Lehman Brothers/ Gulliver/ Inflation and Deflation

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“Bye bye Big Guy”
“Thanks for coming out!”

I’m not having a great day today.  I don’t like to write about those kind of days.  Because everybody has their problems.   Do I want to add my problems to your list?

No.  I don’t.   So this post is really going to be about our economy and our future.  If I tell you that my dog died today it’s only so that you will understand a little bit where I am coming from.   Our dog was very old and he needed to go play somewhere that wouldn’t require him to bring his worn out body.   I’m not talking about Sparky and Malarkey.  They are still here waiting for someone to come and feed them.

So what’s going on with our economy?  We went out to dinner last winter with Carlyle Tiller who was the founder of Wheat Securities and remains a very smart guy.  He was buying gold stocks before the buds came out on the trees.  Alan Greenspan said something about the economy being the worst in about one hundred years.  Well that would include the years of the Great Depression if my math is correct.

A few things can happen.  We can have deflation as in a recession or a depression.  Or we can have inflation as we did in abundance during the 1970’s.  Or we can have a combination of the two.  We had that in the late 1970’s.   Actually we have been having it to some degree since then but it was only very noticeable while President Carter was in office.  The numbers were high and he was gone in short order.

Since then we have lived with mild to moderate inflation and periods of recession.  All of this has been a way of keeping our economy going to some degree.  The patient is sick and he’s getting his insulin.  He’s getting his heart medication.  But he’s not getting well.

At some point he’s going to die.  And then things will start over with a new, much younger, patient.   But first we have to have the funeral for the old guy.  And it’s not going to be fun.  There’s going to be a lot of crying.  Just like there was today after our wonderful old dog breathed his last breath.

Someone on television said that the Federal Reserve should pump 5oo billion dollars into the banking system.  Maybe we can keep things going for another ten or twenty years.  But you can never solve the basic problem this way.  The only way you solve the problem is by euthanizing the old guy or dog and putting him out of his misery.

Let things stabilize at the level of their real value.  Let deflation have its way for awhile.  Don’t let go so far that we loose the ability to treat  our new patient.  We don’t want to go back to the stone age or 1932.  But we need to go back down to a level that makes sense and start over with a new patient.

Maybe the big boys understand this.  Maybe this is why Lehman is no longer with us.  Maybe he was the patient.

Maybe everybody is hoping he was the patient.  But I don’t think so.  Most probably he was like one of those  Lilliputians that tried to tie down Gulliver in Jonathan Swift’s satire.   Gulliver is the patient.

But he is not dead yet. Nobody wants to come out and say it but it doesn’t take a genius to read between the lines.  He probably looks more like a combination of AIG, Bank America and Ford Motor Company.  And those are just his facial features.  So it’s doubtful he will be kicking off any time soon.

5 thoughts on “Lehman Brothers/ Gulliver/ Inflation and Deflation

  1. Sorry to hear about your dog 😦

    I actually found out today that my parents had put down their dog today. Even though I lived with him for a while, I did not get very attached, mainly for the big reason of having to become detached. Anyway they are not taking it very well either, especially my mom. I really cannot relate as I am not going through it nor have I ever had to or probably will have to, but I cannot imagine the pain. They are such adorable creatures and it pains to see them suffer but it also pains to have them gone.

    Evitas last blog post..Vegetarian Recipe: Rice and White Bean Vegetable Medley

  2. Do you think the recent talks between the g20 countries will have much success? These problems are so huge and complicated, is it even possible to have a system that works without serious disruptions and unforseen events. I often wonder if harmonizing tax regimes globally might be a stabilising factor.

  3. You have an interesting thought. However global taxation would probably mean one world government. Is that in the cards? I don’t know. But it will not go down well with many people. Look at the problems Europe has had in that regard. Perhaps they should demonstrate success before any larger scheme is tried.

  4. Very well explained…..inflation and deflation are the part of economy…..it will rise and fall..
    it is up to us, how to manage it…

    Thanks….please post some more new posts related to finance…..

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