Monday, 18 October 2010

New favourite lecture

For a long time I considered Peter Schiff's lecture:
Why the Meltdown Should Have Surprised No One to be the most insightful lecture on the state of our economy you can find on the internet. I've now changed my mind. I'd say it has been topped by Michael Hudson's lecture at the American Monetary Institute in October 2010. To see it go to this page on Steve Keen's blog and scroll down to where it says "Hudson Talk". The viewer is expected to already know about fractional reserve banking and I don't think the lecture will make much sense without that.

Thursday, 7 October 2010


I've said this before, but I'd just like to say it again in another way...

Since the crash and for several years to come, as the leverage unwinding progresses. The things purchased with borrowed money will fall in price relative to the price of things bought with saved money.

Things bought with borrowed money include:

Housing (I'm talking about the price of the house, not the size of the mortgage payments).
Shares (trading on margin).

Things bought without borrowing money include:
Utilities (water, gas,electricity)

Note that in many countries the standard inflation measures (like CPI in the UK) tend not to include (or give much weighting to) things purchased with borrowed money.

Now whether the absolute numerical price of these things rises or falls depends on the rate at which governments pump up their monetary bases. If they pump very fast they may get rising prices in both classes of good. If they pump up slowly there may be falls in both classes. However there is a wide range in between where the price of shares and housing can fall while the price of food and services will rise.