A pair of articles by Austrian economist professor Antal E. Fekete just might have one wondering who is more in the loony bin, mainstream economists like Krugman or those consistently chanting about the death of the dollar coupled with hyperinflation.

Premature Obituaries

Please consider Premature Obituaries

It is open season for wild monetary prognostications. More premature obituaries on the dollar have been posted on the Internet. For example, see Jim Willie’s The US Dollar Paper Tiger (Gold-Eagle, January 11) with epitaphs like “the U.S. dollar rising to the cemetery”, or “dollar death dance”. Or see another article, Jeff Nielsen’s entitled Maximum Fraud in U.S. Treasurys (Gold-Eagle, January 3). It betrays maximum misunderstanding about keeping the dollar on a life-support system. It assumes that the Fed and the U.S. Treasury are fighting tooth and nail to keep the value of government debt high lest it collapse in want of support from Japan, China, and other countries.

These views hang the picture upside down. In actual fact, the Fed and the U.S. Treasury desperately want to beat down the value of the dollar. The greatest obstacle frustrating their effort is the stubbornly high and still increasing value of U.S. Treasurys. Captains of the world’s monetary system are yanking levers and twisting throttles which are no longer connected to anything. The captains are no longer in control. Yet they continue to wave their batons feverishly and pretend that the orchestra is paying attention. They want Jim Willie, Jeff Nielsen and everyone else to believe that the falling interest-rate structure is the outcome of their deliberate monetary policy. In fact, the Fed and the U.S. Treasury are trying to stop the rate of interest from falling further. They instinctively realize the threat of falling interest rates brings deflation and depression in its train. The dollar is much too strong, contrary to the wishes of policy-makers.

It is not so easy to beat down the value of the dollar as suggested by Keynesian textbooks, even if you have the key to print shop where the presses are running. The dollar’s strength prevails in spite of the withdrawal of Chinese and Japanese support of the U.S. bond market, and in spite of the destructive monetary policies of the American guardians of the dollar.

This observation reveals the prevailing profound misunderstanding about the nature of this financial crisis. To set the matter right, in this article I shall recapitulate the argument that I have been presenting on the Internet for the past ten years. ....
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Mike Shedlock

Mike Shedlock

Mike Shedlock is a registered investment advisor representative for Sitka Pacific Capital Management.

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penetrex Wrote: Jan 25, 2012 9:11 PM
The Tea Party wants America to fail so they can blame it on Obama. No compromise, burn the bridges! It's fascinating that this was the attitude of the Bolsheviks before they took power: they didn't want their country to succeed. Both new right and very old radical left take pleasure in disaster, because they believe/d that the people would rise up and throw the old order out. I hope the American public knows who to blame and will throw out all the intransigent Republicans. the Democrats on the Supercommittee, from what we hear from progressive websites, were offering compromise that the left of the party didn't want to consider, but they made it contingent on the Republicans giving on new taxes, especially for the rich.
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mrcommiekiller Wrote: Jan 27, 2012 1:32 PM
Communist Propaganda!
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Blair31 Wrote: Jan 25, 2012 8:48 PM
Ironically, at the 1919 peace conference that produced the Treaty of Versailles, Keynes warned Lloyd
George that expecting Germany to pay the entire cost, (reparations for), World War I, was unrealistic.
Lloyd George, in turn, warned Wilson, and Clemenceau, that it was unrealistic. (Actually, Wilson), but
Wilson listened to Clemenceau, instead of Lloyd George, because Clemenceau wanted to punish Germany.
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Anonymous908 Wrote: Jan 25, 2012 2:23 PM
If it weren't for Ron Paul most of us, including journalists, would still have no idea what Keynesianism or Austrian economics is.

The Keynes model is failing us. The Austrian school of thought, Ron Paul included, correctly predicted the economic downturn years before it happened. Paul remains the only man running for president that is on record pointing out the disaster before it happened. They laughed at him and called him crazy..... he was right.
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penetrex Wrote: Jan 25, 2012 12:58 PM
When George W. Bush gave AIG $85 billion was that a Marxist redistrbution of wealth?
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mrcommiekiller Wrote: Jan 27, 2012 1:32 PM
Communist Propaganda!
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Reality, Again Wrote: Jan 25, 2012 10:09 AM
Krugman is just plain nuts. He can't distinguish between theory and the real world. When the real world and his pet theories collide, he says the real world is wrong. He has too much personally and professionally staked upon those theories and will never admit he's and his theories are wrong.
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witnwisdom7 Wrote: Jan 25, 2012 6:38 AM
Get us off Titanic, losing our Sovereignty, even Israel supports his foreign policy!
http://www.youtube.com/watch?v=ifJG_oFFDK0
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Daniel30 Wrote: Jan 25, 2012 6:21 AM
As one who has followed Austrian economists for a decade or so, I often saw Mitch's articles regarded as decent but exaggerating the possibilities of deflation in a central bank managed economy. The fear was hyperinflation. But Mitch has persisted in arguing for the market nature of credit. We have a system that may use credit to expand the money supply, but within such a system if the people within the market do not or cannot borrow the multiplication does not take place and a stagnant or deflating economy results. Your analysis has proved correct thus far, an important contribution within Austrian economics.
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