Doomstead Diner Menu => Economics => Topic started by: ross on March 31, 2012, 12:36:27 PM

Title: Hyperinflation or Deflation?
Post by: ross on March 31, 2012, 12:36:27 PM
The difference between hyper inflation and deflationary collapse matters to people with cash money and assets. Much depends on the type of assets you have.

Ben Bernanke is waving at the market like a drunk with his dick hanging out that he wants inflation. Serious inflation. And that explains a lot of the asset choice behaviors over the last 18 months. Inflation expectation are extreme. Wouldn't you know, we just had our first shock in the form of a 25% increase for gas inside of three months.

The only outcome is deflation no matter what. The dynamics of the credit leverage we employ in the economy (30 year home financing, 5 year zero interest financing for automobiles) and the (loss of) velocity of money ensure a deflationary event is in our future. We are facing a global breakdown in trade because of failures in the credit/currency markets and availability of low cost energy. The reasons people freaked and made a lot of people full-time TSHTF about "TSHTF" in 2008 is because it looked like the global markets were imploding and going into a terminal collapse.

Even after hyper inflation comes a deflation where money is practically worthless. Meaningful trade is done in barter or "backed scrip."

We are stuffing the toilet bowl to avoid the flush. It won't work. But it can go on a lot longer.
Title: Re: Hyperinflation or Deflation?
Post by: RE on March 31, 2012, 01:43:48 PM
The difference between hyper inflation and deflationary collapse matters to people with cash money and assets. Much depends on the type of assets you have.

True, it DOES matter to people who actually HAVE some "savings" or "assets" which way the Ball Bounces here.  However, since about 80% of the population really HAS no assets or significant savings, how it collapses doesn't really matter to them very much.

The folks who worry about Inflation/Deflation are those who have their Matresses stuffed with FRNs and their Basement Safes stuffed with Gold Eagles to hedge it.  They figure if the FRNs go worthless, the Gold will increase in value.  They may also buy Land to hedge further, figuring they can grow their own Tomatoes in their raised bed Permaculture Garden either way.  Of course, buying Land sticks them with a Tax Liability and since most of the folks with a pile of money would have no clue whatsoever as to what to DO with a piece of land, exactly how good an investment that is for them is an open question.

Let us look at the example of the Average sorta Successful Boomer here who has a Paid Off McMansion, an IRA of say $500K distributed out in Mutual Funds and Stocks and $50K in his FDIC Insured Savings and Checking Accounts.  How does Inflation/Deflation affect him?

If it is Deflation ruling the day, his $500K portfolio drops in value tremendously.  Stocks drop in value, Bonds are Defaulted on.  His $50K in Cash though has more value, assuming of course he gets it out of the Bank before it shuts the doors.

If it is Inflation ruling the day, his Cash money goes about worthless, but in theory he can sell his Stocks and Bonds for higher prices since this is where the newly printed money will flow in some fashion.  However, after converting the sale to Cash at the higher prices, it of course still buys less of what he needs, so he burns through the savings there faster.

In neither case can the Boomer Saver really protect himself, the assets he has may stay steady or even rise in nominal value in an inflationary scenario, but upon liquidating them he still cannot buy what he needs because the commodities have also inflated up in nominal cost.  In a deflation, his assets are worth less (or in some cases WORTHLESS), so he also is fucked this way.

Definitely Helicopter Ben is trying to Inflate the economy, evidenced by the current $4.35/gal I am paying for Gas now here on the Last Great Frontier.  That is even a higher price than I payed right before the crash in 2008-9, I think it maxed then at $4.25/gal.  I cannot see how this price can be supported very long.  Add to that the around $10/gal price I have read is common in Eurotrashland, WTF can BUY this product anymore in these economies?  Either the price collapses or we will quickly be going Lights Out and No Driving here and in Europe.  The end consumer isn't being issued money to buy at these prices.  I expect a Price Collapse, because I do not think the Illuminati are quite ready to send the entire industrialized world into Lights Out quite yet.  Parts of it like Greece and Spain yes, but not the whole Ball of Wax.

RE
Title: Re: Hyperinflation or Deflation?
Post by: Surly1 on April 01, 2012, 06:27:48 AM
This is great!!
Title: Re: Hyperinflation or Deflation?
Post by: ross on April 01, 2012, 07:20:05 AM
It does matter. If you don't have money, it matters even more whether it is deflation or hyperinflation. Hyperinflation is an equalizer in some sense. It destroys everyone's wealth equally past a certain threshold of intolerance. People always win out in these scenarios but they're usually connected government insiders and the owners of physical capital who maintain physical possession through and after the hyperinflation occurs. Who in Zimbabwe was still rich after hyperinflation? The military and Robert Mugabe + entourage (100,000 lucky Ins?)

It has an intimate effect on the pace of collapse and the overall social compact. Hyperinflation would truly galvanize the 99% against the 1%. Engulfed in such a horror, no one can really protect papers assets at all. Consider the one difference going for this monetary collapse is that the majority of the denominations are digital ledgers.

It is the limited number of people capable of operating complex mechanical capital that come out holding the wealth in a hyperinflation. Crime would spike during hyperinflation but social order would not collapse. Government could maintain order up to the point of open insurrection. Rioting and "armed looting" would be expected. Basically, you'd see people get tribal in a hurry.

A lot of businesses would end up closing out of the sheer terror of operating in the HI price environment. Mafias fill the void in vulnerable areas, so pretty much every urban periphery becomes a slum area. Rents can't be paid, real estate owners must collect from their tenants somehow especially b/c physical ejection is risky. The devolution of social order in the exurbs and "working class" suburbs does not signal the end of anything. A new currency can be strung up fast, and it can be fiat. Electronics also allows rapid deployment of a new currency regime. What choice do you have but to use your ATM card for the new red money. Since all the green money got canceled out...

Hyperinflation is not the dirt nap you're looking for. It is likely the contraction in "Growth" aka consumerism and hedonism is restricted to a smaller group, the ones who float their reconstituted corporations on the new red money stock exchange. Who is rich in the Russian Federation? Putin may end up as the richest man in the world!

Deflation, on the other hand, truly threatens the entire economic paradigm and once deflation begins you scale on the Collapse spectrum. Deflation would essentially mean the abandonment of money and the tyranny of money. Greece is being forced to endure a deflation instead of being allowed to have a hyperinflation, which is what would ultimately occur if they default and then re-denominate all the old debt into the new currency.

In Greece, businesses have been shutting down because people stopped patronizing them and the taxes. People went into survival mode. Hoarding cash and supplies. Making arrangements to flee or go underground. Setting up barter exchanges and going back to the land. Also, as money left the economy, things got relatively more expensive. Gas may be $10 in Athens but what's a Greek Taxi make per day? The notional feel for him could be what we'd feel like at $20

Deflation is like unplugging a bath tub full of water. It sucks cash out of the economy to settle obligations at once! The extension of credit ceases because projects and enterprises must stand on their own rather than their ability to favorably finance. Time value of money becomes the primal factor. Extension of cash flow credit, for time-sensitive businesses can end suddenly.

Cash flow ends for everyone because people stop getting paid. And businesses close because their not getting customers because people stop getting paid. It is the virtuous circle of credit collapse. It does not happen overnight. It happens in several dislocations. Greece is significantly advanced right now over a few years at this point. Argentina came through a deflationary collapse that had the unfortunate side effect of severe inflation just not hyperinflation.

Crimes and mafias increase. People turn to the underground economy and barter. The underground and barter exchanges are predatory because the deflation is advantaging certain people. The government can begin to lose a grip on certain areas. If the supply of important civilian goods and services has run out, then the government has become a predatory adversary towards the people. Some areas and communities may agree to incorporate the new mafias. Mostly, people who have hoarded supplies specific to life support. Cooking oil. Rice. Condoms... And they trust can get more.

This is getting long. I only mean to illustrate that while that these paths might lead us to the same place, the journey is very different and cannot be approached the same way. Hyperinflation and collapse takes a very different approach than a grinding deflationary collapse.

Title: Re: Hyperinflation or Deflation?
Post by: RE on April 01, 2012, 09:26:08 AM
Ding Ding Ding!  We have a Winner!

I'm going to put Ross' distinctions of the HI vs DF scenarios up as today's Feature in the Blog.  Later though.  I'm going back to bed for some more snooze time.

RE
Title: Re: Hyperinflation or Deflation?
Post by: RE on April 01, 2012, 02:05:28 PM
This is getting long. I only mean to illustrate that while that these paths might lead us to the same place, the journey is very different and cannot be approached the same way. Hyperinflation and collapse takes a very different approach than a grinding deflationary collapse.

Yea, that one was getting up there in the word count!  You are learning well, Young Skywalker! LOL.

(http://1.bp.blogspot.com/_drsACX1RqfU/TJifoKA6NtI/AAAAAAAAFTw/GVn_PlUlgNg/s640/obi+wan+will+train+luke+skywalker.jpg)

The intermediary outcomes do have differences, but one thing we are not considering here is how Dollar collapse differs from an Argentinian or Zimbabwe collapse.  In those cases, you can have a functioning Black Market utilizing still valid FOREX like Dollars or Euros.  What is going to function on the Black Market in a Dollar collapse?  Not enough people have gold or even silver coins to make that work, and besides, how would you value a Silver coin anyhow?

If Green Dollars aren't functioning, why would Red Dollars?  Just because they change the color they regain some value?

The issue of holding onto and maintaining control over "mechanical capital" is another concept I have difficulty with.  What exactly is Mechanical Capital worth without the Oil to run it?

Anyhow, here in the FSofA during the Great Depression Da Goobermint survived the deflation, but other Goobermints elsewhere did not (notably of course Germany).  However, the resource base was still pretty much intact in those days.  I don't see how Da Goobermint will survive either a Deflation or a Hyperinflation, and once you lose the FSofA as a cohesive Nation-State, it can't issue money of any kind that would be worth the paper it is printed on, Red, White or Blue Money doesn't matter.

Finally, I don't see how HI or DF matters to a person with no Assets and no money at all, aka about 50% of the population at least.  They have nothing to lose if the money HIs, they are ALREADY broke.  They aren't going to have access to the Black Market either way, even if a BM can form in some way running on Junk Silver Coins.  Regular commerce will grind to a halt of course either way.  The social contract will break down rapidly, at which point if you do have some functioning money, you'll likely be killed by somebody else who wants it.  What good is it to have a lot of money in such a situation?

RE
Title: Re: Hyperinflation or Deflation?
Post by: Surly1 on April 01, 2012, 07:05:39 PM

Quote from: RE
Finally, I don't see how HI or DF matters to a person with no Assets and no money at all, aka about 50% of the population at least.  They have nothing to lose if the money HIs, they are ALREADY broke.  They aren't going to have access to the Black Market either way, even if a BM can form in some way running on Junk Silver Coins.  Regular commerce will grind to a halt of course either way.  The social contract will break down rapidly, at which point if you do have some functioning money, you'll likely be killed by somebody else who wants it.  What good is it to have a lot of money in such a situation?


And now I think back to the storage unit paradigm and having trade goods amassed during this time when the (green) money worked. pallets of pint bottles of vodka, potatoes, and as Ross noted, cooking oil and rice. Who will have use for condoms?

Of course it won't take too long for the Mad Max spendthrift grasshoppers to follow the industrious preppers back to their storage unit and take what they want by force, unless you are Armed to the Teeth.

Excellent idea to make this a blog article.
Title: Re: Hyperinflation or Deflation?
Post by: RE on April 01, 2012, 08:22:13 PM

Quote from: RE
Finally, I don't see how HI or DF matters to a person with no Assets and no money at all, aka about 50% of the population at least.  They have nothing to lose if the money HIs, they are ALREADY broke.  They aren't going to have access to the Black Market either way, even if a BM can form in some way running on Junk Silver Coins.  Regular commerce will grind to a halt of course either way.  The social contract will break down rapidly, at which point if you do have some functioning money, you'll likely be killed by somebody else who wants it.  What good is it to have a lot of money in such a situation?


And now I think back to the storage unit paradigm and having trade goods amassed during this time when the (green) money worked. pallets of pint bottles of vodka, potatoes, and as Ross noted, cooking oil and rice. Who will have use for condoms?

Of course it won't take too long for the Mad Max spendthrift grasshoppers to follow the industrious preppers back to their storage unit and take what they want by force, unless you are Armed to the Teeth.

Excellent idea to make this a blog article.

Hyperinflation vs Deflation is always a popular Collapse topic :-)  Its kind of like bring up the Final Four in a Sports Bar, everybody is interested and everybody has an opinion.  Great conversation starter amongst Kollapsniks.

Far as the Storage Unit Paradigm goes, that one is finished once the shelves go empty at Walmart.  Time to go Full Primitive on the Final Bugout.  Empty the storage unit into the SUV with your Last Tankfull of Gas and head for them thar hills.

(http://www.moviegoods.com/Assets/product_images/1020/192348.1020.A.jpg)

RE
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on April 13, 2012, 01:06:05 AM
Is it conceivable we do not end up in the deflation or hyperinflation horror shows and just continue on our merry way of constant currency debasement? Perhaps just shift gears from say a 5% to a 9% inflation for a few decades. The rot we have now in purchasing power has been going on for quite a while and remains remarkably orderly.
Title: Re: Hyperinflation or Deflation?
Post by: Jb on April 13, 2012, 06:18:45 AM
http://www.youtube.com/v/Z3sLhnDJJn0&fs=1

Quote
Is it conceivable we do not end up in the deflation or hyperinflation horror shows and just continue on our merry way of constant currency debasement?

Sorry, Golden Oxen -  I just couldn't resist.  :)

IMO, the current debasement will continue for a while. Another year or two? But entropy is a bitch that can't be reckoned with. As the supplies of cheap, low sulphur, easy to get to oil disappear, the squeeze on our industrial economy makes a long term debasement without consequences 'inconceivable.' Something has to give and I'm assuming the first thing to go will be people's patience.

Jb
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on April 13, 2012, 06:58:22 AM
I hear you Jb and had come to much the same conclusion until watching the natural gas price fall below 2.00 yesterday. Could this fracking, horizontal drilling craze really be the answer? Laughed at the original hype over it and told myself the save the environment crowd would never let them do it to the land or water if it was for real. I also looked at a long term chart of the price of a barrel of oil last night, 2.00 to over 100.00 in five decades and the cars and trucks are still on the roads and growing in number world wide. Haven't changed my mind on a dire outlook yet, but something does not add up here.
Title: Re: Hyperinflation or Deflation?
Post by: Jb on April 13, 2012, 08:16:59 AM
Quote
the cars and trucks are still on the roads and growing in number world wide.

Golden Oxen,

I don't know if you frequent Steve's site over at http://www.economic-undertow.com/, but there has been an ongoing discussion of the declining rate of new car registrations in the EU:  http://www.economic-undertow.com/2012/04/06/the-abject-failure-of-economics/.

According to this article auto sales are up in the US thanks to access to credit and demand for more fuel efficient vehicles.  http://news.yahoo.com/chryslers-us-sales-hit-4-high-march-131431139.html

The US can postpone, but not escape from the economic misery taking a firm hold of the EU. At some point, the next wave of people reach the same breaking point we saw in 2008: Pay the morgage or car loan? Buy gas or buy food?

As for the price of natural gas, check out Chris Nelder's analysis if you haven't already done so: http://www.slate.com/articles/health_and_science/future_tense/2011/12/is_there_really_100_years_worth_of_natural_gas_beneath_the_united_states_.html

Jb
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on April 13, 2012, 08:40:28 AM
Thanks for the links Jb. economic-undertow a new one to me but am very familiar with Chris Nelder's articles. It was his article recently " China in The Drivers Seat" that had started me questioning the whole energy picture. They are buying cars over there like it was the 1950's in the USA. Amazing how the price of oil and especially gasoline haven't altered the worldwide gasoline burning situation to a much larger degree.
Title: Re: Hyperinflation or Deflation?
Post by: reanteben on April 13, 2012, 09:40:12 AM
Ox, if you are questioning the energy picture then prepare to have your mind blown by Steve From Virginia. :)
Title: Re: Hyperinflation or Deflation?
Post by: JoeP on April 13, 2012, 09:54:20 AM
Ben,

Yeah, if you're talking about Steve's reply in the TAE "Downstream Demand Destruction for Oil" thread...that was a doozie.
Title: Re: Hyperinflation or Deflation?
Post by: Surly1 on April 13, 2012, 10:35:33 AM
Link, anyone?
Title: Re: Hyperinflation or Deflation?
Post by: JoeP on April 13, 2012, 10:46:46 AM
Certainly Surly1 -

http://theautomaticearth.org/index.php?option=com_kunena&func=view&catid=14&id=2205&Itemid=96

comment #2215
Title: Re: Hyperinflation or Deflation?
Post by: RE on April 13, 2012, 11:06:06 AM
I just responded to this thread on TAE.  I also put up the original article from FT a couple of days ago

http://www.doomsteaddiner.net/forum/index.php?topic=167.0

I didn't have time to write an article on this one, so Ash beat me to it :-)

RE
Title: Re: Hyperinflation or Deflation?
Post by: reanteben on April 13, 2012, 11:20:54 AM
Ben,

Yeah, if you're talking about Steve's reply in the TAE "Downstream Demand Destruction for Oil" thread...that was a doozie.

joe, i was talking about his essays in general but yes did read that great comment last night. he really knows how to drop in on a thread and show up the OP.

as i like to say nobody does the dynamics of pornographic credit culture like SFV. here's a classic:

http://www.economic-undertow.com/2010/10/24/culture-change-broken-chains/

 
Title: Re: Hyperinflation or Deflation?
Post by: Jb on April 13, 2012, 11:49:28 AM
JoeP beat me to the link! Thanks for that comment about Steve's post.
Title: Re: Hyperinflation or Deflation?
Post by: Surly1 on April 13, 2012, 12:04:36 PM
Thanks for the link. Excellent thread. And I take your point about Steve.
Title: Re: Hyperinflation or Deflation?
Post by: JoeP on April 13, 2012, 12:22:12 PM
You're most welcome guys.  Glad you enjoyed. 

Ben,  I agree.  The only writing I knew of from Steve was TAE and maybe another blog that I can't remember now....then I was reading the comment section from a NY Times article a couple of weekends ago and all of a sudden - BOOM! ... Steve's comment showed up and blew the Times up!
Title: Re: Hyperinflation or Deflation?
Post by: RE on April 13, 2012, 12:43:42 PM
You're most welcome guys.  Glad you enjoyed. 

Ben,  I agree.  The only writing I knew of from Steve was TAE and maybe another blog that I can't remember now....then I was reading the comment section from a NY Times article a couple of weekends ago and all of a sudden - BOOM! ... Steve's comment showed up and blew the Times up!

Steve has a very interesting spin.  His blog is Economic Undertow.  I republished one of his articles here on DD already.  Still working on getting him over here :-)

RE
Title: Re: Hyperinflation or Deflation?
Post by: ross on April 13, 2012, 02:43:18 PM
Quote
Is it conceivable we do not end up in the deflation or hyperinflation horror shows and just continue on our merry way of constant currency debasement?

That sounds like the path we've been on since we went off Bretton Woods. We had a bout of severe inflation in the first decade as the Fed figured it out on the fly, so to speak. A decade of stabilization and experimentation under Reagan. And then they started to get creative in the 90s, manipulative in the 00s and then reactionary in the 10s

I'm not totally there yet, but I'm settling into the notion that this is Collapse, as we'll know it. The Fast Collapse/Mad Max/Blade Runner scenario would be a historical anachronism at this stage.

But, there's never been a global empire at this scale, nor has there been the level of total physical dependence that most people have on stable continuation of the present paradigm. That's what keeps this debate interesting.
Title: Re: Hyperinflation or Deflation?
Post by: RE on April 13, 2012, 03:34:06 PM

I'm not totally there yet, but I'm settling into the notion that this is Collapse, as we'll know it. The Fast Collapse/Mad Max/Blade Runner scenario would be a historical anachronism at this stage.

Quote from: Winston Churchill
Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.

http://www.youtube.com/v/pdRH5wzCQQw


RE
Title: Re: Hyperinflation or Deflation?
Post by: JoeP on April 14, 2012, 02:26:11 PM
RE,

Thanks for the point to Steve's blog - great stuff.  Enjoyed your comment from the "Being Greek …" thread:
 

Reverse Engineer says:
March 19, 2012 at 5:02 pm

“– Gold is a natural resource, unlike petroleum it isn’t burned up driving in circles: it is both durable and valuable!”-Steve

Unlike petroleum also, Gold hasn’t the capacity to do Work. I’ll cop to its Durability, its Value is another question entirely. You can arbitrage the value of human labor against the value of oil to do work, but you can’t do the same thing with Gold.

No doubt with failing fiat of course there will be a migration toward Gold, but one wonders how many margin calls will need to be covered by said Gold piles, and what happens if large amounts of Gold start moving around the system? What will really be scarce and what will hold “value” in the electronic markets?

In the real world of course, Food, Guns and Ammo.

RE

 
 
Yes - it sure is hard to tell what has value in the "unreal" re-hypothecathed world.


Title: Re: Hyperinflation or Deflation?
Post by: RE on April 14, 2012, 04:19:03 PM

Yes - it sure is hard to tell what has value in the "unreal" re-hypothecathed world.

This is probably the major problem, and one area where Steve and I have some disagreement.  He often speaks of creating a monetary sytem where money is a "risk free asset", but I can't imagine any such monetary sytem being possible.  Even Physical Gold is not a risk free asset, since Gold can be hoarded and taken out of circulation, which then can cause Da Goobermint to Confiscate it or ban its use.  This obviously has occurred before.  Land is not a risk free asset, since you have climate issues of all sorts to deal with, not to mention Goobermint Taxation and the costs involved in protecting and defending said asset from others.  Any form of Paper or Digital "Wealth" or Assets have the obvious Risk that you have to work through Middlemen (Banksters) who will go MF Global on you the minute THEY get in a monetary bind.

Food is probably as Risk Free an Asset as there is, but it generally doesn't keep all that well and having large supplies of it on hand is pretty cumbersome.  Perhaps when they start "printing" Soylent Green Wafers  if they keep as long as Twinkies do these will make a viable form of "money" and an asset you can keep around a while.

I don't know how deep you have read so far into Economic Undertow, but you should read Steve's "Debt-o-nomics" series.  That one is very good.  I don't agree with everything in it, but its very good nonetheless.

http://www.economic-undertow.com/?s=Debt-o-nomics

In fact, I think I'll start a thread here in Epicurean Delights specifically for discussion of the concepts Steve presents in this series.

RE
Title: Re: Questions for Stoneleigh/Foss
Post by: EndIsNigh on May 01, 2012, 04:53:58 PM
RE

Quote
Helicopter Ben isn't REALLY printing bills like Weimar, so there isn't an excess of the FRNs out there.

Does this mean you agree with Nicole that deflation is the direction we'll go first?  How might that play out in international markets, particularly Australia?  Do  you agree with the recommendation to hold cash and/or short term gov't bonds (Australian), wait for deflation to drop asset prices, then swoop in and pick up some productive land at hugely discounted prices?  My concern is if things move too quickly, this may not be possible if basic commerce structures break down and people are more concerned with what they're going to eat than who will buy their land.
Title: Re: Re: Questions for Stoneleigh/Foss
Post by: RE on May 01, 2012, 10:44:37 PM
RE

Quote
Helicopter Ben isn't REALLY printing bills like Weimar, so there isn't an excess of the FRNs out there.

Does this mean you agree with Nicole that deflation is the direction we'll go first?  How might that play out in international markets, particularly Australia?  Do  you agree with the recommendation to hold cash and/or short term gov't bonds (Australian), wait for deflation to drop asset prices, then swoop in and pick up some productive land at hugely discounted prices?  My concern is if things move too quickly, this may not be possible if basic commerce structures break down and people are more concerned with what they're going to eat than who will buy their land.

I generally fall into the Deflationato Camp with Stoneleigh, yes.  Overall we most certainly are experiencing deflation through the main asset class of Real Estate as well as a collapse in credit which makes money on Main Street more scarce.  This doesn't mean we won't see price inflation in energy and food prices, just that on balance its a deflationary event here not an inflationary one.

You should read the Hyperinflation vs. Deflation thread here.
http://www.doomsteaddiner.net/forum/index.php?topic=133.0 (http://www.doomsteaddiner.net/forum/index.php?topic=133.0)
I will probably move this post and yours into that thread anyhow.

I also maintain the position that a HYPERinflation of the Dollar won't happen until Da Goobermint starts handing out Free Money to J6P and engages in large scale Goobermint Workfare projects.  As long as the end consumer doesn't have money to spend, a hyperinflation isn't supported.  As the prices go up here, less will be bought and margins will be squeezed, putting more Biznesses Outta Biz.

The fact that AUSTERITY is being so heavily pushed over in Europe and to a slightly lesser extent here pretty much guarantees a further deflationary spiral as more Goobermint workers are laid off, default on their mortgages and further drive RE Assets down in price.

Far as where the gobs of fresh liquidity are currrently going, its mainly into the Stock Market, that is what is propping that up.  Eventually though I think there will be a capitulation event in Equities, and a whole lot of Paper Wealth will once again go Up in Smoke, in what I like to call the Greatest Bonfire of Paper Wealth in all of Recorded History.

Far as where you put your "wealth" if you have some excess, it depends a whole lot on the scale of your savings.  If you are small fry with less than $100K or so, I'd keep at least half in CASH.  Then I'd go with Barterable items which have been discussed before, Booze, Diapers, cannisters of Propane (they go about $2.50 each up here now and you can cook for a few days with one on a camping stove) and of course Ammo.  Then if you are a Gold Bug, feel free to take some savings and buy some Gold Eagles if you like.

If you have the Big Bucks, your problems are greater.  Diversification would seem to be wisest, and you can buy some Hedging instruments and hope they work when TSHTF.  If you have No Shame, you might buy Illuminati Stock in companies like Monsanto and Conagra, unlikely to go Outta Biz too soon.

Insofar as diversifying in Currencies, that is a real crapshoot.  I obviously do not think Yen or Euros are a good choice here to be holding.  Swissies maybe, Oz Dollars, Loonies, Norwegian Krone maybe.  This would depend a lot on where you live also.  I don't think Krone will do you much good in Oz.

Finally, with a lot of excess you might consider raw land also, but that is a real crapshoot in terms of Taxation issues and possible Nationalization of land holdings by individuals in either a full on Fascist or Communist Solution.

In any event, over the longer term here, I think most if not all of the monetary instruments are going to fail.  The main question there remains the timeline for this.  It seems to me the Dollar still has at least a couple of years left in it, barring some major Black Swan.  An explicit World War would be very Bullish for the Dollar.  People will RUN full on to the currency of the Big Ass Military.

Real Endgame scenarios may result in the Hyperinflation of the Dollar Speedy Gonzalo, John Williams and other Inflationistas predict.  I still think that is a ways off, and Deflation overall is running the show here.

RE
Title: Re: Re: Questions for Stoneleigh/Foss
Post by: p01 on May 02, 2012, 05:38:38 AM

If you have the Big Bucks, your problems are greater. [...]

RE
100K?! You're jesting again, RE. Even more?! I say let them have problems.
(http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2012/04/20120429_demo4.png)
Title: Re: Re: Questions for Stoneleigh/Foss
Post by: RE on May 02, 2012, 10:30:55 PM

If you have the Big Bucks, your problems are greater. [...]

RE
100K?! You're jesting again, RE. Even more?! I say let them have problems.

I don't concern myself much with the problems that Pigmen have in trying to "secure wealth" in the Big Number category.  I don't pass out advice generally speaking on whether you should own Stocks or Bonds or even Gold, because really I know that more than 50% of the people out there have at best a few months worth of Bills in their Savings and Checking accounts.

Most of my concern is how to best spend $20K or so or less to prepare yourself, what kind of foods to buy you can store well, what Bugout Machines might help in different situations and so forth.  I take as a given that most people cannot afford to Buy and Outfit a Doomstead they probably cannot Protect & Defend anyhow.

In this category, IMHO you are best off in CASH right now, not Gold because its not as fungible.  IOW, you can't go down to Walmart at the last minute and take a Gold Eagle and buy $1600 worth of groceries still left on the shelves with it, you have to first convert it to FRNs.  You do have to be constantly AWARE of what is going on and be ready for possible hyperinflation of food prices, or the unavailability of food as JIT distribution breaks down.  The minute you Sniff this is occuring, you gotta be the FIRST one down to Walmart with CASH in hand and divest yoruself of it then and there for Hard Goods you have not yet purchased.

Its unreasonable to have too much more than say $20K in CASH around, so if you have more than that you look at Barterables first before Gold, and only add in the Gold if you are pretty flush with over say $30K or so in liquid assets.

Far as trying to protect "wealth" in the Big Numbers category, I do not think it is possible to do that for anyone below the level of Illuminati Apparatchiks, aka your Billionaire types like soros and Gates et al.  In reality, I do not think they will be able to protect their wealth either once the monetary system hits the complete crapper, but that may take some time to complete.  When the cascade really gets underway though, its going to be a great leveller throughout society.  Then REAL wealth will become very important. RW is your connections to your community and the resilience of said community and the resources they have access to and can Protect & Defend as a Community.

RE
Title: Real Unemployment 22% Hyperinflation on Track for 2014 John Williams
Post by: Golden Oxen on May 08, 2012, 03:52:32 AM
The coming fiscal cliff: hyperinflation on track for 2014
John Williams


Jim welcomes back John Williams from Shadow Government Statistics. John believes the real unemployment rate is 22%, not 8.1%, which is why it still feels like a recession. He also calculates the CPI at 6%, not 2.8%, and explains how the government manipulates the rate of inflation. Lastly, John believes the US is still on track for hyperinflation in 2014 as we near the coming fiscal cliff.  :-\

James J Puplava CFP with John Williams
Sponsored by: PFS Grouphttp://www.financialsense.com/financial-sense-newshour/guest-expert/2012/05/08/john-williams/the-real-unemployment-rate-the-coming-fiscal-cliff
Title: Re: Hyperinflation or Deflation?
Post by: ross on May 08, 2012, 05:17:22 AM
THIS IS ME SHOUTING.

HYPERINFLATION IS A POLITICAL CHOICE. IT IS THE OUTCOME OF A SERIES OF FISCAL DECISIONS AND RESULTING SOCIAL REACTIONS. IT IS A POLITICAL PHENOMENON; IF NOT DIVORCED FROM ECONOMICS, THEN AMICABLY SEPARATED.

IF YOU BELIEVE WE WILL SEE HYPERINFLATION, YOU MUST JUSTIFY WHY WE HAVEN'T SEEN IT YET.

MOREOVER, YOU HAVE TO EXPLAIN HOW THE DEFLATIONARY EFFECTS OF THE BUSTING OF THE DEBT SUPER-CYCLE, A DEFLATIONARY EFFECT BASED ON ECONOMIC FUNDAMENTALS, WILL BE OVERCOME BY A HYPERINFLATION.

JUST BECAUSE YOUR PURCHASING POWER IS DESTROYED IN AN ASSET PRICE COLLAPSE DOESN'T MEAN EVERYTHING HYPER-INFLATED. IT MEANS YOUR PURCHASING POWER WAS INFLATED AND NOW... IT IS DEFLATED TO A MORE ECONOMICALLY REASONABLE LEVEL, BASED ON YOUR NET WEALTH CREATION IN THE ECONOMY.

THIS IS ME SHOUTING A LITTLE LOUDER:

THERE WILL BE NO HYPERINFLATION BEFORE A MASSIVE DEFLATIONARY DISLOCATION.

WHAT WILL HAPPEN:

OIL PRICES WILL BE CUT IN HALF (FROM TODAY'S PRICES) OR MORE
AND
PHYSICAL SHORTAGES WILL APPEAR AT THE LOWER PRICE LEVELS.

ONLY THEN, AFTER PHYSICAL SHORTAGES APPEAR, SHOULD ONE ANTICIPATE A HYPERINFLATIONARY EVENT.
Title: Re: Hyperinflation or Deflation?
Post by: p01 on May 08, 2012, 05:55:44 AM
John seems not only divorced and separated from reality, but he's divorced ans separated his neurons, too.
HOW ON EARTH CAN YOU HAVE HYPERINFLATION WITH 22% UNEMPLOYMENT?! HUH?! GIVE THE UNEMPLOYED 100K/YEAR?! FOODSTAMPS DON'T HYPERINFLATE THE TENS OF TRILLIONS OF DEBT DENOMINATED IN USD.
Geez, some people really have no idea what having no money really means.
Title: Re: Hyperinflation or Deflation?
Post by: Jb on May 08, 2012, 06:05:55 AM
Quote
OIL PRICES WILL BE CUT IN HALF (FROM TODAY'S PRICES) OR MORE

Ross, I agree with you but I have one question.

I think we're all assuming that if the price of oil collapses by 50% or more, the KSA will see massive uprising.

Won't China and/or the US step in and agree to buy KSA oil at some negotiated price ($85/b?) to keep the kingdom from collapsing? Or do we buy massive amounts of oil still in the ground to provide KSA with enough cash to hold them over until the price returns ala Chris Cook?

Or in the blink of an eye, do we simply end up in a structural crisis with shortages leading to riots, martial law...?

My understanding is that in order for hyperinflation to occur, you also need a second currency to circulate in the economy for people to switch to. Without that, you only get high prices (not hyperinflation) on consumables as cash chases limited goods. Although I wonder if we could have a global version of hyperinflation if say, China, were to introduce a gold backed currency and the world starts dumping their dollars into the market.

Thoughts?

Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on May 08, 2012, 06:16:44 AM
They have already made the political choice, you missed it. That is what TARP and quantitative easing are all about. Deflation is not an option any longer, a couple of hundred million people standing in soup lines and singing "Brother Can You Spare a Dime", do not work any anymore than the austerity plan for Greece is working. The inflation mechanism is working, it took the price of oil from 30 back to 120 while the world is mired in recession and pumped the stock market from 6000 back to 13000. Food prices and basics have been doing nicely also. You had your whiff of deflation in 2008. The 2014 timeline sounds right  for the lift off into space. Rome wasn't built in a day. The inflation program has been a resounding success so far. Helicopter Ben specialized in this field while at Princeton. He has a doctorate in how to stop deflation, give the gentleman his due.    :icon_study:
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on May 08, 2012, 06:30:54 AM
@ p01 Hyperinflation is a monetary event, it has nothing to do with the state of the economy. The four greatest hyper inflations of recent decades, China, Germany, Argentina, Zimbabwe, took place in collapsing economies. While hardly infallible Mr. Williams is a Summa Cum Laude graduate of Amos Tuck. Usually not a title handed out to buffoons.  GO     :icon_study:
Title: Re: Hyperinflation or Deflation?
Post by: ross on May 08, 2012, 06:54:49 AM
@JB

Oil, seemingly, is that second currency. KSA, Russia, Iran, Venezuela - they all depend on high oil prices to sustain a bloated and inefficient public sector. There is no love for the KSA. It is like a marriage where the spouses sleep in separate bedrooms - for appearances only. We need their oil. They need our fungible currency to buy our toys.

Also, the U.S. is the marginal buyer of oil, globally. Our economy set's the market price b/c most every other national price level is manipulated by subsidy or tax. Just like in 2008, those producer countries got an awful pinch when the price tanked but there was nothing they could do except take supply off the market and wait for demand to firm up. It did once the stimulus arrested the collapse of the banking system and people returned to more "normal" patterns of waste.

@GO

You cannot justify hyperinflation based on "money printing." Main Street didn't directly see a nickel from TARP or QE. They didn't rain down greenbacks from the helicopter or give them out to the poor by the fistful. Those esoteric programs were meant to backstop bank capital by allowing the TBTF to do balance sheet repair via interest rate arbitrage and forestall the severity of the ARM reset. They have nothing to do with a hyperinflationary outcome.

Inflation and hyper inflation are totally, completely different. Hyperinflation is not severe inflation. Hyperinflation is the complete loss of confidence in a specific monetary instrument, leading to collapse in it's purchasing power. The reason you've seen uptick in food prices is because the energy to produce food is more expensive now. The same oil goes into every bushel of corn. It is just that the oil costs twice as much. That is not hyperinflation. That is "inflation" of food prices, or the "deflation" of your purchasing power relative to energy.

The inflation mechanism has worked so far for oil and commodities. Leveraged speculators and social cuing from the FRB haven't hurt the bit either. That level of inflation, even at John Williams 6% CPI, doesn't precede any hyper-inflationary outcome. In fact, it foretells the deflationary outcome. Demand is destroyed as prices move higher, ultimately leading a kneejerk reaction in the opposite direction is supply overwhelms demand forcing the market to move lower in order to clear the excess supply.

I know this is the stick in the eye for a lot of Collapsniks - they latch on to the fantasy that hyperinflation will vindicate their accumulation of physical metal, their hoarding and their prepping. When everyone leans so hard to one side of an argument and their arguments take on a whiff of religious conviction, I look to the unexpected.

What would completely FUCK all these gold bugs, preppers and doomers? What would completely soil the plans of the FRB to inflate our price level to make the debt burden more reasonable? A deflationary dislocation. The deflationary dislocation is self-evident in demographic trends and reasonable economic growth projections. The deflationary outcome is what the Fed is desperate to avoid because it would leave a gigantic swath of the population destitute. Hyperinflation is not a reasonable alternative, it would leave us all destitute, if not dead.

Inflation in "life support" AKA food, water, energy is also be deflationary for asset prices AKA stocks, bonds, industrial metals and bullion. That was the feedback mechanism you witnessed in 2008. I spend less on things I want because I spend more on things I need. Oh shit, no one is going to buy anything but food and fuel. Sell Mortimer, SELL!

Hyperinflation solves nothing. It is the single most destructive outcome (politically, socially, economically) for what we're going through: the unwinding of a debt supercycle.

Deflation allows the market to clear, albeit in extreme pain and distress.

Hyperinflation allow the market to disintegrate and explode, forcing us to start at the beginning. The wet dream for gold bugs and preppers and sadistic Mad Max murderers.

I repeat, hyperinflation is a political choice. It is a policy decision. An attempt to arrest the government's inability to service its obligations. There is feedback into the monetary system, but it is not a monetary event - it is a political event motivated by the government's bankrupt financial position.

We are more likely to see a debt jubilee before we see hyper inflation. 
Title: Re: Hyperinflation or Deflation?
Post by: ross on May 08, 2012, 07:04:22 AM
Googled "John Williams Hyperinflation"

A few results:

"John Williams: Hyperinflation Will Start in the Next Couple Months" Dated 12/10/2010
http://www.shtfplan.com/headline-news/john-williams-hyperinflation-will-start-in-the-next-couple-months_12102010 (http://www.shtfplan.com/headline-news/john-williams-hyperinflation-will-start-in-the-next-couple-months_12102010)

"Hyperinflation Special Report (Update 2010) Dated 12/2/2009 UPDATED 3/15/2011"
http://www.shadowstats.com/article/hyperinflation-2010 (http://www.shadowstats.com/article/hyperinflation-2010)

A hyper-inflationary event is only possible after a deflationary dislocation. The thing that is overlooked about Germany, Argentina, Zimbabwe is that they all faced a deflationary depression with attendant attempts to devalue the currency, and consequently deflate asset values, numerous times before the hyperinflation took hold.
Title: Re: Hyperinflation or Deflation?
Post by: Surly1 on May 08, 2012, 07:59:01 AM
I know this is the stick in the eye for a lot of Collapsniks - they latch on to the fantasy that hyperinflation will vindicate their accumulation of physical metal, their hoarding and their prepping. When everyone leans so hard to one side of an argument and their arguments take on a whiff of religious conviction, I look to the unexpected.

What would completely FUCK all these gold bugs, preppers and doomers? What would completely soil the plans of the FRB to inflate our price level to make the debt burden more reasonable? A deflationary dislocation. //

Inflation in "life support" AKA food, water, energy is also be deflationary for asset prices AKA stocks, bonds, industrial metals and bullion. That was the feedback mechanism you witnessed in 2008. I spend less on things I want because I spend more on things I need. Oh shit, no one is going to buy anything but food and fuel. Sell Mortimer, SELL!

Hyperinflation solves nothing. It is the single most destructive outcome (politically, socially, economically) for what we're going through: the unwinding of a debt supercycle.

Deflation allows the market to clear, albeit in extreme pain and distress.

Hyperinflation allow the market to disintegrate and explode, forcing us to start at the beginning. The wet dream for gold bugs and preppers and sadistic Mad Max murderers.
 

Ross,
Not sure I am well informed enough to have an opinion on the merits of your argument, but what you have expressed is pure gold, you'll pardon the expression. Ought to be on the blog page, IMHO.
Title: Re: Hyperinflation or Deflation?
Post by: nobody on May 08, 2012, 09:13:36 AM
 (Surly) 'Ross,
Not sure I am well informed enough to have an opinion on the merits of your argument, but what you have expressed is pure gold, you'll pardon the expression. Ought to be on the blog page, IMHO'

I second that heartily.  Could you specifically define the "dislocation" part of deflationary.. or provide link or reference to some more basic info regarding this parlance (for the profoundly uneducated such as myself).  If I could follow you better it might provide me with a long hungered for understanding of how "pretend and extend"  seems like it might outlive us all.  and thanks.
Title: Re: Hyperinflation or Deflation?
Post by: JoeP on May 08, 2012, 10:06:19 AM
I have to agree with Ross...and CHS:

"My own position is that hyper-inflation is first and foremost a political phenomenon--it is necessarily the result of specific political policies and choices.

In my view, there are two keys to understanding deflation and hyper-inflation: one is cui bono, to whose benefit? Who benefits from a hyper-inflation that wipes out all cash and cash-equivalent financial assets?

If we take it as axiomatic that hyper-inflation is a political process, then we have to conclude that hyper-inflation serves some powerful interests who would support the policies that would bring it to fruition.

My problem with the "hyper-inflation is inevitable" school of thought is that I cannot identify what powerful interests would gain from the destruction of the currency and all financial wealth. A hyper-inflationary wipeout certainly wouldn't benefit the Financial Power Elites who hold the vast majority of the financial wealth. Yet it is this very Elite which wields the preponderance of political power.

Thus you end up with this untenable conclusion: the politically powerful Financial Elite will consciously choose to self-destruct. I don't buy that as a likely scenario. If inflation started destroying their wealth, then they would instantly influence political policy to reverse course to preserve their wealth."


full post here (http://www.oftwominds.com/blogjan11/bankers-vs-politcos01-11.html)
 
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on May 08, 2012, 10:18:38 AM
If that were the case JoeP. Why are the history books full of hyperinflations? Who benefitted from them all? :icon_study:
Title: Re: Hyperinflation or Deflation?
Post by: nobody on May 08, 2012, 10:33:55 AM
thanks, JoeP, that was helpful.  Quoting further from OTM,

 "I suspect this may explain Great Britain's abrupt and profound policy reversal from extreme Keynesian stimulus via sovereign borrowing to severe austerity."

Austerity can be experienced as inflation and the deepening of austerity perhaps as severe or hyper inflation.  I know that's not technically correct but on the receiving end of all this policy, the effect is our reality.
Title: Re: Hyperinflation or Deflation?
Post by: RE on May 08, 2012, 10:42:14 AM
Googled "John Williams Hyperinflation"

A few results:

"John Williams: Hyperinflation Will Start in the Next Couple Months" Dated 12/10/2010
http://www.shtfplan.com/headline-news/john-williams-hyperinflation-will-start-in-the-next-couple-months_12102010 (http://www.shtfplan.com/headline-news/john-williams-hyperinflation-will-start-in-the-next-couple-months_12102010)

"Hyperinflation Special Report (Update 2010) Dated 12/2/2009 UPDATED 3/15/2011"
http://www.shadowstats.com/article/hyperinflation-2010 (http://www.shadowstats.com/article/hyperinflation-2010)

A hyper-inflationary event is only possible after a deflationary dislocation. The thing that is overlooked about Germany, Argentina, Zimbabwe is that they all faced a deflationary depression with attendant attempts to devalue the currency, and consequently deflate asset values, numerous times before the hyperinflation took hold.

The only Nostradamus who calls imminent Hyperinflation more often than John Williams is Speedy Gonzalo Lira.

The issue with hyperinflating any currency is it has to have another currency to hyperinflate against.  What is the Dollar going to hyperinflate against?  Euros?  Yen?

A "Gold Backed" Renminby by the Chinese is a joke.  If they actually backed Renminby with Gold, every Chinaman in Beijing and Shanghai would head to the Bank to redeem the notes and the Basement Safe of the PBoC would empty out of Gold inside of 2 days.  If the PBoC would NOT redeem the Notes for Gold, nobody would believe the currency was backed with Gold.  Catch-22!

Anyhow, until Helicopter Ben starts handing out Free Money to the end consumers, a hyperinflationary event can't be supported.  Prices go too high, consumer is tapped out, people stop buying, biznesses go outta biz, products disappear from shelves.  Deflation.

RE
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on May 08, 2012, 11:17:16 AM
Why does it need another currency to hyperinflate against? Why can't a loaf of bread just go to twenty dollars and a gallon of gasoline to 20 bucks? Why can't it inflate against a basket of goods. Isn't that the definition of inflation, too much fiat chasing a relatively fixed amount of goods.
Title: Re: Hyperinflation or Deflation?
Post by: RE on May 08, 2012, 12:06:50 PM
Why does it need another currency to hyperinflate against? Why can't a loaf of bread just go to twenty dollars and a gallon of gasoline to 20 bucks? Why can't it inflate against a basket of goods. Isn't that the definition of inflation, too much fiat chasing a relatively fixed amount of goods.

As Ross noted, Hyperinflation and Inflation are not the same thing.  $20/gal gas isn't hyperinflation.  Hyperinflation is Zimbabwe Dollars with 9 Zeros.  It comes when the money being issued is no longer valid in international trade in the currency markets.  For the Dollar to lose all its value in the currency markets now is the same thing as saying the entire monetary system crashes, because all currencies are valued against the Dollar, even Gold is valued against the Dollar.  OUr Illuminati Masters simply don't have any substitute available for the Dollar, if they did then the Dollar could Hyperinflate if the BIS rejected it in favor of some other replacement currency.  This does not appear to be on the near term horizon.

RE
Title: Re: Hyperinflation or Deflation?
Post by: Ashvin on May 08, 2012, 12:49:29 PM
Ben,

Yeah, if you're talking about Steve's reply in the TAE "Downstream Demand Destruction for Oil" thread...that was a doozie.

joe, i was talking about his essays in general but yes did read that great comment last night. he really knows how to drop in on a thread and show up the OP.

So I finally get around to checking out some DD threads, and naturally make my way to HI vs. Deflation, which has a lot of replies. Then I come across this comment from... ben. If by "show up", you mean write a comment that is qualitatively better than the original post itself, then I have no problem with that - it was just a simple commentary on the FT article, after all. But if you mean contradict/debunk the OP, then that's completely wrong. Everything Steve said in his comment is consistent with my views.

Regarding HI vs D, I will say that I agree with just about everything Ross and RE have said on this thread. The only thing I would point out is that HI of the reserve currency could be a potential "solution" for TPTB if they were ready with another global system to substitute for its functions. Most evidence suggests that they are not ready.
Title: Re: Hyperinflation or Deflation?
Post by: nobody on May 08, 2012, 01:01:28 PM
A note from the peanut gallery:  Ash, you sound plenty smart to me and it's nice when you come here and just comment like below.

"Regarding HI vs D, I will say that I agree with just about everything Ross and RE have said on this thread. The only thing I would point out is that HI of the reserve currency could be a potential "solution" for TPTB if they were ready with another global system to substitute for its functions. Most evidence suggests that they are not ready."

Really why don't you guys just start a whole other blog called "Pissing on Other Alphas"?
Title: Re: Hyperinflation or Deflation?
Post by: p01 on May 08, 2012, 01:11:25 PM
Hyper inflate this, please ::)
http://money.cnn.com/2012/05/07/pf/bankruptcy-costs/index.htm (http://money.cnn.com/2012/05/07/pf/bankruptcy-costs/index.htm)
Title: Re: Hyperinflation or Deflation?
Post by: RE on May 08, 2012, 01:15:48 PM
Really why don't you guys just start a whole other blog called "Pissing on Other Alphas"?

Great idea!  We will set it up right after you set up the "Intuition by PMS Collapse Blog" :D

RE
Title: Re: Hyperinflation or Deflation?
Post by: Jb on May 08, 2012, 01:34:58 PM
Golden Oxen:

Why does it need another currency to hyperinflate against?

Because the people using the currency realize it is rapidly losing value and decide to switch to another currency in circulation or one that is accepted by local merchants that is more stable. In the US, we have no such alternate currency to switch to.

This article might help:

http://financialcrisisaftermath.com/the-instability-scenario/lessons-from-argentinas-hyperinflation/ (http://financialcrisisaftermath.com/the-instability-scenario/lessons-from-argentinas-hyperinflation/)

Jb
Title: Re: Hyperinflation or Deflation?
Post by: JoeP on May 08, 2012, 02:49:38 PM
Quote from: GO
If that were the case JoeP. Why are the history books full of hyperinflations? Who benefitted from them all?

Fair question and my answer is basically the same as RE's:

Quote from: RE
For the Dollar to lose all its value in the currency markets now is the same thing as saying the entire monetary system crashes, because all currencies are valued against the Dollar, even Gold is valued against the Dollar.  OUr Illuminati Masters simply don't have any substitute available for the Dollar, if they did then the Dollar could Hyperinflate if the BIS rejected it in favor of some other replacement currency.  This does not appear to be on the near term horizon.

It's a different ballgame when you're talking about the world's main reserve currency.  It may happen one day, but I don't think it will happen anytime in the near future.  The Illuminati, Committee of 300, Bilderbergs (or whatever you want to call them) ain't gonna let it happen anytime soon IMO.
 
Title: Re: Hyperinflation or Deflation?
Post by: JoeP on May 08, 2012, 02:52:50 PM
nobody,

Not sure your idea about alpha pissing is a good one - think I tried it once in college and got locked up.   ;D
 
Title: Re: Hyperinflation or Deflation?
Post by: ross on May 09, 2012, 04:11:22 AM
@nobody

Dislocation, in a nutshell. It is the same effect as related to the physical body. When a shoulder dislocates, it is usually to do overwhelming force impacting at an angle that cannot be properly absorbed. Same thing happens in a market.

An example would be the immediate market aftermath to the Fukushima Disaster. The market's experienced a short-term dislocation as they had to rapidly assimilate new information. The dislocation knocked out a bunch of assumptions about the Japanese economy and consequently the global economy that had to be re-assimilated into conventional wisdom. The snarky axiom about" if you're talking about, it is already priced in" isn't always true and that's why we get dislocations.

A few others in recent memory, Black Friday 1987, market response to Iraq's invasion of Kuwait produced a dislocation, Russian default and LTCM, September 11th, Lehman BK.

What might cause a severe dislocation today?
- A sudden departure from the Euro by a member state (Greece).
- A failed bond auction by the UST, German Bundesbank, or Japanese CB
- An invasion of Taiwan by China.
- An invasion of South Korea by DPRK
- A significant loss of capacity due to terrorism or sabotage in KSA.
- Caesar crossing the Rubicon.
Title: Re: Hyperinflation or Deflation?
Post by: ross on May 09, 2012, 04:26:50 AM
Who benefited from past hyperinflations and who would benefit from a hyperinflation in the United States? This dovetails with why you need a second currency to gauge your hyperinflation.

Who benefited?
- Overwhelmingly, the owners of physical productive assets like factories and farms. Producers of life support like cat food manufacturers.
- Moreover, bureaucrats and politicians who were able to hang on to power. (Whatever it looks like in Argentina, the political power caste did not change. The Kirchner's were Peronist. Does that sound like change? Last I checked Mugabe was still (mostly) in charge in Zimbabwe despite Tsvangarai's claims to the contrary. Weimar Germany might be the only example of extreme political change but you could say that that was only after the HI was over and buried. Parliamentary Democracy actually survived the hyperinflation in Germany, just not the social and political change in the populations).


Who would benefit here?
- The very same people except that deflationary collapse is "safer" at this point for a number of reasons.
It doesn't destroy the FRB-backed Dollar.
It doesn't "level the playing field" economically, like a hyperinflation. Owners of productive assets, mostly the top 10% of wealtholders controlling 70%+ of the corporate equity would retain their ownership.
There is lesser chance of a complete breakdown in the rule of law versus HI. After all, we've been through a deflationary depression once before.

Why does the Hyperinflation need a second currency to gauge?
-Because of the nature of international trade. You cannot have hyperinflation in a vacuum. Your currency has to rapidly lose value against other currency, not just a basket of goods. Currency is the medium for holding accumulated labor and capital. If the medium breaks down because it is subverted via money printing, the break down is measured against others mediums of exchange.
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on May 09, 2012, 05:51:50 AM
Who wins in a hyper inflation? Everyone with debts, the more debt the bigger the score. US Government, European Governments, The US Credit card balance holder, the US real Estate owner, The stockholders of the world. Who loses in a hyper inflation. Everyone who lent the money. China, The Worlds Savers. The Worlds Bond holders. When the reserve currency hyper inflates, the others by the obvious fact it is the reserve currency inflate in lockstep to remain in parity. That is what we have now, Competitive Devaluations. It is possible to have a world wide inflation in all currencies which has been happening for decades , against oil, food, gold and silver. Who wins in a deflation? No one. The debts cannot be paid. This is not the 1930's. The amount of debt outstanding today and its interconnectivity with derivatives and such would cause an immediate and total collapse of the worlds economies. Possible, but by accident only,not design.  :icon_study:
Title: Re: Hyperinflation or Deflation?
Post by: Jb on May 09, 2012, 08:48:47 AM
Quote
Who wins in a deflation?

Anyone free of debt with cash. My 100 year old great-aunt in-law tells me stories of the Depression. "Everthing was so cheap, but it didn't matter. No one had any money."

EDIT (by Ross): Accidentally replied into Jb's reply. Screwed up the wrong button. MODERATOR OUT! *poof*
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on May 09, 2012, 09:10:48 AM
Who wins in a deflation?

Anyone free of debt with cash. My 100 year old great-aunt in-law tells me stories of the Depression. "Everthing was so cheap, but it didn't matter. No one had any money."
Sure were plenty of bargains around for someone with a stash who surmised what was coming. You will kindly note that gold went from 20 to 35 in that horror show, even if it was by FDR's edict. Not your typical metal "The Shiny Old Yeller."    :icon_mrgreen:
Title: Re: Hyperinflation or Deflation?
Post by: Jb on May 09, 2012, 09:31:15 AM
GO: For the record, I am long PMs - at least I'm 'long' as long as I can hold on to them.  :rain:

Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on May 09, 2012, 09:49:48 AM
Jb: Same here my friend, and holding on sure isn't easy. "Gold Will Win", hang tough Jb.   :emthup:
Title: Re: Hyperinflation or Deflation?
Post by: ross on May 09, 2012, 04:20:51 PM
Quote
Who wins in a hyper inflation? Everyone with debts, the more debt the bigger the score. US Government, European Governments, The US Credit card balance holder, the US real Estate owner, The stockholders of the world.
The ultimate Pyrrhic victory. Did the Argentine government "win" from their hyperinflation? How about the Weimar German government? Completely myopic view and blending the definitions of inflation and hyperinflation to suit a set of political assumptions.

Quote
Who loses in a hyper inflation. Everyone who lent the money.
Okay then. Every creditor gets burned. Except for the ones who acquire the property of the debtors in default. Right?

Quote
When the reserve currency hyper inflates, the others by the obvious fact it is the reserve currency inflate in lockstep to remain in parity.
Free floating exchange rates, dood.

Quote
That is what we have now, Competitive Devaluations. It is possible to have a world wide inflation in all currencies which has been happening for decades , against oil, food, gold and silver.
We have had the dollar lose it's purchasing power relative to gold since exiting the Bretton Woods system in 1971. Yes, we have had inflation in the United States for 100 years. Japan has had deflation or disinflation for nearly 20 years. There is no apparent global Malthusian march of the currency lemmings into the abyss of worthlessness. Look at the Brazilian Real, New Zealand Dollar, Aussie Dollar.

Quote
Who wins in a deflation? No one. The debts cannot be paid. This is not the 1930's. The amount of debt outstanding today and its interconnectivity with derivatives and such would cause an immediate and total collapse of the worlds economies. Possible, but by accident only,not design.
Again, creditors win. If your credit is unsecured then your labor is the collateral. Really. The amount of debt outstanding today are virtual obligations to be paid at a future date. The social security obligations are not "on the books" they are figurative based on payout rates. Derivatives are ZERO SUM. For every long derivative there is a short. I am not downplaying the significance of derivative exposure in the credit markets but understand that these derivatives are offset by other positions. There's not 500 trillion of speculative positions.

Gold and silver are hedges of your relative purchasing power. Gold could go down to $800 is still do it's job as a purchasing power hedge if the S&P loses 666.
Title: Re: Hyperinflation or Deflation?
Post by: RE on May 09, 2012, 04:59:22 PM
Gold and silver are hedges of your relative purchasing power. Gold could go down to $800 is still do it's job as a purchasing power hedge if the S&P loses 666.

Its only a hedge on purchasing power if there is something around to buy with it.

Anyhow, under the current set of parameters, getting a hyperinflation of the Dollar rolling seems highly unlikely.  There would have to be another financial instrument to run to which could absorb all the perceived value, and one does not exist.  Any run into a given asset class will just bubble it up temporarily, Gold and Oil included in that.

It feels to me like we are setting up for another crash in Oil prices, which will of course put the KSA and the rest of the Exporters into a world of shit.  I'll say the Euro and the Yen might HI in the next couple of years, but not the Dollar.

RE
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on May 09, 2012, 05:25:16 PM
 @ reply Ross Would you rather live in Argentina today or Greece? Do you see the nation of Germany suffering from the bondage of its war debts and the misery it inflicted on the world after 2 world wars? As to the big Japanese disinflation, do you remember the fact that everyone was talking about in the 80's as to how the land surrounding the Japanese Emperor's home was worth more the all the real estate in California? There is no such a thing as free trading exchange rates. Every currency in the wold is rigged by central banks. Why has China been labeled as a currency manipulator?
 How many countless times has Japan crashed the Yen to defend its export industry? Your idea that derivatives are a zero sum game is a pipe dream. AIG and Lehman went belly up five minutes after the credit default swap meltdown when it became apparent that the people on the wrong side of the hedge could not pay. As to this idea you have of Social Security and other US government obligations being Virtual because they choose to ignore them in their phony book keeping games, I must admit to having no idea of what concept you are conveying. How many people would lose an asset to foreclosure in a circumstance where the fixed amount of debt on the asset was being rapidly inflated into nothing? Conversely what good is acquiring an asset in a sever deflation when it was used as collateral in a former inflated price time. What value has a three year old car with a ten thousand debt still on it after a deflationary collapse. What is the re possessor gaining in that take back?   :exp-huh:
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on May 09, 2012, 05:36:36 PM
Gold and silver are hedges of your relative purchasing power. Gold could go down to $800 is still do it's job as a purchasing power hedge if the S&P loses 666.

Its only a hedge on purchasing power if there is something around to buy with it.

Anyhow, under the current set of parameters, getting a hyperinflation of the Dollar rolling seems highly unlikely.  There would have to be another financial instrument to run to which could absorb all the perceived value, and one does not exist.  Any run into a given asset class will just bubble it up temporarily, Gold and Oil included in that.

It feels to me like we are setting up for another crash in Oil prices, which will of course put the KSA and the rest of the Exporters into a world of shit.  I'll say the Euro and the Yen might HI in the next couple of years, but not the Dollar.

RE
  Sounds logical RE. Would expect the Yen to be the more likely candidate, especially after the nuclear disaster. After all, putting all the endless BS aside, the EURO is really still a German mark with a PIGS smell to it.    :icon_study:
Title: Re: Hyperinflation or Deflation?
Post by: RE on May 09, 2012, 06:09:36 PM
What value has a three year old car with a ten thousand debt still on it after a deflationary collapse. What is the re possessor gaining in that take back?   :exp-huh:

Better question, what is said car worth when you can't get gas to fill it or it costs too much?  Answer, it's worth Bupkis.

Similarly, what is a McMansion out in suburbia worth when you can't get gas for the Car to get to the McMansion?  Answer, it's worth Bupkis.

What is a Chinese Factory making Automobiles worth when people can't afford the gas to drive those cars?  Answer, it's worth Bupkis.

Nevertheless, all 3 of those examples are all Financed and have huge debt loads attached.  The Repo Man gets Bupkis by repoing the "assets" here, because the assets are all worth LESS than Nothing, they are all liabilities.  Anybody who thinks the Chinese are solvent is just nuts.  Any "savings" the Chinese have will all be coniscated to pay off all the loans they took out to build their manufacturing infrastructure over the last 20 years.  That STILL will not cover the debt there of course either.

The Krauts also are so far underwater they should be mixing their air tanks with Helium or they will be soon suffering from Nitrogen Narcosis.  Their whole operation is Vendor Financing of PIIGS, and once they stop financing it, all Krautmobile manufacturing plants will go Belly Up.  The Kraut Goobermint has more per capita Social Welfare liabilities than Medicaire and SS combined.  The only way the Krauts are going to make any money here is the Old Fashioned way, by PRINTING it.

So the whole Biz is going to come down here, in what amounts to the Biggest Margin Call in all of Recorded History, and NO Asset Class is safe.  When it goes down, there won't be TIME for a Hyperinflation.  Flash Crash in OTC MBS and CDS and ALL the Funny Money Helicopter Ben and Super Mario Draghi have printed up will go up in smoke, in the Greatest Bonfire of Paper Wealth in all of Recorded History also.

http://www.youtube.com/v/E1xqSZy9_4I

RE
Title: Re: Hyperinflation or Deflation?
Post by: ross on May 09, 2012, 06:26:41 PM
Quote
Your idea that derivatives are a zero sum game is a pipe dream.

That is the very nature of derivatives. Zero sum. For every buyer there is a seller. Period. You cannot argue this point. It is not a pipe dream. Maybe you do not understand how futures derivatives or swaps work in practice.

As for social security, it is all in the accounting. Every last bit of it.

The value of an asset in hyperinflation can be measured by the value of whatever it produces in whatever stable means of exchange you choose to apply. Gold, bottle caps, ecstasy tabs. Sure, you can pay off your debt as it is inflated away, if you have cash flow...

In deflation, I give a fuck what you paid for the asset when I buy it in liquidation. I'm the owner now. The collateral is forfeited.

What are you arguing at this point? Are you still insisting we will see hyperinflation in the near term (inside of one year) like John Williams?
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on May 09, 2012, 07:14:17 PM
Ross, My reference to the car was the person who was seizing the car was the person or institution that lent me the money to buy it. If the car was worth 20 grand when I bought it and he lent me the money, then I go bust on account of a deflationary collapse and he takes possession of a car worth zilch. What good does that do for the 20 grand he lent me, it has vanished into a near worthless used auto. As for there being a buyer and seller for every derivative, isn't that true of all transactions anywhere and for all items, stocks, bonds, insurance policies etc in the financial universe? How does that fact negate risk. As to Mr Williams forecast that we will enter a hyperinflationary episode in the 2014 time frame, yes I think it is very possible. My feeling on that matter is that interest rates will have risen by then to a degree that the government rollover of the current ocean of short term debt will necessitate vast monetization to pay the increased interest burden. If interest rates do not rise by then I would expect the time horizon to move out a notch. My feeling on deflation is that it is a longshot though it could happen by accident, but the inflation option has already been chosen by TPTB. I still do not understand your point with reference to Social Security.
Title: Re: Hyperinflation or Deflation?
Post by: RE on May 09, 2012, 08:52:36 PM
Ross, My reference to the car was the person who was seizing the car was the person or institution that lent me the money to buy it. If the car was worth 20 grand when I bought it and he lent me the money, then I go bust on account of a deflationary collapse and he takes possession of a car worth zilch. What good does that do for the 20 grand he lent me, it has vanished into a near worthless used auto. As for there being a buyer and seller for every derivative, isn't that true of all transactions anywhere and for all items, stocks, bonds, insurance policies etc in the financial universe? How does that fact negate risk. As to Mr Williams forecast that we will enter a hyperinflationary episode in the 2014 time frame, yes I think it is very possible. My feeling on that matter is that interest rates will have risen by then to a degree that the government rollover of the current ocean of short term debt will necessitate vast monetization to pay the increased interest burden. If interest rates do not rise by then I would expect the time horizon to move out a notch. My feeling on deflation is that it is a longshot though it could happen by accident, but the inflation option has already been chosen by TPTB. I still do not understand your point with reference to Social Security.

There is a discrepancy in Time Frames here, is John Williams calling for HI inside a year or in around 2014, which is more like 2 years?  Big difference there.

I remain convinced the Dollar cannot HI before the Euro and Yen do, and for either one of them to HI will cause a MAJOR Dislocation in the markets which in turn will cause a Flight to Safety into the Dollar.  Dollars during this period would be scarce indeed, and collapsing Markets in Eurotrashland and Radiation Central would cause cascading Margin Calls across the board.  To backstop THAT, Helicopter Ben would have to Print on Hyperdrive, making what he has done so far look like an Amish Horse and Buggy print fest.  I don't think the Political Will is there to do that.

In any event, based on what on a Human Timescale seems like Molasses like progress of the Collapse, I can't see  how this works its way to the Dollar any faster than 2 years.  Its taken 2 years just to Triage Greece out and leave the Greeks on the Stretcher bleeding to death here.  How long will it take to Triage out the Spics and Frogs?  You gotta KNOW here that the ECB will make yet another Stick Save for Spain to drag that one out somehow.

Besides the Economic variable is the Political one.  Regardless of the means taken here to Super Mario DRAGHI it out, we're going to start to see more Major Street Action in Europe, which will require NATO Military intervention at some point, which again is probably Bullish for the Dollar.

I don't think the Bond Spreads are going to hit on USTs that hard for a while, first for the reason that Flight to Safety Eurotrash Pigmen will be liquidating whatever they have in Europe and buying them, and second because whatever they do not buy, Da Fed will.  Such a monetization of this debt isn't Hyperinflationary by itself, since none of this money will make it out into the Main Street Economy.  The only purpose it really serves is to keep Zombie Banks liquid for a while longer; they do NOT pass this money through as Loans out to the real economy.

This whole Bizness probably takes another 2-3 years to work through, and in the meantime you will see Margin Compression all over the map, and a whole new round of Biz Bankruptcies, possibly including Refineries that cannot access the Credit Markets either. HTF do you get a Hyperinflation of the Dollar when biznesses are crashing and laying off more workers who then cannot afford to pay their mortgages either?

In the same 2-3 year timespan it would likely take for a Dollar HI to get rolling, its a better than even chance a Full Scale War with Iran will get underway, and then we get a whole new dynamic of a War Economy with concomitant Rationing and so forth.  You just can't predict how it will go once full on War gets going here.  Only thing you can say is that at least until some cheap Chinese Cruise Missiles send a few Carrier Groups to the bottom of Davey Jones Locker, the Currency of the Big Ass Military will be King.  That currency remains the Dollar, and no substitute is on the Horizon.  I do not think the Dollar can HI until some big Hardware goes to join the Titanic.  The Big Ass Military backs the Dollar.  Until it shows itself to be vulnerable, the Dollar will be sought after and likely very scarce as well.

RE
Title: The Banksters go ALL IN
Post by: RE on May 09, 2012, 10:51:43 PM
I reposted an Oldie but Goodie from TBP I wrote following the Sendai Quake in Nippon on the Blog.  It has relevance to the HI debate here.  Its slightly over a year old, and I annotated it with a few comments to Update.

http://www.doomsteaddiner.net/blog/2012/05/09/the-banksters-go-all-in/ (http://www.doomsteaddiner.net/blog/2012/05/09/the-banksters-go-all-in/)

RE
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on May 10, 2012, 04:35:59 AM
@ Reply Ross: Agree 100 % with your analysis of Military dollar tie. It has long been my view that it is the major factor in the strength of the dollar and its ability to remain the reserve currency. As to war breaking out with Iran and the middle east. You can take everyone's economic forecasts and throw them in the waste basket if it happens. Pondering the possible outcomes of that horror would tilt any ones brain. Having said that my feeling is we can still have on hell of a dollar inflation, not the Zimbabwe kind but the more normal hyper as defined by Wikipedia:

"In 1956, Phillip Cagan wrote The Monetary Dynamics of Hyperinflation, generally regarded as the first serious study of hyperinflation and its effects. In it, he defined a hyperinflationary episode as starting in the month that the monthly inflation rate exceeds 50%, and it ending when the monthly inflation rate drops below 50% and stays below for at least a year."             John Williams is currently predicting it to happen around 2014, he refines and constantly updates it based on current events but is of the impression it is inevitable. :-\











;
Title: Re: Hyperinflation or Deflation?
Post by: nobody on May 10, 2012, 09:18:13 AM
THANKS -Ross for your patient answers to my moronic questions and everyone else for a top-notch discussion concerning this labyrinth of the desperate or coldly calculated and ruthless maneuvers of the financial class.  I still don't get how some rules are simply tossed out the window without a whisper of protest, while others are worshipped like the Christ-child.  It seems so arbitrary to me what is upheld and what is discarded that I don't see why there is a crisis of any sort.  Why don't TPTB just change the whole entire game while they're at it?   To answer my own question, perhaps that's exactly what they are doing and it's taking it's time to play out because the players are all perfectly comfy unlike ourselves.
Title: Re: Hyperinflation or Deflation?
Post by: ross on May 14, 2012, 07:58:00 PM
(http://www.bespokeinvest.com/storage/CRB%20Commodity%20Index.png?__SQUARESPACE_CACHEVERSION=1337004397598)

Gut check time for inflationistas and deflationistas alike.
Title: Re: Hyperinflation or Deflation?
Post by: RE on May 14, 2012, 09:24:44 PM
(http://www.bespokeinvest.com/storage/CRB%20Commodity%20Index.png?__SQUARESPACE_CACHEVERSION=1337004397598)

Gut check time for inflationistas and deflationistas alike.

Looks like Classic Head & Shoulders to me.

(http://www.stockmarket-coach.com/images/head-and-shoulders.jpg)

Look out Below!

(http://iheartwallstreet.com/wp-content/uploads/2010/05/wile_e_coyote_gravity.jpg)

RE
Title: Re: Hyperinflation or Deflation?
Post by: ross on May 15, 2012, 04:48:22 AM
Quote
China’s debt deflation: Wenzhou edition
Last year, we reported the shadow banking mess in Wenzhou that led to companies chiefs fleeing and/or killing themselves to avoid being killed by their creditors.  And the government came in, and you think the crisis is over.  Now, First Financial Daily is reporting an interesting scene happening in banks in Wenzhou.  Even at a normally non-peak hours in the afternoon, it says, banks are full of people queuing, not for borrowing money, but repaying debts.

http://www.alsosprachanalyst.com/economy/chinas-debt-deflation-wenzhou-edition.html (http://www.alsosprachanalyst.com/economy/chinas-debt-deflation-wenzhou-edition.html)

It remains and shall remain...
Title: Re: Hyperinflation or Deflation?
Post by: JoeP on May 15, 2012, 05:38:14 AM
I'll add a couple of charts from China:
 
Title: Re: Hyperinflation or Deflation?
Post by: JoeP on May 17, 2012, 06:17:12 AM
More on China’s debt deflation:

Money is fleeing China (http://www.macrobusiness.com.au/2012/05/money-is-fleeing-china/)

Quote
We already know that last month’s figure for new loans was very mediocre. That appears to be continuing in May. Sina reports that the big 4 bank’s (ICBC, China Construction Bank, Agricultural Bank of China, Bank of China) net new loans for May is bascially zero for the first two weeks.  According to sources, two of the big 4 banks have had new loans of RMB10 billion and a few billion, while another banks have net new loans in negative territory  This suggests that demand for credit is extremely weak, perhaps much weaker than anyone is yet contemplating.
Title: Re: Hyperinflation or Deflation?
Post by: RE on May 17, 2012, 10:22:48 PM
More on China’s debt deflation:

Money is fleeing China (http://www.macrobusiness.com.au/2012/05/money-is-fleeing-china/)

Quote
We already know that last month’s figure for new loans was very mediocre. That appears to be continuing in May. Sina reports that the big 4 bank’s (ICBC, China Construction Bank, Agricultural Bank of China, Bank of China) net new loans for May is bascially zero for the first two weeks.  According to sources, two of the big 4 banks have had new loans of RMB10 billion and a few billion, while another banks have net new loans in negative territory  This suggests that demand for credit is extremely weak, perhaps much weaker than anyone is yet contemplating.

The Chinese are

(http://thisisnotalovesong.files.wordpress.com/2007/07/toast.jpg)

RE
Title: Re: Hyperinflation or Deflation?
Post by: Alan on May 20, 2012, 05:44:12 AM
Hi, RE! I replied to your "China is toast" post over on Steve's blog (.../2012/04/10/black-swans-dive), but you did not reply; you probably did not see it.

Here it is:

I'm curious: are you saying that the entirety of the Chinese people, and nation, are going to disappear, be liquidated, or die, spontaneously? If not the entirety, then how many, as a proportion? 80%? 90%? Less? More?

Or by "toast" do you mean something else, less drastic? Like, say, a reduction of GDP by 30%, or something like that? Or, say, a reduction of life expectancy from the current circa 70 years down to 60, or 50, or whatever.

Please be specific as to what you expect for the Chinese.

Further: WHEN is this going to happen? I mean, approximately. I'm not expecting a precise date, but some reasonable window -- say, "within 3 years", or "before 2020", or something like that.
Title: Re: Hyperinflation or Deflation?
Post by: RE on May 20, 2012, 07:27:17 AM
Hi, RE! I replied to your "China is toast" post over on Steve's blog (.../2012/04/10/black-swans-dive), but you did not reply; you probably did not see it.

Here it is:

I'm curious: are you saying that the entirety of the Chinese people, and nation, are going to disappear, be liquidated, or die, spontaneously? If not the entirety, then how many, as a proportion? 80%? 90%? Less? More?

Or by "toast" do you mean something else, less drastic? Like, say, a reduction of GDP by 30%, or something like that? Or, say, a reduction of life expectancy from the current circa 70 years down to 60, or 50, or whatever.

Please be specific as to what you expect for the Chinese.

Further: WHEN is this going to happen? I mean, approximately. I'm not expecting a precise date, but some reasonable window -- say, "within 3 years", or "before 2020", or something like that.

Hi Alan!

You are right, I didn't see your reply on EU. I don't have as much time to keep track of all the threads on the other blogs I will Poach on now. The diner is very consuming of writing time.

The Chinese situation is a complicated one, and at the moment I don't think they will turn to Toast overnight.They do have more systemic problems than we have here in the FSofA, though probably less than the Europeans have.

I think at the moment on an economic level the european issues preceed the chinese ones,and the Euro issues themselves will likely take a couple of years more before the contagion moves its way to the chinese economy in full force.  This barring a major political upheavalin china,also possible at any time now.

Longer term,the chinese have the worst population problem and worst ecological problems, with the exception of the Nipponese of course.  The industrial infrastructure they built up is malinvestment and their trade surplus will disappear rapidly as their client states in Europe and in the FSofA stop buying. This probably wil not happen overnight either, but will degrade over the next 5-10 yearsuntil a Tipping Point is reached.

I would say the greatest likelihood would be for a massive Civil War to break out in china in the 5-10 year period. They are also the most likely to be hit by a variant of Avian Flu because of density of population issues and the fact they have already beenhit with this stuff in small degree.  A Global Pandemic is most likely to begin in china and hit china the hardest.

RE
Title: Re: Hyperinflation or Deflation?
Post by: Ashvin on May 20, 2012, 09:23:15 AM
I recommend everyone here to take a look at FOFOA's latest (behemoth of a) post - Inflation or Hyperinflation? (http://fofoa.blogspot.com/2012/05/inflation-or-hyperinflation.html)

The most interesting thing for me is that I agree with 99% of what he writes in that post, and I think he provides A LOT of genuine insights (such as the importance of comparing marginal flow of dollars in the "physical plane" - US public deficit vs. trade deficit), but I still strongly disagree with his theoretical foundations, general worldview (including his very benign view of the monetary system - i.e. no malicious intent) and many of his conclusions.

However, I DO agree that dollar HI is a) very likely in the medium to long-term (let's say 8-20 years) and b) much more likely than a prolonged period of regular old inflation. With regards to a), FOFOA doesn't think that sort of timing is very important, but I most certainly do.

Anyway, it is a great post, even though it is very difficult to get through in one sitting.
Title: Re: Hyperinflation or Deflation?
Post by: JoeP on May 20, 2012, 09:28:00 AM
Another toasty chart from China.  This one probably gives Chanos a woody.
 
Title: Re: Hyperinflation or Deflation?
Post by: RE on May 20, 2012, 02:37:52 PM
Note: I placed this post up on the Blog.
http://www.doomsteaddiner.net/blog/2012/05/20/hyperinflation-vs-deflation-continued/-RE (http://www.doomsteaddiner.net/blog/2012/05/20/hyperinflation-vs-deflation-continued/-RE)


I recommend everyone here to take a look at FOFOA's latest (behemoth of a) post - Inflation or Hyperinflation? (http://fofoa.blogspot.com/2012/05/inflation-or-hyperinflation.html)

The most interesting thing for me is that I agree with 99% of what he writes in that post, and I think he provides A LOT of genuine insights (such as the importance of comparing marginal flow of dollars in the "physical plane" - US public deficit vs. trade deficit), but I still strongly disagree with his theoretical foundations, general worldview (including his very benign view of the monetary system - i.e. no malicious intent) and many of his conclusions.

However, I DO agree that dollar HI is a) very likely in the medium to long-term (let's say 8-20 years) and b) much more likely than a prolonged period of regular old inflation. With regards to a), FOFOA doesn't think that sort of timing is very important, but I most certainly do.

Anyway, it is a great post, even though it is very difficult to get through in one sitting.

I read through some of this eruption of prose from the keyboard of FOFOA, and will finish eventually but after skimming what I didn't read in detail, the main problem here is the fact FOFOA refuses to make any kind of timing bet, which is rather critical in all of this.

Even deflationistas like myself will grant that the denoument of currency collapse can come in the form of a hyperinflation.  I maintain however that an HI cannot be supported until and unless Da Goobermint or the Banks which control it start handing out free money to the end consumers.  The "Free Money" could comein the form of Goobermint "Make Work" projects like the WPA or a straight Dole, or from the Banksters it could come in the form of massive new loans made to EVERYBODY, from corporations to municipal Goobermints to keep paying their workers.

At the moment, neither of these outcomes is on the horizon for the FSofA, and for 99% of the people out there, Dollars are a SCARCE commodity and hard to come by.  HTF can you get an HI out of something so scarce? If you take the definition of an HI as 6% monthly inflation, you'll double prices in about a year.  If that occurs with gas here now, gas sales will PLUMMET because people don't have the money to buy gas even at current prices.

Contrast this with the situation in Greece if/when they reissue Drachma.  The Greeks will issue this TP to pay all their pensioners and Civil Service workers to keep them employed.  Any beginning devaluation against the Euro of say 50% will rapidly further devalue.  There is no tie to actual productivity in a Drachma reissue.  There is no tie to Drachma and Oil to run the economy.  The Drachma is meaningless.

The Dollar remains meaningful as long as its tie to Oil remains in place, and as long as dollars are scarce in the real econmy.  Though I did not read all the way through FOFOA's post, I don't see where he ties together the proxy status of the Dollar as representative of a given quantity of Oil.  Long as Saudi's will take Dollars for Oil and the dollars are scarce to end consumers of said oil, you just can't support an HI in the Dollar.

The MOMENT the Saudis will NOT take dollars for Oil is the moment it can HI.  Then they become as worthless as New Drachma.  Everybody who has any Dollars in the Bank of Sealy will try to dump them all at the same time, and whatever is left on the shelves of Walmart will FLY off those shelves at rapidly increasing prices.  Then you'll get your HI until all the warehouses and distribution centers are cleared of goods.  Of course, Da Goobermint will likely step in here with Ration Coupons and so forth to stop that scenario from occurring.

At the moment though, there is little danger the Saudis will stop taking Dollars for Oil, because the House of Saud has a Gun duct taped to the side of its collective Sheik Heads.  The Gun is the Big Ass Military,and without it the House of Saud is TOAST. The Sheiks will be LITERALLY eaten alive by the population surrounding them.  This is the POLITICAL side of the equation that FOFOA never seems to deal with, all his arguments are economic ones.

In any event, for most people it is the TIMING that is most critical here.  That the currency will collapse at some point is inevitable, but when do you divest and what do you do in the meantime?  My "solution" here is to reamin as liquid as possible so I can divest rapidly for hard goods when the final collapse comes.  To be able to do that, I forgo investments that in the interim might provide an increasing pile of funny money if I choose correctly.

Finally, on the Gold issue, the deal with Gold is that even assuming it holds some value that Fiat does not, by the time you work your way down to trading in Gold, there will just be nothing around worth buying for it.  The whole JIT system will collapse, all trade with China will collapse, there just will not be anything to buy once Gold is all there is anyone "trusts" anymore.  No Letters of Credit, no Bankster will be trusted for anything.  You can't move a Global Economy shipping Gold Bars from one place to another, its even probably impossible to do it moving piles of Gold from one holding cell to another in the Basement Safe of the NY Fed.

Meanwhile, until Da Goobermint starts handing out Free Money to J6P the way it does to the TBTF Banksters, I don't think we will see HI in the Dollar.  For sure, it has to wait until after both the Euro and Yen collapse also.  Not on the immediate horizon, IMHO.

RE
Title: Re: Hyperinflation or Deflation?
Post by: Ashvin on May 21, 2012, 06:31:23 AM
At the moment, neither of these outcomes is on the horizon for the FSofA, and for 99% of the people out there, Dollars are a SCARCE commodity and hard to come by.  HTF can you get an HI out of something so scarce? If you take the definition of an HI as 6% monthly inflation, you'll double prices in about a year.  If that occurs with gas here now, gas sales will PLUMMET because people don't have the money to buy gas even at current prices.

I agree,  but I think it is important to distinguish here between inflation and HI. You argument is almost a better critique against prolonged inflation than rapid HI. FOFOA believes that, as long as credit assets are being replaced by fresh base money from the CBs (the Fed, he doesn't like to criticize the ECB for other Freegold reasons...), the kindling for the HI fire is being put in place. The "match" is lit when holders of dollars, domestic and abroad, lose confidence in the currency's ability to act as a store of value that will purchase necessary commodities/goods/services at later dates. Therefore, no direct process of giving cash to consumers by banks or the government is really necessary. I believe his description of the process is pretty accurate, but I disagree on the timing of it all for a lot of different reasons.

Quote
The Dollar remains meaningful as long as its tie to Oil remains in place, and as long as dollars are scarce in the real econmy.  Though I did not read all the way through FOFOA's post, I don't see where he ties together the proxy status of the Dollar as representative of a given quantity of Oil.  Long as Saudi's will take Dollars for Oil and the dollars are scarce to end consumers of said oil, you just can't support an HI in the Dollar.

A/FOA/FOFOA actually do talk a lot about the oil trade, but they always reference gold as the real proxy for oil - they say gold and oil always flow in opposite directions - while currencies just act as an expression of relative values between commodities (i.e. how much oil is needed to purchase a certain quantity of nat gas). The dollar is unique because it has been enshrined as not just a common medium of exchange in the world, but a store of value that foreign CBs must use.

However, they believe that the market system is naturally capable of abandoning the $IMFS (debt-dollar reserve system) and using another system for the oil trade, once the imbalances in the former become severe enough (right about now). The US will naturally lose a lot of influence in this new system, while Europe and Asia will gain a lot of influence (especially if the Euro is used as a new reserve currency tied to gold, which is what they believe will happen). I don't really agree with any of that, though.

Quote
At the moment though, there is little danger the Saudis will stop taking Dollars for Oil, because the House of Saud has a Gun duct taped to the side of its collective Sheik Heads.  The Gun is the Big Ass Military,and without it the House of Saud is TOAST. The Sheiks will be LITERALLY eaten alive by the population surrounding them.  This is the POLITICAL side of the equation that FOFOA never seems to deal with, all his arguments are economic ones.

Agreed, he definitely does not deal with the geopolitical factors, and that stems from his Austrian mindset that the markets can accomplish ANYTHING over time, even if central authorities try to stop it. I completely disagree, and believe the market system actually necessitates centralized intervention to perpetuate the status quo divisions of wealth/power. That is party of why I believe this debt-dollar system could last significantly longer than he thinks.

Quote
In any event, for most people it is the TIMING that is most critical here.  That the currency will collapse at some point is inevitable, but when do you divest and what do you do in the meantime?  My "solution" here is to reamin as liquid as possible so I can divest rapidly for hard goods when the final collapse comes.  To be able to do that, I forgo investments that in the interim might provide an increasing pile of funny money if I choose correctly.

FOFOA would respond by saying it is better to be way too early in divestment than "a day late and a dollar short". That argument also works for the deflation side - better to go into cash too early than to stay invested in other assets a day too long. Both arguments stem from the legitimate idea that dollar-asset deflation AND dollar HI can occur rapidly in this environment, without any early warnings.

Quote
Finally, on the Gold issue, the deal with Gold is that even assuming it holds some value that Fiat does not, by the time you work your way down to trading in Gold, there will just be nothing around worth buying for it.  The whole JIT system will collapse, all trade with China will collapse, there just will not be anything to buy once Gold is all there is anyone "trusts" anymore.  No Letters of Credit, no Bankster will be trusted for anything.  You can't move a Global Economy shipping Gold Bars from one place to another, its even probably impossible to do it moving piles of Gold from one holding cell to another in the Basement Safe of the NY Fed.

This gets into the whole theory of Freegold, which I have major issues with. I lean much more towards your argument, but, theoretically, the concept of Freegold is a very interesting and unique one. If the Freegold system were to actually occur (very unlikely, IMO), then I think a lot of your issues would be resolved, at least until net energy issues came into play and caused the global industrial system to break down. I don't really feel like trying to explain the theory here (partly because I may not fully understand it yet), but here is a link to an FOFOA article that tries to lay it out - Freegold Foundations (http://fofoa.blogspot.com/2011/01/freegold-foundations.html).

I'd like to hear what you think about Freegold.

Meanwhile, until Da Goobermint starts handing out Free Money to J6P the way it does to the TBTF Banksters, I don't think we will see HI in the Dollar.  For sure, it has to wait until after both the Euro and Yen collapse also.  Not on the immediate horizon, IMHO.

RE
[/quote]
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on May 21, 2012, 07:47:46 AM
Quote

    Finally, on the Gold issue, the deal with Gold is that even assuming it holds some value that Fiat does not, by the time you work your way down to trading in Gold, there will just be nothing around worth buying for it.  The whole JIT system will collapse, all trade with China will collapse, there just will not be anything to buy once Gold is all there is anyone "trusts" anymore.  No Letters of Credit, no Bankster will be trusted for anything.  You can't move a Global Economy shipping Gold Bars from one place to another, its even probably impossible to do it moving piles of Gold from one holding cell to another in the Basement Safe of the NY Fed

Nothing has to collapse. Prices take a massive hike upwards, gold goes up, the dollar goes down and the world still spins. Isn't it already true that the dollar has lost 95% of it's value since the creation of The Fed and gold has risen from 20 to close to 2000. Why does everyone talk about a dollar collapse and inflation as something that might happen or is inevitable. When are they going to yank their heads out of their rectums and see that it already has? As far as assuming that gold will hold some of its value that fiat does not, since it has been doing it for about 4000 years now, I would consider it a safe bet. Yes, I know, past performance means nothing!     :icon_study:
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on May 21, 2012, 08:04:10 AM
"Meanwhile, until Da Goobermint starts handing out Free Money to J6P the way it does to the TBTF Banksters, I don't think we will see HI in the Dollar.  For sure, it has to wait until after both the Euro and Yen collapse also.  Not on the immediate horizon, IMHO."

They will, have no doubt about that. He is not called Helicopter Ben without good reason. You should take the time to read his scholarly work on the printing press and it's powers.    :icon_study:
Title: Re: Hyperinflation or Deflation?
Post by: Ashvin on May 21, 2012, 11:42:48 AM
Why does everyone talk about a dollar collapse and inflation as something that might happen or is inevitable. When are they going to yank their heads out of their rectums and see that it already has?

Price inflation in some things has happened and may continue to happen, but dollar collapse (HI) - not even close. Those dollars in your wallet still buy you gas, right? What is it, 50 bucks to fill up a tank? Sometimes less, sometimes more? Groceries?

Even strictly in terms of general confidence in the currency, it is clear that the psychosocial and geopolitical tipping points have not occurred. The Rest of the World is still financing our public/trade deficits, and giving us real things in return for paper dollars at relatively reasonable prices. Foreign CBs are still settling out their transactions in dollars. The largest buyers/traders of your precious gold are still the bullion banks within the debt-dollar system.

And how many rumors/articles have you heard/read about other significant countries cutting off the USD middleman trade over the last few years, which ended up going absolutely nowhere? I've read quite a few of those myself.
Title: Re: Hyperinflation or Deflation?
Post by: RE on May 21, 2012, 03:43:22 PM
Heading back from Talkeetna. I just finished FOFOA's "Freegold" article.  I read a couple of his posts a good while back, now I remember why I stopped reading. Talk about stilted prose!  He can't be a native speaker of English.

Anyhow, there is quite a bit in this to respond to.  I may get to it tonight, but I want to write a travelogue of the Train Trip first. So it may be a day or two.  As you might imagine, I disagree with most of his assumptions so I don't buy the argument he makes with them.

RE
Title: Re: Hyperinflation or Deflation?
Post by: Ashvin on May 21, 2012, 03:49:24 PM
Quote
Anyhow, there is quite a bit in this to respond to.  I may get to it tonight, but I want to write a travelogue of the Train Trip first. So it may be a day or two.  As you might imagine, I disagree with most of his assumptions so I don't buy the argument he makes with them.

Funny, because the latest FOFOA article and the beginnings of a critical discussion here has also inspired me to start a recurring commentary series devoted to fleshing out critiques of Freegold, one at a time.

http://theautomaticearth.com/Finance/freegold-perspectives-and-critiques.html (http://theautomaticearth.com/Finance/freegold-perspectives-and-critiques.html)

I have quite a few critiques myself, but I welcome RE to contribute to the effort, as well as anyone else here. If you want to post the critiques here on DD (the blog or the forum), I will re-post them in commentaries on TAE with an added link to the DD discussion thread.
Title: Re: Hyperinflation or Deflation?
Post by: RE on May 21, 2012, 04:33:57 PM
I have quite a few critiques myself, but I welcome RE to contribute to the effort, as well as anyone else here. If you want to post the critiques here on DD (the blog or the forum), I will re-post them in commentaries on TAE with an added link to the DD discussion thread.

So should I keep the Gonzo to a minimum? :D

RE
Title: Re: Hyperinflation or Deflation?
Post by: RE on May 21, 2012, 05:32:17 PM
Nothing has to collapse. Prices take a massive hike upwards, gold goes up, the dollar goes down and the world still spins. Isn't it already true that the dollar has lost 95% of it's value since the creation of The Fed and gold has risen from 20 to close to 2000. Why does everyone talk about a dollar collapse and inflation as something that might happen or is inevitable.

(http://images2.fanpop.com/images/photos/7200000/Wile-E-Coyote-BEEP-BEEP-wilee-quixote-7263292-800-600.jpg)

RE
Title: Re: Hyperinflation or Deflation?
Post by: Ashvin on May 22, 2012, 12:08:29 AM
I have quite a few critiques myself, but I welcome RE to contribute to the effort, as well as anyone else here. If you want to post the critiques here on DD (the blog or the forum), I will re-post them in commentaries on TAE with an added link to the DD discussion thread.

So should I keep the Gonzo to a minimum? :D

RE

Write it however you feel. As long as you incorporate critical analysis of an aspect of Freegold theory, we're good.
Title: Re: Hyperinflation or Deflation?
Post by: RE on May 22, 2012, 12:54:38 AM

Write it however you feel. As long as you incorporate critical analysis of an aspect of Freegold theory, we're good.

Blah.  I'll certainly analyze it critically no matter how I write it, the issue for me is how it plays with the TAE crowd if it is going up on that platform.  Gonzo turns off a lot of people because they don't see you as "serious" enough if you write that way, and so you lose potential customers because of that.  On the other hand, I get BORED with my own writing if I don't Gonzo it up some.  Always a very tough balance for me to work out when publishing on OPBs.

Anyhow, right now I am writing the text for the Railroad article, which is taking time, and then I have a lot of Graphics I want to drop in this one.  Its going to take another day at least to get this one finished.  I probably won't get to FOFOA's stuff until later in the week.

RE
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on May 22, 2012, 06:58:42 AM
Why does everyone talk about a dollar collapse and inflation as something that might happen or is inevitable. When are they going to yank their heads out of their rectums and see that it already has?

Price inflation in some things has happened and may continue to happen, but dollar collapse (HI) - not even close. Those dollars in your wallet still buy you gas, right? What is it, 50 bucks to fill up a tank? Sometimes less, sometimes more? Groceries?

Even strictly in terms of general confidence in the currency, it is clear that the psychosocial and geopolitical tipping points have not occurred. The Rest of the World is still financing our public/trade deficits, and giving us real things in return for paper dollars at relatively reasonable prices. Foreign CBs are still settling out their transactions in dollars. The largest buyers/traders of your precious gold are still the bullion banks within the debt-dollar system.

And how many rumors/articles have you heard/read about other significant countries cutting off the USD middleman trade over the last few years, which ended up going absolutely nowhere? I've read quite a few of those myself.
Confidence in the issuer is where a fiat currency obtains it's present value. Nothing shows how fragile and fleeting confidence is than it's disappearance. For that reason hyper inflation will very likely appear suddenly and without much prior fanfare. Yes the dollar is STILL currently the worlds reserve currency but it's stature is diminishing. There is a new kid on the block, China, who is doing what he can to diminish the dollar's role. Remember the world's last reserve currency and that famous saying "The Sun Never Sets On The British Empire." It is not "MY" precious gold Ashvin, the civilizations and their citizens that existed thousands of years before my arrival ordained it. I have merely chosen to accept their collective wisdom. I must confess to accepting your barb, or pun, in this particular matter and wearing it proudly as a Badge of Honor.     :icon_study:
pound picture
pound picture
Title: Re: Hyperinflation or Deflation?
Post by: Ashvin on May 22, 2012, 10:36:21 AM
first critique up

http://theautomaticearth.com/index.php?option=com_content&view=article&id=268 (http://theautomaticearth.com/index.php?option=com_content&view=article&id=268)
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on May 22, 2012, 09:04:23 PM
"At the moment, neither of these outcomes is on the horizon for the FSofA, and for 99% of the people out there, Dollars are a SCARCE commodity and hard to come by. HTF can you get an HI out of something so scarce? If you take the definition of an HI as 6% monthly inflation, you’ll double prices in about a year. If that occurs with gas here now, gas sales will PLUMMET because people don’t have the money to buy gas even at current prices."

There is no scarcity of Dollars, they are as scarce as sand and atoms. The entire world has been wall papered with them. There are so many of them they have lost much of their value. They are counted in the trillions now, billions are chump change; and that is where the problem lies. They are being created digitally now to maintain and increase the price structure. The Federal Reserve Banks states a 2% inflation as about right. There is however a scarcity of real money, Gold and Silver, relative to the paper claims against them . That is where scarcity is to be found.  :icon_study:
1834 classic 250 N65 CAC
1834 classic 250 N65 CAC
 
Title: Re: Hyperinflation or Deflation?
Post by: RE on May 22, 2012, 11:17:38 PM

There is no scarcity of Dollars, they are as scarce as sand and atoms. The entire world has been wall papered with them. There are so many of them they have lost much of their value. They are counted in the trillions now, billions are chump change; and that is where the problem lies. They are being created digitally now to maintain and increase the price structure. The Federal Reserve Banks states a 2% inflation as about right. There is however a scarcity of real money, Gold and Silver, relative to the paper claims against them . That is where scarcity is to be found.

They may not be scarce at the wholesale level of the TBTF Banks, they are however exceedingly scarce in the real economy.  If there were plenty flowing around, people wouldn't be defaulting on their mortgages, states wouldn't be laying off their work forces and  Circuit City would still be in Bizness.

The issue here is that even if you digitally create Dollars, if they are not being distributed out they remain scarce for the people that use them for commerce.  They also clearly remain too scarce to bid up the cost of Facepalm. Stock.

Far as the scarcity of Gold is concerned, it is among its many weaknesses as a replacemtn currency medium for the Fiat.  However, you will have to wait for a full new deconstruction of the Gold arguments until I can get to that FOFOA  exercise in ideological justification.  This in turn has to wait until I finish the Railroad Article, which I am sprucing up with pics I took and have to edit so it is taking longer than the typical blog article to get right.

RE
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on May 23, 2012, 04:38:06 AM

There is no scarcity of Dollars, they are as scarce as sand and atoms. The entire world has been wall papered with them. There are so many of them they have lost much of their value. They are counted in the trillions now, billions are chump change; and that is where the problem lies. They are being created digitally now to maintain and increase the price structure. The Federal Reserve Banks states a 2% inflation as about right. There is however a scarcity of real money, Gold and Silver, relative to the paper claims against them . That is where scarcity is to be found.

They may not be scarce at the wholesale level of the TBTF Banks, they are however exceedingly scarce in the real economy.  If there were plenty flowing around, people wouldn't be defaulting on their mortgages, states wouldn't be laying off their work forces and  Circuit City would still be in Bizness.

The issue here is that even if you digitally create Dollars, if they are not being distributed out they remain scarce for the people that use them for commerce.  They also clearly remain too scarce to bid up the cost of Facepalm. Stock.

Far as the scarcity of Gold is concerned, it is among its many weaknesses as a replacemtn currency medium for the Fiat.  However, you will have to wait for a full new deconstruction of the Gold arguments until I can get to that FOFOA  exercise in ideological justification.  This in turn has to wait until I finish the Railroad Article, which I am sprucing up with pics I took and have to edit so it is taking longer than the typical blog article to get right.

RE
   First you argue dollars are scarce. Then your refute your statement in the next sentence by saying we have so much fiat gold cannot replace it do to it's scarcity. Are you not really saying it cannot replace it at it's current price. Whatever the case that is why we have silver, gold's less noble but still precious metal, in the bi metallic money system. Gold for the big purchases and central bank currency backing, silver for the pocket money and everyday transactions.   
1875CC 0 1 N65
1875CC 0 1 N65
Title: Re: Hyperinflation or Deflation?
Post by: RE on May 23, 2012, 12:04:19 PM
  First you argue dollars are scarce. Then your refute your statement in the next sentence by saying we have so much fiat gold cannot replace it do to it's scarcity. Are you not really saying it cannot replace it at it's current price. Whatever the case that is why we have silver, gold's less noble but still precious metal, in the bi metallic money system. Gold for the big purchases and central bank currency backing, silver for the pocket money and everyday transactions.   
1875CC 0 1 N65
1875CC 0 1 N65

Saying that Gold is scarce doesn't refute the fact dollars are scarce in the pockets of consumers these days.  Its faulty logic like that which undermines the whole Gold BZug argument.

Silver for pocket change is also nonsense.  In its generally accepted ratio of around 16:1, this the allotment for silver for each individual comes out to around 13 ozs of that metal.  So  how many ozs of silver do you think the average house would take to buy?  Let's say 1000.  So if I save up 1000 of these coins, this takes them OUT of circulation until I go ahead and buy said house.  During the time I am saving, this means there is LESS than the 13 ozs for each person, because those coins are hiding in my basement safe, about 75 people's pocket change.

I gotta ask GO, how OLD are you?  You write like you are really old in the form and substance of your PM arguments.  I'm going to over/under you at 72.

RE
Title: Re: Hyperinflation or Deflation?
Post by: reanteben on May 23, 2012, 12:20:35 PM
that's 20.5 in ox years.
Title: Re: Hyperinflation or Deflation?
Post by: RE on May 23, 2012, 01:37:12 PM
As requested by Ashvin, I put up my rebuttal to FOFOA's Gold Bug arguments on the Blog.

http://www.doomsteaddiner.net/blog/2012/05/23/hyperinflation-vs-deflation-rebutting-fofoa/ (http://www.doomsteaddiner.net/blog/2012/05/23/hyperinflation-vs-deflation-rebutting-fofoa/)

Have fun with that one GO. :icon_mrgreen:

RE
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on May 23, 2012, 02:12:36 PM
Your correct RE. Along with being a racist, I am a senile old fuck living in the past hung up on  ancient monetary history and Gold.  :-[
Title: Re: Hyperinflation or Deflation?
Post by: RE on May 23, 2012, 02:25:46 PM
Your correct RE. Along with being a racist, I am a senile old fuck living in the past hung up on  ancient monetary history and Gold.  :-[

I never accused you of being Senile. :P

So how close was I on the O/U?

RE
Title: Re: Hyperinflation or Deflation?
Post by: Ashvin on May 23, 2012, 02:53:00 PM
As requested by Ashvin, I put up my rebuttal to FOFOA's Gold Bug arguments on the Blog.

http://www.doomsteaddiner.net/blog/2012/05/23/hyperinflation-vs-deflation-rebutting-fofoa/ (http://www.doomsteaddiner.net/blog/2012/05/23/hyperinflation-vs-deflation-rebutting-fofoa/)

Have fun with that one GO. :icon_mrgreen:

RE

Thanks for the critique RE. I am only going to use a part of it for a re-post on TAE. The reason is because I think a good deal of it is not actually in disagreement with FOFOA.

As I very briefly explained in my first critique, FOFOA is not a hard money guy. He does NOT believe that gold, silver or any other commodity should act as a currency backing, i.e. he does not think we should return (or we are returning) to a gold standard. In fact, a lot of gold bugs HATE him for that reason. Just look at the comments by "pipefit" on TAE. I'm sure GO feels the same way. So I believe FOFOA would actually agree with a lot of what you wrote.

Quote
FOA: Understanding all of this money evolution, in its correct context, is vital to grasping gold's eventual place in the world. A place where it once proudly stood long ago.
 
All of this transition is killing off our Gold Bug dream of official governments declaring gold to be money again and reinstitution some arbitrary gold price.

However, I will repost your critiques of his "primeval" money instinct and capital concept, since its true that he seems to accept the flawed Austrian ideas about the origin of money, and he doesn't deal at all with issues of energy scarcity.

Keep em' coming if you want.

Post is up - http://theautomaticearth.com/Finance/fpc-the-concepts-of-money-and-capital.html (http://theautomaticearth.com/Finance/fpc-the-concepts-of-money-and-capital.html)
Title: Re: Hyperinflation or Deflation?
Post by: RE on May 23, 2012, 04:22:36 PM
As requested by Ashvin, I put up my rebuttal to FOFOA's Gold Bug arguments on the Blog.

http://www.doomsteaddiner.net/blog/2012/05/23/hyperinflation-vs-deflation-rebutting-fofoa/ (http://www.doomsteaddiner.net/blog/2012/05/23/hyperinflation-vs-deflation-rebutting-fofoa/)

Have fun with that one GO. :icon_mrgreen:

RE

Thanks for the critique RE. I am only going to use a part of it for a re-post on TAE. The reason is because I think a good deal of it is not actually in disagreement with FOFOA.

As I very briefly explained in my first critique, FOFOA is not a hard money guy. He does NOT believe that gold, silver or any other commodity should act as a currency backing, i.e. he does not think we should return (or we are returning) to a gold standard. In fact, a lot of gold bugs HATE him for that reason. Just look at the comments by "pipefit" on TAE. I'm sure GO feels the same way. So I believe FOFOA would actually agree with a lot of what you wrote.

Quote
FOA: Understanding all of this money evolution, in its correct context, is vital to grasping gold's eventual place in the world. A place where it once proudly stood long ago.
 
All of this transition is killing off our Gold Bug dream of official governments declaring gold to be money again and reinstitution some arbitrary gold price.

However, I will repost your critiques of his "primeval" money instinct and capital concept, since its true that he seems to accept the flawed Austrian ideas about the origin of money, and he doesn't deal at all with issues of energy scarcity.

Keep em' coming if you want.

Post is up - http://theautomaticearth.com/Finance/fpc-the-concepts-of-money-and-capital.html (http://theautomaticearth.com/Finance/fpc-the-concepts-of-money-and-capital.html)

Feel free to excerpt if you like, though that was not how you originally phrased this idea.  I'm once again having issues accessing TAE, so I won't even see how you mangle my post. LOL.

Like Antal Fekete, I suspect FOFOA thinks Gold will in some way coexist with Credit based economy.  He still appears to believe it has an intrinsic property that will make it function in perpetuity as a value sink, and this just doesn't hold true in a situation of real scarcity.

Far as "keeping them coming" goes, I don't read FOFOAs website, and I pretty much summed up my arguments against Gold in this post.  If FOFOA were to turn up in the Diner to rebut them, I'd have more to say no doubt, but that is highly unlikely.  He doesn't turn up on TAE either, though I suppose if you perpetually tweak him maybe he will.

You are of course always free to excerpt anything I write in these discussion that supports the axe you are grinding with FOFOA.

RE
Title: Re: Hyperinflation or Deflation?
Post by: Ashvin on May 23, 2012, 04:58:33 PM
Feel free to excerpt if you like, though that was not how you originally phrased this idea.  I'm once again having issues accessing TAE, so I won't even see how you mangle my post. LOL.

Well, in my post introducing the commentary series, I did say that I would only post critiques of FOFOA/F-theory that I agree with. I did not edit what you actually wrote, just took out certain parts which appeared to be a critique of a gold standard (i.e. the parts explaining why gold cannot be used as transactional money at large scales). I agree with those parts, but I don't think they are "critiques".

Quote
Like Antal Fekete, I suspect FOFOA thinks Gold will in some way coexist with Credit based economy.  He still appears to believe it has an intrinsic property that will make it function in perpetuity as a value sink, and this just doesn't hold true in a situation of real scarcity.

He believes in the marginal utility theory of value (neoclassical/Austrian BS, IMO), and he believes that gold's utility in the new system will be to preserve a person's purchasing power (ex. if you have 1000 units of currency and it buys you a certain amount of gas at any given time, you can "lock in" that amount of gas by converting the currency into gold). Therefore, diminishing marginal utility will never come into play, because each additional ounce of gold purchased has at least the same (subjective) utility for the purchaser as the previous ounce purchased. In a nutshell, that's how he justifies gold perpetually maintaining its high value (or increasing with the productive capacity of society).

Quote
I'm once again having issues accessing TAE

I wish I understood computers better, because I don't get it...
Title: Re: Hyperinflation or Deflation?
Post by: RE on May 23, 2012, 05:08:40 PM
I never really expected you to publish the whole thing, it was rather a shotgun deal.  Glad at least a couple of the arguments fit what you were looking for, and its good Promotional material for DD  to get up on the TAE homepage.  Now, if you could just get FOFOA to show up for a debate, that could be really fun  :icon_mrgreen:

Why don't you send him an email with a link to all the critiques?

RE
Title: Re: Hyperinflation or Deflation?
Post by: RE on May 23, 2012, 10:11:14 PM

Far as the scarcity of Gold is concerned, it is among its many weaknesses as a replacemtn currency medium for the Fiat.  However, you will have to wait for a full new deconstruction of the Gold arguments until I can get to that FOFOA  exercise in ideological justification.  This in turn has to wait until I finish the Railroad Article, which I am sprucing up with pics I took and have to edit so it is taking longer than the typical blog article to get right.

RE
I note that so far GO has not attempted a Rebuttal to any of the arguments I made in the FOFOA article.   :emthdown:

GO, as the DD resident Gold Bug, I think you have an OBLIGATION to make a Rebuttal here to the stated arguments.  To do otherwise is equivalent to Resigning in a Chess Game.

So, down a couple of cans of Enfamil, strap on your Depends Diaper, and get the Nurse to wheel you over to the Keyboard and take up the Banner for the Gold Bugs!

(http://redpillmixtape.info/wp-content/uploads/nursing-home-abuse-lawyer.jpg)
GO readying for Battle on the Internet

RE
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on May 24, 2012, 04:34:55 AM
Whan that Aprill, with his shoures soote
   The droghte of March hath perced to the roote
   And bathed every veyne in swich licour,
   Of which vertu engendred is the flour;
5   Whan Zephirus eek with his sweete breeth
   Inspired hath in every holt and heeth
   The tendre croppes, and the yonge sonne
   Hath in the Ram his halfe cours yronne,
   And smale foweles maken melodye,

 No speake anglish usa by thee RE, Am a Olde ox.  Journeyman nameth pipefite at taverne TAE mighta yanka thy head from arse RE.  olde ox     :icon_study:
Title: Re: Hyperinflation or Deflation?
Post by: ross on May 24, 2012, 05:17:31 AM
13 ozs of silver per person. I guess I'm a little ahead of the curve...

Between dollar abundance and dollar scarcity is the fact that so little of the claimed amount of dollars in existence actually exists physically in circulation. Quick Google says $925 Billion in circulation mostly in $100 bills and mostly overseas. That estimate was a year old.

Anyway, something to consider since FOFOA (if I read right) seems to suggest the FRB will be forced to monetize bank reserves which would to me indicates he thinks the FRB will print the cash to make everyone good on their FDIC-insured accounts.
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on May 24, 2012, 05:49:38 AM
13 ozs of silver per person. I guess I'm a little ahead of the curve...

Between dollar abundance and dollar scarcity is the fact that so little of the claimed amount of dollars in existence actually exists physically in circulation. Quick Google says $925 Billion in circulation mostly in $100 bills and mostly overseas. That estimate was a year old.

Anyway, something to consider since FOFOA (if I read right) seems to suggest the FRB will be forced to monetize bank reserves which would to me indicates he thinks the FRB will print the cash to make everyone good on their FDIC-insured accounts.
There are also uncountable counterfeit  100 dollar bills in the billions hidden under mattresses, the large majority in Russia. They cannot be detected except by experts with advanced tools because they were printed by master engravers working for Libya and Syria. They were very good at it and successful which is why the currency has been changed so often recently. Gaddaffi was also a master counterfeiter of rare coins. Hitler was fond of the bogus currency business also. I have heard estimates from fairly reliable sources of over 50 billion out there which is bogus. Bogus items exist in everything from gold and silver bars to Rolex watches, but fiat is the place you will find the most of it.    :icon_study:
Title: Re: Hyperinflation or Deflation?
Post by: RE on May 24, 2012, 11:23:31 AM

 No speake anglish usa by thee RE, Am a Olde ox.  Journeyman nameth pipefite at taverne TAE mighta yanka thy head from arse RE.  olde ox     :icon_study:

Don't be such a sensitive Old Coot.  That was some funny stuff!  LOL.  So I underbid, right?  Warren Buffett territory?

RE
Title: Re: Hyperinflation or Deflation?
Post by: RE on May 24, 2012, 11:35:43 AM
13 ozs of silver per person. I guess I'm a little ahead of the curve...

Between dollar abundance and dollar scarcity is the fact that so little of the claimed amount of dollars in existence actually exists physically in circulation. Quick Google says $925 Billion in circulation mostly in $100 bills and mostly overseas. That estimate was a year old.

Anyway, something to consider since FOFOA (if I read right) seems to suggest the FRB will be forced to monetize bank reserves which would to me indicates he thinks the FRB will print the cash to make everyone good on their FDIC-insured accounts.

Helicopter Ben could never actually PRINT the Trillions being bandied about in $100 Denomination Notes.  The notes would stack to the Moon and all the rest of the remaining Trees on Earth would have to be cut down to make good on the Derivative bets.

In terms of Printing to make good on all the FDIC Insured Bank Accounts, that probably is not Hyperinflationary either, since MOST people have no savings at all, or at most a couple of months worth of Bills.  This still doesn't put a continuing flow of Dollars into the hands of J6P to keep buying Gas for his SUV.

My best guess for an HI event is when the Iranians blow Ghanwar to Kingdom Come with Chinese Cruise Missiles.  Then everybody will dump their Dollars to buy the last of the Gas at the Pumps and the last bag of Rice off the shelves at Walmart.

RE
Title: Re: Hyperinflation or Deflation?
Post by: RE on May 24, 2012, 01:46:00 PM
Gold Bugs will probably like this video.

http://www.youtube.com/v/AJwgtcaXFDY

RE
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on May 25, 2012, 03:41:45 AM
Quote RE "Helicopter Ben could never actually PRINT the Trillions being bandied about in $100 Denomination Notes.  The notes would stack to the Moon and all the rest of the remaining Trees on Earth would have to be cut down to make good on the Derivative bets."   

They add 0's, only a few acres of trees needed this way. Picture of 50,000.00 overprint of a former 1.00 China Air Mail stamp from my collection in use in 1948. Not Zimbabwe, but China, a nation of over 1 billion citizens. Utterly amazed at how this nation could function under this HI, yet everyone went about their daily business and look at them today. Always like to look at this stamp whenever I get the idiotic idea in my head to sell a little gold or silver because the price has moved up. I used an air mail example to show that this was a modern post World War II country functioning right along with us.  :icon_study:
China 1948 Airmail 50,000 on 1$ Peking Full og nh Suprb Gem Chan A59
China 1948 Airmail 50,000 on 1$ Peking Full og nh Suprb Gem Chan A59
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on May 25, 2012, 04:28:09 AM
Another from my collection that was in more common everyday use. This is a used canceled example of a Dr Sun Yat-sen. Instead of an overprint it is a new printing with the new 20,000 dollar value. Don't ask me how, hard to believe unless you see it in front of you.  :icon_study: :dontknow:
China 1947 Dr SYS Shanghai Dah Tung print $20 000 yellow green red dramatic per shift gem Chan 1039
China 1947 Dr SYS Shanghai Dah Tung print $20 000 yellow green red dramatic per shift gem Chan 1039
Title: Re: Hyperinflation or Deflation?
Post by: ross on May 25, 2012, 04:58:14 AM
Cool, GO. Are those stamps from a personal collection?
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on May 25, 2012, 05:19:09 AM
China

As the first user of fiat currency, China has had an early history of troubles caused by hyperinflation. The Yuan Dynasty printed huge amounts of fiat paper money to fund their wars, and the resulting hyperinflation, coupled with other factors, led to its demise at the hands of a revolution. The Republic of China went through the worst inflation 1948–49. In 1947, the highest denomination was 50,000 yuan. By mid-1948, the highest denomination was 180,000,000 yuan. The 1948 currency reform replaced the yuan by the gold yuan at an exchange rate of 1 gold yuan = 3,000,000 yuan. In less than a year, the highest denomination was 10,000,000 gold yuan. In the final days of the civil war, the Silver Yuan was briefly introduced at the rate of 500,000,000 Gold Yuan. Meanwhile the highest denomination issued by a regional bank was 6,000,000,000 yuan (issued by Xinjiang Provincial Bank in 1949). After the renminbi was instituted by the new communist government, hyperinflation ceased with a revaluation of 1:10,000 old Renminbi in 1955. The overall impact of inflation was 1 Renminbi = 15,000,000,000,000,000,000 pre-1948 yuan.  :icon_study:

Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on May 25, 2012, 05:23:14 AM
Cool, GO. Are those stamps from a personal collection?
  Yes Ross, I have been fascinated by stamps since I was a boy. Have collected my entire life. What a great hobby to get a kid interested in to learn about history, money matters,art, etc. Plan to start a Do Rare Stamps Qualify as a Doomster Investment topic on DD when I find the time.   The famous Bluenose 1928 Canada. Considered
1562
by most to be on of the worlds most beautiful artistic stamps.
Title: Re: Hyperinflation or Deflation?
Post by: Jaded Prole on May 25, 2012, 05:27:11 AM
Sometimes the only way out is to dump a corrupt system and start over. The only country that wasn't suffering the Great Depression of the 30's was the USSR which was experiencing growth.
Title: Re: Hyperinflation or Deflation?
Post by: ross on May 25, 2012, 06:28:55 AM
In light of the recent experience in the UK where the Royal Mail announced they would increase stamp prices and people started hoarding, I think stamps may qualify.  ;D

http://www.telegraph.co.uk/news/uknews/royal-mail/9205571/Well-beat-the-stamp-hoarders-says-Royal-Mail-in-battle-to-recoup-losses.html (http://www.telegraph.co.uk/news/uknews/royal-mail/9205571/Well-beat-the-stamp-hoarders-says-Royal-Mail-in-battle-to-recoup-losses.html)
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on May 25, 2012, 07:04:54 AM
In light of the recent experience in the UK where the Royal Mail announced they would increase stamp prices and people started hoarding, I think stamps may qualify.  ;D

http://www.telegraph.co.uk/news/uknews/royal-mail/9205571/Well-beat-the-stamp-hoarders-says-Royal-Mail-in-battle-to-recoup-losses.html (http://www.telegraph.co.uk/news/uknews/royal-mail/9205571/Well-beat-the-stamp-hoarders-says-Royal-Mail-in-battle-to-recoup-losses.html)
  Are you sure it will not start another World War such as your infamous Make A List, Check it Twice. Still picking buck shot out of my rear end from Annie Oakley on that one. Will have to think about it for a while, scared of inciting a riot. Can I be held liable for the tree destroyed in their manufacture, or the political views of the persons pictured? Silence is "GOLDEN" is a phrase that has a whole new meaning for me now.  :icon_mrgreen:
Title: Re: Hyperinflation or Deflation?
Post by: RE on May 25, 2012, 01:02:28 PM
Cool, GO. Are those stamps from a personal collection?
  Yes Ross, I have been fascinated by stamps since I was a boy. Have collected my entire life. What a great hobby to get a kid interested in to learn about history, money matters,art, etc. Plan to start a Do Rare Stamps Qualify as a Doomster Investment topic on DD when I find the time.   The famous Bluenose 1928 Canada. Considered
1562
by most to be on of the worlds most beautiful artistic stamps.

(http://stampuoso.com/im/2009/08/stamp-collecting-5.jpg)
You're kidding, right?  Goldfinger's Twin Brother here is a STAMP Collector?  Stamps are just  Teeny Weeny Fiat Paper with Glue on the Back!  :hammer:

RE
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on May 25, 2012, 01:36:28 PM
@ RE Stamps  They are printed in limited quantities, they commemorate a historic event,  or person and place of historic interest, they are used up, the plates are destroyed and collectors save the few remaining of a series for future generations of collectors. They also go up in value rather than down, the older they are the scarcer they are since much less of an issue were printed. You are correct about their use as fiat in times in history when money was no good. After and during the fall of the Confederacy in America, stamps were placed in small pocket holders and used as currency in everyday transactions.   
010US00CONF1862U00001003[SVC2]
010US00CONF1862U00001003[SVC2]
Title: Re: Hyperinflation or Deflation?
Post by: RE on May 25, 2012, 01:48:41 PM
@ RE Stamps  They are printed in limited quantities, they commemorate a historic event,  or person and place of historic interest, they are used up, the plates are destroyed and collectors save the few remaining of a series for future generations of collectors. They also go up in value rather than down, the older they are the scarcer they are since much less of an issue were printed. You are correct about their use as fiat in times in history when money was no good. After and during the fall of the Confederacy in America, stamps were placed in small pocket holders and used as currency in everyday transactions.   
010US00CONF1862U00001003[SVC2]
010US00CONF1862U00001003[SVC2]

In honor of this, I set up a Poll for a new avatar for you  :icon_mrgreen:

RE
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on May 25, 2012, 02:09:15 PM
In early 1862, just months after the American Civil War erupted, people predicted the hard times and shortages looming ahead and began hoarding resources, coins included. Many millions of dollars in gold and silver coins and even copper-nickel cents disappeared from the market as a result of this hoarding. Coins consequently commanded a premium over paper money.

The U.S. Mint soon coined copper-nickel cents almost exclusively, but demand exceeded supply. A resourceful public then used postage stamps as currency for small obligations, a situation that forced shopkeepers to accept stamps as change. Envelopes stating the amount of stamps contained within and cards bearing stamps were sometimes used to keep the stamps from sticking and being destroyed, and printers sold advertisements on large numbers of these envelopes. The government authorized the monetizing of postage stamps by July 1862 and soon began printing stamp impressions on bank note paper.
Encased Postage Stamp
Encased Postage Stamp
Title: Re: Hyperinflation or Deflation?
Post by: el Gallinazo on May 25, 2012, 03:32:58 PM
Ben, can you give me a direct link to Steve from Virginia's mind blowing article?

RE, if it weren't for stylistic differences, your HI / Deflation article could have been written by Nicole Foss.  That is not meant as an insult and I am sure that you reached your conclusions independently :-)

I find, of course, many important factors left out.  Leaving most of my red pill ideas out of the equation, I would point out that family farmers are already being destroyed by the Illuminati, even if they are not in debt, through a mountain of regulations enforced by their jackboot thugs.  Most recently making it illegal for children of family farmers to drive tractors or operate any farm machinery.  Family farmers protest that the goobermint just doesn't understand the economics of family farms.  Au contraire mon cheri.  The family farmer does not understand the agenda of their gooberment which is, of course, Hannibal Lecter behind the green mask.  The purpose of this is to force all food production into the hands of the corporate farms where they can control and somewhat slowly poison the population.  As Henry Kissenger would put it in a more candid moment, to get rid of all those useless eaters.  With robotics and supercomputers, large armies of slaves and serfs are no longer useful to the elite.  A small reservation of us to make them feel superior and supply bodies and terror for their occult and sadistic rituals would be sufficient.  The purpose of fracking and horizontal drilling is to poison the environment as is the millions of tons of chemtrail barium, strontium, nano aluminum, and other assorted goodies such are spirochete spores etc. being dumped on our heads.  Heads up fellow cattle! Blue, clear skies are already becoming a memory over population areas.
Title: Re: Hyperinflation or Deflation?
Post by: RE on May 25, 2012, 03:53:26 PM
Ben, can you give me a direct link to Steve from Virginia's mind blowing article?

RE, if it weren't for stylistic differences, your HI / Deflation article could have been written by Nicole Foss.  That is not meant as an insult and I am sure that you reached your conclusions independently :-)

SoVs blog is Economic Undertow (http://www.economic-undertow.com/).  I don't know which article you are talking about or I would link it directly.  You can search it by title on his Blog.

Yes I know my arguments and Stoneleigh's are very similar, and yes they were arrived at independently.  The first time I read TAE back in 2009, I was like "HOLY SHIT!  Somebody else sees the same thing I do!"  She was the first other deflationista I found when everybody else was going Hyperinflation crazy.

RE
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on May 25, 2012, 06:11:54 PM
El G quote  "The purpose of fracking and horizontal drilling is to poison the environment as is the millions of tons of chemtrail barium, strontium, nano aluminum, and other assorted goodies such are spirochete spores etc. being dumped on our heads.  Heads up fellow cattle! Blue, clear skies are already becoming a memory over population areas."                               

I have no head for this stuff, the lies and conflicting opinions are tough on a guy without proper credentials and factual data. Am not ashamed to learn from others however, and all the non alarmist, well intentioned, respected types I read say this process can do nothing good, and all say for certain it will destroy all the water any where near it; and soon thereafter seep into and destroy huge aquafiers . Where the hell are all these environmentalists hiding, and why are their yaps shut on this issue? Why are they sitting back and allowing these sick bastards to destroy the water supply of our country.? I just don't get it.  :icon_study:
Title: Re: Hyperinflation or Deflation?
Post by: reanteben on May 25, 2012, 07:38:52 PM
Ben, can you give me a direct link to Steve from Virginia's mind blowing article?

RE, if it weren't for stylistic differences, your HI / Deflation article could have been written by Nicole Foss.  That is not meant as an insult and I am sure that you reached your conclusions independently :-)

I find, of course, many important factors left out.  Leaving most of my red pill ideas out of the equation, I would point out that family farmers are already being destroyed by the Illuminati, even if they are not in debt, through a mountain of regulations enforced by their jackboot thugs.  Most recently making it illegal for children of family farmers to drive tractors or operate any farm machinery.  Family farmers protest that the goobermint just doesn't understand the economics of family farms.  Au contraire mon cheri.  The family farmer does not understand the agenda of their gooberment which is, of course, Hannibal Lecter behind the green mask.  The purpose of this is to force all food production into the hands of the corporate farms where they can control and somewhat slowly poison the population.  As Henry Kissenger would put it in a more candid moment, to get rid of all those useless eaters.  With robotics and supercomputers, large armies of slaves and serfs are no longer useful to the elite.  A small reservation of us to make them feel superior and supply bodies and terror for their occult and sadistic rituals would be sufficient.  The purpose of fracking and horizontal drilling is to poison the environment as is the millions of tons of chemtrail barium, strontium, nano aluminum, and other assorted goodies such are
spirochete spores etc. being dumped on our heads.  Heads up fellow cattle! Blue, clear skies are already becoming a memory over population areas.

hey. I don't recall that I was referring to a specific article but just suggesting to our resident goldbug that he might do well to have his noggin toggled by SFV. I recommend Debtonomics 1, the first in his Debtonomics series from earlier this year. ross and jb and RE may have a favorite or two as well.

http://www.economic-undertow.com/2012/01/26/debt-o-nomics/ (http://www.economic-undertow.com/2012/01/26/debt-o-nomics/)
Title: Re: Hyperinflation or Deflation?
Post by: RE on May 25, 2012, 08:12:44 PM
Steve's Debt-o-nomics is also up here in the Diner under Epicurean Delights.

RE
Title: Re: Hyperinflation or Deflation?
Post by: steve from virginia on May 25, 2012, 08:42:27 PM
Read this:

http://nowandfutures.com/d3/Wicksell_Hayek_Keynes_Friedman,_Minsky.pdf (http://nowandfutures.com/d3/Wicksell_Hayek_Keynes_Friedman,_Minsky.pdf)

And this:

http://fraser.stlouisfed.org/docs/meltzer/fisdeb33.pdf (http://fraser.stlouisfed.org/docs/meltzer/fisdeb33.pdf)
Title: My Dinner with Ted Nugent
Post by: RE on May 25, 2012, 09:59:10 PM
Read this:

http://nowandfutures.com/d3/Wicksell_Hayek_Keynes_Friedman,_Minsky.pdf (http://nowandfutures.com/d3/Wicksell_Hayek_Keynes_Friedman,_Minsky.pdf)

And this:

http://fraser.stlouisfed.org/docs/meltzer/fisdeb33.pdf (http://fraser.stlouisfed.org/docs/meltzer/fisdeb33.pdf)

STEVE!  Out of Lurkerville at last!

Elvis has ENTERED the Building!

(http://www.musicpicture.net/image/elvis-presley-14.jpg)

Decided to risk Dinner at Ted Nugent's House after all.  :ernaehrung004:

(http://www.csmonitor.com/var/ezflow_site/storage/images/media/content/2012/0423-us-abizbust/12346474-1-eng-US/0423-us-abizbust_full_600.jpg)

Welcome to the Party.  :multiplespotting:

RE
Title: Re: Hyperinflation or Deflation?
Post by: RE on May 25, 2012, 11:39:08 PM
Quote RE "Helicopter Ben could never actually PRINT the Trillions being bandied about in $100 Denomination Notes.  The notes would stack to the Moon and all the rest of the remaining Trees on Earth would have to be cut down to make good on the Derivative bets."   

They add 0's, only a few acres of trees needed this way. Picture of 50,000.00 overprint of a former 1.00 China Air Mail stamp from my collection in use in 1948. Not Zimbabwe, but China, a nation of over 1 billion citizens. Utterly amazed at how this nation could function under this HI, yet everyone went about their daily business and look at them today. Always like to look at this stamp whenever I get the idiotic idea in my head to sell a little gold or silver because the price has moved up. I used an air mail example to show that this was a modern post World War II country functioning right along with us.  :icon_study:
China 1948 Airmail 50,000 on 1$ Peking Full og nh Suprb Gem Chan A59
China 1948 Airmail 50,000 on 1$ Peking Full og nh Suprb Gem Chan A59

Yes I know you can add Zeros to Save the Trees. I lived in Brasil when they added a new Zero to the Cruzeiros on about a monthly basis.  My stipulation in my post was for $100 Bills.

Rather than Goobermint Bullshit, Lies and Statistics, the best On the Ground indicator an HI is underway would be the day that $1000 Bill start circulating.  The day that occurs is the day I empty the Bank of Sealy and head over to Walmart to empty the shelves of Rice, Beans, Jerky and Canned Goods.

Far as Gold is concerned, did you read the PDF that Steve put up in his first ever post at Ted Nugent's House?  Intersting historical reference in there with respect to Gold Demand:

Quote from: Axel Leijonhufvud

Wicksell

In 1896, Wicksell lived in a gold standard world in which the bulk of the means of
payment consisted of bank notes issued by private banks. Given the stock of means of payment, the quantity theory determined the price level. Predictability of the price level he considered essential to the just functioning of the economy and thus also to social stability

The problem that concerned Wicksell was this. Since the days of Ricardo, the nonbank
public’s demand for minted gold had gone basically to zero.

Seems like the Demand for Gold that exists in the mind of the Gold Bug is not Universal.

RE
Title: Re: Hyperinflation or Deflation?
Post by: JoeP on June 03, 2012, 10:03:39 AM
10 year T-Note rate since '81:
Title: Global Money supply SHRINKING!
Post by: RE on June 06, 2012, 04:08:23 AM
One should not trust much in concolusons or solutions Ambrose Evans Pritchard makes these days as an Illuminati Shill, however at the same time Ambrose does keep up on the numbers pretty well and the artcile he published regarding money supply is pretty sobering.  It folows below here.in

Along with Hilsenrath and other shills in the MSM, Ambrose is TRYING to lay the groundwork for more QE.  This may or may not happen, but that is not really the point here.  I each iteration of QE, the Gold Bugs and Hyperinflationistas like Speedy Gonzalo ZLira and John Williams have been repeatedly tellig us that QE1&2 ETC would result in a Hyperinflation.  How is it then that after TRILLIONS in money creation here for the last 4 years, the Money Supply is not only not  increasing so rapidly as to not need Wheelbarrows to move it about, it is actually DECREASING!?

Answer is of course is that what Helicopter Ben and the rest of the CBs are doing is NOT really printing.  They are making new balacne sheet entries on the books of the tBTF Banks to make them appear to be functional, but they keepspeculating on the markets and the markets keep killing them.  The recent slide in the markets has taken out abotu $3T i the newly created "money"  here  just in the Equity Markets alone, and add in the Bond Market issues in Eurotrashland, it's probably closer to $10T.

So OK yea, with Hilserath, Ambrose and others calliing for another round of QE, do you think THIS time it would be anymore effective in terms of the moeny supply?  Why?  Every time they inject more money, it just burns up faster all the time. it's pretty hard to get an HI running if you can't get the Money OFF TBTF bank computers and into the real economy.

RE


Global slump alert as world money contracts

 Growth of the world money supply has dropped to the lowest level since the financial crisis of 2008-2009, heralding a severe economic slowdown later this year unless authorites rapidly take action.

The latest data show that the real M1 money supply – cash and overnight deposits – for China, the eurozone, Britain and the US has been contracting since the early Spring. Any further falls risk a full-blown global recession.
 

Clear signs of trouble are emerging in the US, until now the last bastion of strength. The New York Institute of Supply Management said its ISM business index – a proxy for business demand – flashed a "screeching halt" in May, crashing to 49.9 from 61.2 in April, where anything below 50 denotes contraction. Unemployment is rising again after grim jobs data for April and May, indicating that the economy may have fallen below stall speed.
 

Central bank governors and finance ministers from the G7 bloc are to hold an emergency teleconference call on Tuesday to grapple with Europe's escalating crisis. There is mounting anger in North America and Asia over the failure of the Europeans to use their vast resources to contain the brushfire in Spain.
 

The world money data collected by Simon Ward at Henderson Global Investors show that real M1 for the G7 economies and leading E7 emerging powers peaked at 5.1pc in November and has since plunged to 1.6pc in April. The data explain why commodity prices are falling hard, with Brent crude down to a 16-month low of under $97 a barrel.
 

China's money data are falling at the fastest pace since records began. The gauge – six-month real M1 – gives advance warning of economic output half a year ahead. "Europe needs to start quantitative easing [QE] immediately and China must ease policy," said Mr Ward.

 
The Americans may act first. Goldman Sachs expects Federal Reserve chair Ben Bernanke to open the door for QE in testimony on Thursday.
 
Stock markets rallied in Madrid and Milan led by bank shares on rumours of an EU plan to recapitalise banks directly with funds from the EU bail-out machinery.
 
Olli Rehn, the EU economics chief, said use of the European Stability Mechanism to bail out lenders was a "serious possibility", adding that it was imperative to "break the link between banks and sovereigns".
 
However, there is no sign yet that Germany will be willing to drop its veto on such action, viewed by Berlin as the start of debt mutualisation. Chancellor Angela Merkel crushed talk of an instant "banking union" after meeting commission president Jose Barroso, saying their could be no quick fix. She called instead for EU banking supervision as a "mid-term goal".
 
Her spokesman said any options that "resemble eurobonds" are for the distant future. "It's up to national governments to decide whether they want to avail themselves of aid. That also applies to Spain," he said.
 
Use of the ESM for bank bail-outs would meet fierce resistance in the German, Dutch and Finnish parliaments. A senior EU official said even Germany's Social Democrats are cooling on eurobonds. "They looked at the polling data and shivered. The German people are not willing to send money into a bottomless pit," he said.
 
Title: Re: Hyperinflation or Deflation?
Post by: JoeP on August 08, 2012, 05:27:53 PM
Back-to-school promotions aren't limited to school supplies

(http://cmsimg.freep.com/apps/pbcsi.dll/bilde?Site=C4&Date=20120806&Category=BUSINESS07&ArtNo=120806012&Ref=AR&MaxW=640&Border=0&Back-school-promotions-aren-t-limited-school-supplies)

By Oliver St. John
USA Today

This stuff's sure not on the list the teacher sent out.

But it's hardly stopping savvy marketers — whose products have absolutely nothing to do with school — from latching onto the back-to-school mantra.

Next to Christmas and its all-important Black Friday, back-to-school is the second-biggest spending event of the year, the National Retail Federation says. It expects $83.8 billion to be spent this season. And retailers from flower-delivery services to skateboard distributors are leaping into the fray.

No product is off-limits, marketing guru Thomas Hine says. "Skateboards is pushing it, obviously. But pushing it is not unknown to retailers," says Hine, author of "I Want That! How We All Became Shoppers."

Among the items that are stretching the meaning of "back-to-school" sales way beyond pencils, paper and clothes:

• Skateboards. AWH Skateboard Distribution offers discounts on bulk orders of skateboards and components. During back-to-school season, parents put their kids' needs first, manager Tony Aimone says, and often think, "I'll skip buying golf clubs, but I'll still buy little Junior a skateboard."

• Flower delivery. ProFlowers tries to have an offer for every holiday it can, even back-to-school, when kids can get 15% off on flowers for their teachers, spokeswoman Jen Carroll says.

• Cars. Ourisman Toyota in Chantilly, Va., has a back-to-school clearance event on vehicles such as the Sienna and Highlander that are geared toward families.

• Tans. A big part of the excitement of back-to-school is about seeing your friends again, and the best way to do that is with a great new tan, says James Oliver, CEO of Beach Bum Tanning. "Going into your first class, you want to look the best you can," he says.

• Speakers. World Wide Stereo managing director Bill Hettinger insists that his back-to-school sale on headphones and speakers isn't aimed at young rock fans but at students who want top-quality audio to compliment online lectures.

• Massages. Nirvana Organic Spa offers discounts for teachers and parents. Teachers account for up to 20% of the business, spa consultant Cyndi Stockton says: "I'm a mom myself, and sometimes you need a massage to get through it all."

http://www.freep.com/article/20120806/BUSINESS07/120806012/Back-to-school-promotions-aren-t-limited-to-school-supplies (http://www.freep.com/article/20120806/BUSINESS07/120806012/Back-to-school-promotions-aren-t-limited-to-school-supplies)
Title: Re: Hyperinflation or Deflation?
Post by: JoeP on August 11, 2012, 06:35:44 AM
Hard landing for China as factory prices fall and deflation looms

Factory gate prices in China fell at an accelerating rate of 2.9pc in July as the economy flirted with industrial recession, prompting calls for further stimulus to head off Japanese-style deflation.

(http://i.telegraph.co.uk/multimedia/archive/02304/china_2304612b.jpg)


By Ambrose Evans-Pritchard
9:36PM BST 09 Aug 2012

“Severe deflation pressures are rippling across the country,” said Alistair Thornton and Xianfeng Ren from IHS Global Insight. “Deflation, not inflation, is the greatest short-term threat to the Chinese economy.”

“The hard landing has happened,” said Charles Dumas from Lombard Street Research. “We don’t believe official data. We think GDP slowed to a 1pc rate in the second quarter.”

A blizzard of weak data has caught policy-makers off guard, though shares rallied in Shanghai on hopes for monetary loosening from China’s central bank after consumer price inflation (CPI) fell to 1.8pc.

New property starts fell 27pc in July. Industrial output growth fell to 9.2pc for a year ago but has been flat over recent months.

“This was the moment when stimulus was supposed to bite. It didn’t,” said Global Insight. Critics say Beijing let the property boom go too far and then hit the brakes too hard last year. Monetary tightening led to a contraction in real M1 money. The delayed effects kicked in this year just as Europe fell back into recession and the US slowed abruptly.

The Politburo has thrown all engines into reverse throttle. The reserve asset requirement for banks has been cut and regions have been given the green light for another blitz of eye-watering stimulus financed by credit from state banks. Wei Yao from Societe Generale said: “The bottoming-out process is taking even longer than we anticipated. The easing policies announced so far have not fully passed through to the real economy.

Expert opinion is split on the severity of the threat. Nomura said the latest spending drive will filter through just in time for the Communist Party hand-over later this year, carrying the economy into mid-2013.

Global Insight said measures in the pipeline are not enough. “The government might not want to pile on debt and revert to grand state-led stimulus but it increasingly appears that there are few other choices,” it said.

Premier Wen Jiabao is loathe to turn the credit spigot on again. He was warned repeatedly that the economy is badly out of kilter and needs to wean itself off exports and investment, a world record 49pc of GDP.

Yet reformers are locked in a struggle with military hawks and Mao revivalists linked to Chonqing chief Bo Xilai. They know that China’s post-Lehman credit spree in 2008 went too far but keeping growth alive has become a political imperative. Chinese exporters are now in serious difficulty. Caixin magazine reports that China’s entire solar industry is “on the verge of bankruptcy” as it struggles with debts built up during its world conquest over the past four years.

Morgan Stanley said Chinese exporters face a “margin call”. Profits have been squeezed 5pc a year since 2004 as wages rise faster than productivity, and the renminbi strengthens against the euro and the dollar.

China Securities Journal confirmed this week that Beijing is steering the currency lower to cushion the shock. “The renminbi has entered a period of depreciation,” it said, adding that this could cause short-term capital outflows – running at $110bn in the second quarter – but the overall effect will be “beneficial, by enhancing exports.”

The policy risks a serious confrontation with Washington. “If they do the same old thing and slam down a few more roads to the Gobi desert they will end up with stagflation. They need Thatcherism to get out of this,” said Mr Dumas.

http://www.telegraph.co.uk/finance/economics/9465651/Hard-landing-for-China-as-factory-prices-fall-and-deflation-looms.html (http://www.telegraph.co.uk/finance/economics/9465651/Hard-landing-for-China-as-factory-prices-fall-and-deflation-looms.html)


Title: Re: Hyperinflation or Deflation?
Post by: WHD on August 11, 2012, 03:23:51 PM
Quote
Premier Wen Jiabao is loathe to turn the credit spigot on again. He was warned repeatedly that the economy is badly out of kilter and needs to wean itself off exports and investment, a world record 49pc of GDP.

Yet reformers are locked in a struggle with military hawks and Mao revivalists linked to Chonqing chief Bo Xilai. They know that China’s post-Lehman credit spree in 2008 went too far but keeping growth alive has become a political imperative. Chinese exporters are now in serious difficulty. Caixin magazine reports that China’s entire solar industry is “on the verge of bankruptcy” as it struggles with debts built up during its world conquest over the past four years.

A year or two ago the talk was all about how the Great Dragon was going to eat our lunch. There's even a cornucopian here on the Diner who thinks China has it all figured out, on the way to some glorious renewable utopia, or something like that. I guess China buying Treasuries so Americans could buy cheap, toxic Chinese crap destined for the landfill, wasn't such great plan after all?  :icon_scratch:

Which teepot is going to spill first, China, India, the EU or America? 2012-2013 is starting to look like an economic bloodbath.
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on August 12, 2012, 04:32:30 AM
Quote WHD "A year or two ago the talk was all about how the Great Dragon was going to eat our lunch. There's even a cornucopian here on the Diner who thinks China has it all figured out, on the way to some glorious renewable utopia, or something like that. I guess China buying Treasuries so Americans could buy cheap, toxic Chinese crap destined for the landfill, wasn't such great plan after all?  :icon_scratch:"

Recessions, depressions, whatever you wish to call them are natural economic events which have occurred regularly throughout history.

May I voice my doubts that an economic  event will ever place this flame throwing Giant Dragon back to his cave? :icon_study:
                                     
China 1885 Customs Small Dragon Smooth Perf 12 5 1cd og vlh superb gem Chan 16
China 1885 Customs Small Dragon Smooth Perf 12 5 1cd og vlh superb gem Chan 16
 
Title: Re: Hyperinflation or Deflation?
Post by: WHD on August 12, 2012, 08:23:14 AM
Quote
May I voice my doubts that an economic  event will ever place this flame throwing Giant Dragon back to his cave?

Golden Oxen,

You're right, no economic event is going to wing that Dragon. An economic event, coupled with an ecological reality like runaway climate change and corresponding food shortages, plus vast resource constraints, well, who really can say? I was more objecting to the talk I was hearing from the culture, from all corners in years past, like the Chinese economy is somehow sounder or more secure than our own, destined for a glorious future as a super-power to exceed America. As if founding your economy on the manufacture of cheap toxic crap, building whole cities no one lives in, and radically reducing the visibility in your cities with metric tons of fine particulate, is somehow a path to greatness. I mean, we did it here in America, and they did it in Europe, and look how shiny we look? But then, we had another century to rape the planet of it's abundance, without much competition. Lot more competition now, and a lot fewer resources.
Title: Re: Hyperinflation or Deflation?
Post by: pansceptic on September 15, 2012, 09:48:03 PM
OK, I know I'm posting to a VERY stale thread, but RE put the FOFOA piece in the rotation at the top of the menu so I read it and the comments.  I have several things to say, so I think I'll break them into separate posts.

re ross:  your assertion that derivatives net out and therefore aren't a mortal risk does not match up with the facts.  AIG was bailed out because it couldn't make good on its derivative bets, which would have crashed its primary counterparty, one of the TBTFs.  Similarly, the failure of Lehman almost crashed the entire system because its counterparties would have failed in a cascade.

One of the good arguments for gold as a medium of exchange is that it has no counterparty liability.  In contrast, FRNs depend on the value of the Fed's balance sheet for their value.  The Fed has just announced that it is going to add billions more in Mortgage Backed Securities to its balance sheet; this implies that the value of FRNs is backed by millions of underwater mortgages.  Sure makes me feel those Animal Spirits!
Title: Re: Hyperinflation or Deflation?
Post by: pansceptic on September 15, 2012, 10:28:39 PM
I now want to write about why the Rich wish to hold gold, come what may.

I'll start with a quote posted by RE:
"Quote from: Axel Leijonhufvud

Wicksell

In 1896, Wicksell lived in a gold standard world in which the bulk of the means of
payment consisted of bank notes issued by private banks. Given the stock of means of payment, the quantity theory determined the price level. Predictability of the price level he considered essential to the just functioning of the economy and thus also to social stability

The problem that concerned Wicksell was this. Since the days of Ricardo, the nonbank
public’s demand for minted gold had gone basically to zero."

I'll talk a specific case, Jack Hinson.  Hinson owned a plantation in the South at the outbreak of the US Civil War.  In the course of the war he lost three sons in combat, had two daughters die of disease, and had his home burned to the ground by Union troops.  After the war he never returned to his plantation, but bought a mill and worked there.  The mill was not purchased with Confederate currency, it was purchased with GOLD COIN.  When his widow died in 1876, she left in her will to each of her surviving daughters "two hundered dollars in GOLD [emphasis mine], which I wish appropriated for their clothing and education."  In uncertain times, wise people have at least some of their accumulated savings in gold.

Wicksell's belief that "the nonbank public's demand for minted gold had gone basically to zero" is not supported by the facts.

I will now discuss psychological reasons why there will ALWAYS be demand for gold...

Human males are bower birds.  They attract a mate by building an attractive nest (McMansion), clear the area in front of it (a nice, close-cropped lawn), and decorate it with some shiny trinkets (waxed SUV, jet skis, etc).  Now the girl, they decorate her with a some gold... maybe even a gold ring on the left hand.  She likes that it can be worked into elaborate shapes (very malleable and ductile), feels substantial (surprisingly heavy for its size; high density), is a nice warm color that looks good against her tanned skin, and doesn't turn her skin green when she perspires.  She does like that it turns her friends green (with envy) when they feel that heavy chain around her neck.

And that alpha male?  Well, nothing says "yeah, I'm all that" like a nice, heavy gold Rolex.  Or if you prefer, in our feudal future, nothing says status like a nice gold crown and Chain of Office.  Or if you see a warlord in your future, well, the only reason he can walk around in public with that huge bling around his neck is that his thugs will squash you like a bug if you try to snatch it.

It's all about status, supported by centuries of folk wisdom.  Some investment is supposedly "good as gold".  A sucessful business is "a gold mine".  A great opportunity is "a golden opportunity".  When all of the i-phones are (not very good) paperweights and all the shiny SUVs are (pretty poor) tents, gold will still be considered a standard of value.
Title: Re: Hyperinflation or Deflation?
Post by: pansceptic on September 15, 2012, 11:16:18 PM
Last post for tonight, I want to ramble a little about even poor people holding a little gold or silver.

Regarding there not being enough precious metals to go around, this was a problem earlier in US history, and the citizens found a work-around.  Specifically, after the "Continentals" inflated to near worthless, there wasn't enough gold and silver coinage to facilitate commerce.  This lack of money caused deflation, resulting in what coinage was available being excessively large denominations.  Their solution: they chopped each Spanish dollar into 8 pie-shaped wedges; to this day one of these Spanish dollars is called "A Piece of Eight" in the US.  When I was a young man, in the rural US old timers would still call a quarter coin "two bits" (2 X 1/8 = 1/4).  There is no reason this cannot be done again with the junk silver and bullion coins in private hands.

Another historical bit:  in 1982 the Vietnamese had deposed Pol Pot in Kampuchea (formerly Cambodia).  The Kymer Rouge paper money was worthless, and people didn't trust the Vietnamese paper money much more.  Commerce still went on: pretty much every merchant had a balance and people used small scraps of gold and silver as money, by weight.  These were not just wedges of coins, but pieces cut from wedding rings, and single links from chains.  Point is, this country had been depopulated, de-industrialized and forcibly de-urbanized by an insane regime and then invaded by a foreign power, yet they still felt the need for something other than just direct barter.  Based on thousands of years of human experience, when all else failed they defaulted to precious metals.

It is tragic that many in the US middle class have been tricked into selling much of their gold jewelry; this pretty much guarantees they will be sharecroppers (at best) when the oil stops flowing.  Don't be one of them!
Title: Re: Hyperinflation or Deflation?
Post by: RE on September 16, 2012, 12:37:18 AM
Another historical bit:  in 1982 the Vietnamese had deposed Pol Pot in Kampuchea (formerly Cambodia).  The Kymer Rouge paper money was worthless, and people didn't trust the Vietnamese paper money much more.  Commerce still went on: pretty much every merchant had a balance and people used small scraps of gold and silver as money, by weight.  These were not just wedges of coins, but pieces cut from wedding rings, and single links from chains.  Point is, this country had been depopulated, de-industrialized and forcibly de-urbanized by an insane regime and then invaded by a foreign power, yet they still felt the need for something other than just direct barter.  Based on thousands of years of human experience, when all else failed they defaulted to precious metals.

It is tragic that many in the US middle class have been tricked into selling much of their gold jewelry; this pretty much guarantees they will be sharecroppers (at best) when the oil stops flowing.  Don't be one of them!

GO is going to LOVE you PS!

I don't have the energy tonight to do PM as Money analysis.  Perhaps tomorrow.

Tonight, I prefer to remember Susan Butcher who lived in the Bush on little money with her Dogs, and the Inuit and Athabascans up here who existed for MILLENIA with no MONEY whatsoever.

Some Homo Sapiens WILL desperately CLING to Money and chop up their Junk Silver Coins into Pieces of Eight I am SURE.  I am EQUALLY Sure these folks will in due time buy their Ticket to the Great Beyond.  Money is NOT the answer.

Money is the ROOT of ALL EVIL.

RE
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on September 16, 2012, 08:32:59 AM
Quote Pansceptic "It is tragic that many in the US middle class have been tricked into selling much of their gold jewelry; this pretty much guarantees they will be sharecroppers (at best) when the oil stops flowing.  Don't be one of them! "
Welcome to the Diner Pansceptic, I enjoyed your postings immensely, and have lost that feeling of being all Alone since your arrival. Yes, "Gold Will Win."    GO           :hi:
Title: Re: Hyperinflation or Deflation?
Post by: monsta666 on September 16, 2012, 09:37:39 AM
Yes, "Gold Will Win."    GO           :hi:
You forgot to add the caveat - gold will win for a time. Whilst gold can retain some of your wealth once the currency fails there will come a time where there is simply no goods to buy gold with. That is when connections and other real assets (such as land) will matter most. Also gold is heavy and can be confiscated by the government/hoards if one is not careful. It is not really practical for day to day transactions so other metals or goods will need to be used for trade.

Still, as much I dislike fiat currencies I do think gold backed currencies do have their weaknesses and many economies in the past failed with them so it is no panacea and should not be seen as such. Also there is not nearly enough gold to carry out cross-border transactions, to give you a simple example imagine if China had to trade gold for oil with Iran. I would imagine China's stock of gold (which is quite considerable compared to most countries) would deplete rather rapidly ditto if any currency were to go back to the gold standard. For that move to work a lot of debt would have to be eliminated by some means and such debt/wealth destruction would bring about the end of the global financial system (if the goal is to bring about the end of the global financial market then that would change the nature of the debate). 

In short I do not see how gold can be used as a form of currency until trade drops quite drastically. I feel we would need to wait a few decades until after the initial "dust" settles from collapse before gold could be used as a official national currency. As for normal transactions on a very local level while useful it does have its limitations which needs to be recognised.
Title: Re: Hyperinflation or Deflation?
Post by: pansceptic on September 16, 2012, 10:06:02 AM
Golden Oxen, thanks for the welcome!  :icon_sunny:  I too am substantially older than RE; perhaps I should have made my handle Golden Geezer  :laugh:

monsta666, you are quite right that we probably won't be conducting large-scale international trade with gold; but as Dmitry Orlov suggests, if we are VERY smart and VERY LUCKY, we will be doing international trade by sailboat by the end of this century.  Sailboats will be bringing high-value items such as the trade with the "Orient" during the middle ages; gold and silver answered quite well then and will again.  I also agree that the use of gold by weight is a ways off...after the central government has ceased to be a daily influence in peoples' lives.  That happened surprisingly quickly in the case of Kampuchea, and may take folks by surprise in the US when (not if) the grid goes down and largely stays down.  To bring this discussion back to FOFOA,  the situation in Kampuchea in 1981-82 was close to his concept of Freegold as I understand it.  The people were NOT using a gold-backed currency manipulated by some central authority (or their cronies), but instead small amounts of gold (and silver :) valued by weight and fineness.

I may well be dirt napping by the time this situation exists in the US, but as RE puts it
SAVE AS MANY AS YOU CAN!
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on September 16, 2012, 10:23:25 AM
@ monsta666, I understand the brainwashing you have undergone, and I must confess; the success of your treatment is such that I feel helpless in correcting what the bankster masters have done to your mind.

Enjoy your credit cards, mortgages, inflation etc.,  and pretty paper and digital money, stay far away from the Four Letter Word, no not that one, this one G--d. I wouldn't want you to destroy the wonderful financial system that the banksters have created for you.
 
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on September 16, 2012, 10:31:39 AM
Golden Oxen, thanks for the welcome!  :icon_sunny:  I too am substantially older than RE; perhaps I should have made my handle Golden Geezer  :laugh:

Hi again pansceptic, I am a senior citizen also so I get your drift. Something tells me you have to be an old timer to comprehend what inflation is and the true value of gold and silver. I am trying to save as many as I can from the paper monster, but as you well know, it is an uphill battle.   Regards GO

Title: Re: Hyperinflation or Deflation?
Post by: pansceptic on September 16, 2012, 11:01:02 AM
GO, thanks for the kind regards.  Re inflation/deflation, an appreciation for the effects of inflation aren't the only reason to hold some gold.  Mish Shedlock, a long-term deflationisto, recommends holding gold as well as cash.  As he puts it: deflation favors money in hand, and gold is money.

RE, I'm sceptical (imagine that!) that money is The Root of All Evil.  Maybe it's just a tool, like a gun; it's the intention of the human using it that may be ill or well.
 
IMO, the root of all evil is the human males' desire to dominate other males.  This has its roots in the competition for the most desireable females.   Once agriculture (just another tool) made surpluses possible, there rose hierarchies of dominator males.  They were able to assemble harems, and skew the dominator-male distiribution by impregnating more females.  The compulsive accumulation of material wealth is partly sublimation and partly alternative strategy (remember those models you dated when you had a high income?) of the desire to attract desireable females.  Political power is of course naked domination of other males and is rewarding in its own right, although Clinton and Berlusconi will attest that its also a plus in the seduction department.

In interest of political correctness/gender equality, I will mention that alpha females display an attenuated form of this same behavior; Mrs Merkel and Hillary Clinton come to mind.
Title: Re: Hyperinflation or Deflation?
Post by: monsta666 on September 16, 2012, 11:27:38 AM
monsta666, you are quite right that we probably won't be conducting large-scale international trade with gold; but as Dmitry Orlov suggests, if we are VERY smart and VERY LUCKY, we will be doing international trade by sailboat by the end of this century.  Sailboats will be bringing high-value items such as the trade with the "Orient" during the middle ages; gold and silver answered quite well then and will again.  I also agree that the use of gold by weight is a ways off...after the central government has ceased to be a daily influence in peoples' lives.  That happened surprisingly quickly in the case of Kampuchea, and may take folks by surprise in the US when (not if) the grid goes down and largely stays down.  To bring this discussion back to FOFOA,  the situation in Kampuchea in 1981-82 was close to his concept of Freegold as I understand it.  The people were NOT using a gold-backed currency manipulated by some central authority (or their cronies), but instead small amounts of gold (and silver :) valued by weight and fineness.

I may well be dirt napping by the time this situation exists in the US, but as RE puts it
SAVE AS MANY AS YOU CAN!

A distinct possibility and something that could happen but as I said earlier: I think this gold based monetary system can only gain traction once the current debt-based fiat currencies go the way of the dodo. Once that has happened and sufficient time elapses and trade is reduced by a sufficient amount then trading gold for goods/services becomes a option. However we must remember that all systems have their strengths and weaknesses and they are open to abuse from the powers that be. I think as people we do have a tendency to romanticise about the past and old systems a little too much. Let us not forget many financial calamities did occur under the gold standard and we should not think the system is without weakness. Now this is not a defence of fiat based currencies either; I do think the disadvantages of a fiat currency will be greater when we go into descent/collapse. I merely wanted to suggest that there are no full proof options.

I do think that since gold is a relatively stable form of wealth (it is not so easy to gain gold or lose it when compared to fiat money) it tends to lend itself better to a steady state economy. Now this is the major reason (in my eyes) why the gold based currency system was a failure when the global economy began to grow rapidly as gold supply could not keep up with the pace of the economic growth. Lack of money and credit was the limiting factors to economic growth. Going forward we can say with some certainty that there will be a period of sustained economic contraction that will result in the money supply contracting, these changing conditions means it is not suitable for gold backed currencies. Furthermore it is likely that they can even exacerbate the situation because by converting to gold you will reduce the amount of money available to the real economy which is already suffering from a scarcity of money. In a world of massive debt expansion deflation will be a killer as the debts will become harder to pay off.

@ monsta666, I understand the brainwashing you have undergone, and I must confess; the success of your treatment is such that I feel helpless in correcting what the bankster masters have done to your mind.

Enjoy your credit cards, mortgages, inflation etc.,  and pretty paper and digital money, stay far away from the Four Letter Word, no not that one, this one G--d. I wouldn't want you to destroy the wonderful financial system that the banksters have created for you.
Brainwashed? A touch dramatic don't you think? I am well aware that the ponzi based financial system is on its last legs and is likely to implode within the next 5-10 years. With that said, I do not think a gold based currency will be our salvation. The problem is there are so many claims to wealth that have been made over the last 100 years that need to be removed before a gold standard can be made to work. With such levels of debts a move to a even scarcer resource (money in the real economy is scarce to gold is scarcer still) could just exacerbate an already bad situation as a contraction in the available money supply will just result in more deflation which will speed up the rate of collapse. Now I am not going to discount the possibility that this is a reason to pursue a gold standard; a fast collapse could be more favourable for the long-term environment of the planet so something that brings up about a faster collapse could be seen as a legitimate goal when seen under this light.

In any case this issue of deflation means it is not practical for the powers that be as they stand to lose the most from such a scenario. We can argue about the merits of such an action but the fact of the matter is it will all be all academic because the move will not happen until after the big crash happens. As for whether it would work best after this crash, it is hard to tell. I think the gold standard offers stability and this is its main strength but we will not have a whole lot of stability in the coming years so this strength will be called into question. On a individual level and perhaps even small business level gold can confer certain advantages but then I see the issue of scarcities becoming a bigger issue that gold cannot overcome. There is no point in having money if there is no goods to buy with it. Plus if you are to believe in a complete breakdown of law and order, and hordes of zombies then having a lot of gold could bring unwanted attention to yourself. That is where connections and other things come to forefront rather than gold I feel.
Title: Re: Re: Questions for Stoneleigh/Foss
Post by: alan2102 on September 16, 2012, 11:41:36 AM
Far as where you put your "wealth" if you have some excess, it depends a whole lot on the scale of your savings.  If you are small fry with less than $100K or so, I'd keep at least half in CASH.  Then I'd go with Barterable items which have been discussed before, Booze, Diapers, cannisters of Propane (they go about $2.50 each up here now and you can cook for a few days with one on a camping stove) and of course Ammo.  Then if you are a Gold Bug, feel free to take some savings and buy some Gold Eagles if you like.
HALF in physical cash?!  Like $25,000 or $50,000?!  That's a hell of a lot. And a BIG mistake -- like TAE's (suicidal) recommendation to hold treasuries.  There is no reason to store so much cash.  There will be no general deflation of the sort that increases the purchasing power of the dollar against common goods.  Real estate will continue to be cheap, maybe cheaper, and some high-ticket luxury goods (like yaughts) will be cheaper.  Gas-guzzling vehicles will be cheaper.  In other words: things that you don't really want, and can't really use, might be cheaper.  But everything else will be more expensive; i.e. your stockpiled dollars will LOSE PURCHASING POWER.  I personally stockpiled $5,000 cash in 1998, fearing that deflation might take hold. I thought it unlikely, but at the same time wanted to be hedged against that possibility. BIG mistake.  Those dollars were worth substantially less every year, for years, whereas if they had been soundly invested in gold and silver, I would have had big gains on that money. Big mistake, and it still smarts. And it would  be an even bigger mistake, going forward from here.  As for stockpiling barterables: I've been down that road, also, and it was a mistake. It is OK for a small amount of money, but reaches diminishing returns real fast.  Take, say, $2,000, or maybe $4,000, and invest in hard goods like that, especially ones that you can for sure use yourself.  That's PLENTY.  And that is IF you have the space for all that crap.  Otherwise, stick to great investments like physical gold and silver. Gold is the more conservative bet; it will do well in either inflation or deflation. Silver is more volatile and speculative, but the gains have been great, and will be much greater, as long as you don't get spooked by the inevitable selloffs and consolidations. No need to obsess about the collapse of civilization and return to bartering booze for potatoes.  No collapse of industry and supply chains.  Not yet, anyway.  Maybe in 10-15 years, depending. Or maybe never. Watch the signs and adjust accordingly. But for right now, no need to think in terms of TEOTWAWKI and return to barter.  All  imnsh-[but EXPERIENCED]-o.
Title: Re: Hyperinflation or Deflation?
Post by: alan2102 on September 16, 2012, 11:58:29 AM

from back on page 1:

Ox, if you are questioning the energy picture then prepare to have your mind blown by Steve From Virginia. :)

Ben, Yeah, if you're talking about Steve's reply in the TAE "Downstream Demand Destruction for Oil" thread...that was a doozie.

............ well, I read Steve's post, and it was interesting, but not compelling. He makes a lot of bold assertions, but documents nothing.  I need more than that.

The link, btw, was:
http://theautomaticearth.com/index.php?option=com_kunena&func=view&catid=14&id=2205&Itemid=96#2215 (http://theautomaticearth.com/index.php?option=com_kunena&func=view&catid=14&id=2205&Itemid=96#2215)
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on September 16, 2012, 12:00:24 PM
@monsta666, Excuse my rude, sarcastic reply. I miss took the tone of your posting and thought you were ridiculing me, a thousand apologies.

Your point that gold is of no value without goods is certainly a valid one. My feeling is we are a long way off from that situation.

I preach the ownership of gold as protection from the increasing loss of purchasing power we face with the inflation necessary to keep the current system viable. It will end, no doubt, but how and when is beyond my scope of understanding.

While mentioning gold, I also mean silver as well, a habit I will try to correct in future postings. If you include silver, gold's less noble relative in my remarks, you will find it solves the problems you pose from gold's scarcity and use in everyday purchases. I honestly feel that their abandonment by the financial system is the most important cause of our current dilemma. A dirty trick from the bankster filth, and so few realize it. Regards, GO
Title: Re: Re: Questions for Stoneleigh/Foss
Post by: alan2102 on September 16, 2012, 12:16:04 PM
IMHO you are best off in CASH right now, not Gold because its not as fungible.  IOW, you can't go down to Walmart at the last minute and take a Gold Eagle and buy $1600 worth of groceries still left on the shelves with it, you have to first convert it to FRNs.  You do have to be constantly AWARE of what is going on and be ready for possible hyperinflation of food prices, or the unavailability of food as JIT distribution breaks down.  The minute you Sniff this is occuring, you gotta be the FIRST one down to Walmart with CASH in hand and divest yoruself of it then and there for Hard Goods you have not yet purchased.
Oh for God's sake, RE.  You sound like me in my wild-eyed doomer daze, 15 years ago! GROW UP.  Barring the mega-black-swan event,  like all-out nuclear war,  it isn't going to happen. The JIT system will not break down.  Even the nuclear war scenario will not commence SO fast that you have no time to react, provided you've got your ear to the ground (as most here seem to do).  There'd be time to take a few coins down to the LCS, trade for FRNs, and then lay in extra supplies.

There's an old expression: "better a year early than a day late".  But experience has taught me that that is much LESS true than I thought, years ago. It is quite possible to prep too much, and spend way too much time in an anxious state, awaiting catastrophe, thinking-through what one's responses will be (and should be right now), etc. Everyone should have some basic supplies and food and tools; this is only prudent.  And everyone should be keeping their ear to the ground, and be flexible and ready to act as necessary. But going far past that causes fatigue, drains away vitality, and produces a psychological state that is not congenial, to put it mildly. Not a good way to live.
Title: Re: Re: Questions for Stoneleigh/Foss
Post by: Golden Oxen on September 16, 2012, 12:22:33 PM
IMHO you are best off in CASH right now, not Gold because its not as fungible.  IOW, you can't go down to Walmart at the last minute and take a Gold Eagle and buy $1600 worth of groceries still left on the shelves with it, you have to first convert it to FRNs.  You do have to be constantly AWARE of what is going on and be ready for possible hyperinflation of food prices, or the unavailability of food as JIT distribution breaks down.  The minute you Sniff this is occuring, you gotta be the FIRST one down to Walmart with CASH in hand and divest yoruself of it then and there for Hard Goods you have not yet purchased.
Oh for God's sake, RE.  You sound like me in my wild-eyed doomer daze, 15 years ago! GROW UP.  Barring the mega-black-swan event,  like all-out nuclear war,  it isn't going to happen. The JIT system will not break down.  Even the nuclear war scenario will not commence SO fast that you have no time to react, provided you've got your ear to the ground (as most here seem to do).  There'd be time to take a few coins down to the LCS, trade for FRNs, and then lay in extra supplies.

There's an old expression: "better a year early than a day late".  But experience has taught me that that is much LESS true than I thought, years ago. It is quite possible to prep too much, and spend way too much time in an anxious state, awaiting catastrophe, thinking-through what one's responses will be (and should be right now), etc. Everyone should have some basic supplies and food and tools; this is only prudent.  And everyone should be keeping their ear to the ground, and be flexible and ready to act as necessary. But going far past that causes fatigue, drains away vitality, and produces a psychological state that is not congenial, to put it mildly. Not a good way to live.
Having some of both solves the problems gents. You have instant liquidity with the cash and inflation protection wit h the gold and silver.
Title: Re: Hyperinflation or Deflation?
Post by: alan2102 on September 16, 2012, 12:38:40 PM

from back on page 3:

THIS IS ME SHOUTING.
THIS IS ME SHOUTING BACK.

Quote
IF YOU BELIEVE WE WILL SEE HYPERINFLATION, YOU MUST JUSTIFY WHY WE HAVEN'T SEEN IT YET.
I DON'T BELIEVE IT LIKELY THAT WE WILL SEE IT, THOUGH I ADMIT IT IS POSSIBLE. WE HAVE NOT SEEN IT YET BECAUSE FAITH IN THE U.S. DOLLAR, GLOBALLY, IS STILL INTACT. THAT CAN CHANGE. INDEED, **IS** CHANGING, AS WE SP... ER, AS WE SHOUT.  A TIPPING POINT COULD BE REACHED, WITH SUDDEN MASS RE-PATRIATION OF DOLLARS, PRECIPITATING HYPERINFLATION. I DO NOT EXPECT THAT, BUT IT COULD HAPPEN. I EXPECT MORE GRADUAL DETERIORATION OF THE DOLLAR.

Quote
THERE WILL BE NO HYPERINFLATION BEFORE A MASSIVE DEFLATIONARY DISLOCATION.
WHAT WILL HAPPEN:
OIL PRICES WILL BE CUT IN HALF (FROM TODAY'S PRICES) OR MORE
AND
PHYSICAL SHORTAGES WILL APPEAR AT THE LOWER PRICE LEVELS.
AU CONTRAIRE. NOT A CHANCE. OIL PRICES WILL RISE FROM HERE. ALL PRICES OF EVERYTHING YOU ACTUALLY USE AND NEED WILL RISE FROM HERE. SORRY. NO BARGAIN PRICING... EVER!  BERNANKE JUST GUARANTEED IT.

"PHYSICAL SHORTAGES" of  **WHAT** WILL APPEAR AT LOWER PRICES?
Title: Re: Hyperinflation or Deflation?
Post by: RE on September 16, 2012, 12:53:22 PM
(http://blog.twowholecakes.com/wp-content/uploads/2011/03/scrooge-mcduck.jpg)
  Now that GO has PS taking his back, the Gold Bugs will likely start flocking in here to the Diner.

Reminder to all Diner patrons, your Gold is no good here!  BYOF! (Bring your own FOOD)  I certainly will not be trading any of my Freeze Dried Mountain House Lasagna for Junk Silver Coins either!  Here in the Diner, its "Gas, Grass or Ass" in trade only!  LOL.  OK, I'll take Ammo also.

Anyhow, with the latest round of QE from Helicopter Ben and Super Mario Dragon, Gold will probably go on another Leg Up here, but increasing failures across the Global Trading system will start to impact JIT, and eventually what is available to buy will be rationed and controlled by Da Goobermint.  Said Goobermint is not going to allow trade in Gold, they didn't allow it in the original Great Depression and they won't now either.  With so little Gold in so few hands (Junk Silver also), it's not distributed well enough for commerce to proceed, and where do you expect any Employers to get hold of Gold OR Silver to pay their employees?

Next, how are all these employees going to "check for fineness" on the little Pouches of coins they get?  Alloyed with Tungsten, you can't do simple Archimides density testing, Au and Tg are too close in density for that.

For as long as the commerce system holds up here, these PMs are likely to keep increasing in relative value against the Fiat, but eventually will just be big Paperweights.

The actual goods for survival are what will hold value, but Owning land in particular is a dicey one to undertake because you have to be able to Protect and Defend the land, and the possibility also exists that all Farms will be Collectivized in the Soviet Model at some point.

It remains unclear how long the entire dynamic will take to play itself out, but you also have to consider Fungibility and how quickly you can divest of savings for hard goods.  I can jump in the Bugout Machine at the drop of a hat and head over to Walmart to clear the shelves first with my CASH, while a Gold Bug will have to head to a coin Dealer first and hope he has enough CASH on hand to fork over for some coins, THEN go to Walmart.  By the time the Gold Bug gets to Walmart, all the 50lb bags of Rice will be GONE, safely BURIED in vacuum sealed bags inside 55 gal Drums buried in Denali National Park in places only *I* have the Latitude & Longitude memorized for.  Then I will go Walkabout into the Bush and stay very small for a couple of years while TSHTF.

THAT is the PLAN for the FINAL BUGOUT.  RUN AWAY!  RUN AWAY FAR!  RUN AWAY FAST!  Bring enough food with you to last a couple of years, hide from the Zombies and don't get put in a Boxcar heading for the Human Waste Reprocessing Facility in San Antonio.

Not counting on Gold to buy me anything (though as mentioned in prior threads I have Panned Up my share of it  :icon_mrgreen: )

RE
Title: Re: Re: Questions for Stoneleigh/Foss
Post by: RE on September 16, 2012, 01:40:32 PM
Oh for God's sake, RE.  You sound like me in my wild-eyed doomer daze, 15 years ago! GROW UP.  Barring the mega-black-swan event,  like all-out nuclear war,  it isn't going to happen. The JIT system will not break down.  Even the nuclear war scenario will not commence SO fast that you have no time to react, provided you've got your ear to the ground (as most here seem to do).  There'd be time to take a few coins down to the LCS, trade for FRNs, and then lay in extra supplies.

There's an old expression: "better a year early than a day late".  But experience has taught me that that is much LESS true than I thought, years ago. It is quite possible to prep too much, and spend way too much time in an anxious state, awaiting catastrophe, thinking-through what one's responses will be (and should be right now), etc. Everyone should have some basic supplies and food and tools; this is only prudent.  And everyone should be keeping their ear to the ground, and be flexible and ready to act as necessary. But going far past that causes fatigue, drains away vitality, and produces a psychological state that is not congenial, to put it mildly. Not a good way to live.

You just got on the Doomer Bandwagon too early Alan and Burned Out on it.  When you expect a Sky is Falling Chicken Little Event to occur for YEARS and it doesn't, eventually you come to conclude it WON'T ever occur.

This is of course sorta like living next door to a fairly Peacefully Percolating Volcano which spews out some lava flows each year but never does a real Pyroclastic Blowout like Mt. St. Helens.

The system remains fragile and set up for a Cascade Failure event.  Super Mario and Helicopter Ben are of course pouring Gasoline onto a Burning fire here.  FSofA Embassies are being ATTACKED all over the world at the same time.  How often has that occurred in your lifetime?  There is a drought underway in the Breadbasket of the FSofA at least as bad as the Dustbowl of the 1930s.  The Chinese aren't Hard Landing, they are CRASH LANDING.
(http://gifsoup.com/view4/4108049/mtsthelens-o.gif)

Eventually here, something gotta give.  When this Volcano Blows, it won't be a long slow eruption.  It will be a Pyroclastic expansion of Hot Gases that will incinerate everything in its path.

RE
Title: Re: Hyperinflation or Deflation?
Post by: pansceptic on September 16, 2012, 01:46:52 PM
RE, I'm suitably impressed, you're even more pessimistic than I!   :o

Don't get me wrong, PMs are not a religion for me.  I'm been fortunate to harvest some of the insane surplus generated by the Cheap Oil Fiesta, and am pretty well diversified.  I took care of the Beans, Bandages, and Bullets as well as the Bullion, and have what would have seemed a few years ago a stupid tall stack of small-denomination FRNs.  I also have a pretty good scrounger skillset.

If you can live primitive a full Alaskan winter, you're a better man than I.  I would rather take my chances at the end of a dirt road in a hilly area of Mississippi (walking or riding a bicycle to it would be literally exhausting, and the area is too forested to provide meaningful food to the Zombies), where the climate is temperate and unfrozen groundwater is plentiful.  I would have to be under a rock to be any further under the radar.

Finally, I'll suggest that for anyone on this board to clean out Wallmart as TSHTF is not contributing to Saving As Many As You Can.  For us to prep now is actually pretty benevolent - we're employing people and keeping the velocity of money up rather than just hoarding it (very deflationary).  However, for us to prep at the last minute is unhelpful to the less aware.
Title: Re: Hyperinflation or Deflation?
Post by: monsta666 on September 16, 2012, 02:03:16 PM
@monsta666, Excuse my rude, sarcastic reply. I miss took the tone of your posting and thought you were ridiculing me, a thousand apologies.
Apology accepted.

Your point that gold is of no value without goods is certainly a valid one. My feeling is we are a long way off from that situation.

I preach the ownership of gold as protection from the increasing loss of purchasing power we face with the inflation necessary to keep the current system viable. It will end, no doubt, but how and when is beyond my scope of understanding.
That is true the situation is still a bit off. I should have been clearer in my original posts but the message I wanted to convey on those posts was how useful gold would be in a post-collapse society. I can definitely subscribe to the notion of using gold as a hedge against inflation especially in light of the competitive QE programs being applied across various central banks. Also, seeing as you were an advocate of gold I had assumed you were also a fan of other precious metals. Silver or other precious metals could be used for day to day transactions but still I wonder how fungible they would be. Would it be readily accepted by merchants?

While mentioning gold, I also mean silver as well, a habit I will try to correct in future postings. If you include silver, gold's less noble relative in my remarks, you will find it solves the problems you pose from gold's scarcity and use in everyday purchases. I honestly feel that their abandonment by the financial system is the most important cause of our current dilemma. A dirty trick from the bankster filth, and so few realize it. Regards, GO
Very true, but remaining on the gold standard would have exposed the American government and its banks of being bankrupt. The powers that be would never allow it. I guess it is nature of governments to delay the day of reckoning as much as possible even if the final day becomes that much by delaying it. Unfortunately the cost of this folly will be borne by the general populace and not the ones in power. At least not initially...
Title: Re: Re: Questions for Stoneleigh/Foss
Post by: alan2102 on September 16, 2012, 02:27:40 PM
Having some of both solves the problems gents. You have instant liquidity with the cash and inflation protection wit h the gold and silver.
Agree to a minor extent. Yeah, have a few hundred bucks cash around. Whatever. But it is NOT the place to put any significant chunk of wealth, for a long period. 

One interesting exception, about which there were several threads on the old latoc forum: NICKELS.  U.S. nickels happen to be the only physical cash that has commodity value at, or exceeding, the face value; i.e. a nickel, which is 25% nickel and 75% copper, is worth (as metal) somewhat more than a nickel. Hence, to store some $$ in the form of nickels provides dual protection: cash as needed in a deflation, but also metal value that will multiply as inflation heats up. Eventually, as the price of copper and nickel rise, nickels will disappear from circulation, just as 90% and 40% silver coins did in the 70s and 80s. (Why get just a nickel's worth for a nickel, when your nickels are worth a dime or more each?)  Just one thing: if you act on this idea, be smart and do not waste your time on individual nickels, or even rolls of nickels. Go to the bank and ask for BOXES of nickels: $100 to the box, about 22 pounds each, all in neat factory rolls.  Very easy to cash in, any time you wish (as opposed to collections of oodles of singles and home-made rolls). Be smart. Do it the easy, wholesale way.

And in the very unlikely event of a severe general deflationary collapse and The End of Civilization As We Know It, your nickels will attract no particular attention. You'll just be the guy who shows up at the farmer's market with a pocket full of nickels every week. Big deal. They could've come from anywhere.
Title: Re: Hyperinflation or Deflation?
Post by: alan2102 on September 16, 2012, 02:53:52 PM
  I certainly will not be trading any of my Freeze Dried Mountain House Lasagna
Fine. I never liked that stuff anyway.

Quote
Anyhow, with the latest round of QE from Helicopter Ben and Super Mario Dragon, Gold will probably go on another Leg Up here
Yep! A big one!  We'll be laughing all the way to the bank. And you?

Quote
but increasing failures across the Global Trading system will start to impact JIT, and eventually what is available to buy will be rationed and controlled by Da Goobermint.
Really?!  WHEN?

You wanna make a bet, R.E.?  I'll bet you that nothing will be rationed, ever, except in the event of war in the M.E. or elsewhere that affects oil shipments.  The world has enormous productive capacity, and enormous transport capacity. Not even massive defaults will get in the way, much.  There might be transient shortages of some things, but it will be unusual and quickly corrected.

Quote
  Said Goobermint is not going to allow trade in Gold, they didn't allow it in the original Great Depression and they won't now either.
Totally different situation then. Gold standard then, but not now.  Gold in private hands: much too little for them to bother with.

Quote
  With so little Gold in so few hands (Junk Silver also),
Exactly. That's why da goobermint won't bother chasing it. At least before the big re-valuation. There's lots of silver in the form of jewelry, silverware, etc., but not that much in money form.

Quote
it's not distributed well enough for commerce to proceed, and where do you expect any Employers to get hold of Gold OR Silver to pay their employees?
Several possibilities. One is that much smaller-denomination coins could be minted; i.e. 1/4-ounce silver, 1/10th-ounce silver, etc. To maintain reasonable size of the coins, the silver will have to be alloyed, or else be present as a smaller plug in a larger round of some other metal. Imagine, say, silver at $300/ounce (a price to which it will probably go, before this is over), such that your 1/10th-ounce silver coin is worth $30 -- a significant amount. There are billions of ounces of above-ground silver that could be and would be drawn-upon at such high prices, so there is really no lack of metal.

Another possibility is monetization of base metals such as copper or nickel, of which there are much larger (essentially unlimited) reserves.

But, in practice, it is unlikely that we'll go back to hard money in that way, just as it is certain that we won't go back to barter. It is too cumbersome, too inconvenient.  A new paper/digital currency will be issued, with perhaps partial backing by gold, or a basket of metals or commodities.  The convenience of paper/digital money is too great for the world to return to a system without them. Still, after the torture of inflationary depression, the new currency will have to be backed with something real, in order to have credibility.

Quote
For as long as the commerce system holds up here, these PMs are likely to keep increasing in relative value against the Fiat, but eventually will just be big Paperweights.
Silly boy.  That will never happen.

Quote
I can jump in the Bugout Machine at the drop of a hat and head over to Walmart to clear the shelves first with my CASH, while a Gold Bug will have to head to a coin Dealer first and hope he has enough CASH on hand to fork over for some coins, THEN go to Walmart.  By the time the Gold Bug gets to Walmart, all the 50lb bags of Rice will be GONE, safely BURIED in vacuum sealed bags ..... blah blah
FINE, R.E.! Have at it! You just GRAB all those bags of rice! With my blessings!   8)

Quote
RUN AWAY!  RUN AWAY FAR!  RUN AWAY FAST![/b][/i]  Bring enough food with you to last a couple of years, hide from the Zombies and don't get put in a Boxcar heading for the Human Waste Reprocessing Facility in San Antonio.
Why not?  I've heard that that HWRF in San Antonio is a really swinging place, full of fun-loving guys and gals!
Title: Re: Re: Questions for Stoneleigh/Foss
Post by: alan2102 on September 16, 2012, 03:24:07 PM
Oh for God's sake, RE.  You sound like me in my wild-eyed doomer daze, 15 years ago! GROW UP.  Barring the mega-black-swan event,  like all-out nuclear war,  it isn't going to happen. The JIT system will not break down.  Even the nuclear war scenario will not commence SO fast that you have no time to react, provided you've got your ear to the ground (as most here seem to do).  There'd be time to take a few coins down to the LCS, trade for FRNs, and then lay in extra supplies.

There's an old expression: "better a year early than a day late".  But experience has taught me that that is much LESS true than I thought, years ago. It is quite possible to prep too much, and spend way too much time in an anxious state, awaiting catastrophe, thinking-through what one's responses will be (and should be right now), etc. Everyone should have some basic supplies and food and tools; this is only prudent.  And everyone should be keeping their ear to the ground, and be flexible and ready to act as necessary. But going far past that causes fatigue, drains away vitality, and produces a psychological state that is not congenial, to put it mildly. Not a good way to live.

You just got on the Doomer Bandwagon too early Alan and Burned Out on it.  When you expect a Sky is Falling Chicken Little Event to occur for YEARS and it doesn't, eventually you come to conclude it WON'T ever occur.
Two things here, and that's one of them. Yes, I've come to conclude -- based on a LOT of reading, observation and thought -- that it is very unlikely that the Big Boom (as you expect) will happen.*  But the other thing, which I've been trying to express (maybe poorly), is that regardless of whether or not such a thing happens, it may not be, and probably isn't, advisable to arrange your whole life around the possibility. It is a DRAG and a WASTE OF ONE'S LIFE. Or so I concluded.  And doubly so as I began to awake to evidence contradicting the doomeristic assumptions that I had made.  In other words: there was less objective reason than ever to be a doomer, added to the fact of the unacceptably-high subjective or psychological/spiritual costs of being a doomer.  In other words: my old doomer self got check-mated, after a fashion. I was compelled to become a different person.  I'm still quite pessimistic by most standards, and people still react to things I say as though I'm Mr Cassandra or Dr Doom, but it is so much different now -- and better!  I like my life a lot more than before, while (paradoxically) I care a lot less how long I live. It is ALL about quality of life, not quantity.  If civilization were to collapse tomorrow, and mutant biker zombies came to finish me off the next day, it is no big deal. It would not bother me.  I maintain a few prudent preps, and try to provide (reasonably) for myself and my own, but  beyond that I'm  not going to sweat it.  When the exit time comes, that's fine with me. I'll just pursue a different kind of existence, elsewhere. QUALITY, man, QUALITY!  A single day filled with love and joy and exhilaration is worth more than a freaking DECADE of nervously "prepping" for armageddon.

...................

* Note: the "Big Boom":  the biggest Big Boom that I can foresee involves climate change, unfolding over the next half-century. If it goes into an uncontrolled feed-forward type of spiral, then maybe we really are, as you say, and nearly literally....TOAST! I'm not at all convinced yet that that will happen; it is a thesis, or a speculation, based on extrapolations from fragmentary evidence. But in the rather-unlikely event that it does happen, then some of your doomiest ruminations will come true, I hereby admit. Though probably not for several more decades.  Oh, and also: all-out nuclear war is another Big Boom possibility. Not likely, but possible, and it could precipitate the total collapse that you imagine, I admit. Total collapse, but not unrecoverable, I don't think. Humanity would recover, but it would be a tremendous undertaking, perhaps over a century.

Title: Re: Re: Questions for Stoneleigh/Foss
Post by: Golden Oxen on September 16, 2012, 04:14:55 PM
Having some of both solves the problems gents. You have instant liquidity with the cash and inflation protection wit h the gold and silver.
Agree to a minor extent. Yeah, have a few hundred bucks cash around. Whatever. But it is NOT the place to put any significant chunk of wealth, for a long period. 

One interesting exception, about which there were several threads on the old latoc forum: NICKELS.  U.S. nickels happen to be the only physical cash that has commodity value at, or exceeding, the face value; i.e. a nickel, which is 25% nickel and 75% copper, is worth (as metal) somewhat more than a nickel. Hence, to store some $$ in the form of nickels provides dual protection: cash as needed in a deflation, but also metal value that will multiply as inflation heats up. Eventually, as the price of copper and nickel rise, nickels will disappear from circulation, just as 90% and 40% silver coins did in the 70s and 80s. (Why get just a nickel's worth for a nickel, when your nickels are worth a dime or more each?)  Just one thing: if you act on this idea, be smart and do not waste your time on individual nickels, or even rolls of nickels. Go to the bank and ask for BOXES of nickels: $100 to the box, about 22 pounds each, all in neat factory rolls.  Very easy to cash in, any time you wish (as opposed to collections of oodles of singles and home-made rolls). Be smart. Do it the easy, wholesale way.

And in the very unlikely event of a severe general deflationary collapse and The End of Civilization As We Know It, your nickels will attract no particular attention. You'll just be the guy who shows up at the farmer's market with a pocket full of nickels every week. Big deal. They could've come from anywhere.
I like you thinking Alan, especially the no drawing much attention aspect. Wouldn't dimes work just as well, and you have silver in your hands rather than base metal??
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on September 16, 2012, 04:32:38 PM
(http://blog.twowholecakes.com/wp-content/uploads/2011/03/scrooge-mcduck.jpg)
  Now that GO has PS taking his back, the Gold Bugs will likely start flocking in here to the Diner.

Reminder to all Diner patrons, your Gold is no good here!  BYOF! (Bring your own FOOD)  I certainly will not be trading any of my Freeze Dried Mountain House Lasagna for Junk Silver Coins either!  Here in the Diner, its "Gas, Grass or Ass" in trade only!  LOL.  OK, I'll take Ammo also.

Anyhow, with the latest round of QE from Helicopter Ben and Super Mario Dragon, Gold will probably go on another Leg Up here, but increasing failures across the Global Trading system will start to impact JIT, and eventually what is available to buy will be rationed and controlled by Da Goobermint.  Said Goobermint is not going to allow trade in Gold, they didn't allow it in the original Great Depression and they won't now either.  With so little Gold in so few hands (Junk Silver also), it's not distributed well enough for commerce to proceed, and where do you expect any Employers to get hold of Gold OR Silver to pay their employees?

Next, how are all these employees going to "check for fineness" on the little Pouches of coins they get?  Alloyed with Tungsten, you can't do simple Archimides density testing, Au and Tg are too close in density for that.

For as long as the commerce system holds up here, these PMs are likely to keep increasing in relative value against the Fiat, but eventually will just be big Paperweights.

The actual goods for survival are what will hold value, but Owning land in particular is a dicey one to undertake because you have to be able to Protect and Defend the land, and the possibility also exists that all Farms will be Collectivized in the Soviet Model at some point.

It remains unclear how long the entire dynamic will take to play itself out, but you also have to consider Fungibility and how quickly you can divest of savings for hard goods.  I can jump in the Bugout Machine at the drop of a hat and head over to Walmart to clear the shelves first with my CASH, while a Gold Bug will have to head to a coin Dealer first and hope he has enough CASH on hand to fork over for some coins, THEN go to Walmart.  By the time the Gold Bug gets to Walmart, all the 50lb bags of Rice will be GONE, safely BURIED in vacuum sealed bags inside 55 gal Drums buried in Denali National Park in places only *I* have the Latitude & Longitude memorized for.  Then I will go Walkabout into the Bush and stay very small for a couple of years while TSHTF.

THAT is the PLAN for the FINAL BUGOUT.  RUN AWAY!  RUN AWAY FAR!  RUN AWAY FAST!  Bring enough food with you to last a couple of years, hide from the Zombies and don't get put in a Boxcar heading for the Human Waste Reprocessing Facility in San Antonio.

Not counting on Gold to buy me anything (though as mentioned in prior threads I have Panned Up my share of it  :icon_mrgreen: )

RE
Note the hedge, probably going up for a while. Another 4000 years perhaps?
Conned and Can't Admit It
I Would be Ashamed Too
Conned and Can't Admit It
I Would be Ashamed Too
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on September 16, 2012, 04:45:07 PM
Quote RE "Now that GO has PS taking his back, the Gold Bugs will likely start flocking in here to the Diner."

The sooner the better, nothing like a breath of fresh crisp air.

Welcome Gold Bugs. You are free to speak at the Diner.

We don't censor pro gold views, even though our dungeon master has been conned by the banksters. He takes wooden nickels in payment for coffee so enjoy the stay.   Welcome!     

 :hi: :Benny_monkeysmilies: :circle: :pile:

 

Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on September 16, 2012, 05:25:04 PM

Reminder to all Diner patrons, your Gold is no good here!  BYOF! (Bring your own FOOD)  I certainly will not be trading any of my Freeze Dried Mountain House Lasagna for Junk Silver Coins either!  Here in the Diner, its "Gas, Grass or Ass" in trade only!  LOL.  OK, I'll take Ammo also.

Gas, Grass, or Ass in trade only please. You must admit lads, sounds like a lot more fun than a cold gold coin.

Grass or Ass Please Goombah
Grass or Ass Please Goombah
Title: Re: Hyperinflation or Deflation?
Post by: RE on September 16, 2012, 07:18:30 PM
RE, I'm suitably impressed, you're even more pessimistic than I!   :o

No shortage of DOOM here on the Diner!  However, compared to Guy McPherson I am positively a Pollyanna.

Quote
Don't get me wrong, PMs are not a religion for me.  I'm been fortunate to harvest some of the insane surplus generated by the Cheap Oil Fiesta, and am pretty well diversified.  I took care of the Beans, Bandages, and Bullets as well as the Bullion, and have what would have seemed a few years ago a stupid tall stack of small-denomination FRNs.  I also have a pretty good scrounger skillset.

Diversification is good if you have enough to diversify.  I tend to make my recommendations for people with a Net Worth of $100K or less.  IOW, about 80-90% of the population.  20% of the population may be earning $100K or better, but they have Negative Net Worth in underwater mortgages and so forth.

I can DETAIL out how to best spend $100K to Prep Up, and in that range it includes very little Gold, maybe $5K most.  You want your Bugout Machine(s), your Guns and Ammo, your Food Preps, Boats, Fishing gear, your Tents and assorted Tools etc etc etc.  That is with making Major purchases USED, my Tioga for instance I bought for $5K used, whereas a new one in the same class is around $70K by itself.

I personally do have some Gold, but I also am in the >$100K Net Worth category.  I got ZERO debts.  Everything I buy I buy for CASH.

Once you  have the Full Set of Preps, I would still suggest going no more than 20-30% into PMs, but rather keep the bulk of it as FRNs to dispose of quickly when TSHTF.

Quote
If you can live primitive a full Alaskan winter, you're a better man than I.  I would rather take my chances at the end of a dirt road in a hilly area of Mississippi (walking or riding a bicycle to it would be literally exhausting, and the area is too forested to provide meaningful food to the Zombies), where the climate is temperate and unfrozen groundwater is plentiful.  I would have to be under a rock to be any further under the radar.

A decade ago before the PAD hit, I could have made it through a full Alaska Winter in the Bush, not as likely today though, at least not going the Full Primitive, Igloo style.  However, I don't expect even under the worst scenario to have to go the FP for a full winter.  I can make it a month at least in a Snow Cave, I've done that.  Pretty sure I could make 3 months.

Thing is, in Winter here without fuel running the 4WD and Snow Machines, NOBODY moves around too much and you don't have to go too far out to be pretty safe.  The only people who will move around much at all are the Mushers, and I know many of them.  Probably 80% of all Mushers live in the Mat Valley.  Got Food, got Fuel, got Portable Shelters and got a LOT of empty territory to go Hole Up.  I can make it through at least one winter.  What occurs after that is anybody's guess.

I have mentioned though in prior posts on this topic that I consider the Bayou of Lousiana to be good for holing up also, if you can stand hot, damp, humid weather and snakes and bugs.  Personally, I'll take 30 below anytime over 90 above and 100% humidity.  I can layer up the clothing for 30 below, I CAN'T cool myself down with 90/100.

Quote
Finally, I'll suggest that for anyone on this board to clean out Wallmart as TSHTF is not contributing to Saving As Many As You Can.  For us to prep now is actually pretty benevolent - we're employing people and keeping the velocity of money up rather than just hoarding it (very deflationary).  However, for us to prep at the last minute is unhelpful to the less aware.

The Last Minute Prep Run doesn't Save anyone but you and your Friends, but once the LMPR is necessary, everybody who is NOT PREPPED to do that is a GONER anyhow.  The Paradigm is Save as Many as You CAN, not save EVERYBODY.

If you are a Mother in a Tsunami with children in both arms, if you try to hold them both you will all 3 DROWN.  You have to let one GO.  When the LMPR becomes necessary, you let go those people who didn't LISTEN.  The purpose of the Diner is to get people LISTENING BEFORE this occurs.

Save as Many as you CAN

RE
Title: Re: Re: Questions for Stoneleigh/Foss
Post by: alan2102 on September 17, 2012, 03:25:30 AM
I like you thinking Alan, especially the no drawing much attention aspect. Wouldn't dimes work just as well, and you have silver in your hands rather than base metal??
90% dimes are a great investment, just like anything silver.  But the silver value of the dime far exceeds ten cents, and you cannot get them for a mere ten cents each.  In the case of  nickels, as currently composed (75% copper, 25% nickel), you CAN get them for a mere five cents each. That's what makes the idea unique.  But, in practice, I don't think it is that great of an idea, since a huge deflationary crash is unlikely, and since gold and silver are so much better as investments, and since nickels are so bulky and heavy. Nevertheless, I've got a few boxes stashed away, just in case.   :)
Title: Re: Hyperinflation or Deflation?
Post by: alan2102 on September 17, 2012, 03:30:41 AM
I personally do have some Gold, but I also am in the >$100K Net Worth category.
You won't be in that category for long, if you increase your exposure to gold and silver.   :)
Title: Re: Hyperinflation or Deflation?
Post by: RE on September 17, 2012, 05:36:33 AM
I personally do have some Gold, but I also am in the >$100K Net Worth category.
You won't be in that category for long, if you increase your exposure to gold and silver.   :)

Gold could drop to ZERO and I'd still have net worth >$100K.  I got plenty-o-money.

RE
Title: The Pauperization of America
Post by: Surly1 on September 18, 2012, 08:07:30 AM
The Pauperization Of America


America Must Face The Reality Of A Growing Lower Class

By Wolf Richter
http://www.informationclearinghouse.info/article32431.htm (http://www.informationclearinghouse.info/article32431.htm)

September 12, 2012 "Information Clearing House" - -  It’s been an unrelenting process. Survey after survey—most recently “The Lost Decade of the Middle Class“—has shown that wages haven’t kept up with inflation since the wage peak in 2000. Periods when real wages rose, for example during the deflationary stretch between March and October 2009, a godsend for struggling workers, were stepped out by the Fed like nasty brushfires. So, families ended up making less at the end of the decade than at the beginning, a phenomenon not seen in the US since World War II. And the middle-income tier actually shrank in size—the process of hollowing out the American middle class.

But there is a new phenomenon: a ballooning lower class. It now engulfs 32% of all adults. In America! Where lower class is the unmentionable class, the class that doesn’t exist, just like the upper class doesn’t exist, but for different reasons.

Political candidates trip all over each other to promise debt-funded goodies and tax cuts—real or imaginary—to the “middle class.” They all claim that a thriving middle class is the foundation of the American economy. The middle class rules! “Everyone is in the middle class,” I was told in high school by the dad of the chick I was dating. That was in the seventies. Now 32% of all American adults find themselves in the unmentionable lower class, according to a survey by the Pew Research Center. Up from 25% in 2008. And none of the presidential candidates has even mentioned them.

A similar phenomenon is playing out in Europe, with more acute overtones. “Poverty is returning to Europe,” said Jan Zijderveld, head of Unilever’s European operations. The world’s third largest consumer products company was adjusting its commercial strategy to this new reality, he said, by redeploying to Europe what worked in poor countries of the developing world. Other stars of the industry affirmed it. “The logic of pauperization,” L’Oréal CEO Jean-Paul Agon called it [read.... The “Pauperization of Europe”].

In America, the hardest hit were young adults, of whom a stunning 39% considered themselves in the lower class, up from 25% in 2008. If trends hold for the next few years, the lower class, the politically unmentionable entity, will ensnare half of all young adults.

Education does matter but isn’t a guarantee: 41% of those with a high school education or less ended up in the lower class. But even among college grads, the trend is grim: 17% considered themselves in the lower class, up from 12% in 2008.

While upward mobility survived, despite the headwinds, there has been a pernicious economic maelstrom: “downward mobility.” The middle class has shrunk from 53% to 49% since 2008, and the upper-middle class from 19% to 15%. Only the upper class has remained stable at 2%. These movements resulted in an awful number: 38% of the people in the lower classes were new arrivals.

Political persuasion didn’t matter, however. Of those in the lower classes, 32% were conservatives, 30% moderates, and 33% liberals.

The system, it seems, has succeeded in wringing out any excess enthusiasm from those who are struggling to climb the hurdles in front of them, though that very enthusiasm is a vital ingredient in economic success:

    Americans in the lower class are more negative about their current financial standing and more pessimistic about their economic future than adults who place themselves in the middle or upper classes. Those in the lower classes also are significantly more likely than other Americans to doubt that hard work brings success.

And it has had a harsh impact on the economy: 84% of the people in the lower classes cut back on spending last year. But then, 62% of the lucky ones, those that remained in the middle class, and 41% of the even luckier ones, those in the upper classes, also cut back. A sign that the tough times have left skid marks.

Yet hope has been swirling around the financial markets. The Fed keeps dangling QE3 out in front of them, and the European Central Bank has come up with its own juicy carrot. Then, just as markets reached multi-year highs, there was an ugly dose of reality. Read.... The Calamity Economy Strikes Again, But Hope Is Back In Vogue.

Title: Post Office Box Inflation
Post by: agelbert on September 26, 2012, 01:50:46 PM
I just paid my annual Post Office Box fee.  :angry5:


Post Office Box inflation is 22.6%.
IOW it went up to $76.

I'm sure the Bureau of Lying Statistics (alias Bureau of Labor Statistics) sees this as another opportunity to play Whack-A-Mole with the CPI math. After all, j6p can always use a hollow in a tree for a box (after bribing the squirrel that lives there with a few acorns) for a PO Box. I'm sure Amazon will make sure UPS delivers there (for a "small" fee, of course).

BLS calls Bernanke at the fed: buzz, buzz.

BLS: We have double digit inflation, sir.

Bernanke: Did you pass out all the Whack-A-Mole games I sent you during the corn price increase this summer?

BLS: silence.

Bernanke: You know, the ones with dollar bills stuck to the moles.

BLS: Then you are saying, as Cheney on 911 said to an airman that asked if "the order still stands" that the "KEEP INFLATION BELOW THE FED TARGET" order still stands?

Bernanke: You are a perceptive  fellow with a wonderful instinct for self preservation. Just see this as another great opportunity to aid the "free market" by boosting bidness at Fed-Ex and UPS.

BLS: Yes sir. Good day.

Bernanke hangs up and walks over to his executive secretary: Remind me to call the CEO of Fed-Ex next week. It really bothers me that a private corporation uses the name "federal". That's a back door hijacking of the authority and good will of the government in order to make a profit. That's not ethical, you know.

Secretary lifts eyebrows, looks at Bernanke: Are you feeling well today, sir?

Bernanke: Quite well, thank you. I'm off to a pressing emergency meeting with the the Federal Reserve Board of Governors to discuss inflation control mathematical derivations, integrations, regression to mean (as well as MEAN regression :evil4: :evil6: :evil7:) economics TOOLS we need to implement.

(http://image.shutterstock.com/display_pic_with_logo/427456/427456,1276461364,14/stock-vector-up-and-down-arrow-currency-55115539.jpg)

(http://1.bp.blogspot.com/_cvdgPlEKW9k/TCqoKu-Ch2I/AAAAAAAABPY/mE0aCzM1x-M/s1600/BernackaMole.jpg)


Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on September 26, 2012, 06:40:21 PM
 Agelbert Quote"I just paid my annual Post Office Box fee.  :angry5:


Post Office Box inflation is 22.6%.
IOW it went up to $76."

That's how it works with fiat Agelbert, Live With It

Not even going to mention the four letter word, Dungeon Master isn't feeling well.

                       
Fiat

Title: Re: Hyperinflation or Deflation?
Post by: agelbert on September 26, 2012, 08:10:56 PM
Quote
That's how it works with fiat Agelbert, Live With It

Does that mean you pay your PO Box with GOLD?  I didn't think so.

If the issue of intrinsic worth is simply a matter of scarcity combined with portability and durability, then Gold, although it definitely has all those qualities (it's shiny too. I forgot that one.  :icon_mrgreen:), is among several other competitors out there for that position.

What you always forget, my friend, is that the "authorities" will allow you to have your precious metals only for as long as it suites them to do so and not ONE SECOND LATER.

Unless and until the legal tender laws do not require you to accept fecal coliforms made out of thin air by the federal reserve with a gun pointed at you by the MIC, your gold is worth only as much as Ben Bernanke WANTS IT TO BE WORTH.

Be wise, turn that gold into something really valuable and useful in times of environmental and governmental collapse.

Here is a small wish list that I have but cannot afford right now except for a few nicknack's. Since you probably can afford some of these top dollar items, having one or more of those items or sets of items may save your life or those of your loved ones in a barter situation.

1. Complete set of highest quality surgical instruments.

2. Several Complete sets of Dental instruments (the Misch patented elevator molar extraction tools -left and right- cost over $2,000 - that's just two tools and you need about 30 tools for a complete set.) 

3. Hydraulic jacks (the power to move heavy objects quickly may save a life when time is of the essence).

4. All the copper pipes you can store. Don't believe for a minute that gold is more valuable than copper pipe in a water scarce future.

5. A kiln with temperatures suitable for making glass, a storage of raw materials and molding equipment for eyeglasses. Taking a course in glass making and glass blowing would certainly be indispensable. A book of detailed instructions. People will need glasses. Knowing how to make them along with lense grinding equipment to make corrective eyeware will be priceless.

6. Standard light microscopes. They are worth FAR more than their weight in gold as an education tool post collapse.

7. Other 19th century style extremely durable weather instruments like barometers and bimetallic strip thermometers. None of this stuff needs power to run and provide you valuable information about environmental conditions.

8. Slide rulers (I've got two old ones - they still work great!).

9. A large store of permanent magnets. Also, insulated wire for making generators will NOT be available post collapse and will also be in demand for wind generated power. It's cheap now but it will be extremely expensive then.

10. Highest quality German barber scissors, several kitchen knife sets and the absolute best honing stones (and oils to keep from destroying the temper during honing) to sharpen edges on everything from dental instruments to kitchen knives.

This list is preliminary but it underscores the fact that many items "available" to us through a doctor or a dentist NOW will NOT be available after the collapse. This will jack up their intrinsic worth above precious metals.

A doctor or dentist bereft of these tools due to having to run away from some town would probably provide you and your family care in barter for surgical or dental instruments. Those tools will be scarcer than precious metals. Think about that and how humans assign relative worth according to scarcity and function.

Finally, I know where I live and the effects of fiat currency quite well, thank you. The issue is the gaming of the CPI to LIE about inflation. I think you will agree that is a crime.
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on September 26, 2012, 08:27:47 PM
What you always forget, my friend, is that the "authorities" will allow you to have your precious metals only for as long as it suites them to do so and not ONE SECOND LATER.

They outlawed booze away for while Agelbert. did it work?

Drugs are illegal to Agelbert, ask K how successful that law is obeyed.

They took gold away once, didn't work to good or very long did it.?

Do you think Mr Paladin is going to turn in his pistols when they outlaw them?

Thanks for your concern, I realize you are sincere and I don't like being on the opposite side of you in an argument because of that. We can't agree on everything Agelbert. 
Those ass holes that fucked this whole country up are going to have too much on their pin headed friggin minds soon to be even thinking about gold, and I mean soon.

Your opinions are always welcomed.                          GO     
Title: Re: Hyperinflation or Deflation?
Post by: RE on September 26, 2012, 08:44:14 PM

Not even going to mention the four letter word, Dungeon Master isn't feeling well.


Speaking of Currency Debasement, don't forget to Drill Out your Louis D'Ors to test for Tungsten content. Nuggets too.

(http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2012/09/tungsten%20gold%20coins.jpg)
(http://gold-quote.net/cartoons/fake-gold.jpg)

RE
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on September 26, 2012, 08:52:19 PM
Speaking of Currency Debasement, don't forget to Drill Out your Louis D'Ors to test for Tungsten content. Nuggets too.

Like I said, wasn''t even going to mention the four letter word to the DM.

I realize that a man of your incredible wisdom would prefer to own the real counterfeit item, rather than one that might be. But then your self inflicted name is REVERSE isn't it.  Is that a another way to say ass backwards?  :icon_mrgreen:
Title: Re: Hyperinflation or Deflation?
Post by: RE on September 26, 2012, 09:15:11 PM

I realize that a man of your incredible wisdom would prefer to own the real counterfeit item, rather than one that might be.

Real Counterfeit?  Is that like Jumbo Shrimp?  Military Intelligence? Honest Banksters? Just Police?  Sustainable Nuclear Power?  Oxymoron time.

Exactly how do you KNOW your Horde of Gold Coins doesn't have any Tungsten Slugs inside them?  X-Ray Vision?

RE
Title: Re: Hyperinflation or Deflation?
Post by: agelbert on September 26, 2012, 09:19:23 PM
GO,
I sincerely hope you are right.

In all those examples you mentioned, the gooberment was still a stable authority and the country hadn't degenerated into war lordism.

In a war lord scenario, the one with the most guns controls what defines legal tender for all debts public and private.

At present Bernanke's got the guns backing him and he has been counterfeiting currency for an awful long time, hasn't he?

But let's say the collapse occurs and you are sitting on a ton of gold with some networked firepower to protect it. You also have a full larder as many preppers do.

There is a very organized gang out there in every town that wears badges and believes the law is whatever they do, whenever they "need" to do it. They are as human as anybody else but feel MORE ENTITLED than most to a claim on your stuff because they can logically claim they provide a community service.

All of a sudden the funny money they are happy with now isn't worth a plug nickel. These are the people that make it there bidness to know all about everyone else's bidness. If you have cops on your gold payroll, you'll be fine. If you don't, you will be the beneficiary of a bill for "security services" in whatever they decide is the correct "price discovery" barter mechanism.

Will your little band fight them or accept their terms? They know ALL about you. What do you know about them? What sort of sanctity of contracts can there exist when the land is ruled by the most guns?

The preppers are mostly concerned about the "hoards" from the inner cities coming at them in a collapse scenario. Shades of The same attitude towards the First Nations when the English colonists got here and were continuously plotting to kill every last "savage" they could. Rinse and repeat with the African Americans and the other minorities.

I think the preppers are looking in the wrong direction.

Be well, GO.



Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on September 26, 2012, 09:39:25 PM

I realize that a man of your incredible wisdom would prefer to own the real counterfeit item, rather than one that might be.

Real Counterfeit?  Is that like Jumbo Shrimp?  Military Intelligence? Honest Banksters? Just Police?  Sustainable Nuclear Power?  Oxymoron time.

Exactly how do you KNOW your Horde of Gold Coins doesn't have any Tungsten Slugs inside them?  X-Ray Vision?

RE
No as in Fiat paper versus Gold. Sure counterfeit money being the former.

As a student of History, Literature, Finance,  Money and it's origin's and such I wouldn't feel right to enter into your domain of science, chemistry, engineering, mathematics, geometry and such. I am truly humbled and gratified that you would ask a person of such limited knowledge such a question.Especially when you confessed to me about your collossal ego last evening. PS,  I knew anyway.

Let's try it this way, you dig out your high school books and look up GOLD and you will find out all about it's UNIQUE atomic properties, its density and weight, it's inertness, and you might be able to come up with an answer on your own.

There is usually a paragraph or two which explains at the end that through out all of history FOOLS have tried to turn lesser metals into gold, LEAD being a favorite.

Show me you can do it on your own and I will give you an A on your report card.   Professor GO      :icon_sunny:

Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on September 26, 2012, 09:52:51 PM
You are indeed correct Agelbert, Gold or hardly anything will be of any value in that society. Obviously I am hoping things are not going to come to a total breakdown of all law and order.
My reasons for wanting to be here on planet earth will have ended at that time and it will be time for me go to sleep for a very long time.
Title: Re: Hyperinflation or Deflation?
Post by: agelbert on September 26, 2012, 10:18:28 PM
GO,
Quote
My reasons for wanting to be here on planet earth will have ended at that time and it will be time for me go to sleep for a very long time.

Being pretty long in the tooth myself with a pacemaker, I may check out before you do.

We do the best we can.

While I'm talking to you right now, I wanted to ask you if you can message me a list of your neato smiley emoticons. Do you make those yourself with some software? That one with the waving sign is really cool. I can think of all kinds of messages in addition to "welcome", "spam", "Im with stupid", etc that I would put on the rocking sign. Where do you get this cool stuff? :emthup: :emthup: :emthup:
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on September 26, 2012, 10:23:56 PM
Sure Angel they are the ones on DD, thats all.  You will see them on the top of your reply box and you just click on the one you feel is appropriate, have used no others.
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on September 26, 2012, 10:32:22 PM
GO,
Quote
My reasons for wanting to be here on planet earth will have ended at that time and it will be time for me go to sleep for a very long time.

Being pretty long in the tooth myself with a pacemaker, I may check out before you do.

We do the best we can.

While I'm talking to you right now, I wanted to ask you if you can message me a list of your neato smiley emoticons. Do you make those yourself with some software? That one with the waving sign is really cool. I can think of all kinds of messages in addition to "welcome", "spam", "Im with stupid", etc that I would put on the rocking sign. Where do you get this cool stuff? :emthup: :emthup: :emthup:

Yeah getting old Sucks Big Time. Those pacemakers can keep you hopping around and staring at the young broads for quite a while though. It Ain't over till it's over.    :laugh: :icon_mrgreen: :icon_mrgreen: :laugh:
Title: Re: Hyperinflation or Deflation?
Post by: RE on September 26, 2012, 10:45:38 PM
Let's try it this way, you dig out your high school books and look up GOLD and you will find out all about it's UNIQUE atomic properties, its density and weight, it's inertness, and you might be able to come up with an answer on your own.

The Density of Gold and Tungsten are nearly precisely Identical at 19.25g/cm3.  So you cannot tell the difference between a coin with a Tungsten Slug at the center versus a Solid Gold Coin, in Archimedes Testing they displace precisely the same amount of water.

Neither are any of the differing Properties of Gold and Tungsten visible or testable when the Tungsten is on the INSIDE of the Coin/Bar and the Gold is on the OUTSIDE.  You cannot tell through any conventional means that a Coin is Gold solid or Tungsten cored without drilling it.

It is already aparent that many of the Gold Bars and Coins in the Swiss National Bank and other repositories of this stuff have been Counterfeited.  Many other Coins out in circulation ALSO are likely to be Counterfeited, more as time goes by here since the Value is jacked up to preposterous heights.

I'll bet if you drilled your Collection,  a good 10% of them are Counterfeit and worth no more than a dollar or two.

RE
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on September 26, 2012, 11:07:36 PM
NEARLY precisely identical

http://search.yahoo.com/r/_ylt=A0oG7huy7GNQQgkAZYNXNyoA;_ylu=X3oDMTByamlqaW9mBHNlYwNzcgRwb3MDMwRjb2xvA2FjMgR2dGlkAw--/SIG=12cvit9qm/EXP=1348754738/ (http://search.yahoo.com/r/_ylt=A0oG7huy7GNQQgkAZYNXNyoA;_ylu=X3oDMTByamlqaW9mBHNlYwNzcgRwb3MDMwRjb2xvA2FjMgR2dGlkAw--/SIG=12cvit9qm/EXP=1348754738/)**http%3a//goldnews.bullionvault.com/tungsten_gold_012620103

http://search.yahoo.com/r/_ylt=A0oG7huy7GNQQgkAa4NXNyoA;_ylu=X3oDMTByMDhrMzdqBHNlYwNzcgRwb3MDNQRjb2xvA2FjMgR2dGlkAw--/SIG=12052d77a/EXP=1348754738/ (http://search.yahoo.com/r/_ylt=A0oG7huy7GNQQgkAa4NXNyoA;_ylu=X3oDMTByMDhrMzdqBHNlYwNzcgRwb3MDNQRjb2xvA2FjMgR2dGlkAw--/SIG=12052d77a/EXP=1348754738/)**http%3a//www.youtube.com/watch%3fv=5FvM_4B7Pkc

http://search.yahoo.com/r/_ylt=A0oG7huy7GNQQgkAcoNXNyoA;_ylu=X3oDMTByZmU2MmgwBHNlYwNzcgRwb3MDOARjb2xvA2FjMgR2dGlkAw--/SIG=14bbq47mm/EXP=1348754738/ (http://search.yahoo.com/r/_ylt=A0oG7huy7GNQQgkAcoNXNyoA;_ylu=X3oDMTByZmU2MmgwBHNlYwNzcgRwb3MDOARjb2xvA2FjMgR2dGlkAw--/SIG=14bbq47mm/EXP=1348754738/)**http%3a//beforeitsnews.com/gold-and-precious-metals/2010/01/new-test-detects-tungsten-gold-fake-bars-and-coins-12305.html
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on September 26, 2012, 11:10:58 PM
RE,
Quote
Yeah getting old Sucks Big Time. Those pacemakers can keep you hopping around and staring at the young broads for quite a while though. It Ain't over till it's over. 

Well, you have an advantage over me. It's not as easy for me to tune up my heart as it is for you to get RADICAL about your legs.  :icon_mrgreen:

(http://[url=http://www.ambassadors.net/images/Olympic-Blade-Runner-inspires-US-troops-RT205LSC-x-large.jpg]http://www.ambassadors.net/images/Olympic-Blade-Runner-inspires-US-troops-RT205LSC-x-large.jpg[/url])
RE after his leg job

(http://images2.fanpop.com/images/photos/4900000/All-Dogs-go-to-Heaven-all-dogs-go-to-heaven-4954125-780-588.jpg)
Agelbert "husbands" his pacemaker  :icon_mrgreen:
  Agelbert you are drinking Heinekens That was GO's quote.    Sober Up  :o ::) :laugh: :laugh:
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on September 26, 2012, 11:13:40 PM
Are you gents talking on PM again??    :'( :-[
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on September 26, 2012, 11:17:10 PM
It is 2 15 AM in Beantown, hitting the hay, Hope your not driving tonight  Agelbert    :laugh: :laugh:
Title: Re: Hyperinflation or Deflation?
Post by: agelbert on September 26, 2012, 11:17:25 PM
Quote
Agelbert you are drinking Heinekens That was GO's quote.    Sober Up

OOPS!

I SWEAR IT'S JUST FOR MEDICINAL PURPOSES!  (Hickup!) :ernaehrung004: 
Title: Re: Hyperinflation or Deflation?
Post by: RE on September 27, 2012, 12:38:35 AM

While I'm talking to you right now, I wanted to ask you if you can message me a list of your neato smiley emoticons. Do you make those yourself with some software? That one with the waving sign is really cool. I can think of all kinds of messages in addition to "welcome", "spam", "Im with stupid", etc that I would put on the rocking sign. Where do you get this cool stuff? :emthup: :emthup: :emthup:

Peter loaded this bunch of Animated Emoticons onto the Diner, I have yet to figure out how to add more of them.  Offsite though, you can find a lot at http://www.websmileys.com/. (http://www.websmileys.com/.)  There are other sites also, you can Google Animated Emoticons. 

Here's one for ya.  (http://www.websmileys.com/sm/evil/210.gif)

RE
Title: Re: Hyperinflation or Deflation?
Post by: agelbert on September 27, 2012, 05:29:54 PM
RE,
Thanks, I'll head over that way, COMMANDANTE. :icon_mrgreen:

Up until now I have hit the modify key on posts with cool emoticons and copied the code off of them. This will be easier.  :emthup:
Title: Hyperinflation or Deflation?: Iran
Post by: RE on October 03, 2012, 06:29:23 PM
As mentioned many times on these pages, HI is a relative phenomenon between currencies traded internationally.  Parity can be maintained between currency if there is coordination between the CBs, as there is between Da Fed, the BoE, the ECB and the BoJ.  Conversely, coordination by these same CBs can produce the effect where smaller currencies are attacked, and that is occurring in Iran right now.  They are being pushed into firing the first shot through economic means, the destruction of their currency.

RE

Guest Post: Hyperinflation Has Arrived In Iran (http://www.zerohedge.com/news/2012-10-03/guest-post-hyperinflation-has-arrived-iran)
Submitted by Tyler Durden on 10/03/2012 17:08 -0400

As we have been actively warning for a few days now (Iran's Misery Index and here) - and has now become mainstream media-critical - Iran is accelerating toward significant regime volatility... it seems our note on hyperinflationary case studies and the 'blame' and 'denial' extension is particularly timely...

Submitted by Steve H. Hanke via Cato-at-Liberty,

Since the U.S. and E.U. first enacted sanctions against Iran, in 2010, the value of the Iranian rial (IRR) has plummeted, imposing untold misery on the Iranian people. When a currency collapses, you can be certain that other economic metrics are moving in a negative direction, too. Indeed, using new data from Iran’s foreign-exchange black market, I estimate that Iran’s monthly inflation rate has reached 69.6%. With a monthly inflation rate this high (over 50%), Iran is undoubtedly experiencing hyperinflation.

When President Obama signed the Comprehensive Iran Sanctions, Accountability, and Divestment Act, in July 2010, the official Iranian rial-U.S. dollar exchange rate was very close to the black-market rate. But, as the accompanying chart shows, the official and black-market rates have increasingly diverged since July 2010. This decline began to accelerate last month, when Iranians witnessed a dramatic 9.65% drop in the value of the rial, over the course of a single weekend (8-10 September 2012). The free-fall has continued since then. On 2 October 2012, the black-market exchange rate reached 35,000 IRR/USD – a rate which reflects a 65% decline in the rial, relative to the U.S. dollar.

(http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2012/09-2/IRRUSD.png)

The rial’s death spiral is wiping out the currency’s purchasing power. In consequence, Iran is now experiencing a devastating increase in prices – hyperinflation.  As Nicholas Krus and I document in our recent Cato Working Paper, World Hyperinflations, there have been 57 documented cases of hyperinflation in history, the most recent of which was North Korea’s 2009-11 hyperinflation. That said, North Korea’s hyperinflation did not come close to the magnitudes reached in the recent, second-highest hyperinflation in the world, that of Zimbabwe, in 2008, nor has Iran’s hyperinflation – at least not yet.
Title: Re: Hyperinflation or Deflation?
Post by: widgeon on October 03, 2012, 06:42:05 PM
Exactly.

Quote
Conversely, coordination by these same CBs can produce the effect where smaller currencies are attacked,


http://www.doomsteaddiner.net/forum/index.php?topic=905.0 (http://www.doomsteaddiner.net/forum/index.php?topic=905.0)
Title: Re: Hyperinflation or Deflation?
Post by: WHD on October 03, 2012, 06:44:26 PM
And so it beings. The sanctions on Iran can now be construed as an act of war.
Title: Re: Hyperinflation or Deflation?
Post by: Tao Jonesing on October 03, 2012, 10:52:53 PM
Don't be fooled by the prefix.
Hyperinflation is Deflation.
Next.

Another "Not Quite A Haiku" courtesy of TJ
Title: Hyperinflation or Deflation?: Piling On the Iranians
Post by: RE on October 04, 2012, 12:58:57 AM
Talk about being Upfront about Economic Warfare!  The MSM is now touting FURTHER sanctions by the EU on the Towel Heads in Iran to destabilize their currency!  70% HI per month is NOT enough here!  Push them over the EDGE here, FORCE them to strike out!

The End Game Doth Approach.  It is clear WAR with Iran is...wait for it...

COMING SOON TO A THEATRE NEAR YOU!!!!

RE

Europe Weighs More Sanctions as Iran’s Currency Plummets (http://www.bloomberg.com/news/2012-10-04/europe-weighs-more-sanctions-as-iran-s-currency-plummets.html)

 By Indira A.R. Lakshmanan - Oct 3, 2012 7:00 PM PT

The U.K., France and Germany are pressing for new sanctions to bring Iran’s economy to its knees and curb its nuclear ambitions, according to several European diplomats, as rioting over the country’s tumbling currency suggests the existing sanctions are taking a toll.

In a confidential letter to the 27 EU member states, portions of which were provided to Bloomberg News, the foreign ministers of Europe’s three largest economies criticized Iran for its lack of openness over its nuclear program and called for raising the cost to Iran’s leaders of refusing to abandon what the U.S., Europe and Israel say is a covert nuclear weapons program. Iran says its program is solely for civilian energy and medical research.

(http://www.bloomberg.com/image/iZiLV2hiU8Oo.jpg)

Iranian riot police stand next to a garbage container which is set on fire by protesters, in the first sign of public unrest over Iran's plunging currency, in central Tehran, near the main bazaar on October 3, 2012. Source: AFP/Getty Images

 Oct. 3 (Bloomberg) -- David Hartwell, an analyst at IHS Jane's, a unit of IHS Global Insight, discusses the Iranian rial, accelerating inflation and the country's nuclear program. He speaks with Guy Johnson on Bloomberg Television's "The Pulse." (Source: Bloomberg)


 Oct. 3 (Bloomberg) -- Iranian President Mahmoud Ahmadinejad said the country will overcome trade and financial sanctions imposed in the past year. (Source: Bloomberg)


Iran’s rial is already in a tailspin, dropping 18 percent on Oct. 1, reaching a record low of 35,000 to the dollar on the unofficial market, and losing more than half its value against the dollar in street trading in the past two months. Photographer: Ali Mohammadi/Bloomberg
.
“So far, Iran has not reacted positively to our proposal,” the British, French and German ministers wrote in their Sept. 20 letter, referring to a proposal for Iran to abandon medium-enriched uranium in exchange for aviation and energy incentives.

“On the contrary: Our concerns have once again increased,” the letter says, referring to an Aug. 30 report by the United Nations’ International Atomic Energy Agency in Vienna that found Iran had increased its stockpiles of enriched uranium, which -- if diverted from safeguards and further enriched -- could be used to produce a weapon.

Ahead of the next EU foreign ministers’ meeting Oct. 15 in Luxembourg, European diplomats and finance officials are discussing proposals to tighten the vise on Iran in the energy, finance, trade and transportation sectors, according to four European officials who all spoke on condition of anonymity because of diplomatic protocol.

More Pressure

The U.K., France and Germany believe a diplomatic solution is possible, the EU diplomats said, though they think more pressure is needed to force Iran to cooperate. Along with the U.S., Russia and China, the three European nations have engaged in nuclear negotiations with Iran since April that so far haven’t produced an agreement.

U.S. Undersecretary of the Treasury David Cohen is visiting France, Germany, Italy and the U.K. this week to discuss coordinating efforts to increase the pressure on the Iranian government.

Among the proposals under discussion in European capitals are measures to close the loopholes that have allowed Iran to circumvent existing sanctions, according to the four EU diplomats. Those would include limiting exceptions to the freeze on Iranian central bank assets under European jurisdiction, a move that would further complicate efforts by Iran to access its hard currency reserves to stabilize the Iranian rial, the diplomats said.

Other Proposals

Other proposals from the British, French and German governments include working more closely with the maritime industry to halt the reflagging of Iranian ships and tightening bans on sales of potential dual-use technology that might have nuclear or missile applications, the EU diplomats said.

Further financial penalties might include blocking more Iranian central bank transactions with European banks and halting so-called U-turn transactions for Iran that begin and end with a non-Iranian bank, according to the EU officials. Such measures would severely limit EU trade with Iran, proponents say.

Although the EU imposed an Iranian oil embargo on July 1, Europe continues to export billions of dollars of worth of goods and services to Iran, said Mark Dubowitz, executive director of the Foundation for Defense of Democracies, a Washington research group that advocates tougher sanctions.

European Imports

According to figures compiled by FDD from EU government sources, Germany exported 1.4 billion euros of goods to Iran between January and July of this year, and Italy exported 550 million euros worth between January and May 2012, Dubowitz said.

One senior European diplomat who called the existing sanctions unprecedented in their scale said the aim of new measures would be to bring Iran’s economy to its knees in a way that hurts the regime rather than the people.

Iran’s rial is already in a tailspin, dropping 18 percent on Oct. 1, reaching a record low of 35,000 to the dollar on the unofficial market, and losing more than half its value against the dollar in street trading in the past two months.

Iran’s free-falling currency has turned meat into a luxury, sparking overnight price surges and spurring shoppers to stockpile goods, Tehran shopkeepers said in interviews. Riot police yesterday fired tear gas and sealed off parts of downtown Tehran after the currency’s plunge triggered street protests.

Rising Inflation

The inflation rate, which Iran’s Parliament Speaker Ali Larijani last week estimated at 29 percent, sent the price of milk in Tehran up 9 percent yesterday.

The financial and oil sanctions now in place may be triggering a balance of payments crisis that could cripple the Iranian government’s ability to pay for essential imports, according to European and U.S. officials who spoke on condition of anonymity because of the sensitivity of the issue.

The plummeting Iranian currency is making imports prohibitively expensive. Combined with insufficient foreign exchange reserves that limit the euros and dollars available to pay for imported goods and services, new “EU sanctions that restrict Iran’s ability to import critical European goods and services could combine to push Iran to economic collapse,” Dubowitz said in an interview.

U.S. and European officials also credit the sanctions -- in conjunction with poor economic management in Iran -- for spurring capital flight from Iran and a crisis of confidence in the currency.

Cartoon Bomb

Israeli Prime Minister Benjamin Netanyahu’s speech at the United Nations’ General Assembly last week, in which he dramatized the threat from the Iranian nuclear program with a cartoon of a nuclear bomb and underscored Israel’s readiness to take preemptive military action, gives added impetus to the push for additional sanctions, according to the European diplomats.

Netanyahu, who’s expressed skepticism about the efficacy of U.S. and European sanctions, now seems to be more open to them.

An Israeli official said a foreign ministry analysis found sanctions are hobbling Iran’s economy, even though they haven’t prompted Iran to abandon its nuclear program. Israeli officials think further sanctions need to be more targeted, according to the foreign ministry official who spoke on condition of anonymity because of the sensitivity of the issue.

Netanyahu “really has no choice if the U.S. is dead-set against” a military attack, Shmuel Sandler, a political scientist at Bar Ilan University near Tel Aviv, said in a telephone interview. “For now, it looks like he’s going to have to wait and see if the sanctions work.”

‘Cripple Date’

Bijan Khajehpour, an Iranian economist and strategic consultant now based in Vienna, said he disagrees “with those who say the Iranian economy is collapsing or that there’s an economic ‘cripple’ date.”

The Iranian economy, he said, is too big and too complex for that, with ample domestic industry to replace foreign imports. Iran has been under a variety of sanctions long enough that its leaders have found illicit workarounds for most obstacles, he said.

Sanctions, he said in an interview during a visit to Washington yesterday, “are not achieving their goal” to persuade Iran’s leaders to abandon their nuclear program. Government and government-affiliated businesses are “actually benefiting” from restrictions on legal trade and from the currency crash, he said, by engaging in arbitrage and black- market activities, hiding assets and not being accountable.

To contact the reporter on this story: Indira A.R. Lakshmanan in Washington at ilakshmanan@bloomberg.net
Title: Re: Hyperinflation or Deflation?
Post by: widgeon on October 04, 2012, 10:02:21 AM
Regarding HI Events;

The circumstances of the last years has also bared clear the fact that HI "Warfare" (tipping target countries into high inflation or HI) requires the close collaboration of essentially all CB's of consequence.  Countries can also go there on their own by stupid policy, but countries of consequence can be protected from HI for a very time by the actions of coordinating CB's.

Japan has made out as well as it has for the last 20+ years because they are in the club as a virtual colony of the US.  The existence of the Japanese banking structure allowed the Banksters to get away w/ untold billions upon trillions in the carry trade for 20 years at least.  So, therefore Japan had to protected from HI despite their spendthrift gov.

We can reasonably surmise the essential members of the club are US Fed, BoE, BoJ, ECB, Swiss Bank, and their subordinates.  I suspect that for the most part Russia & China are not in the inner circle and their cooperation is not required.

Title: Re: Hyperinflation or Deflation?
Post by: Surly1 on October 04, 2012, 10:05:24 AM
Great stuff.
Title: Re: Hyperinflation or Deflation?
Post by: RE on October 04, 2012, 10:46:07 AM
We can reasonably surmise the essential members of the club are US Fed, BoE, BoJ, ECB, Swiss Bank, and their subordinates.  I suspect that for the most part Russia & China are not in the inner circle and their cooperation is not required.

Indeed, the above mentioned CBs are the "core" controlled through the BIS which serve to control all trade and subordinate all other currencies.  The Ruskies were already pushed out once which essentially caused the Soviet Union to collapse.  Both they and the Chinese were forced to "play ball" here, and the pressure has been on Iran to do so as well for quite some time.

RE
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on October 04, 2012, 11:05:43 AM
And so it beings. The sanctions on Iran can now be construed as an act of war.

True, but what saddens me about this currency war is that it is being waged against the poor citizens and children of Iran, many of whom are our supporters and are trying to survive. The Government swine and soldiers of Iran will get their milk and bread while many of our friends are made to suffer.

Warfare against children and friendly citizens should not be the way our country conducts business.   :'(

Title: Re: Hyperinflation or Deflation?
Post by: monsta666 on October 08, 2012, 10:25:49 AM
There is hyperinflation relative to other currencies then there is hyperinflation relative to hard assets such as gold, oil, homesteads or any other physical commodities. I can agree with the argument that so long as there is co-ordination between the central banks then hyperinflation between currencies is unlikely to occur (once the globalised banking system and world trade plunges then all bets would be off however) what we could see however is if CBs become very aggressive there will be high inflation in the basic cost of living. These rising living expenses could develop into hyperinflation if the various governments are pushed into providing an acceptable standard of living to is people. Is such a scenario conceivable or more important, likely?
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on October 08, 2012, 10:45:23 AM
There is hyperinflation relative to other currencies then there is hyperinflation relative to hard assets such as gold, oil, homesteads or any other physical commodities. I can agree with the argument that so long as there is co-ordination between the central banks then hyperinflation between currencies is unlikely to occur (once the globalised banking system and world trade plunges then all bets would be off however) what we could see however is if CBs become very aggressive there will be high inflation in the basic cost of living. These rising living expenses could develop into hyperinflation if the various governments are pushed into providing an acceptable standard of living to is people. Is such a scenario conceivable or more important, likely?
Likely
Title: Re: Hyperinflation or Deflation?
Post by: widgeon on October 08, 2012, 10:48:24 AM
I don't think that scenario would result in HI ... HI is a bit of a canard, just serious "normal" inflation would be crushing.

When (if) HI occurs in the major currencies it would be a clear indication that endgame of fiat is here.

Title: Re: Hyperinflation or Deflation?
Post by: JoeP on October 14, 2012, 02:43:56 PM
Rise of the $5 Pizza

Embracing deflation with 99-cent stores and discount movies

Tim Cavanaugh
10/12/2012


If you believe inflation is under control, then answer this: Where can you get a dozen eggs for a buck?

For decades economists have warned about the dangers of deflation. The ongoing double-digit, multimarket decline in real estate prices should horrify us, we are told. Even our language has been edited to reflect this mentality; the phrase real estate recovery is a happy-sounding euphemism for a reinflation of housing prices. Yet everywhere you look, Americans are happy to do the deflation dance.

Deep-discount stores, usually with the word dollar in their names, are enjoying a boom that dates back to the turn of the 21st century but has been invigorated by the continuing credit unwind. Also expanding during the recession/recovery have been discount and second-run movie houses, which offer audiences big-screen thrills at the Reagan-era price of $3 a ticket. And although Federal Reserve Chairman Ben Bernanke told the Senate in July that “we would certainly want to react against any increase in deflation risk,” chain restaurants all over the country have drawn a 14-inch line in the sand in the form of the $5 pizza.

This nationwide return to value has been missed by most media outlets. In a July cover story illustrated by a muscular Uncle Sam with pasties attached to his nipples, the British magazine The Economist posited a “Comeback Kid” American economy but used as its prime example Ethan Allen, an upscale furniture maker based in Connecticut. Now it’s true that in the first quarter of 2012 Ethan Allen saw 8 percent growth in net sales over 2011. And furniture is a perpetually overpriced industry that strongly encourages its customers to take on debt. (In many store windows you see prices listed in monthly installments.) Yet even here the real growth is, literally, in the cheap seats. Wisconsin’s Ashley Furniture Industries sells loveseats for about a third of what Ethan Allen charges and pulls in about six times as much money. If Ashley’s too rich for your blood, 15 percent of Americans shop in consignment stores and another in 18 percent favor thrift stores, according to America’s Research Group, a consumer behavior research firm.

This growth is largely due to Americans from higher income quintiles who are sinking to discount shopping. Dollar General Chairman Rick Dreiling reported in 2011 that half of his chain’s new customers come from “non-core, higher-income families,” with 22.4 percent of new Dollar General customers earning $70,000 or more.

“You see this flight to value that accelerated during the recession, which ended three years ago,” says Craig Johnson, president of the Connecticut-based consulting firm Customer Growth Partners. “But the growth in deep-discount stores has held up.” The North Carolina–based Family Dollar chain saw net sales increase 10 percent between 2011 and 2012. Tennessee’s Dollar General grew net sales 13 percent in the first quarter of 2012.

In a January 1991 memo advocating a modest “singles and doubles” marketing strategy, Jeffrey Katzenberg, then chairman of the Walt Disney Company, warned that “when times get tough…people will still want to escape to the movies, but they’ll want it for the historic cost of a loaf of bread.” The $3 movie tickets sold by Danny Heilbrunn, owner of the Ohio Danbarry Dollar Saver movie theater chain, don’t quite fulfill that promise. (Thrifty shoppers will recognize a $3 loaf of bread as highway robbery.) But Danbarry does a brisk business selling cheap movie tickets in tough times.

Heilbrunn brushes off my suggestion that stagnation has been good for discount theaters with the movie man’s mantra that pictures are not affected by the economy. But he opened another Danbarry house in 2009, at the supposed trough of the recession. Most major U.S. cities host thriving second-run houses. The 35-state Carmike chain greeted 2009 with a “Recession Special” of a 16-ounce beverage and 46-ounce popcorn for a dollar each. As of August, Carmike’s 2012 revenues (admissions plus concessions) were up 17.5 percent from the same period the year before.

But dollar stores and second-run houses merely slow the course of inflation. The $5 pizza—marketed by Little Caesars and countless smaller pizza chains—actually reverses it. Our do-nothing Department of Commerce does not maintain a historic database of pizza prices, but I can remember regularly spending $8 or $10 for a pie in the 1980s. The price of a pizza has fallen not just in inflation-adjusted terms (and by the way, why do you never hear the term deflation-adjusted?) but in nominal dollars.

Tahir Majeed, co-founder of Minnesota-based $5 Pizza, opened his first takeout shop in 2008 and is currently opening his 13th. “With the recession everybody wants to run their business more carefully,” Majeed says. “So now we’re not selling expensive stuff.”

Does he worry that inflation—which, whatever you may be told, has not been low throughout the long recession and in fact has robbed your dollar of 10 percent of its value since 2007—could make it impossible to deliver on his chain’s promise of a large pie for a Lincoln? “No,” Majeed says. “We can make another menu: $10 or $15. People who make money want to go for more expensive options.”

Majeed says he is not considering portion shrinkage, which asks shoppers to pay the same price for less. Others are not so shy. The industry standard half-gallon container of ice cream was disappeared in the middle of the last decade and replaced with a 1.75-quart (later downgraded to 1.5-quart) lookalike. The venerable 64-ounce orange juice container was quietly downgraded to 59 ounces in 2010. (For that matter, is 14 inches really a “large” pizza?)

Yet award-winning New York Times columnist Paul Krugman insists that it’s deflation we must fear. Rep. Paul Ryan (R-Wis.), the Republican vice presidential nominee, cited fear of a “deflationary spiral” to excuse his 2008 House vote for the bank-bailing Troubled Asset Relief Program. It is well that experts remind us deflation is terrible. Otherwise we might grow too fond of it. 

http://reason.com/archives/2012/10/12/rise-of-the-5-pizza
Title: Re: Hyperinflation or Deflation?
Post by: RE on October 14, 2012, 04:56:58 PM
With pretty much the sole exceptions of the price of Gas to fill my SUV and some Super-Premium foods I like to buy like Stinky French Cheeses, I haven't seen all that much inflation over the last 6 years up here on the Last Great Frontier.  I'm only going to compare Alaska prices here, because it is a different economy than the lower 48. 

Even Gas prices were already over $3 when I got here, now they spike over $4 sometimes, but at best that is around 4% yearly inflation.

The Michelinas Bargain Frozen foods I buy to Nuke for Lunch still run around $1 each.  I can buy a Crockpot made in China CHEAPER now than then, one day walking the Walmart Aisles they were On Sale at $5 each!  Cheaper than a pack of smokes up here! Even if I don't have electricity to run the external heating element, the Ceramic Crock insert can go over a fire and cook just the same.  It is at least as good Ceramic as any Ming Dynasty pot and will last just as long if you dont drop it.

Real Estate up here has dropped precipitously from the Peak in 2006, I have a friend who bought a McMansion at around $450K, he's trying to sell it and it is valued on Zillow at $275K.

The Carz Market?  HA!  I bought a used Toyota Pickup circa 1983 when I first got here for $500.  My first Honda Motorcyle I bought in my college years cost me $1500!  In 1970s dollars!  Lasted 2 years, had issues, sold it to a broke guy for $50, he fixed it and as of last year was still driving it.  The Mazda I bought to replace it I got for $900, and still runs great.

My Bugout Machine sold originally for $24K in 1983, I picked it up for $5K in 2009 dollars.  45K Miles on it, just a few cosmetic rust spots on the exterior.  Burns gas like a PIG, but I almost never drive it anywhere.

On the Pizza Level, it is true that I no longer can find the 25 cents/slice Pizza from the small Italian Pizzerias of Da Good Old Days in NYC, where Pizza was REALLY PIZZA, but if I buy a Frozen Pizza at Safeway, On Sale I get it for $5 or so.

Furniture? HA!  Who buys that stuff new?  I have a Futon Couch I bought for $50, a used Desk I bought for $10 and my Chair with armrests new from Walmart for $50.  I sleep on a Queen Size Air mattress, they last about 2-3 years usually, price $30.  To make it super comfy, I layer on top of it a 3" Memory oil foam topper that cost $100 I think.  I can make it stiff by pumping it up high, or mushy with less pressure.  Its BETTER than a Sealy Posturepedic running $1000 and more.

Down in the 3rd World, basic Commodity Prices are KILLING people who live on $2 a day, but here in the Land of Good & Plenty Food Pirces are not changing all that much really, because so much of the cost is in the processing and transportation ends of the Industrial Foods we buy.  The input cost of the food itself is only a small part of the cost of a Michelinas Frozen Lasagna.

Of course, the MARGINS are ever decreasing for the producers of these items, but there was a pretty healthy cushion there for many years, so they haven't gone Outta Biz yet.

It reamins an Open Question as to whether the Prices will HI or whether the manufacturers will just drop off the map one by one as their margins decrease.  I don't see HI as likely here until Helicopter Ben starts LITERALLY dropping money from Chinooks onto the consumers of these goods.  That ain't happening as of yet.  Only Pigmen get the Free Money, and they only buy a VERY few Pizzas.

RE
Title: Re: Hyperinflation or Deflation?
Post by: JoeP on October 14, 2012, 05:30:58 PM

On the Pizza Level, it is true that I no longer can find the 25 cents/slice Pizza from the small Italian Pizzerias of Da Good Old Days in NYC, where Pizza was REALLY PIZZA, but if I buy a Frozen Pizza at Safeway, On Sale I get it for $5 or so.

NYC pizza must be in a league of it's own.  I visited NYC once...in my late 20's.  Great 4 day trip. I remember the only pizza I had there came from what appeared to be a convenience store and that slice ranks in the "top five" slices I have ever consumed. And I've had pizza in a lot of cities.  ;D

   
Title: Re: Hyperinflation or Deflation?
Post by: Petty Tyrant on October 14, 2012, 06:05:34 PM
As  mentioned by both Joe and RE above Deflation in the housing sector is a real killer, and the false bottoms that keep getting called are laughable. IM trying to liquidate right now and man have I taken a huge hit on the property bought after 08. See I thought it was cheap in 08 and didnt think it would just keep getting cheaper.

Im no expert but the "experts" have started a vague warning of inflation sinc QE3 was announced, obviously all the printing $ goes to the banks and thats why theres been no inflation from it so far. Its obviously open to manipulation, when "they" are ready they only need to up rates a tad and voilah HI here we go.

The next question is if/when worthless piles of paper are replaced with subcutaneous keycards, whos up for it?
Title: When Pizza was PIZZA!
Post by: RE on October 14, 2012, 06:26:25 PM
NYC pizza must be in a league of it's own.  I visited NYC once...in my late 20's.  Great 4 day trip. I remember the only pizza I had there came from what appeared to be a convenience store and that slice ranks in the "top five" slices I have ever consumed. And I've had pizza in a lot of cities.  ;D

Indeed, there was a time when Pizza was REALLY PIZZA, and NY Shitty was where it was.

There was a tiny Pizxeria on Main Street in Flushing at the end of the Number 7 Line Subway I would exit after my day of "learning" at Stuy High, 4 Tables and a Counter with the Latest Pizzas under it you could buy by the slice.  The place was the size of a Postage Stamp.

Unbelievably at the time even, the Pizza Oven was BRICK, not steel.  The Pizza Men tossed the dough disks high in the air, spreading the dough with their fists until it was paper thin, experienced ones kowing JUST when the dough would break and stopping the twirling right before that.

For 25 Cents I got Pizza Slices I will NEVER FORGET.

Gotta write an Article, "When Pizza was PIZZA".

RE
Title: Re: Hyperinflation or Deflation? Hyperinflation by 2014 John Williams
Post by: Golden Oxen on November 01, 2012, 04:02:31 AM
http://www.youtube.com/v/GRR7EzsS6m4&fs=1
Title: Re: Hyperinflation or Deflation?
Post by: monsta666 on November 01, 2012, 08:59:56 AM
I do not think I have seen an expert that believes so deeply for a hyperinflation event as John Williams. He has repeatedly and to his credit not backed off his prediction of a hyperinflationary event occurring on 2014. I think considering the fact we are almost at the end of 2012 with reasonable inflation makes this hard to believe. I do think at some point hyperinflation will occur and I base this opinion on the fact this has been the tendency of fiat currencies historically however I cannot see it happening in the time frame John Williams suggests.

There are some strong deflationary forces at work with defaults, endemic high unemployment and stagnant wages. What will need to happen for hyperinflation to really kick off is a crisis of confidence in the dollar. At the moment it is highly likely there will be a crisis in the Euro and Yen before we see one in the dollar. Until the Euro has its crisis "resolved" it is hard to see how people will dump the dollar. The dollar is still perceived as a "safe haven" and until this status is removed the dollar will continue to enjoy relative stability. It seems there will need to be a number of years until we see the end for the Euro and for the investor to realise that their confidence in the dollar as a safe haven is misplaced.

Moreover for hyperinflation to occur we will also need the consumer to gain some sort of access to this printed money. For that to happen we would need some unusual intervention from the Fed/government. Again we are not really near the point when the Fed will attempt such measures as the situation is not that desperate at the moment. Such measures maybe attempted earlier if it is seen that the EU has implemented such measures with some successes (at least in the short-term) but these actions are unlikely to occur within the next year or two. This assumes there are no black swan events in the next two years which - depending on your inclination - could be a big assumption to make. In any case as inflation remains uncomfortably high at this moment and more so going forward, owning hard assets such as gold or silver will be a sound hedge against inflation.
Title: Re: Hyperinflation or Deflation?
Post by: widgeon on November 19, 2012, 12:24:59 PM

Turbo Tim endorses unlimited printing.  What could go wrong.

http://cnsnews.com/news/article/treasury-secretary-geithner-lift-debt-limit-infinity (http://cnsnews.com/news/article/treasury-secretary-geithner-lift-debt-limit-infinity)
Title: Re: Hyperinflation or Deflation?
Post by: widgeon on November 23, 2012, 11:38:51 AM
BoJ; Print phaster.

http://www.theatlantic.com/business/archive/2012/11/there-is-only-one-thing-that-can-save-japan-now-inflation/265421/ (http://www.theatlantic.com/business/archive/2012/11/there-is-only-one-thing-that-can-save-japan-now-inflation/265421/)



SF Fed; Print phaster.

http://finance.yahoo.com/news/feds-bond-buys-arent-near-190600297.html (http://finance.yahoo.com/news/feds-bond-buys-arent-near-190600297.html)



I'm sure the appearance of coordination among these independent banks is purely coincidental.
Title: Re: Hyperinflation or Deflation?
Post by: RE on November 23, 2012, 06:32:30 PM

I'm sure the appearance of coordination among these independent banks is purely coincidental.

Elvis has a good one up on EU now, Japan=Detroit which I will put up for tomorrow's Blog here on the Diner.

The BIG HOBGOBBLIN here for everybody in MSE (main stream economics) is the D-Word, and it is not Depression.  It is DEFAULT.  Yea, we know inflation sucks, but OMFG DEFAULT would be HORRIBLE!  LOL.

The same theme runs through every economy currently on the BRINK, from Greece to Spain to Japan, which is that they MUST-NOT-DEFAULT!  As soon as any one of these economies defaults it is Cascade Failure time and TSHTF.

Everybody in MSE from Ambrose to the IMF is pushing for further QE to keep the House of Cards from collapsing, but at this point EVERYBODY KNOWS the Patient is Terminal no matter what is done.

Of course, the suggestion that the Nips put the Printing Press on overdrive might keep Japan, Inc. afloat another day, the BLOWBACK from that is enormous.  It will destroy the carry trade in Yen, and anybody currently holding Yen as a Hedge will dump wholesale.  Cue HI in Japan.

The Day of Reckoning gets ever closer here.  It is a Horserace now between Japan, Inc. and the Eurotrash as to which one goes over the Cliff first.  I will bet the Nips get pushed off the Cliff first now.  They have been Vassals to Western Illuminati since Cmdr. Matthew Perry arrived at the Osaka Harbor with his Steam Powered Gunboats in the 1850s.  They are TOAST now.

RE
Title: Re: Hyperinflation or Deflation?
Post by: widgeon on November 24, 2012, 09:42:02 AM
Obviously (?), the reason "default" is verboten is because, for the most part, the bonds are held by the 1%.  It's their rent money.

Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on November 24, 2012, 09:57:18 AM
Obviously (?), the reason "default" is verboten is because, for the most part, the bonds are held by the 1%.  It's their rent money.

With all due respect Widgeon, you are in error with this statement from my experience.

The 1% are too smart to own bonds. You will find they own all the choice property, best farmland, blue chip stocks, most of the rental real estate, domicile in mansions with waterfront property, all the fine art not residing in museums, tons of gold, diamonds, and precious stones, oil, and of course the politicians that screw us for their benefit.

The bonds they do own are merely short term governments where they park billions for  a short time before pouncing on their next prey.
Title: Re: Hyperinflation or Deflation?
Post by: Snowleopard on November 24, 2012, 10:56:50 AM
Obviously (?), the reason "default" is verboten is because, for the most part, the bonds are held by the 1%.  It's their rent money.

With all due respect Widgeon, you are in error with this statement from my experience.

The 1% are too smart to own bonds. You will find they own all the choice property, best farmland, blue chip stocks, most of the rental real estate, domicile in mansions with waterfront property, all the fine art not residing in museums, tons of gold, diamonds, and precious stones, oil, and of course the politicians that screw us for their benefit.

The bonds they do own are merely short term governments where they park billions for  a short time before pouncing on their next prey.

They DO own the bonds, or at least it appears they do.  ie. They own the stock of the TBTF banks, who own the stock of the central banks, and together these banks own most of the bonds.  They cannot lose here, because the lions share is owned by the central banks who "created" the money to purchase them.
Title: Re: Hyperinflation or Deflation?
Post by: monsta666 on November 24, 2012, 11:37:35 AM
The fear of default/deflation is the big argument that hyperinflationists make when they say hyperinflation is the final outcome of the monetary system. The powers that be will do everything in their power (and then some) to avoid defaults or deflationary environments as measures taken to stave off default not only appear to offer a painless solution but they avoid the value of various assets dropping rapidly thus harming the elite disproportionately to the rest of the population.

Since the elite will suffer from deflation they will do all they can to preserve the system even if it is ultimately unsustainable. They are less harmed with high inflation than the struggling consumer at the bottom of the food chain and besides it is likely the value of their assets or rents will increase appreciably countering any losses from inflation. If they can keep inflation at a goldilocks range then they could come out on top even. At least this is the hope they will have after accumulating much debts or holding increasingly questionable assets.
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on November 30, 2012, 11:08:18 PM
Just got my first home heating oil delivery, $4.00 a gallon for home heating oil.

I wonder why the Goobermint doesn't include the price of oil or food when figuring the CPI Index?

                                                                                                                                             :Thinkingof_:
Title: Re: Hyperinflation or Deflation?
Post by: widgeon on December 01, 2012, 03:10:29 AM
You can hedonically adjust and use water.  True, it won't burn but it is liquid and will make you pheel as if you've filled your tank.

Title: Re: Hyperinflation or Deflation?: Central Banks Ponder Going Beyond Inflation Ma
Post by: Golden Oxen on December 10, 2012, 06:06:28 AM
 
Central Banks Ponder Going Beyond Inflation Mandates
By Craig Torres and Simon Kennedy - Dec 10, 2012

Inside the world’s oldest central bank, a new debate is raging over a dilemma facing monetary authorities around the globe.

Policy makers at Sweden’s 344-year-old Riksbank and elsewhere are arguing about how far they can look beyond their price mandates and focus instead on economic growth, employment or financial stability when inflation threats are either not pressing or deemed to be passing. This marks a shift from three decades in which central bankers battled inflation, an enemy they understood so well that most made it their singular emphasis in the 1990s.

“There are lots of things central banks are worried about at the moment, and inflation is not the highest priority,” said Stephen King, chief economist at HSBC Holdings Plc in London and a former U.K. Treasury official. “As long as people believe central banks are committed over the longer term to price stability, there is leeway to play around with other objectives.”

How much they should lean toward alternate goals is contentious. At the Riksbank, Deputy Governor Lars E.O. Svensson, who once taught economics alongside Federal Reserve Chairman Ben S. Bernanke at Princeton University in New Jersey, says keeping inflation too low hurts hiring, while Governor Stefan Ingves has said he worries about a debt bubble arising from low interest rates. The Riksbank left its benchmark rate unchanged at 1.25 percent at its October meeting.
Internal Criticism

Meanwhile, the Bank of England has ignored three years of above-target inflation as it tries to tackle slow growth in an economy just emerging from a recession. The European Central Bank faces internal criticism for proposing to buy bonds of cash-strapped nations. The Bank of Japan (8301)’s rejection of more- radical policy options in a period of moderate deflation has become a key political debate ahead of Dec. 16 elections.

Bernanke’s Fed is leading the way toward a broader mission, thanks to its dual mandate of achieving stable prices and maximum employment. After decades of emphasizing low inflation, it now aims policy at reducing the jobless rate.

The Federal Open Market Committee meets this week after Bernanke announced an open-ended program in September to purchase $40 billion in mortgage-backed securities a month. The buying -- which probably will push the Fed’s balance sheet beyond $3 trillion -- will stop only when the labor market improves “substantially,” the Fed said.
http://www.bloomberg.com/news/2012-12-10/central-banks-ponder-going-beyond-inflation-mandates.html (http://www.bloomberg.com/news/2012-12-10/central-banks-ponder-going-beyond-inflation-mandates.html)   :icon_study:
Title: Re: Hyperinflation or Deflation?
Post by: Petty Tyrant on December 10, 2012, 12:42:27 PM
"The UK is just emerging from a recession", the US is in recovery too. believe that and believe that koolaid about interest rates and the banks looking out for our best interests. I aint smoking that hopium, Im calling BS.

Its really simple, as your debt becomes unservicable you get downgraded credit rating. Then you get higher interest rate because you are higher risk. Ask Greece.
Title: Re: Hyperinflation or Deflation?
Post by: widgeon on December 12, 2012, 11:29:48 AM
The Bernank goes peddle to the metal.  The next announcement will be an agreement on the phiscal cliphph that includes a large new stimulus program - raising federal spending again.


Title: Re: Hyperinflation or Deflation?
Post by: widgeon on December 12, 2012, 11:39:03 AM
Looks like I'm in error ... apparently the CONgress has already approved the new stimulus program.  LOL.

Quote
us-runs-172-billion-budget-deficit-in-nov-2012-12-12

Quote
In November, the government spent $334 billion and took in $162 billion in revenue.


http://www.marketwatch.com/story/us-runs-172-billion-budget-deficit-in-nov-2012-12-12 (http://www.marketwatch.com/story/us-runs-172-billion-budget-deficit-in-nov-2012-12-12)
Title: Re: Hyperinflation or Deflation?
Post by: widgeon on December 12, 2012, 12:04:16 PM
LOL.  I just noticed with that new data that gov actually borrowed more than 50% of it's spending.  I think that is the first time that has happened.

Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on December 12, 2012, 12:21:28 PM
LOL.  I just noticed with that new data that gov actually borrowed more than 50% of it's spending.  I think that is the first time that has happened.

And you may rest assured it won't be the last time Widgeon.
Title: Re: Hyperinflation or Deflation?
Post by: widgeon on December 12, 2012, 01:01:42 PM
No Doubt On That Point.

I'm actually kind of amazed they still publish the real numbers ... assuming they are real of course.  If these numbers present their "best face forward" - oh my gosh.
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on December 12, 2012, 01:14:21 PM
No Doubt On That Point.

I'm actually kind of amazed they still publish the real numbers ... assuming they are real of course.  If these numbers present their "best face forward" - oh my gosh.

Fiat money will get you into an insane asylum every time. "Gold Will Win"
Title: Helicopter Ben goes "All In"
Post by: RE on December 13, 2012, 02:57:13 AM
The Bernanke thinks he can reduce UE by buying every worthless asset on the market.  That'll work. NOT.

RE

Bernanke Wields New Tools to Reduce Unemployment Rate (http://www.bloomberg.com/news/2012-12-13/bernanke-wields-new-tools-to-reduce-unemployment-rate.html)

By Caroline Salas Gage & Craig Torres - Dec 13, 2012 1:24 AM PT.
.
Chairman Ben S. Bernanke moved the Federal Reserve further into uncharted policy territory in combating joblessness by tying the bank’s interest-rate outlook to unemployment and inflation, while committing to an even faster expansion of the central bank’s balance sheet.

The actions on the eve of the Fed’s centenary year underscore Bernanke’s hallmark commitment to experimentation and forceful action, derived in part from his research showing too little monetary stimulus produced large economic costs for the U.S. in the 1930s and for Japan in the 1990s. He called the current state of the labor market, with unemployment at 7.7 percent, “an enormous waste of human and economic potential” and said the benefits of more bond buying outweigh the potential risks.

The Fed has more than tripled the size of its balance sheet with three rounds of large-scale asset purchases intended to bring down long-term borrowing costs and stimulate purchases of homes and cars. Photographer: Andrew Harrer/Bloomberg
.
“Bernanke is pulling out all the stops to kick this economy back into a higher gear,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “They are buying everything in sight -- Treasuries, mortgage-backed securities -- and will keep rates low until everyone who wants a job has one.”

Bonds fell yesterday on the prospect of higher inflation after policy makers boosted their main stimulus tool by adding $45 billion of monthly Treasury purchases to an existing program to buy $40 billion in mortgage debt a month. That decision puts the Fed’s $2.86 trillion balance sheet on track to reach almost $4 trillion by the end of next year.

The yield on the 10-year note was little changed today, and traded at 1.69 percent at 9:13 a.m. in London. The yield on the 30-year Treasury bond rose one basis point to 2.896 percent.

Rate Outlook

Central bankers for the first time linked their interest- rate outlook to economic thresholds, saying rates will stay low “at least as long” as unemployment remains above 6.5 percent and if the Fed projects inflation of no more than 2.5 percent one or two years in the future. Fed officials don’t see joblessness falling near that goal until 2015.

The adoption of thresholds was urged in September 2011 by Charles Evans, president of the Chicago Fed, who said the central bank should “add very significant amounts of policy accommodation” to bring down unemployment, even at the risk of a temporary increase in inflation.

A year later, the idea was backed by President Narayana Kocherlakota of Minneapolis, who had earlier criticized the Fed’s easing policies. Fed Vice Chairman Janet Yellen and the Boston Fed’s Eric Rosengren last month backed the concept. In a Nov. 27 speech, Evans spelled out the numerical benchmarks that were adopted yesterday.

‘All in’

“The Fed is all in,” said Diane Swonk, chief economist for Mesirow Financial Holdings Inc. in Chicago. “They are absolutely committed to averting the mistakes of the Japanese and of the Great Depression. They will not stop too soon. He is willing to take the risk of unintended consequences.”

U.S. stocks erased gains as optimism about the Fed’s additional asset purchases faded and investors focused on the budget deadlock in Washington. The Standard & Poor’s 500 Index closed up less than 0.1 percent at 1,428.48 in New York, after earlier climbing as much as 0.8 percent.

The additional Treasury purchases will follow the expiration at the end of this year of Operation Twist, in which the central bank each month has swapped about $45 billion of short-term Treasuries for an equal amount of long-term debt.

Bernanke’s View

Bernanke, who lowered the benchmark interest rate almost to zero four years ago, yesterday said the Fed’s “ability to provide additional accommodation is not unlimited,” which is “an argument for being a little bit more aggressive now.”

When he was a Princeton University professor, Bernanke presented a paper in January 2000 with the title “Japanese Monetary Policy: A Case of Self-Induced Paralysis?” In it, he criticized monetary authorities’ unwillingness to experiment, “to try anything that isn’t absolutely guaranteed to work.”

In slumps, policy makers need “Rooseveltian resolve,” he wrote, which he described as a “willingness to be aggressive and to experiment -- in short, to do whatever was necessary to get the country moving again.”

Bernanke, who turns 59 today, shunned orthodoxy as the global credit crisis unfolded, giving out more than $2 trillion in emergency aid through six loan programs, currency swaps with other central banks and the rescues of Bear Stearns Cos. and American International Group Inc. (AIG)

Balance Sheet

The Fed has more than tripled the size of its balance sheet with three rounds of large-scale asset purchases intended to bring down long-term borrowing costs and stimulate purchases of homes and cars. Bernanke broke new ground with the latest round of so-called quantitative easing by setting no limit on the size or duration of the program.

The economic parameters for policy tightening replaced the Fed’s previous calendar-based guidance that rates would stay “exceptionally low” at least through the middle of 2015.

“From a communications perspective, it is absolutely paradigm changing,” said Carl Tannenbaum, chief economist at Northern Trust Corp. (NTRS) in Chicago, where he worked at the central bank until July this year. “The Fed has put itself very squarely in the search for better economic growth.”

FOMC participants yesterday lowered their forecasts for growth next year. They now see the economy expanding 2.3 percent to 3 percent, compared with 2.5 percent to 3 percent in September. The average pace of growth for the decade through 2007 was 3 percent.

Job Market

“A return to broad-based prosperity will require sustained improvement in the job market, which in turn requires stronger economic growth,” Bernanke said yesterday.

More than three years into the recovery, the 7.7 percent jobless rate remains higher than Fed officials’ estimates for full employment, which range from 5.2 percent to 6 percent. Employers added 146,000 workers to payrolls in November, less than the monthly average of 151,000 this year and the 153,000 in 2011.

The search for stronger growth comes with an indication of some tolerance for inflation to exceed the Fed’s 2 percent goal after year-over-year readings have come in below that level past seven months through October.

Inflation expectations climbed after the Fed’s announcement. The break-even rate for five-year Treasury Inflation Protected Securities -- a yield differential between the inflation-linked debt and Treasuries -- rose to 2.1 percentage points from 2.07 points on Dec. 11. That’s a measure of the outlook for annual consumer prices over the life of the securities.

Price Acceleration

“There’s reason to be concerned” about inflation, said Marvin Goodfriend, a former adviser at the Richmond Fed. The Fed’s 6.5 percent unemployment objective is “aggressive,” while using a projection for price acceleration over one to two years may not lead to policy tightening before inflation “becomes a problem,” he said.

“It’s likely that the Fed will have a balance sheet $2 trillion higher before it tries to reverse” its stimulus, said Goodfriend, a professor at Carnegie Mellon University’s Tepper School of Business in Pittsburgh.

Inflation has “remained tame and appears likely to run at or below” the Fed’s 2 percent goal, Bernanke said.

Bernanke said tying the outlook for interest rates to economic variables is a better way to communicate the policy outlook than using a time horizon because markets can “infer how our policy’s likely to evolve.”

Data Adjustment

“If information comes in which says the economy is stronger or weaker than we expected, that would in principle require a change in the date, but it doesn’t necessarily require a change in the thresholds, because that data adjustment can be made by markets just simply by looking at their own forecasts,” Bernanke said.

The thresholds will act as an “automatic stabilizer,” he said. If there is a “shock” to the economy, investors will push interest rates down on expectations it will take longer for the Fed to tighten policy, Bernanke said.

One such shock is already on the horizon as lawmakers and the Obama administration continue talks to avert more than $600 billion of automatic spending cuts and tax increases that threaten to throw the country into a recession.

The so-called fiscal cliff is a “major risk factor” that is harming investment and hiring decisions by causing “uncertainty” or “pessimism,” Bernanke said. The Fed “doesn’t have the tools” to offset that event, he said.

Bernanke “is really on guard” against criticism that “he had done too little,” said Stephen Oliner, a resident scholar at the American Enterprise Institute in Washington and a former senior adviser at the Fed Board in Washington.

“The way the economy has evolved and inflation has evolved suggests that there is really nothing here that says the Fed has been too aggressive,” he said. “They are getting feedback that says, ‘Keep going.’”
Title: Re: Hyperinflation or Deflation?
Post by: Snowleopard on December 13, 2012, 12:06:48 PM
The Bernanke thinks he can reduce UE by buying every worthless asset on the market.  That'll work. NOT.

RE


““

It might work IF the banks are certian all the toxic debt has been transferred to the taxpayer.  At that point they might start to lend to each other again.  Meanwhile house prices are starting to rise again in some areas and banks are working on their foreclosure backlog.  Not much action on the REO backlog yet though.

Pondering:

IF Bernank & Co manage to pull this off, (and it is starting to look possible, i didn't expect them to get this far);  do we get "irrational exuberance II" and a "2008 on steroids" crash around 2020?   or does something else pull the dollar down first?

After that, do the bankers own everything?  or nothing?
Title: Re: Hyperinflation or Deflation?
Post by: Petty Tyrant on December 13, 2012, 05:13:46 PM
Good point snowleopard, and what I was wondering also. All the bad debts they buy up become govt debt and the central banks end up owning it all?
Title: Swapping Trash
Post by: RE on December 14, 2012, 03:58:52 AM
How long does this one play?

RE

Central Banks Renew Currency Swap Lines

(http://www.zerohedge.com/sites/default/files/pictures/picture-54151.jpg) (http://www.zerohedge.com/users/calibratedconfidence)
Submitted by CalibratedConfidence (http://www.zerohedge.com/users/calibratedconfidence) on 12/14/2012 01:26 -0500
Title: Re: Hyperinflation or Deflation?
Post by: widgeon on December 14, 2012, 03:12:46 PM
By the time "they" admit that inflation is starting to get cooking ... most of us will already be roasted.

http://www.peakprosperity.com/blog/80251/qe-4-folks-aint-normal (http://www.peakprosperity.com/blog/80251/qe-4-folks-aint-normal)

Quote
The rather politely ignored truth right now, at least by most news outlets and politicians, is that the world's central banks have wandered very far off the reservation and are running an experiment that really has only two possible outcomes.  One is a return to what we all might call 'normal and stable' economic growth.  The second is the complete collapse of the fiat money and their attendant financial systems and markets.
Title: Nips Go Full Inkjet!
Post by: RE on December 19, 2012, 01:02:40 AM
Not to be outdone by The Bernank, Da New Goobermint of the Land of the Rising Sun has announced they will go ALL IN on the Printing Game!

Thank God we have Digibits now.  If they were printing Paper Notes,the entire Amazon Rainforest would have to be Levelled to supply the Pulp.

The Yen HIs before the Dollar.  Horserace between the Yen and Euro which one HIs first here. (http://smileys.on-my-web.com/repository/Happy/happy-131.gif)

Below from Ambrose, who is Giddy that the Nips will try to Reflate the Ballon here.

RE

Japan's Shinzo Abe prepares to print money for the whole world (http://www.telegraph.co.uk/finance/economics/9751609/Japans-Shinzo-Abe-prepares-to-print-money-for-the-whole-world.html)

Japan’s incoming leader Shinzo Abe has vowed to ram through full-blown reflation policies to pull his country out of slump and drive down the yen, warning Japan's central bank not to defy the will of the people.

(http://i.telegraph.co.uk/multimedia/archive/02430/japan_2430560b.jpg)

Angela Merkel and Shinzo Abe. Mr Abe's Liberal Democratic Party won a landslide victory on Sunday Photo: AP

By Ambrose Evans-Pritchard
7:45PM GMT 17 Dec 2012
110 Comments

The profound shift in economic strategy by the world’s top creditor nation could prove a powerful tonic for the global economy, with stimulus leaking into bourses and bond markets - a variant of the "carry trade" earlier this decade but potentially on a larger scale.

"We think this could be the beginning of a fresh reflation cycle for the global system, combining with the US recovery to mark a turning point in the crisis," said Simon Derrick from BNY Mellon.

"It is tremendously important for global growth, and markets are starting to take note," said Lars Christensen from Danske Bank.

Mr Abe’s Liberal Democratic Party (LDP) won a landslide victory on Sunday, securing a two-thirds "super-majority" in the Diet with allies that can override senate vetoes.

Armed with a crushing mandate, Mr Abe said he would "set a policy accord" with the Bank of Japan for a mandatory inflation target of 2pc, backed by "unlimited" monetary stimulus.

"Its very rare for monetary policy to be the focus of an election. We campaigned on the need to beat deflation, and our argument has won strong support. I hope the Bank of Japan accepts the results and takes an appropriate decision," he said.

The menace behind his words did not have to be spelled out. He has already threatened to change the Bank of Japan’s governing law if it refuses to comply. "An all-out attack on deflation is on its way," said Jesper Koll, Japanese equity chief at JP Morgan.

Mr Abe plans to empower an economic council to "spearhead" a shift in fiscal and monetary strategy, eviscerating the central bank’s independence.

The council is to set a 3pc growth target for nominal GDP, embracing a theory pushed by a small band of "market monetarists" around the world. "This is a big deal. There has been no nominal GDP growth in Japan for 15 years," said Mr Christensen.

The yen depreciated sharply to Y84.48 against the dollar on Monday, the weakest in nearly two years, as traders bet that the LDP will this time bend the Bank of Japan to its will.

The yen has weakened 5pc over the past month, helping to lift the Nikkei index of stocks by 10pc. The Tokyo bourse is still down 75pc since peaking in 1989. Land prices have fallen by two-thirds.

The LDP plans what some have dubbed a "currency warfare fund" to weaken the yen with a blitz of foreign bond purchases, copying Switzerland’s success in capping the franc.

The effect of Switzerland’s unlimited bond purchases has been to finance most of the eurozone’s budget deficits for the last year with printed money. If Japan tries to do this - with a vastly bigger economy - it would amount a blast of quantitative easing for the world.

Japan’s curse as creditor nation with $3 trillion of net assets abroad is that safe-haven flows cause the yen to strengthen during a crisis, tightening policy in a "pro-cyclical" fashion when least wanted, this time due to the Fukushima nuclear disaster and Europe’s sovereign debt saga.

The effect of the strong yen has been to asphyxiate Japan’s exporters, leading to a "hollowing out" of manfacturing as companies switch plant abroad. Fuel imports to replace the closure of nuclear plants amount to an added import shock.

The combined effect has caused the country's historic trade surplus to evaporate altogether, not helped in recent months by a partial boycott of Japanese goods in China over the Diayou-Senkaku island dispute. The burden of the strong yen has finally become too great to bear.

Opinion is split over the wisdom of ultra-loose money. Although Japan is trapped in chronic deflation, it is a stable - almost comfortable - equilibrium. The "real" value of savings is rising, in stark contrast to the West.

Stephen Jen from SLJ Macro Partners said the Bank of Japan is right to fret that a return to inflation could set off a spike in debt costs and a flight from Japanese government bonds (JGBs).

"Any meaningful sell-off in the JGBs could trigger a serious problem in Japan’s banking system. The holdings of JGBs by Japanese banks account for 900pc of their Tier I capital," he said. Better the Devil you know.

Professor Richard Werner from Southampton University, author of Princes of the Yen, said the Bank of Japan is to blame for the country's failure to shake off its financial crisis in the early 1990s and for two Lost Decades of perma-slump that have followed. He accused the bank of dragging its feet at every stage, forcing governments to rely on huge fiscal deficits instead.

This tight-money/loose fiscal mix has pushed public debt to 240pc of GDP. The country would have been better served if the bank had stopped the rot immediately by flooding the money supply to kickstart lending. "It has taken 20 years and the Fed's Ben Bernanke to show them how to do it."

"Mr Abe has the right intentions but the Bank of Japan knows how to put up a fight. After watching the glacial moves in Japan for over 20 years - often in the wrong direction - I want to see the details before being sure that something really big is happening," he said.
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on December 19, 2012, 02:23:29 AM
Quote
Not to be outdone by The Bernank, Da New Goobermint of the Land of the Rising Sun has announced they will go ALL IN on the Printing Game!

Thank God we have Digibits now.  If they were printing Paper Notes,the entire Amazon Rainforest would have to be Levelled to supply the Pulp.

At least the Amazon forest and the amount of ink that could be produced put some sort of tangible limit on their madness. Now we have insanity to infinity. Get ready for hyper inflation if they can pull it off!

                       
Carson City Trade Dollar
Carson City Trade Dollar
Title: Japan post six consecutive month of declining exports
Post by: monsta666 on December 19, 2012, 12:16:25 PM
More troubling news for Japan as they post another month of declining exports. This is the sixth consecutive month that Japanese exports declined in total output. A big source of this trouble comes from the strong yen that has plagued the economy for the last few years as investors flock to Japan due to its safe haven status and the fact the currency is extensively used for carry trade (http://en.wikipedia.org/wiki/Carry_trade#Currency). The analysts are hopeful this problem of a strong yen will be solved with Abe's loose monetary policies which will lower the value of yen and make their exporting companies more competitive. It remains to be seen if this will come true particularly if we consider the fact their main markets of Europe/US show little growth and China is boycotting their products due to a territorial dispute. In actual fact it is quite likely the real reason for this ploy is to keep interest rates on bonds low allowing the Japanese government to remain solvent for a bit longer. High interest rates and deflation does no favours to a deeply indebted nation so it will be avoided at all costs.   

19 December 2012 Last updated at 02:05

Japan exports decline for sixth consecutive month
(http://news.bbcimg.co.uk/media/images/63627000/jpg/_63627185_152301066.jpg)
Anti-Japan protests in China hurt sales of Japanese goods in the country

Japan's exports have fallen for a sixth straight month, underlining the issues faced by the incoming government set to take charge in the coming days.

Shipments fell 4.1% in November, from a year earlier. Exports to China declined 14.5% and to the European Union by 20%. Sales to China have been hit by a territorial dispute, while continuing debt issues in the European Union have hurt exports to the region's economies. Exports are a key driver of Japan's economic growth. A continued slowdown in the sector would hurt the government's attempts to revive growth in the world's third-largest economy.

Turnaround?

However, there are hopes that the sector may see a turnaround in the coming months, not least because of the measures promised by Shinzo Abe who is set to be the country's new prime minister. Mr Abe, the leader of the Liberal Democratic Party, which won Japan's general elections earlier this week, has said that he will implement measures aimed at weakening the Japanese currency, the yen.

"
There is trend for the currency to remain weak for the next few months"


Martin Schulz
Fujitsu Research Institute

The strength of the yen has been one of the key issues faced by the country's exporters in recent times. A strong yen not only makes their goods more expensive to foreign buyers but also hurts their profits when they repatriate their overseas earnings back home. The Japanese currency rose almost 6% against the US dollar between April 2011 and November 2012.

However, after Mr Abe promised to take steps to weaken the currency, it has dipped, falling almost 6% since November. It hit a 20-month low of 84.48 yen against the US dollar earlier this week after exit polls indicated a win for Mr Abe. It was trading close to 84.35 yen against the US dollar in Asian trade on Wednesday. Analysts said the Japanese currency was likely to remain at a similar level in the near term, which they said would help provide a much needed boost to exporters.

"There is trend for the currency to remain weak for the next few months," said Martin Schulz of Fujitsu Research Institute in Tokyo.

"This should help the exporters gain some of the ground they have lost to regional competitors."

Original article can be found here. (http://www.bbc.co.uk/news/business-20778447)
Title: Re: Hyperinflation or Deflation?
Post by: widgeon on December 19, 2012, 02:43:22 PM
Mystery to me why so few want to buy their Cs and Sr fortified products.  I guess Hillary needs to step in and force these products into amerika: unlabeled of course.


Title: Re: Hyperinflation or Deflation? PRINTING OF $100 BILLS SOARS
Post by: Snowleopard on December 21, 2012, 03:54:39 PM
..

Cash Is King: Printing of $100 Bills Soars
.
.

By Matt Nesto | Breakout – 10 hours ago.. .


A good detective always looks for a motive when beginning an investigation. And so, when Nick Colas discovered that the number of $100 bills printed last year suddenly spiked, the chief market strategist at ConvergEx Group decided to figure out what was going on.
 
The first thing he discovered, as we discuss in the attached video, is that "$100 bills are still wildly popular and growing in popularity." On the other hand, the use of smaller denomination bills ($1, $5, $10 and $20) has been declining for over a decade, as the number of cashless transactions has steadily gone up. In fact, in the fiscal year that just ended in October, Colas writes in a recent note to clients, the U.S. Bureau of Engraving and Printing cranked out 3 billion, $100 notes.
 
"That's substantially higher than the run-rate of the past couple of years," Colas points out, and 50% more than the 2 billion $1 bills that were inked up. "It's actually a record amount of production," he says.
 
All of which begs the question, why?
 
Part of this new demand, he says, comes from the classic nefarious sources: drug dealers, arms smugglers, tax cheats and bribes. But some of it is also due to hoarding or the fact that more people than ever, oddly enough, are losing faith in government and/or the economy and are shunning the surety of traditional investments. It's a phenomenon that's led to a huge increase in demand for gold and other precious metals, but also for — you guessed it — $100 bills.
 
And it's not just here at home. While it's hard to quantify the exact amount, it is believed that the majority of $100 bills are probably being held overseas, since they are globally recognized, widely accepted and the easiest way to store wealth.
 
"Cash really is king if you want to preserve wealth in an increasing tax environment," Colas says, noting that while gold is a viable strategy for saving some money, "nothing beats a $100 bill if you have to buy some food."
 
What's interesting, or inexplicable, to many money watchers is that this huge increase in the printing of old-style $100 bills happened right before the expected launch of the new and improved $100 bills that will include a 3-D blue stripe and bell-in-an-inkwell security features. According to the Federal Reserve and its NewMoney.gov website, production problems have delayed the launch of the newest $100 notes for over a year now, though an announcement is expected soon.
 
In the meantime, with bank deposit rates and yields on U.S. Treasury bills at record lows and paying next to nothing, savers miss out on very little interest if they choose to hold cash rather than invest it.
 
But alas, there is a silver lining to be found within all of this dollar debasement that at least one Wall Street veteran points to. "It proves beyond a doubt that the dollar is still the reserve currency of choice around the world," Colas concludes. "It may not [always] be from the most savory part of the economy, but it does signal that there's still a lot of faith in the dollar."

http://finance.yahoo.com/blogs/breakout/cash-king-printing-100-bills-soars-132438479.html (http://finance.yahoo.com/blogs/breakout/cash-king-printing-100-bills-soars-132438479.html)
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on December 21, 2012, 05:02:56 PM
Quote
," Colas concludes. "It may not [always] be from the most savory part of the economy, but it does signal that there's still a lot of faith in the dollar."

He must also believe in the Tooth Fairy.

It signals the burgeoning work for cash, avoiding taxation, no records, and stay on food stamps and the dole, not faith in the dollar. Hard to tax a salary paid in cash or goods and services bought that way. The fact it is C notes and not smaller denominations says much about their purchasing power as well.

Don't forget our new flourishing pot industry also, a business where Cash has always been King.


Title: Re: Hyperinflation or Deflation?
Post by: Snowleopard on December 21, 2012, 09:53:12 PM
Quote
," Colas concludes. "It may not [always] be from the most savory part of the economy, but it does signal that there's still a lot of faith in the dollar."

He must also believe in the Tooth Fairy.

It signals the burgeoning work for cash, avoiding taxation, no records, and stay on food stamps and the dole, not faith in the dollar. Hard to tax a salary paid in cash or goods and services bought that way. The fact it is C notes and not smaller denominations says much about their purchasing power as well.

Don't forget our new flourishing pot industry also, a business where Cash has always been King.

GO

I agree there is an ongoing loss of faith in all fiat money, which explains the steady advance of the gold price over the last decade.  This advance in the gold price would be much larger if the banksters were not manipulating markets to hold it back in defense of their fiat. 

That said, there is certianly plenty of demand for dollars.  Without that demand they would be flying back "home" and there would be no need to print so many at least until the new design was ready for the presses. It is, at least, one of the better looking horses destined for the glue factory.

True enough about the uses this guy "forgot" to mention and the declining purchasing power.  Another unmentionable is the prospect of a slow motion (non panic) bank run.  Bank walk??  If savings account pays squat, less gets deposited. 

I was also wondering if this record fiat printing might get to be habit-forming for Uncle.  If so, that would move up the "dollar horse's" date with the glue factory.
Title: Re: Hyperinflation or Deflation?
Post by: RE on December 21, 2012, 10:47:30 PM
As bad as the Dollar is, it is better than Euros, Yen or Renminby, and it is Fungible currency all over the world.  So anybody with excess of the 3 above currencies will trade them for Dollars, particularly in China where the Renminby is close to hyperinflating.  Black Markets in Eastern Europe tend to function entirely in Dollars.

In all cases, the demand for $100 denomination bills is to store wealth, they don't need many lower denomination notes.  When somebody needs to Cash out such a bill, they spend it all on Hard Goods, any change is in the Local Currency.

Long as all these folks keep most of these $100 bills stuffed in Mattresses and just dribble them out as they need stuff, it doesn't add much circulating money to the economy.  The velocity of money is very low here.

The Dollar won't HI until after the other majors collapse.  At the point it does HI, there won't be much to buy at Walmart anyhow.

In any event, the FSofA Military pays its soldiers in Dollars, so the Dollar must function to keep the Military functional.  I can pretty much guarantee they won't be paying soldiers in Gold anytime too soon here.

This CASH should function for a while, even if the Banking system collapses.  Digibit Dollars in your bank account however are another story.  Those can Vaporize in an MF Global Heist in a Heartbeat.

RE
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on December 21, 2012, 10:58:13 PM
Quote
GO

I agree there is an ongoing loss of faith in all fiat money, which explains the steady advance of the gold price over the last decade.  This advance in the gold price would be much larger if the banksters were not manipulating markets to hold it back in defense of their fiat.

That said, there is certianly plenty of demand for dollars.  Without that demand they would be flying back "home" and there would be no need to print so many at least until the new design was ready for the presses. It is, at least, one of the better looking horses destined for the glue factory.

True enough about the uses this guy "forgot" to mention and the declining purchasing power.  Another unmentionable is the prospect of a slow motion (non panic) bank run.  Bank walk??  If savings account pays squat, less gets deposited.

I was also wondering if this record fiat printing might get to be habit-forming for Uncle.  If so, that would move up the "dollar horse's" date with the glue factory.

You pose some interesting observations and questions Snowleopard.

With the Fed policy since the crash I have become totally baffled by all this phenomenon we are witnessing.

Zero interest rates

Banks refusing to lend

Credit card debt usury remaining at such lofty levels

Pension funds and Savers bankrupted by zero interest rates.

Why do the provide the needed currency for the underground economy to hoard, since most use is tax avoidance or illegal activity?

The list goes on and on.

While things may appear normal to most, my feeling is we are in  a period of total fiscal and monetary insanity that cannot be comprehended, let alone understood by any sane person. 

Like you however, I think all the madness is hastening the end of fiat, but Stoneleigh over at TAE will tell you differently, therefore, even on that point we have some highly intelligent, not to be ignored, opposite opinion.

It's a Mad House!

http://www.youtube.com/v/VFCM6TZgTMI&fs=1
Title: Re: Hyperinflation or Deflation?
Post by: widgeon on December 22, 2012, 04:03:09 PM
http://www.youtube.com/v/zkOOCx8tT08&fs=1
Title: Re: Hyperinflation or Deflation?
Post by: Snowleopard on December 23, 2012, 12:13:10 PM
Quote
GO

I agree there is an ongoing loss of faith in all fiat money, which explains the steady advance of the gold price over the last decade.  This advance in the gold price would be much larger if the banksters were not manipulating markets to hold it back in defense of their fiat.

That said, there is certianly plenty of demand for dollars.  Without that demand they would be flying back "home" and there would be no need to print so many at least until the new design was ready for the presses. It is, at least, one of the better looking horses destined for the glue factory.

True enough about the uses this guy "forgot" to mention and the declining purchasing power.  Another unmentionable is the prospect of a slow motion (non panic) bank run.  Bank walk??  If savings account pays squat, less gets deposited.

I was also wondering if this record fiat printing might get to be habit-forming for Uncle.  If so, that would move up the "dollar horse's" date with the glue factory.

You pose some interesting observations and questions Snowleopard.

With the Fed policy since the crash I have become totally baffled by all this phenomenon we are witnessing.

Zero interest rates

Banks refusing to lend

Credit card debt usury remaining at such lofty levels

Pension funds and Savers bankrupted by zero interest rates.

Why do the provide the needed currency for the underground economy to hoard, since most use is tax avoidance or illegal activity?

The list goes on and on.

While things may appear normal to most, my feeling is we are in  a period of total fiscal and monetary insanity that cannot be comprehended, let alone understood by any sane person. 

Like you however, I think all the madness is hastening the end of fiat, but Stoneleigh over at TAE will tell you differently, therefore, even on that point we have some highly intelligent, not to be ignored, opposite opinion.

It's a Mad House!

http://www.youtube.com/v/VFCM6TZgTMI&fs=1

You can say it is MAD or INSANE,  and it IS from many points of view.

One "insane" point of view:

Consider a country where any serious level of participation requires the participant to make "blood" donations to feed the vampyres-in-charge.   S/he is expected to be thankfull for the opportunity to be allowed to serve and donate.  Many who cannot participate at this level become junior vampyres, also fed from those "donations".  That works for awhile but the vampyres continue to increase their numbers and appetite.  A major problem occurs when the required "donations" are at a level that causes many full participants to sicken and die or join the ranks of the junior vampyres which further adds to the demands on the remaining donors.  A temporary solution was to expand the scheme to more countries, and that is now hitting limits.

A more rational and (limited) global point of view that some would call insane:

The owners of the big banks are in charge, and the banks are dead (insolvent).  They ARE the exchanges and trading houses.  They own (among others) most western politicians, most western media, the MIC, the oilcorps, legal and illegal drug cartels, the FED (and other central banks) and the US Treasury.  Thus they command bailouts when they lose their gambles, interest rates that help them survive, austerity for the masses and QE tribute for bankster life support, money printing when they need it, not to mention get out of jail free cards and licenses to steal.   :evil4:

The illegal drug trade is a cash intensive business run in part for the profit of the big banks.  The "war on drugs" is many faceted, but overall it is a war on the competition and a generator of slush funds.  It also helps control and fund local and state police operations in USA.  Most big banks have gotten "slap on the wrist" fines for laundering drug profits that amount to a cost of business.  Funding CIA and DOD black ops is another cost of the business and sometimes those ops are business.  This explains (among other things) the DEA/ATF smuggling guns to a partner drug cartel in Mexico and the invasion of Afghanistan to restart the opium/heroin trade shut down by the Taliban.  Iran-contra was not a rogue op but almost SOP.   :evil4:

RE made some good points above in the thread.  I went over to TAE and read some of the deflation vs HI stuff, and they make some good points also.  Logically, it makes sense that collapse of other monetary systems will strengthen the dollar, as will default, collapse of derivitaves, banks, and other digital fantasy "wealth".  This is the most likely possibility.

There are two less likely possibilities i see here:
1. Collapse leads to chaos and rapid dollar money printing leading to HI.
2. The system holds together with money printing support for awhile, and then collapses with universal HI.

All of the above suggest that HI will likely come later rather than sooner.

However, i'm not thinking i can understand all possibilities.  There are too many wild cards in the deck.

For example: USA luck could run out.   A massive USA military defeat, domestic disaster, and/or international gaffe could change things rapidly, and HI could be a consequence.  This type of HI trigger would require international repudiation of the dollar, it needs an alternative in place (or that can step up quickly) and a defeated, ineffective, or otherwise fully occupied USA military.
Title: Re: Hyperinflation or Deflation? :The Trillion Dollar Coin: Zimbabwe Dream
Post by: Golden Oxen on January 11, 2013, 04:09:54 AM
The very latest from the long silent Gonzalo Lira, a very colorful and interesting Financial Commentator.  :icon_mrgreen:
 


The Trillion Dollar Coin: The Zimbabwe Dream of the Obama-heads


Why do banks spend money making sure that their branches look good and solid? Why do banks spend even more
 money making sure their main offices look as solid and stately and settled as ancient temples?

Is this what Yglesias
and the Obama-heads
have in mind?
Why, to give the illusion of solidity. Because in finance, the illusion of solidity begets solidity—just as the appearance of banana republic-dom begets a banana republic.

The trillion dollar coin idea floating around out there is the dumbest idea ever—but it’s also dangerous for two reasons: It is a naked power grab by the executive, and it shatters the illusion of solidity and sense in the monetary system.

Matt Yglesias over at Slate is fervently in favor of the trillion dollar coin idea, and he gives as good a précis as any of the situation.

Treasury Secretary Tim Geithner can order the United States Mint to create large-denomination platinum coins—a $1 trillion coin, say, or a bunch of $10 billion coins—and use them to finance the government.

Really.

It all goes back to sub-section (k) of 31 USC § 5112 “Denominations, Specification, and Design of Coins.” The opening subsections consists of boring specifications about the coins the United States issues. Subsection (k) says “The Secretary may mint and issue platinum bullion coins and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary’s discretion, may prescribe from time to time.”

http://gonzalolira.blogspot.com/2013/01/the-trillion-dollar-coin-zimbabwe-dream.html (http://gonzalolira.blogspot.com/2013/01/the-trillion-dollar-coin-zimbabwe-dream.html)   :icon_study: :icon_study:
Title: Re: Hyperinflation or Deflation? :The Trillion Dollar Coin: Zimbabwe Dream
Post by: RE on January 11, 2013, 04:21:21 AM
(http://www.cartoonspot.net/looney-tunes/images-looney-tunes/speedy-gonzales-A.gif)
The whole purpose of the "Trillion Dollar Coin" is to highlight the absurdity of a 1 oz Gold Coin valued at say $10K.

Speedy Gonzalo as usual is running a few cans short of a 6-Pack in his analysis.  Wait until you get a load of my DME article.  :icon_mrgreen:

RE
Title: Re: Hyperinflation or Deflation? :The Trillion Dollar Coin: Zimbabwe Dream
Post by: Golden Oxen on January 11, 2013, 04:35:41 AM
(http://www.cartoonspot.net/looney-tunes/images-looney-tunes/speedy-gonzales-A.gif)
The whole purpose of the "Trillion Dollar Coin" is to highlight the absurdity of a 1 oz Gold Coin valued at say $10K.

Speedy Gonzalo as usual is running a few cans short of a 6-Pack in his analysis.  Wait until you get a load of my DME article.  :icon_mrgreen:

RE

I was going to tackle it first thing with my first morning coffee, but then decided, for some strange inexplicable reason, I would be best waiting until after breakfast or having something solid in my stomach; and oh yes, waiting a while for my blood pressure pill to perform it's task. ;) :D :D ;D
Title: Re: Hyperinflation or Deflation? :The Trillion Dollar Coin: Zimbabwe Dream
Post by: RE on January 11, 2013, 04:55:15 AM

I was going to tackle it first thing with my first morning coffee, but then decided, for some strange inexplicable reason, I would be best waiting until after breakfast or having something solid in my stomach; and oh yes, waiting a while for my blood pressure pill to perform it's task. ;) :D :D ;D

You might want to have a Puke Bucket available also. :icon_mrgreen:

RE on the Couch, GO over the Bucket.
(http://gifsoup.com/view7/3874078/vomit-1-o.gif)

RE
Title: Re: Hyperinflation or Deflation?
Post by: alan on January 11, 2013, 06:59:43 AM
All of the above suggest that HI will likely come later rather than sooner.

Or, maybe the dollar system will end with more of a whimper than a bang. No
hyperinflation or dramatic collapse, but rather a steady (or even not-so-steady,
but incremental, over time) migration away and adoption of alternatives.

Don't look now, but it is already underway...

Quote

www.gold-eagle.com/editorials_12/willie123112.html (http://www.gold-eagle.com/editorials_12/willie123112.html)

The Coming Isolation of USDollar
Jim Willie CB
31 December 2012

[snip]

The typical human reaction to any infection, vermin, danger, or toxicity is to stand back, to isolate the agent, to trap it, to prevent its further spread or release, then to remove it in a safe secure way if possible using trained professionals. Eventually decisions must be made on the level of acceptable risk on the removal, like what is willing to be lost or damaged or killed in the process. Risk analysis, cost trade-offs, and minimization decisions must be evaluated and executed. The toxic agent in global trade, global banking, and global bond market is the USDollar. In 2009, the Jackass began making a certain firm point. Those nations that depart from the entire USDollar system early will be the leading nations in the next chapter, with stronger foundations, richer solvency, emerging economies, healthier financial markets, efficient credit engines, growing wealth, stronger political helm activity, and better functioning systems generally. Imagine a contaminated blood system that infects, corrupts, and destroys all interior organs from the spread of the toxin. Those nations that stick with the crumbling USDollar system stubbornly will find a horrible fate with devastating effects, rampant economic damage, broken financial markets, sputtering credit engines, tremendous loss of wealth, wrecked supply lines, poverty spreading like wildfire, ruined political structures, social disorder, isolation from the rest of the world, and a fast ticket to the Third World. That is EXACTLY what is happening in the last several months. A division has begun, as the East has been busily installing the next generation platforms, as related to trade, banking, and commercial integration.

[snip]

A Paradigm Shift is taking place, and the ASEAN-China summit gave proof positive in a seminal event of the vast changes in progress. The United States just suffered its worst humiliation ever as a nation on the Eastern global stage. It was exceeded only by the humiliation for a US president personally. The story went uncovered by the lapdog inept US press. The late November Asian summit meeting held in Phnom Penh included 15 Asian nations, which represent half the world's population. They decided to form a Regional Comprehensive Economic Partnership that excludes the United States. The Asians are pushing to isolate the United States. Regard it as punishment for hegemony, or a reaction to prevent further capital drainage, or to protect from central bank abuse, or to wall off continued bond fraud export, or to defend against military aggression. Regard it as confirmation that China is the regional leader in Asia, even for military security. Regard it as a response to banker criminality, or simply for being totally full to the brim of American corruption and arrogance and abuse of position, led by creation of the USDollar as an elaborate weapon and credit card whose balance is never to be repaid. Abuse of power and sponsored financial corruption will have extreme consequences in the reshaping of global commerce and banking. The US will be isolated, so as to protect the rest of the world from its fascist exhibitions and deep manifestations.

[snip]

The new system will be decentralized, meaning not funneled through the major banks, not passing through the USFed as clearing house. Turkey will be essential in the formation of the Eurasia trade zone. First comes the Asian trade zone (the US excluded), and next comes the hand shake between the Asians and Europeans to create Eurasia. Some folks have expressed doubt toward the arrival of a vast trans-continental trade region. They seem painfully unaware of an incredible network of railway lines connecting Russia to Germany and China, and of a incredible network of liquified natural gas lines connecting Russia with all of Europe and Central Asia. Across the new trade zone and its diverse commerce, the USDollar will not be at the center. It is in fact being isolated, since it is a toxic agent. Everything US$-based is crumbling, from currencies to bonds to banks to credit lines to economies.

[snip]

The described isolation on numerous fronts, whether trade or COMEX or banks, all work toward the elimination of the toxic agent in the USDollar. The world wants a more just, more functional, more efficient, more equitable global trade system. The United States has abused its global reserve custodian position too long. The world is fighting vigorously to remove it. The usage of the USDollar as a credit card to finance its consumption binge without ability to pay will come to an end. The usage of the USDollar as a device to enable powerful aggression in war to advance syndicate interests like vertically integrated narcotics will come to an end. The usage of the USDollar as a banking monopoly device will come to an end. The usage of the USDollar as an instrument for bond fraud will come to an end. The usage of the USDollar as a free lunch device to finance the USGovt deficit will come to an end. When the USDollar is no longer the global reserve currency, the door to the Third World will be opened wide. When the USDollar is no longer the global reserve currency, the supply lines will be interrupted to the USEconomy, giving off a prominent Third World stench. When the USDollar is no longer the global reserve currency, the price inflation effect will become a national topic of grand debate and extreme anger. When the USDollar is no longer the global reserve currency, the United States as a nation will experience tremendous additional isolation and hardship, as most Third World nations do. The level of corruption within the USGovt and US banking corner offices is already far more entrenched than any Third World nation. The vote fraud for US national elections is equally prevalent, but more sophisticated.

When the USDollar is no longer the global reserve currency, the Gold Standard will be right around the corner, if not already in the implementation stage. The Gold price will react quickly to the removal of the USDollar from its prized perch of abuse. The center of the new trade settlement system will be GOLD, which is not even being discussed by the enlightened denizens of the gold community. It will be the basis of the Letters of Credit, in the form of gold trade notes. The short-term credit that facilitates trade will have a truly magnificent grand Gold core. The common agreement will be to make the Gold price at least $5000 per ounce, probably closer to $7000 per ounce. They will in the process dismiss, overrun, and put into oblivion the COMEX and the LBMA, rendering them to the scrap heap of irrelevance.
Title: Debt Monetization Economics
Post by: RE on January 12, 2013, 01:24:20 AM
Debt Monetization Economics (http://www.doomsteaddiner.net/blog/2013/01/12/debt-monetization-economics/) by Diner Godfather Rogue Economist now UP on the Diner Blog!  Rogue Economist was my original "RE" handle before I changed it to Reverse Engineer.  :icon_mrgreen:

My latest contribution to the ever ongoing HI vs Deflation Debate, taking into account the Population issues and Globalization of the Dollar as World Reserve Currency since the 1970s.

Of course, though the massive Balance Sheet expansion of the various CBs involved here is none too good overall, the Dollar still appears to be the the best of the Dogshit currently being printed.  Dollar HI looks to be a while away yet.

(http://www.worldoflongmire.com/features/apes/planet6/madhouse.jpg)
Up a day early from usual Sunday Publication for a full weekend of Monetary Madness here on the Diner.

Its a MADHOUSE!

RE
Title: Re: Hyperinflation or Deflation?
Post by: Surly1 on January 12, 2013, 02:45:25 AM
Since this thread seems to be about reactions to received wisdom, I hope I can post this here without being guilty of thread jacking. And if not well it will be the first time. This is by a blogger I like to read and John Aziz who publishes a blog called, “azizonomics.” It's about the perception gap between what economists believe and what the public believes. Pretty amusing.

Economists vs the Public
January 11, 2013

(http://azizonomics.files.wordpress.com/2013/01/20130112_fnc728.png?w=500&h=252)

They don’t agree:



My responses:

Question 1 — Agree

Economists in Sapienza and Zingales’ study resolutely agreed that it is hard to predict stock prices. A majority of the public agreed with the statement, but not so resolutely. Stock prices are the culmination of transactions between humans, and human behaviour is hard to predict because it is often irrational and informed by cognitive fallacies.

Question 2 — Agree, with a bitter taste in my mouth.

Economists were vastly more bullish on the stimulus’ effect on unemployment than the general public. And the data is actually quite unkind toward the economist’s view — the real unemployment path was far worse than the path projected by those in the Obama administration who promoted the stimulus. However, this is more of a symptom of the stimulus’ designers underestimating the depth of the economic contraction that the financial crisis caused. There is no doubt that the stimulus created jobs and lowered the unemployment rate in the immediate term. Whether the jobs created were really useful and beneficial — and to what extent the stimulus was a malinvestment of capital  — is another question entirely, and one which can only be answered in the long run.

Question 3 — Agree

Economists overwhelmingly agreed that market factors are the chief cause behind variation in petrol prices. The public agreed, but to a lesser extent. Presumably, the dissenting public and dissenting economists see government intervention as a more significant force? Certainly, the present global oil market is a precarious pyramid of supply chains balanced on the back of the petrodollar empire. But the market reflects these factors.  When governments start a war, that is reflected in the oil price. That’s a force that the market responds to. If a central planner was directly setting the oil price (rather than merely influencing it) — as is the case in communist countries — that would be a price determined by non-market forces.

Question 4 — Uncertain

Economists were broadly certain that a carbon tax is less costly than mileage standards. I think this is far too general a question. Without nuts-and-bolts policy proposals, it is not really possible to assess which would be more costly.

Question 5 — Uncertain, leaning toward Disagree.

This was the only question where economists and the public were largely agreeable — and economists were largely split. As I stated above, the “success” of the stimulus package can only really be assessed in the longer run, and even then there are difficulties with measurement. Generally, I suspect very much that the various interventions in 2008 onward have preserved and supported economically unsustainable and inefficient sectors and industries that ought to have been liquidated and rebuilt (especially the financial industry, but also other sectors, e.g. Detroit). Had the government in 2008 followed the liquidationary trend in the market, the slump would have been much deeper, unemployment would have risen much higher, but the eventual rebound may have been much quicker and stronger.

Question 6 — Agree

This is where economists and the public disagree the most. It is the point on which the public was the most bullish, and economists almost unanimously bearish. Economists in general seem to believe that what they define as free trade is best, even when it destroys domestic supply chains and drastically decreases manufacturing employment. To economists, this means that the American government should not discriminate against foreign products but buy for the best product and the best price. This ignores some important externalities. Buying American certainly supports American jobs, because money goes to American companies, and toward American salaries. This might foster inefficient and otherwise-unsustainable industries, but if the American public chooses to favour American products for their government, that is their right. And a strong domestic manufacturing base is no bad thing, either.



Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on January 12, 2013, 06:02:59 AM
Quote
Buying American certainly supports American jobs, because money goes to American companies, and toward American salaries. This might foster inefficient and otherwise-unsustainable industries, but if the American public chooses to favour American products for their government, that is their right. And a strong domestic manufacturing base is no bad thing, either.

Especially if it is an item or items critical for the well being of our economy or safety.

We also outsource out research and development, our ingenuity, and our patent protected products and procedures of  proper manufacture when we resort to this practice. It seems to me a substantial hidden cost that is never discussed beyond the cheap labor excuse.
Title: Re: Hyperinflation or Deflation?
Post by: Petty Tyrant on January 12, 2013, 06:04:53 AM
All of the above suggest that HI will likely come later rather than sooner.

Or, maybe the dollar system will end with more of a whimper than a bang. No
hyperinflation or dramatic collapse, but rather a steady (or even not-so-steady,
but incremental, over time) migration away and adoption of alternatives.

Don't look now, but it is already underway...

Quote

www.gold-eagle.com/editorials_12/willie123112.html (http://www.gold-eagle.com/editorials_12/willie123112.html)

The Coming Isolation of USDollar
Jim Willie CB
31 December 2012

[snip]

The typical human reaction to any infection, vermin, danger, or toxicity is to stand back, to isolate the agent, to trap it, to prevent its further spread or release, then to remove it in a safe secure way if possible using trained professionals. Eventually decisions must be made on the level of acceptable risk on the removal, like what is willing to be lost or damaged or killed in the process. Risk analysis, cost trade-offs, and minimization decisions must be evaluated and executed. The toxic agent in global trade, global banking, and global bond market is the USDollar. In 2009, the Jackass began making a certain firm point. Those nations that depart from the entire USDollar system early will be the leading nations in the next chapter, with stronger foundations, richer solvency, emerging economies, healthier financial markets, efficient credit engines, growing wealth, stronger political helm activity, and better functioning systems generally. Imagine a contaminated blood system that infects, corrupts, and destroys all interior organs from the spread of the toxin. Those nations that stick with the crumbling USDollar system stubbornly will find a horrible fate with devastating effects, rampant economic damage, broken financial markets, sputtering credit engines, tremendous loss of wealth, wrecked supply lines, poverty spreading like wildfire, ruined political structures, social disorder, isolation from the rest of the world, and a fast ticket to the Third World. That is EXACTLY what is happening in the last several months. A division has begun, as the East has been busily installing the next generation platforms, as related to trade, banking, and commercial integration.

[snip]

A Paradigm Shift is taking place, and the ASEAN-China summit gave proof positive in a seminal event of the vast changes in progress. The United States just suffered its worst humiliation ever as a nation on the Eastern global stage. It was exceeded only by the humiliation for a US president personally. The story went uncovered by the lapdog inept US press. The late November Asian summit meeting held in Phnom Penh included 15 Asian nations, which represent half the world's population. They decided to form a Regional Comprehensive Economic Partnership that excludes the United States. The Asians are pushing to isolate the United States. Regard it as punishment for hegemony, or a reaction to prevent further capital drainage, or to protect from central bank abuse, or to wall off continued bond fraud export, or to defend against military aggression. Regard it as confirmation that China is the regional leader in Asia, even for military security. Regard it as a response to banker criminality, or simply for being totally full to the brim of American corruption and arrogance and abuse of position, led by creation of the USDollar as an elaborate weapon and credit card whose balance is never to be repaid. Abuse of power and sponsored financial corruption will have extreme consequences in the reshaping of global commerce and banking. The US will be isolated, so as to protect the rest of the world from its fascist exhibitions and deep manifestations.

[snip]

The new system will be decentralized, meaning not funneled through the major banks, not passing through the USFed as clearing house. Turkey will be essential in the formation of the Eurasia trade zone. First comes the Asian trade zone (the US excluded), and next comes the hand shake between the Asians and Europeans to create Eurasia. Some folks have expressed doubt toward the arrival of a vast trans-continental trade region. They seem painfully unaware of an incredible network of railway lines connecting Russia to Germany and China, and of a incredible network of liquified natural gas lines connecting Russia with all of Europe and Central Asia. Across the new trade zone and its diverse commerce, the USDollar will not be at the center. It is in fact being isolated, since it is a toxic agent. Everything US$-based is crumbling, from currencies to bonds to banks to credit lines to economies.

[snip]

The described isolation on numerous fronts, whether trade or COMEX or banks, all work toward the elimination of the toxic agent in the USDollar. The world wants a more just, more functional, more efficient, more equitable global trade system. The United States has abused its global reserve custodian position too long. The world is fighting vigorously to remove it. The usage of the USDollar as a credit card to finance its consumption binge without ability to pay will come to an end. The usage of the USDollar as a device to enable powerful aggression in war to advance syndicate interests like vertically integrated narcotics will come to an end. The usage of the USDollar as a banking monopoly device will come to an end. The usage of the USDollar as an instrument for bond fraud will come to an end. The usage of the USDollar as a free lunch device to finance the USGovt deficit will come to an end. When the USDollar is no longer the global reserve currency, the door to the Third World will be opened wide. When the USDollar is no longer the global reserve currency, the supply lines will be interrupted to the USEconomy, giving off a prominent Third World stench. When the USDollar is no longer the global reserve currency, the price inflation effect will become a national topic of grand debate and extreme anger. When the USDollar is no longer the global reserve currency, the United States as a nation will experience tremendous additional isolation and hardship, as most Third World nations do. The level of corruption within the USGovt and US banking corner offices is already far more entrenched than any Third World nation. The vote fraud for US national elections is equally prevalent, but more sophisticated.

When the USDollar is no longer the global reserve currency, the Gold Standard will be right around the corner, if not already in the implementation stage. The Gold price will react quickly to the removal of the USDollar from its prized perch of abuse. The center of the new trade settlement system will be GOLD, which is not even being discussed by the enlightened denizens of the gold community. It will be the basis of the Letters of Credit, in the form of gold trade notes. The short-term credit that facilitates trade will have a truly magnificent grand Gold core. The common agreement will be to make the Gold price at least $5000 per ounce, probably closer to $7000 per ounce. They will in the process dismiss, overrun, and put into oblivion the COMEX and the LBMA, rendering them to the scrap heap of irrelevance.

Welcome to DD Alan

That all sounds too much like Justice, I think they have other plans.
Title: Re: Debt Monetization Economics
Post by: monsta666 on January 12, 2013, 06:55:19 AM
Debt Monetization Economics (http://www.doomsteaddiner.net/blog/2013/01/12/debt-monetization-economics/) by Diner Godfather Rogue Economist now UP on the Diner Blog!  Rogue Economist was my original "RE" handle before I changed it to Reverse Engineer.  :icon_mrgreen:

My latest contribution to the ever ongoing HI vs Deflation Debate, taking into account the Population issues and Globalization of the Dollar as World Reserve Currency since the 1970s.

Of course, though the massive Balance Sheet expansion of the various CBs involved here is none too good overall, the Dollar still appears to be the the best of the Dogshit currently being printed.  Dollar HI looks to be a while away yet.

(http://www.worldoflongmire.com/features/apes/planet6/madhouse.jpg)
Up a day early from usual Sunday Publication for a full weekend of Monetary Madness here on the Diner.

Its a MADHOUSE!

RE

A well written and good article that supports your general opinion that we will get deflation rather than hyperinflation. If I read it correctly the thrust of your argument is that the quantitative easing policies pursued by the major central banks is not actually causing inflation as nearly all that money just ends up in corporate/financial institutions bank accounts and does not actually enter Main Street as the big banks do not extend credit to J6P. Meanwhile the real economy is tanking and due to people either being unemployed or having less disposable income so the M1 money supply is slowly going down thus what we have is deflationary environment. That is if we take this purely on a monetary terms (in all cases the price of goods is rising due to higher input costs so this is inflation by other means). Your view is also supported by the fact that the velocity of money is declining:

(http://media.peakprosperity.com/images/chs-themes-2013-1.jpg)

I will say that this "money printing" does create some inflation however. Perhaps it is not as much as we expect as little of this money enters the hand of J6P but the money is used to inflate the value of other assets such as bonds and stocks. To give you an example in 2012 the British economy suffered three quarters of negative growth (and that is even with massaged government statistics) yet the FTSE 100 has more or less maintained a bull run throughout 2012. As I speak the FTSE 100 is near 2007 highs despite the British economy being on the slammer. It is a similar story with bond prices, debt situation in UK is horrible and the deficits are sky high yet demand for British bonds is higher than ever. I suppose the bonds can be explained outside of quantitative easing measures but still, the point is this funny money does enter the system through other channels and that does inflate the price of certain assets. I suppose we could say this money does create inflation by propping up house prices (without the money) Fannie Mae would go bust and there would be more housing stock left on the market as a result. I will grant you the last area is rather speculative and as you mentioned in the past it is a bit like the old Obama/Bernanke argument that while maybe true can never be proven to be false.

However here is the rub, that hyperinflationists including big bloggers such as Chris Martenson, John Williams et al. will argue about and make their case for hyperinflation. At some point a crisis of confidence will be reached (someone will finally call out the emperor has no clothes). This will trigger the big banks and corporations to cash out on their money and all that M3 money sloshing around finally enters the main economy. The banks and corporations will do this because they want to unload their toxic assets onto J6P while they quickly invest that money into gold or land thus triggering hyperinflation AND making J6P be the one to hold the empty bag. Thus people like Martenson encourage people to buy gold and get a leg up on the bankers before they do it themselves. Now I am somewhat speculating on what the hyperinflationists are saying but that does seem to be the general jist of their argument, at least from how I see it. It does seem they expect some kind of inflection point where the velocity suddenly changes and the money floating around in Wall Street suddenly comes out into Main Street and overwhelms the system. The fact the US is the reserve currency of the world only makes it worse to them as they will argue that the Asian corps will also join the act of dumping assets for dollars into the dying economy. Contracting number of goods/services and exploding money supply = hyperinflation so to speak.

What are your thoughts on such arguments?
Title: Re: Hyperinflation or Deflation?
Post by: widgeon on January 12, 2013, 03:51:12 PM
Commoditized, Global Market resources, can still experience (relatively) high inflation in all currencies.  Consider IF Japan, for instance, decides to print vigorously to buy minerals & energy ... by doing so they will be able to falsely drive up the relative price of globalized resources.  It works (unusual inflationary pressure) for global resources but not so much for 'strictly' local items (nat gas?).


Title: Re: Debt Monetization Economics
Post by: RE on January 12, 2013, 11:43:28 PM
However here is the rub, that hyperinflationists including big bloggers such as Chris Martenson, John Williams et al. will argue about and make their case for hyperinflation. At some point a crisis of confidence will be reached (someone will finally call out the emperor has no clothes). This will trigger the big banks and corporations to cash out on their money and all that M3 money sloshing around finally enters the main economy. The banks and corporations will do this because they want to unload their toxic assets onto J6P while they quickly invest that money into gold or land thus triggering hyperinflation AND making J6P be the one to hold the empty bag. Thus people like Martenson encourage people to buy gold and get a leg up on the bankers before they do it themselves. Now I am somewhat speculating on what the hyperinflationists are saying but that does seem to be the general jist of their argument, at least from how I see it. It does seem they expect some kind of inflection point where the velocity suddenly changes and the money floating around in Wall Street suddenly comes out into Main Street and overwhelms the system. The fact the US is the reserve currency of the world only makes it worse to them as they will argue that the Asian corps will also join the act of dumping assets for dollars into the dying economy. Contracting number of goods/services and exploding money supply = hyperinflation so to speak.

What are your thoughts on such arguments?

I am of course aware of the arguments made by the Hyperinflationistas, but IMHO they are based on a model which is somewhat archaic now, that many individuals have money Stashed away that they will try to unload when the Loss of Faith comes.  In fact, nobody has such a huge stash of cash, not even the TBTF Banks with digibits "on reserve" in Da Fed Supercomputer.

The argument goes that when Faith is lost inthe currency, everybody who holds some tries to Unload at the same time, flooding the market with worthless toilet paper while the price of a Ribeye shoots to the MOON (and beyond).

Except here is the deal with this:   actuality, the folks who hold this "cash" in reserve are insolvent, with even larger DEBTS on their balance sheets than the cash reserve they supposedly have.  Nobody can really unload CASH until they pay off their counterparties.  As soon as any TBTF bank undertakes to unload massive amounts of "reserve" currency, their Counterparties will slap them with lawsuits demanding to be paid first.  LOCKUP!  This is essentially "Frozen Money".

Second problem with all this reserve money is what would the TBTF Banks buy that they already do not own?  They sure don't wanna buy Real Estate with it, in fact they are stuck being unable to unload too many foreclosed on properties they ALREADY own.

Buy Commodities?  The Prop Desk of JP Morgan Chase and Goldman Sacks the Taxpayer are ALREADY loaded with Commodities, Oil Tankers filled to the brim floating out at sea, Gold bars in the Basement Safe, and they really can't unload any of them, not even the freaking Gold because as soon as any big holder of Gold floods the market with that, the price will crater also.

What will/can the TBT Banks do with huge currency reserves then?  Answer, buy the currency of some other worthless piece of shit Central Bank, and that is what they are doing.  They trade Euro's for Yen and Yen for Dollars and Dollars for Francs, it all is sloshing around daily int he currency markets this way.  Indeed some does make it into the Stock and Bond markets inflating those prices, but that does't really put a lot of money into the Main Street economy.  A VERY small percentage of the population owns Stocks and Bonds, even through Pension Plans.

What is the ONLY way the TBTF Banks ever put money into the hands of the Konsumer?  Only by Loans, they don't GIVE money away ever.  Except now there is nobody to Loan money to at the retail level that is creditworthy enough to do that, or has any Collateral the Bank would like to Repo either.

It's only once Da Goobermint starts handing out money to J6P that an HI event might be supported in the Dollar, and at the moment that is not on the Horizon at all.  In fact Goobermint Jobs are being slashed, UE Bennies are being slashed and the only Free Money being issued out is in Food Stamps enough to keep the population from Food Rioting.  That is not pouring out money fast enough to drive an HI event in the Dollar.

The Nipponese on the other hand are clearly at the point of making a direct transfer of Goobermint money to Industry by Nationalizing it, at which point Da Goobermint is making the Payroll for these companies.  They start to add money to salarymen's paychecks, THEN loss of faith in the Yen comes and you get an HI of this currency.  What will they try to buy with it?  You guessed it, DOLLARS, which would rapidly suck dollars out of circulation if the relative values don't change, but of course they will.  The Yen HIs with respect to the Dollar this way.

Anytime one of the Weaker Currencies experience a Loss of Faith, it will Prop Up the Dollar.  Dollar shortages in funding are more likely than HI, at least for the near future anyhow.

Meanwhile though, Demand Destruction and growing UE will continue, until there is a Political Tipping Point on this.  The PIIGS have to be at the End of their Rope here, hard to imagine how the Greeks can take much more "Austerity" without Revolution, Coup d'Etat or SOMETHING.  Increasing Suicides notwithstanding, I can imagine they will just all willingly roll over here and Off Themselves.

I'm looking for an HI in the Yen and Euro first here, before Dollar HI.  It may come rapidly on the heels of that though.  Time will tell, but the Denoument gets closer by the day.

RE
Title: Re: Hyperinflation or Deflation?
Post by: widgeon on January 13, 2013, 03:23:24 AM
It's too bad we've been cursed w/ the historic meaning of "Hyper"-inflation because Hyper-inflation is not the alternative to Deflation.  There can be a lot of bad garden variety inflation long before "Hyper" is ever close to being achieved.

Speaking only for the US, any extended period of moderately high inflation ... such as a redo of the 70's price increases ... would be sufficient to crush most of what remains.  Too many are too close to the edge.  It will not take HI the wipe out a vast majority of J6P.  Most are within one more price doubling of "the end."



Title: Re: Hyperinflation or Deflation?
Post by: Petty Tyrant on January 13, 2013, 04:51:48 AM
RE
I thought the initial section was difficult to understand but then the final picture was easy for the layperson to grasp. You probably forget that for the average joe the economu is either "good" or "bad" and anything happening overseas has nothing to do with them. A Year ago I knew about 10% on the subject as now. Another variable in all that coordinated or coincidental printing is the role of the BRIICS in targetting the dollar as the one to walk away from, which I think is just  business sense rather than a currency war attack.
Title: Re: Hyperinflation or Deflation? Debt Monetization Economics
Post by: Golden Oxen on January 13, 2013, 07:29:36 AM
This video from Belarus is one of the forms of Currency Induced Cost Push Inflation that always occurs in dire business conditions. It is a concept that very few seem to be able to get their heads around.

Inflation for some reason is only understood as a product of too much demand, or a supply starvation.

A 20% fast loss in value in the US dollar, the reserve currency by default, would have a profound impact on prices internally and externally much greater than the percentage loss of the currency.

                         http://www.youtube.com/v/RgAcHeL1dro&fs=1

While I agree with RE's idea that the dollar has some time left due to the dire situations with the other colored  toilet paper, it is possible we are wrong. I offer the chart below as evidence, and would like to remind everyone of the opinions expressed about this form of fiat at its low way back in August. They will not ring a bell before the dollar goes into another fall phase!   :icon_study:

                   
Dollar vs Euro
Dollar vs Euro
                                         
Title: Re: Debt Monetization Economics
Post by: monsta666 on January 13, 2013, 08:42:06 AM
Except here is the deal with this:   actuality, the folks who hold this "cash" in reserve are insolvent, with even larger DEBTS on their balance sheets than the cash reserve they supposedly have.  Nobody can really unload CASH until they pay off their counterparties.  As soon as any TBTF bank undertakes to unload massive amounts of "reserve" currency, their Counterparties will slap them with lawsuits demanding to be paid first.  LOCKUP!  This is essentially "Frozen Money".

Second problem with all this reserve money is what would the TBTF Banks buy that they already do not own?  They sure don't wanna buy Real Estate with it, in fact they are stuck being unable to unload too many foreclosed on properties they ALREADY own.

I must admit for awhile I tended to side with the hyperinflationists in how the insolvency issue would be handled. I think the main reasoning that put me in this camp is that historically when a government was running a fiat currency it would end with hyperinflation. However more recently I have my doubts, I think as you said things are let different. The bigger issue I do see against the hyperinflation argument is a currency can only hyperinflate RELATIVE to another currency. In the case of Germany in the past their Marks were valued relative to the British pound which was the reserve currency at the time. When they decide to print and people lost faith in the value of the Mark it declined relative to other currencies. We have never really had a scenario where the actual reserve currency - the currency all other currencies are essentially pegged to - hyperinflates. 

And it is this point that had me thinking; if you have a reserve currency hyperinflating how would that work in a system were all other currencies are floating against its value? A lot of the value of other currencies comes with how it is valued relative to the dollar. So it follows, if the value of the dollar became worthless then the valuations of other countries would at best go out of whack or more likely become worthless. In other words for the dollar to hyperinflate then it would likely require that all other currencies hyperinflate simultaneously to maintain "relative" valuations. Now what are the possibilities of all currencies hyperinflating at the same time? It seems quite a stretch to me.

To me what would need to happen to make this kind of scenario work is if currencies one by one hyperinflated as investors lost faith in each country. So perhaps the yen goes, followed by the Euro then sterling until we only have the dollar left standing. Now how things work out from there is another question. I think as you say the situation is a bit different as the sheer level of debt today is so high and there is not many "bankable" projects the banks could buy. So where does that money go and what happens if the people want to withdraw in mass? Does the government at this point declare a bank holiday and then invokes Martial law.

The other alternative is Bernanke unleashes the ultimate QE where he funds the banks directly so people can receive their payments. I do not think we can dismiss this notion that Bernanke (or whoever is in charge at time) will do this. It is quite probable they will literally try everything (and then some) to keep this whole thing from falling. Money is the main conduit that gives the illuminati their power; if that goes their power over the masses wanes significantly. What I am trying to say here is you need to really think out the box here because Bernanke and Co. will have the resources and the brightest sparks devising a way of trying to extent the inevitable as much as possible. If there are big holes what is the most creative thing you can come up with? I am sure they will do these things if push really came to shove.

If people want to withdraw and there are lawsuits he can back the banks up and say he will fund any short fall so investors will get their money. Such words would maintain some faith in the system. Sure there would be a loss of faith if he just outright printed his way out of this hole. Plus it would clearly expose to ALL that the Fed is a private entity as their actions would violate the constitution (it is my understanding that it is only the government that is constrained not to print money). Seeing as the Fed is a private entity they have no such limitation and hold absolute power over the currency and can implement any action if it is deemed desirable. Sure enforcing this power would deal a mortal blow to their credibility but then you know people; if pushed, people can do literally anything to cling onto power that bit longer. I suppose maybe I am going a bit out there and what I say is highly speculative but have you ever considered the Fed attempting something truly extraordinary (even if it means the death of them) so they could extent the game as long as physically possible? Such actions would likely eventually lead to hyperinflation or are these big interventions really unlikely to happen?

I will say this: whatever happens is largely an academic exercise because by the time hyperinflation/deflation does hit the average J6P ain't going to have much savings and likely no job. Deflation/hyperinflation will not make a difference to their outcome if they had nothing to hold onto. This is really a pigman problem and I am sure there will be some cannibalisation among the pigs as this thing plays out.

(http://www.newyorker.com/online/blogs/culture/pigs.jpg)
Title: Re: Hyperinflation or Deflation? Debt Monetization Economics
Post by: monsta666 on January 13, 2013, 09:12:12 AM
It's too bad we've been cursed w/ the historic meaning of "Hyper"-inflation because Hyper-inflation is not the alternative to Deflation.  There can be a lot of bad garden variety inflation long before "Hyper" is ever close to being achieved.

Speaking only for the US, any extended period of moderately high inflation ... such as a redo of the 70's price increases ... would be sufficient to crush most of what remains.  Too many are too close to the edge.  It will not take HI the wipe out a vast majority of J6P.  Most are within one more price doubling of "the end."

It is true there is not really a hard definition of what hyperinflation is. However a common threshold used to distinguish hyperinflation from mere high inflation is that the monthly inflation must exceed 50% to be deemed hyperinflation. Now as you say this leaves a lot of space of bad garden inflation but then it should be noted that hyperinflation is not an overnight affair. Normally it starts of as persistently highish inflation that slowly rises higher until it is actually high inflation. The rate of inflation then continues to rise until it finally becomes hyperinflation. This process will take a few years to play out however. Generally the rate of increase in inflation follows an exponential trajectory as shown below:

(http://i264.photobucket.com/albums/ii162/monsta666/GermanMark_zps5de625fb.jpg)

Notice it took five years for the currency to hyperinflate.

While I agree with RE's idea that the dollar has some time left due to the dire situations with the other colored  toilet paper, it is possible we are wrong. I offer the chart below as evidence, and would like to remind everyone of the opinions expressed about this form of fiat at its low way back in August. They will not ring a bell before the dollar goes into another fall phase!   :icon_study:

                   
Dollar vs Euro
Dollar vs Euro
                                         

I think the thing to remember is all these governments are playing games with one another. One month it is Bernanke declaring he will print money but then another month Super Mario will declare his own program and then the Japanese will roll out their own operation. On a month to month basis the values may shift but in the grand scheme of things (with stress on the word scheme) the values of each currency do not change that much with one another. If the value of the dollar falls then it means the Euro is too high and Mario will be sure to unveil his latest money printing fraud. It is hard for an honest person to keep up and predict what will happen because it goes against his nature to think about lying on a continual basis. The bankers on the other hand have no such limitations and can easily lie without so much as a second thought. Got to really think out the box and pretend you are a immoral snake when guessing what will happen. Not an easy thing to do if you are honest.
Title: Re: Hyperinflation or Deflation?
Post by: alan on January 13, 2013, 04:49:14 PM
All of the above suggest that HI will likely come later rather than sooner.

Or, maybe the dollar system will end with more of a whimper than a bang. No
hyperinflation or dramatic collapse, but rather a steady (or even not-so-steady,
but incremental, over time) migration away and adoption of alternatives.

Don't look now, but it is already underway...

Quote

www.gold-eagle.com/editorials_12/willie123112.html (http://www.gold-eagle.com/editorials_12/willie123112.html)

The Coming Isolation of USDollar
Jim Willie CB
31 December 2012

[big snip]


Welcome to DD Alan

That all sounds too much like Justice, I think they have other plans.

Yes, "they" do. That's what the article was about. Depends on who "they" is.

Thanks for the welcome. Cheers to you, too.

Title: Re: Hyperinflation or Deflation?
Post by: alan on January 13, 2013, 04:58:24 PM
It's too bad we've been cursed w/ the historic meaning of "Hyper"-inflation because Hyper-inflation is not the alternative to Deflation.  There can be a lot of bad garden variety inflation long before "Hyper" is ever close to being achieved.

YES!  All the "hyper" talk can get overheated, and tiring.  It is like doomers' perpetual
expectation of apocalyptic doom that never comes. I mean, maybe it will come, but
it is unlikely, and pointless to speculate about. Things will change, of course, and in
a big way. But probably not apocalyptically.

This is what I was trying to convey on the last page, when I wrote that "maybe the
dollar system will end with more of a whimper than a bang. No hyperinflation or
dramatic collapse, but rather a steady (or even not-so-steady, but incremental, over
time) migration away and adoption of alternatives."  ---
http://www.doomsteaddiner.net/forum/index.php?topic=133.msg14866#msg14866 (http://www.doomsteaddiner.net/forum/index.php?topic=133.msg14866#msg14866)
[the rest was snippets from Jim Willies column "The Coming Isolation of USDollar"  --
well worth reading for an outline of megatrends now well underway]
Title: Re: Hyperinflation or Deflation?
Post by: steve from virginia on January 14, 2013, 05:52:31 PM


@RE:

Quote
“Other Checkable Deposits” I believe represents Reserves the TBTF Banks have on deposit at the Fed, my good friend and fellow Macro Economist Steve from Virginia from Economic Undertow will correct me if I am wrong on this."

Both checking and savings components are essentially the same thing, unsecured loans made by depositors to banks (and guaranteed by way of deposit insurance and a back-up Treasury promise).

Secured deposits are the other large component of the deposit-bank balance sheet. These are loans made to the bank with no guarantee but are secured with high-grade commercial- or Treasury bonds as collateral. Lenders to banks are the infamous 'bond-holders' everyone complains about. They are no different from ordinary depositors except that their investments tend to be very much larger -- as much as $100 billion and more.

Cash flows are also held outside of banks in commercial paper- and repo markets and in non-bank money (cash) markets. Usually the 'depositors' here are very large firms such as General Electric and Boeing Corp. Security is commercial paper (bonds), offered with a haircut,  and US Treasuries without the haircut. Term of loans in these markets is generally overnight. 

What else caught my eye ...

Hyperinflation: depends where. Europe yes, where there is currency arbitrage between local currencies and euro or dollar. If a country leaves the euro and issues its own currency it will depreciate and there will be hyperinflation as locals rush to buy as many dollars as fast as possible. Both the rushing and the buying will amplify pressure on the local currency as is underway in Iran.

US inflation is very unlikely b/c the country is a 'dollar desert' and the government works hard to insure there is nothing to arbitrage against it. There might be some small trade in Canadian dollars against it but nothing like China where both the dollar and euro trade freely on 'curb exchanges' for yuan.
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on January 14, 2013, 06:05:41 PM
Quote
US inflation is very unlikely b/c the country is a 'dollar desert' and the government works hard to insure there is nothing to arbitrage against it. There might be some small trade in Canadian dollars against it but nothing like China where both the dollar and euro trade freely on 'curb exchanges' for yuan.

Agreed, but don't forget Gold, Silver, and most important of all OIL.

Gold and Silver Markets are too small to absorb the huge volume of dollars looking for a hedge, but the OIL and it's related markets are enormous.

I have no proof but it has long been my suspicion that the price of oil would be materially lower than it is now if not for its usage as a dollar hedge. That plunge from 150 to 30 in the financial meltdown was a real eye opener to this observer.
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on January 14, 2013, 06:21:59 PM
The other checkable deposits component of M1 consists of negotiable order of withdrawal (NOW) accounts and automated transfer service (ATS) balances at banks, thrifts, and foreign related institutions, credit union share draft balances, and demand deposits at thrifts. These items are reported on the FR 2900 and, for institutions that do not file the FR 2900, are estimated using data reported on the Call Reports.

   1996-12-12    Current

alfredgraph
alfredgraph

alfred.stlouisfed.org/series?seid=WOCDSL

 
Title: Re: Hyperinflation or Deflation?
Post by: Petty Tyrant on January 22, 2013, 05:33:29 AM
Todays news contained after the main hoo haa of BO's inauguration infotainment, was the BOJ open ended buying up of 138Billion $/month going on the public tab, raising the USFedreserves 80Billion$/month stakes. This being treated as welcome good news..
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on January 22, 2013, 05:40:42 AM
Todays news contained after the main hoo haa of BO's inauguration infotainment, was the BOJ open ended buying up of 138Billion $/month going on the public tab, raising the USFedreserves 80Billion$/month stakes. This being treated as welcome good news..

Sure is a lot of bogus fiat swimming around out there, oceans full of it.

Anyone notice how 100 or 200 billion has become "Chump Change."   :icon_scratch: ::)
Title: Insufficient Inflation
Post by: RE on January 27, 2013, 03:28:34 AM
He Huffed & He Puffed, but the Balloon would not inflate.

Below, Wolf Richter of Testosterone Pit details the expanding CB Balance sheets, Da Fed's alone now $3T and triple what it was in 2007, but sadly Prices haven't tripled. Just increasing  paltry 2%/annum.  Not enough to keep the Corp Balance Sheets looking Profitable!

This has been confounding the Hyperinflationistas for years now, John Williams and Speedy Gonzalo Lira just can't understand why we aren't pushing Wheelbarrows of Toilet Pape around to buy Bread?

Answer is of course said Funny Money is NOT getting sprinkled out to J6P from the Helicopter.  The money isn't passed out in new Loans that Trickle Down to J6P in the form of more Jobs and Higher Salaries.  In fact the opposite is true as Jobs are Slashed and Wages Drop.  Demand drops right after that, lower sales, less profit even with higher prices. Ya can't keep pushing up the prices and make any more money.

If they want Inflation, they gotta start handing out Free Money to J6P, not just Banksters. 1% of Pigmen with big bank accounts just don't BUY enough stuff.

RE

The Failing Pretense of Growth (http://www.zerohedge.com/contributed/2013-01-26/failing-pretense-growth)
Submitted by testosteronepit on 01/26/2013 12:12 -0500

Central BanksChinadefaultFree MoneyRealityTrade DeficitYen


Wolf Richter   www.testosteronepit.com (http://www.testosteronepit.com)   www.amazon.com/author/wolfrichter (http://www.amazon.com/author/wolfrichter)

Hasbro, the second largest toymaker in the US behind Mattel, confessed that it would miss fourth-quarter revenue estimates. Christmas wasn’t kind. Despite “double digit growth in our emerging markets business,” as CEO Brian Goldner said, revenues fell by 2% for 2012 and by 3.8% for the quarter. But 4% inflation, preferably more, would have covered up that debacle.

The consequences are brutal. There will be a pile of restructuring charges, and 10% of the people will be axed—a collective punishment that the Romans used to dish out to lackadaisical legionnaires. They called it “decimation” (Latin for “removal of the tenth”). One in ten soldiers, determined by drawing lots, would be stoned or clubbed to death by his buddies. It did wonders for morale, and the whole empire collapsed.

Procter & Gamble, the consumer products giant with a myriad of ubiquitous brands, brimmed with optimism in its earnings call on Friday as CFO Jon Moeller praised its “growth strategy.” But in the end, sales grew only 2%, about the rate of inflation. It’s tough out there.

A decimation had already been announced last February: 10% of non-manufacturing employees, “roughly 5,700 roles,” he said. Not people, but “roles.” 5,500 of these roles were already gone. The rest would be gone soon. Ahead of schedule. But it still wasn’t enough. In November, P&G “committed to do more,” that is axe another 2% to 4% of “non-manufacturing enrollment,” but “any additional enrollment progress”—enrollment progress!—in fiscal 2013 would give P&G a “head start” for their 2014 to 2016 “enrollment objectives” [for a peculiar American conundrum, read Making Heroes of Those Who Slash Jobs].

But why this decimation? Sales growth. Or rather, the lack thereof. Which Moeller said, would be “1% to 2%.” Below the rate of inflation. Other large companies are in a similar predicament. Microsoft, for example, admitted on Thursday that its revenues rose a paltry 3%. Inflation is just too embarrassingly low for these corporate giants that are dependent on incessant price increases to doll up their top line.

Fed to the rescue! And it has been trying. After years of escalating waves of QE, the Fed has finally managed to print so much money that its balance sheet officially as of Friday, and for the first time in US history, broke through the $3 trillion mark. Here is a screenshot to eternalize the historic event:



On August 1, 2007, when the prior all-time-craziest Fed-inspired credit bubble was showing signs of blowing up, there were “only” $874 billion in assets on that balance sheet. Over the last two months alone, the Fed printed enough dollars to mop up $160.4 billion in securities. The two largest asset groups on the balance sheet: US Treasuries ($1.697 trillion) and mortgage-backed securities ($983 billion). Every month the Fed will add $45 billion in Treasuries and $40 in mortgage-backed securities. Until it comes up with something new.

Other central banks have also run their printing presses until they’re white hot. As all this money went looking for things to buy, it pushed bonds into the stratosphere, and yields into hell. Risk is no longer compensated. Some governments have been borrowing at negative yields. Even 10-year Treasuries yield less than inflation. And junk bonds with a considerable chance of default, if the free money ever dries up, yield as little as a 1-year FDIC-insured CD used to yield before the financial crisis. Commodity prices have been driven up. Food has become unaffordable for many people in poorer parts of the world. And equities have been driven to lofty heights. China just warned that “hot money” fresh off the US and Japanese presses would wash over China and drive asset bubbles to even more insane and dangerous heights.

But the one thing all this money-printing just hasn’t done in the US in 2012 is create the kind of substantive inflation that a lot of corporations need to beautify their revenues. Inflation creates the pretense of growth—just like salaries that have been rising, but less than inflation. It makes things look good on the surface, and analysts can go around and hype the company’s “growth strategy,” and everybody is happy. Reality be damned.

Meanwhile, European talking heads have been reassuring us on an hourly basis that the worst of the debt crisis is over. But the Japanese trade deficit, a measure of reality, not words, tells a different story about the crisis in Europe. And about troubles coming to a boil in China. But neither can be cured by Prime Minister Shinzo Abe’s plan to demolish the yen. Read.... What the Japanese Trade Deficit Says About the Fraying Fabric In China And Europe.
Title: Currency War Conundrums
Post by: RE on January 31, 2013, 01:36:53 AM
When all major Currencies Print Simultaneously, how does one currency HI against the next?

When Debt is created but currency is not lent out into the market, how do MOST people have enough money to pay inflated prices?

Why does ANYONE accept the "value" of these currencies anymore?

RE

Things That Make You Go Hmm - Such As Currency Wars (http://www.zerohedge.com/news/2013-01-30/things-make-you-go-hmm-such-currency-wars)
Submitted by Tyler Durden on 01/30/2013 21:15 -0500

BondCentral Banks


Nobody ever really wins at Thumb Wars, which makes the whole thing rather pointless; and, as it turns out, the same can be said about the subject of Grant Williams discussion in this week's 'Things That Make You Go Hmmm...', - Currency Wars - which seem to be erupting across the globe; and, as they gain in intensity, these monetary conflicts are threatening to throw a major spanner in the works of a world that, until recently, seemed to have been operating under the assumption that it was possible for multiple countries to all devalue their currencies simultaneously in order to inflate their massive debts away.

Poor, misguided fools.

There are many parts of the current financial equation that puzzle me, from investors who are happy to accept guaranteed losses in their government-bond portfolios to governments that genuinely seem to think that increasing their spending by a tiny bit less than they had intended counts as a 'spending cut'; from yield-starved souls who feel that the appropriate return for dipping one’s toe into the junk bond market is sub-6% to business owners who, in a world sloshing in trillions of freshly printed funny money, are forced to pay double-digit interest rates for access to some of the magical bounty.

But beneath it all, at the wellspring of all the disconnects and false price signals that are making investing in today’s supposedly free markets an impossible task, lies the source of my greatest consternation: central banks.

I have one simple question for those august institutions, and it is this:


Do they really think it is possible for them all to devalue their currencies against each other simultaneously and achieve anything but rampant and universal inflation at some future point in time?

As we head into 2013, we find ourselves in a situation unlike any that has ever occurred in the history of global finance. The ability to simplify the complexity of that situation is something only the very brightest amongst us are able to do, and one such man is Raoul Pal of the Global Macro Investor put together a very simple list which, at the time he compiled it in late December, beautifully highlighted the utter absurdity of today's central banking folly.

The list was split into sections that grouped the 38 countries that had negative or zero real rates (yes: THIRTY. EIGHT.), as well as the countries that either had explicit QE programs in place or were actively intervening in or verbally manipulating their currencies:

(http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2013/01/20130130_war.jpg)

Now, does it seem remotely possible that all these countries can have weak currencies at the same time? Of course it isn't possible. Not without rampant inflation, it isn't. But that doesn't appear to be a problem for the central bankers of the modern world, who are confident that inflation is 'contained'. Yes, 'contained'. Is anyone paying attention, I wonder?

The competitive devaluation merry-go-round will continue, because these buffoons have left themselves no other options.

Much more inside...
TTMYGH (http://www.scribd.com/doc/123055450/TTMYGH#)

Title: Re: Currency War Conundrums
Post by: Golden Oxen on January 31, 2013, 06:25:17 AM
When all major Currencies Print Simultaneously, how does one currency HI against the next?

When Debt is created but currency is not lent out into the market, how do MOST people have enough money to pay inflated prices?

Why does ANYONE accept the "value" of these currencies anymore?

RE

This is what Gold is all about.
                                                 
                                             

Things That Make You Go Hmm - Such As Currency Wars (http://www.zerohedge.com/news/2013-01-30/things-make-you-go-hmm-such-currency-wars)
Submitted by Tyler Durden on 01/30/2013 21:15 -0500

BondCentral Banks


Nobody ever really wins at Thumb Wars, which makes the whole thing rather pointless; and, as it turns out, the same can be said about the subject of Grant Williams discussion in this week's 'Things That Make You Go Hmmm...', - Currency Wars - which seem to be erupting across the globe; and, as they gain in intensity, these monetary conflicts are threatening to throw a major spanner in the works of a world that, until recently, seemed to have been operating under the assumption that it was possible for multiple countries to all devalue their currencies simultaneously in order to inflate their massive debts away.

Poor, misguided fools.

There are many parts of the current financial equation that puzzle me, from investors who are happy to accept guaranteed losses in their government-bond portfolios to governments that genuinely seem to think that increasing their spending by a tiny bit less than they had intended counts as a 'spending cut'; from yield-starved souls who feel that the appropriate return for dipping one’s toe into the junk bond market is sub-6% to business owners who, in a world sloshing in trillions of freshly printed funny money, are forced to pay double-digit interest rates for access to some of the magical bounty.

But beneath it all, at the wellspring of all the disconnects and false price signals that are making investing in today’s supposedly free markets an impossible task, lies the source of my greatest consternation: central banks.

I have one simple question for those august institutions, and it is this:


Do they really think it is possible for them all to devalue their currencies against each other simultaneously and achieve anything but rampant and universal inflation at some future point in time?

As we head into 2013, we find ourselves in a situation unlike any that has ever occurred in the history of global finance. The ability to simplify the complexity of that situation is something only the very brightest amongst us are able to do, and one such man is Raoul Pal of the Global Macro Investor put together a very simple list which, at the time he compiled it in late December, beautifully highlighted the utter absurdity of today's central banking folly.

The list was split into sections that grouped the 38 countries that had negative or zero real rates (yes: THIRTY. EIGHT.), as well as the countries that either had explicit QE programs in place or were actively intervening in or verbally manipulating their currencies:

(http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2013/01/20130130_war.jpg)

Now, does it seem remotely possible that all these countries can have weak currencies at the same time? Of course it isn't possible. Not without rampant inflation, it isn't. But that doesn't appear to be a problem for the central bankers of the modern world, who are confident that inflation is 'contained'. Yes, 'contained'. Is anyone paying attention, I wonder?

The competitive devaluation merry-go-round will continue, because these buffoons have left themselves no other options.

Much more inside...
TTMYGH (http://www.scribd.com/doc/123055450/TTMYGH#)
Title: Re: Hyperinflation or Deflation?
Post by: widgeon on January 31, 2013, 02:24:10 PM
Remarkable how so many nations with huge debts and deficits are still able to buy each others' notes.

Title: Re: Currency War Conundrums
Post by: monsta666 on January 31, 2013, 03:53:43 PM
This is what Gold is all about.
                                                 
                                             

What do you think of the story of King Midas? Is it a coincidence Disney happened to release King Midas' tale in 1935 during the Great Depression just as the US economy left the gold standard in 1933?

http://www.youtube.com/v/HTTfIyavoJo&fs=1
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on January 31, 2013, 08:44:13 PM
Quote
What do you think of the story of King Midas? Is it a coincidence Disney happened to release King Midas' tale in 1935 during the Great Depression just as the US economy left the gold standard in 1933?

I doubt it Monster, just another popular fable with meaning. "Beware Of What You Wish For"

Enjoyed the cartoon, brought back memories of a happier time in my youth when Saturday afternoon at the movies was a big thing eagerly awaited. Two feature films, prefaced by a dozen cartoons, a break between the movies with the Three Stooges, Flash Gordon, Abbot and Costello performances while awaiting movie number two.

Cost of admission was 10 cents and a box of freshly popped pop corn the size of a cereal box was a nickel.

You kids in the Diner have no idea what inflation really is and it is most difficult to explain to one that hasn't witnessed it.
Title: Re: Hyperinflation or Deflation?
Post by: RE on January 31, 2013, 09:17:36 PM
You kids in the Diner have no idea what inflation really is and it is most difficult to explain to one that hasn't witnessed it.

You haven't been where we're going either GO.

Quote from: Revelation 18:11-18
11 “And the merchants of the earth will weep and mourn over her, for no one buys their merchandise anymore: 12 merchandise of gold and silver, precious stones and pearls, fine linen and purple, silk and scarlet, every kind of citron wood, every kind of object of ivory, every kind of object of most precious wood, bronze, iron, and marble; 13 and cinnamon and incense, fragrant oil and frankincense, wine and oil, fine flour and wheat, cattle and sheep, horses and chariots, and bodies and souls of men. 14 The fruit that your soul longed for has gone from you, and all the things which are rich and splendid have gone from you,[e] and you shall find them no more at all. 15 The merchants of these things, who became rich by her, will stand at a distance for fear of her torment, weeping and wailing, 16 and saying, ‘Alas, alas, that great city that was clothed in fine linen, purple, and scarlet, and adorned with gold and precious stones and pearls! 17 For in one hour such great riches came to nothing.’ Every shipmaster, all who travel by ship, sailors, and as many as trade on the sea, stood at a distance 18 and cried out when they saw the smoke of her burning, saying, ‘What is like this great city?’

RE
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on January 31, 2013, 09:37:02 PM
Quote
You haven't been where we're going either GO.

That's for sure, none of us have been there, I am only trying my best to survive until we arrive. Amazing how you don't understand that.  :icon_scratch:

Note that you bold faced the Gold and Silver in your post, the banksters did a real good job on you brainwashing. I sure won't stop trying to undo the brain damage inflicted upon you, but those Illuminati are a powerful bunch of Bastards. My odds of success are quite slim, lottery odds at best.  :'(

Trying to save as many as I can.  :icon_sunny:
Title: Re: Hyperinflation or Deflation?
Post by: Petty Tyrant on January 31, 2013, 09:37:22 PM
You kids in the Diner have no idea what inflation really is and it is most difficult to explain to one that hasn't witnessed it.

You haven't been where we're going either GO.

Quote from: Revelation 18:11-18
11 “And the merchants of the earth will weep and mourn over her, for no one buys their merchandise anymore: 12 merchandise of gold and silver, precious stones and pearls, fine linen and purple, silk and scarlet, every kind of citron wood, every kind of object of ivory, every kind of object of most precious wood, bronze, iron, and marble; 13 and cinnamon and incense, fragrant oil and frankincense, wine and oil, fine flour and wheat, cattle and sheep, horses and chariots, and bodies and souls of men. 14 The fruit that your soul longed for has gone from you, and all the things which are rich and splendid have gone from you,[e] and you shall find them no more at all. 15 The merchants of these things, who became rich by her, will stand at a distance for fear of her torment, weeping and wailing, 16 and saying, ‘Alas, alas, that great city that was clothed in fine linen, purple, and scarlet, and adorned with gold and precious stones and pearls! 17 For in one hour such great riches came to nothing.’ Every shipmaster, all who travel by ship, sailors, and as many as trade on the sea, stood at a distance 18 and cried out when they saw the smoke of her burning, saying, ‘What is like this great city?’

RE

Sounds like Fast Crash, something Loyd Blankfein hinted at last week being interviewed about the euro;  Grinning like a cheshire cat stated they can SUPPRESS but not PREVENT a collapse.

Title: Re: Hyperinflation or Deflation?
Post by: RE on January 31, 2013, 10:54:42 PM

Note that you bold faced the Gold and Silver in your post, the banksters did a real good job on you brainwashing.

Nonsense. Nobody here including you Bashes Banksters as often as I do or at the length I do or in the detail I do.  EVERYBODY KNOWS this.  I'm the guy with the Guillotine meme.  (http://www.websmileys.com/sm/violent/sterb251.gif)

Banksters Hoodwinked J6P for Millenia with Gold and Silver, long before Fiat was a Twinkle in the Eye of Sir Isaac Newton.  Babylonians trading in PMs got as FOOKED as everybody else when TSHTF at the Tower of Babel.

You just have lost too many functional Brain Cells to Alzheimers to be able to grasp the lessons of History.  :icon_mrgreen:

RE
Title: Argentina on the Ropes...AGAIN!
Post by: RE on February 05, 2013, 04:30:01 AM
Wonder how Ferfal is doing?  Doug Casey?

RE

Argentina Freezes Supermarket Prices To Halt Soaring Inflation; Chaos To Follow (http://www.zerohedge.com/news/2013-02-04/argentina-freezes-supermarket-prices-halt-soaring-inflation-chaos-follow)

(http://www.zerohedge.com/sites/default/files/pictures/picture-5.jpg) (http://www.zerohedge.com/users/tyler-durden)
Submitted by Tyler Durden (http://www.zerohedge.com/users/tyler-durden) on 02/04/2013 19:25 -0500
Title: Re: Hyperinflation or Deflation? Chicken or the Egg?
Post by: Golden Oxen on February 07, 2013, 03:02:02 AM
There is no inflation Diners, just ask Big Brothers Bureau of Lying Statistics  :(


By Ned W Schmidt CFA
Created 6 Feb 2013

No, we do not have the answer to that age old question, and nor do we plan on writing any further about the collapse of AAPL. We do know that when it comes to prices, the chicken came first this time. What is baffling, and beyond our understanding, is that the investment world is still blathering on about technology and bank stocks. Chickens and eggs are doing better than both, as shown in the charts below. As to our question pertaining prices, chicken prices bottomed in September 2011. Since then chicken prices have risen nearly 70%, beating most other prices.

                                           
eggs cash us d 2011 2013
eggs cash us d 2011 2013

Egg prices bottomed last Summer. So, it seems, the chicken did come first. Since that major low, egg prices have more than doubled. Clearly, eating breakfast has become more expensive. So, turn off the cable business show, and tune in the radio to the daily agricultural price report. If a chicken and her eggs can out perform Street gurus, why listen to them?                                 
                                           
                                           
us cash broilers 2011 2013
us cash broilers 2011 2013

Some have been wiser than those, to be kind to their ineptitude, still mired in technology and bank stocks. Above chart, about which we have talked before, is a price index for the first tier Agri-Food stocks. That index rose to a new high at the end of January and is working on another as February unfolds.

Much, actually too much, has been said and written of the market, as measured by the S&P 500, making a multi year high. As that chart portrays, it has made a new multi year high, but how someone can crow about that measly performance is beyond our ability to explain. At the same time, little needs to be said about how Agri-Investors have done. While one cannot eat an Agri-Food stock, one might be able to afford chicken and eggs at the dinner table in the future. Remember to invite your poor friend still waiting for technology and bank stocks to recover. They might be hungry.

                                     
tier one agri equities vs sp500 2007 2012
tier one agri equities vs sp500 2007 2012

http://feedproxy.google.com/~r/fso/~3/uYog_JihiSI/chicken-or-the-egg (http://feedproxy.google.com/~r/fso/~3/uYog_JihiSI/chicken-or-the-egg)   :icon_study:
Title: Re: Hyperinflation or Deflation?
Post by: widgeon on February 07, 2013, 10:08:36 AM
Eggs are up about 50% in the last 6 months.

Pork sausage seems to be down though.

Have you seen the prices of cans of "Cream of Whatever" soups?  Take your nitro-capsules with you.

Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on February 07, 2013, 10:06:07 PM
Eggs are up about 50% in the last 6 months.

Pork sausage seems to be down though.

Have you seen the prices of cans of "Cream of Whatever" soups?  Take your nitro-capsules with you.

Hi Widgeon, My understanding of the pork and beef prices not exploding yet is due to the premature slaughtering of the herds because they could not afford of get delivery of needed grains from the drought. The research I get on commodity prices are all warning that this is a temporary situation and the prices will explode once this supply is sold off.

I am a great believer in the Chicken Soup, or Jewish Penicillin, as it is jokingly called theory of staving off colds and flu and make chicken soup every week in the winter. The prices of the ingredients have exploded recently, carrots, celery, parsley, chickens, even the lowly onion. Nothing shocks me like the price of potatoes however, for over twenty years I bought a ten pound bag of Maine Potatoes for a buck, now its 3.79. and premium Idaho potatoes go for 89cts a lb. yes eighty nine cents a pound, as if they were fresh green peppers.

As for your comment about the price of canned soups, I marvel at how anyone buys them anymore, sometimes I think they are joking or testing the consumer to see how dumbed down he has become when I see the prices of those cans of sodium.  :-\
Title: Lessons of the 1930s
Post by: RE on February 08, 2013, 03:49:54 AM
The saying goes that History doesn't Repeat, but it does Rhyme.

The Rhyme in this case appears to be what was BAD in 1930 is just SAD in 2013.  No saving this shit.

RE

Lessons From The 1930s Currency Wars (http://www.zerohedge.com/news/2013-02-07/lessons-1930s-currency-wars)

(http://www.zerohedge.com/sites/default/files/pictures/picture-5.jpg) (http://www.zerohedge.com/users/tyler-durden)
Submitted by Tyler Durden (http://www.zerohedge.com/users/tyler-durden) on 02/07/2013 20:23 -0500
Title: Re: Hyperinflation or Deflation? Gasoline Prices on the Rise
Post by: Golden Oxen on February 09, 2013, 04:41:58 AM
May Pose Risk to Consumer Sentiment

As the winter storm pounded the Northeastern United States today, gasoline futures hit another high. The March delivery contract broke $3.06, indicating that retail prices for fuel will be going up.

Already prices at the pump are the highest for this time of year.

    CNBC: - Nationally, retail gasoline prices have soared 11 cents in a week and nearly 30 cents in a month to $3.57 a gallon on Friday, according to AAA. Pump prices are the highest on record for early February, and are rising the fastest along the coasts.

    The state-wide average price of gasoline in New York is $3.92 a gallon and California gas prices on average have now surpassed the $4-a-gallon mark.

Increased demand from abroad, stronger crude prices, and some refinery shutdowns are all contributing to higher prices.

                                                 
gasoline futures 8 feb 2013 jpg
gasoline futures 8 feb 2013 jpg

http://feedproxy.google.com/~r/fso/~3/wLxE6WP62Sw/gasoline-prices-on-rise-may-pose-risk (http://feedproxy.google.com/~r/fso/~3/wLxE6WP62Sw/gasoline-prices-on-rise-may-pose-risk)   :icon_study:
Title: Liquidity Traps & Asset Class Sinkholes
Post by: RE on February 16, 2013, 11:20:27 PM
Liquidity Traps & Asset Class Sinkholes (http://www.doomsteaddiner.net/blog/2013/02/16/liquidity-traps-asset-class-sinkholes/) by Diner Godfather RE now UP on the Diner Blog!

More Classic Stuff, this time dug from the archives of Reverse Engineering.  My Oct 2010 take on the long running HI vs Deflation issue.  Still mainly in the Deflationato Camp.

RE
Title: Re: Liquidity Traps & Asset Class Sinkholes
Post by: jdwheeler42 on February 17, 2013, 05:54:06 AM
I love the part about along the lines that "money will either disappear or become worthless".  I've been trying to figure out a way to simplify explaining deflation vs. hyperinflation and how the end result is basically the same.  For the more economically sophisticated I've been saying that computer digits will revert to their intrinsic value, but that goes over most people's heads.
Title: Why Peak Oil Threatens the International Monetary System
Post by: RE on February 18, 2013, 05:30:20 AM
A fairly long screed by Erik Townshend and nothing real new for veteran Diners, but a good primer for newbies on how the IMS works (or doesn't).

The main thing which bugs me about this is that the flight to a "safer" currency is unexplainable.  If nations could trade directly in Gold, they would have done so long ago and abandoned the Dollar when Nixon shut the Gold Window.  Who would believe Chinese Yuan have any more value than Dollars?

When the Dollar rolls over, Money on the International level of trade is DONE for quite some time, if not (hopefully) forever more.

RE

Commentary: Why Peak Oil Threatens the International Monetary System (http://aspousa.org/2013/01/commentary-why-peak-oil-threatens-the-international-monetary-system/)

ASPO-USA (http://aspousa.org/author/aspo-usa/)
 |
January 6, 2013

Commentary: Why Peak Oil Threatens the International Monetary System
(Note: Commentaries do not necessarily represent the position of ASPO-USA. )
By Erik Townsend (http://www.eriktownsend.com/)
Introduction
Having spent the last several years of my life engineering investment strategies to profit from the inevitability of Peak Oil, I’ve become obsessed with understanding the ramifications of radically different energy supply dynamics on the global economy. There are many facets to this, some obvious and some not so obvious. So when ASPO-USA Executive Director Jan Mueller approached me at the end of this year’s conference in Austin and asked for an article discussing the less obvious economic impacts of Peak Oil, I knew instantly that the topic should be the threat Peak Oil poses to the International Monetary System (IMS). This connection is critically important, but far from obvious.
I assure you that this story is very much about Peak Oil, but please bear with me, as I’ll need to start by reviewing what the IMS is and how it came about in the first place. Then I’ll explain the role energy has already played in shaping the present-day IMS, and finally, I’ll tie this back to Peak Oil by explaining why rising energy prices could very well be the catalyst that will cause the present system to fail.

What is the International Monetary System?
At the end of World War II, many countries were literally lying in ruin, and needed to be rebuilt. It was clear that international trade would be very important going forward, but how would it work? World leaders recognized the need to architect a new monetary system that would facilitate international trade and allow the world to rebuild itself following the most devastating war in world history.
A global currency was out of the question because the many countries of the world valued their sovereignty, and wanted to continue to issue their own domestic currencies. In order for international trade to flourish, a system was needed to allow trade between dozens of different nations, each with its own currency.

(http://aspousa.org/wp-content/uploads/2013/01/brettonwoods.jpg) (http://aspousa.org/wp-content/uploads/2013/01/brettonwoods.jpg)


A convention was organized by the United Nations for the purpose of bringing world leaders together to architect this new International Monetary System. The meetings were held in July, 1944 at the Mt. Washington Hotel in Bretton Woods, New Hampshire, and were attended by 730 delegates representing all 44 allied nations. The official name for the event was the United Nations Monetary and Financial Conference, but it would forever be remembered as The Bretton Woods Conference.
To this day, the system designed in those meetings remains the basis for all international trade, and is known as the Bretton Woods System. The system has evolved quite a bit since its inception, but its core principles remain the basis for all international trade. I’m going to focus this article on the parts of the system which I believe are now at risk of radical change, with Peak Oil the most likely catalyst to bring about that change. Readers seeking a deeper understanding of the system itself should refer to the Further Reading section at the end of this article.

Why is an International Monetary System needed?
It simply wouldn’t be practical for all countries to sell their export products to other countries in their own currencies. If one had to pay for wine from France in French Francs (there was no Euro currency in 1944), and then pay to import a BMW automobile in German Marks, then pay for copper produced in Chile in Pesos, each country would face an overwhelming burden just maintaining reserve deposits of all the various world currencies. The system of trade would be very inefficient. For centuries, this problem has been solved by using a single standard currency for all international trade.
Because a standard-currency system dictates that each nation’s central bank will need to maintain a reserve supply of the standard currency in order to facilitate international trade, the standard currency is known as the reserve currency. At various times in history, the Greek Drachma, the Roman Denari, and the Islamic Dinar have served as de-facto reserve currencies. Prior to World War II, the English Pound Sterling was the international reserve currency.
Throughout history, reserve currencies came into and out of use through happenstance. The Bretton Woods conference marked the first time that a global reserve currency was established by formal treaty between cooperating nations. The currency chosen was, of course, the U.S. Dollar.
How does the IMS work?
The core of the system was the U.S. Dollar serving as the standard currency for international trade. To assure other nations of the dollar’s value, the U.S. Treasury would guarantee that other nations could convert their U.S. dollars into gold bullion at a fixed exchange rate of $35/oz. Other nations would then “peg” their currencies to the U.S. dollar at a fixed rate of exchange. Each nation’s central bank would be responsible for “defending” the official exchange rate to the U.S. dollar by offering to buy or sell any amount of currency bid or offered at that price. This meant each nation would need to keep a healthy reserve of U.S. dollars on hand to service the needs of domestic businesses wishing to convert money between the local currency and the U.S. dollar.

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By design, the effect of the system was that each national currency was indirectly redeemable for gold. This was true because each nation’s central bank guaranteed convertibility of its own currency to U.S. dollars at some fixed rate of exchange, and the U.S. Treasury guaranteed convertibility of U.S. dollars to gold at a fixed rate of $35/oz. So long as all of the governments involved kept their promises, each nation’s domestic currency would be as good as gold, because it was ultimately convertible to gold. United States President Richard Nixon would break the most central promise of the entire system (U.S. dollar convertibility for gold) on August 15, 1971. I’ll come back to that event later in this article.

Triffin’s Dilemma
In 1959, three years after M. King Hubbert’s now-famous Peak Oil predictions, economist Robert Triffin would make equally prescient predictions about the sustainability of the “new” IMS, which was then only 15 years old. Sadly, Triffin’s predictions, like Hubbert’s, would be ignored by the mainstream.
(http://aspousa.org/wp-content/uploads/2013/01/triffin-239x300.jpg) (http://aspousa.org/wp-content/uploads/2013/01/triffin.jpg)The whole reason for choosing the U.S. dollar as the global reserve currency was that without a doubt, the U.S.was the world’s strongest credit in 1944. To assure confidence in the system, the strongest, most creditworthy currency on earth was chosen to serve as the standard unit of account for global trade. To eliminate any question about the value of the dollar, the system was designed so that any international holder of U.S. dollars could convert those dollars to gold bullion at a pre-determined fixed rate of exchange. Dollars were literally as good as gold.
Making the USD the world’s reserve currency created an enormous international demand for more dollars to meet each nation’s need to hold a reserve of dollars. The USA was happy to oblige by printing up more greenbacks. This provided sufficient dollars for other nations to hold as foreign exchange reserves, while at the same time allowing the U.S.to spend beyond its means without facing the same repercussions that would occur were it not the world’s reserve currency issuer.
Triffin observed that if you choose a currency because it’s a strong credit, and then give the issuing nation a financial incentive to borrow and print money recklessly without penalty, eventually that currency won’t be the strongest credit any more! This paradox came to be known as Triffin’s Dilemma.
Specifically, Triffin predicted that as issuer of the international reserve currency, the USA would be prone to over consumption, over-indebtedness, and tend toward military adventurism. Unfortunately, the U.S. Government would prove Triffin right on all three counts.
Triffin correctly predicted that the USA would eventually be forced off the gold standard. The international demand for U.S. dollars would allow the USA to create more dollars than it otherwise could have without bringing on domestic inflation. When a country creates too much of its own currency and that money stays in the country, supply-demand dynamics kick in and too much money chasing too few goods and services results in higher prices. But when a country can export its currency to other nations who have an artificial need to hold large amounts of that currency in reserve, the issuing country can create far more money than it otherwise could have, without causing a tidal wave of domestic inflation.
Nixon proves Triffin right
By 1970, the U.S.had drastically over-spent on the Vietnam War, and the number of dollars in circulation far outnumbered the amount of gold actually backing them. Other nations recognized that there wasn’t enough gold in Fort Knox for the U.S.to back all the dollars in circulation, and wisely began to exchange their excess USDs for gold. Before long, something akin to a run on the bullion bank had begun, and it became clear that the USA could not honor the $35 conversion price indefinitely.
On August 15, 1971, President Nixon did exactly what Triffin predicted more than a decade earlier: he declared force majeure, and defaulted unilaterally on theUSA’s promise to honor gold conversion at $35/oz, as prescribed by the Bretton Woods accord.
Of course Nixon was not about to admit that the reason this was happening was that the U.S. Government had abused its status as reserve currency issuer and recklessly spent beyond its means. Instead, he blamed “speculators”, and announced that the United Stateswould suspend temporarily the convertibility of the Dollar into gold. Forty-two years later, the word temporarily has taken on new meaning.

Exorbitant Privilege
With the whole world conducting international trade in U.S. dollars, nations with large export markets wound up with a big pile of U.S. dollars (payments for the goods they exported). The most obvious course of action for the foreign companies who received all those dollars as payment for their exported products would be to exchange the dollars on the international market, converting them into their own domestic currencies. What may not be obvious at first glance is that there would be catastrophic unintended consequences if they actually did that.
If all the manufacturing companies in Japan or China converted their dollar revenues back into local currency, the act of selling dollars and buying their domestic currencies would cause their own currencies to appreciate markedly against the dollar. The same holds true for oil exporting countries. If they converted all their dollar revenues back into their own currencies, doing so would make their currencies more expensive against the dollar. That would make their exports less attractive because, being priced in dollars, they would fetch lower and lower prices after being converted back into the exporting nation’s domestic currency.
The solution for the exporting nations was for their central banks to allow commercial exporters to convert their dollars for newly issued domestic currency. The central banks of exporting nations would wind up with a huge surplus of U.S. dollars they needed to invest somewhere without converting them to another currency. The obvious place to invest them was into U.S. Government Bonds.
This is the mechanism through which the reserve currency status of the dollar creates artificial demand for U.S. dollar-denominated treasury debt. That artificial demand allows the United States government to borrow money from foreigners in its own currency, something most nations cannot do at all. What’s more, this artificial demand for U.S. Treasury debt allows the USA to borrow and spend far more borrowed foreign money than it would otherwise be able to, were it not the world’s reserve currency issuer. The reason is that, if not for the artificial need to hold dollar reserves, foreign lenders would be much less inclined to purchase U.S. debt, and would therefore demand much higher interest rates. Similarly, the more that international trade has grown as a result of globalization, the more the United States’ exorbitant privilege has grown.
Have you ever wondered why China, Japan, and the oil exporting nations have such enormous U.S. Treasury bond holdings, despite the fact that they hardly pay any interest these days? The reason is definitely not because those nations think 1.6% interest on a 10-year unsecured loan to a nation known to have a reckless spending habit is a good investment. It’s because they have little other choice. The more their own economies rely on exports priced in dollars, the more they need to keep their own currencies attractively priced relative to the U.S. dollar in order for their exports to remain competitive on the international market. To achieve that outcome, they must hold large reserves denominated in U.S. dollars. That’s why China and Japan – major export economies – are the biggest foreign holders of U.S. debt.
The net effect of this system is that the USA gets to borrow money from foreigners at artificially low interest rates. Moreover, the USA can become over-indebted without the usual consequences of increasing borrowing cost and declining creditworthiness. Other nations have little choice but to maintain a large reserve supply of dollars as the international trade currency. But the U.S. has no need to maintain large reserves of other nations’ currencies, because those currencies are not used in international trade.
(http://aspousa.org/wp-content/uploads/2013/01/valery-203x300.jpg) (http://aspousa.org/wp-content/uploads/2013/01/valery.jpg)By the mid-1960s, this phenomenon became known as exorbitant privilege: That phrase refers to the ability of the USA to go into debt virtually for free, denominated in its own currency, when no other nation enjoys such a privilege. The phrase exorbitant privilege is often attributed to French President Charles de Gaulle, although it was actually his finance minister, Valery Giscard d’Estaing, who coined the phrase.
What’s important to understand here is that the whole reason the U.S. can get away with running trillion-dollar budget deficits without the bond market revolting (a la Greece) is because of exorbitant privilege. And that privilege is a direct consequence of the U.S. dollar serving as the world’s reserve currency. If international trade were not conducted in dollars, exporting nations (both manufacturers and oil exporters) would no longer need to hold large reserves of U.S. dollars.
Put another way, when the U.S. dollar loses its reserve currency status, the U.S.will lose its exorbitant privilege of spending beyond its means on easy credit. The U.S. Treasury bond market will most likely crash, and borrowing costs will skyrocket. Those increased borrowing costs will further exacerbate the fiscal deficit. Can you say self-reinforcing vicious cycle?

But wait… Wasn’t Gold convertibility the whole basis of the system?
If the whole point of the Bretton Woods system was to guarantee that all the currencies of the world were “as good as gold” because they were convertible to U.S. dollars, which in turn were promised to be convertible into gold… And then President Nixon broke that promise in 1971… Wouldn’t that suggest that the whole system should have blown up in reaction to Nixon slamming the gold window shut in August of ’71?
Actually, it almost did. But miraculously, the system has held together for the last 42 years, despite the fact that the most fundamental promise upon which the system was based no longer holds true. To be sure, the Arabs were not happy about Nixon’s action, and they complained loudly at the time, rhetorically asking why they should continue to accept dollars for their oil, if those dollars were not backed by anything, and might just become worthless paper. After all, if U.S. dollars were no longer convertible into gold, what value did they really have to foreigners? The slamming of the gold window by President Nixon in 1971 was not the only cause of the Arab oil embargo, but it was certainly a major influence.

What’s holding the IMS together?
Why didn’t the rest of the world abandon the dollar as the global reserve currency in reaction to the USA unilaterally reneging on gold convertibility in 1971? In my opinion, the best answer is simply “Because there was no clear alternative”. And to be sure, the unmatched power of the U.S.military had a lot to do with eliminating what might otherwise have been attractive alternatives for other nations.
U.S. diplomats made it clear to Arab leaders that they wanted the Arabs to continue pricing their oil in dollars. Not just for U.S.customers, but for the entire world. Indeed, U.S. leaders at the time understood all too well just how much benefit the USA derives from exorbitant privilege, and they weren’t about to give it up.
After a few years of tense negotiations including the infamous oil embargo, the so-called petro-dollar business cycle was born. The Arabs would only accept dollars for their oil, and they would re-invest most of their profits in U.S. Treasury debt. In exchange for this concession, they would come under the protectorate of the U.S. military. Some might even go so far as to say that the U.S. government used the infamous Mafia tactic of making the Arabs an “offer they couldn’t refuse” – forcing oil producing nations to make financial concessions in exchange for “protection”.
With the Arabs now strongly incented to continue pricing the world’s most important commodity in U.S. dollars, the Bretton Woods system lived on. No longer constrained by the threat of a run on its bullion reserves, the U.S. kicked its already-entrenched practice of borrowing and spending beyond its means into high gear. For the past 42 years, the entire world has continued to conduct virtually all international trade in Dollars. This has forced China,Japan, and the oil exporting nations to buy and hold an enormous amount of U.S. Treasury debt. Exorbitant privilege is the key economic factor that allows the U.S.to run trillion dollar fiscal deficits without crashing the Treasury bond market. So far.

There’s a limit to how long this can last
But how long can this continue? The U.S.debt-to-GDP ratio now exceeds 100%, and the U.S.has literally doubled its national debt in the last 6 years alone. It stands to reason that eventually, other nations will lose faith in the dollar and start conducting business in some other currency. In fact, that’s already started to happen, and it’s perhaps the most important, under-reported economic news story in all of history.
Some examples…China and Brazil are now conducting international trade in their own currencies, as are Russia and China. Turkey and Iran are trading oil for gold, bypassing the dollar as a reserve currency. In that case,U.S.sanctions are a big part of the reason Iran can’t sell its oil in dollars. But I wonder if President Obama considered the undermining effect on exorbitant privilege when he imposed those sanctions. I fear that the present U.S. government doesn’t understand the importance of the dollar’s reserve currency role nearly as well as our leaders did in the 1970s.

The Biggest Risk We Face is a U.S. Bond and Currency Crisis
To be sure, Peak Oil in general represents a monumental risk to humanity because it’s literally impossible to feed all 7+ billion people on the planet without abundant energy to run our farming equipment and distribution infrastructure. But the risks stemming directly from declining energy production are not the most imposing, in my view.
Decline rates will be gradual at first, and it will be possible, even if unpopular, to curtail unnecessary energy consumption and give priority to life-sustaining uses for the available supply of liquid fuels. In my opinion, the greatest risks posed by Peak Oil are the consequential risks. These include resource wars between nations, hoarding of scarce resources, and so forth. Chief among these consequential risks is the possibility that the Peak Oil energy crisis will be the catalyst to cause a global financial system meltdown. In my opinion, the USA losing its reserve currency status is likely to be at the heart of such a meltdown.
A good rule of thumb is that if something is unsustainable and cannot continue forever, it will not continue forever. The present incarnation of the IMS, which affords the United States the exorbitant privilege of borrowing a seemingly limitless amount of its own currency from foreigners in order to finance its reckless habit of spending beyond its means with trillion-dollar fiscal deficits, is a perfect example of an unsustainable system that cannot continue forever.
But the bigger the ship, the longer it takes to change course. The IMS is the biggest financial ship in the sea, and miraculously, it has remained afloat for 42 years after the most fundamental justification for its existence (dollar-gold convertibility) was eliminated. How long do we have before the inevitable happens, and what will be the catalyst(s) to bring about fundamental change? Those are the key questions.
In my opinion, the greatest risk to global economic stability is a sovereign debt crisis destroying the value of the world’s reserve currency. In other words, a crash of the U.S. Treasury Bond market. I believe that the loss of reserve currency status is the most likely catalyst to bring about such a crisis.
The fact that the United States’ borrowing and spending habits are unsustainable has been a topic of public discussion for decades. Older readers will recall billionaire Ross Perot exclaiming in his deep Texas accent, “A national debt of five trillion dollars is simply not sustainable!” during his 1992 Presidential campaign. Mr. Perot was right when he said that 20 years ago, but the national debt has since more than tripled. The big crisis has yet to occur. How is this possible? I believe the answer is that because the U.S. dollar is the world’s reserve currency and is perceived by institutional investors around the globe to be the world’s safest currency, it enjoys a certain degree of immunity derived from widespread complacency.
But that immunity cannot last forever. The loss of reserve currency status will be the forcing function that begins a self-reinforcing vicious cycle that brings about a U.S. bond and currency crisis. While many analysts have opined that the USA cannot go on borrowing and spending forever, relatively few have made the connection to loss of reserve currency status as the forcing function to bring about a crisis.
We’re already seeing small leaks in the ship’s hull. China openly promoting the idea that the yuan should be asserted as an alternative global reserve currency would have been unthinkable a decade ago, but is happening today. Major international trade deals (such as China and Brazil) not being denominated in U.S. dollars would have been unthinkable a decade ago, but are happening today.
So we’re already seeing signs that the dollar’s exclusive claim on reserve currency status will be challenged. Remember, when the dollar loses reserve currency status, the U.S.loses exorbitant privilege. The deficit spending party will be over, and interest rates will explode to the upside. But to predict that this will happen right now simply because the system is unsustainable would be unwise. After all, by one important measure the system stopped making sense 42 years ago, but has somehow persisted nonetheless. The key question becomes, what will be the catalyst or proximal trigger that causes the USD to lose reserve currency status, igniting a U.S. Treasury Bond crisis?
Elevated Risk
It’s critical to understand that the USA is presently in a very precarious fiscal situation. The national debt has more than doubled in the last 10 years, but so far, there don’t seem to have been any horrific consequences. Could it be that all this talk about the national debt isn’t such a big deal after all?
The critical point to understand is that while the national debt has more than doubled, the U.S. Government’s cost of borrowing hasn’t increased at all. The reason is that interest rates are less than half what they were 10 years ago. Half the interest on twice as much principal equals the same monthly payment, so to speak. This is exactly the same trap that subprime mortgage borrowers fell into. First, money is borrowed at an artificially low interest rate. But eventually, the interest rate increases, and the cost of borrowing skyrockets. The USA is already running an unprecedented and unsustainable $1 trillion+ annual budget deficit. All it would take to double the already unsustainable deficit is for interest rates to rise to their historical norms.
This all comes back to exorbitant privilege. The only reason interest rates are so low is that the Federal Reserve is intentionally suppressing them to unprecedented low levels in an attempt to combat deflation and resuscitate the economy. The only reason the Fed has the ability to do this is that foreign lenders have an artificial need to hold dollar reserves because the USD is the global reserve currency. They would never accept such low interest rates otherwise. Loss of reserve currency status means loss of exorbitant privilege, and that in turn means the Fed would lose control of interest rates. The Fed might respond by printing even more dollars out of thin air to buy treasury bonds, but in absence of reserve currency status, doing that would cause a collapse of the dollar’s value against other currencies, making all the imported goods we now depend on unaffordable.
In summary, the U.S. Government has repeated the exact same mistake that got all those subprime mortgage borrowers into so much trouble. They are borrowing more money than they can afford to pay back, depending solely on “teaser rates” that won’t last. The U.S. Government’s average maturity of outstanding treasury debt is now barely more than 5 years. This is analogous to cash-out refinancing a 30-year fixed mortgage, replacing it with a much higher principal balance in a 3-year ARM that offers an initial teaser rate. At first, you get to borrow way more money for the same monthly payment. But eventually the rate is adjusted, and the borrower is unable to make the higher payments.
The Janszen Scenario
When it comes to evaluating the risk of a U.S. sovereign debt and currency crisis, most mainstream economists dismiss the possibility out of hand, citing the brilliant wisdom that “the authorities would never let such a thing happen”. These are the same people who were steadfastly convinced that housing prices would never crash in the United States because they never had before, and that Peak Oil is a myth because the shale gas boom solves everything (provided you don’t actually do the math).
(http://aspousa.org/wp-content/uploads/2013/01/janszen-212x300.jpg) (http://aspousa.org/wp-content/uploads/2013/01/janszen.jpg)At the opposite extreme are the bloggers on the Internet whom I refer to as the Hyperinflation Doom Squad. Their narrative generally goes something like this: Suddenly, when you least expect it, foreigners will wise up and realize that the U.S. national debt cannot be repaid in real terms, and then there will be a panic that results in a crash of the U.S. Treasury market, hyperinflation of the U.S. dollar, and declaration of martial law. This group almost always cites the hyperinflations of Zimbabwe and Argentina as “proof” of what’s going to happen in the USA any day now, but never so much as acknowledges the profound differences in circumstances between the USA and those countries. These folks deserve a little credit for having the right basic idea, but their analysis of what could actually happen simply isn’t credible when examined in detail.
Little-known economist Eric Janszen stands out as an exception. Janszen is the only credible macroeconomic analyst I’m aware of who realistically acknowledges just how real and serious the threat of a U.S.sovereign debt crisis truly is. But his analysis of that risk is based on credible, level-headed thinking complemented by solid references to legitimate economic theory such as Triffin’s Dilemma. Unlike the Doom Squad, Janszen does not rely on specious comparisons of the USA to small, systemically insignificant countries whose past financial crises have little in common with the situation the USA faces. Instead, Janszen offers refreshingly sound, well constructed arguments. Many of the concepts discussed in this article reflect Janszen’s work.
Janszen also happens to be the same guy who coined the phrase Peak Cheap Oil back in 2006, drawing an important distinction between the geological phenomenon of Hubbert’s Peak and the economic phenomenon which begins well before the actual peak, due to increasing marginal cost of production resulting from ever-increasing extraction technology complexity.

“But there’s no sign of inflation…” (Hint: It’s coming)
Janszen has put quite a bit of work into modeling what a U.S.bond and currency crisis would look like. He initially called this KaPoom Theory, because history shows that brief periods of marked deflation (the ‘Ka’) usually precede epic inflations (the ‘Poom’). He recently renamed this body of work The Janszen Scenario. Briefly summarized, Janszen’s view is that the U.S. has reached the point where excessive borrowing and fiscal irresponsibility will eventually cause a catastrophic currency and bond crisis. He believes that all that’s needed at this point is a proximal trigger, or catalyst, to bring about such an outcome. He thinks there are several potential triggers that could bring such a crisis about, and chief among the possibilities is the next Peak Cheap Oil price spike.

How Peak Oil could cause a Bond and Currency Crisis
There are several ways that an oil price spike could trigger a U.S.bond and currency crisis. Energy is an input cost to almost everything else in the economy, so higher oil prices are very inflationary. The Fed would be hard pressed to continue denying the adverse consequences of quantitative easing in a high inflation environment, and that alone could be the spark that leads to higher treasury yields. The resulting higher cost of borrowing to finance the national debt and fiscal deficit would be devastating to the United States.
A self-reinforcing vicious cycle could easily begin in reaction to oil price-induced inflation alone. But we must also consider how an oil price shock could lead to loss of USD reserve currency status, and therefore, loss of U.S.exorbitant privilege. In the 1970s, the USA represented 80% of the global oil market. Today we represent 20%, and demand growth is projected to come primarily from emerging economies. In other words, the rationale for oil producers to keep pricing their product in dollars has seriously deteriorated since the ‘70s. The more the global price of oil goes up, the more the U.S. will source oil from Canadian tar sands and other non-OPEC sources. That means less and less incentive for the OPEC nations to continue pricing their oil in dollars for all their non-U.S. customers.
Iran and Turkey have already begun transacting oil sales in gold rather than dollars. What if the other oil exporting nations wake up one morning and conclude “Hey, why are we selling our oil for dollars that might some day not be worth anything more than the paper they’re printed on?” Oil represents a huge percentage of international trade, so if oil stopped trading in dollars, that alone would be reason for most nations to reduce the very large dollar reserves they now hold. They would start selling their U.S. treasury bonds, and that could start the vicious cycle of higher interest rates and exploding borrowing costs for the U.S. Government. The precise details are hard to predict. The point is, the system is already precarious and vulnerable, and an oil price shock could easily detonate the time bomb that’s already been ticking away for more than two decades.

What if U.S. Energy Independence claims were true?
There’s another angle here. Peak Oil just might be the catalyst to cause the loss of U.S. exorbitant privilege, even without an oil price shock.
Astute students of Peak Oil already know better than to believe the recently-popularized political rhetoric claiming that the USA will soon achieve energy independence, thanks to the shale oil and gas boom. To be sure, the Bakken, Eagle Ford, and various other U.S. oil and gas plays are a big deal. The most optimistic forecasts I’ve seen show these plays collectively ramping up to as much as 4.8 million barrels per day of production, which is equivalent to about ½ of Saudi Arabia’s current production.
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But the infamous “wedge of hope” chart from the EIA projects production declines from existing global resources of 60 million barrels per day by 2030. By the most optimistic projections, all the exciting new plays in the U.S. will replace less than 5 million barrels per day. Where the other 55 million barrels per day will come from remains a mystery! And of course the politicians never bother to mention such minor details when they make predictions of energy independence.
But let’s just pretend for a moment that hyperbole is reality, and that the USA will achieve energy-independence in just a few years’ time. Now consider the consequences to the IMS. The oil-exporting nations would lose the USA as their primary export customer, and would no longer have an incentive to price their oil in dollars, or to maintain large dollar reserves. They would start selling off their U.S. treasury bonds, and pricing their oil in something other than dollars. Large oil importers like China and Japan would stop paying for oil in dollars, and would no longer need to maintain present levels of U.S. dollar reserves. So they too would start selling U.S. treasury bonds, pushing up U.S. interest rates in the process. Once again, we have the ingredients for a self-reinforcing vicious cycle of increasing U.S. interest rates causing U.S. Government borrowing costs to skyrocket.
Without the artificial demand for treasury debt created by exorbitant privilege, the U.S. would be unable to finance its federal budget deficit. The Federal Reserve might respond with even more money printing to monetize all the government’s borrowing needs, but without the international demand that results from the dollar’s reserve currency status, the dollar would crash in value relative to other currencies as a result of excessive monetization by the Fed. The resulting loss of principal value would cause even more international holders of U.S. Treasury debt to panic and sell their holdings. Once again, a self-reinforcing vicious cycle would develop, with consequences for the United States so catastrophic that the 2008 event would pale in contrast.

Rambo to the Rescue?
Let’s not forget that the USA enjoys virtually unchallenged global military hegemony. China is working hard to build out its “blue water navy”, including strategic ballistic missile nuclear submarine capability. But the USA is still top dog on the global power stage, and if the USA was willing to use its nuclear weapons, it could easily defeat any country on earth, except perhaps China and Russia.
While the use of nuclear weapons in an offensive capacity might seem unthinkable today, the USA has yet to endure significant economic hardship. $15/gallon gasoline from the next Peak Cheap Oil price shock coupled with 15% treasury yields and a government operating in crisis mode just to hold off systemic financial collapse in the face of rampant inflation would change the mood considerably.
All the USA has to do in order to secure an unlimited supply of $50/bbl imported oil is to threaten to nuke any country refusing to sell oil to the U.S. for that price. Unthinkable today, but in times of national crisis, morals are often the first thing to be forgotten. We like to tell ourselves that we would never allow economic hardship to cause us to lose our morals. But just look at the YouTube videos of riots at Wal-Mart over nothing more than contention over a limited supply of boxer shorts marked down 20% for Black Friday. What we’ll do in a true crisis that threatens our very way of life is anyone’s guess.
If faced with the choice between a Soviet-style economic collapse and abusing its military power, the USA just might resort to tactics previously thought unimaginable. Exactly what those tactics might be and how it would play out are unknowable. The point is, this is a very complex problem, and a wide array of factors including military capability will play a role in determining the ultimate outcome.
I certainly don’t mean to predict such an apocalyptic outcome. All I’m really trying to say is that the military hegemony of the USA will almost certainly play into the equation. Even if there is no actual military conflict, the ability of the U.S. to defeat almost any opponent will play into the negotiations, if nothing else.

Conclusions
The current incarnation of the International Monetary System, in which the USA enjoys the exorbitant privilege of borrowing practically for free, and is therefore able to pursue reckless fiscal policy with immunity from the adverse consequences that non-reserve currency issuing nations would experience by doing so, cannot continue indefinitely. Therefore, it will not continue indefinitely. How and when it will end is hard to say, especially considering the fact that it’s already persisted for 42 years after it stopped making sense. The system will continue to operate until some catalyst or trigger event brings about catastrophic change.
The next Peak Cheap Oil price spike is not the only possible catalyst to bring about a U.S. bond and currency crisis, but it’s the most likely candidate I’m aware of. I don’t believe that U.S. energy independence is possible, but if it were, the end of oil imports from the Middle East would also be the catalyst to end exorbitant privilege and bring about a U.S.bond and currency crisis. To summarize, the music hasn’t stopped quite yet, but when it does, this will end very, very badly. I’m pretty sure we’re on the last song, but I don’t know how long it has left to play.

Further Reading
Time Magazine’s overview of the Bretton Woods system at http://www.time.com/time/business/article/0,8599,1852254,00.html (http://www.time.com/time/business/article/0,8599,1852254,00.html) offers an excellent discussion which anyone can understand.
For those seeking a more detailed discussion, Iowa State University’s Professor E. Kwan Choi offers excellent course notes on the subject at http://www2.econ.iastate.edu/classes/econ355/choi/bre.htm (http://www2.econ.iastate.edu/classes/econ355/choi/bre.htm).
Wikipedia also offers articles on both the Bretton Woods system and the actual conference held there in 1944.
Title: Re: Hyperinflation or Deflation?
Post by: Petty Tyrant on February 18, 2013, 07:44:42 AM
Great article easy to understand. Good that it recognises the most powerful military industrial complex does not have to take lying down losing world reserve currency status. That does not mean the govt is doing all it can to save everyones lifestyle, only its own continued existence and power. Just how valuable the average obsolete joe is to the state remains to be seen. Expansion of the proxy wars in syria and north africa look like the main vehicle.
Title: Re: Hyperinflation or Deflation?
Post by: Snowleopard on February 18, 2013, 03:34:54 PM
A good article, all true, but it does frame in terms of nations, where things have gone a bit beyond that.

Quote
The current incarnation of the International Monetary System, in which the USA enjoys the exorbitant privilege of borrowing practically for free, and is therefore able to pursue reckless fiscal policy with immunity from the adverse consequences that non-reserve currency issuing nations would experience by doing so, cannot continue indefinitely. Therefore, it will not continue indefinitely. How and when it will end is hard to say, especially considering the fact that it’s already persisted for 42 years after it stopped making sense.

Agreement with above, but it doesn't mention the trillions printed up by central banks for "bailouts", "loans" to other banks, and various discretionary spending.  All of which is charged to the taxpayers of the nations and/or the holders of the currencies through inflation.

Quote
The system will continue to operate until some catalyst or trigger event brings about catastrophic change.

Quite true.  As UB pointed out, they are already busy cleaning up those in MENA who might want to resist the top tier solutions to the financial crises they will trigger when all is prepared.  Always ready to "save" (rob) us in a crisis planned for that purpose.  If a crisis develops before they are ready, they might have to go for some interim choice from tier B.

I would really like to see the contingency plans.  I wonder if an annoying mouse could help :)
Title: Hyperinflation or Deflation?: DEF TAKES THE LEAD!
Post by: RE on March 29, 2013, 12:35:00 AM
In the great battle of HI vs DF, it appears to me that with the Asset Confiscation ongoing in Cyprus, as well as Capital Controls being imposed all over the EZ (and in fact the world as the article below on the Ruskies from ZH shows), we have entered a New Phase where Money will be taken OUT of circulation, rather than new money being issued in Print to Cover.

The amount of Money Eurotrash can spend now on a daily basis is extremely restricted.  Beyond that, plenty in Cyprus has already disappeared entirely from the economy.

Assuming the Euroclowns continue to follow this policy (and Diesel-BOOM's pronouncement this is a "template" indicates they will)  there will be a massive collapse both in the Velocity of Money and in the Money Supply in the EZ.  That doesn't mean the Euro will soar in value though, since anyone in their right mind is trying to unload Euros now.  HI is not outta da question for the Euro here.

Far as the Dollar is concerned though, VERY Deflationary.  Extreme scarcity of Dollars relative to a falling Euro will suck any liquid dollars outta circulation rapidly as Money Managers try to unload Euro based assets.  Given the size of the Euro Banking Sector and the EXTREME Leverage, even on Overdrive I doubt Helicopter Ben could keep up.

There also is likely a Margin Call Event coming down the pipe from this in Europe.  It will force Liquidation of Assets across the board, and the Eurotrash have a lot of Gold.  I forsee a massive Collapse in the PMs market when the Euro Collapses.  I think it is a 6 month-1 year timeline.  Disclosure: I am going to short PMs and go LONG on the Dollar through this Shitstorm.

RE

Russia Is Next In Line To Restrict Cash Transactions (http://www.zerohedge.com/news/2013-03-28/russia-next-line-restrict-cash-transactions)
Submitted by Tyler Durden on 03/28/2013 21:42 -0400

Gross Domestic ProductheadlinesMonetary Policy


The Russians are taking a page from the Europeans book (and not a positive one for libertarians). Given the substantial criminal activity and illegal entrepreneurship in Russia - the grey and black economies account for 50–65 percent of GDP and estimates that about $50 billion was taken out of Russia illegally in 2012 alone - the great and glorious leaders have decided to impose restrictions on cash transactions. As Russia Beyond The Headlines reports, Russia may ban cash payments for purchases of more than 300,000 rubles (around $10,000) starting in 2015 - starting with a higher ($19,500) restriction in 2014. They will also enforce mandatory cash-free salary payments (cash compensation accounts for 15% of GDP currently) in an effort to both bring some of the population's 'grey' income out of the shadow; and increase the volume of cash reserves in the banks. It would appear that wherever we look now, leadership are realizing that the limits of fiscal and monetary policy have been reached and now changing rules, limiting freedom, and outright confiscation are the only way to maintain a status quo. Ironic really, when the enforcement of said rules may just be the catalyst for the end of the status quo as the middle class suffers.

 

Via Russia, Beyond The Headlines,


Russia may ban cash payments for purchases of more than 300,000 rubles (around $10,000) starting in 2015. The move is expected to boost banks’ cash reserves and put a damper on Russia’s shadow economy. However, the middle class will most likely end up having to pay the price for the scheme.

 

Moscow is looking to kill two birds with one stone: Firstly, it wants to bring some of the population’s “grey” income out of the shadow; secondly, it wants to increase the volume of cash reserves in the banks. The government’s bill will introduce the new rule to the State Duma. The document was prepared by the Ministry of Finance and approved by the government.

 

The restrictions on cash transactions will develop in two phases. In 2014, a ban on cash payments for purchases worth more than 600,000 rubles (about $19,500) will be introduced; the limit will then be halved to 300,000 rubles in 2015. Furthermore, the document introduces mandatory, cash-free, salary payments.

 

...

 

Even now, cash withdrawals on payday account for around 85 percent of all ATM transactions. Moreover, in 2005–2011, cash flows more than quadrupled. According to Bank of Russia estimates, more than 90 percent of all commodity purchases in Russia are paid for in cash.

 

The government is now trying to bring the shadow economy into the light and increase money flows into the treasury, according to Investcafe analyst Yekaterina Kondrashova. In her words, as soon as the new rules come into effect, those using unofficial wage payment schemes will encounter certain difficulties, although there could be some ways to circumvent the law.

 

The Ministry of Internal Affairs and the National Anticorruption Committee estimate the market for money laundering and cash conversions at somewhere between 3.5 and 7 trillion rubles ($113–230 billion) — about 60 percent of the Russian federal budget.

 

Rosstat reports that the volume of the shadow economy (“grey” money from tax evasion, compensations paid as “cash in envelopes” and violations of currency and foreign trade regulations) is at least 15 percent of the GDP, according to Ricom-Trust senior analyst Vladislav Zhukovsky.

 

Given the substantial criminal activity and illegal entrepreneurship, the grey and black economies account for 50–65 percent of GDP. Even former Central Bank Chief Sergey Ignatyev had to admit that about $50 billion was taken out of Russia illegally in 2012 alone.


There is another side to the move toward plastic, however. Cash-free payments will result in higher prices for some goods and services. The middle class will suffer the most, because the “risk group” includes property and automobile transactions. The luxury segment will also be affected, including customized tours.
Title: Re: Hyperinflation or Deflation?
Post by: JoeP on March 30, 2013, 04:36:41 PM
I'm still in the deflation camp.  Real life example: I get at least one paper thing stuck to my mailbox every week from some start-up lawn maintenance entity...and even though I'm tired of almost immediately throwing them into recycle bin, I look at the price they are offering.  I have no interest in requesting their services, but for some reason I look at the offer. BTW, I have a "zoysia" lawngrass that is superior to it's sister grass "bermuda".  I picked it to preserve water as zoysia is less water-dependent than bermuda. So for anyone out there with kids - this purchase was for you.   :icon_sunny:

Back to my deflation preference - the amount of $$ requested for lawn maintence is steadily decreasing from my lens, at least for the last five years. But is this a reliable measure/metric for inflation/deflation?
 
Title: HI vs DF: Japan, Inc. to the Rescue!
Post by: RE on April 06, 2013, 12:16:59 AM
Normally I would have dropped this piece by Ambrose into the AEP thread, but it is so over the top in the HI-DF category I hadda drop it here.

What is the gist of this?  The Nips are going ALL IN to Inflate their dying Economy! As if Printing Yen will magically make them rich again.  We can Recapitalize Ourselves!  We'll Print More Yen!

Now you know of course Kuroda couldn't do this without a Full :emthup: from Helicopter Ben.  When Japan Inc. starts Pitching Out the Bonds, Da Fed will Buy Them.  Why?  Because NOBODY ELSE WILL, not even Mrs. Watanabe, who is FRESH OUT of Yen due to the Medical Bills she is paying for 2 Year Old Mariko Watanabe's Chemotherapy for Leukemia.

In reality of course, like here with Helicopter Ben pitching FRNs at his Goldman Buddies, Kuroda magically Printing Up Yen to LOAN to Nip TBTF Banks doesn't mean they'll loan it out to Hiromatsu Sushi Roll. Nor does it enable them to buy more Oil, even if Helicopter Ben keeps pace and Prints in tandem because...there is no more Oil to Buy!  Printing more Money doesn't make new Cheap Oil fields and doesn't make Expensive ones Fracked Out any cheaper either.  J6P here and HSR STILL can't afford the GAS to fill the Chevys and Toyotas!

Why would anyone Buy a Yen?  What will a Yen buy you?  Only the other CBs will buy Yen, to keep the Exchange Rate from going Ballistic.  All that Printing won't do a damn thing to keep the Industrial Model running though.  It's FINISHED.

RE

Quote from: Ambrose Evans-Pritchard
Japanese bank governor Haruhiko Kuroda makes history with monetary blitz (http://www.telegraph.co.uk/finance/economics/9972754/Japanese-bank-governor-Haruhiko-Kuroda-makes-history-with-monetary-blitz.html)

The Bank of Japan has launched the most daring monetary experiment of modern times, aiming to double the money base within two years to overpower deflation and catapult the economy out of slump.
 
By Ambrose Evans-Pritchard
8:09PM BST 04 Apr 2013
118 Comments
The blast of money is expected to reignite the yen “carry trade” and flood global markets with up to $2 trillion (£1.3 trillion) of pent-up savings, giving the entire world a shot in the arm.

 The BoJ’s new team under governor Haruhiko Kuroda voted 8:1 for a double dose of “quantitative and qualitative monetary easing”, vowing to inject stimulus for “as long as it takes” to break the deflation psychology.

“This will be recorded in economic history books as a watershed in central bank action. Investors should be shocked and awed,” said Stephen Jen from SLJ Macro Partners.

The monetary base will rocket from 29pc to 56pc of GDP by 2014. The pace of bond purchases will rise to 7.5 trillion yen (£53bn) a month, almost three times the US Federal Reserve’s stimulus as a share of the economy. The maturities will stretch to 40 years, ending the three-year cap that has hobbled policy for a decade.

“This is a huge sum. It could set off a rip-roaring economic boom if they buy the bonds from insurance companies and boost broad money by 10pc over the next year,” said Tim Congdon from International Monetary Research.

Mr Kuroda said the bank had taken “all available steps” to meet its new target of 2pc inflation within two years. “This is an unprecedented degree of monetary easing,” he said.

The scale of action caught markets off guard, sending 10-year bond yields tumbling to an all-time low of 0.44pc. The yen weakened three “big numbers” to 96 yen against the dollar, in the biggest one-day move for more than a year. The Nikkei index of stocks jumped 2.2pc, crowning a 50pc rise since October.

Hans Redeker, from Morgan Stanley, said the package was dramatic enough to break “Endaka” – strong yen – once and for all. “The carry trade is going into full swing. Japan’s institutional funds are going to wind down their currency hedges from 70pc to a normal hedge ratio nearer 35pc, and that will free up $1 trillion of overseas lending,” he said.

“This is a gigantic fixed-income machine. They don’t buy equities and real estate. They buy bonds, and we think they’ll look at peripheral eurozone markets like Italy and Spain.”

Japan’s legendary housewives and grannies – so-called “Mrs Watanabe” – lead a phalanx of retail investors with another trillion dollars waiting to venture abroad once again in search of yield. In the 2003-08 cycle, the money leaked into everything from Australian “Uridashi” bonds and Icelandic debt, to London property.

Simon Derrick, from BNY Mellon, said Japan’s battle-weary investors may be more cautious this time, chilled by North Korean jitters and tensions with China. “We don’t think the climate is yet right for the carry trade,” he said.

Hiroaki Muto, from Sumitomo Mitsui, said the Kuroda experiment could go badly wrong if markets started to think the BoJ was printing money to cover Japan’s fiscal deficits. “At some point, yields could spike”, he said.

Japan is the only major country yet to start retrenchment. Premier Shinzo Abe is boosting spending by an extra 2pc of GDP to kickstart recovery, though the budget deficit is already 9pc.

Japan has had no trouble raising funds from its captive debt markets so far, but ageing costs are rising and public debt will reach 245pc of GDP this year.

The International Monetary Fund says Japan may hit the buffers unless it changes course soon, warning that confidence can evaporate fast. A 200 basis point rise in borrowing costs would play havoc with public finances.

Mr Kuroda played down the concerns, insisting there was no risk of a “sudden” jump in long-term rates or a fresh asset price bubble.

Japanese officials say monetary stimulus should protect against a debt compound trap by cutting “real” rates. While Japan’s borrowing costs look low, they are higher than in the US, Britain or Germany if adjusted for deflation.

The Kuroda policy is radically different from past episodes of BoJ stimulus, mostly half-hearted tinkering to fend off political pressure. It brings the BoJ into line with the US, UK and Swiss central banks.

The European Central Bank looks increasingly isolated after it sat on its hands on Thursday, offering little to soften the credit crunch in Italy and Spain. The hawkish stance is leading to an over-valued euro. “We’re afraid that the euro could rise further. That is the last thing that Europe needs,” said Mr Redeker.

The euro has risen 32pc against the yen since July, giving Japanese exporters an edge over European rivals. A Ford executive warned last month that Japanese car makers are poised to sweep the EU market.

An army of doubters question whether Mr Kuroda’s shock therapy will feed through to the real economy. Daragh Maher, from HSBC, fears a “damp squib” outcome that exposes the limits of central banking, or a “UK replay” where inflation rises but wages lag, causing a squeeze in real incomes. “Neither would point to a new era for Japan’s economy.”
Title: HI vs. DF: Surviving Monetary Kamikaze
Post by: RE on April 06, 2013, 10:39:35 PM
From Asia Confidential on ZH.

Getting SERIOUS now...

RE

Protecting Yourself From Japanese Insanity (http://www.zerohedge.com/contributed/2013-04-06/protecting-yourself-japanese-insanity-0)

(http://www.zerohedge.com/sites/all/themes/images/bagicon.png) (http://www.zerohedge.com/users/asia-confidential)
Submitted by Asia Confidential (http://www.zerohedge.com/users/asia-confidential) on 04/06/2013 16:33 -0400

I'd hate to say it but this time really is different. Never before has there been coordinated global money printing of the scale of today. Ever. Japan intends to double its money in circulation in just two years. This is incredible stuff. But it only mimics the U.S. Federal Reserve which has tripled the amount of dollars in circulation since 2008.
Most stock brokers and mainstream media will tell you that this money printing is what's needed to stimulate economies and whether it succeeds or not, the outcome will be relatively benign. Don't believe them. It's highly likely that this is not a normal economic cycle and the consequences will be more extreme: success will mean all the printed money filters through to economies resulting in double digit inflation or failure will bring serious deflation. In other words, the most probable outcomes aren't pretty and you need to prepare your investment portfolios as such. Today I'll suggest some ways that you might be able to do this.
Sayonara to Japan
First to Japan. You've got to love mainstream media, investors and stockbrokers. The Japanese central bank's plans to end deflation have been widely greeted as having surpassed expectations. They're described as "bold", "inventive" and just what Japan needs after sitting on its hands for 20 years. Nowhere have I seen words such as "stupid", "insane" or "half-witted". Because anyone with a brain can tell you that Japan's plans will have terrible consequences, whether they succeed or not.
First, let's look at what Japan intends to do:
Title: HI vs. DF: Monetary Kamikaze-Nip Bond Market Dislocation?
Post by: RE on April 08, 2013, 01:36:06 AM
If this shit is not evidence of a Bond Market Dislocate in Progress, I don't know what is.

The Shitstorm is getting good here now.  :happy1:

RE

Japan Bond Market Halted For Second Day In A Row (http://www.zerohedge.com/news/2013-04-08/japan-bond-market-halted-second-day-row)

(http://www.zerohedge.com/sites/default/files/pictures/picture-5.jpg) (http://www.zerohedge.com/users/tyler-durden)
Submitted by Tyler Durden (http://www.zerohedge.com/users/tyler-durden) on 04/08/2013 00:21 -0400
Following Friday's epic collapse, snap-back, and circuit-breaker halt in JGB Futures, it appears that investors cannot get enough of Japanese bonds today. From the JPY144.02 close, JGB Futures traded up at the open, oscillated and then gapped higher (on heavy volume) to JPY145.25 before the TSE halted trading once again (on a volatility-based circuit-breaker limit) due to 'rapid price fluctuations. The quadrillion JPY cash JGB market appears very illiquid as we scan the benchmark issues with the 30Y yield higher by 4bps, the 20Y lower by 14bps, and the 10Y lower by 3bps as it appears the futures are the weapon of choice. Since the halt ended, JGB Futures have slipped back notably. It seems pretty evident when and where the BoJ monetization took place but desk chatter was that it was poorly run.


(http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2013/04/20130407_JPY6_0.jpg) (http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2013/04/20130407_JPY6.jpg)

but in contrast to Friday's epic fail this brief surge in price appears nothing...
(http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2013/04/20130407_JPY7.jpg) (http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2013/04/20130407_JPY7.jpg)

This should give some more context for just how broken these markets are. A 5bps drop in a 50bps 10Y yield (the BoJ monetization?) followed by a 7bps rip higher!! Interesting that JPY was sold hard during the break in Cash bond trading...
(http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2013/04/20130407_JPY8_1_0.jpg) (http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2013/04/20130407_JPY8_1.jpg)
So absent the BoJ's efforts today, the JGB market would have been significantly uglier.
Title: Gold Hammerred-RE Makes the Call!
Post by: RE on April 13, 2013, 03:00:12 PM
Back a couple of weeks I made this call


There also is likely a Margin Call Event coming down the pipe from this in Europe.  It will force Liquidation of Assets across the board, and the Eurotrash have a lot of Gold.  I forsee a massive Collapse in the PMs market when the Euro Collapses.  I think it is a 6 month-1 year timeline. Disclosure: I am going to short PMs and go LONG on the Dollar through this Shitstorm.

Gold closed down below $1500 and I closed out for now on the shorts.   :icon_mrgreen:  I think it still has a ways to go but won't be linear, short squeeze coming soon.

Meanwhile, on this leg, I did well.  :icon_mrgreen:

The Gold Bugs on ZH are so confused.  Poor Gold Bugs.  LOL.

RE
Title: Re: Gold Hammered --- RE Makes the Call
Post by: Eddie on April 13, 2013, 03:40:07 PM
Well played, Godfather.
Title: Re: Gold Hammered --- RE Makes the Call
Post by: RE on April 13, 2013, 03:55:08 PM
Well played, Godfather.

(http://2.bp.blogspot.com/_zBqxgfZayuc/TO_JMyL9bSI/AAAAAAAABT8/oSetD3zCC9I/s1600/taking-a-bow.jpg)
:Takes Bow:  :icon_mrgreen:

I'm going to write up another PM diatribe for tomorrow's Diner Brunch Menu.  Meanwhile, I just put up Slogger's Gold, Greed & Global Collapse on the Diner Blog.

RE
Title: Gold, Greed & Global Collapse
Post by: RE on April 13, 2013, 04:04:56 PM
Gold, Greed & Global Collapse (http://www.doomsteaddiner.net/blog/2013/04/13/gold-greed-global-collapse/) by Slogger John Ward now UP on the Diner Blog!

RE
Title: Re: Gold, Greed & Global Collapse
Post by: Golden Oxen on April 13, 2013, 05:07:28 PM
Gold, Greed & Global Collapse (http://www.doomsteaddiner.net/blog/2013/04/13/gold-greed-global-collapse/) by Slogger John Ward now UP on the Diner Blog!

RE

Top notch article ***** five star rating, well worth the time reading for a capsule view of the hi jinks going on today in financial markets. While a slow or lite doomer, if anything can bring the world to an end tomorrow it is a  total instant financial collapse brought about by these mad men and their mainipulations.  :(
Title: Re: Gold, Greed & Global Collapse
Post by: JoeP on April 13, 2013, 05:55:13 PM
Anyone know the "support" $$ number for gold?  Or has it already busted through it?
 
Title: Re: Gold, Greed & Global Collapse
Post by: Golden Oxen on April 13, 2013, 06:15:43 PM
Anyone know the "support" $$ number for gold?  Or has it already busted through it?

JoeP, This is from Monty Guild answering your question. It busted through prior support around 1530 Friday.

 These are techinical analysts opinions, not mine, I use fundamental analysis. 

Quote
The Chinese and other wise buyers will add aggressively at 1350-1370, which would be approximately one third correction from 2002 bottom to 1900 top.

Many central bankers in China etc will try to make insiders pay by getting rid of some dollars in exchange for gold. The Chinese bankers all went to top schools for PhDs then worked at JP Morgan or Goldman on the international trading desk before joining the People’s Bank. They know how rigging works and how to twist the rigging to their advantage .

Speculators seeing other profit areas are temporarily distracted from gold. I look for them to return to long side about 1350.

Humbly,
Monty Guild
Title: Re: Gold, Greed & Global Collapse
Post by: JoeP on April 13, 2013, 06:17:47 PM
Anyone know the "support" $$ number for gold?  Or has it already busted through it?

Quick Stockcharts results say GLD is $6 below the 50 day MA.  But it's also $4.50 above the 200 day MA.  So I guess it's within a "sensitive" range.
Title: Re: Gold, Greed & Global Collapse
Post by: JoeP on April 13, 2013, 06:56:04 PM
Anyone know the "support" $$ number for gold?  Or has it already busted through it?

Quick Stockcharts results say GLD is $6 below the 50 day MA.  But it's also $4.50 above the 200 day MA.  So I guess it's within a "sensitive" range.

Damn, I did a redo on the chart using $GOLD, and it looks like support has clearly been broken.  I must have made a mistake in my GLD price result.
Title: Re: Gold Hammerred-RE Makes the Call!
Post by: jdwheeler42 on April 13, 2013, 08:00:10 PM
Gold closed down below $1500 and I closed out for now on the shorts.   :icon_mrgreen:  I think it still has a ways to go but won't be linear, short squeeze coming soon.

Meanwhile, on this leg, I did well.  :icon_mrgreen:

The Gold Bugs on ZH are so confused.  Poor Gold Bugs.  LOL.

RE

You got to know when to hold 'em
Know when to fold 'em
Know when to walk away
Know when to run
You never count your money
When it's sittin' on the table
There'll be time enough for countin'
When the dealin's done


Two good calls, getting in AND getting out....
Title: Whither Gold?
Post by: RE on April 13, 2013, 08:27:00 PM

The Gold Bugs on ZH are so confused.  Poor Gold Bugs.  LOL.


Just about done with Whither Gold?, my latest in explanations on how the Gold Market works and what to expect in the coming months.  Up for Sunday Brunch tomorrow here on the Doomstead Diner. Should be Required Reading for all Gold Bugs.  :icon_mrgreen:

RE
Title: Re: Hyperinflation or Deflation?
Post by: Petty Tyrant on April 13, 2013, 09:04:11 PM
Michael Snyder said last year that he expected gold and silver to stop being so linnerarly bullish and fluctuate wildly in coming years. I think it might have something to do with the forming up and fruition of the chinese side deals for direct convertibility to yuan of other currencies, that have been long in the pipeline now coming to fruition. Or nor, just a joker in the pack to ponder.
Title: Whither Gold?
Post by: RE on April 14, 2013, 02:38:42 AM
Whither Gold? (http://www.doomsteaddiner.net/blog/2013/04/14/whither-gold/) now UP on the Diner Blog!

This should get some entertaining responses.  :icon_mrgreen:

RE
Title: Re: Hyperinflation or Deflation?
Post by: Mister Roboto on April 14, 2013, 08:05:48 AM
I have some money in gold that I own through the agency of BullionVault, but not as much as I used to have.  I agree with Nicole Foss over at TAE that gold is in a bubble, and when that bubble deflates and you own gold through the agency of BV or GoldIsMoney, you might have a very difficult time finding a buyer for converting your gold holdings back into usable cash.  And because something in a bubble tends to end up rather lower in value than when the bubble began to inflate, one could conceivably stand to lose a lot.  So now I have some of money still in gold, most in short-term US Treasury Notes, and some in a money-market.  The idea is to avoid having my proverbial eggs all in one basket. I think all monetary value is in a bubble, so there are no "perfectly safe" strategies for covering your assets indefinitely, the best you can do is buy yourself some time.
Title: Re: Hyperinflation or Deflation?
Post by: Petty Tyrant on April 14, 2013, 08:54:38 AM
through the agency of BV or GoldIsMoney, you might have a very difficult time finding a buyer for converting your gold holdings back into usable cash. 

Not at all MR, the govt will act as a perfectly willing taker when they raid that from you like they did in the 30's . And you would have plenty of other takers among people like me who dont want to provide a DNA sample when ordering some, problem is you dont really have it, you only think you do like the german govt or poor wealthy cypridiots did.
Title: Re: Hyperinflation or Deflation?
Post by: agelbert on April 14, 2013, 12:14:24 PM
RE,
Great article! I agree 1,000%!

The one thing I would add is that the boyz that manipulate the gold price have defeated normal supply and demand dynamics that SHOULD have the price of PMs going UP now, not down, by the naked leveraged shorting bullshit aided and abetted by the Fed through the broker dealer banks.

The US Treasury AND the Fed want to keep a lid on perceived inflation, right? What better way than keeping PM prices down by hook AND by crook to back up their monstrous lies about "low" food and shelter price inflation published by the lakeys at the BLS?

Once the anti-PM boyz trigger the stampede to panic the gold bugs, they start buying stuff with their gold (from fear of needing more of the PM to buy the land, a yacht or whatever further down the road) and a valid supply/demand dynamic actually emerges.  :evil4:

I firmly believe that IF the commodities and stock pricing formula (Black Scholes?) disallowed NAKED short interest bets, this manipulation of PMs could not happen. When you've got unlimited leverage, you can game the crap out of the system. Of course the conspiratorially minded would say, NO SHIT!, that's why it was set up that way! But there IS a limit to this batshit crazy gaming and I think the boys have fucked up big time with PM overkill.

I don't believe this whole thing is about PMs. They are the manipulated fig leaf to cover massive currency debasement to "make good" all the fucked up derivative bets going back to 2008. I perceive that the HUGE effort (bordering on panic) by the boyz at the Fed and other central banks to trash PMs (equivalent to pushing a rubber band way down) will end in a huge snap back when the PM price reverts to the mean.

I have no PMs although I think silver would be nice to have and has a lot of upside potential but all this PM news is a smoke screen to hide galloping inflation. There is no way in hell that the American public is going to be convinced (as in Orwell's 1984) that the price of chocolate has been "reduced" :o from $10 to $15! :evil4: 

Not that they won't keep trying to convince us that up is down. I just think less and less people believe the bullshit and are now taking their cues on what to believe by what their actual experience is.

Propaganda, devoid of all plausability and even a shred of truth or reality, doesn't work anymore. I think we are getting there. The PM price is NOT in a bubble as some, in error, claim. I agree with you that this is a manipulation totally divorced from supply and demand economics.

I predict $50 silver before the end of the year. Gold, I don't know because it is such a target of massive manipulation but I'm SURE it is not going lower. :icon_mrgreen:

Ladies and Gentlemen, Place your bets!  :pile:
:icon_mrgreen:
Title: Whither Gold?
Post by: RE on April 14, 2013, 12:55:51 PM

I predict $50 silver before the end of the year. Gold, I don't know because it is such a target of massive manipulation but I'm SURE it is not going lower. :icon_mrgreen:


Well, we disagree on your conclusion, IMHO there still is substantial downside risk for PMs falling further.

As I see it, the price of PMs is subsidiary to the price of energy and the availability of credit.  The high price of energy is bankrupting Goobermints all over the world dependent on Oil as a means to run their industrial economies. Goobermints were the last "credit-worthy" customers, J6P and small biz is BK and cut off already. TBTF corps get credit straight from Da Fed, but they pump it into the stock market to keep themselves floating another day.

Result is disappearing Money of the Fiat kind, it's not available to bid on and sequester as a pile of gold, which is not appreciating in value but rather depreciating, and fairly rapidly too, off 20% from the top over the last 2 years.

Will a point come where some people with enough cash drop in the PMs market to bid it back up?  Maybe, but the only people with that much cash are the CBs themselves, because of course they can conjure it up on demand.

As many Dollars and Euros as have been printed here, what is in Short Supply in Eurotrashland and the FSoA are...Dollars and Euros! LOL. Detroit doesn't have enough Dollars to pay its bills, and Portugal doesn't have enough Euros to pay theirs.  These places are running out of Fiat, not running out of Gold. LOL. Fiat is very hard to come by for anyone except a well connected Pigman on the Bonus Gravy Train.  Are YOU rolling in fiat? 80% of the FSoA population can't BEG the stuff up these days, they would do better Panning for Gold in the Yukon Territory. LOL.

Anyhow, the Oil Market remains the one to watch more than the PMs market.  I suspect it's on the verge of deflating again as per 2008, and this time will shut in production, followed by shortages, followed by permanent Depression until such time as we remove ourselves from the fossil fuel based economy.

RE
Title: Re: Hyperinflation or Deflation?
Post by: Eddie on April 14, 2013, 01:15:36 PM
I predict $50 silver before the end of the year

That would be very nice for me, but I don't look for it.
Title: Re: Hyperinflation or Deflation?
Post by: jdwheeler42 on April 14, 2013, 01:16:54 PM
One thing people need to keep in mind is that there are 3 very different types of gold: gold-in-hand, gold-in-the-ground, and gold-on-paper.  Gold-on-paper is just a promise to deliver gold-in-hand at a future date, or sometimes not even that.  Originally gold-on-paper was sold by people who had gold-in-the-ground and needed to have a set price to sell it at before they started digging it up.

The important thing to remember is that the value of gold-on-paper is 100% trust-based.  For now people aren't putting a premium on gold-in-hand, but that will not necessarily always be so.  The value of gold-on-paper can conceivably go to $0 if no one believes that they will ever get gold-in-hand from it.
Title: Re: Hyperinflation or Deflation?
Post by: RE on April 14, 2013, 01:26:27 PM
I predict $50 silver before the end of the year

That would be very nice for me, but I don't look for it.

I say we short Eddie's Silver and GO's Gold and use the proceeds to pay for a Foxstead.  :icon_mrgreen:

Silver: $15-18 in Oct/Nov.  If I hit this one right, certify me genius. LOL.  Longshot bet, don't bet the farm on it.

RE
Title: Re: Hyperinflation or Deflation?
Post by: agelbert on April 14, 2013, 02:35:20 PM
Quote
Are YOU rolling in fiat?

Nope. :icon_mrgreen:

For the rest, time will tell. Any thoughts on naked shorting and unlimited leverage depressing the PM prices? I think it is most interesting that the same boyz that do that don't do exactly the same thing to oil to drop the price, don't you? They can, you know. :evil4:
Title: Re: Hyperinflation or Deflation?
Post by: agelbert on April 14, 2013, 02:40:31 PM
Quote
I say we short Eddie's Silver and GO's Gold and use the proceeds to pay for a Foxstead. 

Silver: $15-18 in Oct/Nov.  If I hit this one right, certify me genius. LOL.  Longshot bet, don't bet the farm on it.

RE


Well, where is your stop set to cover if the price goes up instead of down? A broker would force you to cover the moment you didn't have the mulla to back the increase. What say ye about covering capitulation at $40 for silver? :icon_mrgreen:
Title: Re: Hyperinflation or Deflation?
Post by: Mister Roboto on April 14, 2013, 02:43:51 PM
Let us not forget that one major factor in the overvaluation of gold is the Zeropercent Interest Rate Policy causing there to be all this free money that needs assets to chase after, and commodities including PMs are where a lot of that money is going.
Title: Re: Hyperinflation or Deflation?
Post by: agelbert on April 14, 2013, 02:56:07 PM
Quote
Let us not forget that one major factor in the overvaluation of gold is the Zeropercent Interest Rate Policy causing there to be all this free money that needs assets to chase after, and commodities including PMs are where a lot of that money is going.

If that were so, the massive cork the Feds are trying desperately to keep on published inflation would have been popped off the inflation genie and we would be in the 1970s all over again. I believe the funnel of "free" money is specific to manipulating equities. The currency is being debased. The normal response of high inflation is being gamed by keeping hot money AWAY from wages and commodities IMHO. Time will tell whether that's the true story or not. :icon_mrgreen:
Title: Re: Hyperinflation or Deflation?
Post by: jdwheeler42 on April 14, 2013, 02:56:37 PM
For the rest, time will tell. Any thoughts on naked shorting and unlimited leverage depressing the PM prices? I think it is most interesting that the same boyz that do that don't do exactly the same thing to oil to drop the price, don't you? They can, you know. :evil4:

Not exactly.... the reason they can do it to gold is because gold isn't consumed (except in relatively miniscule quantities in things like electronics).  While they could theoretically do the same to the price of oil, that would have real world consequences as people try to line up to buy the cheap oil that isn't there.
Title: Re: Hyperinflation or Deflation?
Post by: agelbert on April 14, 2013, 03:20:02 PM
Quote
Not exactly.... the reason they can do it to gold is because gold isn't consumed (except in relatively miniscule quantities in things like electronics).  While they could theoretically do the same to the price of oil, that would have real world consequences as people try to line up to buy the cheap oil that isn't there.


You have a point paricularly about gold (not so much for silver which is an industrial metal and antimicrobial substance with many noncurrency uses).

But I don't think this is about PMs per se. PM downward pushed prices are a fig leaf.
Again, this is about masking trillions of $$$ of Fed counterfeiting currency debasement to pretend high inflation is not occurring so they can game the CPI.
The PM market is minuscule compared with perishable commodities (and there IS BIG inflation in their prices!) but the propaganda arm is in full force telling everyone, HEY, there ain't no inflation.; gold is down, SEE!? It's a clever smoke screen, period. :evil4:

Oil is involved in demand destruction, as RE has recently written about. Their profit margins are getting squeezed and they DON'T want to lower their prices because they are just getting what they can before the petroleum industry goes tits up from the renewable energy "termites" nibbling at it from EVs to all the renewable energy projects being nearly 100% of new power infrastructure. GOOD! :icon_mrgreen:

They pulled that price lowering crap in the 1980s to destroy renewables then but now, on top of the oil running low (NOT OUT!), they KNOW they have REAL competition for the first time in their sordid history. EXCELLENT!  :icon_sunny:
Title: Re: Hyperinflation or Deflation: Gold consumption
Post by: monsta666 on April 14, 2013, 03:50:10 PM
Speaking of gold consumption, I googled for this phenomena and found the following article shown below. It says that 320 tons and 7,500 tons of gold/silver is used in electronics each year and of this total only around 15% is recovered. That means 278 tons of gold is consumed per year on electronics if the figures are true. I am not sure if that sum can be deemed trivial considering that 2700 tons of gold are mined each year. That wastage shows a 10% consumption rate assuming gold is not consumed in industries outside electronics.
-- -----------------------------------------------

Electronics industry uses 320 tons of Gold,7500 tons of Silver annually (http://www.bullionstreet.com/news/electronics-industry-uses-320-tons-of-gold7500-tons-of-silver-annually/2255)

A staggering 320 tons of gold and more than 7,500 tons of silver are now used annually to make PCs, cell phones, tablet computers and other new electronic and electrical products worldwide.
(http://www.bullionstreet.com/uploads/news/2012/7/1341818092.jpg)

ACCRA (BullionStreet): A staggering 320 tons of gold and more than 7,500 tons of silver are now used annually to make PCs, cell phones, tablet computers and other new electronic and electrical products worldwide.

Precious metals such as gold have wide use in electronics because they are efficient conductors of electricity. Gold doesn't corrode, thus providing for uninterrupted supply of current and voltage in connectors, circuits, connecting wires, etc.

Experts from the Bonn-based United Nations University provided a financial estimate that the 'urban mining' of e-waste could generate: $21 billion each year ($16 billion in gold and $5 billion in silver). There is more. At present, barely 15% of these precious metals are recovered from the e-waste.

Quantities of gold, silver and other precious metals available for recovery are rising in tandem with the fast-growing sales of electronic and electrical goods, including the new category of tablet computers.

With respect to gold alone, electronic and electrical products consumed 5.3% (197 tons) of the world’s supply in 2001 and 7.7% last year (320 tons -- equal to 2.5% of the US gold reserves in the vaults of both Fort Knox, Kentucky, and the Federal Reserve Bank of New York).

In that same decade, even as the world’s annual gold supply rose 15% - from about 3,900 tons in 2001 to 4,500 tons in 2011 - the price per ounce leapt from under $300 to more than $1,500.

Thanks to the volume and value of precious metals e-waste contains, developing countries with an active informal recycling sector collect as much as 80-90% of their locally-generated e-waste.

The clincher was that e-waste now contains precious metal deposits'' that are 40 to 50 times richer than ores mined from the ground. The UN meet's main focus was on recycling. E-waste is emerging as one of the biggest modern-day challenges.
Title: Re: Hyperinflation or Deflation: Gold consumption
Post by: jdwheeler42 on April 14, 2013, 04:46:39 PM
Speaking of gold consumption, I googled for this phenomena and found the following article shown below. It says that 320 tons and 7,500 tons of gold/silver is used in electronics each year and of this total only around 15% is recovered. That means 278 tons of gold is consumed per year on electronics if the figures are true. I am not sure if that sum can be deemed trivial considering that 2700 tons of gold are mined each year. That wastage shows a 10% consumption rate assuming gold is not consumed in industries outside electronics.

Good article, monsta... but yes, even though 278 tons sounds like a lot, a 10% consumption rate is trivial for these purposes.  Can you imagine if we grew 10 times as much wheat as we ate?  Pumped 10 times as much oil?  Spills wouldn't be accidents, they'd be company policy!  While a significant amount of gold does get made into jewelry, people generally don't throw away jewelry, so it still acts as a reserve.  And considering the IMF, central banks, and private exchanges hold over 32,000 tons (according to NumberSleuth (http://"http://www.numbersleuth.org/worlds-gold/")), it would take quite a long time to use it all up.
Title: Re: Hyperinflation or Deflation: Gold consumption
Post by: monsta666 on April 14, 2013, 05:42:25 PM
Good article, monsta... but yes, even though 278 tons sounds like a lot, a 10% consumption rate is trivial for these purposes.  Can you imagine if we grew 10 times as much wheat as we ate?  Pumped 10 times as much oil?  Spills wouldn't be accidents, they'd be company policy!  While a significant amount of gold does get made into jewelry, people generally don't throw away jewelry, so it still acts as a reserve.  And considering the IMF, central banks, and private exchanges hold over 32,000 tons (according to NumberSleuth (http://"http://www.numbersleuth.org/worlds-gold/")), it would take quite a long time to use it all up.

I suppose in the grand scheme of things it is trivial but then I have a hard time saying 280 tons of discarded gold is a tiny amount especially if you think that an ounce goes for around $1,500 these days. However as you say it will be a long time before these losses would cover the gold held in the central bank nevermind the total amount of gold that is available which is around 165,000 tons. In fact I would argue further and say that we would never use up all the gold because once the oil and fossil fuel energy goes so does the electronics industry. With that industry gone there will no longer be gold consumption rate.
Title: Gold Asia Margin Calls: Look out BELOW!
Post by: RE on April 15, 2013, 12:04:04 AM
Man, much as I like to be RIGHT all the time, being THIS right is SCARY.  Shit, I haven't even been able to get the bet in yet on $18 Silver!  LOL.  Not to mention now I am SORRY I folded so soon on the Gold shorts. :(

Will be interesting to see how the PPT handles this over here when the markets open.  How Low will they let the PMs go?  Fucking LIMIT DOWN on the Nikkei!

Time once again to BRING ON Ben Lichtenstein! :icon_mrgreen:

Here they come to SELL 'EM AGAIN!
http://www.youtube.com/v/WrxlVjZJawQ?feature=player_embedded

RE

Gold, Silver In Asian Liquidation Mode As China Growth Slows More (http://www.zerohedge.com/news/2013-04-14/gold-asian-liquidation-mode)

(http://www.zerohedge.com/sites/default/files/pictures/picture-5.jpg) (http://www.zerohedge.com/users/tyler-durden)
Submitted by Tyler Durden (http://www.zerohedge.com/users/tyler-durden) on 04/14/2013 22:02 -0400
Title: Goldfinger Pussy Whipped?
Post by: RE on April 15, 2013, 02:13:44 AM
Anybody else pick up on the fact GO is NOTICEABLY ABSENT from this thread as we track Gold getting HAMMERRED in the markets?  :icon_mrgreen:

Looks like Goldfinger has been PUSSY WHIPPED!  :whip:

(http://2.bp.blogspot.com/--RCU2PF-cfI/Tf-OewHRCPI/AAAAAAAABQM/bVPQH6hEfvQ/s1600/Pussy-Galore-image.jpg)

I LIVE for GLOATING!  :icon_mrgreen:

RE
Title: Re: Hyperinflation or Deflation?
Post by: jdwheeler42 on April 15, 2013, 06:05:03 AM
Why does the phrase "deflationary death spiral" keep running through my head? ???:evil4:
Title: Re: Hyperinflation or Deflation?
Post by: Petty Tyrant on April 15, 2013, 07:02:18 AM
I was going to go and check on him make sure he hadnt slit his wrists, Play some mozart to cheer him up. Then I remembered his 90" Claude Monet was still worth more money than its 300lb solid gold frame, and he couldnt be underwater since he first got the nuggets in the original goldrush pulled out with a pickaxe and pan LOL.
Title: Re: Hyperinflation or Deflation?
Post by: agelbert on April 15, 2013, 11:21:23 AM
RE and UB,
Shame on you shameless gloaters! You are bad! :icon_mrgreen:

Ve VIL SEE who has ZE last Laugh! :evil6:


Silver at $50 before December 31, 2013! Shorts MUST cover when silver passes $40, PERIOD! ;)
Title: Re: Hyperinflation or Deflation?
Post by: pansceptic on April 15, 2013, 04:08:41 PM
While it does appear to be the case that the current running of PM stoploss orders was precipitated by several massive naked short transactions in gold, the limit down movement of copper and decline in oil suggest that all is not well in the world of finance.  Either big money sees deflation coming, or there is a liquidity crunch going on.

But I have some problems with RE's exortation to invest in people and community.  All of my friends are either 1) aging boomers like myself, mostly with health problems, or 2) younger folk (this includes 30-somethings) who are app-addled gadget junkies with NO real-world skills.  I am genuinely at a loss what to do with my paper winnings and my remaining time on this planet.  I'm beginning to see the merit to the head-in-the-sand Party On philosophy some of my friends enjoy.
Title: Re: Hyperinflation or Deflation?
Post by: RE on April 15, 2013, 04:25:16 PM
But I have some problems with RE's exortation to invest in people and community.  All of my friends are either 1) aging boomers like myself, mostly with health problems, or 2) younger folk (this includes 30-somethings) who are app-addled gadget junkies with NO real-world skills.  I am genuinely at a loss what to do with my paper winnings and my remaining time on this planet.  I'm beginning to see the merit to the head-in-the-sand Party On philosophy some of my friends enjoy.

Join Me, WHD, Surly, LD, Roamer, & Ben in the Sustaining Universal Needs community development project!  Better known as the Sun  :icon_sunny: Project.  ;D

RE
Title: Re: Hyperinflation or Deflation?
Post by: widgeon on April 15, 2013, 04:53:26 PM
These have definitely been freakish movements.  I sold all my longs (3 Vanguard funds) at the open today.  The Fed can do whatever they want.  It's their casino and "we're" mere playthings.
Title: Re: Hyperinflation or Deflation?
Post by: Petty Tyrant on April 15, 2013, 05:55:43 PM
While it does appear to be the case that the current running of PM stoploss orders was precipitated by several massive naked short transactions in gold, the limit down movement of copper and decline in oil suggest that all is not well in the world of finance.  Either big money sees deflation coming, or there is a liquidity crunch going on.

But I have some problems with RE's exortation to invest in people and community.  All of my friends are either 1) aging boomers like myself, mostly with health problems, or 2) younger folk (this includes 30-somethings) who are app-addled gadget junkies with NO real-world skills.  I am genuinely at a loss what to do with my paper winnings and my remaining time on this planet.  I'm beginning to see the merit to the head-in-the-sand Party On philosophy some of my friends enjoy.

You have been quiet lately pan, Have you thought about joining the foxstead? several such younger folk with the right sets of real world skills, looking for investment from boomer doomers.
Title: Re: Hyperinflation or Deflation?
Post by: pansceptic on April 15, 2013, 07:25:53 PM
Uncle Bob wrote
Quote
You have been quiet lately pan, Have you thought about joining the foxstead? several such younger folk with the right sets of real world skills, looking for investment from boomer doomers.

and RE:
Quote
Join Me, WHD, Surly, LD, Roamer, & Ben in the Sustaining Universal Needs community development project!  Better known as the Sun   Project.

You are right, I've been away for a while.  Where is the story on Foxstead or Sun Project on the boards?
Title: Re: Hyperinflation or Deflation?
Post by: RE on April 15, 2013, 07:36:57 PM

You are right, I've been away for a while.  Where is the story on Foxstead or Sun Project on the boards?

It's on an inside Board.  You have to Pony Up a $100 contribution to the Diner for access.  Ask Eddie if he thinks it's worth it, he is a subscriber even though so far he is only partially on board and is generally Dr. Gloomy. :icon_mrgreen:

RE
Title: Wheels Coming Off...
Post by: RE on April 15, 2013, 11:52:05 PM
Wheels Coming Off... (http://www.doomsteaddiner.net/blog/2013/04/15/wheels-falling-off/), Elvis's contribution to the weekend rout in the PMs market now UP on the Diner Blog!

Like the rest of these related articles, I am putting discussion all together inside this thread, which is the longest and most comprehensive thread looking at the collapse on the Economic level here on the Diner.

RE
Title: Forced Liquidation on the Horizon: The Ghost of Andrew Mellon
Post by: RE on April 16, 2013, 12:58:58 AM
Silver at $50 before December 31, 2013! Shorts MUST cover when silver passes $40, PERIOD! ;)

I'll take that bet! If Silver even makes it to $30 by Dec 31 I'll be amazed.

The Yen is on the verge of complete HI collapse.  Japan Inc. is going into a Forced Liquidation.  That means the Nips are going to have to SELL EVERYTHING at firesale prices, INCLUDING their PMs.  The Eurotrash can't afford to buy Jack Shit and the Chinese already HAVE more Silver than they will ever use as their export economy collapses and they DIE by the Truckload from Swine and Avian Flu.

Who is left to step up to the Plate to BUY?  Only Helicopter Ben.  You think the Master of Fiat will step in to prop up PMs?  He won't let them go to Zero, but he won't ramp them like the S&P either.

Mass Liquidation is coming down the pipe here, mark my words.  The run for the Fire Exits is just beginning here.

Quote from: Andrew Mellon
Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate. It will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up from less competent people.”

The Ghost of Andrew Mellon is upon us now.

RE
Title: Re: Hyperinflation or Deflation?
Post by: widgeon on April 17, 2013, 08:18:42 AM
Definitely a Ghost in the (fiat) Machine Today.

We'll soon see if there is any "Free" left in these markets.

I can't pin what the underlying trigger here has been.  Just those remarkable moves in Au & Ag which strongly indicate something's not right under-the-hood and that TPTB are ready to move on that fact.

Title: Re: Hyperinflation or Deflation?
Post by: widgeon on April 17, 2013, 09:18:34 AM
Action in oil is sick too.  Threatening to bring a stop to that tight oil fracking in ND and elsewhere.  It did in 2008/09.  A few $ left to fall, but not many.
Title: Re: Hyperinflation or Deflation?
Post by: agelbert on April 17, 2013, 09:39:44 AM
Quote
Quote from: agelbert on April 15, 2013, 11:21:23 AM


Silver at $50 before December 31, 2013! Shorts MUST cover when silver passes $40, PERIOD!



I'll take that bet! If Silver even makes it to $30 by Dec 31 I'll be amazed.

RE,
Okey dokey! If silver gets to $20 before it gets to $40, I'll throw in the towel and call you DA TRIUMPHANT GODFADER WINNER! :emthup: :icon_mrgreen:


However, if it gets to $40 first, you must be a good Mafia Don and eat your PM CROW VEGGIES!   :whip:  :laughing7:
Title: Re: Hyperinflation or Deflation?
Post by: DoomerSupport on April 17, 2013, 09:48:56 AM
Quote
Quote from: agelbert on April 15, 2013, 11:21:23 AM


Silver at $50 before December 31, 2013! Shorts MUST cover when silver passes $40, PERIOD!



I'll take that bet! If Silver even makes it to $30 by Dec 31 I'll be amazed.

RE,
Okey dokey! If silver gets to $20 before it gets to $40, I'll throw in the towel and call you DA TRIUMPHANT GODFADER WINNER! :emthup: :icon_mrgreen:


However, if it gets to $40 first, you must be a good Mafia Don and eat your PM CROW VEGGIES!   :whip:  :laughing7:

I hope it does go to $ 20, then $ 40.   :evil4:



Title: Re: Hyperinflation or Deflation?
Post by: agelbert on April 17, 2013, 10:03:52 AM
Quote
I hope it does go to $ 20, then $ 40.    :evil4:

Careful, old boy! Churn with poor timing leads to the poor house!  ;)
Title: Re: Hyperinflation or Deflation?
Post by: DoomerSupport on April 17, 2013, 10:06:50 AM
Quote
I hope it does go to $ 20, then $ 40.    :evil4:

Careful, old boy! Churn with poor timing leads to the poor house!  ;)

Churn?  Not selling what I currently have, just looking for another buying opportunity!

Title: Re: Hyperinflation or Deflation?
Post by: agelbert on April 17, 2013, 10:38:03 AM
Quote
Churn?  Not selling what I currently have, just looking for another buying opportunity!

Right you are. I thought you were talking about speculating but I see you are holding onto physical. Good for you!  :emthup: :icon_sunny:
Title: Re: Hyperinflation or Deflation?
Post by: DoomerSupport on April 17, 2013, 10:48:37 AM
Quote
Churn?  Not selling what I currently have, just looking for another buying opportunity!

Right you are. I thought you were talking about speculating but I see you are holding onto physical. Good for you!  :emthup: :icon_sunny:

I bought most of my PM's at $ 803 for gold and $ 15.13 for Silver.  Still up over 70% on gold and 44% on Silver. 

Title: Re: Hyperinflation or Deflation?
Post by: agelbert on April 17, 2013, 11:20:52 AM
Quote
I bought most of my PM's at $ 803 for gold and $ 15.13 for Silver.  Still up over 70% on gold and 44% on Silver. 


Wise investment decisions that are protecting you from inflation.  :emthup:

Have you checked out the double leveraged silver AGQ ETF? It moves twice as fast (in EITHER DIRECTION, of course!) as the price of silver. Since silver is WAY down now, there may be some money in AGQ.
Title: Re: Hyperinflation or Deflation?
Post by: DoomerSupport on April 17, 2013, 12:37:46 PM
Quote
I bought most of my PM's at $ 803 for gold and $ 15.13 for Silver.  Still up over 70% on gold and 44% on Silver. 


Wise investment decisions that are protecting you from inflation.  :emthup:

Have you checked out the double leveraged silver AGQ ETF? It moves twice as fast (in EITHER DIRECTION, of course!) as the price of silver. Since silver is WAY down now, there may be some money in AGQ.

Nope.  If I cannot put it in a safe, I don't pretend to own it.

PM's are about only a fraction of my strategy so I probably don't qualify as a gold bug.   :)


Title: Gold Crash + Oil Crash = Recession
Post by: RE on April 19, 2013, 11:50:34 PM
Gold Crash + Oil Crash = Recession (http://www.doomsteaddiner.net/blog/2013/04/19/gold-crash-oil-crash-recession/) by Michael Snyder now UP on the Diner Blog!

Crash Velocity Increasing here...

RE
Title: Re: Gold Crash + Oil Crash = Recession
Post by: Golden Oxen on April 20, 2013, 05:15:56 AM
Gold Crash + Oil Crash = Recession (http://www.doomsteaddiner.net/blog/2013/04/19/gold-crash-oil-crash-recession/) by Michael Snyder now UP on the Diner Blog!

Crash Velocity Increasing here...

RE

This is a top notch article, and recommend it highly to those with interest in my Gold & Silver news thread. Five star ***** rated by GO :emthup:
Title: HI or DF? The June 2009 RE Prediction
Post by: RE on May 04, 2013, 11:11:13 PM
Mining the archives over on Reverse Engineering, I found this post on the HI v DF issue.  Most predictions still holding up OK.

RE

Quote from: RE June 2009
OK, we can now Laff with Arthur Laffer. Arthur is Mr Supply Side Economics, the
guy who provided the basis for the Trickle Down Economics of the Raygun
Administration. The dude is still alive and cooking! Read Arthur's take on the
current situation:

http://online.wsj.com/article/SB124458888993599879.html (http://online.wsj.com/article/SB124458888993599879.html)

Arthur is another person warning of the INFLATION possible with the outrageous
expansion of the money supply, and frankly he makes good arguments for this.
Carried out to its logical conclusion, you would get hyperinflation out of what
the Fed is doing here. The problem is that the deflationary spiral is outpacing
the inflationary possibilities at the longer end of this exercise. I will try
to explain the difference between Arthurs analysis as it applied to the 70s and
80s as it applies to now, ShortonOil can correct me if I blow this analysis big
time, which is quite possible. LOL. I just work the Big Picture, he does the
numbers based on Available Energy. I do the analysis top down, he goes bottom
up. If we converge, I think you can put money on the conclusions. Well if
there WAS money you could put money on, you could do that anyhow. LOL.

In the 70s-80s, you could expand money supply and still stay within the scope of
Available Energy, at least Worldwide. To do it, you had to bring in OPEC Oil
which dislocated te sytem for a bit, but you still had great EROEI. The
expanding money supply moved out through the economy, had periods of Infaltion
and Stagflation, high interest rates for a while, etc. The reason I do not
think you get Inflation here as long end result is you do not have the Buffer
System of Available Energy to increase production and move the increased money
supply into the general economy. If you look at the actual increse here in
money supply, its all on the banking end, little of it is moving outward to the
general economy. Unlike the 70s-80s period, there is no way to do that, not
even moving the capital around globally does that.

What the Laffer Curve DOES tell us now as in that period is that raising Tax
Rates won't raise Revenue. At a certain point you reach Peak Tax Revenue, rates
can increase but the tax base decreases. Unless you ca further input energy and
raise GDP with that energy, you cannot raise real tax revenue. That is the
point we are at NOW. Its not so much Peak Oil as it is Peak Taxes. However,
generating a large increase in Money Supply in such a situation is not really
inflationary in the sense that you are I would experience such a thing. The
decrease i productivity and the marginal return on tax rate increases is such
that deflation exceeds inflation. You COLLAPSE before you can reinflate in
other words.

I stick to my hypothesis you will not see HyperInflation other than as a minor
last gasp in the endgame. Prior to that, almost all productivity will disappear
from the system, including Goobermint Tax receipts. By the time outrageous
amounts of Toilet Paper actually make it out of this deflationary spiral, all
the systems we depend on for moving around the credit and the money and the
products will long have gone dysfunctional. We collapse before Inflation can
hit the real economy.

Looking for someone to disabuse me of this notion with a good argument to the
contrary. Also curious if Short agrees with this analysis. He's my Bottom Up
check here. If I get agreement there, I know we are in the DEEP DOO DOO for
sure.

RE
Title: Re: Hyperinflation or Deflation?
Post by: jdwheeler42 on May 04, 2013, 11:47:33 PM
The answer is, it's whatever they want it to be, for as long as they're in control.  What is the marginal costs of printing digits in a computer?  They really have no technical constraints when it comes to fighting deflation.  Bernanke managed to DOUBLE the money supply in a SINGLE year, a unprecedented feat, yet even the least doctored figures showed prices going up only about 10%.  So you're right RE about there being strong deflationary forces at work, but when it comes to nominal values, the whole thing is rigged, they can make the numbers anything they want.  Until, of course, the system completely breaks down.
Title: Re: Hyperinflation or Deflation?
Post by: RE on May 05, 2013, 12:40:24 AM
The answer is, it's whatever they want it to be, for as long as they're in control.  What is the marginal costs of printing digits in a computer?  They really have no technical constraints when it comes to fighting deflation.  Bernanke managed to DOUBLE the money supply in a SINGLE year, a unprecedented feat, yet even the least doctored figures showed prices going up only about 10%.  So you're right RE about there being strong deflationary forces at work, but when it comes to nominal values, the whole thing is rigged, they can make the numbers anything they want.  Until, of course, the system completely breaks down.

There actually ARE technical constraints that are difficult to overcome, primary among them DISTRIBUTION of freshly minted Digibits.

Helicopter Ben can create an Infinite amount of digibits pressing the F7 Print Button on the Laptop, but he cannot get said money distributed out past the first layer of Primary Dealers and then to an extent their top clients of TBTF Corporations.

For an HI event to occur, the megabucks created have to flow out into the economy at large, and the only way that happens is through loans and investment to build new projects and Goobermint Bonds to pay the costs of Goobermint.  So unless the newly minted digibits are used to HIRE people both in the Public and Private Sector, you just can't get HI.  The CUSTOMERS don't have access to this newly created money, only the Extractor/"Producers" do.

What is actually occuring though?  In the PIIGS Nations particularly, money is NOT getting distributed out to the population, in fact it is being CHOKED OFF through Austerity.  So the Oil Extractors and Speculators can drive the price up, but since few but the Elite in Eurotrashland have money to buy it at said prices, all that happens is you destroy the demand for it.  HI does not occur because more and more people get triaged off the economy this way.

Same thing is occurring here on a less obvious scale, Munis like Stockton and Detroit are CUT OFF and getting Triaged off the Oil economy.  The megabucks Helicopter Ben prints each day are moved into the Stock Market to keep it floating, thus keeping the Pensions from going Bust, but it's not creating any new Jobs and there is no Investment going on that pays a real return.  In fact the total employed workforce keeps shrinking.  So unless HB starts handing out Free Money to these folks, the same thing occurs here as in Eurotrashland, which is Demand Destruction, not HI.

HI will only come at the VERY end of this game when people finally realize their savings will not buy ANYTHING, and everyone who still has some FRNs tries to unload them simultaneously.  That would include the Chinese of course.  Thing is, this is a Death Sentence for the Chinese also, they know it so don't do it.  BAU continues there as long as they remain a sink for malinvestment.  More new money burned up in worthless Bridge to Nowhere and Ghost City projects.

The game is running down, and fast as printed, any new money is burned up long before it makes it into the pockets of J6P to drive up the prices.  It is deflation driven by lack of Inputs, primarily energy.

RE
Title: Re: Hyperinflation or Deflation?
Post by: jdwheeler42 on May 05, 2013, 02:07:43 AM
Technically, you contradicted yourself....

For an HI event to occur, the megabucks created have to flow out into the economy at large, and the only way that happens is through loans and investment to build new projects and Goobermint Bonds to pay the costs of Goobermint.
.
.
.
So unless HB starts handing out Free Money to these folks, the same thing occurs here as in Eurotrashland, which is Demand Destruction, not HI.
.
.
.
RE

Food stamps, unemployment benefits, disability payments, stimulus payments, first time homebuyer credits, health care tax credits, and the like all qualify as "Free Money" for these purposes.  This puts the money in the hands of the consumers never to be paid back as long as the government can keep rolling over its bonds.  That's what I mean when I say there are no technical constraints.  Not that they would want to, but they certainly have the capability of handing out virtually unlimited quantities of free money.

That said, I will definitely agree that it looks like we are headed towards a deflationary spiral.  Even the central bankers don't seem so panicked by it as they were 10-15 years ago.
Title: Re: Hyperinflation or Deflation?
Post by: RE on May 05, 2013, 02:36:42 AM
Food stamps, unemployment benefits, disability payments, stimulus payments, first time homebuyer credits, health care tax credits, and the like all qualify as "Free Money" for these purposes.  This puts the money in the hands of the consumers never to be paid back as long as the government can keep rolling over its bonds.  That's what I mean when I say there are no technical constraints.  Not that they would want to, but they certainly have the capability of handing out virtually unlimited quantities of free money.

This is an attempt to pass out money, but it is quite limited in actuality, least as far as our economy goes.  UE Bennies generally amount to no more than $400/wk at BEST and have a limited lifespan, SS & SSDI are not a whole lot more than that, my recent SS statement told me if I went on SSDI tomorrow because of my PAD I would receive around $1700/mo.  I'm not gonna be living High on the Hog on that money unless I move to some Banana Republic as an Ex-Pat.

If you are gonna get HI, Da Goobermint will have to Hand Out a good deal more money than what is doled out in SS and UE money.  You are doing good if you can cover Rent and Food on this money, much less buy Gas for your SUV.

RE
Title: Re: Hyperinflation or Deflation?
Post by: widgeon on May 05, 2013, 02:37:19 PM
But, I think we CAN have HI in "asset" prices w/ the current mode of operations ... in that sense just consistent w/ other HI regimes of the past.  What are the connected and PD's doing w/ the $ they are given?  Speculating risk free in liquid assets, causing the price to appreciate.

I think the door is open for high "inflation" in asset prices because of what they are doing.  Eventually, that will trickle down to high inflation elsewhere ... eventually.

Title: Re: Hyperinflation or Deflation?
Post by: RE on May 05, 2013, 04:16:56 PM
But, I think we CAN have HI in "asset" prices w/ the current mode of operations ... in that sense just consistent w/ other HI regimes of the past.  What are the connected and PD's doing w/ the $ they are given?  Speculating risk free in liquid assets, causing the price to appreciate.

I think the door is open for high "inflation" in asset prices because of what they are doing.  Eventually, that will trickle down to high inflation elsewhere ... eventually.

Well, first off HI doesn't stand for "HIGH Inflation", it stands for "HYPER Inflation".  AKA prices skyrocketing at rates of 10%/month and higher.  This is not evident anywhere in the major currencies at the moment, though I suspect the Euro and Yen will see their Final Days this way.

Far as Asset Prices go, the Numero Uno Asset held by most people is Real Estate, aka the McMansion, which continues to Deflate in value.

The main area you can make a case for Inflation of any kind going on is in Food & Energy prices, but even they are not steadily inflating at any great rate.  I am now paying $3.80/gallon for gas, whereas a year ago I was paying up to $4.25/gallon.  I can still find Ribeye Steaks on Sale at 3 Bears for $5.99/lb.  The WORST inflation I have seen is in Beer prices, which are up 33% from when I arrived up here. That is about 5%/year, which is bad but it's not HI by any means.

Deal here is, Hyperinflationista Chicken Littles like John Williams and Speedy Gonzalo Lira have been predicting HI every year since 2008 and the beginnings of QE, but it is still not evident anywhere in the Industrialized economies.  What IS evident is continuing Demand Destruction, High rates of UE and cutbacks of Goobermint services and Pensions.

As much money as is being created on the Mainframes at Da Fed and the TBTF Banks, it is simply not being distributed out to J6P in any meaningful form.  Most people can't go and rush to Unload Worthless Fiat Euros/Yen/Dollars because they don't HAVE them to unload!  They are all quite SCARCE in the Real Economy.

I don't rule out HI as a Final End Game scenario, but it is not what is playing out so far.  What is playing out is Demand Destruction and the Triaging of weaker countries off the Credit Bandwagon and shoving vast populations into grinding poverty.  That is DEFLATION in my book.

RE
Title: Re: Hyperinflation or Deflation?
Post by: widgeon on May 05, 2013, 06:20:52 PM
The action in the markets is very similar to what one would expect when viewing past HI scenarios.  Much of the free money goes into equities.  That is happening again.  I don't really care about "most people's" assets.  All that matters for HI correlates, like the equity markets, are the assets of the 1%.

Much gets lost when the term "hyper-inflation" gets used.  It's a red herring.  Plain garden variety high inflation will be sufficient to put the coup de grace to us.

Here in OK even RE prices are now, in some places, 2x higher than in 2007.  The volume of sales are down, but the amounts buyers are getting is really high.  There's been not a single penny of deflation on anything here in OK.

Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on May 05, 2013, 08:47:23 PM
The action in the markets is very similar to what one would expect when viewing past HI scenarios.  Much of the free money goes into equities.  That is happening again.  I don't really care about "most people's" assets.  All that matters for HI correlates, like the equity markets, are the assets of the 1%.

Much gets lost when the term "hyper-inflation" gets used.  It's a red herring.  Plain garden variety high inflation will be sufficient to put the coup de grace to us.

Here in OK even RE prices are now, in some places, 2x higher than in 2007.  The volume of sales are down, but the amounts buyers are getting is really high.  There's been not a single penny of deflation on anything here in OK.

You are correct Widgeon, inflation is the name of the game and always will be until there is an accidental deflationary bust, which will never happen by design, only miscalculation by the Central banks: and if that happens; it will be corrected quickly by a torrent of FIAT.

This is the situation we find ourselves in now; there was an accidental deflationary bust in 2007 with the real estate game that took the authorities by surprise. Their response, as was predicted by the Gold Bugs since the creation of fiat, was a blizzard of new money creation to arrest it and move prices back up. So far it was successful and the amount of money now being created as well as the resultant debt make HI just about inevitable.

There is of course a timing involved in this, and Gold detractors, having been brainwashed by fiat fantasies promoted by banksters cannot understand this. May I humbly quote a few paragraphs from the Ludwig von Mises institute explaining inflation, which I think say's better what you and I are trying to convey to the misinformed.

Quote
Increases in the money supply set in motion an exchange of nothing for something. They divert real funding away from wealth generators toward the holders of the newly created money. This is what sets in motion the misallocation of resources, not price rises as such. Moreover, the beneficiaries of the newly created money--i.e., money "out of thin air"--are always the first recipients of money, for they can divert a greater portion of wealth to themselves. Obviously, those who either don't receive any of the newly created money or get it last will find that what is left for them is a diminished portion of the real pool of funding.

Furthermore, real incomes fall, not because of general rises in prices, but because of increases in money supply; in other words, inflation depletes the real pool of funding, thereby undermining the production of real wealth-- i.e., lowering real incomes. General increases in prices, which follow increases in money supply, only point to the erosion of money's purchasing power--although general rises in prices by themselves do not undermine the formation of real wealth as such.
Title: Re: Hyperinflation or Deflation?
Post by: RE on May 05, 2013, 09:05:26 PM

You are correct Widgeon, inflation is the name of the game and always will be until there is an accidental deflationary bust, which will never happen by design, only miscalculation by the Central banks: and if that happens; it will be corrected quickly by a torrent of FIAT.

Oh, Deflation happens in a Calculated fashion also.  Remember the words of Andrew Mellon:

Quote from: Andrew Mellon
Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate.

It's all about timing and knowing in advance how the game will be played.  Right now they are playing the Liquidation Game in Greece and Cyprus.  Hell, you can pick up the Parthenon for Pennies now!

This is migrating rapidly to Spain, and eventually will Cross the Pond also.  Losing control of the situation is not what causes Deflation, that is UNDER control.  Losing control is the HI Endgame, which as I have said many times is possible if not likely, but it is not the case right now by any stretch of the imagination.

RE
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on May 05, 2013, 09:34:37 PM
Quote
It's all about timing and knowing in advance how the game will be played.  Right now they are playing the Liquidation Game in Greece and Cyprus.  Hell, you can pick up the Parthenon for Pennies now!

I get your point and it has some validity. I am of the opinion you are looking at a failed currency experiment, namely the EURO and ignoring the much bigger picture of what a larger more important part of the financial world is embarking on for policy. I assure you that if Greece and Cyprus could print their own Euro's they would; and I feel they will all go back to printing their own brand of paper soon anyway.

 I will give you the acknowledgement that the game plan can change, and things can go awry from the unforeseen, but in  all honesty I would counsel getting ready for some severe inflation and soon. Your argument also has in it's favor the folks at TAE, who claim the deflationary bust that I have referred to in 2007 was the real thing and we are witnessing a futile effort to prevent it from expressing itself fully. I admit that I could be in error in my judgement due to my respect for those people and their scholarship on these matters. One must walk his own path in these matters however, and I see nothing but severe inflation in our future.
Title: Re: Hyperinflation or Deflation?
Post by: RE on May 05, 2013, 10:11:29 PM
I don't think you are entirely wrong GO, Inflation is as much a part of the Game as Deflation is.  As Thomas Jefferson said:

Quote from: Thomas Jefferson
If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered...I believe that banking institutions are more dangerous to our liberties than standing armies... The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.

Note here in Jefferson's statement that Deflation succeeds Inflation, which comes first.

The Game is far from OVAH with the Dollar, though the Euro and Yen appear to be nearing the End Game.

Inflation, particularly in Energy and Food Prices (closely related) is highly likely at this point, but that is a scarcity driven issue in its own right.  HYPER Inflation though, particularly in the Dollar is not too likely in the near term.  The Euro and Yen have to crash first before that can occur.

I doubt the Illuminati can maintain control of the situation for long after the Euro goes the way of the Dinosaur.  However, to bet against the Dollar is to bet against the POWER of the Big Ass Military.  They will go out IN FORCE to "Peace Keep" and STEAL resources as they are still able to do, read that Syria right now.

The Dollar collapses when the BAM does.  Money is all about POWER.  Long as the BAM enforces the Value of the Dollar at the Point of a Gun, people will take it as money.  They have no other choice.

RE
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on May 05, 2013, 10:35:00 PM
Quote
The Game is far from OVAH with the Dollar, though the Euro and Yen appear to be nearing the End Game.
Quote
The Dollar collapses when the BAM does.  Money is all about POWER.  Long as the BAM enforces the Value of the Dollar at the Point of a Gun, people will take it as money.  They have no other choice.

Again you are correct but looking at a piece of the bigger picture. My concern is not of a total collapse of the dollar, and you are correct about our military status as being of prime importance.

My fear is severe inflation. It is my opinion we will have it in all currencies. My view is different from yours in that I feel the dollar depreciates less than the ones you mentioned, but depreciates none the less, and it will fit your definition of HI. Keep in mind that the dollar, the World's reserve currency, has already lost over 95 % it'd purchasing power by the governments own assertion since the Fed was created. This happened as it maintained it's prominence as the world's reserve currency. Aren't you old enough to remember the 10 cent cup of coffee, the brand new 15 thousand dollar home in suburbia, the 60 cent bakers dozen (13) of doughnuts and they were big ones? Not even going to mention the price of gasoline it was so cheap.

The mathematics of debt and money creation and the interest on that debt suggest that inflation in the US will continue at an ever increasing rate, irrespective of how fast other currencies depreciate, but I tend to agree with you it will be at a slower rate than most.
Title: Re: Hyperinflation or Deflation?
Post by: RE on May 06, 2013, 06:28:13 AM
Aren't you old enough to remember the 10 cent cup of coffee, the brand new 15 thousand dollar home in suburbia, the 60 cent bakers dozen (13) of doughnuts and they were big ones? Not even going to mention the price of gasoline it was so cheap.

Not QUITE so old as to remember the $15K McMansion, the one my mom got in the divorce settlement with Dad the Pigman went for $30K when purchased.  Sold at around $160K at a not so good point in the manipulations, had she either sold earlier or later it might have pulled in $300K.  I don't remember the 60 cent "Bakers Dozen", but I do remember the 25 cent Pizza Slice.

Anyhow, inflation is ongoing in any active monetary system.  If the inflation matches up with the population increase and overall extraction of wealth from the earth, it is necessary as part of the monetary game of Expansion.  If you have More People around, you need More Money of course.  If you did NOT increase the Money Supply and the population doubled (more than that actually since 1970), then everyone would have half as much money to work with.

What we are talking about here though is NOT this type of inflation, which occurs inexorably in any monetary system based on Growth.  With HI, you are talking about the SUDDEN and COMPLETE loss of faith in the currency which causes it to become essentially valueless in short order.  While this may be in the offing for the Yen and Euro in the near Future, it does not seem likely for the Dollar.  The Dollar would be the BENEFICIARY of the collapse of the Euro or Yen in the short term.

Anyhow, in order to keep the game operational, TPTB have to have currency they control, and it can be Fiat or PMs.  The fact is Central Banks hold MOST of the Monetary Gold in the world in their Basement Safes.  They can push the Gold Market around at will.  Thing is, either PMs OR Fiat must represent something REAL in the world of Energy Resource.  Once they become divorced from that, they lose value.

RE
Title: Re: Hyperinflation or Deflation?
Post by: widgeon on May 14, 2013, 03:55:52 PM
"The booming stock market is the first sign of hyperinflation. That is always the case"

http://maxkeiser.com/2013/05/14/the-booming-stock-market-is-the-first-sign-of-hyperinflation-that-is-always-the-case/ (http://maxkeiser.com/2013/05/14/the-booming-stock-market-is-the-first-sign-of-hyperinflation-that-is-always-the-case/)

I put alot of "qualifiers" around the word "hyper" because there is alot of room for argument.  Let's just say it's sufficient to say, very high inflation.
Title: Re: Hyperinflation or Deflation?
Post by: Eddie on May 14, 2013, 04:07:26 PM
If wages start to go up for a reasonable percentage of employed people in non-government jobs, then I'll know inflation is about to head to a whole new level. Some writers are starting to talk about that happening sooner rather than later.
Title: HI v DF: Abenomics & Nippon Toast
Post by: RE on May 19, 2013, 04:10:14 AM
Some interesting conjectures by Daniel Cloud off the pages of Zero Hedge on why the Dollar so far has not gone HI, and why the Yen probably will.

I don't agree with all of it, but will wait to see what this brings in from the Diners before dropping on my 2,000,000 cents worth. (Inflation, you know) LOL.

RE

"Boldly They Rode And Well", Or Why Japan Is Not America (http://www.zerohedge.com/news/2013-05-18/boldly-they-rode-and-well-or-why-japan-not-america)

Submitted by Tyler Durden on 05/18/2013 15:30 -0400

Submitted by Daniel Cloud

Boldly They Rode And Well


I believe that Shinzo Abe has made a very serious strategic miscalculation. I used to be confused in much the same way he now seems to be, but I was cured of my confusion by thinking about Chinese inflation.

For a long time, I was puzzled by the fact that America’s endless multi-stage QE program seemed to have no effect on measured inflation, on the CPI and the PPI. But then I realized that by only looking at the United States and their three hundred million-plus people, I was missing the big picture, missing the most important part of its aggregate impact on the Earth’s seven billion inhabitants.

QE may never have much of an effect on the inflation rate in the fifty states of the United States of America, because it is workers in the developing world, and in particular, in China, who are the marginal hires in our still-globalizing, still-offshoring world economy. There is no distinct American economy, now, there is no Chinese economy, there is only the world economy, and the Fed makes policy for large parts of it. China has the kinds of structural rigidities in its labor, goods, information, and asset markets that make inflationary psychology very probable. It already had an ongoing and stubborn problem with inflation before QE started, so the required psychology already existed. And, perhaps most importantly, much of the money the Fed is printing doesn’t actually end up in the United States. It ends up being added to the reserves, and therefore the domestic money supply, of countries like China, who want to keep their currencies pegged, or quasi-pegged, to the dollar.

Why? Simply letting their currency appreciate would do to the Chinese what it did to Japan in the late ‘80’s. But to keep the yuan from appreciating against the dollar as a result of the increased supply of dollars from QE, the government of China must buy all the dollars anyone shows up with, at the pegged exchange rate. To pay for them, China must issue yuan, and pay them out to the holders of those dollars. That makes the supply of yuan in circulation increase by the same amount – as the dollars are added to the country’s reserves, the domestic money supply has a matching increase. The authorities can try to “sterilize” this hot money, by selling treasury bills, but experience has shown that the flows are simply too large and long term for this to be very effective.

Since this means the money supply in China is constantly increasing at what would otherwise be an undesirably rapid rate, the result, as readers of Zero Hedge already know, is a persistent problem with inflation. Inflation is a form of taxation; by printing money, the State funds itself by taking a little bit of wealth away from each holder of the currency. (Or in the case of the dollar, of all the various currencies pegged to it…)

In 2012, according to a recent post on ZH, citing the WSJ, nominal private sector wages in China were up 17.1 percent. This means wages are compounding at a rate much, much higher than GDP growth, and the process shows no signs of stopping. That endless increase feeds through into product prices – not the prices of exported products, since it’s necessary to stay competitive in dollar terms, but the prices of ones sold into the domestic market. The same effect is echoed all through the developing world, in any country that wants to participate in dollar-based world trade, and feels it has to keep its currency in a stable relationship with the dollar to do so without undue disruption. That increase in the cost of the goods and services available to them makes the middle class, and the many people who are still poor in those countries, worse off than they otherwise would have been. (It was rising food prices, tied to Chinese demand, that were the straw that finally broke the camels’ back in Egypt and Syria.) On the other hand, the American policy that ultimately causes it helps the Fed’s main constituency, developed-country banks, and helps developed-country governments keep spending, and allows developed-country political actors to maintain their patronage networks.

QE works, politically, because it is mostly a tax on consumers in the developing world. It keeps the banking system in Europe, and therefore the rest of the world, from collapsing, for the time being, it maintains the existing set of political arrangements, and the costs fall mainly on people who will never have a chance to vote in an OECD election. Ben Bernanke’s great triumph, as an ideologue, is to have come up with a Rawlsian, distributive justice argument in favor of what really amounts to taxing the poor to protect the assets of the rich. (To add insult to injury, in a country like China, where nobody ever gets to vote on anything, it’s taxation without any hint or whisper of representation. Egypt showed us what that can lead to, though as Americans we shouldn’t need reminding.) Given the actual goal, which is to maintain the status quo in world affairs as long as possible, it isn’t clear what other policy could have been chosen, but the justification offered in public is, of necessity, somewhat ironic.

The risk to world markets, at the moment, comes from the fact that the people who run the Fed and Treasury may actually be sincere in offering that justification, that the irony may be unintended. Their somewhat myopic focus on the developed world – which is, after all, where all the relevant political constituencies live – means that they may not actually understand that robbing the poor to pay the rich is what they’ve been doing. All they know, perhaps, is that the policy didn’t cause anyone who mattered to them any pain – so it seems possible that they have perceived it as actually costless, as a free lunch. It’s easy to be incurious about how migrant workers in Wuhan are doing, when the Chinese press can’t really cover their situation, and you never meet or talk to such people yourself. (Somehow they don’t get invited to G7 meetings…)

Certainly, the Japanese don’t seem to have been let in on the joke. We’ve been doing QE for years. It hasn’t had any of the predicted catastrophic effects. We kept obnoxiously pointing this out to everyone, and voicing our exasperation at their failure to emulate us. Eventually the political pressure for adopting such an apparently costless, and riskless, and kind-hearted policy became irresistible, and there was a coup at the Bank of Japan.

The mistake Abe is making, though, is to think the same trick that worked for the US will work for them. The problem, as Shirakawa no doubt realizes, is that the two country’s situations are not at all analogous, because the yen isn’t really a reserve currency in the same way the dollar is. There is no population of natural sovereign buyers who will be forced to print their own currency to mop up excess yen, as there is for the dollar. No sovereign is going to want to dramatically increase the allocations of their country’s reserves to the yen, not when it’s in the middle of being deliberately devalued, or really ever. Russia and China and Saudi Arabia don’t need any more yen, they have plenty. Oil isn’t priced in yen. Japan isn’t the world’s largest economy, or even its second largest. World trade isn’t conducted in yen. The emerging economies will just let it collapse. There is no natural sovereign sink for yen to drain into, as there is for the dollar, no group of buyers of last resort with bottomless pockets and no choice but to buy.

But that means nobody else is going to want to hold yen either. Why own a currency when the issuer publicly plans to make it worth less, and to raise the inflation rate well above the current long-bond yield at the same time? That isn’t a store of value; it’s a live grenade. People in the private sector, wishing to survive, will fling the grenade away. There is nothing to stop them, no natural buyer the other side, because the only player who could possibly defend the yen – the BoJ – is publicly committed, in a politically irrevocable way, to the opposite path. Because of the relative success of QE in the United States, policy-makers will be complacent about the risks.

The mistake Abe is making is to generalize from the experience of the central bank of the world’s primary reserve currency to his own very different situation. Japan can’t tax its allies to support its insolvent State by printing money, because (aside from the US, which is also broke) it has no allies. Any liquidity it squirts at them will simply splash off. What will really happen is, therefore, exactly what you would expect to happen to a country with a convertible currency and a very large national debt which credibly announces that it plans to abruptly double its money supply – there will be a scramble to get out, and the yen will decline, or Japanese bond yields will rise, until one or the other reaches a level that offers some prospect of a positive return. Though of course, there will be overshooting.

That means a much, much lower yen, and/or much higher JGB yields, which would of course be instantly fatal. So, as George Soros has already warned, what we may actually get (unless Abe flinches, and reverses course, which is hard for him to do now he’s actually pulled his sword out, yelled “Banzai!”, and started the cavalry charge) is an uncontrolled devaluation of the yen, to some level that would seem wildly unrealistic to us now, with incalculable risks for the stability of world markets. And it’s all based on a mistake, an incorrect analogy with America’s situation. “Boldly they rode and well, into the jaws of Death, into the mouth of Hell…” The nobility of failure may, I suppose, be some consolation, for Abe, personally, at least.

The only really unusual thing about this particular case is the fact that the uncontrolled devaluation has been publicly announced, in advance, in a way that’s extremely credible. That makes it an unprecedented experiment – which could easily turn out to be the recipe for an unprecedented disaster.



RE
Title: Re: Hyperinflation or Deflation?
Post by: ross on May 19, 2013, 06:37:03 AM
Cheer up, Gringos. It is a dollar bull market! The US Dollar Index is at multi-year highs.

The death of the dollar has been greatly exaggerated. Best of a bad lot. Canadian and Aussie Dollar at parity were an absurd joke. The Swissie at parity? Please. What you are witnessing now is the beginning of a multi-year trend of relative dollar strength.

Hyperinflation has been the ultimate economic canard; a shifty bit of bullshit spun over the last five years even as velocity of money collapsed. Plus, Soros is out. Why aren't you?

Inflation isn't anywhere on the horizon. Wages cannot, will not increase for the "average" worker until they are equalized with the Chinese and Indians (many of whom still eat one meal per day!). You think I'm joking? These are the economic realities of globalization.

American wages still have a lot of catching up to do on the downside and that is deflationary. Do you think dollar strength will help America's low skill laborers more money, or less?
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on May 19, 2013, 07:38:04 AM
Cheer up, Gringos. It is a dollar bull market! The US Dollar Index is at multi-year highs.

The death of the dollar has been greatly exaggerated. Best of a bad lot. Canadian and Aussie Dollar at parity were an absurd joke. The Swissie at parity? Please. What you are witnessing now is the beginning of a multi-year trend of relative dollar strength.

Hyperinflation has been the ultimate economic canard; a shifty bit of bullshit spun over the last five years even as velocity of money collapsed. Plus, Soros is out. Why aren't you?

Inflation isn't anywhere on the horizon. Wages cannot, will not increase for the "average" worker until they are equalized with the Chinese and Indians (many of whom still eat one meal per day!). You think I'm joking? These are the economic realities of globalization.

American wages still have a lot of catching up to do on the downside and that is deflationary. Do you think dollar strength will help America's low skill laborers more money, or less?

Hi Ross, Your argument is bandied about by the anti gold establishment and is as false as their fiat currencies.

The dollar has lost over 95% of it's purchasing power since the establishment of the Fed, while maintaining it's status as the world's reserve currency.

Relative strength does not mean strength if others are weakening  at a faster rate. It only means they will approach zero more quickly

If the dollar were to rise substantially against the other major currencies, it would mean hyper inflation for them deflation for us. That cannot happen alongside globalization at the same time. Currency wars and trade restrictions and tariffs soon follow. Currency devaluations occur on an every day basis as the rush to remain competitive intensifies.

Deflation in the US, would cause a default of the entire debt structure and instant economic collapse. We had a taste of that for a brief moment in 2008 and you saw the Fed's reaction to it. It is the only acceptable solution, "Inflate or Die' is what it is called.

Fiat debt based currencies are a curse placed on mankind by the banksters at various times throughout all of history. Each and every one of them has ended in a hyperinflation and a kneeling at the altar of Gold begging for forgiveness.

Don't be confused at their demise not happening simultaneaously.

As for Mr, Soros may I suggest you replace your admiration for him with a man infinitely more wiser, my opinion of course; Sir Issac Newton

                                                        "Newton (the grand architect of the gold standard)... replied:  'Gentlemen, in applied
mathematics, you must describe your unit."

                           
                                                                             
2013 gold maple leaf reverse2 300x300
2013 gold maple leaf reverse2 300x300
                                                             

Title: Re: Hyperinflation or Deflation?
Post by: Petty Tyrant on May 19, 2013, 09:04:42 AM
Ross,
sounds like you are running memories of glory days. The US has no export economy sector not going under other than arms sales or items made in prisons. It has a temporarty right to print the world reserve currency. The rest of the world is exiting the USD and making all sorts of side deals swap to swap without going through the USD. That is because the 16T deficit of spending 3T per year on amex is writing on the wall.

Above parity of 1.05 AUD for the last year or so dropped to 98.5 in the past few days since the budget figures came out and surprise surprise not only no budget surplus as promised but 18B$ deficit. I was not surprised at all, and I wont be surprised when the projected return to surplus doesnt happen again the year after next. Theres still low unemployment which is why nobody will turn up for les than 150$ a day, no homeless or hungry and nobody preparing for economic collapse. An economy completely connected to a chinese choker-chain.
Title: Re: Hyperinflation or Deflation?
Post by: RE on May 19, 2013, 03:49:43 PM
Cheer up, Gringos. It is a dollar bull market! The US Dollar Index is at multi-year highs.

The death of the dollar has been greatly exaggerated. Best of a bad lot. Canadian and Aussie Dollar at parity were an absurd joke. The Swissie at parity? Please. What you are witnessing now is the beginning of a multi-year trend of relative dollar strength.

I tend to agree with this, the rest of the "Majors" in the Currency Wars game have even more systemic problems than the Dollar does, so the Dollar runs the show, exporting Inflation to the Developing World while keeping it somewhat in check here.  Organic Inflation of Food & Fuel prices due to scarcity issues will still occur, but not an HI event for the Dollar on the Horizon yet.

People tend to forget that HI is a RELATIVE event of people abandoning one currency in favor of another.  You can't abandon the Dollar for any other Major, they all are WORSE.  A few people can abandon the Dollar to drop Savings into PMs, but they are not a viable currency since not enough people have them and they don't circulate.

Where I do have some issues with DCs argument is with this statement:

Quote
But that means nobody else is going to want to hold yen either. Why own a currency when the issuer publicly plans to make it worth less, and to raise the inflation rate well above the current long-bond yield at the same time? That isn’t a store of value; it’s a live grenade. People in the private sector, wishing to survive, will fling the grenade away. There is nothing to stop them, no natural buyer the other side, because the only player who could possibly defend the yen – the BoJ – is publicly committed, in a politically irrevocable way, to the opposite path. Because of the relative success of QE in the United States, policy-makers will be complacent about the risks.

The BoJ is NOT the only player who can defend the Yen, our friends at Da Fed can do it too through the back door.  Helicopter Ben can Print more Dollars to buy more Yen.  It's mainly a policy question of who to support for how much and when, and then Leak the information to Insiders so they can pocket money on the arbitrage.

None of this of course handles Elvis' "Triangle of Doom", where organic production costs for Oil exceed the customer's ability to pay, this is going to happen regardless of what Relative values between the currencies are.  When this occurs (according to Elvis' graphs) the Production of the expensive Oil will begin to be shut down in earnest and Shortages will begin to appear more frequently, beginning with the most marginal Developing Nations, then moving inward through the PIIGS Nations and Japan, and then finally crossing the Pond here to the FSoA.

So if you look at a 2 year timeline before expensive Oil production shut down, then another couple of years while Dominoes Fall around the world, it looks to be a good 4-5 years before Full On DOOM hits the shores of the FSoA.  This is still a decent window to get the SUN  :icon_sunny: Project up and running.

RE
Title: HI v DF: Ambrose Sez PRINT!
Post by: RE on May 20, 2013, 03:13:41 AM
Ambrose thinks the BIS and IMF are "disasterously wrong" to suggest that QE isn't working and Da Fed needs to PRINT MORE MONEY!  Ambrose also calls the BIS & IMF "Watchdog" organizations.  hahahahahahahahaha

RE

BIS and IMF attacks on quantitative easing deeply misguided warn monetarists (http://www.telegraph.co.uk/finance/economics/10067080/BIS-and-IMF-attacks-on-quantitative-easing-deeply-misguided-warn-monetarists.html)

Monetarists across the world have warned that the International Monetary Fund and the Bank for International Settlements are making an historic error by calling for a withdrawal of emergency stimulus before the global economy has fully recovered.
The BIS warned against "ever more monetary policy activism" to keep the global economy afloat. It called on the US, Britain, Japan, and the eurozone, to restore interest rates to normal levels "sooner rather than later." Photo: Getty Images
Ambrose Evans-Pritchard

By Ambrose Evans-Pritchard

3:59PM BST 19 May 2013

The two watchdogs launched broadsides against central bank largess last week. The BIS -- the forum of central banks -- was particularly blunt, seeming to imply that quantitative easing "does not work".

Critics say this risks undermining the credibility of radical measures when more may yet be needed. They fear central banks could repeat the mistake made in 1937 when the Federal Reserve lost its nerve and tightened too soon, tipping America back into depression.

"The BIS and the IMF are deeply misguided and risk doing the world a grave disservice. The biggest threat right now is irrational fear of bubbles among central banks," said Lars Christensen, a monetary theorist at Danske Bank.

"How can they criticize the Bank of Japan for pulling the country out of 15 years of deflation and the longest asset price collapse in modern history?"

Mr Christensen said deflationary forces are stalking the global economy, making it essential to offset budget cuts with monetary stimulus. The US is tightening fiscal policy by 2pc of GDP this year, the most in half a century.
Related Articles

Columbia Professor Michael Woodford, America's leading monetarist, told a London forum recently that the global authorities must not repeat the mistake made by the Bank of Japan when it drained money too fast, thinking the economy was safely out of the woods. "All this talk of exit strategies is deeply negative," he said.

A Japanese official said his government will have firm words with the BIS and the IMF, since the criticisms implicitly question the wisdom of premier Shinzo Abe's reflation strategy -- deemed a success so far in Japan.

While stock markets are booming, global recovery has not yet reached "escape velocity", and remains at risk of stalling. The Dutch CPB index of world trade contracted by 0.7pc in February. Commodity prices have been sliding since September, a sign of potential deflation.

The BIS warned against "ever more monetary policy activism" to keep the global economy afloat. It called on the US, Britain, Japan, and the eurozone, to restore interest rates to normal levels "sooner rather than later."

"If a medicine does not work as expected, it's not necessarily because the dosage was too low. Maybe instead the course of treatment should be reconsidered," said the bank's chief Jaime Caruana.

The BIS enjoys huge prestige. It was the only major institution to warn persistently before 2008 that credit excess threatened to trigger a global crisis. The bank's monetary veteran Claudio Borio is esteemed by specialists as one of the world's most brilliant economists.

Mr Caruana said central bank largesse is distorting the financial system and storing up trouble for the future. It is also letting governments "kick the can down the road" and delay reform.

Similar arguments were made by the IMF in a working paper on "Unconventional Monetary Policies". While concluding that emergency action had prevented a deeper downturn, it said potency is "diminishing", and side-effects are becoming worse.

There are signs of a "mispricing of credit risk", a euphemism for asset bubbles. The longer it goes on, the harder it will be for central banks to extricate themselves. The IMF said losses from soaring bond yields -- and therefore falling values -- could reach 7pc of GDP for the Bank of Japan, 6pc for the Bank of England, and 4pc for the Fed.

"I am totally bewildered by what the BIS and the IMF are saying," said Tim Congdon from International Monetary Research. "There is no sign that inflation is out of control, and US house prices are far from their peak. QE has been necessary to stop the M3 quantity of money falling, which could do great damage. The IMF has departed from its monetary tradition," he said.

Yet there are clearly serious problems with the way QE is working. "We see bubbles everywhere," said Bill Gross from the bond fund PIMCO.

While the MSCI index of developed world equities has risen 34pc since central banks turned the spigot back on last summer, there has been little trickle down to ordinary people. The wealth gap is growing wider. Professor Woodford said it may be necessary to break the ultimate taboo and deploy QE to fund government projects, injecting stimulus directly into the veins of the economy.

Fed hawks have long been demanding an end to QE3, running at $85bn a month. Some doves are now joining the chorus. San Francisco Fed chief John Williams said the bank could start winding down stimulus "as early as this summer" and hopes to halt bond purchases by the end of the year.

In February the Fed published a paper "Crunch Time" by former governor Frederic Mishkin warning that the Fed's capital base could be wiped out "several times" once yields rise. It said the risks of QE are growing, with trouble compounding fast if it continues into 2014.

Whether the Fed really will start to taper off QE soon is unclear. Economic growth may have slowed to 1.5pc this quarter, close to the Fed's "stall speed" indicator. Core PCE inflation has fallen to 1.1pc.

New housing starts fell 16pc in April. Unemployment claims have spiked again. The 'Philly' and 'Empire State' indexes for manufacturing point to contraction. Capital Economics said it is "jumping the gun" to talk of Fed exit this year, a view echoed by Goldman Sachs.

Ultimately the Fed decision to taper off QE will be decided by chairman Ben Bernanke, his deputy Janet Yellen, and New York Fed chief Bill Dudley. Mr Bernanke will tip his hand in testimony to Congress next week.

Veteran US investor Warren Buffett says the day Mr Bernanke signals a retreat from QE will be "the shot heard around the world". Euphoric markets are clearly betting that he will not do so soon.
Title: Re: Hyperinflation or Deflation?
Post by: ross on May 20, 2013, 04:18:58 AM
You sentiment donkeys will be pulled kicking and screaming to the dollar bull. Fuck the export economy. Fuck the Fed. PRICE PAYS!!! Can you read a chart? PRICE PAYS!!!

I told you to get ready, make a list and buy stocks over a year ago and I was run off the board. I'm telling you that the dollar has confirmed an uptrend on daily and weekly timeframes with the potential to sustain the trend for multiple years.

Boo hoo! The world isn't conforming to my worldview. Number one argument in this joint.

YOUR PRECIOUS METALS THESIS IS COMPLETELY, UTTERLY BUSTED BY PRICE AND SENTIMENT. Take the coming counter-trend rally (if you're lucky, you'll get eight weeks) to reassess... PRICE PAYS, PRICE PAYS, PRICE PAYS

THIS IS ME SHOUTING.
Title: Re: Hyperinflation or Deflation?
Post by: RE on May 20, 2013, 04:26:28 AM

Just like I told you to buy stocks over a year ago and was run off the board


Pshaww.  You weren't "run off" the board, you decided to go Walkabout.

:hi: BACK!

http://www.youtube.com/v/5VlGyMG0ksg?feature=player_detailpage

RE
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on May 20, 2013, 04:35:38 AM
You sentiment donkeys will be pulled kicking and screaming to the dollar bull. Fuck the export economy. Fuck the Fed. PRICE PAYS!!! Can you read a chart? PRICE PAYS!!!

I told you to get ready, make a list and buy stocks over a year ago and I was run off the board. I'm telling you that the dollar has confirmed an uptrend on daily and weekly timeframes with the potential to sustain the trend for multiple years.

Boo hoo! The world isn't conforming to my worldview. Number one argument in this joint.

YOUR PRECIOUS METALS THESIS IS COMPLETELY, UTTERLY BUSTED BY PRICE AND SENTIMENT. Take the coming counter-trend rally (if you're lucky, you'll get eight weeks) to reassess... PRICE PAYS, PRICE PAYS, PRICE PAYS

THIS IS ME SHOUTING.

What were your views on April Fools day, before the big smackdown?  Why Weren't You Shouting Then? What was your Chart
shouting then?
Title: Re: Hyperinflation or Deflation?
Post by: ross on May 20, 2013, 04:39:27 AM
PMs have been a sell for not quite a year. Silver has been bearish since last year. You didn't see it set up in gold quite as early. The blow-off came later. I didn't need to scream anything. The charts do all the talking.

Price is the only thing that matters when assessing asset values. Seriously.



Ok, RE, I guess technically you're right. I played possum from the trolls for a year. I'm relieved that the smell appears to have been contained at this time.
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on May 20, 2013, 04:56:58 AM
Quote
Price is the only thing that matters when assessing asset values. Seriously.

I see, in which currency?  :icon_scratch:
Title: Re: Hyperinflation or Deflation?
Post by: RE on May 20, 2013, 04:57:42 AM
Ok, RE, I guess technically you're right. I played possum from the trolls for a year. I'm relieved that the smell appears to have been contained at this time.

Let the GAMES BEGIN!  :icon_mrgreen:

"Foreman is doing what he did to a Veteran Russian, Leonis Shapoulis as a 19 year old at the Olympic Games in Mexico City..."

LOL.  I got "the clip" MEMORIZED now. I don't even have to embed it anymore!  :icon_mrgreen:

RE
Title: Re: Hyperinflation or Deflation?
Post by: Petty Tyrant on May 20, 2013, 06:23:49 PM
Ah the good ole how to protect your assets and prosper from economic collapse meme, also known as cutting off your nose to spite your face as granma used to say.
Title: Re: Hyperinflation or Deflation?: Velocity of Money and the Crack-Up Boom
Post by: Golden Oxen on May 21, 2013, 04:04:00 AM
Five Star GO Rating *****

 Velocity of Money and the Crack-Up Boom
By John Rubino
Created 20 May 2013

Based on both recent history and mainstream economic theory the past few years should not have been possible. When you cut interest rates to near-zero, run deficits of 10% of GDP and buy up every government bond in sight with newly created currency, you get a boom, end of story. That’s just the way capitalism works.

But this time was different. After four years of QE and ZIRP and all the other easy-money acronyms, we entered the month of May with Europe in a deepening recession and the US recovery petering out. [1]

The culprit? The one piece of the puzzle that governments can’t control: the velocity of money. This is simply a measure of how quickly holders of currency, i.e., banks, consumers, businesses, hand their currency off to someone else. The faster and more frequent the hand-offs, the more stuff gets bought and the more robustly an economy grows. But after their 2009 near-death experience, the world’s banks have been in no mood to lend. Instead, they’ve been sticking all the new currency their governments have been giving them under the proverbial mattress. This reluctance to lend means record low money velocity and little or no economic growth.
                                                                             
                                                         
m2v

But in just the past month something fundamental has changed. US home sales and prices have accelerated, with prices returning to 2006 levels in some markets and bidding wars, flippers and interest-only mortgages once again becoming common. Stock prices pierced old records and then spiked rather than corrected. Suddenly we’re back in an asset-driven boom.

But it’s a boom with a twist because it coincides with unprecedented amounts of “excess reserves” in the banking system. This is the raw material for new loans, and banks across the country are worrying that they’re missing the boat by remaining in cash. Marginal mortgage applicants now look a lot more attractive because their collateral is appreciating. Private businesses, judged by the share prices of their publicly-traded peers, are becoming more valuable and hence more creditworthy. Families with rising stock portfolios and appreciating houses suddenly look like better bets for car loans.

So what happens if a tidal wave of bank reserves are suddenly converted to business and consumer loans at a time when asset markets are already overheated? Maybe the fabled crack-up boom of Austrian economics. A couple of weeks ago Daily Reckoning [3] addressed this issue in an article that quoted Ludwig von Mises’ famous definition of a crack-up boom:

    This first stage of the inflationary process may last for many years. While it lasts, the prices of many goods and services are not yet adjusted to the altered money relation. There are still people in the country who have not yet become aware of the fact that they are confronted with a price revolution which will finally result in a considerable rise of all prices, although the extent of this rise will not be the same in the various commodities and services. These people still believe that prices one day will drop. Waiting for this day, they restrict their purchases and concomitantly increase their cash holdings. As long as such ideas are still held by public opinion, it is not yet too late for the government to abandon its inflationary policy.

    But then, finally, the masses wake up. They become suddenly aware of the fact that inflation is a deliberate policy and will go on endlessly. A breakdown occurs. The crack-up boom appears. Everybody is anxious to swap his money against ‘real’ goods, no matter whether he needs them or not, no matter how much money he has to pay for them. Within a very short time, within a few weeks or even days, the things which were used as money are no longer used as media of exchange. They become scrap paper. Nobody wants to give away anything against them.

    It was this that happened with the Continental currency in America in 1781, with the French mandats territoriaux in 1796, and with the German mark in 1923. It will happen again whenever the same conditions appear. If a thing has to be used as a medium of exchange, public opinion must not believe that the quantity of this thing will increase beyond all bounds. Inflation is a policy that cannot last.

So how close are we to the point where “finally, the masses wake up?” Hard to say. Stocks and houses are back at previous-bubble levels and there’s even talk of a shortage of government bonds. And based on the excited emails pouring in from people who, after a decade of bad returns have seen their aggressive growth funds rise by 25% in a quarter and are feeling like geniuses, animal spirits are back and happy. All while bank lending has barely started to ramp up.  It’s safe to assume that banks getting into the game would heat the markets up even more.

How would today’s financial system handle the resulting volatility? Prudent Bear’s Doug Noland addresses this in his most recent Credit Bubble Bulletin:

    I don’t mean to imply that today’s environment is comparable to 1999. The U.S. economy was sounder in 1999 – and the global economy was a whole lot more stable. Global imbalances in 1999 were insignificant compared to the present. The U.S. economic and Credit systems had yet to be degraded by a doubling of mortgage debt and a massive misallocation of resources. The federal government hadn’t doubled its debt load in four years. Europe had not yet terribly impaired itself with a decade of runaway non-productive debt growth. China and the “developing” economies had not yet succumbed to historic Credit booms, overinvestment and economic maladjustment. Central banks hadn’t yet resorted to really dangerous measures.

The implication: This world, levered to the hilt in response to the policy mistakes and financial crises of the past few decades, is more complex and fragile than the systems that (barely) survived the bursting of the tech stock and housing bubbles. So this bubble and its aftermath might be a whole different animal
 
http://feedproxy.google.com/~r/fso/~3/pAMO3ORh3eo/velocity-money-crack-up-boom (http://feedproxy.google.com/~r/fso/~3/pAMO3ORh3eo/velocity-money-crack-up-boom)  :icon_study: :icon_study: :icon_study:
Title: Re: Hyperinflation or Deflation?: Velocity of Money and the Crack-Up Boom
Post by: RE on May 21, 2013, 04:26:00 AM
The culprit? The one piece of the puzzle that governments can’t control: the velocity of money

BZZZZZTTT!!!!! WRONG ANSWER!  :icon_mrgreen:

This is not what the CBs cannot control, other than as an OUTCOME of what they really cannot control, which is the real availability of resource base upon which to run an economy.

The problem here is that Credit is issued on Energy Extraction, and no matter how much Credit is Issued, Energy cannot be extracted any faster at positive EROEI.  You can't make any MONEY on resource extraction.  It simply does not MATTER what the Money representing the resources is, if the resources are not there to extract, all the money issued is WORTHLESS!

PMs as the ultimate in value sink for people who LOVE them and will buy at any price present a means to try to store wealth, which works as long as said believers keep buying.  This maintains some value in the PMs, but it is not enough to counter the value lost as energy production shrinks.

MONEY=ENERGY.  End of Story.

RE
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on May 21, 2013, 04:41:23 AM
Quote
MONEY=ENERGY.  End of Story.

RE

There were four thousand years of history before your oil age came along and there was money.  Your train of thought or ideas on this matter are incoherent to me. While you are no doubt serious in your view, whatever you are saying makes absolutely no sense.

No government can control any natural resource scarcity, oil, corn, water; nor can it control a drought or earthquake. What has this got to do with money and its current massive creation by the central banks of the world???    :icon_scratch:

Title: Re: Hyperinflation or Deflation?
Post by: monsta666 on May 21, 2013, 03:51:16 PM
I do agree with GO that central banks cannot control the velocity of money and it is this lack of control that has prevented inflation really taking root in the main economy. I would argue the only reason there is an inflation in the economy is due to energy scarcity. Since energy is required to produce any good or service a rise of energy costs will cause the price of all goods/services to rise. This has been the chief factor in the inflation you see and NOT the money printing. Money printing has created asset inflation primarily in the form of stocks and bonds and to a lesser extent real estate but it has not seeped into the general economy as the commercial banks are not lending this free money out. The commercial banks are hoarding the money they receive from the central banks and only use it to speculate and play games on the market (such as the gold/silver manipulations you currently see).

There were four thousand years of history before your oil age came along and there was money.  Your train of thought or ideas on this matter are incoherent to me. While you are no doubt serious in your view, whatever you are saying makes absolutely no sense.

Got to remember there are more sources of energy than simply oil. Before oil the amount of energy man was harnessing increased via coal and before that it was peat (a precursor to coal). Finally it should not be forgotten that food itself is a source of energy and this source of energy has slowly but steadily increased by the rising adoption of agriculture across the globe. In fact it was this expansion of agriculture that created a lot of wealth for empire expanders who we should remember amounted to nothing more than ambitious and reckless merchants willing to risk all for great riches. At least this is how the British empire had its roots founded.

Speaking of the British empire it should be noted that at the beginning of the British ascendency the current number one power of the time was Spain. Spain was the biggest economy around the late 1500s, held the reserve currency of the world and most significant held most of the gold deposits of the world by stealing it from the Aztecs. England on the other hand had little gold and was nowhere near challenging the Spanish in terms economic or reserve currency status. So how did the English surpass the Spanish who had all that gold?

It was because the English were one of the first nations to jump into the debt based currency system that we see today. With debt the British no longer had to depend entirely on taxes to fund wars but more important than this England, like many northern Europe states at the time, were one of the first nations to utilise the energy of coal heavily. This utilisation of coal enabled them to develop more guns, more rapidly than the Spanish as well as develop the early industrial machines that gave them the big hop on several nations (including Spain). This superior technological advantage allowed them to conquer distant regions taking the other countries resources. With those resources at hand and the greater means of production the English had everything but gold. But this was soon rectified by the fact the Spanish had the gold but since they could produce nothing of significance the Spanish had to use their gold to buy things they wanted. Pretty soon their gold went to the British and other successful European states such as Holland as they had the energy and therefore the means of production.

The downfall for England came when bigger challengers such as the US began developing in earnest and due to their huge resource base of coal AND oil there was simply no way the British could compete with the US even with the British having an empire to leach on. You can also say that the real turning point for the British happened in 1913 when they reached peak coal on a national level. The thrusting force of their empire expansion had reached its zenith at 1913 and it is notable that from 1913 they consistently declined in terms of world power. A similar dynamic occurred in 1970 for the US when they reached their own peak production in 1970. When looking at history from an energetic lens things can make sense.

Heck it can be said the Roman and Greek civilisations went into decline when they exhausted the resource base of trees and agricultural land. Before the advent of fossil fuels the perennial problem many civilisations faced was running out of trees as they used the thermal energy from tree burning to smelt metal that would be used by the militaries or farmers of the day. The other major issues of early civilisations was desertification or salination of agricultural lands due to overly intensive farming practices. Again such events would result in a decline in total energy output of a given economy and this decline in energy output has often coincided with declines of ancient civilisations or empires.
Title: Re: Hyperinflation or Deflation?
Post by: RE on May 21, 2013, 04:16:46 PM
Quote
MONEY=ENERGY.  End of Story.

RE

There were four thousand years of history before your oil age came along and there was money.  Your train of thought or ideas on this matter are incoherent to me. While you are no doubt serious in your view, whatever you are saying makes absolutely no sense.

Energy in the Pre-Industrial Economy came in the form of food transmitted through animal and human (slave) labor. In those days the Money represented those things.  This is how Work got done in the preindustrial era.  Once the energy of fossil fuels replaced human and animal labor as the primary means of doing Work, the Money came to represent that instead.

It's NOT that hard to understand GO, it's a direct consequence of Thermodynamics.

Note: I wrote this before reading Monsta's reply.  As usual, Great Minds Think Alike. :icon_mrgreen:

RE
Title: Re: Hyperinflation or Deflation?
Post by: Petty Tyrant on May 21, 2013, 04:47:56 PM
All that needs to be put into perspective that where the labour is cheap there is still plenty of expansion, china is on track to become the world reserve currency and indonesia is expected to become the regional power in SE asia in 30 yrs. Industry dying out where labor is expensive is because of global labour market more than energy supply for now imo. Until they are finished fracking it does not matter how expensive that fracking is because they can always add another zero to make a billion a trillion or squillion.
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on May 21, 2013, 05:55:45 PM
Quote
MONEY=ENERGY.  End of Story.

RE

There were four thousand years of history before your oil age came along and there was money.  Your train of thought or ideas on this matter are incoherent to me. While you are no doubt serious in your view, whatever you are saying makes absolutely no sense.

Energy in the Pre-Industrial Economy came in the form of food transmitted through animal and human (slave) labor. In those days the Money represented those things.  This is how Work got done in the preindustrial era.  Once the energy of fossil fuels replaced human and animal labor as the primary means of doing Work, the Money came to represent that instead.

It's NOT that hard to understand GO, it's a direct consequence of Thermodynamics.

Note: I wrote this before reading Monsta's reply.  As usual, Great Minds Think Alike. :icon_mrgreen:

RE

I see, that was quite and explanation. It has been studied carefully and placed in my theories on money and resources file.  :laugh: 
0006
Title: Re: Hyperinflation or Deflation?
Post by: RE on May 21, 2013, 07:38:56 PM
I see, that was quite and explanation. It has been studied carefully and placed in my theories on money and resources file. 

You have a better theory, Einstein?  Monsta and I are awaiting your Genius.   :icon_mrgreen:

RE
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on May 22, 2013, 05:04:00 AM
Quote
I do agree with GO that central banks cannot control the velocity of money and it is this lack of control that has prevented inflation really taking root in the main economy. I would argue the only reason there is an inflation in the economy is due to energy scarcity. Since energy is required to produce any good or service a rise of energy costs will cause the price of all goods/services to rise. This has been the chief factor in the inflation you see and NOT the money printing.

This is where I humbly submit where you and RE are lost Monsta, may I try and explain with a different, simple method of expounding my view. Please forgive my statement interspersed with questions approach to try and get my point across to you gentlemen, it is most difficult for me to explain otherwise.

The dollar came under attack in the late sixties and early seventies.

It was losing purchasing power and people holding dollars were getting pissed off.

The French demanded Gold for their dollars.

The Arab's founded OPEC, claiming they were getting screwed by accepting dollars.

Why did the Saudi's have to form a CARTEL if a scarcity or expensive oil was the problem?

Nixon freaked out at the gold drain from the US treasury and slammed the gold window shut. He broke a promise to all foreign holders of dollars for conversion to Gold if they chose.

The Arabs had an Oil Embargo shortly there after 1973, driving the price of petroleum through the roof.

The economic damage to the US economy was extensive, gas lines, rationing, tourist industry decimated.

Without having the restraint of gold backing the Fed panicked and went into a printing frenzy so the public could afford the abrupt rise in the gasoline prices, which continues to present.

The banksters seized upon the opportunity presented to mail everyone Free :laugh: :laugh: credit cards with which to purchase gas and other goodies.

The prices of ALL goods went into ORBIT!

Houses went from 20 grand to 400 grand. Coffee went from a dime a cup to 2 bucks a cup. Newspapers went from a nickel to a buck. gasoline went from 60 cents a gallon to over 4.00.

Why didn't the gasoline keep up with the other items? Notice it went up the least of most items? See why a cartel had to be formed?

We had a financial deflationary bust five years ago from the creation of all this maniacal amounts of debt that were created from this fiat craze.

The authorities have reacted in the same way, a frenzy of zero interest rates and debt creation in a scale undreamed of by anyone sane.

We have a record Dow and S&P to show for it so far, and very little else. and no one knows how it will all play out.

The orgy currently taking place in the markets, with nothing going on economically to justify it, tilts me towards the view that a wealth effect is being created which will raise the price of all goods again as folks getting out of their dollar holdings by going to stocks first, will spread.

It is starting to show up in real estate prices again supposedly, as well as necessities.

If the printing doesn't work and we lapse back into a deflationary spiral it remains to be seen what the ploy will be, my feeling is it will be much much more of the same medicine.

Again my apologies for my methodology, but you can get my drift that you and RE mistakenly place our current woes on oil. You are failing to see the real cause which is a fiat dollar cut loose from it's anchor Gold, and fast becoming worthless since that very sad day for it's future destiny.

Other currencies or countries being in worse shape than us does little to solve our problem, while it gives the appearance  only of relative safety.

                                                                     
1922 Gold Certificate Gold Coin Note
1922 Gold Certificate Gold Coin Note

Title: Re: Hyperinflation or Deflation?
Post by: RE on May 22, 2013, 05:13:23 AM

This is where I humbly submit where you and RE are lost Monsta, may I try and explain with a different, simple method of expounding my view. Please forgive my statement interspersed with questions approach to try and get my point across to you gentlemen, it is most difficult for me to explain otherwise.

Nowhere in this diatribe do you address the question of where money got its value prior to the Age of Oil, all you do is recount how money lost value as energy became more scarce.  Your argument actually validates that there is a Money-Energy relationship really.

Come on Einstein, explain how Money got value prior to the Age of Oil and what it represents.  Inquiring minds want to know.

RE
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on May 22, 2013, 06:04:04 AM

This is where I humbly submit where you and RE are lost Monsta, may I try and explain with a different, simple method of expounding my view. Please forgive my statement interspersed with questions approach to try and get my point across to you gentlemen, it is most difficult for me to explain otherwise.

Nowhere in this diatribe do you address the question of where money got its value prior to the Age of Oil, all you do is recount how money lost value as energy became more scarce.  Your argument actually validates that there is a Money-Energy relationship really.

Come on Einstein, explain how Money got value prior to the Age of Oil and what it represents.  Inquiring minds want to know.

RE

From a stated weight in either Gold or Silver.

The dollar at one time had a stated weight of 1 0z of silver, the silver dollar
or 1/20th an oz of gold, thus the 1 Dollar gold coin.

                                                                         
1857C 1 Dollar Gold N58
1857C 1 Dollar Gold N58

                                                                         
1882 1 Dollar Silver
1882 1 Dollar Silver

                                                                         
Title: Re: Hyperinflation or Deflation? Diatribe!
Post by: Golden Oxen on May 22, 2013, 06:33:55 AM
 Quote RE
Quote
Nowhere in this diatribe

The fact that you call my sincere response to your inquiry a Diatribe, points out the difficulty in trying to discuss matters with  you. As you state so well, you are an ego maniac, who cannot be disagreed with either rightly or wrongly.

My views are mine, they could be correct or incorrect. I have no feelings of malice towards people who disagree, perhaps some frustration or the view they are misinformed or have been subject to brainwashing from the MSM, but never do I feel they are attacking me, just my ideas on a subject. 

               Definition of diatribe (n)

Bing Dictionary
di·a·tribe
 [ d ə trb ]   

    bitter criticism: a bitter verbal or written attack on somebody or something

Synonyms: attack, tirade, invective, denunciation, harangue, rant, criticism, discourse
Title: Re: Hyperinflation or Deflation?
Post by: Petty Tyrant on May 22, 2013, 07:25:13 AM
Anything under 15 minutes where the speaker doesnt turn purple doesnt qualify. This is the definition in MY dictionary...
http://www.youtube.com/user/gcelente (http://www.youtube.com/user/gcelente)
Title: Re: Hyperinflation or Deflation?
Post by: ross on May 22, 2013, 07:38:10 AM
Dolla dolla bull y'all
Title: Re: Hyperinflation or Deflation?
Post by: RE on May 22, 2013, 04:00:16 PM
From a stated weight in either Gold or Silver.

Where does the Stated Weight get it's value?

RE
Title: Re: Hyperinflation or Deflation?
Post by: RE on May 22, 2013, 04:19:32 PM
Dolla dolla bull y'all

We're on a ROLL Ross!  Here's TWO from Ambrose (http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/) that will make GO positively PUKE!  :icon_mrgreen:

(http://stream1.gifsoup.com/view1/1652603/family-guy-puking-o.gif)

RE

BRICS risk 'sudden stop' as dollar rally builds

The stock of capital flowing into emerging markets has doubled from $4 trillion to $8 trillion since the Lehman Crisis, chasing a catch-up growth story that looks tired and has largely sputtered out in Brazil, Russia and South Africa.

(http://i.telegraph.co.uk/multimedia/archive/02570/china_2570511b.jpg)
Propaganda Wall Poster Shanghai China 1982
A Chinese propaganda poster from 1982. Stripped bare, the BRICS miracle is really about China, and even the Politburo has run into diminishing returns after ramping up credit from $9 trillion to $23 trillion in four years

By Ambrose Evans-Pritchard

9:01PM BST 22 May 2013

Comments53 Comments

Much of the money has gone into debt, with falling economic returns. This is the next shoe to drop in the festering saga of global imbalances. All it will take is a gear-shift by the US Federal Reserve and the inevitable dollar surge that follows. It was the Volcker Fed that set off Latin America's defaults in the early 1980s. It was the mighty dollar that set off Mexico's Tequila crisis, and then the East Asian chain-reaction in the 1990s.

"Every emerging market blow-up that I have seen was preceded by a rise in the dollar," said Albert Edwards for Societe Generale.

"Investors overlook how vulnerable these countries are to a dollar shock. The whole process of excess liquidity and foreign reserve build-up goes into reverse. It acts like monetary tightening and turns into a vicious circle. Markets look for the weak link with the worst current account deficit, and then the dominoes start to fall," he said.

Fed chairman Ben Bernanke told Congress on Wednesday that "premature tightening" could abort the US recovery. There will be no "tapering" of quantitative easing until the fourth quarter. But passive tightening has begun. America's broad M3 money supply has been flat for months.

Former IMF official Stephen Jen, now at SLJ Macro Partners, foresees a "sudden stop", the moment when funding for emerging markets dries up abruptly and investors run for the exits.


Mr Jen said the flow of money before 2007 was "pulled in" by a genuine growth story, but what has happened since is different. Money has been "pushed out" of the West by QE in the US and Britain, or by the emergency stimulus in Europe, with liquidity washing through the global system.

It is of "inferior quality", "fickle", and likely to be "fully reversed" as the Fed hoovers up excess money. The timing is in the hands of Bernanke, but the screws are already tightening for some in Asia, Latin America and the Mid-East as commodities deflate.

The cumulative inflow of capital has been 60pc of GDP in Lebanon, 58pc in Bulgaria, 56pc in Hungary, 50pc in Ukraine, 48pc in Poland, 42pc in Chile, 39pc in Romania, 32pc in Malaysia, 28pc in Thailand and 26pc in Turkey, to name a few. It can be good or bad. The devil is in the detail. But the overall level is what you see at cycle peaks. The IMF says the flows have been "ample but not alarming", yet also warned of a "sudden change in global market sentiment".

You can take a contrarian view, seeing the 12pc fall in the MSCI Index of emerging market stocks since early 2011 as a chance to pick up bargains. Bank of America says the sector "typically" beats the S&P 500 and Eurostoxx when the mood is this bearish. It depends whether you think the two-year drought is "typical", or the end of the road for a whole catch-up model.

South Africa has already become the first of the "BRICS" quintet to graduate from routine trouble to what looks like an old-fashioned Third World crisis. The current account deficit is 6pc of GDP. The rand plunged to a four-year low against the dollar this week, and 10-year bond yields have lost their footing.

“Clearly a risk that all of us see is a sudden change in sentiment. Once there have been good inflows there might be unanticipated outflows,”said finance minister Pravin Gordhan.

The fear is that South Africa is becoming ungovernable, with no end in sight to violent strikes by miners. Police opened fire on protesters at Lonmin's Marikana mine last year in a clash that killed 34 people.

Brazil has not yet lost its halo but it has all the signs of stagflation, and remains stuck where it has been for half a century in the "middle income trap". Manufacturing output is lower today than in 2008, more like Italy than China. It is the result of an over-mighty real during the iron ore and agro-boom, and a bad case of the "resource curse".

Fiscal policy was too loose, countered by tight money, so the real soared. Dilma Rousseff's government tried to blame others with talk of "currency war". Now it is dabbling in protectionism. We have seen this story before in Latin America.

Brazil's global ranking is 107 for infrastructure, 123 for roads, and 135 for ports, according to the World Economic Forum. The country never really overcame its bad habits. And much the same could be said of Russia, another resourse casualty that bet too heavily on oil and gas in the shale-shaken energy universe.

Russia is not in crisis. Growth is sputtering along at 1.6pc. Manufacturing is up 1.2pc over the past year. But the BRICS story is essentially dead, a "Bloody Ridiculous Investment Concept", says Mr Edwards.

It is true that India has embraced free markets - sort of - and ditched the suffocating Hindu Model. Yet the old India is still there, grappling with power blackouts, a current account deficit of 6.7pc of GDP and a central and local budget deficit near 10pc of GDP.

Stripped bare, the BRICS miracle is really about China, and even the Politburo has run into diminishing returns after ramping up credit from $9 trillion to $23 trillion in four years. At best China will have settle for more pedestrian growth, but it too is at the mercy of the Fed.

By pegging its currency to the dollar it risks an exchange rate surge against the rest of Asia, compounding the effects of a 30pc rise against Japan's yen since last summer.

This looks all too like the mid-1990s, when the yen crashed against the dollar and gave China a brutal deflationary shock. China's $3.4 trillion foreign reserves will prove no defence. To deploy reserves the would entail conversion back into yuan, causing the currency to rise. It would exacerbate the shock.

To cap it all, this is happening just as China's trade surplus vanishes and American firms switch plant back to US soil for cheaper power and better labour productivity. The wheel is turning full circle.

Local stock markets have already priced in the new reality. Shanghai is off 70p from its 2008 peak in real terms. But foreigners who shovelled $8 trillion into their love affair with BRICS and bricklets have yet to adjust. European banks have lent $4.4 trillion to the bloc. Something to ponder.

These cycles of emerging market exuberance are as old as capitalism. They happened episodically all through the 20th Century, and all through 19th Century before that, usually ending with a cold douche. It should be no great shock if it happens yet again.


Risk of vicious circle for gold as hedging return


The curse of hedging that blighted gold in the 1990s is making a comeback, and threatens to loom over the market like Banquo's ghost.

(http://i.telegraph.co.uk/multimedia/archive/02569/Gold_2569348b.jpg)
Gold is already under heavy pressure as the dollar recovers and markets start to anticipate a more hawkish Federal Reserve

Photo: Alamy

Ambrose Evans-Pritchard

By Ambrose Evans-Pritchard

7:09PM BST 21 May 2013

London-listed gold producer Petropavlovsk has said it will pre-sell 55pc of its future output planned for the second quarter of 2014, at an average price of $1,408 an ounce. This is the first time that a big producer has hedged more than half its future sales.

“We have a huge investment programme and thought a little price protection in the short-term will let us sleep better at night,” said chairman Peter Hambro.

Tyler Broda from Nomura said this may signal the return of “structural hedging” across the industry, with other companies scrambling to lock in forward contracts. “This could increase the pressure on the spot gold price over the coming years,” he said. The risk is a vicious circle as hedging leads to lower prices, leading to more hedging.

The process pushed gold down to $252 an ounce in 2009, though there were many other forces at work, including sales by the Bank of England and other Western central banks.

“It was hedging that killed gold prices the 1990s,” said Ross Norman from Sharps Pixley. “Every time there was rally, the producers seized on the chance to sell forward. It was most unhelpful.”

Mr Norman said it was the unwinding of hedge books a decade ago that unleashed the bull market. This process could now go into reverse if hedging spreads. "We don't think it will. The forces that led to the bull market will prevail," he said.

Gold is already under heavy pressure as the dollar recovers and markets start to anticipate a more hawkish Federal Reserve. Investors have been pulling 20 tonnes a week from exchange traded funds. The spot price fell $26 to $1363 on Tuesday, nearing its recent low of $1,322.

Petropavlovsk operates in Russia’s Amur region. It has already hedged a large part of its sales for this year, but the new details go further.

Mr Hambro said the hedging move is a not a bet that gold’s bull market is over. “The reason why gold rose to dizzy heights and is still high is because the world is in a terrible mess. That has not changed. Only a tiny fraction of our 25m ounces of resources and reserves is hedged,” he said.

The central banks of Russia, China and the emerging world are still net buyers. “We receive requests regularly from sovereign wealth funds interested in acquiring gold, and they want physical not paper,” he said.

Mr Hambro said an “enormous number” of mines across the world are losing money and will have to close, putting a floor under the market. The average cost of the industry is $1,300, though the “marginal” cost is nearer $900. A fifth of mines are already under water.

Big players such as Barrick and Anglo-Ashanti had to write off billions after hedging too much of their output and missing out on the first phase of the bull market. “I don’t think anybody will want to go through that again soon,” said Mr Hambro.

Petropavlovsk has a heavy debt load of $1.1bn, mostly stemming from a cutting-edge investment in a pressure oxidisation (POX) facility.

The six-year project is akin to the shale revolution in natural gas and should yield a bonanza once it comes on stream, but falling gold prices have strained finances. The new operations have been stretched by 18 months to gain breathing time.

Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on May 22, 2013, 06:27:28 PM
From a stated weight in either Gold or Silver.

Where does the Stated Weight get it's value?

RE

Your childish college brat games of ignoring the questions that were posed,  and constantly getting off topic with your chicken or egg first bull
shit have convinced me that you are not serious and wasting my time.

The Gold and silver get their value from what a certain weight can buy in a free market, decided by buyers and sellers of such items reaching agreement.

As to your other posting about the value of the dollar, I have explained repeatedly to you my views on one colored piece of toilet paper gaining  value over another, while the entire realm of toilet paper loses value daily, accept at varying rates. So Gold quoted in dollars is going down currently, while quoted in Yen it is making new highs at the same time. What is your point? This is your idiotic defense of fiat currencies??

Don't think for one minute you fool me with your childish behavior, absurd tactics to take the focus of my points, and inability to answer the questions posed in my explanation of my views.

It is parent teacher night when you are talking with GO teacher, you may return to your class room and preach to the kids. Parent teacher night has ended.
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on May 22, 2013, 06:32:57 PM
Quote
We're on a ROLL Ross!  Here's TWO from Ambrose that will make GO positively PUKE!  :icon_mrgreen:

Isn't it amazing how Ambrose is a prep school ass hole brat and the Bible a book of fairy tales, until they say something you like and then become pearls of treasured wisdom?   :laugh: :laugh: :laugh:
Title: Re: Hyperinflation or Deflation?
Post by: agelbert on May 22, 2013, 06:39:59 PM
Go said to RE,
Quote
Don't think for one minute you fool me with your childish behavior, absurd tactics to take the focus of my points, and inability to answer the questions posed in my explanation of my views.

GO, why don't you have a little fun with RE and ask him to define "value" as well as the adjective "intrinsic" in regard to "value" ?  I'm sure it would be great fun and trigger quite a bit of rambunctious philosophising from the diner crowd. :laughing7:  :icon_mrgreen:
Title: Re: Hyperinflation or Deflation?
Post by: RE on May 22, 2013, 07:00:16 PM

The Gold and silver get their value from what a certain weight can buy in a free market, decided by buyers and sellers of such items reaching agreement.

Precisely WHAT are the Gold and Silver Coins BUYING in the "Free Market"?

RE
Title: Re: Hyperinflation or Deflation?
Post by: RE on May 22, 2013, 07:11:02 PM
Quote
We're on a ROLL Ross!  Here's TWO from Ambrose that will make GO positively PUKE!  :icon_mrgreen:

Isn't it amazing how Ambrose is a prep school ass hole brat and the Bible a book of fairy tales, until they say something you like and then become pearls of treasured wisdom?   :laugh: :laugh: :laugh:

Ambrose is STILL a Jackass Shill for the Latest Spin from the Illuminati (like Hilsenrath on the WSJ) but fact is even though these guys are IDIOTS, what they write makes markets.  Ambrose writing shit like this will drive down the price of Gold, just like Hilsenrath indicating Da Fed will tighten up on Funny Money drives up the Dollar.

Ross is no Dummy, he TRADES this shit every day in the Chicago COMEX Sewer.  He is kicking ass here as a Dollar Bull while Gold Bugs are getting their Asses Wiped.  :icon_mrgreen:  LOSERS!  Eat it Gold Bugs, you are getting yout Gonads handed to you on a Silver Plate.  :icon_mrgreen:

RE
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on May 22, 2013, 07:23:28 PM
Quote
Ross is no Dummy, he TRADES this shit every day in the Chicago COMEX Sewer

That certainly explains why he came out of his smelly sewer to rant nonsense the day after gold got whacked by his masters; and speaks volumes about his going walkabout for so long. Shorting Gold can be quite an experience, huh me lads.  ;D ;D

Enjoy your current run Ross, you know the old traders adage, "I'd rather be lucky than smart."
Title: Re: Hyperinflation or Deflation?
Post by: RE on May 22, 2013, 07:37:36 PM
Quote
Ross is no Dummy, he TRADES this shit every day in the Chicago COMEX Sewer

That certainly explains why he came out of his smelly sewer to rant nonsense the day after gold got whacked by his masters; and speaks volumes about his going walkabout for so long. Shorting Gold can be quite an experience, huh me lads.  ;D ;D

Enjoy your current run Ross, you know the old traders adage, "I'd rather be lucky than smart."

Sour Grapes.  The Margin Calls haven't even hit in earnest yet here.  Wait till the Euro and Yen get flushed.  Hedge Funds will be SELLING Gold to whoever will buy it for a Twinkie.

Here they come to SELL em AGAIN!  :icon_mrgreen:

http://www.youtube.com/v/WrxlVjZJawQ?feature=player_embedded

RE
Title: Re: Hyperinflation or Deflation?
Post by: monsta666 on May 22, 2013, 07:41:12 PM
The Gold and silver get their value from what a certain weight can buy in a free market, decided by buyers and sellers of such items reaching agreement.

You never countered my point on how the British accumulated more wealth and power than the Spanish despite the fact the Spanish had all the gold while the English just had little gold and was effectively running on fiat.

The thing with gold is it is like other commodities; gold is subject to supply and demand forces just like anything. If the supply of gold is high relative to the number of goods in the market then the value of gold diminishes. For example if you lived in a town that was experiencing a gold mining boom then the value of gold would be less as getting hold of a piece of steak would be harder than an ounce of gold. Granted this is an extreme example but it highlights the fact that the value of gold is not determined by its weight but rather its supply relative to other goods and services. To take this even further if there are no goods or services i.e. no market then the value of gold would drop to zero because gold by itself has no intrinsic value. You cannot eat gold.

If you want a more practical example of this dynamic at work then consider a deflationary scenario. In a deflationary scenario many firms will go bankrupt and the number of goods available declines dramatically. It can also be observed that the money supply of fiat will also decline as it is destroyed through various defaults. Seeing as gold will have a fixed supply then this means the value of gold will decline in this scenario. Gold is only useful in protecting yourself against inflation and can only act as hedge against that. If the opposite occurs then gold will not serve you but cost you.

In the medium term I can see the value of gold increasingly significantly but I do think there will be a time when you need to cash out into hard assets such as land or whatnot. If not the market will go and the value of gold will plummet rapidly. There could be hyperinflation but then at some point I expect massive deflation as the economy seizes to operate due to a failure of supply chains. Deflation is bad news for gold. Can't get around that point you can only choose to ignore it.
Title: Re: Hyperinflation or Deflation?
Post by: Petty Tyrant on May 22, 2013, 07:51:08 PM
Quote
Ross is no Dummy, he TRADES this shit every day in the Chicago COMEX Sewer

That certainly explains why he came out of his smelly sewer to rant nonsense the day after gold got whacked by his masters; and speaks volumes about his going walkabout for so long. Shorting Gold can be quite an experience, huh me lads.  ;D ;D

Enjoy your current run Ross, you know the old traders adage, "I'd rather be lucky than smart."

I see, I thought it strange ross poetic expression above was more ebonic than eloquent for a barrister. Im convinced that paper gold trading is not a safe and secure stable store of wealth immune to HI as holding in your hand is.
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on May 22, 2013, 08:25:17 PM
Quote
Deflation is bad news for gold. Can't get around that point you can only choose to ignore it.

Monsta, let us take a look at history and see where you are in error. The last great deflation in the 1930s called the Great Depression, just about everything went down in price with the EXCEPTION of the price of GOLD. It remained constant at the dollar price of 20 thus making it rise in value relative to other things at the time. It was then confiscated form the citizenry by FDR and the price of it almost doubled to 35 dollars by government decree, as a means to increase the money base, devalue the dollar, and pump us out of the Big D

Need I say more about your theory? I realize you are being sincere and I enjoy discussing matters with you because you are serious. My honest feeling is we have a problem of communication on this particular topic because you are a citizen of a different country and are dealing with a different currency than the dollar.

There are probably many reasons for the question you pose about Spain's Gold. I can only tell you that Gold has a tendency to flow to the economic power or powers of the time. Currently the US and Germany are the two largest owners, with massive flows leaving the west and heading towards the east. You are discussing major capital and economic tides of World history that is beyond the scope of this forum to explain. In my opinion it is a subject requiring and encyclopedia size set of books to explain or comprehend. 

RE likes to align himself with others when he tries to irk or lambast me. He aligned himself with you in our latest tiff and I hope you did not think I was including your comments in my reply to him when I dumped his reply in the waste basket. He is currently Ross's pal in his tag team approach of ridicule, and wouldn't you know it, Ross is a smart man, a big time Comex trader, No DUMMY that's for sure. you have been currently replaced. :laugh: :laugh: :laugh: :exp-grin: :exp-grin:

                                           
RE Ross Tag Team,RE has bushy head of hair
RE Ross Tag Team,RE has bushy head of hair
Title: Re: Hyperinflation or Deflation?
Post by: RE on May 22, 2013, 11:34:07 PM

RE likes to align himself with others when he tries to irk or lambast me. He aligned himself with you in our latest tiff and I hope you did not think I was including your comments in my reply to him when I dumped his reply in the waste basket. He is currently Ross's pal in his tag team approach of ridicule, and wouldn't you know it, Ross is a smart man, a big time Comex trader, No DUMMY that's for sure. you have been currently replaced.

Not replaced, augmented.  Call us the 3 Musketeers of Deflation.  :icon_mrgreen:

(http://2.bp.blogspot.com/_ygzBVpZDqq0/TTj6Y63Y6QI/AAAAAAAAAD0/l9dDHSdQNq8/s1600/3+musketeers.jpg)

Anyhooooo, you asked for it..... :icon_mrgreen:

FOREMAN IS GOING ABOUT HIS BIZNESS!  HE IS GOING ABOUT HIS BIZNESS! FRAZIER'S HEAD IS GETTING HIT AGAIN AND AGAIN!  IT IS TARGET PRACTICE FOR GEORGE FOREMAN! IT IS TARGET PRACTICE!

http://www.youtube.com/v/W9q7mvc6bsY?feature=player_detailpage

RE

Title: Re: Hyperinflation or Deflation?
Post by: Surly1 on May 23, 2013, 03:53:14 AM

The Gold and silver get their value from what a certain weight can buy in a free market, decided by buyers and sellers of such items reaching agreement.

Precisely WHAT are the Gold and Silver Coins BUYING in the "Free Market"?

RE

Whaa, they established  free market and I missed it? Now THAT's news!!
Title: Re: Hyperinflation or Deflation?
Post by: agelbert on May 23, 2013, 10:18:46 AM
(http://research.stlouisfed.org/fred2/data/BASE_Max_630_378.png)
INFLATION ELEPHANT IN THE "we are experiencing deflation and a strong dollar"  ROOM.  8)



I certainly agree with Surly that there ain't no such thing as the "free market" in the USA. However, since we have these silly nuisances called Legal Tender Laws  :evil5:  :evil6: , we are obligated to buy WHATEVER with magical shrinking dollars while the deflationists ( :cwmddd:  :iamwithstupid:  :laughing5:) claim said dollar is growing on steroids!  :icon_scratch:

The pretense of the Fed (hey, we've only got 1% inflation!  :evil4:) is backed in bizarro land of up is down and vice versa by J6p getting paid even LESS in nominal amounts of magical shrinking dollars than a few years back AND the common "wisdom" that the price of copper, silver, gold and other metals, be they precious or not, DEFINE a state of inflation if they go up and deflation if they go down.

NOT TRUE! Why? Because the Fed is manipulating the paper price DOWN while the ACTUAL price for physical, except in the case of copper from the present global depression, CONTINUES TO GO UP.

THE STRONG DOLLAR IS A SCAM (see the chart above). Don't fall for it.    ;)
Title: Re: Hyperinflation or Deflation?
Post by: agelbert on May 23, 2013, 10:42:11 AM
GO said to Monsta
Quote
There are probably many reasons for the question you pose about Spain's Gold.

I read about that a few years back. Spain's colonial gold, silver and agricultural commodities extraction empire did just fine as a cruel and powerful empire money wise UNTIL they financialized their empire and the gold (and everything else of commodity value) moved north.

Wikipeda on financialization:
Quote
More popularly, however, financialization is understood to mean the vastly expanded role of financial motives, financial markets, financial actors and financial institutions in the operation of domestic and international economies.

Sociological and political interpretation have also been made. In his 2006 book, American Theocracy: The Peril and Politics of Radical Religion, Oil, and Borrowed Money in the 21st Century, American writer and commentator Kevin Phillips presented financialization as “a process whereby financial services, broadly construed, take over the dominant economic, cultural, and political role in a national economy.” (page 268).

Philips considers that the financialization of the U.S. economy follows the same pattern that marked the beginning of the decline of Habsburg Spain in the 16th century, the Dutch trading empire in the 18th century, and the British Empire in the 19th century: (It is also worth pointing out that the true final step in each of these historical economies is; collapse)
 ... the leading economic powers have followed an evolutionary progression: first, agriculture, fishing, and the like, next commerce and industry, and finally finance. Several historians have elaborated this point. Brooks Adams contended that “as societies consolidate, they pass through a profound intellectual change.
Energy ceases to vent through the imagination and takes the form of capital.”

http://en.wikipedia.org/wiki/Financialization (http://en.wikipedia.org/wiki/Financialization)

Kevin Phillips accurately predicted the current clusterfuck in the USA as a collapse pattern of all empires when they turn their nuts and bolts trading of commodities into financialization.  : :icon_study: :emthup: 8)
Title: Re: Hyperinflation or Deflation? Dollar Indices: Research Rubbish?
Post by: Golden Oxen on May 23, 2013, 10:50:01 AM
Quote
THE STRONG DOLLAR IS A SCAM (see the chart above). Don't fall for it.    ;)
Thank you Agelbert, for your timely an most appropriate reply. The following gentleman expounds on your theme in much more detail but comes up with the same result. Hope you find it interesting, even though you are already aware of the SCAM.

Dollar Indices: Research Rubbish?
By Ned W Schmidt CFA
Created 23 May 2013

Investors rely on indices to help understand how a market is moving, and perhaps even how it might move in the future. Technical analysis of a market, for example, is only possible due to market indices. How else would we assess what might be happening in a market? If an index is not properly constructed, that whole effort may prove fruitless.

Indices must adapt and change to accommodate the economic evolution that takes place in the market. The Dow Jones Industrial Average bears no resemblance to the first Dow average which was created more than 100 years ago. Due to the inadequacies inherent to the mathematics of that average, market weighted indices were created. The well-known S&P 500 being the best example.

The first step in using any index is a review of the construction of the index. What is included in the index is obviously important. Equally important, and perhaps a more serious concern, is what is excluded from the index. Investors should be aware that the name of the index may or may not accurately reflect what it is the index measures. A cursory review of many indices will find that few adequately measure the market with which they are associated by their names.

As we are interested in Gold, the comments which follow relate to a popular dollar index. Note that we have not chosen this index for a vindictive reason. Rather, it was chosen due to popularity and ease of understanding. The comments that follow are generally applicable to other dollar indices. In short, nearly all dollar indices are inadequately constructed and are therefore of little analytic value. Due to inadequacies in their construction they likely tell us little or nothing about the future for Gold.

An index to be useful should have two characteristics: depth and timeliness. It should be sufficiently broad as to create a reasonable approximation of what a market might be doing. It should evolve over time to include changes taking place in the market. Of the 30 stocks in the Dow Jones Industrial Average, for example, only 6 have been in that average for more than 40 years.

A popular dollar index is the USDX produced by ICE. Per the web site of that exchange,

    “The USDX is quite unique among currency indices in its fixed composition. It has changed once since its 1973 introduction, and that was when the euro was launched in January 1999, replacing a number of European currencies. The net representation of the European legacy currencies in the USDX remained fixed at 57.6%.” (theice.com, 20 May 2013)

Rarely do we read of market research that brags about having not changed or adapted its methodology in 40 years. In short, this index assumes that the global economic system is today as it was 40 years. On this basis any such index fails to meet an important criterion, timeliness. The only change that occurred in this index was forced upon it when the Euro replaced the former European currencies.

                                                                 
weights of ice futures
weights of ice futures

Chart to the right comes from the ICE web site. In it are listed the currencies that compose this index. Note per the above that the composition has not changed in 40 years.

While the British Pound, Swedish krona, and Swiss franc are indeed unique currencies issued by sovereign governments, the economies of those nations are not independent of the European economy. In reality, 77.3% of the value of this index is determined by Europe. That is hardly a representative sample of the world’s economy today. And we must ask, when was the last time you used Swedish krona?

What is not included in, or excluded from, an index is equally important. All of the currencies of Latin America are excluded. With the exception of the Japanese yen, all Asian currencies are excluded. Where are India and Russia? Africa does not exist per most of these indices.

Perhaps the most shocking exclusion from dollar indices is the Chinese Renminbi. China surpassed the U.S. to become the largest global trading nation, imports plus exports, in 2012.(bloomberg.com, 9 February) But yet, this dollar index has 77% exposure to the European economy, and zero(0%) to the Chinese economy. Some justification should be available for such a questionable design feature.

                                               
us dollar renminbi 2011 2013
us dollar renminbi 2011 2013

Second chart on this page portrays the dollar value of the Chinese Renminbi over the past 2+ years. The readily apparent appreciation of the Renminbi, depreciation of the U.S. dollar, has been excluded from most dollar indices. That exclusion of the Chinese Renminbi suggests that the such indices may not have adequately portrayed the value of the dollar in recent times.

That reality leads to some questions. How long can these researchers ignore the Chinese economy? What justification exists to exclude the currency of what is becoming the most important economy in the world? How can researchers use indices with such deficiencies to predict the future price of Gold?

Based on the inclusions and exclusions in dollar indices we would have to question their usefulness. Any claim that these indices reflect a reasonable measure of the value of the dollar would seem to be difficult to defend. More serious is that research using these dollar indices to infer the potential for Gold or Silver may be questionable as well as fallacious. Serious issues exist with such research that should make any investor dubious of using conclusions on Gold based on dollar indices.

http://feedproxy.google.com/~r/fso/~3/kRed7X5OAu4/dollar-indices-research-rubbish (http://feedproxy.google.com/~r/fso/~3/kRed7X5OAu4/dollar-indices-research-rubbish)  :icon_study: :icon_study:
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on May 23, 2013, 10:58:46 AM
Quote
Kevin Phillips accurately predicted the current clusterfuck in the USA as a collapse pattern of all empires when they turn their nuts and bolts trading of commodities into financialization.  : :icon_study: :emthup: 8)

Agelbert, You are a true Font of Knowledge and Wisdom, a Beacon of Light in a world of Darkness and Ignorance.

I better STFU before you know who get's jealous and pissed.  :icon_mrgreen: :icon_mrgreen: :laugh: ::) :exp-laugh:
Title: Re: Hyperinflation or Deflation?
Post by: agelbert on May 23, 2013, 11:32:40 AM
Quote
I better STFU before you know who get's jealous and pissed.     :laughing1:  :laughing3: :laughing4: :laughing5: :laughing6:
:laughing7: :laughing8: :laughing9:  :laughing11: 

Uh Oh.... I think I hear the Godfader loading a "Jumpin' Joe Frazier is DOWN" video!  :icon_mrgreen:

(http://www.samanthastephens.com/wp-content/uploads/2012/05/Godzilla1.jpg)
RE ain't happy...


GO, we are in trouble now! :laughing1:  :laughing3: :laughing4: :laughing5: :laughing6:
:laughing7: :laughing8: :laughing9:  :laughing11:
Title: Re: Hyperinflation or Deflation?
Post by: monsta666 on May 23, 2013, 11:55:22 AM
Quote
Deflation is bad news for gold. Can't get around that point you can only choose to ignore it.

Monsta, let us take a look at history and see where you are in error. The last great deflation in the 1930s called the Great Depression, just about everything went down in price with the EXCEPTION of the price of GOLD. It remained constant at the dollar price of 20 thus making it rise in value relative to other things at the time. It was then confiscated form the citizenry by FDR and the price of it almost doubled to 35 dollars by government decree, as a means to increase the money base, devalue the dollar, and pump us out of the Big D

Okay I will concede the point that gold did retain its nominal value even under a deflationary environment but at the end of the day the gold investor still lost out. As you highlighted the gold they possessed got confiscated by government decree. The government bought the gold at $20 an ounce and then used that gold to recapitalise the banks by revaluing gold at $35. The investor lost out and the banks got free money by this legal government backed form of looting. This is not much different to what we see happen in Cyprus. Sure Cyprus involved fiat currency but the dynamic is the same and must be seen as such. Revaluing gold to a higher value is the same as printing fiat currency. It steals wealth from the genuine investor (in gold this is the gold bug) and transfers the wealth to banks.

This brings me to the next point which I think is even more fundamental. There is no such thing asset as a risk free asset. Not even gold is risk free and can be unstable in terms of the wealth it can store for its holder. Gold maybe able to save you from hyperinflation but generally you lose out in deflation. And even if the deflation does not wipe you out (like in the case of the depression) there is always the risk of confiscation either by violent mobs or government/banks. To be sure, this is not a criticism solely directed at gold, this type of risk can apply to any asset class you pick. True some assets contain more risk than others and are therefore inferior but all assets contain some element of risk.

This is an important point to grasp because it demonstrates that we can never have complete control over our fate. We can maximise the probability of helping ourselves and minimising risk but we can never eliminate it entirely. We must always apply a degree of faith on everything we do. This should not to be seen as a bad thing; it is good to have faith with yourself and it is equally important if not more so to have faith in the intentions and actions of others. It is simply important to recognise faith and see it as such. One of the big problems I see with people and society in general is the need for control, the need to eliminate all risk. It is never possible and this desire to seek control can be very damaging and corrosive to society especially if you have a libertarian disposition. It is better to recognise that anything, even gold can be fallible and just have faith that we can work things out. Off course there is a place for thought and critical thinking in all this; all I say is there no certainties in life and not even gold can over rule this unpredictability of life.

To go back to the issue of gold there is another big issue and that is off scarcity. Gold is not held by many people and this is not simply the case of people having no faith in gold. Take me for example I have a modest wage and cannot dream of spending $1500 for an ounce of gold. I lack the financial means to get it. I am sure the same story can also be said for the vast majority of unemployed youth in the western world. This leaves only a small subset of the population who can afford gold and what's more this gold that is so cherished is often hoarded by gold investors. This hoarding of wealth especially if done to an excessive degree is damaging to greater society as this wealth could have been invested in more productive means such as more sustainable living arrangements. I am not so well versed in the teachings of the Bible but it is my understanding that it is not morally right to hoard excessively and if one finds themselves in the fortunate position to have more wealth than they are able to find use for it is better to give this money to people in need. Obviously you do follow due diligence when handing this money so it reaches suitable candidates but provided the candidate is of good moral character then such investments will be rewarded in the future. I don't think such things would be said if there wasn't a grain of truth.

The other danger to bear in mind with hoarding is gold hoarders often end up lending that gold to other people who lack gold. This borrowing inevitably leads to the generation of interest, which again is seen in bad light (actually forbidden) by the Bible, and it is this greed to gain more through lending that gives rise to fractional reserve banking and later great financialisation which is so damaging to society as agelbert has alluded to. On a final note it is this need for credit expansion that eventually leads to the scenario where there is not be enough gold to service the debts. The traditional solution (as in the 1930s and 70s) was to switch from gold to fiat currencies to extend and pretend that the country is not insolvent. It is the element of greed and the need to have more that primarily drives people to fiat and the eventual madness you see today. As we all know the Bible considers greed a bad sin and warns us of its problems. We are witnessing the results of following an economic policy where greed is good.
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on May 23, 2013, 12:42:22 PM
@ Reply to Monsta

Many valid points Monsta, my reason for buying Gold, I became a Doomster in my late teens; was solely as a way to hedge against what I felt was an inevitable inflation. It worked out well for me, but as you point out there are many pitfalls along the way and many in the future to have to deal with, and it is not just related to Gold investments.  No investment is perfect and all are subject to risks both foreseen and unforeseen.

Keep in mind that in all my postings about Gold, I have never claimed it to be the perfect investment. My claim is and continues to be that it is real honest money, not perfection, and that fiat is a fraud forced upon the public by crooked banksters and paid off politicians. That is one of the few things in this world that I feel sure of and sincere in presenting to others. 
usgold quarter eagle 1910
usgold quarter eagle 1910

merchandise futurama monopoly 10 dollar bill richard nixon
merchandise futurama monopoly 10 dollar bill richard nixon

Title: The Ideal Monetary Unit
Post by: agelbert on May 23, 2013, 03:19:03 PM
Quote
The Dow Jones Industrial Average bears no resemblance to the first Dow average which was created more than 100 years ago.

Great article, GO.  :emthup: As for the Dow, what would it be like if American Cotton Oil* was still on it?  :icon_mrgreen:

* http://www.quasimodos.com/info/dowhistory.html (http://www.quasimodos.com/info/dowhistory.html)

I think Monsta, RE, you and myself are on the same page in agreeing that no asset class is risk free.

From an INTRINSIC VALUE point of view, what would be the most perfect "standard" for a
monetary system?

It would have to be something really hard to manipulate; something defined scientifically with physics that could not be gamed.

I put my thinking cap on and came up with the Kilowatt Hour Standard!
Say what!? ???

Think about it; it's a measure of ENERGY. It takes energy to get goods to market as well as to produce them. An ounce of gold would be worth X number of kwhs (which would, in a renewable energy economy, include the cost of bioremediating the gold mine  :icon_sunny:).

It would be really hard for Big Ag to say it took more kwhs to grow food this year but, if they could prove it, that woulld justify sellling for more kwhs a bushel. Big Oil would be under the same restraint. :evil6:

How could the Fed print kwhs out of the clear blue sky? It couldn't (it would have to lie of course  :evil4:) .

In order to get energy, it has to be transformed from matter, do not pass go, do not collect two hundred.  :icon_mrgreen:

See, I just won the Nobel Prize in the Renewable energy economy of the future KILOWATT HOUR STANDARD.  ::)  :icon_mrgreen:

NOBODY can deny that a KILOWATT HOUR (currently worth between 8 and 15 cents) does not have INTRINSIC VALUE. All living things need ENERGY to live.  ;D

I welcome co-authors to my world changing economic thesis. I will be happy to have my friends from the diner share the Noble Nobel Prize with me.  :icon_mrgreen:

Of course, I do expect ya'll to flesh it out a little with some high falluting erudite economics speak so we can impress the eggheads. Ya gotta snow em' with some supply and demand charts, projected increased market stability, prosperity and public confidence that the game ain't rigged as a GDP multiplication factor. Get to work!   :whip:    :laughing7:

News Flash! Killowatt Hour Monetary Standard Takes the Financial World By Storm! New Era of comodity pricing based on bioremediation from mining to top soil repair costs for full energy production costs immune to speculation! Bernanke and Fed governors hiding in Argentina!  :icon_mrgreen:
Title: Re: The Ideal Monetary Unit
Post by: RE on May 24, 2013, 12:01:00 AM
I put my thinking cap on and came up with the Kilowatt Hour Standard!

This is analogous to the Food Calorie Unit I mentioned was used in Feudal Japan, with the Koku representing the amount of rice necessary to feed a person for a year.  Main difference is there are I think 1000 Energy Calories to an Food Calorie, this is just a terminology issue really, they are synonymous in terms of measuring Energy content.

To run this system, each year you need to account for how much energy/food is produced and stored, and only have in circulation the amount of money that corresponds to that production.  This is the basis for a Resource Based Economy.

The problem with using PMs for this is they tend to get Hoarded and taking them Out of Circulation in lean years is quite difficult if not impossible.  Even if there is less Food/Energy available, the PM holder still expects to buy the same amount of food with it.  Obviously he cannot, since it is just not THERE to buy, so the price in PMs starts to rise, causing inflation of the organic kind in this situation.  Anyone with few PMs gets priced out of the Food market and ends up starving.

So you need money which Expires each year, and then only issue enough New Money which corresponds to the actual production of the society. This will maintain stable prices, and is the principle behind Demmurrage Money.  Problem here from the Hoarder's point of view is you can't Save any Money, it will expire at the end of the year.  Of course, you could be Taxed out of excess each year also if production is thin, that would be one means of regulating the total available currency each year.

Demmurrage and RBE are not Ideal, but they do probably represent the best way to negotiate a transition off a Money based economy to a Gift Economy.  Toby and I whacked at this one at great length on Reverse Engineering.

FOREMAN IS AS POISED AS HE CAN BE IN A NEUTRAL CORNER!  FRAZIER IS TAKING THE MANDATORY 8 COUNT!

 :icon_mrgreen:

RE
Title: RE said ... Agelbert answered...
Post by: agelbert on May 24, 2013, 11:35:41 AM
Quote
The problem with using PMs for this is they tend to get Hoarded and taking them Out of Circulation in lean years is quite difficult if not impossible. Even if there is less Food/Energy available, the PM holder still expects to buy the same amount of food with it. Obviously he cannot, since it is just not THERE to buy, so the price in PMs starts to rise, causing inflation of the organic kind in this situation. Anyone with few PMs gets priced out of the Food market and ends up starving.

AHEM! Hoarding is merely one of many dynamic variables of human behavior involving supply and demand.  But, of course, if food is scare (lack of supply leading to more demand) the amount of gold or fertilizer or wampum you need to buy it will increase. It will still take the same number of kwhs to make said gold, fertilizer or wampum. The standard has not been altered by Fed cointerfeiting of a fiat, non-energy based currency.

Quote
So you need money which Expires each year, and then only issue enough New Money which corresponds to the actual production of the society. This will maintain stable prices, and is the principle behind Demmurrage Money. Problem here from the Hoarder's point of view is you can't Save any Money, it will expire at the end of the year. Of course, you could be Taxed out of excess each year also if production is thin, that would be one means of regulating the total available currency each year
.



You're the Columbia brainiac, not me but it seems to me that energy cannot be created or destroyed, but only transformed from one form to another. Said various energy states possess different amounts of potential energy when you are talking about dropping rocks from a tower but here we are not talking about anything but what it takes to transform a seed to food or a mine ore vein to an ounce of gold. That COST in kwhs should remain fairly constant for the ore but will vary in the food, not from the required amount of energy, but in regard to supply and demand. IOW, a lack of supply would militate paying more kwhs for a bushel than those required to grow said bushel.

Quote
Demmurrage and RBE are not Ideal, but they do probably represent the best way to negotiate a transition off a Money based economy to a Gift Economy. Toby and I whacked at this one at great length on Reverse Engineering.

A Gift Economy is probably the most practical economy from the point of view of biosphere mimicry. When a ruminant grazes, it is both giving food in the form of urine and feces fertilizer to the grass while the grass is giving its own energy package. It's a lot more complicated than that but it remains a closed system where the up cycle MUST equate to the down cycle.

Since entropy is a fact of life in our universe, we need the sun to keep goosing the cycle or we are all dead. We do the best we can to store the energy of the sun but we are only getting started in that area. The so-called "storage" of energy in hydrocarbons was always a one sided equation that didn't account for the "non-gift" of excess CO2 on the "defecation" side.

Capitalism is naturally against an energy monetary standard because it is based on accumulation leading to price dictatorship, not maintaning a healthy balance. Capitalism is a hoarder's wet dream because it serves to INCREASE the purchasing power of his hoard by artificially eliminating enough supply to create added demand. :emthdown:

This is the phenomenum that leads to bubbles where the hoarded item is suddenly flushed into the market and the price plumments.

Supply and demand, from the wiles of nature is a normal and expected part of an energy monetary standard that would NOT produce booms and busts or bubbles.

On the other hand, the capitalist hoarding and derivative speculation that produces ARTIFICIAL supply and demand is simply corruption, inefficiency and accelerated system entropy born of human greed.

You will NEVER get a squirrel to hoard "too many" acorns to affect supply and demand among his fellows because he only gathers a lot when they are plentiful for all (oaks do NOT put out acorns in the same quantities every year and some years don't put out ANY acorns). In addition, the acorns will spoil eventually so a two or three year supply wouldn't help Scrooge McSquirrel to lord it over his nut loving friends.  :icon_mrgreen:

This dynamic quality of a food product, as opposed to a metal or some other finished product like a stainless steel pot, is important because, as you said, you can't really "store" the energy because the food changes state and goes "bad" (not really, it's just going to another cycle point in the biosphere loop but, of course, we can't eat it so it's "value" in kwhs is "lost" to the market).

I think that can be worked out and just as fruit in season costs less than fruit out of season, the "value" in kwhs would vary with the time of the year.  :emthup::icon_sunny:

Quote
Demurrage is the cost associated with owning or holding currency over a given period. It is sometimes referred to as a carrying cost of money. For commodity money such as gold, demurrage is the cost of storing and securing the gold. For paper currency, it takes the form of a periodic tax, such as a stamp tax, on currency holdings. Demurrage is sometimes cited as economically advantageous, usually in the context of complementary currency systems.

http://en.wikipedia.org/wiki/Demurrage_(currency) (http://en.wikipedia.org/wiki/Demurrage_(currency))

Quote
Demurrage and RBE are not Ideal, but they do probably represent the best way to negotiate a transition off a Money based economy to a Gift Economy. Toby and I whacked at this one at great length on Reverse Engineering.

Maybe, maybe not. Demurrage is just anothe COST. ALL costs associated with currencies, goods and services can be defined in terms of kwhs whereas fiat currencies in a greater degree and commodity based currencies in a lesser degree are subject to the distortions of hoarding (i.e. artificial supply and demand), counterfeiting and general greed based corruption.

A standard based on kwhs, BTUs or joules wouuld also wipe out Soros type crooks that make money off of currency arbitrage speculation.  :emthup: :icon_mrgreen:

Energy cannot be created or destroyed, but only transformed from one form to another. I say get an agreement from the SUN project members to a certain amount of kwhs instead of dollars and the amount will never have to be adjusted for inflation!  :icon_mrgreen:

Title: Re: RE said ... Agelbert answered...
Post by: monsta666 on May 24, 2013, 05:22:37 PM
AHEM! Hoarding is merely one of many dynamic variables of human behavior involving supply and demand.  But, of course, if food is scare (lack of supply leading to more demand) the amount of gold or fertilizer or wampum you need to buy it will increase. It will still take the same number of kwhs to make saif gold, fertilizer or wampum. The standard has not been altered by Fed cointerfeiting of a fiat, non=energy based currency.

The issue with hoarding is that until the saved money is spent again it has left the money supply. If enough people do not spend money then the money supply will decrease significantly. This has the effect where the price of goods will fall as there is less money in circulation relative to the normal of goods available. Once this dynamic becomes established then there will be a tendency for people to save even more in the hopes that tomorrow's price will be better (cheaper) than today.

This issue of excess saving then has the issue that if money is stored and not spent in sufficient amounts on direct consumption then the incentive to provide goods (such as solar panels) will be less because there is simply less money (due to a decline of today money supply). More important still a lack of money also means less investment spending so the solar panel businesses will not build on capacity or worse yet they will defer maintenance due to a lack of investment. This is a perennial issue of PM currencies but it can easily become a problem in this future money of kWh if it is not addressed.

To offer an example let us suppose we have 10,000 notes of 1 kwh tokens since the economy has an output of 10,000 kWh. On year one let us say only 9,000 of those kWh tokens were spent while all the remaining 1,000 tokens were saved for a "rainy day" (I am talking about saving on the notes not the solar energy here). The economy is still producing 10,000 kWh however but only 9,000 tokens has been spent by the individual members of society. Because of this lack of demand some of the output of the economy has not been utilised and it is this lack of demand that likely means that total energy output of the economy would drop to 9000 kWh, so it meets demand and the existing money supply of the economy. This is what is likely to happen if the saved money does not enter the economy. Furthermore as we see here a decline in energy output is likely to lead to a deterioration in the state of the economy; after all it has declined by 10% in real terms.

What is significant in all this however is the fact that even if the hoarders decided to spend their money again since the size of the economy has shrank then the amount of kWh they could buy with this money would be less as you would have a situation of 10,000 kwh energy tokens chasing 9,000 kWh of real energy capacity in the economy. Therefore what 1 kWh token could buy would be less than the real amount and this inflation has been caused by a REAL scarcity of an energy resource in the economy and not because of an expansion of the money supply. If you notice the actual money supply has remained constant at 10,000 tokens.

This is always the issue with saving that is rarely acknowledged as saving is generally considered a virtue by society and not a vice (unlike excessive spending). Saving and hoarding creates significant problems as it decreases the purchasing power of money and generally undermines money's ability to act as a medium of exchange. It is a very tricky issue, and I would say in an ideal world you would want money to fulfil both functions of being a medium of exchange AND a store of wealth. However if you make money easy to store then it becomes saved and this makes it harder to purchase real goods as the ease of saving will cause its purchasing power to decline; this undermines your money system from acting as a good medium of exchange.

In this sort of topic you must make some compromise between what you want your money to do. Is it more important that your money acts a means of acquiring goods/services or is it more important it acts as a store of wealth? If you wish to implement solutions to hoarding such as demurrage/currency resetting etc. as RE alludes then to me this suggests that people like RE are of the opinion that money should primarily function as a medium of exchange and NOT a store of wealth. I do agree that this is what the primary function of money should be (RE is free to bite me if I have misinterpreted what he is standing for).  In any case though you need to make up your mind as to what money should really do. You cannot have it all.

The traditional capitalist solution to hoarding was to offer savers/hoarders an incentive in releasing this saved money and this came about by offering interest on the money they lent out from their accumulated savings. This act of lending creates even greater problems than that of hoarding as now you have a situation where you need to generate new energy tokens to meet the obligations of paying the interest payments. If enough money in circulation is generated through loans of this nature you will get the push towards a fractional reserve system and later exotic financial products which enable people to make those interest payments with greater ease but with the ultimate cost of making the eventual currency collapse more total. This issue of saving and the subsequent lending that comes from this initial savings is the reason why the Bible is so critical over the matter of saving and the ultimate folly this behaviour induces:

Quote from: Matthew 6:19–21
Do not lay up for yourselves treasures on earth, where moth and rust destroy and where thieves break in and steal, but lay up for yourselves treasures in heaven, where neither moth nor rust destroys and where thieves do not break in and steal. For where your treasure is, there your heart will be also.

In addition to the Bible saying such things I do know in Islam hoarding is frowned upon because it says excessive saving leads to a decline in purchasing power. As you see there are numerous schools of thought that advocate AGAINST hoarding and I would say this stems from the knowledge of what damage savings can do to society at large especially if that money is used to lend out to less fortunate members of society which has tended to happen on a historical basis. Two facts of human nature at work here; the need for security but taken to an excessive degree and the natural greed factor that people want something from nothing (this want of something for nothing most commonly manifests itself through interest from loans).

You're the Columbia brainiac, not me but it seems to me that energy cannot be created or destroyed, but only transformed from one form to another. Said various energy states possess different amounts of potential energy when you are talking about dropping rocks from a tower but here we are not talking about anything but what it takes to transform a seed to food or a mine ore vein to an ounce of gold. That COST in kwhs should remain fairly constant for the ore but will vary in the food, not from the required amount of energy, but in regard to supply and demand. IOW, a lack of supply would militate paying more khws for a bushel than those required to grow said bushel.

The costs may remain the same but energy output in a given economy will fluctuate naturally from year to year. In one year you may have more sunlight than normal or you had a good harvest thus the total energy output of a given economy can expand or decline. If you want a money supply to represent the real wealth of an economy then you must find some mechanism were it adjusts to these yearly changes. Easiest way to do this is for the amount of tokens available in circulation to be reset or altered to reflect the true reality of the energetic output of the given economy. The total energy produced by the overall ecosystem maybe a constant but we are only accounting for the energy used in the human economy so the tokens need to reflect this total.

I believe this is the real issue here and not the amount of energy it takes to perform a given task although it can be noted the amount of energy to perform certain tasks would be dependent on the quality of resources used. For example it would take less energy to transform an ore containing 10% iron into 1 ton of solid iron than transforming a 1% ore of iron into 1 ton of solid iron. This can be extended to other fields such as farming where poor quality soils would yield less energy output than a soil of superior quality.
Title: Re: RE said ... Agelbert answered...
Post by: RE on May 24, 2013, 06:09:15 PM
Well, this one is getting good.  I can see we have a new Combined Diner Economista article in the making here.

You're the Columbia brainiac, not me but it seems to me that energy cannot be created or destroyed, but only transformed from one form to another.

Energy cannot be created or destroyed, but it can be Available or Unavailable for use by Homo Sapiens in any given year or on any given day.  Easy example is on a Sunny Day your solar PV cells will produce copious power, on a Cloudy Day, not so much.  On a Windy Day, your Windmills produce lots of power, on a still air day, ZERO.  In a wet year, your fields produce a good crop, in a drought year, not so much. Etc.

If the Tokens (Money) you use for Energy are to retain a Constant Value, they have to represent the actual amount of Energy available in any given year (you obviously can't change the Money Supply on a Daily Basis depending on whether it is Windy or not).  Far as Homo Sapiens is concerned, the most important part of this is the Yearly Stored Energy in the form of the Food Harvest.  In lean years to keep the Food Price constant, you have to take Money OUT of the Basement Safes of Hoarders, otherwise they will start digging into their Hoards of Gold Coins, driving up the price of food and pricing all the non-Hoarders out of the Food Market.  Obviously, the typical Wage Earner cannot Hoard a whole lot of Gold Coins, you gotta be a Wealthy Old Hoarder to do that.  So what happens here?  Golden Oxen can buy Plenty-o-food even though it will more rapidly deplete his Hoard of Gold Coins, while WHD and LD, Strapping Young Bucks will STARVE because they never got a chance to pile up a big Hoard of Gold in the Basement Safe.  This is not overall a good Survival Strategy for a Tribe, where Old Guys get plenty-o-food while the Young Guys and their Families STARVE.

The Saving Paradigm is overall disruptive to commerce, because the Saved Tokens come OUT from the Basement Safe at precisely the wrong time, when there is an overall LACK of what they are supposed to represent, which in all cases is actually some form of Energy.  As I said early on here in this particular Episode of the Debate, Money=Energy, a concept GO still has difficulty grasping but is in fact the way it has always worked, just in Da Old Days prior to Industrialization, the Energy and its transmutation into Work were done through Human (Slave) and Animal Labor mostly.  Coal & Oil and their Monopolization by a few people made them Rich Beyond All Measure, far more Wealthy than any Pharoah with thousands of Hebrew Slaves ever was.  The Money they created and issued out as Debt to access the Resource they "Owned" and Monopolized is a measure of the Available Energy in the society.  Long as Available Energy kept Increasing, they could keep issuing out more Money and meet the Debt Service required to keep them Rich in Perpetuity.  As Available Energy now DECREASES, they cannot keep issuing out more Debt on it, they simply do not have it to sell.  The cheap stuff is already wandering around in the Atmosphere as molecules of CO2.  If they do keep issuing out more of it, all that occurs is it drives up the nominal price of the Energy, and they still cannot service the Debt.  End of Game.

Changing the system over to Gold won't change this dynamic, it won't put anymore Cheap Oil into the ground.  All it will do is allow Old Hoarders of Gold to buy what none of the Young Folks can afford anymore, which is Food to Live on.  The only EXIT from this is for the Young Folks to LEAVE the Oil Economy and start Growing their Own Food, and when an Old Guy comes and offers them a Gold Coin for their Food, tell him to EAT HIS GOLD.  :icon_mrgreen:

FOREMAN IS DOING TO FRAZIER WHAT HE DID AS A 19 YEAR OLD TO A VETERAN RUSSIAN, LEONIS SHAPOULOUS, IN THE 1968 OLYMPIC GAMES IN MEXICO CITY!

RE
Title: Re: RE said ... Agelbert answered...
Post by: Petty Tyrant on May 24, 2013, 07:01:10 PM


AHEM! Hoarding is merely one of many dynamic variables of human behavior involving supply and demand.  But, of course, if food is scare (lack of supply leading to more demand) the amount of gold or fertilizer or wampum you need to buy it will increase. It will still take the same number of kwhs to make saif gold, fertilizer or wampum.

Mmmm Wampum

Nice bible reference monsta,
Hinduism also has many parables along those lines also, such as the monkey who greedily gathers more mangoes than it can eat and goes further out along the branch collecting until the branch breaks.
Title: Re: RE said ... Agelbert answered...
Post by: jdwheeler42 on May 25, 2013, 01:33:10 AM
In this sort of topic you must make some compromise between what you want your money to do. Is it more important that your money acts a means of acquiring goods/services or is it more important it acts as a store of wealth?
In the Austrian school of economics, they make the distinction between MONEY, a store of wealth, and CURRENCY, a medium of exchange, for just that reason.  MONEY should be rare, easily recognizable, easily divisible, should not deteriorate, and should be fungible, i.e. each piece identical to every other.  (Diamonds are the classic example of something that is not fungible, the value of each is wildly dependent on its own characteristics.)  Gold does therefore make excellent MONEY.  CURRENCY, on the other hand, you want to have just the right amount circulating so that prices are stable and productivity is not limited by the supply of CURRENCY.  Gold is atrocious for CURRENCY.
Title: Re: Hyperinflation or Deflation?
Post by: agelbert on May 25, 2013, 03:48:29 PM
(http://www.iroquoismuseum.org/images/shell4.jpg)
iroquoismuseum.org

Quote
Wampum, ke`kwuk, squau-tho-won; all are Algonquian words for shell beads or string of shell beads. Wampumpeage is a Narragansett word for "white beads strung". Throughout northeastern America, wampum was used for jewelry, gifts, communication, historical record of important events, religious ceremonies, and trade. It was the earliest form of currency known in North America. Its value was derived from the difficulty involved in producing the cylindrical bead from both Quahog and Whelk, and the scarcity of suitable shells. White beads were made from Whelk, purple-blackish from Quahog.
The beads were produced from the inner spiral of the shells. The spiral or columna must be thick enough to withstand grinding, shaping and drilling. The shells were collected along the coastal shores during the summer, and worked in the winter months. The inner spirals were cut into cylinders measuring 1/4 inch long by 1/8 inch diameter. Each bead was then smoothed through grinding, polished, drilled, and finally strung on hemp fibers or sinew. It was difficult, tedious, and time consuming work. The proportionate scarcity of the Quahog dark beads doubled their value to that of white wampum.

http://www.mohicanpress.com/mo08017.html (http://www.mohicanpress.com/mo08017.html)

She sells seashells by the seashore. If she sells seashells by the seashore, how many seashore shells does she sell? This old tongue twisting pronunciation trainer underscores step one in the manufacture of Wampum. You needed a supply of a certain, special and very attractive type of Calcium Carbonate, which was limited in quantities, to begin to do WORK=ENERGY INPUT plus some ARTISTIC CREATIVITY on the seashells in order to produce a CURRENCY that was BOTH a medium of exchange AND a store of value.   

(http://upload.wikimedia.org/wikipedia/commons/thumb/8/8e/Wampum_ej_perry.jpg/300px-Wampum_ej_perry.jpg)

In a barter economy, the transfer of goods and services from one party to another is hindered by the lack of liquidity of say, an animal, a bear skin or whatever. The lack of a medium of exchange that can be subdivided into small enough units for both parties to make up perceived different values in a barter transaction is the need thar fosters the creation of "money" in the first place.

Wampum was initially a form of artistic expression as well as a form of communication (it was a store of value as jewelry and venerable truth through news and agreements).

However, as the quantity gradually increased and most natives agreed more or less on its value, wampum began providing the liquidity that a barter economy could not.

Consequently the Native Americans along the eastern area of North Amerca gradually adopted wampum as a currency in addition to valuing its beauty (jewelry = bling). The Natives that lived along the beach had an edge on those inland because of easy access to the raw materials.

(http://wordbuff.com/wp-content/uploads/2012/05/wotd-wampum.jpg)

Quote
With the influx of more Europeans in the 17th century, notably the Dutch and English, metal tools became widely available to Indians in the east.

Among these tools were slender metal drills which greatly facilitated the production of wampum. These new tools enabled the Indians to produce uniform beads more quickly and with greater ease.

Applying basic economic principles to wampum as a commodity/currency in the 17th century, it might be assumed that wampum decreased in value as its production was sped up.
On the contrary, its value remained stable.

Again applying the basic economic rule of supply and demand, though the Europeans brought tools that helped to increase wampum production, they also balanced their contribution with an increased demand for the shell beads.

http://www.mohicanpress.com/mo08017.html (http://www.mohicanpress.com/mo08017.html)

Wampum is pretty and, until the Europeans showed up with metal hand tools, a good store of wealth because the amount of energy=work it took to make it as well as the amount of shells available  limited the amount of wampum in circulation.

But those metal thingamajigs the white devils brought made it EASY (LESS TIME & ENERGY=WORK) to make lots of pretty wampum (metal hand drills). This new wampum looked just as good or better than the older stuff made with less sophisticated (non-metal) tools.

At first everybody prospered. There was more wampum, and contrary to standard economic theory that when you increase the currency in circulation, you get inflation, this did not happen right away. Everybody, including the white devils  :icon_mrgreen:, were happy with the wampum economy.

But time passed and things changed.


Quote
As the New England colonists adopted wampum as their standard currency, incidents of fraud (wampum counterfeit) increased.

Both Indian and Englishman were known to pass off inferior or fraudulent wampum to unsuspecting colonials.


In time, regulation and a standardized measure of wampum strands was implemented. A fathom (6 feet) was the most usual measurement and instantly denoted a specific monetary value measured against English shillings, pence, pounds, and so forth.

The fact that legislation was introduced, regulations regarding wampum manufacture were set down, penalties for counterfeit or inferior quality wampum trading were harsh, and in some colonies the rejection of dark wampum for only white (though its value was greater, it was easier to counterfeit by way of dye), all illustrate how dependent the colonists and Indians were on these shell beads.

There was some fluctuation in wampum's value, as is always the case with currency, but by and large, it remained uniformly acceptable and desirable to nearly the end of the 17th century in the colonies and into the 18th century along the frontiers.

Its worth, however, was tenable. Wampum was only good as long as the Indians prized it. If or when that was no longer the case, an economic crash could occur throughout the English colonies that would have had serious consequences in New England, and subsequently, in the mother country as well.

It was this realization, along with the declining demand for fur, that moved the New Englanders to gradually phase out wampum as a currency standard. With silver from the West Indies beginning to circulate in North America, wampum was slowly being replaced by that universally valued commodity, metal coinage.

http://www.mohicanpress.com/mo08017.html (http://www.mohicanpress.com/mo08017.html)

Two things happened:

1) The colonists, who had hitherto absorbed the wampum glut by their demand for the beads, lost interest in wampum partly becasue they didn't require as many furs (wampum was the currency the colonists used to buy pelts). Wampum lost value as a medium of exchange as the increase in available currency took its toll.

Counterfeiting exacerbated the problem of undermining the medium of exchange value of the currency. A given piece of wampum lost purchasing power because of wampum glut AND a competing currency of coinage.

2) The artistic value part of wampum as a store of wealth suffered as well. Any philatelist can tell you that old stamps get their "value", not from a pretty painting on the stamp, but MAINLY from their scarcity.

This was depressing. Imagine all those hours spent painstakingly making wampum and that neighboring squaw that is all thumbs can suddenly make several times as much as you can just because she has a white devil metal thingamajig to goose production! And now the white devils don't want them as much as they used to either.  :(

But as you can see below, despite its disappearance as a currency, wampum survives to this day as a product of patient craftsmanship, artistry and historical communication.

Quote
It is interesting, if not ironic, to note that wampum remains valuable even today. A single wampum bead made from Quahog or Whelk, manufactured in New England coastal areas can cost up to $10! Overseas wampum is less expensive, but still demands a good price. Wampum, the first currency of the new world, has survived as a desired item long enough to be considered a classic.

But it would never regain its position as a medium of exchange/currency.

(http://www.law.syr.edu/_assets/images/academics/wampum_small.gif)
Two Row Wampum The patient artistry and symbolism crafted in this wampum is an example of how wampum is a store of value. 

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Celebrating 400 Years of the Two Row Wampum

Vanessa Parker

May 25, 2013

In an effort to maintain a separate and peaceful coexistence, an agreement was made 400 years ago between a group of Haudenosaunee nations and the incoming European settlers who were rapidly arriving. That agreement remains valid today.

The Two Row Wampum was made with strings of wampum, or crushed shells, which were made into purple and white beads threaded onto strings, forming a belt.

]The white beads, located outside of two large purple rows of beads, represent the truth.

The purple beads are separated into two rows, one representing the canoe of the Haudenosaunee, the other representing the sailboat of the incoming Europeans.

Each row represents the separate cultures, traditions, governments and religions.

In between the purple rows run three rows of white beads. These represent peace, friendship and maintaining a sense of equality forever.
full article here:

http://indiancountrytodaymedianetwork.com/2013/05/25/celebrating-400-years-two-row-wampum-149469 (http://indiancountrytodaymedianetwork.com/2013/05/25/celebrating-400-years-two-row-wampum-149469)

What lessons can we take from the above Native American experience?

1) Money is created in order to ease the transfer of goods and services. This medium of exchange normally has the following qualities:

A. Liquidity

B. Durability

C. Portability

D. Agreed upon value per unit


2) The ENERGY it takes to create said money is directly proportional to a unit of said money as a store of value.

The extreme situation, never reached by wampum because it always took SOME skill and energy to make, is FIAT currency where it has ZERO value as a store of wealth.

The case of the US dollar is BELOW ZERO as a store of wealth because, in addition to it being fiat, the supply is growing absent any energy inpout whatsoever. So the dollar loses value as it sits from Fed  inflation (counterfieting). Legal Tender Laws force the citizenry to run around trying to preserve some value in a currency that shrinks in value year after year. Many of these value chasers go for PMs, paintings, land, antique cars, Early American antique furniture, etc. They are all looking for something that meets the criteria of liquidity, durability, portability and agreed upon value per unit to a greater or lesser degree.

3) Beyond the basic biochemical needs of proper nutrition, shelter and health, human culture places a great deal of value on tangibles and intangibles outside the default requirements of human life.

Humans will always value creativity and imaginative and useful innovations that bring beauty, comfort and utility to our lives as STORES OF VALUE.

What price can you place on a song? What value does a set of verses have that took a song writer 5 minutes to write after he had dreamed them versus a painstakingly written flute sonata?

Hard to say, right? One took a lot less ENERGY than the other, both in kwhs and artistic creativity, but may have sold for a lot more money.
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What about greed and other economy influencing factors?

The issue of greed, hoarding, the amount of currency in circulation as a trigger for consumerism or the reverse are all PRODUCTS of distortions in an economy.

Monsta feels, like most economists, that currency does not simply encourage certain types of behavior deleterious to an economy, but DICTATES IT.

I don't feel that way because I view money as an EFFECT, not a CAUSE. I do agree that the money supply certainly must remain in a fairly constant proportion per capita to avoid distortions.

Food will never be currency simply because, even if you could freeze dry it with solar energy and store it also with solar energy for a hundred years or so to use it as you needed it, there is only so much food you or anybody else can eat.

People want furniture, tools, culture, beauty, some entertainment, etc. A prisoner in solitary confinement goes bonkers even though he has sufficient food, shelter and health care.

Life is MUCH more than food, shelter and health.

RE feels that, since GO can't eat his gold, it therefore has no intrinsic value. As GO and all gold bugs have noticed, gold has the following "money-like" attributes:

A. Liquidity
B. Durability
C. Portability
D. Agreed upon value per unit

GO observes, rightfully, that the US dollar retains the above attributes by the big gun the government has called Legal Tender Laws, not by reality. This pisses him off.  :angry3:  He decides that any excess dollars in his possession must be quickly converted to something besides dollars because the value of said dollars, like wampum (eventually) after the metal hand drills were introduced by the white devils, is going down.

GO watches the Fed money supply going exponential and really gets pissed off! :angry5:
This is far worse than wampum inflation because this is raw counterfieting of fiat! GO starts to buy this, that and the other with those magically shrinking dollars from collector's items like stamps to maybe antique furniture to paintings to rare coins to, YOU GUESSED IT, GOLD!  :icon_mrgreen:

Gold is hard to counterfiet. There is a way to use nuclear physics (this is not a joke, it's the real deal!) to transmute some cheap element to gold but the energy expenditure is greater than the energy needed to mine and produced finished gold from ore. However, when fusion becomes a reality, the equation for gold may change and, it too, will go the way of wampum. :o  Don't worry GO, it may be a while yet.* ;D

Bernanke realizes there are a lot GOs out there on to his game so he starts jacking around with the PM paper prices (tanking them) to drive the GOs back to the Fed fiat fantasy of a strong dollar. :evil5: 

Agelbert sees all this shit go down, scratches his head  :icon_scratch: and comes to the conclusion that we need something like wampum but without those hand drills or the counterfeiting dye! His wonderful and innovative Kilowatt Hour Monetary Standard :icon_sunny: is, horror of horrors
, greeted with hardy harrs and guffaws from fellow diners RE and Monsta666. :laughing5: :laughing6:  Harrumph! :argue:


ANY currency that is not BOTH a medium of exchange and a store of value will be corrupted, distorted, counterfieted and generaly devalued, PERIOD.

The "tokens" or other symbology that is used for such currency obviously introduces DEBT because there might be a whole lot more symbols, tokens or pieces of paper with funny squiggles on them than the ACTUAL store of value represented. THAT'S JUST A DETAIL. If you can avoid corruption and insure transparency, that can be minimized.

The "fear" that hoarders are going to trash the economy by taking money out of circulation is unfounded. That's merely an EFFECT of capitalism. It has nothing to do with the concept of money per se.

This EFFECT is really quite easy to prevent. All you have to do is tax the fuck out of wealth (NOT INCOME!) above X net worth to keep a lid on excess capital accumulation. Thomas Jefferson was in favor of that, as a matter of fact (google it!).

Once everyone is on board with a stable currency like kwhs, I would also eliminate the difference between earned and unearned income (capital gains) and progressively tax that too. That's an additional INCENTIVE to NOT hoard and a guarantee that the velocity of money will remain fairly constant. 

Have a nice day.

*
Quote
Nuclear experiments have successfully transmuted lead into gold, but the expense far exceeds any gain.[7]  It would be easier to convert gold into lead via neutron capture and beta decay by leaving gold in a nuclear reactor for a long period of time.  :icon_mrgreen:

http://en.wikipedia.org/wiki/Nuclear_transmutation (http://en.wikipedia.org/wiki/Nuclear_transmutation)
Now we know why GO hates nuclear power plants! :laughing7:



After being double teamed, Cassius Clay dances like a butterfly and stings like a BIG BUMBLEBEE! :laughing7:  :icon_mrgreen:

http://www.youtube.com/v/LNdmySLkqyI#]http://www.youtube.com/watch?v=LNdmySLkqyI#[/url]&fs=1

Title: Energy, Money & Gold
Post by: RE on May 25, 2013, 04:03:05 PM
Energy, Money & Gold (http://www.doomsteaddiner.net/blog/2013/05/25/energy-money-gold/)  by the Diner Rogue Economistas  :icon_mrgreen: now UP on the Diner Blog!

Nothing new for regular Diners, it is a compilation post from this thread.

RE
Title: Re: Hyperinflation or Deflation?
Post by: RE on May 25, 2013, 04:44:24 PM
Nice History Lesson on Wampum, but this has little to do with your Kilowatt Hour Standard.

You don't carry around Kilowatt Hours in your Pocket.  You do carry Wampum, Gold, Fiat or a Debit Card around.  The KW-hr is not the currency here, nor can you really Save KW-hours meaningfully, especially with some of the Renewables which are intermittent in nature.

So, you need some TOKEN to represent your KW-hours, which could be Wampum, Gold, Fiat Paper or Digibits.  In all cases though, whatever you choose here has to correspond to the real amount of KW-hours you have at your disposal in any given year.  If you don't, whenever there is scarcity in the KW-hours, sequestered Wampum, Gold, Fiat whatever comes out from the Basement Safes of the Hoarders and drives up the prices.  Those without savings in Wampum, Gold or Fiat are priced out of the market and STARVE.

Now personally I like Wampum better than Gold or Fiat, since it is a naturally produced item, is relatively rare, takes no Mining and is quite Portable.  However, one can see all sorts of ways this could be "counterfeited" nowadays, you might do Aquaculture raising the Mollusks in quantity and make tons of Wampum this way.

Gold is somewhat harder to actually Produce than Mollusks, but it doesn't stop the Counterfeiting/Debasement process in a Practical sense.  Can you tell the difference in between a 99% Pure Gold Coin and a 95% Pure one?  Not really, short of some very careful testing you can't.  Gets worse with the Silver coins of course, and as we all know the Romans went about the Biz of reducing Silver content in their coinage as the Empire collapsed.  Was the Collapse of the Empire a result of the currency debasement, or was the currency debasement a result of the Collapsing Empire?  Which came first, the Chicken or the Egg?

I would suggest that the collapsing empire and falling per capita energy is what caused the currency debasement rather than the other way round here, quite similar to today.

Anyhoo, Counterfeit-proof Currency doesn't exist, never has in all of recorded history.  The closest thing to it might be the Bitcoin Idea using Prime Numbers which are quite Rare in the Infinite series of Numbers, but here you become dependent on Computers and a very Energy dependent World Wide Web to run the system, and besides that you got Hackers who can find means to steal your Bitcoins out of your "protected" Bitcoin Wallet and besides that a Goobermint which runs the Servers and can shut you out of your Wallet anytime they like.

In the end, you can use just about anything for Wampum, including Abstract Numbers, but the AMOUNT of Wampum has to correspond directly to the amount of Available Energy the society has.  When that falls, you gotta reduce the amount of Wampum in circulation, or the Price gets driven up for Energy.  Doesn't matter if it is Gold, Wampum or Fiat, it is really the ENERGY that people Need/Want here, and any functioning money has to correspond to what is available.

RE
Title: Re: Hyperinflation or Deflation?
Post by: agelbert on May 25, 2013, 05:58:15 PM
Quote
So, you need some TOKEN to represent your KW-hours, which could be Wampum, Gold, Fiat Paper or Digibits.  In all cases though, whatever you choose here has to correspond to the real amount of KW-hours you have at your disposal in any given year.  If you don't, whenever there is scarcity in the KW-hours, sequestered Wampum, Gold, Fiat whatever comes out from the Basement Safes of the Hoarders and drives up the prices.  Those without savings in Wampum, Gold or Fiat are priced out of the market and STARVE.

Yes, you will always need some token, symbol or paper to represent your non-fiat type currency that could distort the economy because more tokens were out there (DEBT CREATION) than the wampum or kwhs they represented.

Your points are quite valid where there is ANARCHY.

Where there is responsible government, the amount of tokens in circulation is carefully matched per capita. A measure of trust in government is, of course, required here.

You keep saying you can't store kwhs. Well, there's a bunch of them stored in your house! A bunch of wood, glass, plumbing, wiring, etc. had energy applied to them to erect your structure. It's there . It has value in energy because it exists at a higher state of organization than a pile of rubble. More energy = less entropy.

To avoid hoarding, you TAX net wealth above a point and income as well.

One dollar is worth about 7 kwhs. when electricity was at 3 cents a kwh, a dollar was worth  about 33 kwh. Notice he energy and the work performed by one kwh is IDENTICAL from 3 cents a kwh to 15 cents a kwh. You are technically "storing" kwhs in your dollar right now.

A kwh is ALREADY a one world currency because it translates to the same amount of energy=work in any country on earth. What's more, nobody can claim a reserve currency status (except at the point of a gun  :evil4:).

Sure, you will never be able to hold a kwh in your hand unless you want to be electrocuted.  :icon_mrgreen: However, we humans have been using symbols and tokens for all kinds of things since day one. :icon_sunny:  The problem is TRUST in the token once you have agreed what said token stands for in terms of energy. That's a societal and government problem, not a money problem. ;)

As you said, human senses being what they are, faking gold, platinum, silver or whatever in different percentages is no big deal. Portable Assay equipment is hard to come by. :icon_mrgreen:  The issue is TRUST. If trust dies, the economy falters because nobody trusts anybody else. GO can easily get taken to the cleaners with some tungsten fun and games as easy as the next guy. That's why I don't focus on PMs exclusively.

Anarchy results from lack of trust. Then we have situations like what occurred shortly before the French Revolution where SAWDUST was a common part of loaves of bread sold on the streets. You say that food is IT as a medium of exchange but what happens when meat is injected with saline solution to jack up the weight or grapes are dumped in water so the osmotic pressure will inflate them for added weight and price?

It never ends when trust is gone.

ANYTHING can be gamed, as you said. I'm adding FOOD to that list. IF we have a government we can trust to do the best for society by abiding by the rules of the biosphere, a monetary standard based on a unit of energy is the best deal because the cost of just about anything you buy will remain fairly constant in those terms year after year.

Of course, if you can't trust the government to keep from issuing a zillion kwhs of tokens that represent more enrgy in goods and services that you can buy, well yeah, it ain't worth it. :emthdown:

Monsta brought up the bible and it's admonition to not hoard. I don't address that good and valid advice because it is based on the belief that there is an afterlife that you are seeking that is compromised by greed. This is proper but most people could care less.

From a prudent economics point of view, the biblical proverb, "Neither a borrower nor a lender be" gives excellent advice. This is profound because it dictates that if you have the means and someone you know needs help, you GIVE them the help, you don't LEND them the help. This is anathema to capitalism so it is conveniently absent from most nominally "Christian" pulpits in the Western Word.  :evil4:

The above behavior is ALSO based on TRUST, not of your fellow man but on God as your actual provider.

Belief in God aside for a moment, the stress placed on the average person under the system of ANARCHY we are approaching from lack of trust in our government is a major problem for Homo SAP. Nobody wants to trust and the top dogs in government do ZIP to FIRST, admit they have betrayed our trust and SECOND, proceed to put confidence and trust building measures in place.

We can go round and round about the currency and what a store of value is, but if trust is gone in everyone and all government actions, the economy will continue to stagger along like a drunk from one crises of snail paced growth to another.

Successful monetary systems, like successful human relations, are really all about trust.
But I admit I cannot begin to estimate the value of trust in kwhs.  :icon_mrgreen:   
Title: Re: Hyperinflation or Deflation?
Post by: monsta666 on May 25, 2013, 06:57:09 PM
In the Austrian school of economics, they make the distinction between MONEY, a store of wealth, and CURRENCY, a medium of exchange, for just that reason.  MONEY should be rare, easily recognizable, easily divisible, should not deteriorate, and should be fungible, i.e. each piece identical to every other.  (Diamonds are the classic example of something that is not fungible, the value of each is wildly dependent on its own characteristics.)  Gold does therefore make excellent MONEY.  CURRENCY, on the other hand, you want to have just the right amount circulating so that prices are stable and productivity is not limited by the supply of CURRENCY.  Gold is atrocious for CURRENCY.

It is true that a distinction is made between money and currency, and this applies even outside Austrian school of economical theory, I am not sure this changes the story all that much. You see, while it sounds plausible in theory to develop a monetary system where you have separate tokens with one serving as money and another as currency the real problems comes with how this will work out on a practical basis.

If we devised a system with two sets of tokens you have the same issue because for this system to work participants would naturally demand that currency could be converted to money and currency quite easily. While the conversion to currency to money would not be too bad (provided the seller of money were to spend that currency immediately) the fact there is money in the system means that you can still get the situation where extra money can be released into the currency system. This increase in currency supply will cause inflation in the real economy and this increase of currency is likely to coincide during a period of real scarcity. This creates the situation RE highlighted were the members of society who lack money will be priced out by people who own the money. So this system does not ameliorate a situation of resource scarcity and actually exacerbates it.

We can already identify real examples of this as savings accounts act as a form of money but not currency. A savings account is not a of medium exchange as you cannot use the money in this account to directly pay for goods and services. It must be transferred to a checking account for it to be used in the real economy. Yet despite this process we see that hoarding can still occur as some currency is withdrawn from the currency supply and into the money supply. What is more in this situation you still likely run into the problem where this money can be used as collateral for further loans which generates other problems such as interest payments. Interest payments are not sustainable on a long-term basis so it is likely any monetary system that utilises any money will likely suffer boom and bust periods due to the issue of exponential growth in the money/currency supply.

This system would be even less viable if the energetic output of the economy cannot increase to meet this growth in money supply. At the end of the day even if the money/currency supply remains constant if the economic output declines then you will get organic inflation from resource scarcity. This is why it is so important that the money/currency supply adjust to the output of the economy. I would also say that to prevent large runs into money/currency you should really limit the amount that could be saved. I believe setting a limit of savings that is sufficient to live on one to two years would be best and this is limit should be an ABSOLUTE limit and not a RELATIVE limit to income. This would not only prevent the worst excess of money hoarding; it would also serve as a means of redistributing gold ownership which is likely to be very concentrated as no person could accumulate more than two years worth of savings from money. This limit would do more than devising a double token monetary system. Then again this construct should be supplemented by readjusted of the total money/currency supply to actual economic output on a periodic basis.

2) The ENERGY it takes to create said money is directly proportional to a unit of said money as a store of value.

There are some problems here. First of all it is hard to determine if each unit of energy equals the same amount of energy. For example how would we know how much a particular log of wood releases in terms of energy? These issues become even more problematic if we compare wood energy to other commodities such as oil/coal. The energetic content per mass would be vastly differently and it is these differences in weight to energy ratio that will likely make some sources of energy more valuable than others. Second there is also the problem that not all forms of energy are directly fungible. Some energy sources such as thermal energy maybe more valuable in Northern countries where more would be needed for energy while other forms of energy such chemical energy would be more valuable if the food resources were more scarce.

Even if you used a more neutral source of energy storage as a token for energy (say a battery) you can still run into the issue that the energy used to make each battery would vary. This means not all units of energy storage could be valued equally. This I suppose may not as big an issue if this token is used as a form of money but as a currency it would be a real problem. Then again these unequal units would still pose problems even if it were used as a form of money. This is because people would naturally wish to hoard the newer superior batteries (which likely have less of its energy drained through natural discharge). Another potential issue with unequal energy storage units is the fact you can get interest accuring in TWO forms! First it is likely that this saved money can be loaned to generate interest in the conventional sense but the other form of interest is old batteries can be loaned in return for new superior batteries (receiving those higher quality batteries would serve as this other form of interest).

Then again these issues could be avoided if all batteries or tokens of money/currency were treated as equal but then you just have to accept that the purchasing power of some tokens/batteries would not directly reflect the amount of energy they held. This I feel is likely the better compromise provided you could ensure the tokens were within an acceptable range of quality. Any tokens that fell out acceptable ranges would have to be adjusted for.

The case of the US dollar is BELOW ZERO as a store of wealth because, in addition to it being fiat, the supply is growing absent any energy inpout whatsoever. So the dollar loses value as it sits from Fed inflation (counterfieting). Legal Tender Laws force the citizenry to run around trying to preserve some value in a currency that shrinks in value year after year. Many of these value chasers go for PMs, paintings, land, antique cars, Early American antique furniture, etc. They are all looking for something that meets the criteria of liquidity, durability, portability and agreed upon value per unit to a greater or lesser degree.

Too true but then I feel a lot of these END GAMES is the result of trying to keep this mad debt-based monetary system going. This debt based game started because of an excessive amount of loans being generated. This process of continued credit expansion originated from accumulated savings caused by hoarding. This process started before capitalism and has occurred for centuries nay millennia seeing as these issues are addressed in the Bible, Koran and Hinduism. Now I am not trying to say all savings are bad, it is prudent to save on certain occasions. I just feel some safeguards must be placed to prevent excessive savings. An acceptable amount of savings should be a year or two income that is sufficient to sustain a person to a reasonable level for that period. The community must decide what is an acceptable standard of living and set this limit as an absolute limit for all members of society.

3) Beyond the basic biochemical needs of proper nutrition, shelter and health, human culture places a great deal of value on tangibles and intangibles outside the default requirements of human life.

Humans will always value creativity and imaginative and useful innovations that bring beauty, comfort and utility to our lives as STORES OF VALUE.

What price can you place on a song? What value does a set of verses have that took a song writer 5 minutes to write after he had dreamed them versus a painstakingly written flute sonata?

Hard to say, right? One took a lot less ENERGY than the other, both in kwhs and artistic creativity, but may have sold for a lot more money.

I agree with many of these points. It is hard to account for many things as many goods and services we have such as music and creative are intangibles that cannot truly be expressed with monetary units. Furthermore due to the complexity of the ecosystem it is next to impossible to find the true value of trees and other resources as their value in providing life and nutrients to soils other animals etc. is fiendishly hard to discover. I am not sure man can ever find the true value so we should not make a system where we must depend on finding the true value of everything (which would be needed to make an honest monetary system). This is too complex a task and when devising any potential system we must try and observe the KISS principle (Keep It Simple Stupid). We need to make this system somewhat idiot proof as not everyone is as capable as yourself! :emthup:

It these reasons why I believe the use and dependency of money should be kept to a minimum. The effects of money are in general not good for society so the best policy is to minimise the use of it. Make people independent and self-sufficient in meeting most of their needs and make them only need money at the margins to obtain goods that are seriously hard to acquire from the local community. To me money is like a drug; in certain circumstances we must use drugs but at the same time we must recognise that all drugs have side-effects that have negative effects. That is why we must only use drugs when it is necessary and when needed the dose needs to be kept at a minimum to reduce blowback. We should not use drugs more than necessary or as an easy "fall back" option. Other measures must be explored and exhausted before going down the medication option. We must certainty not get ourselves into a situation were we are dependent on drugs to make it through day to day life. If we get to that stage then you can be sure the drug dealers will coerce the public into committing bad actions through this dependency. In many ways money acts on similar principles to this analogy and so we must apply it accordingly.

The "fear" that hoarders are going to trash the economy by taking money out of circulation is unfounded. That's merely an EFFECT of capitalism. It has nothing to do with the concept of money per se.

Just to be sure I do not think hoarding should be banned or outlawed. I just think limits should be set and people should not have the capability of hoarding too much money. If you set an upper limit then you offer an incentive for people to give this excess money to people more in need. If you create a society that rewards people with status by committing such deeds then people will do this more and you will have a better society. In a way an incentive to commit towards deeds of charity will make the economy (and society) more gift based. We should base a community on these principles and maybe I am naive but I think giving your excess savings to people in need seems like a much better thing to do.

Now again, I am not saying that savings should be banned. People do need to have some security so they have something that allows them to tide over difficult times. All I am really arguing is that we should not have a situation where a person can hoard millions of token of energy while a 1,000 other people starve due to a lack of energy tokens. We must prevent these type of situations from developing and to do that we need to set limits on how much we can save. The issue of what is reasonable can be subject to debate. I do feel we are actually on the same wavelength on this point seeing as you made a Jefferson reference in regards to preventing excessive capital accumulation through taxation. I do not think taxation is a bad means of achieving this goal because my suggestion is merely another means of delivering the same result.
Title: Re: Hyperinflation or Deflation?
Post by: jdwheeler42 on May 25, 2013, 07:12:45 PM
Food will never be currency simply because, even if you could freeze dry it with solar energy and store it also with solar energy for a hundred years or so to use it as you needed it, there is only so much food you or anybody else can eat.
:LolLolLolLol:
I had to laugh at this statement, having watched "A Boy and His Dog" last night, where the admission price to "movie night" after World War 4 was cans of food.

I sure hope that food is never scarce enough to become currency, Agelbert, but I sure would not be bold enough to say "never".
Title: Re: Hyperinflation or Deflation?
Post by: Petty Tyrant on May 25, 2013, 07:18:35 PM
Kwhs or wampum are fine with me, as long as they are not issued fy a federal reserve rothschild bank with interest debt attached, requiring a growth based instead of stable state sustainable economy.
Title: Re: Hyperinflation or Deflation?
Post by: jdwheeler42 on May 25, 2013, 07:38:39 PM
It is true that a distinction is made between money and currency, and this applies even outside Austrian school of economical theory, I am not sure this changes the story all that much. You see, while it sounds plausible in theory to develop a monetary system where you have separate tokens with one serving as money and another as currency the real problems comes with how this will work out on a practical basis.

Okay, I think you read more into what I was saying.  I wasn't necessarily suggesting having money and currency being completely separate entities, I was just saying you need to keep the two concepts distinct.  If you don't, you can get into argument like "Gold is good/Gold is bad" when what each is really saying "Gold is good money/Gold is bad currency".

Quote
Just to be sure I do not think hoarding should be banned or outlawed. I just think limits should be set and people should not have the capability of hoarding too much money. If you set an upper limit then you offer an incentive for people to give this excess money to people more in need. If you create a society that rewards people with status by committing such deeds then people will do this more and you will have a better society. In a way an incentive to commit towards deeds of charity will make the economy (and society) more gift based. We should base a community on these principles and maybe I am naive but I think giving your excess savings to people in need seems like a much better thing to do.

I still say, let people save up as much money as they want, for 49 years.  Then on the 50th year, it all gets redistributed -- and all loans forgiven.  And of course, you have this set in place from year 1, so people plan accordingly.
Title: The Fed's Real Worry - A Pick Up In Deflation
Post by: RE on May 25, 2013, 10:22:51 PM
From Lance Roberts of Street Talk Live.  H/T Tyler Durden on ZH.  Basically, Da Fed is fighting Deflation and Losing.

RE

The Fed's Real Worry - A Pick Up In Deflation
(http://www.streettalklive.com/daily-x-change/1711-the-fed-s-real-worry-a-pick-up-in-deflation.html)
                  
            Written by Lance Roberts | Friday, May 24, 2013         
            Share (http://www.streettalklive.com/daily-x-change/1711-the-fed-s-real-worry-a-pick-up-in-deflation.html#)(http://assets.pinterest.com/images/PinExt.png) (http://www.streettalklive.com/)
In several of my recent missives I have made several references to the wave of deflationary pressures that are currently encircling the globe. 
In "Japan: A Few Thoughts On The Crash" (http://www.streettalklive.com/daily-x-change/1710-japan-a-few-thoughts-on-the-crash.html) I stated:
"The unintended consequence of such actions, as we are witnessing in the U.S. currently, is the ongoing battle with deflationary pressures. The lower interest rates goes the less economic return that can be generated. An ultra-low  by Text-Enhance">interest rate (http://www.streettalklive.com/daily-x-change/1711-the-fed-s-real-worry-a-pick-up-in-deflation.html#) environment, contrary to mainstream thought, has a negative impact on making productive investments and risk begins to outweigh the potential return."
[/B]
Also, in "Bernanke's Link to "Mother Nature" (http://www.streettalklive.com/daily-x-change/1708-bernanke-s-link-to-mother-nature.html)
"How many more natural disasters will come to offset the negative economic impact of a zero interest rate environment coupled with a wave of deflationary pressures is unknown."
[/B]
But most importantly in "Why Bonds Aren't Dead & The Dollar Will Get Weaker" (http://www.streettalklive.com/daily-x-change/1703-why-bonds-aren-t-dead-the-dollar-will-get-weaker.html) I stated:
"A wave of 'disinflation' is currently engulfing the globe as the Eurozone economy slips back into recession, China is slowing down and the U.S. is grinding into much slower rates of growth. Even Japan, despite their best efforts through a massive QE program, cannot seem to break the back of the deflationary pressures on their economy. This is a problem that has yet to be recognized by the financial markets.
The recent inflation reports (both the Producer and Consumer Price Indexes) show deflationary forces at work. Wages  by Text-Enhance">continue (http://www.streettalklive.com/daily-x-change/1711-the-fed-s-real-worry-a-pick-up-in-deflation.html#) to wane, economic production is stalling and price pressures are falling. More importantly, there are downward pressures on the most economically sensitive commodities such as oil, copper and lumber all indicating weaker levels of economic output. The battle against deflationary economic pressures has been what the Federal Reserve has been forced to fight since the financial crisis. The problem has been that, much like 'Humpty-Dumpty', the broken financial transmission system, as represented by the velocity of money, can't be put back together again."
[/B]
The last paragraph above is particularly important.  The biggest fear of the Federal Reserve has been the deflationary pressures that have continued to depress the domestic economy.  Despite the trillions of dollars of interventions by the Federal Reserve the only real accomplishment has been keeping the economy from slipping back into an outright recession.  However, when looking at many of the economic and confidence indicators, there are many that are still at levels normally associated with previous recessionary lows.  Despite many claims to the contrary the global economy is far from healed which explains the need for ongoing global central bank interventions.  However, even these interventions seem to be having a diminished rate of return in spurring real economic activity despite the inflation of asset prices.
Despite the ongoing rhetoric of those fearing inflation due to the Fed's monetary interventions the reality is that such actions have, so far, failed to overcome the deflationary forces of weak global demand.   The chart below is the spot price of copper.   Copper, often dubbed "Dr. Copper", is very sensitive to  by Text-Enhance">economic growth (http://www.streettalklive.com/daily-x-change/1711-the-fed-s-real-worry-a-pick-up-in-deflation.html#) as copper is used in everything from production, to manufacturing, transportation, housing, etc.   So goes copper - so goes the economy.   Copper is currently confirming the peak in economic growth for the current cycle.
(http://www.streettalklive.com/images/stories/1dailyxchange/Copper-vs-GDP-052413.PNG) (http://www.streettalklive.com/images/stories/1dailyxchange/Copper-vs-GDP-052413.PNG)
However, the question remains, do we have inflation or don’t we?  Are we experiencing the 1970’s all over again as inflation kills the economy, or in the words of Ben Bernanke, have we entered an era of low inflation and  by Text-Enhance">interest rates (http://www.streettalklive.com/daily-x-change/1711-the-fed-s-real-worry-a-pick-up-in-deflation.html#) that will last for some time as the threat of deflation remains a prevalent enemy to the economic recovery? 
3 Components Of Inflation
I believe that there are three components required to create a truly inflation environment.
by Text-Enhance">Commodity price (http://www.streettalklive.com/daily-x-change/1711-the-fed-s-real-worry-a-pick-up-in-deflation.html#) inflation is certainly one of them as it does immediately impact the consumptive capability of the average consumer.   However, in order to see true pricing pressures across the economy there are two other factors that are critical; 1)the velocity of money, or how fast money is flowing through the system from the banks to small businesses and ultimately consumers, and; 2) wage growth which gives the consumer increased purchasing power.
Why are these two factors so critical to overall inflation question?   In the most recent  NFIB survey only a small fraction of respondents stated that this was a “good time to expand their business” while the majority of respondents stated that their major concerns were “poor sales, taxes and government regulations”.  If you are a small business, who coincidently creates roughly 70% of all new jobs in the economy, and you are worried about poor sales prospects and a weak economic environment, it is highly unlikely that you are going to borrow money to expand your business or extend credit to customers.  Businesses in turn choose to hoard cash as a hedge against a weak economic environment instead of making productive investments that will lead to more jobs and higher wages.
Besides the rise and fall of commodity prices, which do indeed contribute to the inflationary backdrop, the demand for money to make productive investments by businesses which leads to higher levels of production, wage growth and, ultimately, consumption is what drives overall inflation.  It is important to remember that in economics inflation is:
"...a rise in the general level of prices of goods and services in an economy over a period of time.  When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation reflects a reduction in the purchasing power per unit of money – a loss of real value in the medium of exchange and unit of account within the economy."
[/B]
It is very difficult to have a "general rise in price levels" amidst a lack of consumer demand driven by suppressed wages, high levels of unemployment and little demand for credit by businesses. The lack of demand exerts downward pressures on the pricing of goods and services keeping businesses on the defensive.  This virtual spiral is why deflationary environments are so dangerous and very difficult to break.
I have constructed a composite "High Inflation Index" in an attempt to measure these three legs of inflationary pressures.  The purpose, of course, is to visualize the data to determine if inflation is prevalent in the current economic cycle or not.   The index is equally weighted of the M2 Velocity of Money, the Year Over Year (YOY) percent change in wages and the YOY percent change in the Consumer Price Index (CPI).  The first chart shows the historical levels of each of the three components.
(http://www.streettalklive.com/images/stories/1dailyxchange/High-Inflation-Index-052413-2.PNG) (http://www.streettalklive.com/images/stories/1dailyxchange/High-Inflation-Index-052413-2.PNG)
Notice that there is a very tight relationship between the rise and fall of compensation of employees and the velocity of M2 money supply.  With M2 velocity plunging to historically low levels this does not bode well for sustained increases in either employment or compensation as the demand for money simply does not exist currently.  The next chart is the weighted average of the three components into an index.
(http://www.streettalklive.com/images/stories/1dailyxchange/High-Inflation-Index-052413.PNG) (http://www.streettalklive.com/images/stories/1dailyxchange/High-Inflation-Index-052413.PNG)
The index clearly shows the "high inflationary" pressures that were prevalent in the 1970’s as the economy suffered real inflation and rapidly rising interest rates.   Recently, inflationary pressures rose as economic growth surged from the lows of the financial crisis as the economic system was flooded by trillions of dollars of stimulus, bailouts and financial supports.  However, that surge, in both the economic growth and the inflationary pressures, peaked in early 2011 and have been on the decline since.  This is why the Federal Reserve remains extremely worried about the diminishing rate of return on their monetary experiments as it relates to the economy.  Inflating asset prices higher have increased consumer confidence but has had little translation into the creation of underlying economic growth.
With the index clearly warning of rising deflationary pressures in the economy, which has recently been seen in many of the manufacturing reports that have shown downward pricing pressures both on prices paid and received, there is no "exit" currently for the Federal Reserve to reduce its monetary supports.  The real concern is that with the index at just 4.88%, which is well below the long term average of 11.63%, that the economy is far to weak to handle much of an exogenous shock.
The risk, as discussed recently with relation to Japan, is that the Fed is now caught within a "liquidity trap."  The Fed cannot effectively withdraw from monetary interventions and raise interest rates to more productive levels without pushing the economy back into a recession.  The overriding deflationary drag on the economy is forcing the Federal Reserve to remain ultra-accommodative to support the current level of economic activity.  What is interesting is that mainstream economists and analysts keep predicting stronger levels of economic growth while all economic indications are indicating just the opposite.
Despite the Fed's recent communications that they are planning to "taper" the current monetary program by the end of this year - the index is suggesting that their interventions, in one form or another, are unlikely to end anytime soon.  The threat of "deflation" remains the Fed's primary concern.
Title: re: Energy, Gold & Money
Post by: RE on May 25, 2013, 11:02:56 PM
As usual I tend to agree with most of what you wrote Monsta, but I do have a question for you on this one:

Quote
I believe setting a limit of savings that is sufficient to live on one to two years would be best and this is limit should be an ABSOLUTE limit and not a RELATIVE limit to income.

This basically puts the Kabosh on any Retirement past 2 years in length right before you Kick the Bucket.  NO Pension Plans, NADA.

Then what do you do about people who Save other things which command some monetary value, at least in times of Surplus, like say Stamp Collections or Fine Art collections? Of course if nobody can save more than 2 years worth of Subsistence Living, I don't suppose said collections would command all that much money.

Needless to say, you'll have a real tough time on a Political level getting Pigmen to hand over their Gold Hoards, not to mention taking away J6Ps Pension after 2 years of Retirement.

(http://aconaz.org/2009-0717-SoylentGreen-Chri.jpg)
Of course a Gift Economy doesn't have these issues, since you probably would Gift the Old Folks their Food as long as there was some surplus.  Otherwise you send them to the Soylent Green production facility.  :icon_mrgreen:

Anyhow, in the intervening time before a Gift Economy can be Reverse Engineered, you will need some Kludges to cover elderly folks who can't work anymore (or just not as efficiently as younger folks who need jobs), and a means of pulling the Basement Safe Hoards of Gold Coins OUT of the Hands of Aging Pigmen and shifting them over to Young Bucks with Growing Families full of Hungry Kids.

Got some proposed solutions for this?

RE
Title: Re: Hyperinflation or Deflation?
Post by: RE on May 25, 2013, 11:34:00 PM

Where there is responsible government, the amount of tokens in circulation is carefully matched per capita. A measure of trust in government is, of course, required here.

"Responsible" and "Goobermint" in the same sentence is an Oxymoron.  :icon_mrgreen:

However, if you agree that the amount of Tokens needs to be taken in and out of circulation to match actual production, you just are agreeing with me on principles of a Resource Based Economy, which in this case is mainly measured by Available Kilowatt-Hours per Capita.

So how do you go about taking the excess Gold Coins hoarded in some Pigman's Basement Safe OUT of his Greedy Little Arthritic Hands so he can't go out and spend them, driving up the price of food and pricing everyone who does NOT have such a Hoard out of the market?

Quote
You keep saying you can't store kwhs. Well, there's a bunch of them stored in your house! A bunch of wood, glass, plumbing, wiring, etc. had energy applied to them to erect your structure. It's there . It has value in energy because it exists at a higher state of organization than a pile of rubble. More energy = less entropy.

The fact it took energy to refine copper to make copper wire doesn't make said energy useful anymore.  It just gradually oxidizes over time and the energy is released as waste heat.

A Battery will store energy and release it again in useful form, but all batteries go dead over a fairly short period of time if not recharged.  Try starting your Bugout Machine if you leave it for a few months in Winter without starting it and recharging the battery.

Stuff like ethanol and propane probably represent the best storable energy forms, since both keep basically forever until burned and both can be produced from growing stuff, but of course this uses up land otherwise dedicated to food production.

Roamer and I have discussed at some length means of storing Mechanical & Thermal Energy, but these also have limitations, main one being they are extremely Local so you can't transfer the energy collected in one spot over to another spot even if an Energy Token is transferred across locations.

Without Energy which is Portable, the Currency based on it can't be portable either.  It can only work locally where the Energy is actually produced and distributed.  If your Currency is Gold, it won't buy you any energy at all in a location with no Solar Thermal or Wind Turbines running on Windy Days.

Anyhow, we run right back around to the original Hypothesis I made, which is that Money=Energy, they are an equivalency.  Less Available Energy in the society means Less Money available, or Money which is Worth Less, and in cases of REAL scarcity, WORTHLESS.  If the shelves of Walmart & Safeway go empty, all the Gold in the World won't buy you a Twinkie.  They aren't there to BUY, and you can't EAT GOLD.  :icon_mrgreen:

RE
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on May 26, 2013, 03:47:50 AM
Kwhs or wampum are fine with me, as long as they are not issued fy a federal reserve rothschild bank with interest debt attached, requiring a growth based instead of stable state sustainable economy.

Again, you are talking about the many attributes of Gold Uncle. The real money that the combined wisdom of all who came before us gave to us as after centuries of testing it's worth.

"Gold was not selected arbitrarily by governments to be the monetary standard. Gold had developed for many centuries on the free market as the best money; as the commodity providing the most stable and desirable monetary medium."

Murray N. Rothbard

                                                                     
Ancient Roman Gold Coin 790 BC
Ancient Roman Gold Coin 790 BC

                                                                             
Title: Re: Hyperinflation or Deflation?
Post by: RE on May 26, 2013, 04:03:54 AM

Again, you are talking about the many attributes of Gold Uncle. The real money that the combined wisdom of all who came before us gave to us as after centuries of testing it's worth.

I fail to see how that addresses ANY of the issues with respect to how saved Gold allows access to Food for Old People while Young People with No Gold STARVE.

Nor does it address debasement issues of alloying that cannot easily be tested, etc.  Gold has never proven to work well as currency, it is constantly fucked with by the people who hold most of it, they can dump on the market if they like, restrict production if they like etc.  Nothing you say holds up when you scrutinize history, its just a belief system.  Its like saying there is a "Free Market".  There IS no Free Market and there never has been one since Ag took over the "Civilization" of Homo Sapiens.  You spout complete and unjustified nonsense.

Can you actually address the arguments here for a change?

RE
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on May 26, 2013, 04:26:46 AM
Quote
Can you actually address the arguments here for a change?

RE

I do, you are incapable of understanding them due to your brainwashing by the banksters.

I just made a concrete true factual historical point about Gold and it being the money handed to us by our ancestors.

You, in your usual crazed fashion start rambling about the elderly, poverty, greed, all sorts of traits of MEN.

Gold is an inert precious metal taken from the ground. It has no human attributes, it is the money of history. In your hatred of it due to your conditioning you give it human properties. You do not understand Gold or my argument that it is real money and the fiat a debt based bankster scam.

Your affliction is a common one. We live in  a world of people enslaved in debt, usury, credit scores, all sorts of bankster fuckduckery. going off the Gold standard was the reason for much of it in my humble opinion.

                                                       "The history of fiat money is little more than a register of monetary follies and inflations. Our present age merely affords another entry in this dismal register."

Hans F. Sennholz

 
Title: Re: re: Energy, Gold & Money
Post by: monsta666 on May 26, 2013, 05:01:35 AM
I still say, let people save up as much money as they want, for 49 years.  Then on the 50th year, it all gets redistributed -- and all loans forgiven.  And of course, you have this set in place from year 1, so people plan accordingly.

Then what do you do about people who Save other things which command some monetary value, at least in times of Surplus, like say Stamp Collections or Fine Art collections? Of course if nobody can save more than 2 years worth of Subsistence Living, I don't suppose said collections would command all that much money.

Needless to say, you'll have a real tough time on a Political level getting Pigmen to hand over their Gold Hoards, not to mention taking away J6Ps Pension after 2 years of Retirement.

It is my reasoning that the concept of retirement is a product of the oil age. Once the oil goes then the concept of a retirement and a retirement fund will go the way of the dinosaur. On top of this once oil goes, modern medicine will also disappear so the life expectancy of the elderly who require modern medicine to stay alive will be curtailed significantly. They will not need 10 years worth of savings because they will likely die before then.

In any case though for the few elderly that remain they can still have jobs as village elders or other occupations that require less physical activities. They would not have savings but could be sustained by the tribe through the gift part of the economy. As I said earlier we need to strive for a system where people are mostly self-sufficient in terms of meeting their needs and only use money to trade at the margins since as you know, money and concentrated wealth, have a great deal of blow back attached to them. This is especially so if people need to depend on money for day to day living.

The power of the community and tribe will also be enhanced and less likely to be coerced if members of its society can meet their own needs. Its been the tactic of the World Bank and IMF to make African tribes etc. less self-sufficient so they can reeled into the money economy more easily. By allowing certain members of members of the tribe to depend entirely on money you leave a back door open for some pigman to undermine the whole system. Money is like a drug and should be treated as such. While it can offer some favourable outcomes in small doses we need to recognise the dangers of it and so minimise its use and we must be especially careful not to form a dependence on it. We should really depend on the gift economy whenever possible.

I am not sure how this idea could be sold to the public but it is my hope that when the economy goes into failure mood J6P will be so mad at the pigmen that they will agree to solutions that will severely limit their power and wealth. The restrictions from savings can also be reduced gradually so at first the restriction starts at 10 years and slowly declines to the two year limit I suggested. Another note to bear in mind is once the economy does fail a lot of wealth and savings will go up in a cloud of smoke. In fact I believe it will be the largest smoke of fire you will ever see in the history of the mankind. That event alone is likely to render most savings obsolete and it is at that moment around zero point where people will be more likely to take radical ideas such as this one.
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on May 26, 2013, 06:00:00 AM
Quote
Despite the Fed's recent communications that they are planning to "taper" the current monetary program by the end of this year - the index is suggesting that their interventions, in one form or another, are unlikely to end anytime soon.  The threat of "deflation" remains the Fed's primary concern.

How true.
Title: Re: Hyperinflation or Deflation?
Post by: Petty Tyrant on May 26, 2013, 07:50:09 AM
"That is why gold, silver and other hard assets are going to be so good to have in the long-term.  In the short-term they will experience wild swings in price, but if you can handle the ride you will be smiling in the end."

(from Michael Snyder's last offering on the question of inflation or deflation), I find hes usually right on the money.
Title: Re: Hyperinflation or Deflation?
Post by: Golden Oxen on May 26, 2013, 08:46:28 AM
"That is why gold, silver and other hard assets are going to be so good to have in the long-term.  In the short-term they will experience wild swings in price, but if you can handle the ride you will be smiling in the end."

(from Michael Snyder's last offering on the question of inflation or deflation), I find hes usually right on the money.

You will kindly notice uncle that the anti gold crowd touts stocks as the way to paper riches and wealth, while calling every flash crash, bear market, violent reaction to the downside from unexpected news as a Great Buying Oppurtunity, but every time gold does a pull back or gets whacked, or goes into a bear market, the paper dimwits all yank their heads out of their asses and start screaming "Gold Just Fell" "We Told You So" "Gold Sucks"

What a sorry lot indeed.  :'(
Title: Jdwheeler, Monst & RE
Post by: agelbert on May 26, 2013, 01:29:53 PM
Quote

Posted by: jdwheeler42
May 25, 2013, 07:12:45 PM

Quote from: agelbert on May 25, 2013, 03:48:29 PM

Food will never be currency simply because, even if you could freeze dry it with solar energy and store it also with solar energy for a hundred years or so to use it as you needed it, there is only so much food you or anybody else can eat.

:LolLolLolLol:

I had to laugh at this statement, having watched "A Boy and His Dog" last night, where the admission price to "movie night" after World War 4 was cans of food.

I sure hope that food is never scarce enough to become currency, Agelbert, but I sure would not be bold enough to say "never".

(http://www.buzzle.com/img/articleImages/350767-57728-51.jpg)

My dear fellow, it has been a long time since the Egyptians, a smart group of people that used raisins both as a currency and a store value, bought embalming fluid with a weighted portion of their raisin hoard.  :icon_mrgreen: As you know, raisins keep quite well for long periods as long as the relative humidity is pretty low. Egypt, being a rather arid place then as it is now, did quite well with raisin currency.  :emthup:

But in today's world the demurrage (carrying cost) of a raisin currency would have to figure in the humidity control cost in the raisin vaults. The U.S. government claims that coins last about 25 years and paper currency about 5 years. Raisins have a 12 month shelf life* so that's pretty good. With modern freeze drying that could easily be expanded to several years without sacrificing any of the nutritritional qualities but this demurrage would subtract somewhat from its value as a store of wealth. And then there's that "minor" detail of the personal hygiene of the humans that handle the raisin currency...

IF food ever becomes money again, we will be living in a culture reduced to the rule of the jungle. Such things as a Stradivarious violin will only be worth a few minutes of heat from a furnace or fireplace.   :P  :emthdown: I just don't see us reaching that extreme. It's okay as a thought experiment but I don't believe the probability of it occurring is that high.

Follow the thought experiment to its logical, Malthusian end and you have a dystopia that won't be a lot of fun where the most basic drives of humanity from hunger to sex to bullying are used as "currency" for obtaining food, pussy and slaves. When food is money, so is the fist and sex.  :evil4: That's ANARCHY, as in ZERO GOVERNMENT.  I won't live in that world. I don't think you would want to either.  ;)

Monsta and I are on the same page as far as limiting hoarding by taxing net wealth as well as income from all sources, whether it is called capital gains to dodge taxation or not. RE won't buy this because he thinks gooberment is the problem, not the solution.

The problem is lack of trust/respect/community. A proper framework of trust/respect/community is commonly called RESPONSIBLE GOVERNMENT.  If that's an oxymoron, then Homo SAP is an evolutionary dead end.  :( :emthdown:

I'm not a Catholic but the pope said something recently that makes a lot of sense, "MONEY MUST BE THE SERVANT OF THE PEOPLE. PEOPLE SHOULD NOT BE THE SERVANTS OF MONEY".


The PURPOSE of money is NOT to introduce debt; it is to facilitate the transfer of ownership in goods and services. When the purpose is corrupted so it is used to facilitate exponential growth with debt and concentration of capital in a few hands, it is actually working AGAINST its primary purpose. That's what we have today. :emthdown:

*Shelf Life of Raisins

Quote
Shelf life of 12 months when stored in a cool dry environment. Store away from walls. Our recommended storage conditions are 45o F at 60% relative humidity (RH). Avoid extreme temperature fluctuations. Raisins are semi-perishable, and are prime targets for pests, especially insects. Take appropriate insect control steps when storing this raisins for any length of time. Always reseal any partially used cases.

http://www.stapleton-spence.com/raisins.php (http://www.stapleton-spence.com/raisins.php)
Title: Re: Hyperinflation or Deflation?
Post by: agelbert on May 26, 2013, 03:13:53 PM
RE said,
Quote
However, if you agree that the amount of Tokens needs to be taken in and out of circulation to match actual production, you just are agreeing with me on principles of a Resource Based Economy, which in this case is mainly measured by Available Kilowatt-Hours per Capita.

YEP! What's more, I happen to believe that ANY economy is ACTUALLY, ALWAYS resource based! When the pigmen and/or top dogs in the driver's seat of the government are corrupt, conscience free greedballs ( :iamwithstupid:   :emthdown:), they create a rent seeker's paradise and a mine field of costs for j6p which ultimately funnels the resources into a tiny minority at the top while denying said resources to the masses. The economy, OF COURSE, then starts to stagnate because of deliberate criminal, as well as stupid, behavior on the part of an elite.

Just because they pervert the purpose and concept of money does not mean that people EVER forget that life is about food, clothing, shelter, health and cultural diversions from entertainment to education to religion. When the population is inhibited from these community fostering and economy stabilizing activities, we have the type of clusterfuck we have today.

Bernanke doesn't give a rat's ass about deflation. If he did, he could have thrown a trillion with ZIRP LOANS here and there for infrastructure projects, refurbishing of EVERY government building to lower energy demands, high speed internet for the whole country , etc.

He knew God Damned good amd well those things would goose the economy AND jack up wages so HE REFUSED TO DO THEM just like he refuses to back Elizabeth Warren's bill to give student loans the same low interest rate deal that banks get. His main concern has ALWAYS been keeping wages in the tank and GIVING (NOT LOANING after inflation on zirp is computed) money though ZIRP to the INSOLVENT banking crooks.

Just because you have demand collapse for a large range of goods and services related to consumerism does not mean you do not have UNAVOIDABLE inflation in food and health care to the tune of 10% PLUS a year.

To ignore those PAINFUL JOLTS to Amercan family budgets is to deny reality. You can delay buying a computer, a car, a washing mashine or an ipod if you are strapped for cash BUT you CANNOT stop eating, paying for health insurance or health care. The OPTIONAL ITEMS are the ones experiencing so-called "deflation".

Deflation is a monetary phenomenum. Demand destruction is a different ball of wax related exclusively to high unemployment and low wages. Conflating the two is mixing apples and oranges.

There IS a GENERAL RISE IN PRICES among the NON-OPTIONAL COSTS OF LIVING (as good a definition as any you will find in an economics text of INFLATION). To claim that, since that rise in prices does not extend to electronic goods, cars or whatever, we must have deflation, is inaccurate.  :emthdown:

IF we were having MASSIVE CROP FAILURES like those predicted to occur soon with Global Warming, THEN you could justify the higher prices in food (and the CRAP that passes for food), but we haven't gotten there YET. Yes , there is speculation on the commodities exchanges but that is another REFLECTION of EASY MONEY FROM DA FED, as in TOO MUCH ZIRP MULLA OUT THERE. Speculation ONLY occurs if people have the money to bet with and is a PRODUCT of high inflation, not an exception to it.

Want some more proof that we are in an inflationary environment? Take a look at the Fed's DARLING, the stock market.

The New York Stock Exchange has now released the April number for the amount of margin debt held by NYSE member brokerage firms. And it came in at a new all-time high of $384.37 billion. The previous high was set in July 2007 at $381.37 billion.

If that doesn't come from too many easy dollars chasing stocks from INFLATIONARY PRESSURES, I don't know what does. :icon_mrgreen:

But I'll tell ya what, RE, since you are all fired up about claiming we are in a deflationary environment, follow that logic to its logical end.  THAT MEANS the money you have in the bank right now will buy MORE STUFF next year than this year (including food and health care!).

WHY? because the "deflation" we are experiencng in durable goods prices will SPREAD to food and health care as LESS DOLLARS are available for food and health care.

Now if I'm right and we are in a disguised INFLATIONARY environment, said inflation will begin spreading into durable goods AND wages. Next year you will be able to buy LESS food, health care AND durable goods for the same amount of money. Wages will be higher too.

Ironically, I would benefit from a deflationary environment. I wish we had one. It would be quite a switch for me to find my dollar can go farther next year than it can this year. I just don't see that happening.  :(
Title: Re: re: Energy, Gold & Money
Post by: RE on May 26, 2013, 05:42:38 PM

I am not sure how this idea could be sold to the public but it is my hope that when the economy goes into failure mood J6P will be so mad at the pigmen that they will agree to solutions that will severely limit their power and wealth. The restrictions from savings can also be reduced gradually so at first the restriction starts at 10 years and slowly declines to the two year limit I suggested. Another note to bear in mind is once the economy does fail a lot of wealth and savings will go up in a cloud of smoke. In fact I believe it will be the largest smoke of fire you will ever see in the history of the mankind. That event alone is likely to render most savings obsolete and it is at that moment around zero point where people will be more likely to take radical ideas such as this one.

Highlight mine.  The ACTUAL Quote on this for Diners  is:

"THE GREATEST BONFIRE OF PAPER WEALTH IN ALL OF RECORDED HISTORY"

It was the first Quote I got Featured as "Quote of the Month" on the Homepage of PeakOil.com.  :icon_mrgreen:

I do agree most Savings are going to be rendered Worthless and once things get really bad, some very Radical Solutions will be undertaken, not the least of which will be PM Confiscation either by what is left of Da Goobermint or by your Local Warlord.  So if you have a large Hoard of PMs, I would suggest going into the Warlord bizness also.

IMHO, a Transitionary Mechanism might be to take the Food and Shelter Economies off the Money Economy, and apportion this out to everyone regardless of age.  So once you no longer can work, you at least have Food & Shelter for the remainder of your life as long as there is sufficient food for everyone being produced by the Tribe as a whole.

RE
Title: Re: Hyperinflation or Deflation?: What's Fueling The Stock Market
Post by: Golden Oxen on May 26, 2013, 10:15:43 PM

Thursday, May 23, 2013
What's Fueling The Stock Market?
(Hint: It isn't fundamentals)

The run-up in the stock market (the SPX for purposes of this article) has been nothing short of stunning. Since hitting a sell-off bottom on October 4, 2011, the SPX has run-up a nearly non-stop 47.8%. In just the last month, the SPX has run up 7.5%. This is in the face of deteriorating economic indicators and declining corporate revenues. The stock market has for sure taken most observers and professionals by surprise, except for maybe the most passionate "perma-bulls."

Given this incredible move higher in stocks, I wanted to investigate a couple of possibilities for what is fueling this near-parabolic stock rally. Based on what I've been able to come up with, it's pretty clear that stocks are rocketing higher on Fed fuel and not fundamentals. But don't take it from me, it seems that some high profile billionaire investors are unloading their big positions, especially anything related to consumption:  Billionaires Are Dumping Stocks.  Let's take a look "under the hood" of the economic and financial system and see if we can figure out why.

While Bernanke was giving his report on the economy and monetary policy to the Joint Economic Committee of Congress today, in which he pretty much laid to rest any fears that the Fed would "taper" its monetary policy and bond purchase program anytime soon, I decided to look into some of the Fed's monetary data as reported on the  St. Louis Fed website.  Specifically I wanted to look at the Adjusted Monetary Base, which is the sum of the currency in circulation plus the commercial bank reserves held at the Fed, because this monetary account is the one directly affected by the QE program.

Here's the most current snap-shot of the Monetary Base going to back to 1984, when the data-series began:
 (click to enlarge) 

Close to $2.8 trillion in money has been printed and used to purchase assets from the banking system, ranging from highly distressed toxic waste to short-term Treasury notes.

Next I decided to "blow up" the chart above and look at just the last twelve months and compare it to the same time period for a chart of the S&P 500:

(click to enlarge)
(click to enlarge)

As you can see, there is nearly a 1:1 correlation between the near-parabolic growth in the Monetary Base since the end of November 2012 and the near-parabolic trajectory of the SPX since mid-November (marked by the vertical red lines). I don't have time to run the data, but my University of Chicago B-School training visually tells me that the correlation is probably around .8, if not higher, meaning 80% of the move in stocks since November can be attributed to the increase in the Fed's Monetary Base.

Without doing a data dump of recent corporate earnings reports, we know that regardless of the net income being reported (net income being potentially subjected to many forms of GAAP accounting manipulations), that the revenues being reported by the largest of the SPX companies are flat to down. This is not the sign of an economy that is capable of growth and true earnings expansion. To give one example, Caterpillar (CAT) recently reported its April revenues. Globally sales were down 9% from March, but they were down a shocking 18% in North America:  CAT April revenues.  This is primarily heavy machinery related to construction and homebuilding. If CAT's sales are plunging like this, it means that construction and homebuilding are likely getting ready to drop pretty hard.

My point here is that economic and corporate fundamentals are not supporting the rapid move higher in the stock market and the concomitant rapid expansion in the market values of individual companies. To reinforce this point, I wanted to show a chart that I sourced from Zerohedge, which maps out the accelerating decline in the per share operating income of the S&P 500 over the last 12 months:
(click to enlarge)

In other words, based on economic and corporate earnings reports which are suggestive of a slow down in the economy, combined with the fact that corporate operating income is plunging, there can be no doubt that the run-up in the stock market is unequivocally not supported by fundamental factors.

That leaves only the money being printed by the Fed. Wall Street analysts can crow all they want about how the economy is improving and corporate earnings will improve, but the proof so far is in the numbers, which show that just the opposite is occurring.

Moreover, Fed officials can talk all they want about tapering QE, but if you look at their actions based on the recent move in the trailing twelve month Monetary Base above, not only are they not tapering, they are actually increasing the rate at which they are injecting liquidity into the banking system. In my mind, at least, there can be no doubt that the money being printed by the Fed is what is fueling the stock market.


Now we can debate whether or not the Fed is serious about "tapering" its printing. But I have no doubt based on the evidence I presented today that if the Fed were indeed to "taper," the stock market suffer a serious and rapid decline.

The real question now is for how long can this stock market "melt up" last?  No one can possibly know that answer for certain, but at this point buying stocks right now is not about analyzing fundamentals and value, but more akin to playing stock market roulette. Anyone who has been fortunate enough to take advantage of being long the stock market should seriously consider hedging or taking a significant portion of their investment off the table.

                                                           
536584 1369250247925211 Dave Kranzler origin
536584 1369250247925211 Dave Kranzler origin

                                                     
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536584 13692489896643178 Dave Kranzler origin

                                                     
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