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Why deflation wont work

 -- Published: Sunday, 19 April 2015 | Print  | Disqus 

...And why prices won’t decrease as postulated by The Austrian Economists...

Unbrideled capitalism will only tend to strain the natural resources further!


Publicly And Personally, I try to be non-partisan as regards whether we should adopt the Gold Standard or Not.


One of my primary concerns is that, if and when we adopt the gold standard, there will be a deflationary trend to assets, products and services to a certain extent, because gold is limited, paper money is not.


General human tendency is to see your own assets and income increase in value and your expenses decrease in value over time.


The popular governments of our times seem to have accessed this basic psychological need and hence have embarked on a general policy of monetary inflation, wherein the prices of goods and services in real terms keep decreasing over time AND the cost of liabilities keeps decreasing over time... as apparent from the Real Negative Interest Rates all over the world.


But these steady prices or slightly increasing prices (all said and done, the rate of inflation under a gold standard will be proportional to the production / mining / availability of 'exchange' gold) over time goes against human nature.


So, IF HUMAN PSYCHOLOGY IS ANY GUIDE TO ECONOMICS, we are not going to see much deflation, what we are going to see is shortages, if and when this false credit bubble collapses...


On an another thought line...


Just today I read on the news wire that some banks in the PIGS countries are paying home loan borrowers... Yah, you read it right. Some banks are Actually paying borrowers to borrow money...Small percentages for the moment...This news set me off quite a bit... coming as it is on a leisurely Sunday afternoon... actually got me a bit worried...So here comes the day when not only thrifty savers are penalised, nay even the well run banks have no solace and on top of that, indulgence is truly being rewarded... in terms of money. Well, home loan borrowers can’t exactly said to be indulging themselves... But the very fact that banks can afford (are forced) to pay the borrower make this whole charade laughable.


Well... the world has gone topsy-turvy. You save money with a bank, you need to pay the bank for safe-keeping (?) it AND IF you want to spend like there is no tomorrow, then you are rewarded!!!


How long can this last?

The central banks (and other powers that be) will keep churning out newer money (by printing or worse, just at the touch of a button) trying to inflate away their way out of expenses and debts. Humanity will keep exploiting non-sustainable natural resources (such as the land, water, air, earth) and one fine morning (or night) we will suddenly realise, that THIS EARTH can no longer support the exorbitant ways of modern humans. It could be anything (climate change, global warming, ice age, blight, crop failures, monsoon failure, earthquake anything)...


How long will it take, we don’t know, but one thing is for sure...if we keep exploiting nature, one day we might have to pay dearly by way of sudden mass deaths, starvation, freezing...


My advice for today (as it always is):

Save some of your investible surplus in gold and silver, have kids, Have a beer(OR maybe a whiskey OR a stiff glass of rum ;)), take care of your parents and children, meet a new lady (or a gentleman for that matter), Build a modest house, drive a fuel efficient car, don’t air-travel too much, Enjoy your life to a moderate extent in general, but don’t burden mother earth to such an extent that the burden will become unsustainable.


Sunday Cheers and have a happy, long, fulfilling life ahead !!!



Manish Thatte


p.s. On the auspicious occasion of Akshay Tritiya, We are inaugurating the Nasik office of Finansys Wealth Advisors LLP on 21st April 2015... All are welcome to enjoy high-tea and snacks at the venue. Please email me for the full address.

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 -- Published: Sunday, 19 April 2015 | E-Mail  | Print  | Source:

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