4.5 million euros, or increased more than threefold. As to the 0.1% of the wealthiest, 90% of whose wealth is held in financial assets, and who will be the main beneficiaries of the abolition of the wealth tax, their fortunes rose from 4 to 20 million euros, that is, they increased fivefold. In other words, the biggest fortunes in financial assets rose even more rapidly than property assets, whereas the opposite should have been the case if the hypothesis of a fiscal flight were true. Moreover, this type of finding is a characteristic in the ranking of fortunes, in France as in all countries. According to Forbes, the top world fortunes, which are almost exclusively held in financial assets—have risen at a rate of 6% to 7% per year (on top of inflation) since the 1980s, or 3–4 times more rapidly than growth in GDP and of world per capita wealth.

A few years ago my friend Jon Brooks supplied this great illustration of skewed interpretation at work. Here’s how investors react to events when they’re feeling good about life (which usually means the market has been rising): Strong data: economy strengthening—stocks rally Weak data: Fed likely to ease—stocks rally Data as expected: low volatility—stocks rally Banks make $4 billion: business conditions favorable—stocks rally Banks lose $4 billion: bad news out of the way—stocks rally Oil spikes: growing global economy contributing to demand—stocks rally Oil drops: more purchasing power for the consumer—stocks rally Dollar plunges: great for exporters—stocks rally Dollar strengthens: great for companies that buy from abroad—stocks rally Inflation spikes: will cause assets to appreciate—stocks rally Inflation drops: improves quality of earnings—stocks rally Of course, the same behavior also applies in the opposite direction. When psychology is negative and markets have been falling for a while, everything is capable of being interpreted negatively. Strong economic data is seen as likely to make the Fed withdraw stimulus by raising interest rates, and weak data is taken to mean companies will have trouble meeting earnings forecasts. In other words, it’s not the data or events; it’s the interpretation. And that fluctuates with swings in psychology.

A confidential report delivered in June 1965 by Abel Aganbegyan, director of the Novobirsk Institute of Economics, highlighted the difficulties. Aganbegyan noted that the growth rate of the Soviet economy was beginning to decline, just as the rival US economy seemed particularly buoyant; at the same time, some sectors of the Soviet economy - housing, agriculture, services, retail trade - remained very backward, and were failing to develop at an adequate rate. The root causes of this poor performance he saw in the enormous commitment of resources to defense (in human terms, 30-40 million people out of a working population of 100 million, he reckoned), and the 'extreme centralism and lack of democracy in economic matters' which had survived from the past. In a complex modern society, he argued, not everything could be planned, since it was impossible to foresee all possible contingencies and their potential effects. So the plan amounted to central command, and even that could not be properly implemented for lack of information and of modern data-processing equipment. 'The Central Statistical Administration ... does not have a single computer, and is not planning to acquire any,' he commented acidly. Economic administration was also impeded by excessive secrecy: 'We obtain many figures... from American journals sooner than they are released by the Central Statistical Administration.' Hence the economy suffered from inbuilt distortions: the hoarding of goods and labour to provide for unforeseen contingencies, the production of shoddy goods to fulfill planning targets expressed in crude quantitative terms, the accumulation of unused money by a public reluctant to buy substandard products, with resultant inflation and a flourishing black market.

In both oral and typographic cultures, information derives its importance from the possibilities of action. Of course, in any communication environment, input (what one is informed about) always exceeds output (the possibilities of action based on information. But the situation created by telegraphy, and then exacerbated by later technologies, made the relationship between information and action both abstract and remote. For the first time in human history, people were faced with the problem of information glut, which means that simultaneously they were faced with the problem of a diminished social and political potency. You may get a sense of what this means by asking yourself another series of questions: What steps do you plan to take to reduce the conflict in the Middle East? Or the rates of inflation, crime and unemployment? What are your plans for preserving the environment or reducing the risk of nuclear war? What do you plan to do about NATO, OPEC, the CIA, affirmative action, and the monstrous treatment of the Baha'is in Iran? I shall take the liberty of answering for you: You plan to do nothing about them. You may, of course, cast a ballot for someone who claims to have some plans, as well as the power to act. But this you can do only once every two or four years by giving one hour of your time, hardly a satisfying means of expressing the broad range of opinions you hold. Voting, we might even say, is the next to last refuge of the politically impotent. The last refuge is, of course, giving your opinion to a pollster, who will get a version of it through a desiccated question, and then will submerge it in a Niagara of similar opinions, and convert them into--what else?--another piece of news. Thus, we have here a great loop of impotence: The news elicits from you a variety of opinions about which you can do nothing except to offer them as more news, about which you can do nothing.

As I saw it, there was a 75 percent chance the Fed’s efforts would fall short and the economy would move into failure; a 20 percent chance it would initially succeed at stimulating the economy but still ultimately fail; and a 5 percent chance it would provide enough stimulus to save the economy but trigger hyperinflation. To hedge against the worst possibilities, I bought gold and T-bill futures as a spread against eurodollars, which was a limited-risk way of betting on credit problems increasing. I was dead wrong. After a delay, the economy responded to the Fed’s efforts, rebounding in a noninflationary way. In other words, inflation fell while growth accelerated. The stock market began a big bull run, and over the next eighteen years the U.S. economy enjoyed the greatest noninflationary growth period in its history. How was that possible? Eventually, I figured it out. As money poured out of these borrower countries and into the U.S., it changed everything. It drove the dollar up, which produced deflationary pressures in the U.S., which allowed the Fed to ease interest rates without raising inflation. This fueled a boom. The banks were protected both because the Federal Reserve loaned them cash and the creditors’ committees and international financial restructuring organizations such as the International Monetary Fund (IMF) and the Bank for International Settlements arranged things so that the debtor nations could pay their debt service from new loans. That way everyone could pretend everything was fine and write down those loans over many years. My experience over this period was like a series of blows to the head with a baseball bat. Being so wrong—and especially so publicly wrong—was incredibly humbling and cost me just about everything I had built at Bridgewater. I saw that I had been an arrogant jerk who was totally confident in a totally incorrect view. So there I was after eight years in business, with nothing to show for it. Though I’d been right much more than I’d been wrong, I was all the way back to square one.

KEYNESIAN ECONOMICS AND STIMULUS Keynesian economics is based on the notion that unemployment arises when total or aggregate demand in an economy falls short of the economy’s ability to supply goods and services. When products go unsold, jobs are lost. Aggregate demand, in turn, comes from two sources: the private sector (which is the majority) and the government. At times, aggregate demand is too buoyant—goods fly off the shelves and labor is in great demand—and we get rising inflation. At other times, aggregate demand is inadequate—goods are hard to sell and jobs are hard to find. In those cases, Keynes argued in the 1930s, governments can boost employment by cutting interest rates (what we now call looser monetary policy), raising their own spending, or cutting people’s taxes (what we now call looser fiscal policy). By the same logic, when there is too much demand, governments can fight actual or incipient inflation by raising interest rates (tightening monetary policy), increasing taxes, or reducing its own spending (thus tightening fiscal policy). That’s part of standard Keynesian economics, too, although Keynes, writing during the Great Depression, did not emphasize it. Setting aside the underlying theory, the central Keynesian policy idea is that the government can—and, Keynes argued, should—act as a kind of balance wheel, stimulating aggregate demand when it’s too weak and restraining aggregate demand when it’s too strong. For decades, American economists took for granted that most of that job should and would be done by monetary policy. Fiscal policy, they thought, was too slow, too cumbersome, and too political. And in the months after the Lehman Brothers failure, the Federal Reserve did, indeed, pull out all the stops—while fiscal policy did nothing. But what happens when, as was more or less the case by December 2008, the central bank has done almost everything it can, and yet the economy is still sinking? That’s why eyes started turning toward Congress and the president—that is, toward fiscal stimulus—after the 2008 election.

Between 2003 and 2008, Iceland’s three main banks, Glitnir, Kaupthing and Landsbanki, borrowed over $140 billion, a figure equal to ten times the country’s GDP, dwarfing its central bank’s $2.5 billion reserves. A handful of entrepreneurs, egged on by their then government, embarked on an unprecedented international spending binge, buying everything from Danish department stores to West Ham Football Club, while a sizeable proportion of the rest of the adult population enthusiastically embraced the kind of cockamamie financial strategies usually only mooted in Nigerian spam emails – taking out loans in Japanese Yen, for example, or mortgaging their houses in Swiss francs. One minute the Icelanders were up to their waists in fish guts, the next they they were weighing up the options lists on their new Porsche Cayennes. The tales of un-Nordic excess are legion: Elton John was flown in to sing one song at a birthday party; private jets were booked like they were taxis; people thought nothing of spending £5,000 on bottles of single malt whisky, or £100,000 on hunting weekends in the English countryside. The chief executive of the London arm of Kaupthing hired the Natural History Museum for a party, with Tom Jones providing the entertainment, and, by all accounts, Reykjavik’s actual snow was augmented by a blizzard of the Colombian variety. The collapse of Lehman Brothers in late 2008 exposed Iceland’s debts which, at one point, were said to be around 850 per cent of GDP (compared with the US’s 350 per cent), and set off a chain reaction which resulted in the krona plummeting to almost half its value. By this stage Iceland’s banks were lending money to their own shareholders so that they could buy shares in . . . those very same Icelandic banks. I am no Paul Krugman, but even I can see that this was hardly a sustainable business model. The government didn’t have the money to cover its banks’ debts. It was forced to withdraw the krona from currency markets and accept loans totalling £4 billion from the IMF, and from other countries. Even the little Faroe Islands forked out £33 million, which must have been especially humiliating for the Icelanders. Interest rates peaked at 18 per cent. The stock market dropped 77 per cent; inflation hit 20 per cent; and the krona dropped 80 per cent. Depending who you listen to, the country’s total debt ended up somewhere between £13 billion and £63 billion, or, to put it another way, anything from £38,000 to £210,000 for each and every Icelander.

Beginning in 2011, SpaceX won a series of contracts from NASA to develop rockets that could take humans to the International Space Station, a task made crucial by the retirement of the Space Shuttle. To fulfill that mission, it needed to add to its facilities at Cape Canaveral’s Pad 40, and Musk set his sights on leasing the most storied launch facility there, Pad 39A. Pad 39A had been center stage for America’s Space Age dreams, burned into the memories of a television generation that held its collective breath when the countdowns got to “Ten, nine, eight…” Neil Armstrong’s mission to the moon that Bezos watched as a kid blasted off from Pad 39A in 1969, as did the last manned moon mission, in 1972. So did the first Space Shuttle mission, in 1981, and the last, in 2011. But by 2013, with the Shuttle program grounded and America’s half-century of space aspirations ending with bangs and whimpers, Pad 39A was rusting away and vines were sprouting through its flame trench. NASA was eager to lease it. The obvious customer was Musk, whose Falcon 9 rockets had already launched on cargo missions from the nearby Pad 40, where Obama had visited. But when the lease was put out for bids, Jeff Bezos—for both sentimental and practical reasons—decided to compete for it. When NASA ended up awarding the lease to SpaceX, Bezos sued. Musk was furious, declaring that it was ridiculous for Blue Origin to contest the lease “when they haven’t even gotten so much as a toothpick to orbit.” He ridiculed Bezos’s rockets, pointing out that they were capable only of popping up to the edge of space and then falling back; they lacked the far greater thrust necessary to break the Earth’s gravity and go into orbit. “If they do somehow show up in the next five years with a vehicle qualified to NASA’s human rating standards that can dock with the Space Station, which is what Pad 39A is meant to do, we will gladly accommodate their needs,” Musk said. “Frankly, I think we are more likely to discover unicorns dancing in the flame duct.” The battle of the sci-fi barons had blasted off. One SpaceX employee bought dozens of inflatable toy unicorns and photographed them in the pad’s flame duct. Bezos was eventually able to lease a nearby launch complex at Cape Canaveral, Pad 36, which had been the origin of missions to Mars and Venus. So the competition of the boyish billionaires was set to continue. The transfer of these hallowed pads represented, both symbolically and in practice, John F. Kennedy’s torch of space exploration being passed from government to the private sector—from a once-glorious but now sclerotic NASA to a new breed of mission-driven pioneers.

In January 1971 he startled the newsman Howard K. Smith by telling him, "I am now a Keynesian in economics," and in August he jolted the nation by announcing a New Economic Policy. This entailed fighting inflation by imposing a ninety-day freeze on wages and prices. Nixon also sought to lower the cost of American exports by ending the convertibility of dollars into gold, thereby allowing the dollar to float in world markets. This action transformed with dramatic suddenness an international monetary system of fixed exchange rates that had been established, with the dollar as the reserve currency, in 1946.

After months of calling for inflation of housing prices, Krugman in 2002 came right out and said the Fed needed to create a housing bubble. Since 2007, Krugman has repeatedly and angrily denied that was what he was saying, so let me run his comments in their full context: A few months ago the vast majority of business economists mocked concerns about a “double dip,” a second leg to the downturn. But there were a few dogged iconoclasts out there, most notably Stephen Roach at Morgan Stanley. As I’ve repeatedly said in this column, the arguments of the double-dippers made a lot of sense. And their story now looks more plausible than ever. The basic point is that the recession of 2001 wasn’t a typical postwar slump, brought on when an inflation-fighting Fed raises interest rates and easily ended by a snapback in housing and consumer spending when the Fed brings rates back down again. This was a prewar-style recession, a morning after brought on by irrational exuberance. To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.6 Well, Krugman got exactly what he wanted.

This means that workers can expect to get more money as society becomes more advanced, but only because more money is produced. As more of it is produced, it skews the balance of supply vs. demand and so causes inflation – it is as if money itself gets cheaper. So the rate at which wages increase will tend to be the same as the rate of inflation – nominal but never real, in economic terms.

With all this credit available, with almost no realistic lending standards, is it any wonder why colleges and universities continually raise their tuition year after year? Is it any wonder why costs of books, room and board constantly increase well beyond the average rate of price inflation, and decreased costs of technology?

The United States was no longer the overwhelming military power in the world, no longer sure of never losing wars. no longer confident of having learned how to maintain employment and to check inflation, no longer reveling in resource independence, technological supremacy, favorable exchange rates, and the privileged life abroad. (xiii)

It's going on within this world wide corporation. Instead of marriage to the One above, it's lust for power and fornication to this currency currently in circulation. Manipulation to the out most, every time a native is manipulated, it's corkscrews and champagne toast, mashed potatoes and beef roast, living in Hell while they sip and dine on the east coast. Only a dream of prosperity through inflated currency, gold bricks which alone could keep up from catastrophe will soon vanish and no rate of interest will tempt it to return for eternity.

One of the benefits of the national police force was the inception of national crime statistics. Although these represent only crimes recorded by the police, they offer real figures to work with, if only to map trends. Despite all the usual caveats about their unreliability, most historians have endorsed the official picture. The homicide rate for England and Wales was as high as 2 per 100,000 only once during the century, in 1865; otherwise it was about 1.5 per 100,000 and occasionally as low as i per 100,000, a record low.81 Between 1857 and 189o there were rarely more than 400 homicides reported each year, and in the 189os the average was below 350.82 In 1835-1837 9 percent of all English crimes were violent crimes, and from 1837 through 1845 the share declined to 8 percent.83 Even that 8 percent is inflated by the fact that of the crimes against the person some 25-33 percent were cases of infanticide, which would not have involved firearms. Crimes committed with guns were rare. Between 1878 and 1886 the average number of burglaries in London in which firearms were used was two per year; from 1887 to 18g1 this rose to 3.6 cases a year.84 "It was a rough society," David Philips concluded after examining Victorian crime, "but it was not a notably homicidal society. The manslaughter cases do not show a free use of lethal weapons."85 On the other hand, ordinary citizens were free to use lethal weapons to defend themselves. And as the difficulties of imposing restrictions on private firearms indicate, members of Parliament and their constituents were vigorously opposed to such attempts.

To achieve typical longer-term financial goals, such as retiring, the money that you save and invest generally needs to grow at a rate much faster than the rate of inflation.

The two most important facts about grade inflation, however, are that it exists and that it suffuses students with unwarranted confidence in their abilities. Almost every institution of higher education is complicit in what is essentially collusion on grades, driven on one side by market pressures to make college fun, to make students attractive to employers, and to help vulnerable professors escape the wrath of dissatisfied students, and on the other by irresponsible notions about the role of self-esteem in education. RATE

Just before Thanksgiving, I met with Bunker Hunt, then the richest man in the world, at the Petroleum Club in Dallas. Bud Dillard, a Texan friend and client of mine who was big in the oil and cattle businesses, had introduced us a couple of years before, and we regularly talked about the economy and markets, especially inflation. Just a few weeks before our meeting, Iranian militants had stormed the U.S. embassy in Tehran, taking fifty-two Americans hostage. There were long lines to buy gas and extreme market volatility. There was clearly a sense of crisis: The nation was confused, frustrated, and angry. Bunker saw the debt crisis and inflation risks pretty much as I saw them. He’d been wanting to get his wealth out of paper money for the past few years, so he’d been buying commodities, especially silver, which he had started purchasing for about $ 1.29 per ounce, as a hedge against inflation. He kept buying and buying as inflation and the price of silver went up, until he had essentially cornered the silver market. At that point, silver was trading at around $ 10. I told him I thought it might be a good time to get out because the Fed was becoming tight enough to raise short-term interest rates above long-term rates (which was called “inverting the yield curve”). Every time that happened, inflation-hedged assets and the economy went down. But Bunker was in the oil business, and the Middle East oil producers he talked to were still worried about the depreciation of the dollar. They had told him they were also going to buy silver as a hedge against inflation so he held on to it in the expectation that its price would continue to rise. I got out.

The increase in barrel prices strongly contributed to inflation, which then triggered an escalation in interest rates, an increase that caused the explosion of the subprime bubble.

your investments have to produce a rate of return equal to inflation.

My father liked to constantly remind me that he put himself through college, purchased his first house and a car for $500 with his weekend job. The way I figured it, by rate of inflation and hours worked, I should have been able to afford a mansion and a yacht by now. Somehow, the math wasn’t working out like that. Maybe I was under my desk the day they taught that in school.

The first truth is that this is a big decision. It is a decision that has many pros and cons: from credibility, mainstreaming, lifelong friendships, and pre-reqs for worthwhile advanced degrees on the one hand to binge drinking, staggering debt and subsequent indentured servitude, high drop out rates (especially for males), aimlessness, and protracted adolescence on the other. Selecting a college is also a different decision than it was 30 years ago, or 20, or 10. College costs have been rising faster than the economy and inflation for decades. Meanwhile, the predictive value of a college education is going down as corporations are increasingly less likely to provide extended training resources and opportunities to new grads. This is a result of the average length of tenure for new employees going ever downward.

I found myself constantly drawn to the subject of narcissistic personality disorder (NPD), which I have concluded is inextricably linked to psychopathy, although this link is rarely mentioned in medical papers or among the psychiatric profession generally. As with psychopathy, people with NPD make up approximately 1 per cent of the population with rates greater in men. Another direct comparison between those suffering with NPD and psychopathy/sociopathy is that both types are characterised by exaggerated feelings of self-importance. In its moderate to extreme forms these people are excessively preoccupied with personal adequacy, power, prestige and vanity; mentally unable to see the destructive damage they are causing themselves and others. Symptoms of the NPD disorder include seeking constant approval from others who are successful in positions of power in whatever form it may be. Many are selfish, grandiose pathological liars; their egos and sense of self-esteem over-inflated, while at once they are torn between exaggerated self-appraisal and the reality that they might never amount to much.

Based on my readings of history, my readings of existing conditions, and my understanding of how the economic machine works, the promises that are denominated in the world’s reserve currencies, most importantly the dollar, are too large and growing too fast to be paid in hard money. In other words, the debt that is denominated in these currencies is an overhang, so money will probably be printed to service debts and debt growth4 and interest rates will probably be held below inflation and economic/income growth rates. This reflects the fact that the major reserve currency countries are late in their debt/money/capital market/economic cycles and that wealth will probably be increasingly redistributed from those who have a lot of it to those who don’t have enough of it in one way or another. The extent to which these things will be true will vary from country to country, though it will likely be worldwide.

Over the decade, gold surged and commodities kept up with rising inflation, returning around 30 percent and 15 percent on an annualized basis, respectively. But the high rate of inflation wiped out the modest 5 percent annual nominal return for stocks and 4 percent return for treasuries matched to equity volatility.

day to the news that the economy is back on track only to discover that there is less oil supply at our disposal than there was when demand started to fall. And it won’t be just the one-two punch of reviving demand and sagging supply that pushes prices up in a hurry. Once the genie of inflation is out of the bottle, it is going to take oil prices on a ride along with everything else. For one thing, there will be more money chasing fewer barrels in the world so the price will go up. And the dollars chasing that oil are going to be worth less and less even as the oil gets more valuable. Remember the Argentine peso and its 20,000 percent inflation rate? If a barrel of crude had been denominated in pesos, oil would have gone up 20,000 percent in 1989–90. If the United States wants to reflate its way out of recession, it is going to pump up the price everybody in the world pays for oil, since everybody pays in US dollars. If the dollar is worth less, oil is going to be worth that much more.

A WORLD OF SLOWER GROWTH AND HIGHER INFLATION If triple-digit oil prices are the true culprit behind the recent recession, what happens if oil prices recover to triple-digit levels or even close to them when the economy recovers? Does the economy slip right back into recession again? Everything else being equal—or ceteris paribus, as they say in the economics textbooks—that’s probably as good a forecast as any. Every oil shock has produced a global recession, and the record price increase of the past few years may produce the biggest one of all. But recessions, no matter how severe, are finite events. Ultimately, we face a far more challenging economic verdict from oil. Any way you cut it, a return to triple-digit oil prices means a much slower-growing world economy than before. And not just for a couple of quarters of recession. That’s because virtually every dollar of world GDP requires energy to produce. Not all of that energy, of course, comes from oil, but far too much does for world GDP not to be affected by oil’s growing scarcity. And there is nothing at the end of the day that we can do about depletion. Big tax cuts and big spending increases can mitigate triple-digit oil’s bite, but the deficits they inevitably produce ultimately lead to tax hikes and spending cuts that just make the suffering all the more painful down the road. Taking out a loan to pay your mortgage might defer your problems for a month or so, but in the end, it often makes your difficulties more acute. Borrowing from the future just turns today’s problems into tomorrow’s, and by the time tomorrow comes, they’ve become a lot bigger than if we had dealt with them today. Trillion-dollar-plus deficits, just like a near-zero percent federal funds rate, can mask the impact of high energy prices for a while, but ultimately they can’t protect economies that still run on oil from the impact of higher energy prices and the toll that they take.

All markets are primarily driven by just four determinants: growth, inflation, risk premiums, and discount rates.

Due to high inflation rate the FED Must be really fed up.

The world was changing at an ever-increasing rate and that was a trend that couldn’t be stopped. These people were the ones who had been left behind. The ones who steadfastly refused to leave the dead cities they had been born in. The ones who saw themselves as America’s backbone but who survived on government aid and disability checks. Drug addicts, drunks, and halfwits incapable of performing anything but the simplest of tasks. Ironically, it was those self-destructive traits that made them so useful. Their inflated sense of worth and victimization was easy to manipulate. When asked what exactly it was they wanted, they either didn’t know or weren’t willing to make the sacrifices necessary to get it. What they did know—with burning certainty—was what they hated: the world that had stolen everything from them.

The analysis of the /General Theory /shows that inflation is a real, not a monetary, phenomenon. It operates in two stages (once more giving a crudely simple account of an intricate process). An increase in effective demand meeting an inelastic supply of goods raises prices. When food is supplied by a peasant agriculture a rise of the prices of foodstuffs is a direct increase of money income to the sellers and increases their expenditure. The higher cost of living sets up a pressure to raise wage rates. So money incomes rise all round, prices are bid up all the higher and a vicious spiral sets in. The first stage — a rise of effective demand — can very easily be prevented by not having any development. But if there is to be development there must be a stage when investment increases relatively to consumption. There must be an increase in effective demand and a tendency towards inflation. The problem is how to keep it within bounds. Some schemes of investment that seem to be clearly indispensable to improvements in the long run, such as electrical installations, take a long time to yield any fruit and meanwhile the workers engaged on these have to be supplied. The secret of non-inflationary development is to allocate the right amount of quick-yielding, capital-saving investment to the consumption-good sector (especially agriculture) to generate a sufficient surplus to support the necessary large schemes. It is in this kind of analysis, rather than in the mystifications of “deficit finance,” that the clue to inflation is to be found. [pp. 110-11]

inflation is a zero-sum game: there are always winners and losers, not just losers. The idea that it is only the latter has been encouraged by neoliberal scholars in order to justify policies that lead to economic contraction every time upward pressure is placed on wages by low unemployment rates.

We must take into account not only the current inflation rate but also the prospects for inflation a few quarters ahead, when the effects of policy decisions will actually be felt

But at some point a strengthening economy and rising inflation pressures would presumably force us to raise short-term interest rates. It was possible to end up temporarily paying more interest on banks’ reserves than we earned on the securities we held, which in turn might lead to several years in which we had little or no profits to remit to the Treasury.

The second means of building a fortune through theft was to take advantage of sky-high inflation rates.

Bitcoin’s high volatility is often used as an example of why it cannot be trusted as a global payment mechanism. Bitcoin is volatile; it lost 30 percent of its value in 2018, only to rise over 100 percent in the first six months of 2019. But that volatility must be put in context. The inflation rate on the bolívar, Venezuela’s local currency, was 1.8 million percent in 2018. Having the choice, even in 2018, I would much rather lose 30 per-cent on my Bitcoin than 1.8 million percent on my bolívar.

an inflation rate low enough that households and businesses did not take it into account when making economic decisions.

How do you end inflation? The good news is that a nation doesn’t need tax hikes, super-high interest rates, horrible recessions—or even fishing restrictions. The way to do it, very simply, is to stabilize the value of money. How to achieve this? When a currency begins to slide, the first step should be for a government to publicly declare its intention to support its money, i.e., maintain its value. The way to do so is, very simply, by shrinking the monetary base.

The 1970s was a decade marked by runaway inflation and the Fed’s attempt to control that inflation. Early in the decade, short-term interest rates spiked in 1973-1974, reaching a high of 14% as the U.S. went off the gold standard and was hit with an oil embargo. Where banks were now allowed to pay 3.00% interest on savings accounts, overnight Repo rates were trading between 10% and 20%. Institutional investors were obviously attracted to the high rates in the Repo market and flocked to get in. Many more large corporations amended their investment rules to allow them to invest in Repo, bringing even more cash investors into the market.

When the Fed makes a loan, taking securities or bank loans as collateral, the recipient of the loan deposits the funds in a commercial bank. The bank in turn adds the funds to its reserve account at the Fed. When banks hold substantial reserves, they have little need to borrow from other banks, and so the interest rate that banks charge each other for short-term loans—the federal funds rate—tends to fall. But the FOMC targets that same short-term interest rate when making monetary policy. Without offsetting action, our emergency lending—by increasing the reserves that banks held at the Fed—would tend to push down the federal funds rate and other short-term interest rates. Since April, we had set our target for the federal funds rate at 2 percent—the right level, we thought, to balance our goals of supporting employment and keeping inflation under control. We needed to continue our emergency lending and at the same time prevent the federal funds rate from falling below 2 percent. Thus far, we had successfully resolved the potential inconsistency by selling a dollar’s worth of Treasury securities from our portfolio for each dollar of our emergency lending. The sales of Treasuries drained reserves from the banking system, offsetting the increase in reserves created by our lending. This procedure, known as sterilization, allowed us to make loans as needed while keeping short-term interest rates where we wanted them.

As a general rule, then, while evaluating our investments we must remind ourselves to adjust them for inflation, because that gives us what is called ‘the real rate of return’. Even if your investments have grown at 20 per cent per annum last year, if the inflation rate for that year was 25 per cent, it means you’ve lost money. Too

Our thinking diverged in several areas. I championed, and he distrusted, formal policy frameworks like inflation targeting, which were intended to improve the Fed’s transparency. He had even made jokes about his own strained relationship with transparency. He told a Senate committee in 1987, “Since becoming a central banker, I have learned to mumble with great incoherence. If I seem unduly clear to you, you must have misunderstood what I said.” Also, he did not put much stock in the ability of bank regulation and supervision to keep banks out of trouble. He believed that, so long as banks had enough of their own money at stake, in the form of capital, market forces would deter them from unnecessarily risky lending. And, while I had argued that regulation and supervision should be the first line of defense against asset-price bubbles, he was more inclined to keep hands off and use after-the-fact interest rate cuts to cushion the economic consequences of a burst bubble.

Like Argentina, China had incredibly restrictive rules about moving money into and out of the country. But in China, unlike Argentina, these rules were not a response to runaway inflation, but instead part of the government’s effort to keep tight control over the exchange rate of the yuan, in order to promote the export economy. The authoritarian government also wanted to keep a close check on what its citizens were doing. Each Chinese citizen could move only the equivalent of $50,000 out of the country each year. As a result, it became difficult for wealthy people, including government officials, to get their riches out of China and into more secure foreign bank accounts.

The unprecedented bull market in Treasury bonds, supported by the belief that Treasury bonds are “insurance policies” in the case of financial collapse, could end as badly as the bull market in technology stocks did at the turn of the century. When economic growth increases, Treasury bondholders will receive the double blow of rising interest rates and loss of safe-haven status. One of the prime lessons learned from long-term analysis is that no asset class can stay permanently detached from fundamentals. Stocks had their comeuppance when the technology bubble burst and the financial system crashed. It is quite likely that bondholders will suffer a similar fate as the liquidity created by the world’s central banks turns into stronger economic growth and higher inflation.

for most political leaders the warnings of the experts counted for little when compared with the immediate advantages of monetary union. As soon as a country adopted the euro, its public debt received the highest rating by the international agencies, and consequently its government could borrow at about the same interest rate as the most virtuous members of the bloc. This meant that countries like Greece, Portugal, Spain, or Italy could borrow at rates well below the double-digit rates they had to pay before adopting the euro. In particular, the possibility of borrowing at low cost in the international financial markets is what made possible the Spanish real-estate boom. As a result of the euro-induced boom, wages and inflation grew much faster in Spain than in Germany or France. At the same time, the ECB, being mainly concerned with the level of inflation in the largest economies of the euro zone – Germany, France, and Italy – allowed the interest rate to remain low – too low for the conditions prevailing in Spain.

To fit into the Golden Straitjacket a country must either adopt, or be seen as moving toward, the following golden rules: making the private sector the primary engine of its economic growth, maintaining a low rate of inflation and price stability, shrinking the size of its state bureaucracy, maintaining as close to a balanced budget as possible, if not a surplus, eliminating and lowering tariffs on imported goods, removing restrictions on foreign investment, getting rid of quotas and domestic monopolies, increasing exports, privatizing state-owned industries and utilities, deregulating capital markets, making its currency convertible, opening its industries, stock and bond markets to direct foreign ownership and investment, deregulating its economy to promote as much domestic competition as possible, eliminating government corruption, subsidies and kickbacks as much as possible, opening its banking and telecommunications systems to private ownership and competition and allowing its citizens to choose from an array of competing pension options and foreign-run pension and mutual funds. When you stitch all of these pieces together you have the Golden Straitjacket. . . . As your country puts on the Golden Straitjacket, two things tend to happen: your economy grows and your politics shrinks. That is, on the economic front the Golden Straitjacket usually fosters more growth and higher average incomes—through more trade, foreign investment, privatization and more efficient use of resources under the pressure of global competition. But on the political front, the Golden Straitjacket narrows the political and economic policy choices of those in power to relatively tight parameters. . . . Governments—be they led by Democrats or Republicans, Conservatives or Labourites, Gaullists or Socialists, Christian Democrats or Social Democrats—that deviate too far from the core rules will see their investors stampede away, interest rates rise and stock market valuations fall.36

And all you have to do is stay alive and those Social Security payments will keep coming each and every month—payments guaranteed by the United States government and protected against inflation. That’s because every January, you get, by law, annual benefit raises that equal the prior year’s rate of inflation.1

Indeed, two researchers have charged into the already fraught H5N1 publication controversy insisting the numbers are wrong, that the true mortality rate is likely to be much, much lower and that bad policy is being driven by the inflated figures.

the consequences of this state of affairs have been drawn by the Hungarian-born American financier George Soros who, in an essay published in September 2012 (Soros 2012), argued that in order to avoid a definitive split of the euro zone into creditor and debtor countries, and thus a likely collapse of the EU itself, Germany must resolve a basic dilemma: either assume the role of the ‘benevolent hegemon’ or else leave the euro zone. If Germany were to give up the euro, leaving the euro zone in the hands of the debtor countries, all problems that now appear to be insoluble, could be resolved through currency depreciation, improved competitiveness, and a new status of the ECB as lender of last resort. The common market would survive, but the relative position of Germany and of other creditor countries that might wish to leave the euro zone would change from the winning to the losing side. Both groups of countries could avoid such problems if only Germany was willing to assume the role of a benevolent hegemon. However, this would require the more or less equal treatment of debtor and creditor countries, and a much higher rate of growth, with consequent inflation. These may well be unacceptable conditions for the German leaders, for the Bundesbank and, especially, for the German voters.

ECB – unlike, say, the US Federal Reserve which is placed within a political structure where Congress, the President, and the Treasury supply all the necessary political counterweights – is free (indeed, is supposed) to operate in a political vacuum: the parliaments and governments of the members of the euro zone have lost control over monetary policy, while the EP has no authority in this area. Moreover, the ECB enjoys not only ‘instrument independence’ but also ‘goal independence’. When a central bank enjoys only instrument independence, it is up to the government to fix the target – say, the politically acceptable level of inflation – leaving then the central bank free to decide how best to achieve the target. In the case of goal independence, the discretionary power of the central banker is much larger. The idea that central bankers, or other economic experts, may know what rate of inflation is in the long-run interest of a country (and, a fortiori, of a group of countries at very different levels of socioeconomic developments such as the EU) is indeed extraordinary. Politicians and elected policymakers, rather than experts, can be expected to be sensitive to the public’s preferred balance of inflation and unemployment. If the public wants to trade some unemployment for a somewhat higher rate of inflation, it can make this preference known by electing candidates who stand for such a policy; but no such possibility is given to the citizens of the euro zone or to their political representatives.

Not surprisingly, nearly all Greeks think poorly of their public administration. In a 2012 EU survey, 96 percent of polled Greeks characterized it as “bad”—the worst result in the EU. The sentiment is so pervasive that one can assume most of the public administrators share it. The poll result was similar in the years preceding the financial crisis, and therefore cannot be attributed to subsequent cuts in services. Despite Greeks’ dissatisfaction with the way their government works, public employees in the decade leading up to the crisis received very large pay raises. During that time, public sector wages per employee grew by over 100 percent, near the highest increase in the eurozone, according to a report published by the European Central Bank. By contrast, in Germany, where people were satisfied with the way the state bureaucracy functioned, public wages grew around 13 percent. (That low rate, when one factors in inflation, essentially meant a pay cut.) Greek civil servants also received an array of benefits that sweetened their jobs. Until 2013, when the Greek government put an end to it, those working in front of computers—a condition considered a hardship—received an extra six days off a year in order to provide them some relief.

Suppose that we believe that in 200 years, people would be prepared to pay a million dollars (that's in today's dollars, not inflated ones) to be able to have an unspoilt valley. Now imagine that today we can profit by cutting down the forest in the valley, which will never regrow. If we apply an annual discount rate of 5 percent, compounded exponentially, how big would that profit have to be to justify the loss of a million dollars in 2210? The answer, surprisingly, is just sixty dollars! That's all that a million dollars in 200 years is worth, at that rate of discount. Obviously, then, if we use a 5 percent discount rate, values gained one thousand years in the future scarcely count at all. This is not because of any uncertainty about whether there will be human beings or other sentient creatures inhabiting this planet at that time, but merely because of the compounding effect of the rate of return on money invested now.

Credit expansion results in the recurrence of economic crisis and periods of depression. Inflation makes the prices of all commodities and services soar. The attempts to enforce wage rates higher than those the unhampered market would have determined produce mass unemployment prolonged year after year. Price ceilings result in a drop in the supply of commodities affected. The economists have proved these theorems in an irrefutable way. No

In these uncertain days, bond funds are an especially important option for investors. Unlike stock funds, they have high predictability in at least these five ways: (1) The current yields (on longer-term issues) are an excellent—if imperfect—predictor of future returns. (2) The range of gross returns earned by bond managers clusters in an inevitably narrow range that is established by the current level of interest rates in each sector of the market. (3) The choices are wide. As the maturity date lengthens, volatility of principal increases, but volatility of income declines. (4) Whether taxable or municipal, bond fund returns are highly correlated with one another. Municipal bond funds are fine choices for investors in high tax brackets, and inflation-protected bond funds are a sound option for those who believe that much higher living costs will result from the huge federal government deficits of this era. (5) The greatest constant of all is that—given equivalent portfolio quality and maturity—lower costs mean higher returns. (Don’t forget that index bond funds—or their equivalent—carry the lowest costs of all.)

The United States is absolutely ripe for a rise in gasoline taxes. The nominal gasoline excise tax rate has been fixed at 18.4 cents per gallon since 1994.29 Inflation alone has reduced the real value of that tax per gallon by around 30 percent. As with other federal tax rates, the U.S. excise tax rate on gasoline is extremely low by international comparison. We might conservatively assume that by 2015 an extra 0.5 percent of GDP could be collected by some combination of a higher gasoline excise tax and modest carbon levies on other fossil fuels (such as on coal at the utilities). Other

The gold standard had its advantages, no doubt. Exchange rate stability made for predictable pricing in trade and reduced transaction costs, while the long-run stability of prices acted as an anchor for inflation expectations. Being on gold may also have reduced the costs of borrowing by committing governments to pursue prudent fiscal and monetary policies.

Moreover, these changes occurred when most American households actually found their real incomes stagnant or declining. Median household income for the last four decades is shown in the chart above. But this graph, disturbing as it is, conceals a far worse reality. The top 10 percent did much better than everyone else; if you remove them, the numbers change dramatically. Economic analysis has found that “only the top 10 percent of the income distribution had real compensation growth equal to or above . . . productivity growth.”14 In fact, most gains went to the top 1 percent, while people in the bottom 90 percent either had declining household incomes or were able to increase their family incomes only by working longer hours. The productivity of workers continued to grow, particularly with the Internet revolution that began in the mid-1990s. But the benefits of productivity growth went almost entirely into the incomes of the top 1 percent and into corporate profits, both of which have grown to record highs as a fraction of GNP. In 2010 and 2011 corporate profits accounted for over 14 percent of total GNP, a historical record. In contrast, the share of US GNP paid as wages and salaries is at a historical low and has not kept pace with inflation since 2006.15 As I was working on this manuscript in late 2011, the US Census Bureau published the income statistics for 2010, when the US recovery officially began. The national poverty rate rose to 15.1 percent, its highest level in nearly twenty years; median household income declined by 2.3 percent. This decline, however, was very unequally distributed. The top tenth experienced a 1 percent decline; the bottom tenth, already desperately poor, saw its income decline 12 percent. America’s median household income peaked in 1999; by 2010 it had declined 7 percent. Average hourly income, which corrects for the number of hours worked, has barely changed in the last thirty years. Ranked by income equality, the US is now ninety-fifth in the world, just behind Nigeria, Iran, Cameroon, and the Ivory Coast. The UK has mimicked the US; even countries with low levels of inequality—including Denmark and Sweden—have seen an increasing gap since the crisis. This is not a distinguished record. And it’s not a statistical fluke. There is now a true, increasingly permanent underclass living in near-subsistence conditions in many wealthy states. There are now tens of millions of people in the US alone whose condition is little better than many people in much poorer nations. If you add up lifetime urban ghetto residents, illegal immigrants, migrant farm-workers, those whose criminal convictions sharply limit their ability to find work, those actually in prison, those with chronic drug-abuse problems, crippled veterans of America’s recently botched wars, children in foster care, the homeless, the long-term unemployed, and other severely disadvantaged groups, you get to tens of millions of people trapped in very harsh, very unfair conditions, in what is supposedly the wealthiest, fairest society on earth. At any given time, there are over two million people in US prisons; over ten million Americans have felony records and have served prison time for non-traffic offences. Many millions more now must work very long hours, and very hard, at minimum-wage jobs in agriculture, retailing, cleaning, and other low-wage service industries. Several million have been unemployed for years, exhausting their savings and morale. Twenty or thirty years ago, many of these people would have had—and some did have—high-wage jobs in manufacturing or construction. No more. But in addition to growing inequalities in income and wealth, America exhibits