A 5th Economic Condition?

[MediumTex]

The mechanisms of how our money and banking system work are confusing to me.

As we have determined money = debt. In other words banks create money by fabricating it out of thin air and lending it to people to whom it becomes debt.

These people have to pay back the debt with interest however, which requires a growing money supply, otherwise there will not be enough money system wide to cover a repayment of principal + interest throughout the entire system. If the money supply is contracting rather than expanding, all that will result is the mathematically impossible act of paying down outstanding debt (100 dollars + interest) out of a money supply that consists of only (100 dollars). In other words, more foreclosures and a dysfunctional economy.

The government must continue to print money to fill the gaping hole left by banks failing to multiply the money supply by issuing loans or we will spiral down even further. If we achieve a society where there is no debt, then we have in essence no money.

Waking up to this reality is unsettling.

It's a little like when you first become aware of your own mortality, except this is becoming aware of the mortality of the entire economic system. 

I would expect a person to go through the Kubler-Ross stages of grief at this realization:

1. Denial and Isolation - The system isn't really based upon a set of absurd assumptions.  There are very smart people running things and they will take care of whatever problems may arise.  Look at that Ben Bernanke--what a stud!!!
   
2. Anger - I can't believe those greedheads came up with such a stupid system that guarantees eventual insolvency but only after everyone except the elite have been completely impoverished.  I think I'm going to join the Tea Party.
 
3. Bargaining - Please, please, please, just bail out the financial sector one more time and we promise we will adopt sensible reserve standards, risk management and lending guidelines.  If you don't bail out the system, Armageddon will happen--banker bonuses will be severely affected. 
 
4. Depression - We should have known better than to turn our society over to financial interests.  Every society in the history of the world that came to be dominated by bankers was soon bankrupted as the moneyed interests moved on to pick the next carcass clean.  Why didn't we listen to Andrew Jackson?   

5. Acceptance - Well, this sucks.  The bankers drove our entire economy into the ground and now the people have to pay for the damage they caused through higher taxes and lower standards of living.  Oh well, I guess that's just the way it goes when greed rules the world.  Maybe there will be more fairness in the afterlife.  Oh look, "Dancing With the Stars" is about to come on!

[pershing83]

Medium Tex...

PRPFX Yahoo numbers are a month old as Yahoo is for all open ended mutal funds. YTD now 8% for PRPFX. This is not bad, BTW. I use Mkt Place for daily numbers on mutual funds. Usually post them about 6PM EST

What I want to know is how is the classic pp doing YTD. This is the only place I know to look or ask.

[MediumTex]

What I want to know is how is the classic pp doing YTD. This is the only place I know to look or ask.

Based upon SmartMoney info, here is what I get YTD:

TLT: 3.09%

GLD: 13.28%

VTI: 8.22%

SHY: .95%

Total return for this portfolio in 4x25% configuration: 6.39%

I don't recall if the performance above includes dividend reinvestment.

[pershing83]

Thanks.

[AgAuMoney]

But, in all seriousness the part that I find most puzzling of all, is that you are so confident in your position on inflation, at this point, that nothing — not even some years of actual deflation — would convince you otherwise.

What years of actual deflation?  And how do you define deflation?  If you claim prices, the CPI_U shows inflation.  If you speak money supply, the fed data shows that by most definitions the supply is increasing, that's also inflation.  Only the very broadest measure of assets, not money, is decreasing.  And economists can debate all day if those are part of the money supply.

It seems incredibly risky to get so invested in one particular outcome — to the point where one can't (or is unwilling to) envision any other outcome.

Which is why I don't do it.  I've already posted what it would take for me to see deflation, and it isn't happening.  History says it shouldn't be happening, and so far I've seen no reason to expect "this time it's different."

What I do see is a whole lot of professionals that have nearly always been wrong trying to claim "this time it's different."  And I see a whole lot of people that trust those authorities.

I only bring it up because I agree that inflation may happen, and it probably will happen. But, I tend to be wrong about a lot of things, and I certainly wouldn't put the majority of my money towards that hunch.

Neither would I.

AgAu... in a way, I think you've structured your life and investments in such a way that you have no choice but to have an unwavering bias to believe in high inflation. So, every other argument against that stance — whether its logical or not — is instantly dismissed without serious thought.

How is that helpful when the other side of the coin may be right?

If I had structured my life and investments in expectation of high inflation I'd be in even fewer bonds and cash, and if I expected a dollar collapse was imminent I'd be getting out of the suburbs -- 50 miles away per every 100,000 people seems about right.  The stored food is something I and my parents and my wife and her parents have always done.  I even did it while I was in school, but then it was a few weeks instead of a year.  (You should try it.  Until you do, you have no idea the freedom and cost savings when you buy bulk and only on sale.)  The stored water is because I'm on a well and without electricity I have no water.  And no water gets unpleasant very quickly.  Just ask my neighbor who is now spending $10,000 to put in a generator after our last multi-hour outage a few weeks ago.

Instead I've reached a compromise with where I live (I'd rather have no visible neighbors and no building codes) and gone for a safe portfolio with 40% of my assets and a variable portfolio composed of precious metals, blue chip stocks, a few other stocks, and cash.  Five years ago that VP was only 30% of my assets but has now doubled to 60%.  I don't give a damn what anyone else thinks, that performance is good enough for me.

Show me an argument against my balanced portfolio which has not been proven wrong multiple times over the past 10 years.  Show me how taking gains out of precious metals and putting them into blue chips has been anything but conservative.

I'm glad you can see the mote in my eye.

[MediumTex]

AgAuMoney,

When this multi-decade bull market in treasuries finally ends, where do you think the 30 year yield will have finally bottomed?

Do you think it was in 2008 or is it yet to happen?

[AgAuMoney]

The mechanisms of how our money and banking system work are confusing to me.

That's the first step. 

As we have determined money = debt. In other words banks create money by fabricating it out of thin air and lending it to people to whom it becomes debt.

Not just the banks but the gov't also.  Which is really a shame because it is fiat, we could have just printed it ourselves.  (There is a good argument that such would be unconstitutional, because the gov't is allowed to borrow but not issue fiat money which the founders called a "bill of credit".  The constitution specifically forbids states to issue such, and it is documented that the founders considered allowing the fed gov't to issue but decided against it.)  So instead the gov't borrows money into existence.

If we achieve a society where there is no debt, then we have in essence no money.

The constitution does allow states to make money from gold or silver, and historically people with no money have always adopted SOMETHING as a medium of exchange, a standard store of value, and measure of account.  And where it was available, those societies have always ended up preferring gold or silver.  (Then it gets co-opted by banks or the gov't "we are here to help", then debased or replaced, then sought out again, then co-opted again, ...)

[AgAuMoney]

What would it take to convince you that we are in a multi-year deflationary period in which there is likely to be lots of slack in the economy and not much pricing power for anyone?

When I don't see prices increasing and when actual money supply (not just claimed derivative values) is decreasing.

See what happened with MCDonalds stock today?  They announced good results, and the market really liked it.  Part of those results included that they have been raising prices, and selling more food even with those price increases.

[doodle]

AgAu,

I had dinner at Chipotle tonight and noticed that the chicken burrito bowl was up from 5.95 to 6.25 and the chips were up from 1.25 to 1.35. It seems insignificant, but that is a 5% increase on the burrito bowl and 8% increase on the chips.

I was wondering if you have thought about diversifying the cash portion of your portfolio into a basket of currencies? I have debated buying yuan, thinking that it is undervalued relative to the dollar and that the central bank in China will have to revalue it upwards to control the rampant inflation they are having over there.

I think you can open an account in Yuan at everbank.com

[Gumby]

But, in all seriousness the part that I find most puzzling of all, is that you are so confident in your position on inflation, at this point, that nothing — not even some years of actual deflation — would convince you otherwise.

What years of actual deflation?  And how do you define deflation?  If you claim prices, the CPI_U shows inflation.  If you speak money supply, the fed data shows that by most definitions the supply is increasing, that's also inflation.  Only the very broadest measure of assets, not money, is decreasing.  And economists can debate all day if those are part of the money supply.

I was talking about the future.

For all you know, we could be on the verge of a huge deflationary crash. But, it just sounds like you wouldn't even believe it was happening if it actually happened.

It seems incredibly risky to get so invested in one particular outcome — to the point where one can't (or is unwilling to) envision any other outcome.

Which is why I don't do it.  I've already posted what it would take for me to see deflation, and it isn't happening.  History says it shouldn't be happening, and so far I've seen no reason to expect "this time it's different."

Who said "this time it's different"? You don't think deflationary crashes can just happen?

What I do see is a whole lot of professionals that have nearly always been wrong trying to claim "this time it's different."  And I see a whole lot of people that trust those authorities.

I'm not sure people really try to prove their points by saying that we're experiencing something new and different. Usually people pull real examples from history (1930s, Japan, etc.)

I only bring it up because I agree that inflation may happen, and it probably will happen. But, I tend to be wrong about a lot of things, and I certainly wouldn't put the majority of my money towards that hunch.

Neither would I.

AgAu... in a way, I think you've structured your life and investments in such a way that you have no choice but to have an unwavering bias to believe in high inflation. So, every other argument against that stance — whether its logical or not — is instantly dismissed without serious thought.

How is that helpful when the other side of the coin may be right?

If I had structured my life and investments in expectation of high inflation I'd be in even fewer bonds and cash, and if I expected a dollar collapse was imminent I'd be getting out of the suburbs -- 50 miles away per every 100,000 people seems about right.  The stored food is something I and my parents and my wife and her parents have always done.  I even did it while I was in school, but then it was a few weeks instead of a year.  (You should try it.  Until you do, you have no idea the freedom and cost savings when you buy bulk and only on sale.)  The stored water is because I'm on a well and without electricity I have no water.  And no water gets unpleasant very quickly.  Just ask my neighbor who is now spending $10,000 to put in a generator after our last multi-hour outage a few weeks ago.

Ok, now it makes a little more sense. Before it almost sounded like you were living in an inflationist cult compound

Instead I've reached a compromise with where I live (I'd rather have no visible neighbors and no building codes) and gone for a safe portfolio with 40% of my assets and a variable portfolio composed of precious metals, blue chip stocks, a few other stocks, and cash.  Five years ago that VP was only 30% of my assets but has now doubled to 60%.  I don't give a damn what anyone else thinks, that performance is good enough for me.

Please believe me that I'm not criticizing your portfolio. I'm actually slightly envious of your courage. It's just that having 60% of your assets in a VP implies that you can afford to lose 60% of your net worth (i.e. the definition of a VP is money you can afford to lose). If that's the case, more power to you! If not, then it seems like a big risk.

Show me an argument against my balanced portfolio which has not been proven wrong multiple times over the past 10 years.

Well, I think 10 recent years means nothing in the grand scheme of things. You don't really expect the world will constantly repeat 10 year periods over and over again do you?

Show me how taking gains out of precious metals and putting them into blue chips has been anything but conservative.

Any deflationary crash would hurt your VP pretty hard. Most crashes tend to be deflationary (according to HB).

I'm glad you can see the mote in my eye.

This isn't meant to be a criticism. I'm just trying to understand how an inflationist isn't the slightest bit worried about a deflationary crash. They do happen. And they happen big. You seem unwilling to believe that they do.

[MediumTex]

Gumby,

I think AgAu may be saying that he simply has faith that Bernanke will be able to create inflation no matter how stiff the deflationary headwinds.

I am less confident about this scenario than him, but that's how I am reading his arguments.

[Gumby]

Absolutely commodities are not driven by speculation.  Ever been on a sailboat?  Speculation is the little gust or temporary shift in the wind that makes the sails snap a bit even tho the wind is still from the same direction.

Commodities spike and crash all the time. They spiked and crashed in the 1860s, in the late 1910s, in the late 1930s, in the late 1940s, in the 1970s — all complete 180º changes in the wind. Hardly the smooth sailing you describe.

Why do you suppose those bubbles happens? Could it be....

...Speculation??

"Buying anything that is a collectible, has no cash flow, and is based only on a future sale to a greater fool, if you will—even if that purchaser is not a fool—is speculating. The "investment" might work—owing to a limited supply of Monets, for example—but a commodity doesn’t have the same characteristics as a security, characteristics that allow for analysis. Other than a recent sale or appreciation due to inflation, analyzing the current or future worth of a commodity is nearly impossible.

The line I draw in the sand is that if an asset has cash flow or the likelihood of cash flow in the near term and is not purely dependent on what a future buyer might pay, then it’s an investment. If an asset’s value is totally dependent on the amount a future buyer might pay, then its purchase is speculation. The hardest commodity-like asset to categorize is land, an asset that is valuable to a future buyer because it will deliver cash flow, not because it will be sold to a future speculator."

— Seth Klamon, founder of hedge fund Baupost

"Why should commodities provide investors with a real risk premium? Shouldn’t  prices actually decline  in real terms over time? A bushel of wheat, a lump of  iron-ore or an ingot of silver today is identical to a bushel of wheat, lump of iron-ore or ingot of silver produced one thousand years ago. The only difference is that they’re generally cheaper to produce because over time, human innovation has  lowered the cost of production.  When you buy commodities, you’re selling human ingenuity.

Past performance is no guarantee of future results, obviously, but human ingenuity has a good track record of overcoming nature’s constraints so far. A commodity bull market is really just a bottleneck  and as a  species we’ve succeeded in bottleneck  removal. Historically, most bull markets have ended up where they started.

Why bet against human ingenuity by buying physical commodities when you can bet on it by investing in  the enterprises whose  task  is to remove the bottlenecks and lower commodity prices?"

— Dylan Grice, Societe Generale

...Not to mention that Commodities haven't exactly performed that well over the past 130 years (in real terms):

[Gumby]

Gumby,

I think AgAu may be saying that he simply has faith that Bernanke will be able to create inflation no matter how stiff the deflationary headwinds.

I am less confident about this scenario than him, but that's how I am reading his arguments.

Seems like the economy should be showing more signs of recovery by now if his powers of inflation are so strong.

[doodle]

A little background on "The Bernank" might help with this deflation debate:

From Wikipedia:

Bernanke served as a member of the Board of Governors of the Federal Reserve System from 2002 to 2005. In one of his first speeches as a Governor, entitled "Deflation: Making Sure It Doesn't Happen Here", he outlined what has been referred to as the Bernanke Doctrine.[24] In that speech, he assessed the causes and effects of deflation in the modern economy. Bernanke states:

"The sources of deflation are not a mystery. Deflation is in almost all cases a side effect of a collapse of aggregate demand -- a drop in spending so severe that producers must cut prices on an ongoing basis in order to find buyers. Likewise, the economic effects of a deflationary episode, for the most part, are similar to those of any other sharp decline in aggregate spending--namely, recession, rising unemployment, and financial stress."

Bernanke Doctrine

Bernanke emphasized that Congress gave the Fed responsibility for preserving price stability (among other objectives), which implies avoiding deflation as well as inflation. He states that deflation is always reversible under a fiat money system. Where currency is under a monopoly of issuance, or where there is a regulated system of issuing currency through banks which are tied to a central bank, the monetary authority has the ability to alter the money supply and thus influence the interest rate (to achieve monetary policy goals). Bernanke asserted that the Fed "has sufficient policy instruments to ensure that any deflation that might occur would be both mild and brief" [1].

In order to combat deflation, Bernanke provided a prescription for the Federal Reserve to prevent it. He identifies seven specific measures that the Fed can use to prevent deflation.

1) Increase the money supply (M1 and M2).
"The U.S. government has a technology, called a printing press, that allows it to produce as many dollars as it wishes at essentially no cost." "Under a paper-money system, a determined government can always generate higher spending and, hence, positive inflation."[1]

2) Ensure liquidity makes its way into the financial system through a variety of measures.
"The U.S. government is not going to print money and distribute it willy-nilly ..."although there are policies that approximate this behavior."[1]

3) Lower interest rates - all the way down to 0 per cent.
Bernanke observed that people have traditionally thought that, when the funds rate hits zero, the Federal Reserve will have run out of ammunition. However, by imposing yields paid by long-term Treasury Bonds,
"a central bank should always be able to generate inflation, even when the short-term nominal interest rate is zero ...[this] more direct method, which I personally prefer, would be for the Fed to announce ceilings for yields on all longer-maturity Treasury debt."[1]
He noted that Fed had successfully engaged in "bond-price pegging" following the Second World War.

4) Control the yield on corporate bonds and other privately issued securities. Although the Federal Reserve can't legally buy these securities (thereby determining the yields); it can, however, simulate the necessary authority by lending dollars to banks at a fixed term of 0 per cent, taking back from the banks corporate bonds as collateral.

5) Depreciate the U.S. dollar. Referring to U.S Monetary Policy in the 1930s under Franklin Roosevelt, he states that:
"This devaluation and the rapid increase in money supply ... ended the U.S. deflation remarkably quickly."[1]

6) Execute a de facto depreciation by buying foreign currencies on a massive scale.
"The Fed has the authority to buy foreign government debt ... [t]his class of assets offers huge scope for Fed operations because the quantity of foreign assets eligible for purchase by the Fed is several times the stock of U.S. government debt."[1]

7) Buy industries throughout the U.S. economy with "newly created money" In essence, the Federal Reserve acquires equity stakes in banks and financial institutions. In this "private-asset option," the Treasury could issue trillions in debt and the Fed would acquire it, still using newly created money.

[doodle]

Gumby,

The man seems hell-bent on achieving inflation at any cost. He hasn't reached the bottom of the list yet so he still has some new tricks up his sleeve to further devalue your hard earned savings.

In the Austrian school when a central bank attempts to use the printing presses and other esoteric monetary policy tools to reinflate a credit bubble without letting it natural deflate and reach a new bottom, you get a crack-up boom.

For this reason George Soros said he was buying gold for protection against deflation. He knows that Bernanke won't let it happen and the ultimate result will be hyperinflation and extreme currency devaluation.

Will he succeed in defeating deflation? Will somebody not renew his term as chairman? These questions are unknown...but it seems like he won't let it happen on his watch without a huge fight.  

I would also ask anyone who believes in deflation to just look around you and the prices you pay for things....

Can you find anything other than housing that is becoming cheaper???

Billion Prices Project Data: http://bpp.mit.edu/usa/

[Gumby]

Gumby,

The man seems hell-bent on achieving inflation at any cost. He hasn't reached the bottom of the list yet so he still has some new tricks up his sleeve to further devalue your hard earned savings.

What if he's trying to avoid the so-called "Crack Up Boom" and treads too carefully? What if he's impotent when it comes to fighting deflation? The Bernanke doctrine is nothing more than a theory.

Once again Doodle, you want to believe that the Bernank is the most powerful man in the world and that he can do anything he wants. But, what if the Bernank is wrong?

You want to believe that the Fed is already causing inflation, but what if it isn't actually causing any inflation...

The Central Bank Is Causing Inflation

...and you want to believe that it's all due to the exploding money supply. But, did you ever consider that M2 only growing at a meager pace?:

The Exploding U.S. Money Supply Myth

...and you want to believe so bad that we are all drowning in inflation, that you won't even consider that inflation is very low and bordering on deflation?

Inflation Update (July 15, 2011)

It seems to me that you're unwilling to consider that the other side of the debate has any merit. You can only see one outcome — that may not even be happening — where the market and the data may say otherwise.

Instead of saying, "interesting, maybe they have a valid argument..." you just dismiss those opposing arguments — even though neither you nor I really understand all the nuances of the monetary system. Whereas, I'm simply saying that I don't know whether Bernanke can bring inflation or not.

Why are you so sure of your ability to figure out the direction of the economy?

[doodle]

Gumby,

I am not 100% sure that we won't experience a short bout of deflation. But, I would argue

#1) every central bank in the world is poised and ready to fight to defend against deflation even if this means opening up the printing presses and throwing a Fed party with MC Bernanke "making it rain".  

#2) The overall long term emerging market story is intact. A large degree of the reason we haven't experienced more inflation in the west is because we outsourced production to labor forces willing to work for 2 dollars an hour. This pool of cheap labor is beginning to demand more money putting upward pressure on prices.

#3) The downward hundred year trend for the dollar is pretty well established and I don't see any reason that it would reverse.

#4) The world is becoming more resource constrained driving up the cost of doing business.

I personally, come down in the stagflation camp for America. I think we are going to muddle through a phase of slightly higher inflation with economic stagnation as our workforce struggles to compete in a global marketplace.

Ultimately, I think that this issue is being made out to be more difficult than it really is.

When you go out and spend your money do you see that prices for food, insurance, fuel, etc. are generally getting cheaper or more expensive?

I acknowledge that I could be wrong but even still, I have slightly hedged my PP to higher inflation by implementing a 50% 5 year bond ladder instead of the barbell.

I figure that if we do get deflation, I might miss out on the LT treasury pop, but having 50% in bonds and cash puts me in a decent position. I think any deflation will be temporary as long as central banks can control the amount of money in the economy.

Now, if Bernanke retires and they close down the Fed, then I would definitely want to be in LT treasuries.

[doodle]

Gumby,

Can you explain how you think deflation could happen over a prolonged period with a central bank that is hellbent against letting it happen?

Looking at CPI numbers, it looks they have been pretty effective so far against stopping it.

[Gumby]

Gumby,

Can you explain how you think deflation could happen over a prolonged period with a central bank that is hellbent against letting it happen?

Looking at CPI numbers, it looks they have been pretty effective so far against stopping it.

Here's an interesting viewpoint to mull over...

Why Credit Deflation is More Likely Than Mass Inflation: An Austrian Perspective

[doodle]

I want to make a final point that you can make an argument against anything. Listen to this rational argument against silver in 2006:

The author missed nearly a 1000% increase.

http://seekingalpha.com/article/10056-r ... er-etf-slv

However, if you look back throughout history the cards are definitely stacked against #1) Fiat currencies #2) Fiat currencies issued by HUGE debtor nations.

[Gumby]

I want to make a final point that you can make an argument against anything. Listen to this rational argument against silver in 2006:

The author missed nearly a 1000% increase.

http://seekingalpha.com/article/10056-r ... er-etf-slv

However, if you look back throughout history the cards are definitely stacked against #1) Fiat currencies #2) Fiat currencies issued by HUGE debtor nations.

Doodle, that's exactly my point. Why on earth would you only want to accept one argument when so many different arguments can be made?

Did understand Boyapati's viewpoint? Are you willing to bet your life that he's wrong?

I think it's a little odd to bring up someone's prediction from 2006. In 2006, nobody could have envisioned what happened in 2008. The unthinkable happened. Now we're in 2011 and everyone and their mother is predicting inflation. What makes you think the unthinkable (i.e. Deflation) won't happen in the next few years?

[Gumby]

Here's another viewpoint that MT posted a few months ago

http://www.contraryinvestor.com/2011arc ... omar11.htm

Why are you so sure that this viewpoint is wrong? Your only defense so far is that someone can make an argument for anything — what kind of a rebuttal is that?

[doodle]

Gumby,

My primary argument I guess is that all of human history has shown that fiat currencies trend to zero, and this is especially the case when those fiat currencies are being issued by the largest debtor nation.

Why on earth would a nation that is the largest debtor nation that has ever existed, and that can print as much money as it wants, intensify its debt and economic problems by risking deflation? Because they want to save the middle class?

Are you telling me that a central bank that can print as much money as it wants is not capable of simply erasing all of the debts in our system overnight by just punching a few more zeros onto the end of the money supply?

Besides the brief blip in 2009...have we seen any deflation at all....even though we are in one of the worst recessions / economic contractions since the 30's? We should be experiencing massive deflation...but we are not. That should speak volumes about the power of the central bank already.

[Gumby]

Gumby,

My primary argument I guess is that all of human history has shown that fiat currencies trend to zero, and this is especially the case when those fiat currencies are being issued by the largest debtor nation.

Why on earth would a nation that is the largest debtor nation that has ever existed, and that can print as much money as it wants, intensify its debt and economic problems by risking deflation? Because they want to save the middle class???

Are you telling me that a central bank that can print as much money as it wants is not capable of simply erasing all of the debts in our system overnight by just punching a few more zeros onto the end of the money supply??

Besides the brief blip in 2009...have we seen any deflation at all....even though we are in one of the worst recessions / economic contractions since the 30's? We should be experiencing massive deflation...but we are not. That should speak volumes about the power of the central bank already.

The answer to all your questions were in the links that I've posted.

Doodle, it's pretty clear to me, by the speed of your replies — and the fact that you don't have questions about them — that you're not even reading these contrarian viewpoints.



It's like you don't even want to learn about different opinions. And for someone who claims to be so cultured from having lived in so many different countries, that really surprises me.

[doodle]

I promise that I will read the Austrian perspective paper that you posted...because I do want the perspective. However, sometimes these academics who have never made a dollar in their lives get so lost in their quantitative analysis that they overlook the simplicity of the system. Sometimes the academics are the worst people to listen to.

Jim Rogers..(who also does have academic credentials) has made billions over the last 30 years by understanding the way the world works. This also goes for George Soros, Marc Faber, Bill Gross, and many other people that put their reputations and fortunes on the line when they make predictions.

For the most part, their bank accounts have proven them correct. For the most part 1000's of years of history have proven the points they make valid.

Why is this time any different? Why do all fiat currencies issued by large debtor nations eventually fail..but this time is different.

I think the burden of proof has to be on the deflationistas in this case as they try to buck 5000 years of history.