Hyperinflation in Iran

From Cato’s Steve Hanke:

Since the U.S. and E.U. first enacted sanctions against Iran, in 2010, the value of the Iranian rial (IRR) has plummeted, imposing untold misery on the Iranian people. When a currency collapses, you can be certain that other economic metrics are moving in a negative direction, too. Indeed, using new data from Iran’s foreign-exchange black market, I estimate that Iran’s monthly inflation rate has reached 69.6%. With a monthly inflation rate this high (over 50%), Iran is undoubtedly experiencing hyperinflation.

When President Obama signed the Comprehensive Iran Sanctions, Accountability, and Divestment Act, in July 2010, the official Iranian rial-U.S. dollar exchange rate was very close to the black-market rate. But, as the accompanying chart shows, the official and black-market rates have increasingly diverged since July 2010. This decline began to accelerate last month, when Iranians witnessed a dramatic 9.65% drop in the value of the rial, over the course of a single weekend (8-10 September 2012). The free-fall has continued since then. On 2 October 2012, the black-market exchange rate reached 35,000 IRR/USD – a rate which reflects a 65% decline in the rial, relative to the U.S. dollar.

The rial’s death spiral is wiping out the currency’s purchasing power. In consequence, Iran is now experiencing a devastating increase in prices – hyperinflation.  As Nicholas Krus and I document in our recent Cato Working Paper, World Hyperinflations, there have been 57 documented cases of hyperinflation in history, the most recent of which was North Korea’s 2009-11 hyperinflation. That said, North Korea’s hyperinflation did not come close to the magnitudes reached in the recent, second-highest hyperinflation in the world, that of Zimbabwe, in 2008, nor has Iran’s hyperinflation – at least not yet.

Since hyperinflation destroys the division of labor and causes social disorder, the risks of another Middle East war is looming large.

By the way, one can’t discount that the US economic warfare policies could contributing to Iran’s hyperinflation through the CIA’s surreptitious counterfeiting of the rial.

In Fantasyland Price Inflation has been Imaginary

One of the popular mainstream deceptions or mendacity employed by the apologists or lackeys of the state has been to repeatedly claim that there has been “no visible signs of inflation”.

Really?

Then how come even the OECD acknowledges that price inflation exists? 

From AFP,

Higher energy prices forced annual inflation in advanced economies to rise to 2.0 percent in August from 1.9 percent in July, the OECD said Tuesday.

"Energy price inflation accelerated sharply to 3.5 percent in August, up from 0.7 percent in July, while food price inflation slowed to 2.1 percent in August, compared with 2.3 percent in July," said the Organisation for Economic Cooperation and Development in a statement.

Excluding food and energy, the annual inflation rate slowed to 1.6 percent in August compared with 1.8 percent in July, according to the data for the 34-member OECD.

By individual countries, inflation gained pace in Germany, reaching 2.1 percent in August from 1.7 percent in July, while in the United States it advanced to 1.7 percent from 1.4 percent.

In Japan, however, consumer prices dipped 0.4 percent in August.

Outside the OECD area, annual inflation accelerated in India to 10.3 percent in August from 9.8 percent in July.

Inflation also rose in Russia to 5.9 percent from 5.6 percent and in China to 2.0 percent from 1.8 percent, the organisation said.

Annual inflation was stable in Brazil from July to August at 5.2 percent and Indonesia at 4.6 percent.

Let us put this way, if central banks were to acknowledge that price inflation exists then what justifies their current policies of inflationism?

Here is an example. The Bloomberg Businessweek quotes Fed Chairman Ben Bernanke

Five years of low interest-rate policies “have not led to increased inflation,” and the public’s expectations for price gains “remain quite stable,” Bernanke told the Economic Club of Indiana.

In reality, the policy of inflationism has been justified based on the supposed non-existence or non-threat of price inflation. Should inflation become a menace, central banks might be forced to resort to tighten or to exit from the current accommodation phase which will spoil Bernanke-global central banks support for their cronies. 

And may I also reiterate that Ben Bernanke’s explicit goal has been to support the asset markets.

I quoted Mr. Bernanke in my last stock market outlook  

The tools we have involve affecting financial asset prices. Those are the tools of monetary policy. There are a number of different channels. Mortgage rates, other rates, I mentioned corporate bond rates. Also the prices of various assets. For example, the prices of homes. To the extent that the prices of homes begin to rise, consumers will feel wealthier, they’ll begin to feel more disposed to spend. If home prices are rising they may feel more may be more willing to buy home because they think they’ll make a better return on that purchase. So house prices is one vehicle. Stock prices – many people own stocks directly or indirectly. The issue here is whether improving asset prices will make people more willing to spend. One of the main concerns that firms have is that there is not enough demand…if people feel their financial position is better they’ll be more likely to spend….

 So are we not seeing asset price inflation?

The post Bernanke’s QE forever or infinity has brought back the Risk ON environment as I earlier noted

This has been back led by US Stocks (SPX).

Risk ON means that world equities (MSWORLD), commodities (CCI) and even the euro (XEU) have risen in tandem.

Junk bonds have been booming too.

Inflationism does not necessarily translate to price inflation but to boom-bust cycles. But given the concerted efforts by all major central bankers to reflate (manipulate) the system, not only just boom bust cycles, but price inflation poses as clear and present danger.

Yet like incantation, the political pious repeatedly mumbles of the supposed NO price inflation environment. 

Go figure.

The following charts are all from tradingeconomics.com.

Euroland

United States

United Kingdom

Japan (the only exception)

China

Brazil

Russia 

India

And all these considers the accuracy of the respective statistics. As stated above, governments are likely to under declare inflation rates for political reasons.

One thing the above suggests is that the world is headed initially for stagflation. 

Updated to add: 

Ironically, the New York Fed's economic model predicts of "explosive inflation" 

From Zero Hedge:

Carlstrom et al. show that the Smets and Wouters model would predict an explosive inflation and output if the short-term interest rate were pegged at the ZLB (Zero Lower Bound) between eight and nine quarters. This is an unsettling fi nding given that the current horizon of forward guidance by the FOMC is of at least eight quarters

The Information Age and the Philippine Cybercrime Law

Amidst fiery protest by many Philippine cyberspace users, the newly enacted Cybercrime Prevention Act of 2012 RA 10175 took effect today (BBC). 

So far, according to Freedom House in 2012 the Philippines ranks 6th in the world in internet freedom.

I am pretty sure that the law will diminish the current state of internet freedom, regardless of the excuses given by politicians, and regardless of the relative standings of internet freedom in the world overtime. Although I expect some of the current activities to shift to the informal cyberspace.

Just read all the clauses containing the term “misleading” as punishable by law to understand the law’s arbitrariness. This simply means legalistic vagueness could be used to harass political opposition or anyone on the whims of the politicos.

As of this writing the government website hosting RA 10175 is down. This could be because of heavy traffic or could be down due to protest activities undertaken by hacktivists (Examiner)

As a side note, I am also quite delighted to see the passionate responses even by statists against internet censorship. It’s a bizarre world though, when curtailment of freedom involves them, the statists balk, resist and join the commotion, but when curtailment is applied only to others they cheer.

Nevertheless, here are the top 10 Countries who censor the internet most.

From 24/7 Wall Street based on Freedom House's ranking of internet freedom

1. Iran

2. Cuba

3. China

4. Syria

5. Uzbekistan

6. Ethiopia

7. Myanmar

8. Vietnam

9. Bahrain

10. Saudi Arabia

The next list is from the Committee to Protect Journalists 

The growing crusade by governments against the internet or internet censorship should be expected and constitutes resistance to change as forces of decentralization (internet) and centralization (governments) have been on a head-on collision course.

This essentially represents part of the volatile and turbulent transition process towards the deepening of the information age.

The lists of the 10 countries who apply internet censorship most reveals that despite governments’ acts to suppress free expression, the freedom of internet expression still thrives, albeit underground.

To give some examples

-China’s shadow or informal social media users continue to swell despite the government’s prohibition.

-Cuba’s repressive government has repeatedly failed to stop domestic political activist blogger who became an international sensation Yoani Maria Sánchez Cordero.

-There is the ongoing harassment against Wikileaks through  founder Julian Assange and the war against eponymous group Anonymous (who ironically appears to have taken up the cudgels of domestic cyber activists) for exposing on government malfeasances.

-Also the Iranian government’s attempt to convert her cyberspace into a national intranet has dramatically backfired where Iran’s government has been forced to retreat.

From Gizmodo,

After seriously flipping out, cutting of Iranian access to Google and basically herding all its citizens into a tiny little government-approved intra-net pen, the Iranian government has softened its Internet ban just a little bit and restored access to Gmail.

Though the outcry against censoring the Internet at large was loud, the backlash against cutting users off from Google services such as Gmail was particularly strong. Many Iranians (reportedly around half) resorted to using VPNs to get outside of the the intra-net bubble, creating millions of dollars in profit for local VPN firms. Even government officials railed against the lack of Gmail, and complained that local clients just weren't up to snuff.

Given that the penetration rate of internet users in the Philippines is nearly at 30% of the population (internetworldstats.com), from which the bulk comes from the elite and the middle class, it would not be surprising if a sustained uproar would end up with a political ‘compromise’ ala Iran.

Bottom line: Global governments including the Philippines will continue to do everything to try to control and regulate the flow of information in order to preserve the status quo. However and unfortunately for them, the free market in the internet, people’s newfound fondness with connectivity and the knowledge revolution will give them quite a challenge.

Yet there is no stopping the march towards the information age.

Quote of the Day: The Ethics of Fascism

Fascist ethics begin ... with the acknowledgment that it is not the individual who confers a meaning upon society, but it is, instead, the existence of a human society which determines the human character of the individual. According to Fascism, a true, a great spiritual life cannot take place unless the State has risen to a position of pre-eminence in the world of man. The curtailment of liberty thus becomes justified at once, and this need of rising the State to its rightful position.

This is from Mario Palmieri in The Philosophy of Fascism 1936 (Liberty Tree).  

A alter ego of fascism is nationalism. 

From Wikipedia: Fascism ( /ˈfæʃɪzəm/) is a radical authoritarian nationalist political ideology

ASEAN’s Interest Rate Swap Markets Signals Stagflation Risks

Mainstream "experts" continue to dish out bromides about forthcoming rate cuts for the Philippines and her ASEAN peers without recognizing that impact of the FED-ECB-BoJ-SNB-BoE inflationists policies will heighten the risks of stagflation for the region.

Yet current market signals seems pointing to such direction.

From Bloomberg (bold emphasis added) 

Interest-rate swaps in Malaysia and Thailand are signaling central banks will start to tighten monetary policy next year for the first time since 2011, as fighting inflation takes precedence over economic growth.

Malaysian and Thai contracts in which investors exchange a fixed payment for a floating rate for two years climbed to four- month highs of 3.18 percent and 3.08 percent, respectively, in September. Societe Generale SA recommends clients pay the swaps in Malaysia targeting an increase to 3.35 percent. Goldman Sachs Group Inc. raised its forecasts for five-year rates in both countries on Sept. 19.

Southeast Asian nations are expanding at a faster pace than economists predicted this year, even as Europe’s debt crisis and unemployment in the U.S. reduce export orders. Analysts including Societe Generale’s Wee-Khoon Chong and central banks are starting to flag inflation risks for next year, driven by rising domestic demand and funds pumped into the European and U.S. financial systems.

What the mainstream imputes as ASEAN’s “growth dynamic” represents no less than a concealed credit driven boom.

Indonesia (IMF)

ASEAN M3 and Claims on private sector credit (IMF)

Thailand (US Global Investors)

These dynamics seem in the process of validating my prognostications

Capital inflows coupled with domestic negative real rates regime will likely translate into serial bubble blowing dynamics.

So yes, the risks of bubbles in Asia will become more enhanced. Even the local central bank or the Bangko Sentral ng Pilipinas (BSP) has recently acknowledged of such risks which they arrogantly claim they can control.

In addition, domestic and global bubbles will increase the risks of a global stagflation which is likely slam emerging markets harder.

The risks of ballooning bubble or stagflation will likely become evident in 2013-2014.

Remember that emerging Asia (ASEAN) is highly vulnerable to inflation risks, as I also wrote earlier, 

High commodity prices are likely to influence emerging markets consumer price inflation more. Food makes up a large segment of consumption basket for emerging Asia including the Philippines. This would prompt for their respective central banks to reluctantly tighten. Monetary tightening will put pressure on the stock market.

Stagflation, thus, also represents both a contagion and internal (political and market) risk for the Philippines and for emerging Asia.

A stagflationary environment will prove to be a spoiler for stock market bulls.

But the effects of monetary inflation via stagflation will not be the same, there will select sectors that may surf the stagflation tide.

For now, these incipient signs of price inflation won’t be much of a headwind for central bank sponsored stock market and financial asset boom...until next year.

Global Debt Default Binge: US Debt Now at $16,159,487,013,300.35

Speaking of the global debt default binge, the US debt clock according to the US treasury direct have now been at $16,159,487,013,300.35 as of October 1, 2012

Writes the Zero Hedge (bold original)

September 30 was the last day of Fiscal 2012 for the US which explains why despite the barrage of debt issuance in the past month, the year closed with total debt of just $16.066 trillion, a modest increase of just $50 billion in the month. Luckily, moments ago we got the first DTS of the new fiscal year, which eliminated any residual confusion we had. As of the first day of FY 2013, total US debt soared by $93 billion overnight, and is now a record $16,159,487,013,300.35. One can see why Tim Geithner wants to push all the debt under the coach for as long as possible (and the scariest thing is that the actual increase in Treasury cash was a mere $11 billion). But wait, there's more. As a reminder, final Q2 US GDP was recently revised lower by $20 billion, which if we extrapolate into Q3 (leading to a nominal GDP print of $15.71 trillion), means that as of today, total US Federal debt to GDP is 103%. And rising about 1.5% per month.

At the Brilling.com US debt clock time bomb, as of this writing is now $16.164 trillion!

Tic tic tic boom!

Signs of Dancing on the Grave of Keynesianism

Yesterday my quote of the day was about Austrian economist Gary North’s prediction of the twilight of the Keynesian political economy.

Today, Sovereign Man’s Simon Black enumerates of the 8 signs that reveals how the “system is broken”.

Apparently 6 of them represent symptoms of Mr. North’s prophesy.

The 6 signs from Simon Black:

3) Last month, a school district in California sold $164 million worth of bonds at 12.6% interest; this is more than Pakistan, Botswana, and Ecuador pay in the international bond market.

4) Based on the Treasury’s most recent statistics, US government interest payments to China will total at least $26.055 billion this year. The real figure may be much higher given that China has been purchased Treasuries for decades, back when interest rates were much higher. They’re still getting paid on those higher rates today.

Even still, this year’s interest payment to China totals more than ALL the silver that was mined in the world last year.

5) In August 2008, just before the Lehman Brothers collapse, the number of employed persons in the United States was 145.47 million persons. Over the subsequent years, the employment figure dipped to as low as 139.27 million. Today it stands at 142.1 million.

Even if this is considered recovery, to ‘rescue’ those 2.8 million jobs, it took the federal government an additional $6.421 trillion worth of debt ($2.3 million per job), and a $1.9 trillion (203%) expansion of the Federal Reserve balance sheet.

6) Meanwhile, despite trillions of euros in debt and bailouts, the unemployment rate in the eurozone just hit a record high of 11.4%… and a second Spanish bailout is now imminent.

7) Inflation in Zimbabwe (3.63%) is lower than inflation in the UK (3.66%, August 2011-July 2012).

8) Last week, the French government reached a ‘historic’ budget compromise, shooting for a budget deficit that’s ‘only’ 3% of GDP. This is based on an assumption that the economy will grow by 0.8%.

In other words, France’s official public debt (which is already at 91% of GDP) will increase by 2.2% of GDP next year amid flat growth. And this is what these people consider progress.

From Cato’s Dan Mitchell

To add, last month the French government approved of the 75% tax on those earning over one million euros a year — by holding public spending and not cutting government jobs (IBD). So the French class warfare policy essentially kills the proverbial goose that lays the golden eggs.

So by maintaining the unproductive segments of a society who entirely depends on the shrinking the productive sectors, French politicians believe that the Santa Claus Fund will never end and instead would bring about prosperity.

The populist measures undertaken by the French government essentially assures of the diffusion and the intensification of the Euro crisis which most likely serves as the death warrant for the euro.

Events in France will perhaps herald the coming global debt default that will engulf most of developed nations and emerging economies whose economies have been predicated on the Keynesian parasitical relationship welfare-warfare states.

In a world of politics, common sense is uncommon specially backed by obtuse theories moored on the belief of the Philosopher’s stone of turning lead into gold.

As the distinguished Ron Paul recently wrote,

It's because too many politicians believed that a free lunch was possible and a new economic paradigm had arrived. But we've heard that one before — like the philosopher's stone that could turn lead into gold. Prosperity without work is a dream of the ages.

Gary North on How to Gum Up Any Institutions

Well if governments can make a mess of society through immoral  statutes and regulations, people can reciprocate by goofing up the system through non-violent means.

Austrian economist and author Gary North offers how to gum up any institutions, not limited to the government.

Rules are about redirecting people’s behavior to assure compliance. And institutions rely on sets of rules for it to thrive.

Economist Gary North explains:

First, every institution assumes voluntary compliance in at least 95% of all cases. This may be a low-ball estimate. Most people comply, either out of fear or lack of concern or strong belief in the system and its goals.

Second, every institution has more rules than it can follow, let alone enforce. Some of these rules are self-contradictory. The more rules, the larger the number of contradictions. (There is probably a statistical pattern here – some variant of Parkinson's law.)

Third, every institution is built on this assumption: partial compliance. Not everyone will comply with any given procedural rule. There are negative sanctions to enforce compliance on the few who resist. They serve as examples to force compliance. Conversely, very few people under the institution's jurisdiction will attempt to force the institution to comply exactly with any procedural rule.

These three laws of institutions – and they really are laws – offer any resistance movement an opportunity to shut down any system.

Economist North provides an example of how Vladimir Bukovsky jammed the Soviet Union Gulag, along with other inmates, by sending daily letter of protests to the Soviet bureaucracy from which the latter had to legally respond. The result was bureaucratic chaos.

As the 75,000 complaints became part of the statistical record, the statistical record of the prison camp and the regional camps was spoiled. All bureaucrats suffered. There went the prizes, pennants, and other benefits. "The workers start seething with discontent, there is panic in the regional Party headquarters, and a senior commission of inquiry is dispatched to the prison."…

Finally, in 1977, they capitulated to several specific demands of the prisoners to improve the conditions of the camps. The governor of the prison was removed and pensioned off. Their ability to inflict death-producing punishments did them little good, once the prisoners learned of the Achilles' heel of the bureaucracy: paperwork.. The leaders of the Soviet Union could bear it no longer: they deported Bukovsky.

Economist North further discusses on American community organizer Saul Alinsky’s improvisation of Mahatma Gandhi’s non-violent means of protests:

Alinksy realized early that very few people will pay the price that Gandhi paid. So, he devised a system of resistance that lowered the risk, thereby lowering the cost. He understood the economists' law: "When the cost of producing anything falls, more will be supplied." More of what? Resistance.

His system involved at least one of two tactics: (1) violating a rule to which only a minimal negative sanction was attached, (2) follow the organization's procedural rules to the letter in a Bukovsky-like manner.

He tested his non-violent strategy and tactics in the 1960s in Chicago. He wrote a book on his system, Rules For Radicals (1972). He wrote this.

Let us in the name of radical pragmatism not forget that in our system with all its repressions we can still speak out and denounce the administration, attack its policies, work to build an opposition political base. True, there is still government harassment, but there still is that relative freedom to fight. I can attack my government, try to organize to change it. That's more than I can do in Moscow, Peking, or Havana. Remember the reaction of the Red Guard to the "cultural revolution" and the fate of the Chinese college students. Just a few of the violent episodes of bombings or a courtroom shootout that we have experienced here would have resulted in a sweeping purge and mass executions in Russia, China, or Cuba. Let us keep some perspective.

We will start with the system because there is no other place to start from except political lunacy. It is most important for those of us who want revolutionary change to understand that revolution must be preceded by reformation. To assume that a political revolution can survive without a supporting base of popular reformation is to ask for the impossible in politics. Men don't like to step abruptly out of the security of familiar experience; they need a bridge to cross from their own experience to a new way. A revolutionary organizer must shake up the prevailing patterns of their lives – agitate, create disenchantment and discontent with the current values, to produce, if not a passion for change, at least a passive, affirmative, non-challenging climate. "The revolution was effected before the war commenced; John Adams wrote. "The Revolution was in the hearts and minds of the people. . . . This radical change in the principles, opinions, sentiments and affections of the people was the real American Revolution." A revolution without a prior reformation would collapse or become a totalitarian tyranny.

Read the rest here 

Mr. Alinsky then devised of 13 tactical guidelines for the “gummit” model, again Mr. North:

1. Power is not only what you have but what the enemy thinks you have.
2. Never go outside the experience of your people.
3. Wherever possible go outside the experience of the enemy.
4. Make the enemy live up to their own book of rules.
5. Ridicule is man's most potent weapon.
6. A good tactic is one your people enjoy.
7. A tactic that drags on too long is a drag.
8. Keep the pressure on.
9. The threat is usually more terrifying than the thing itself.
10. The major premise for tactics is the development of operations that will maintain a constant pressure upon the opposition.
11. If you push a negative hard and deep enough it will break through into its counter side.
12. The price of a successful attack is a constructive alternative.
13. Pick the target, freeze it, personalize and polarize it.

The Gandhi Alinsky disobedience model reminds me of Etienne de la Boetie, French judge, writer and founder of modern philosophy and one of the early advocates of civil disobedience, who once wrote 

Resolve to serve no more, and you are at once freed. I do not ask that you place hands upon the tyrant to topple him over, but simply that you support him no longer; then you will behold him, like a great Colossus whose pedestal has been pulled away, fall of his own weight and break into pieces

Gumming up a tyrannical institution is a way to re-establish or win back freedom.

Libertarians are Thinkers, Not Feelers

Our adapted political ideology have not only been shaped by our life’s circumstances, orientation and other influences but importantly from our personality.

And from the psychological framework, libertarians are said to be thinkers and not impulsive and emotional chumps.

That’s according to a study cited by the prolific author Matthew Ridley at the Wall Street Journal

The study collated the results of 16 personality surveys and experiments completed by nearly 12,000 self-identified libertarians who visited YourMorals.org. The researchers compared the libertarians to tens of thousands of self-identified liberals and conservatives. It was hardly surprising that the team found that libertarians strongly value liberty, especially the "negative liberty" of freedom from interference by others. Given the philosophy of their heroes, from John Locke and John Stuart Mill to Ayn Rand and Ron Paul, it also comes as no surprise that libertarians are also individualistic, stressing the right and the need for people to stand on their own two feet, rather than the duty of others, or government, to care for people.

Perhaps more intriguingly, when libertarians reacted to moral dilemmas and in other tests, they displayed less emotion, less empathy and less disgust than either conservatives or liberals. They appeared to use "cold" calculation to reach utilitarian conclusions about whether (for instance) to save lives by sacrificing fewer lives. They reached correct, rather than intuitive, answers to math and logic problems, and they enjoyed "effortful and thoughtful cognitive tasks" more than others do.

The researchers found that libertarians had the most "masculine" psychological profile, while liberals had the most feminine, and these results held up even when they examined each gender separately, which "may explain why libertarianism appeals to men more than women."

All Americans value liberty, but libertarians seem to value it more. For social conservatives, liberty is often a means to the end of rolling back the welfare state, with its lax morals and redistributive taxation, so liberty can be infringed in the bedroom. For liberals, liberty is a way to extend rights to groups perceived to be oppressed, so liberty can be infringed in the boardroom. But for libertarians, liberty is an end in itself, trumping all other moral values.

Just a clarification: libertarianism is a political theory which according to Mr. Libertarian, Murray N. Rothbard is “an important subset of moral theory that deals with the proper role of violence in social life” and that while libertarians agree with Lord Acton "liberty is the highest political end", it is “not necessarily the highest end on everyone's personal scale of values”.  

In short, in terms of politics yes "liberty is an end", but politics is just one of the many aspects of a person’s life.

Quote of the Day: Dancing on the Grave of Keynesianism

From author Gary North at the Mises Institute:

The Keynesians seem to be dominant today. They are dominant because they have been brought into the hierarchy of political power. They serve as court prophets to the equivalent of the Babylonians, just before the Medo-Persians took the nation.

They are in charge of the major academic institutions. They are the main advisers in the federal government. They are the overwhelmingly dominant faction within the Federal Reserve System. Their only major institutional opponents are the monetarists, and the monetarists are as committed to fiat money as the Keynesians are. They hate the idea of a gold-coin standard. They hate the idea of market-produced money….

The welfare-warfare state, Keynesian economics, and the Council on Foreign Relations are going to suffer major defeats when the economic system finally goes down. The system will go down. It is not clear what will pull the trigger, but it is obvious that the banking system is fragile, and the only thing capable of bailing it out is fiat money. The system is sapping the productivity of the nation, because the Federal Reserve's purchases of debt are siphoning productivity and capital out of the private sector and into those sectors subsidized by the federal government…

I offer this optimistic assessment: the bad guys are going to lose. Their statist policies will bring destruction that they will not be able to explain away. Their plea will be rejected. "Give us more time. We just need a little more time. We can fix this if you let us get deeper into your wallets."

In the very long run, the good guys are going to win, but in the interim, there is going to be a lot of competition to see which group gets to dance on the grave of the Keynesian system.

Get out your dancing shoes. Keep them polished. Our day is coming.

A Video Tale of Two Koreas

Economic Freedom defines the difference (hat tip Art Carden at the Division of Labor) 

North Korea

  

South Korea
 

Charts: Gold versus Major Fiat Currencies

The mainstream has been focused on the price of gold vis-à-vis the US dollar.

Although the US dollar, as the world’s major reserve currency, through the US Federal Reserve, dominates global central bank policymaking, apparently other major international reserve currencies have mimicked US Fed Chair Ben Bernanke’s approach.

The result of concerted inflationism has been to devalue respective currencies against gold. 

All charts from gold.org

Gold: British Pound (approaching record highs)

Gold: euro (at record highs) 

Gold: Australian dollar (approaching record highs)

Gold: Canadian dollar (approaching record highs)

Gold: Swiss Franc (at record highs). Since the Swiss franc has been pegged to the euro thus the franc essentially reflects on the euro’s conditions

Gold: Japanese Yen (near record highs)

Gold: South African Rand (record highs)

Gold: India’s Rupee (record highs)

Gold: China’s yuan (near record high despite China’s aggressive gold accumulation)

Gold: Hong Kong dollar (near record highs) HKD is pegged to the US dollar

Gold: Mexican peso (near record highs)

The above clearly shows that governments have not been engaged in devaluation against other currencies but against gold, which should eventually spillover to other commodities.

As the great dean of the Austrian school of economics once wrote,

It must be emphasized that gold was not selected arbitrarily by governments to be the monetary standard. Gold had developed for many centuries on the free market as the best money; as the commodity providing the most stable and desirable monetary medium. Above all, the supply and provision of gold was subject only to market forces, and not to the arbitrary printing press of the government.