Pre-publication versions are now available for download of War on Savings (International Edition) and PowerPoint Presentations War on Savings Part 1 and Part 2.
The PowerPoint presentations have been designed to simplify technical components of War on Savings – Modern Monetary Policy Deficiencies Exposed. (International Edition). Additional PowerPoint Presentations will be published in the future.
Your comments to ccpt@iafrica.com will be welcome.
Sarel Oberholster
14 January 2009
Wednesday, January 14, 2009
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2 comments:
Hi Sarel,
The most recent story on a system under extreme stress is UK. This is a very large economy, 5th in the world.
With foreign debts of 4.4T, twice the size of its economy, it is facing extreme stress.
Perhaps, this will also be the all-important study case for your theory -- how can stasis be maintained in a world under death-spiral or can it?
I'm supplementing you with two articles:
1.
http://www.dailymail.co.uk/debate/columnists/article-1121427/PETER-OBORNE-We-8217-nation-brink-going-bankrupt.html
2.
http://blogs.telegraph.co.uk/ambrose_evans-pritchard/blog/2009/01/20/seriously_alarmed
Do you expect this economy to escape stasis into hyperinflation?
Your in-depth & insightful discussion & comments, particularly related to the credit theory you presented, will be greatly appreciated.
Kind regards,
Roger
Hi Rodger
Thank you again for your feedback. Your probing questions are as always a challenge.
I could not fathom the use of the term death-spiral as I have never used such a term in my work. I then note that it is a term used by Ambrose Evans-Pritchard. I would prefer that the authors of those articles answer for their comments as I my work do not suggest a death spiral of assets. I do however define the destruction of the currency (the national monetary unit used in a country) as part of a Hyperinflationary Depression and the very obvious example is that of Zimbabwe presently. Zimbabwe is but one more member to this club. Hyperinflationary episodes and currency destruction occurred in Weimar Germany, Japan, Italy, Turkey and many other countries. It is a fairly common occurrence in history but is normally reserved for specific countries and always requires extremely irresponsible monetary and fiscal policies.
It would be an economic first to see a number of top ten economies explode into hyperinflationary episodes. I maintain my stance that the greater probability is Deflationary Stasis.
The events in the UK in my humble opinion have not reached a level of intervention which would trigger a hyperinflationary episode but the depreciation of the currency against other currencies will certainly bring inflationary consequences. Maintaining low interest rates in such an environment will invite further weakening of the currency and will more likely trigger a substantial rise in UK interest rates rather than a hyperinflationary episode. The deflationary depression will prevail in Stasis as defined and the difference between the UK and Japan will thus be expressed in the higher and lower interest rates. Japan’s savings, weak currency policy and export orientated economy can therefore tolerate a Stasis with near zero interest rates but the UK economy has no such luxury and will probably suffer the Stasis with high interest rates before reaching the trigger level for a hyperinflationary depression.
The bottom line is the choices that politicians will make. Force the interest rates to zero and allow the GBP to depreciate out of control and the risk of a Hyperinflationary Depression accelerates. The UK will be unable to finance their borrowing needs, not nationally or internationally. The need for foreign finance would probably force them to raise interest rates and keep them in the grips of Stasis. I would therefore postulate that cause and effect indicates that the UK will suffer in Stasis with high interest rates but will not trigger a Hyperinflationary Depression.
As you rightly say, the UK and in fact the whole global economy is currently a case study for the economic theories contained in War on Savings.
Kind regards,
Sarel Oberholster
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