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Nullflation is the Worst of All Economies

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Whoever claims that economic competition represents 'survival of the fittest' in the sense of the law of the jungle, provides the clearest possible evidence of his lack of knowledge of economics. - George Reisman

Nullflation is the Worst of All Economies


Bad monetary and fiscal policy, often designed by the IMF, is the real cause of global problems. The only explanation for why government leaders continue to follow these policies is that by blaming markets, they avoid blaming themselves.
 Brian S. Wesbury

Before you put your own spin on the meaning of NULLFLATION, read up on the definitions and conditions for those other seven dwarfs that rhyme with FLATION, as presented by the Gold-Eagle site.

1) Disinflation is a term to describe a historical period in which inflation was not as high as expected or anticipated at the time. Disinflation marked the U.S. economics in the 1990's.

2) Inflation is a term to describe rising prices in the marketplace due to more money chasing fewer goods. Investment advisors during periods of inflation promote the concept that "Cash is Trash."

3) Deflation is a term to describe declining market prices. The technical definition relates to the Consumer Price Index falling or decreasing thereby producing a negative percentage growth rate. There is less money available to chase available goods. Deflations tend to remove poor economic choices.

4) Stagflation is a term coined in the 1970's to describe the unprecedented combination of slow economic growth and rising prices in the U.S. Many of today's investors and mutual fund managers were still in diapers during this stagflation period.

5) Hyper inflation in my opinion is when the Consumer Price Index is increasing by 100% or more when annualized. History indicates that when a government goes into hyper inflation the government and the hyperinflation period won't last long. In my opinion, hyperinflation was a major contributor the French Revolution in the 1800s.

6) Reflation is thought as a period of inflation whereby banks are made more liquid to avoid bankruptcy after a deflationary period has ended.

7) "Retroflation" apparently means something similar to "stagflation."

With this background NULLFLATION captures the nature of our current economic system and its dire consequences for all of us. This is not a pretty picture and if you are looking for a nice and clean way out of this plight, you will be sorely disappointed.

Null means invalid. We now live under an insupportable and defective economic system. The circumstances of the international interdependent, ‘so called’  - Free Trade - world economy, means that the fallout is global in scope. However, the domestic economy has a crucial and fundamental problem that most of the rest of the world does not share. The combination of all public and private debt, dominated in U.S. Dollars (the euphemism for Federal Reserve notes), bears an ominous day of reckoning. The reality that most people desperately want to dismiss and avoid at all cost, is that this cumulative liability can never be repaid, under the debt creation money system that is represented by fractional reserve banking.

What we have today is an economy that is the worst of all economies. Remember that government - on any level - is never a wealth creator, but siphons off capital to fund their civic functions, services and obligations. Here is how the domestic economy now functions, under the adverse effects of Free Trade.

1)  A severe contraction of wealth creation economic commerce is evident. Jobs moved offshore. Those remaining produce basic products and discretionary possessions have slowed to a crawl. Actual unemployment, reporting those who left the job search and including all unable to secure a living wage position, can only drastically increase. (deflationary pressure)

2) Prices for essentials and utility services continue to rise because the law of  “supply and demand” has been temporarily suspended by corporate monopolies who drove out all real competition. This allows for inflated consumer pricing that few can afford to pay. (stagflationary pressure)

3) Taxes rise dramatically to fund huge federal, state and local expenditures. Government never contracts, new spending - both domestic and foreign - will diminish incomes of all tax payers. (government disflation fraudulent statistic reporting)

4) Value of the currency decreases since no real rate of returns exist for savings or investments. Bear equity markets cause net assets to shrink, reduced dividends and ridiculous saving rates. Banks have unconscionable spreads between loan charges and their cost to raise new capital. (reflation policy)

5) Exchange value for the U.S. currency weakens with conversion from the dollar to the EURO as the new standard for oil payment (Iraq). With the threat of losing reserve status for international settlement, the dollar drops in relationship to other currencies; therefore, requiring more dollars to buy the same amount of goods. (currency inflation)

This is the world of  NULLFLATION !!! The invalid economic formula that created the conditions that guarantee an ultimate repudiation of the public debt, will not save the financial wealth of those who are obligated with personal debt. The government will hyperinflate, as a last desperate move to satisfy liabilities with worthless currency at a greatly reduced value. The net reality when all the dust settles, is the impoverishment of the American people, while the growth of central government only reorganizes. Private property will become meaningless, since even if it is paid for, few buyers will have the ability to purchase. Historic stores of wealth, like gold and silver, will become contraband and confiscated. Only the black markets (translate that into the one TRUE market economy) will thrive, while the traders will be labeled as ‘Enemies of the State’. Government assistance will not be known as welfare, but will become “subsidence survival for sustenance”, at a very high price - Conformity to the State.

When the velocity of money is curtailed or ceases to exist, the forces of command and control drives the economy to its knees. A simple example will illustrate the way a healthy economy should function.

If the entire economy was represented with a real and stable money supply, (not Federal Reserve debt notes) in circulation of $1,000,000, and changed hands by turning quickly and with confidence that this process would continue; you would generate a huge reassurance in economic activity. If that turn was three times the current rate of business, the tripling of transactions would spawn a multiplier factor that would vastly stimulate demand, unleash dormant capital (presently disinvested because of no real rates of return, and great risks in equity ownership), re-employ the unemployed, raise necessary taxes for legitimate public functions (through a consumption sales tax), all within a non inflationary environment (because the money supply would not be required to increase, in order to service - debt creation money - through the banking system).

Is this too complicated for you?

If not, the result you get is called PROSPERITY !!!

That original million turned quickly into a flow of three times that amount. Because of this increase in velocity, profit margins can start to return, which will fuel the confidence to reinvest for additional business activity. Folks, the current United States NULLFLATION economy is doomed to go bust. Sorry, that’s not what you want to hear, but the forces of compound interest can’t be tamed when it is used as the basis of a debt creation banking system. The pleasant ride has hit a brick wall. All the magic of Wall Street alchemy, won’t protect you, while it will enrich many of them. They are the elites that make the rules, at least up until now. There is no commercial solution without a politically inspired economic revolution. You have been systemically driven into personal and national insolvency through a calculated scheme of enslavement. The Corporate/State axis is the enemy, and the solution is to establish a genuine Free Enterprise economy, one which will never result in Nullflation.

SARTRE - February 28, 2003

...economic history is a long record of government policies that failed because they were designed with a bold disregard for the laws of economics. - Ludwig von Mises

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