As the spin down proceeds along here, the circular nature of Money Creation and Destruction becomes ever more apparent, even I think to the Casual Observer now. Reason it is becoming much more obvious now than in the past is that BOTH Money Creation and Destruction are occurring exponentially more rapidly these days than just a few years ago.
We have all been Witness to TARP, QE1 & QE2, and the EFSF Slush Fund, which in combination add up to TRILLIONS of some Fiat created over the last 4 years since the 2008 Financial Crisis. This non-stop creation of credit to maintain liquidity has provided an enormous amount of Fodder for the arguments of Hyperinflationistas and Gold Bugs alike. According to BOTH John Williams and Speedy Gonzalo Lira, all this Printing SHOULD have resulted in HI of the Dollar in around 2011 at the LATEST, if you read their arguments in 2009-10 anyhow. Here we are in 2012 though, and it still does not take a wheelbarrow to buy a Loaf of Bread, though Bread IS more prcey today than in 2009.
Why has HI not occurred as of yet in the Dollar? A few reasons for this. First of all, the Dollar is just a COMPARATIVELY valued currency, valued against the worth of other currencies in operation. It’s not a good currency, but compared to the other main currencies it is valued against, it is positively Sterling! Bad as FSofA debt is, it is better debt than that owed by the various PIIGS nations. Its better than Glow inthe Dark Yen.
The ABSOLUTE Truth of course is that ALL Fiat is diminishing in it’s relative worth against Oil, which in this industrial cuture provides the underpinning for the value of all Fiat. PMs play a tangetial role in this, their worth depends on valuation against both the Oil resource and the perceived Safety of PMs while Fiat loses its value. Overall though, Gold is a minor player in a much bigger game, and Gold cannot abosrb the lost value in Industrial Equities. Put it this way, if you took all your Monsanto,IBM,GE etc Stock and tried to convert it to Gold, at current valuations for Gold there is not enough around to place all that value. Gold would have to raise in value by orders of magnitude to take on the current valuations, and that is not going to happen. Why? Because the current valuations of equities are entirely WRONG to begin with! You cannot transmute false valuations in equities (or real estate or derivatives etc) into “real”valuations in Gold anymore than you can transmute Lead into Gold. The shit simply isn’t WORTH what the “market”says it is worth, because the “market” marks to MAKE BELIEVE now, not any real valuation.
Anyhow,it is the recent IPO of Facepalm that leads me to write this analysis, because inside the Diner the case was made by GO that $100B worth of fiat was created in this IPO, which is for the most part true. At this point, Morgan Stanlety who underwrote the IPO is going to have to Borrow money to buy the stock itself and keep the price propped up at anywhere near its IPO price. MS can only do this for so long though, even with an open spigot from Helicopter Ben. The rest of the competitors to MS will see this weakness and keep dumping stock forcing MS into a deeper hole to prop it up. The OTHER sharks in the water will eat MS ALIVE if they persist in propping it up.
So,the $100B or so created to purchase this stockrather quickly goes up in flames here without EVER making it out into the Main Street Economy to Hyperinflate anything. Rinse and repeat said process with all the recent IPOs from Poopon to Zinger to the “new”GM.They are ALL losing their value, all the money created to buy them is going right up in SMOKE here.
Forget HI, even just keeping regular Inflation going is a daily job for Helicopter Ben that overall he is losing. None of the Funny Money being created makes it any further out to the Real Economy than the Bonuses paid to the Banksters for making these deals and setting up a new paper construct, in this case Facepalm. Facepalm has no real good revenue model here, it is a fucking FAD. In the end, social networking and Tweeting the details of your daily life is just BORING. Really, even the Tweets of Bill Gross are BORING,and he is worth BILLIONS.
Facepalm is a fabulous example for what is going on in the Grand Schema here, which is to try to keep this monetary system running blowing ever more and newer Bubbles,but the latest Bubbles are so full of HOLES they capture no Air whatsoever, not even for a MOMENT after they are offered up for consumption.Railroads,Carz, they captured some air for a while when the Black Gold came a-bubblin’up from Jed Clampett’s farm, but these things at leasthad some SUBSTANCE to them. Virtual Creations on the internet HAVE NO SUBSTANCE. In REALITY,they are quite worthless things. Facepalm is a MIRAGE of wealth,though to be sure Suckerbug cashed out himslf on this mirage. For everyone ELSE who invested in it, you are the Suckerbug’s Sucker holding the bag.