I am no expert in these areas. I don't have a degree in economics, voodoo, or meteorology. Still, I am interested in thinking how things might work and the direction the world might go.
There for a few days we were hearing about silver's record highs. Today it's hitting $40, and there is not much being said. Gold is edging toward $1500, and oil is around $120 +/- at my last check. To top it off, the euro is surging against the dollar. There are still people saying that it is "only commodities", which is true (I would drop the "only"). Yesterday I saw a blurb about housing "officially" double-dipping. I think it was more like housing was clinging desperately to a branch on the edge of a cliff, and the branch just broke off. But, anyway, housing prices are not recovering.
Here's the really simple point to keep in mind. The federal government cannot afford deflation. The Federal Reserve bank is not officially part of government, but only "not officially". The central banks in the U.S. and Europe determine government monetary policy. They do it whether there is a conservative government or a liberal government. The goal of central banking is to consolidate as much of the wealth and property of a given nation-state as possible into the fewest hands possible. That is not, by the way, a conspiracy theory so much as it is a simple and observable fact. To the bankers, this makes perfect sense. I do not see it as necessarily malicious or intentional evil. What else would bankers do?
To this end, bankers prefer fiat currency issued by a stong central government. They like a government that will borrow money to fund extensive entitlement programs while providing a guaranteed stream of income for those holding government bonds. The bankers and their affiliates can lobby a central government for statute and regulatory changes that will enable this plutocracy to further enhance its wealth accumulation. A central bank's symbiotic relationship with a central government is one of the reasons the Founders were reluctant to have a central bank and stipulated in the Constitution that only Congress could coin money.
Since the dollar was floated relative to gold (under the Nixon administration), the Fed has been able to manipulate the value of our fiat currency. This has worked fairly well in some cases, not so well in others. Again, for the most part, this is not malicious, it's just stupid. Politics get too involved and people are harder to control than the bankers imagine. Communication modes change. Information becomes more easily accessible and more, if you will, feral. Still, the central banks have done a good job of convincing people that paper dollars are something of sound and lasting value instead of token markers in a vast and often uncontrollable game.
(Parenthetically, if I were a conspiracy theorist, I would make predict rampant inflation going into the 2012 election with continuing high unemployment and growing unrest. I would predict the rise of a third party candidate to draw off center-left "moderate" voters unhappy with Obama but unwilling to vote for a social and/or fiscal conservative. I would predict the rise of a Republican candidate who is just enough outside the establishment to appeal to the Tea Party folks. I would predict the Republicans holding onto the House and gaining enough votes in the Senate to give them a majority which they will then proceed to lose in 2014. The reason the Senate will go back the Republican in 2014 is because interest rates will have been raised dramatically in the face of run-away inflation. But I'm not a conspiracy theorist, and the people who would be behind any such conspiracy are not that good or that smart. The last time that scenario worked out all right because the percentage of productive workers was higher than it is today.)
The Federal Reserve works at the creating and sustaining of economic bubbles through its monetary policy. As long as there is an industrial base and a majority of the people in a given political region producing what we might call "capital" goods in the form of energy resources, ores, and productivity-enhancing equipment along with foodstuff, the central bankers can do well enough. When the number of non-productive people, e.g., financial services workers, government workers, and welfare recipients, grows to too large a percentage of the population, the central bank seeks to expand the central government's influence and sphere of control. In Europe, this meant the creation of the EU. In North America, NAFTA may have been a symptom. Now we have the WTO and the IMF. I don't think the UN itself is organized enough to be really involved but it does provide something of a loose framework.
Again, this is not some world-wide, ancient conspiracy. It is ancient, but it is mere self-interest magnified. It makes sense to the financiers who are able to pull these various strings. People simply have a tendency to use the power that is available to them. Fiat currency and political consolidation are powerful tools.
The Federal Reserve and its sister central banks wish to continue to plunder the remaining affluence of the American taxpayer. Taxpayers are still a slight majority in this country so there is still opportunity for rapine. Fearful of resistance if taxes are increased too much, the federal government and its central bank have hit upon an insidious alternative — inflation, which in the context of a huge federal deficit, becomes a massive tax increase. Last night on the news from a nearby city, the mayor was boasting that sales tax revenues are up. Well, hell, yes, they are. If a loaf of bread that used to cost $2.00 is now $3.00, the city collects another few cents per loaf. So even if fewer loaves are purchased, an increase in revenues can be seen. The same is true of "record profits". Never trust any measurement made with an elastic tape.
The end result is that the average person has less money to spend on goods and services apart from taxes, utilities, food, and fuel.
That is the reason I have questioned and still question the deflationist's reasoning. It's still possible that, as I have said before, somebody perfects some new technology that completely alters the situation. If there is such a thing as cold fusion, and it could be discovered and perfected quickly, we would all be out of this mess in five years. Aside from that, there is the "good business" of war, which daily seems more acceptable and even appealing to the previously anti-war left.
I would like to remind those who think war might be an option that the Four Horsemen are a package deal.