Currency Crisis! Inflation! Sovereign Defaults! Bahhhh… Who Are ‘Ya Gonna Believe, The Government Or Your Lyin’ Eyes?
There has been much discussion on the topic of inflation, deflation
and hyperinflation. I, personally, am in the stagflation camp –
basically the worst of both worlds. The evidence is plain to see to my
virgin eyes: real asset prices are dropping through the floor (for four
years now) while input prices (fuel, energy, supplies, commodities),
food and the general cost to live (I have to phrase it differently since
our government doesn’t believe that this is true of the cost of living) is going up.
It truly amazes me that the everyday guy and gal can be convinced
that inflation is tamed as the things that they need to survive – food,
warmth, clothing – cost them more month by month. I remember when I made
the opposite argument in residential and commercial real estate three
years ago. Ben Bernanke said “green shoots”, yet real assets sat
stagnant and empty. Reference Who are ya gonna believe, the pundits or your lying eyes?
Jim Roger, besides being a rather colorful figure, has been correct
on his commodities call over the last couple of years and he has been
sounding the currency crisis and inflation call as of late. If anything,
I give credit where it is due. I can’t disagree with him on the
currency front. This is what he had to say on CNBC regarding Social Unrest and Currencies:
More social and political turmoil is
likely in the future so commodities prices will continue rising,
renowned investor Jim Rogers, CEO of Rogers Holdings, told CNBC
Thursday…. “I don’t own very many equities,” Rogers, who co-founded
the Quantum Fund with billionaire George Soros in the 1970s, said in an
interview. “I don’t know what’s going to happen but I expect more
currencies turmoil, more social unrest, more governments collapsing so I
invest more in currencies and commodes than stock,” he added.
Rogers said he has had long positions in commodities for 12 years and
has warned repeatedly that food prices will “go through the roof.”
Shortages of food products are likely to last for a long time and
create more upheaval and the ranks of farmers around the world have
diminished, he said, adding that for some soft commodities it will take
years to increase the stock.
“You don’t just snap your fingers and have palm oil, all this takes time,” Rogers said.
In June of 2009, he had a very similar stance, and he was correct (of
course he had this stance for a while as well). These guys below put
together a cogent argument.
The National Inflation Association guys have put together a
relatively well produced video channel that appears to have an agenda,
but also has many, many valid points on the topic. The phrase du jour…
“The Keynsian solution to economic slowdown is to keep the bubble
going”. Ain’t that the truth?
What is not mentioned in the interesting video below is that food
inflation in US supermarkets is concealed by deceptive packaging. One
way to surreptitiously raise the price on a box of serial is to put less
cereal in the box and sell the box for the same price. This happens
more than many suspect, particularly since most consumers don’t bother
to even glance past the pretty colors that illustrate the brand.
I have made an FX trend model available for all to download. Its 10
mb, containing a lot of data, but you’ll definitely get your money’s
worth. The model is available here: BoomBustBlog Complimentary FX Index model. Below is a video of a quick presentation made by one of the BoomBustBlog regulars.
Related inflationary reading: