Sustainability of U.S. Deficits Reason Why Investors Own Some Gold


Today’s Daily Reckoning is an ambitious one. But hey, after you’ve seen James Cameron’s Avatar, you feel like pretty much anything is possible. We’ll save the movie review for later. For now, let’s have a look at some obvious and not so obvious warning signs emanating from the economy. First is the picture below.

It is not April Fool’s day. Federal Reserve Chairman Ben Bernanke is Time magazine’s man of the year. Good on ya Ben! But beware the curse.

On February 15th 1999, Alan Greenspan, Larry Summers, and Robert Rubin made the cover of the same rag with the audacious tag, “The Committee to save the world….the inside story of how the Three Marketeers have prevented global economic meltdown…so far.”

Ben Bernanke is Time magazine's man of the year

It turned out that “so far” would last about another year. As you can see from the chart below, the S&P 500 peaked in March of 2000, and then crashed. It wouldn’t reach another new high until July of 2007 – right about the time a couple of leveraged funds from Bear Stearns stuffed to the gills with CDOs started to shake the financial system to its foundations.

The world doesn’t look very saved, does it? Judging by today’s Fed statement the world needs more saving. The Fed didn’t change rates. But it didn’t say when it would remove its support for the housing market (via purchases of mortgage-backed securities) or when it would wind down its other programs that support the fragile state of credit in the American market.

The truth is the Fed can’t remove that support yet – or the cost of housing finance would rise in the States. But it may rise anyway. The spread between two-year U.S. Treasury notes and 10-year notes is widening. Thirty-year mortgage rates in the U.S. are tied to the 10-year note. Higher ten-year yields drive up new mortgage and mortgage refinance rates in the States.

Double plus ungood.

By the way, not that we’re a bond sleuth, but we read in the Wall Street Journal earlier this week that the spread between 2-year notes and 30-year U.S. bonds is as wide as it has been at any time since 1980. It’s the yield curve. So what does it mean that the U.S. yield curve is so steep?

We reckon it means that investors want to be paid more to lend money long-term. This means they fear inflation. They’re happy to load into shorter-term notes and bonds. But loan the U.S. government – a government Barack Obama says will go bankrupt if health care costs are not restrained – for 30 years? Fugeddaboutit!

Note that Obama did not say what Senator Barnaby Joyce has said, that America could default on its debt. You have to applaud the Senator for uncharacteristic candour, as far as politicians. Technically, he’s probably not quite correct though.

The U.S. government sells debt in dollars. It also prints dollars. That means it can print new dollars to pay off its debt. It needn’t default, i.e. be unable to find currency to pay its creditors. If it were issuing debt in a foreign currency, say Yuan, then it would have to pay debt off in that currency and COULD default.

But perhaps we are quibbling over details. An inability to service its debt or pay off its long-term obligations, or just a willingness to do so by printing more money, is effectively a devaluation of the U.S. dollar. That’s what the currency markets have been telling us all year. And that’s one reason why the yield curve is starting to look like an Olympic ski jump.

This fear of the sustainability of the U.S. deficits is another reason investors and people who use their brain own at least some gold. And on that subject, we copped it a bit from a friend last night for our comments yesterday. He also trotted out a famous quote about gold from Warren Buffett.

“Don’t you think you were a bit self indulgent yesterday going after Pascoe?”


“Well, it is a fair point.”

“What is?”

“If the world goes to hell like you say, you can’t eat gold. You can’t sleep on it, although you could sleep with it I suppose. How useful is it really going to be as a medium of exchange or a store of value if economic activity grinds to a halt?”

“I don’t know. I’m not Nostradamus. But I’m not recommending people convert all their equity holdings into precious metals either. I AM recommending they own some bullion and, for leverage purposes, some gold shares. That doesn’t seem so radical. Why would anyone find the idea of hedging your bets against monetary policy so kooky?”

“Because monetary and fiscal policy have basically worked, at least here in Australia.”

“Are you drunk?”

“I’m serious. The stimulus worked. It kept Australia out of recession. What more do you want?”

“Less. Less is more mate. The stimulus increased the debt and maintained the appearance of growth. But the economy didn’t need growth. It needed to reduce personal debt levels and consumption and get a less leveraged balance sheet. The government encouraged the exact opposite.”

“Blah blah blah. Even Buffett thinks you’re wrong about gold. What’s that quote of his… ‘Gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.’ What do you say to that?”

“Buffet is a better investor than I’ll ever be. And obviously he’s a smart guy. But surely he’s heard of Gresham’s Law.”


“Gresham’s Law. Bad money drives out good. Or to quote the late, great Harry Browne, ‘If an individual holds two types of money of unequal value, he will spend the bad money and save the good money.'”

“I’m afraid I’m not following you.”

“That’s because you’re a moron. But it’s the argument between owning all paper and at least some gold. You don’t convert all of your wealth to gold because right now, that’s not useful. You need cash to conduct transactions in the real economy. And when the government is inflating away systematically, it makes absolute sense to get rid of cash before its purchasing power diminishes. Trade it for tangible goods that DO have value or utility like whiskey, cigars, and bullets.”

“How about something less revolutionary like houses? “

“Maybe not a bad idea if you’re using cash and not debt. And it would be a good idea if the price of the asset wasn’t going to collapse imminently. You don’t want to convert your cash into a capital asset that rapidly depreciates in value, which is possible with house prices.”

“But isn’t that possible with gold too? You convert your cash into a tangible asset whose value fluctuates? And it doesn’t even pay a yield! And you can’t exactly live in it either.”

“Of course that’s all true. But the reason central banks and households own gold, and the reason people have hoarded it for thousands of years, is that they KNOW intuitively that gold is good money, sound money, and that paper money is generally not good money – especially when it’s being actively destroyed by bad fiscal and monetary policy. Generally it’s not something you have to consciously think about. Most of the time the money in your pocket is exchangeable for the things you want.”

“So what’s the problem?”

“The problem now is that people are beginning to understand that monetary inflation is theft. If you trade your labour for wages paid in the form of cash, and the government devalues that cash, it’s stealing your productivity. It’s trading its paper product for the fruits of your labour at a discount. It’s cheating you. Gold doesn’t cheat you. It doesn’t love you either. It doesn’t do anything. That’s why people prefer to hold some of their wealth in that form, for those times when they are being cheated by government.”

“Well, that’s pretty much all the time isn’t it?”

“You know what H.L. Mencken said about elections in democracies? He said they are an advanced auction of stolen goods. There’s a whole lot of stealing going on these days. A fiat money system is systematic theft because it’s based on unsound money. That’s what’s being exposed by this financial crisis. The entire funding model of the fiscal welfare state is collapsing because it’s based on debt and fraudulent, counterfeit money.”

“Hey do you want to go see Avatar?”


We’re not saying people who don’t understand gold’s role as money are stupid – although maybe a few of them definitely ARE stupid. What we are saying is that it’s not rational to hedge against what you don’t know is coming. Most people have no experience with a currency collapse. So they don’t prepare for it. It seems so unlikely that it’s not worth hedging against.

Incidentally, until we start hearing this conversation in barber shops, we won’t be convinced gold is in a bubble. But in the meantime, if you are less dogmatic, a strategy for converting your equity holdings to something more tangible is just as practical.

For example, earlier this week we mentioned ExxonMobil’s big natural gas play in the U.S. This matches a theme we laid out earlier in the year at Diggers and Drillers that unconventional natural gas plays – gas from shale formations – would be the next intelligent speculation in Australian energy shares.

That’s a classic case of substitution. The high oil price makes other energy alternatives economically realistic. They can stand in as substitutes for the fuel we get from oil (most of the time). This is what Michael Pascoe correctly pointed out when he said we can “make more” of the stuff.

Unfortunately for Ben Bernanke, the Fed can only make more dollars, not more gold. There are not many ready substitutes for precious metals. That’s part of what gives them their inherent value; their scarcity. Gold is not exactly unobtainable, like the unobtanium in Cameron’s Avatar. But it’s certainly getting a lot more desirable the more sovereign states go into debt they can never repay.

Dan Denning
for The Daily Reckoning Australia

Dan Denning
Dan Denning examines the geopolitical and economic events that can affect your investments domestically. He raises the questions you need to answer, in order to survive financially in these turbulent times.


  1. LOL… you contradicted yourself Dan!

    You say Australians should buy gold because its a good hedge against inflation and i agree but you also mention in the article that property prices are about to collapse. So why buy gold for inflation when you are stating that Australia is about to experience deflation

  2. GB why would property prices going down imply deflation? That’s a really weird thing to say that makes me think you don’t know what you just said.

  3. The Daily Reckoners will talk down housing as they don’t want you to invest there, they are hoping u subscribe to Diggers and Drillers and invest in stocks!

  4. drew weeks
    i guess it all depends on whether you believe that a property crash will be contained to the property market only and not to the general economy

    I think the crash will be caused by a collapse in the resource industry, which will lead to a crash in property industry and then the retail industry and so on…. not an environment that is conducive to rising prices which is why i said deflation

  5. Credit disappearing is not deflation. It just makes some debt disappear.

    Gernot Hassenpflug
    December 18, 2009
  6. GB consider housing price crash plus and rising oil prices , then you may see inflation inspite of falling house prices.

  7. Nirvan good point. But oil I suspect is not likely to rise unless commodities prices in general rise. We could however end up in Government induced inflation while at the same time home prices fall a touch, that I guess would be unsettling for many people?

    Greg Atkinson
    December 18, 2009
  8. I expect that the monetary inflation (worldwide) to translate into commodity price increases and therefore into consumer price inflation. Maybe sugar a good example. For the time being the carry trade is unwinding a touch with the USD rally but I suspect back into full swing next year. Im hoping to buy some LNG plays on the cheap if small caps come off enough.

    Lachlan Scanlan
    December 18, 2009
  9. The resource industry will not crash, China will not let it, remember it is a totalitarian state, with full control, it will not allow itself to falter like say, the Asian economies did in the 90s, China will do whatever it takes to grow, grow, grow.

  10. GB property prices can collapse in terms of gold but still rise in terms of a fiat currency which is exactly the most likely scenario that’s going to unfold.

    Just think about this, what good is a million dollar house if you have 50k worth of food in your fridge? :)

  11. “Deflation is the midwife of hyperinflation”.

    One of several fellow traveller comments here

    I agree that the Chinese are being a bit cute (their existing USD reserves are out buying better things) and that there is no acknowledgement here of the carry trade’s own appropriation of the increased reserves. But delever those carry risks taken off US balance sheets and I contend that it all hits together. USD spike, dollar drought, deflation, then wild inflation.

  12. bertie – china was one of the countries that faltered in the 90’s and guess what caused it? bad bank loans… what is china doing now??? lending like crazy. Its like they have one goal and one goal only and will do anything to reach even destroy their economy in the process and i think that goal is to be an economic superpower. the problem is they seem to believe that an economic superpower means they must have the biggest economy in $$ terms (GDP)

    and china cant grow and grow and grow because inflation will step in and put a stop to it

  13. I read that ZH thread last night Ross and loved it!
    My thinking was DXY to 80-82 resistance area which is commonly touted but maybe you see more in it and therefore are expecting a major new round of deleveraging rather than a modest correction? I did see some bearish analyses on ZH suggesting DXY to 90.
    I liked that saying about the midwife etc. People keep arguing about inflation or deflation but its likely going to be both. At least in US deflation has already occurred and now possibly more to come and also may spread around globe if a big USD rally prevails here. However in response to deflation and in a world of unbacked fiat, consumption economies and taxes and interventionist policy dating way back then QE and inflation are highly likely.
    As I see it the deflationary cycle is close to over, the rally in USD will be wiped out fairly soon and inflation will start. My thinking is based more on assumption of some control over situation by US Fed, vampire squids etc and a historical perogative to maintain inflation (perma bull) at almost any cost.

    Lachlan Scanlan
    December 19, 2009
  14. We think China’s growth will continue, Bertie. It will suffer minor setbacks from time-to-time, but providing the political frame remains intact, within their long-term planning, China is set to eclipse the US _and_ Europe. Not sure that’s a particularly _good_ thing, when you consider China’s human rights record, but the US hasn’t exactly been squeaky-clean, during the last sixty years, either. China will probably continue to focus more on its domestic markets, as some of its consumer trading partners become protectionist simply to survive, but who would you rather bet on, than China? I could be wrong here. Maybe the US _can_ drag itself up out of the mire… but it seems to me that China is continually reshaping its industries faster, more efficiently, with far lower labor and infrastructure costs and restrictions, than the US. Its rise won’t be without some major issues, like water shortage. We gained a small inkling of that problem in Mexico, where _every_ home purchases two or more very large water containers every week… despite the fact that three rivers we swam in were crystal clear(!) Our view is that political instability aside, water will be China’s major issue during the next two decades… .

  15. deflation I’m referring to above is in US.

    Lachlan Scanlan
    December 19, 2009
  16. The median house price in Melbourne inflated by 25% over the past year.
    According to a report in the age on Saturday Dec 19th.
    Now that is a bubble, and it truly reflects inflation within the economy.
    CPI is not reflective of where all that extra money sloshing abound our shores has gone. If the biggest most vital asset class to the masses has bubbled by a quarter inside a year, then expect other prices (including the price of labour) to rise in relation to it, or, expect the bubble to burst.

  17. Uhhh… but Father Bear Steve K said we’d see a 40% fall for breakfast: bubble, pop & crash. Property falls and it’s good. Property rises, it’s a bad, bad bubble. The argument that wages must rise or property will go bust is enticing in its simplicity, but property markets are more complex than that. Wages _will_ rise, of course, but a host of other factors (interest rates, government policies, population growth, foreign property investment, employment, taxation changes, etc) are all factors which affect property values. Wages are a small part of the equation. If you live in Victoria and you’re still hoping Keen is right.. and you’ll buy cheaper next year… good luck, Joe. If you made more than 25% in cash, shares and gold during the last year… and scored free rent for a year… you’re well ahead. If your plan is simply ‘No wage rise = 25% fall in Melbourne values’, it could be worth having a backup plan… . If Santa gives all homeowners a tax write-off on mortgages next week, you’ll need to look at Plan C.

  18. The lesson for me is that if you make investment decisions based on published data coming from vested interests (eg: real estate agents reporting their sales figures), then you will very likely make a miscalculation.

  19. Completely correct, Dan. It’s the income derived over time and the equity that counts. Freedom and independence are just the icing on the gingerbread. :)

  20. Nice one Pete

    So wages aren’t that important then?? Personally I would suggest that wages are everything!!!!

    You get money coming in through wages and with those wages you pay your costs. Guess what? Interest payments on a mortgage are a cost!!

    ‘interest rates, government policies, population growth, foreign property investment, employment, taxation changes’ all affect costs which defines how much wages you have left to live on

    so if your costs are too big you can no longer live… that implies wages are the most important part of the equation and that is the problem that keen is trying to make people aware of – peoples costs are blowing out which oversized interest payments etc…

  21. There are certainly a lot of people expecting the Aussie bubble to deflate or pop. Does this mean that they are right – not necessarily but it is interesting how wide spread it is.

    “Hugh Hendry also has some Australian 10-year government bonds, as the manager says the country is the last to experience a housing bubble, and has a highly leveraged consumer. He expects to be able to make money in the country when these things begin to unwind.”

  22. Lachlan, we know the US deflation that has already happened has yet to hit the balance sheets (GAAP rule deferment), the profit reporting, or the media in the way that takes it to another level again, and yet it must. We see only the traces of it in the consumer stall, the deteriorating state and fed tax receipts and the Keynesian liability loads accepted by the government. Deflation in action creates much more than the little squeals that we have seen up to now.

  23. Good luck, GB. There have been a lot of very clever people making the same point(s) for two years now. If you’re right, You and Hugh will make a killing in the Australian property market. Our advice is to have a realistic back-up plan in place, to cover a slight possible margin for error.. ;)

  24. Very true Pete, a backup plan is very important. To quote Cromwell:

    “I beseech you, in the bowels of Christ, think it possible you may be mistaken. ”


  25. O how true, Don. Goldbug plan: Dollar falls, I rise (again); Stocks fall, I rise (again); Property falls, I rise (again).
    Are Goldbugs the only class of investors whose plan depends on everyone else failing?! Jeez, I’m impressed! Could happen, of course… and I really do wish you well in going against _all_ the odds. Our own plan works best if the Australian economy does well, but I do understand your ongoing need for a complete collapse of fiat currencies, the US, Europe, China, our own economy, the stockmarket, employment, and property, etc, etc. Gold really, really _is_ that important. :)

  26. Hi Ross.
    I began my thinking along deflationary lines and I still see it that way.
    I favour John Exters viewpoint. I only factor in hyperinflation (US origin) as an intermediate event that John hadnt forseen before he died. He did not know they would print as they have. So in an economic sense I agree completely with the deflation scenario which is why I like the midwife piece. Hyperinflation/very high inflation I see as purely a monetary event likely to impose somewhere in the middle. My timing for inflation predicated through technicals on the USDX ie making a new yearly low soon below 08 low. I think it could be soon unless this new USD rally has longer term legs…which I tend to bet it won’t. I think a last ditch, all out increase in credit/money supply is a final, futile attempt at arresting the fall into the deflationary abyss.
    I note Ross you do see (and Bill Bonner also) a “wild inflation”, “hyperinflation” conclusion to all this.
    But how does that come to an end? Is it with resumption of deflation?
    Do our views only diverge where you possibly see a great deleveraging as imminent, but where I see inflation as imminent?
    Actully, will/how can/what does it take, for currency stability to re-emerge. Thats a huge question. Do we need another dark age? Or were the dark ages really an age of relative (no dogma here) simplicity and truth. Is the current age of post enlightenment just doublespeak for an age of increasing lies and theft?… I do have views on these matters but not a DR kinda topic.

    Ross I havent given much time to reconsider my “flation” thinking of late. I can also see your brain is brimming with much relevant information I have not considered. Please critisize where your thinking diverges, you may save me some money!
    Also I dont see a new perfect world with gold as money….maybe just some token, partial backing as govs’ try to regain some credibility while they sell their new currency formats.
    Catch you round Ross.

    Lachlan Scanlan
    December 20, 2009
  27. It seems to me that because many people haven’t experienced falls in property prices they don’t believe it can happen. I live in Japan and have experienced 10 years of deflation.When I arrived it was an expensive place to live, now prices of many goods and services are cheaper than Australia. Beer,whisky,rents,and eating at restaurants for example. Also the value(?) of my apartment has dropped about 40 percent and that’s assuming I could find someone to buy it, which I doubt. Worst investment I ever made,should have bought some GOLD!! Some great stuff written on The Daily Reckoning. Dan’s humor alone makes it worth reading. Keep it up.

  28. Lachlan, I am a little more forthcoming on timing of a likely deflationary event than those that go straight past it toward hyper inflation. But that deflationary event time scale for mine is determined by three main things, 1st being the breaking of consumers’ recovery expectations, the second is any substantial marking to market of current balance sheet assets, the third is the discovery that most that expect to have derivative cover have taken punts with flimsy counterparties that will prove to have inconsequential resources when called.

    The reason I went the UUCP calls at the time, (based on the view that others would see the probability of what would happen during any unwinding of hyper levered carry risk), that turned so good was that there were real parties that still had liquid assets that were inspired by many including Bill Bonner that predicted only the certainty of the long term demise of the USD but not then conceiving likely intermediate events (Dan D did start his “short covering” caution a while ago however).

    I am less than enthused about the credentials of USD call counterparties now so I am out. I reckon currency swap counterparties are now among the riskiest. Call it “short covering” or what you will, unwinding stupid US originated risk taken with the new version of funny money leverage will mean bucketloads of trouble.

  29. One of the reasons we decided to travel the world for seven months was to see firsthand the very trauma you describe, Bryan. What we found was that realty in some parts of the world is overpriced. These locations were primed for a tumble… . Some, like the UK, are still falling and may fall further. Even people who believed they ‘knew the market’ were caught. In other parts of the world, property is, to our mind, incredibly cheap. Despite that we haven’t bought any (yet). We really don’t know enough. But it has given us a reasonable overview; certainly enough to impart the belief that we _don’t_ know enough. You bought in Japan ten years ago? You lost 40%? We should listen to an American who lost 40% after the Japanese market had collapsed ten years _before_ that? We’d need to think on that awhile… . Location remains the first three rules of realty, Bryan. Console yourself with the knowledge that you’ve had ten years’ free rent at almost a zero interest rate. If you don’t grow from your experience in Japan, you’re destined to remain a tenant. Nothing wrong with that at all. Our own goals can’t be achieved without our highly-valued tenants…

  30. So Lachlan, what’s at the tip of Exter’s Pyramid?

    I think a distinction between ‘inflation’ & ‘deflation’ is another fallacy to confuse & obfuscate. The two are just symptoms of the same monetary disorder, that being ‘paper is as good as gold’, or to put it more succinctly, ‘debt can be extinguished with a paper promise to extinguish debt’.

    Just because there is ‘deflation’ doesn’t mean there is not ‘inflation’.

  31. “I think a distinction between ‘inflation’ & ‘deflation’ is another fallacy to confuse & obfuscate
    Totally agree Justin, although we can use these paper indicators to judge the health of the paper system and therefore the evaluate the current need to gamble on the alternatives eg gold. As the liquidity pyramid unfolds its wrath against paper, paper steps up the fight with…more paper. Hence an increase in inflation , possibly hyper. Of course it’s a pointless reaction. The real story lies behind the mask of paper value ie how are real/relative values changing eg the easily manipulated paper medium gives rise to unrealistic values in certain areas… such as, close to home… property too high, gold too low etc etc. Not that I would critisize those who master the former anomaly to their benefit…they should because thats the reality at times of the environment around. Without an escape plan (risk management)however the wisdom of such is in doubt….as I believe it will be for gold at a furure point.
    At some stage the reckoning is inevitable and we’ll all suffer with it more or less. With PMs we have some protection but government reaction to the unfolding scenario is uncertain so we have to keep real in this regard.
    Its true I believe that markets stay irrational longer than we can stay solvent. I suppose Exter died well short of the very end game. The end is imminent now though. We have to focus on the big currencies IMO. Who is controlling them, what are their MO’s. What do their actions say about these currencies, can these currencies withstand the obligations against them ie what level of printing, debt is likely required.
    The current round of paper is stuffed!
    At some future point a fresh fiat arrangement will trump gold again or gold will keep us honest. But honesty is not an dominant endemic human trait. And I wont stay poor betting on dogma so I guess one day, sadly, I’ll have to sell my gold.

    Lachlan Scanlan
    December 21, 2009
  32. Lachlan, if I may be so bold, spend some time at; (as it happens, one of DR’s ‘Sites we Like!’)

    Masses of stuff there. Of interest is the basis, the premise being that when the future price of gold is below the spot, there is no physical gold to be exchanged, redeemed, swapped etc for gold futures (the gold bonds of today). When there is no gold for delivery on futures, it will soon follow there’s nothing of anything else available for delivery, or the cheque that is the dollar bounces.

    The basis currently sits near zero.

  33. The basis being the difference between spot & futures prices.

  34. Will do that. Cheers Justin.

    Lachlan Scanlan
    December 21, 2009
  35. Lachlan the difference between inflation and deflation are not by intention to confuse but real effects and have quite different scenarios. Take for a moment, the deflation of the US fiat currency. Suddenly China lent out proportionally more money relatively and are very very happy with their investment because they get more in return for their initial input. Competition in trading in foreign goods is very uncompetitive for the US because they can’t charge prices that are cheap enough without causing more distortions within their economy. The theme here is that lots of effects occur which cause psychological shifts and different methods to counter the problem as well as internal structure changes which require a lot of internal operation rather than global interaction. Obviously the relatively simple and worthless insight here is just a primer to the understanding of how complicated the relative change in value of inflation / deflation interacts with a global environment. It has alot of merit knowing which way it goes as any sort of investment requires knowing which way the investment goes relatively, up or down. Although understanding whether we experience inflation / deflation is usually a fallacious process (because people love a good yarn), it would be no fallacy at all to actually understand which were to occur and how this influenced your investment decisions.

  36. Gidday Drew
    John Maynard Keynes…”By a process of inflation governments can confiscate secretly an unobserved an important part of the wealth of their citizens”
    Drew maybe the confusion and obfuscation Justin refers to was unintended rather than by design. However they present consistently with the inflation process and used to great advantage by govs non the less.

    Lachlan Scanlan
    December 22, 2009
  37. Drew, is your definition of simple, ‘to confuse & obfuscate’?

    I think the confusion & obfuscation is intended, but that’s assuming the gov & its central bank are smart enough to do it, rather than ‘grope along in a fog of uncertainty’.

    I think that inflation & deflation are really symptoms of the same monetary disorder. Look at Zimbabwe, that country has experienced severe ‘deflation’; capital destruction on a massive scale (empty granaries, breeding stock being slaughtered for food, mine shutdowns etc), basically an almost total loss of production of anything, yet suffered hyperinflation as well. The two are not mutually exclusive, in fact, I suspect they may be one & the same thing.

  38. The ubiquitous Socialist nanny-state has triumphed over both Capitalism and Communism.


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