Wednesday, August 25, 2010

Informed consent

Greetings good citizen,

As you know I’m chock full of little sayings and one of them I haven’t had cause to use in quite a while charged to the forefront this morning.

Are you ready?

It’s stupid really…and it is a sad indictment of our species to even go there but, it is what it is.

‘You can’t make (fill in the adjective here) decisions without accurate information’ (but, sadly, we do it all the time because most things can’t wait until the truth is dragged out into the light, kicking and screaming…)

The sad part here is the notorious ‘poor quality’ of the information we do have access to.

The hope here is that those actually acting upon the part of the story you’ve been allowed to glimpse have ‘more’ information than you do. The scary part is this is often a ‘sometimes yes and sometimes no.’ proposition.

Worse, we are often subject to the ‘prejudices of the observer’ so the information is ‘tainted’ from the get-go.

That said, and totally ‘tangential’ to the subject, is the debate over ‘hyper-inflation vs. deflation’.

I have stuck to my guns because it is picking fly shit out of pepper to argue that ‘falling value’ is any different from ‘increased worthlessness’.

WTF is wrong with these people?

Anyway, at least Mr. Panzer agrees with me:

Hyperinflation is a fiscal phenomenon borne out of a bankrupt state that can’t service its debts. Monetization is a trigger while a rise in consumption and velocity is a psychological effect, as Hazlitt notes. After all, if massive inflation is coming, what's the first thing you want to do? You’ll position yourself in hard assets well ahead of thinking “I need to spend now because this money will be worthless later.”

It’s not ‘too much money chasing too few goods’ as the idiots explained it back in the Eighties, it’s people trying to ‘rid’ themselves of increasingly worthless ‘cash’ as fast as they could/can.

To claim that lower producer prices is the cause of this is, well, insane (not that there is any shortage of whackos out there…)

This, ironically, brings us full circle to our original premise…you can’t make, er, ‘decisions’ without, er, ‘solid’ information.

Yet we do it all the time.

Because we have to…

Indecisiveness has its price too.

Did I mention that this little tidbit had a ‘dumb’ side to it? There it is. Probably why I haven’t wheeled out this little nugget in a long time, it’s a ‘paradox’.

Conundrum or not, it is still something important to be mindful of.

Which is to say your decisions will only be as good as the information they’re based on.

Garbage in = Garbage out.

Shifting back to our supply line example here, hyper-inflation is driven by scarcity. As more and more people try to ‘convert’ their cash into a dwindling supply of resources, prices go ballistic.

So the knot heads preaching the ‘danger’ of falling prices have it exactly backwards, it is the rapidly shrinking ‘supply line’ that will be the cause for, er, ‘panic’.

What, good citizen, have I been telling you for over three years now?

That ‘collapse’ will come when the global supply lines ‘crash’. (There are dozens of ‘drivers’ of this scenario but the end result is the same…)

Ironically, the single largest likely driver is the ‘value’ of the global reserve currency.

Any ‘disagreement’ about the value of the dollar could trigger the ‘vaporization’ of the world’s financial markets.

You can play out this ‘thought experiment’ in your own head, good citizen.

How likely do YOU think it is that the USA will ‘default’ on its debts?

Thank you for letting me inside your head,


No comments:

Post a Comment