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The Deflation vs Hyperinflation Debate On Steroids, Or Mish vs Gonzalo Lira In The Octagon

Tyler Durden's picture




 

A recent guest post by Gonzalo Lira on Zero Hedge, providing a theoretical framework for the arrival of hyperinflation, went viral, generating over 75k views and over 1,000 comments, further confirming that the biggest and most confounding debate in all of finance is what will the final outcome of the Fed's market manipulative actions be: deflation, inflation or, and not really comparable, hyperinflation (which is a distinctly different phenomenon from either of the above). The post infuriated some hard core deflationists who continue to refuse to acknowledge the possibility that in its attempt to inspire inflation at all costs, the Fed may just push beyond the tipping point of monetary imprudence away from mere target 2-3% inflation, and create an outright debasement of the world's reserve currency. One among these was none other than Mish himself, who a week ago recorded a podcast on Global Edge with Eric Townsend and Michael Hampton (link here), in which his conclusion was that Hyperinflation is the endgame, "so it is unlikely." Of course, the very premise of this statement argues that even in a monetary collapse the Fed will retain control over the flow of money, which of course is unlikely, and thus makes us very skeptical that such a simplistic and solipsistic argument is enough to resolve the debate. Since one of the items covered in the Mish podcast was Lira's argument, it was only fair that Gonzalo himself should be heard.

So a few days ago Global Edge ran a follow up podcast with just Gonzalo Lira, in which the Chilean was given the opportunity to defend himself and to further validate his argument. In a very lively and heated discussion, which teaches the amateurs at CNBC just how one should run a financial debate, Lira and host Hamtpon agree that hyperinflation may play out differently than
many expect. Among the questions probed are whether property will be a good investment in a
hyperinflation scenario, and what may happen to all other key asset classes once the Fed finally loses control of everything. Still, the best outcome would be to give Lira and Mish a one to one venue in which the two can battle it out: surely it would have no actual impact as the deflationists and hyperinflationists of the world tend to be among some of the most dogmatic individuals in the world, but it sure makes for much more entertaining theater than watching those idiots in Congress pretend they are in control of the financial destruction currently going on in America.

45 minutes of excellent financial debate follow after the jump (and the original Mish interview can be found here).

 

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Sun, 09/12/2010 - 10:37 | 576786 Gonzalo Lira
Gonzalo Lira's picture

Actually, yes, you can: In fact, that's what I believe is happening. We are having deflation now, but will have hyperinflation soon (before Dec. 2011), because of the Treasuries bubble. 

 

It's not either/or—one is prelude to the next. 

 

GL

Sat, 09/11/2010 - 19:35 | 576141 Frank Owen
Frank Owen's picture

Does Mr. Lira really have enough background to be in the octagon? I would rather Tyler and Mish be debating. I want Mish's blood all over the mat... I want to hear him stumbling around muttering "It's garbage... garbage... and who's to blame? Unions!" just before he's taken out on a stretcher with a split skull.

Sat, 09/11/2010 - 19:44 | 576151 tom
tom's picture

+1

Sun, 09/12/2010 - 10:40 | 576790 Gonzalo Lira
Gonzalo Lira's picture

The issue isn't to "win" an argument, as if it were a sport—the issue is to discover what is going to happen, using reason, evidence and debate. 

 

Maybe that's a quaint and old fashioned approach to these issues—if it is, fine, then I'm quaint and old-fashioned. 

 

GL

Sun, 09/12/2010 - 12:27 | 576881 contrabandista13
contrabandista13's picture

keep up the good work señor lira..... all new ideas are always vilified as blasphemy.... as you have probably already noticed, there are many comemierdas out there looking to befriend a bernie madoff.

here's an aphorism for you..... "The ratio of comemierdas (douche bags) is constant...." Alberto Fariñas

Sun, 09/12/2010 - 00:41 | 576507 Johnny Bravo
Johnny Bravo's picture

Yeah, Mish makes way more sense than that Gonzo Lira guy anyway.

I think he could wipe the floor with a lot of the guest posters here as well.

Sun, 09/12/2010 - 01:27 | 576556 Spitzer
Spitzer's picture

Then buy treasuries, all of them you possibly can ! 30 years at 3% ? no problem.

Maximum upside with minimal downside

 

Sun, 09/12/2010 - 01:33 | 576559 dogbreath
dogbreath's picture

mish = gatekeeper

Sun, 09/12/2010 - 02:19 | 576579 GoinFawr
GoinFawr's picture

interesting. Would you care to elaborate?

Sun, 09/12/2010 - 12:32 | 576888 dogbreath
dogbreath's picture

I used to read mish alot.  Funny thing is his name started popping up sort of freqently on some of the other finnancial sites I visited disagreeing with contrarians.  I am not a complete newby but my background does not allow me to wade in the way others here have in this hyper........tion  debate. Huge respect for many here.  I get the same impression of mish as I did after reading most of chomsky's books in the 80's - 90's. It wasn't about the great stuff chomsky wrote about it was what he omitted.  Mish started disagreeing with other's on the internet.  I went looking for Prof. Fekete's rebuttal to Mish's public criticism but couldn't find it.  Sorry to say but it seemed but IT SEEMED that Mish was some sort of attack dog and surprise here he is again confusing the debate.  To me this is not a debate - its an education.  The enemy is ignorance. 

I do not visit his site anymore.  Maybe Mish is JB

Tue, 09/14/2010 - 02:32 | 580085 GoinFawr
GoinFawr's picture

"Maybe Mish is JB"

Well, I highly doubt that: Mr.Shedlock has class and a brain.

Curious take tho'.

Regards

Sun, 09/12/2010 - 14:53 | 577015 DoChenRollingBearing
DoChenRollingBearing's picture

@ JB, GL, and posters above.  My take for what it's worth (not much):

We are currently in a deflationary environment in the sense that fewer of us have as much money that we had before.  Assets are down, but various necessities are going up in price, and I think that trend will continue for awhile, how long, beats me.  This has all dragged out much longer than I expected in, say, September 2007 when Bear Stearns two hedge funds died, the first visible dominoes to fall.

OK, the above is my read on the recent past and present.

What comes next?  My guess that the present continues for awhile longer, I do not see any Black Swans (but, of course I cannot see a Black Swan, by definition!), but at some point, before too long, the massive forces grinding against each other will force a System Failure.  Which way?  Default/deflation sure is a possibility.  But at some point, I have to believe that .gov and the Fed WILL PRINT THE MONEY!

So what to do?  Getting out of debt will help almost anyone in a deflationary scenario.  Holding a REALLY diverse set of assets will help, as not EVERYTHING will go down at once, there is ALWAYS an asset that is rising if the others are going down.

Diversification and flexibility (the latter Gully Foyle pointed out a few days ago, thanks!).  So, I am trying to have it all.  My specifics below:

-- Gold, maybe up to 10% (I am at 6.5% or so now), bitchez!

-- Some real estate, our condo and a tiny piece of CRE

-- Some real FRNs, sitting in the safe, $20s and $100s

-- A profitable business outside the USA

-- Already passed along big assets to my kid

-- Cut spending money here at home

-- Maintain our health, have food stored, have guns & ammo

-- If I could have assets in another UNIVERSE, I would consider that

-- Try to grow spiritually and get right with God

The big hole in the Bearing's strategy is no farmland, real survival skills and living in a condo near a major city.

Looks like a couple of interesting years ahead.  Best to you all.

Sun, 09/12/2010 - 17:12 | 577127 kathy.chamberli...
kathy.chamberlin@gmail.com's picture

f a r m  l a n d , bitches

Sat, 09/11/2010 - 19:36 | 576142 spinone
spinone's picture

We have a fiat fractional reserve monetary system.  The fiat currency has no intrinsic value, except by law.  Fractional reserve money is mostly lent into existence.  I believe that the borrowers have been debt saturated.  bankers killed the goose that laid the golden egg.  Once a fiat fractional reserve currency is debt saturated, it is broken.  The dollar is broken.  If this expresses itself as deflation or inflation is like saying the car is broken, because it either won't start or will overheat if you drive it.  Either way, its a clunker.

Sat, 09/11/2010 - 22:00 | 576347 BrosMacManus
BrosMacManus's picture

I find this topic fascinating. 

One's perspective on what is wrong with the car is nonetheless useful. Whether we're in a deflationary spiral or on the cusp of (hyper)inflation affects what options people perceive as most important from a prepping angle. Pay off debt or buy hard assets and maintain the debt as the hard assets' appreciation will more than cover it?

This feels deflationary to me, what with stimulus, real estate, credit contraction, unemployment, PPT/market trading on something other than fundamentals. However, gold/PMs says the (hyper)inflation genie wants outta the bottle.

Sun, 09/12/2010 - 16:04 | 577074 spinone
spinone's picture

I think you can count on inflation in the things you need (food, fuel, medical care), deflation in the things you have (that are financed; houses, cars, boats, plasma TV's).

To me, thats symptomatic of a broken currency.

Tue, 09/14/2010 - 18:33 | 581887 Geoff-UK
Geoff-UK's picture

Paying off debt only makes sense if you think hyperinflation is a ways off, I think.

Personally, I'm inclined to buy PMs with a HELOC, credit cards, and the $200 I borrowed last weekend from Jimmy at the bar.

Intending to screw all of them when hyperinflation hits--Jimmy's always been an asshole anyway...

Sun, 09/12/2010 - 11:50 | 576859 contrabandista13
contrabandista13's picture

And soon enough, we will be happy to give you cash for your clunker.... AGAIN...!

Sun, 09/12/2010 - 13:29 | 576931 bruiserND
bruiserND's picture

I have $10,000,000 that I was going to give you spinone but you seem to have repudiated it.

Hyperinflations are caused by a currency repudiation, which leads to a sudden surge in velocity. Cash previously printed by Central Banks  to combat 'deflation' suddenly enters the real economy and.......kaboom your shazam moment

Right now 300 million Americans are busting their asses to get their hands on dollars. What is the "trigger" ? i.e. a canceled or fraudulent election in November. There must be a trigger for Gonzalo Lira to have his Chilean hyperinflation  redux.  What's the trigger?

 

Sun, 09/12/2010 - 16:01 | 577069 spinone
spinone's picture

I'll take that 10,000,000 and buy PM's with it.

What I'm saying is that the dollar is broken when the economy is debt saturated.  Fractional reserve lending is not getting currency into circulation, and debts are being defaulted on  Does the dollar still have momentum as the world reserve currency?  Of course. 

 

Sun, 09/12/2010 - 16:18 | 577087 trav7777
trav7777's picture

Please, no more bullshit QTM Chicago School monetarist CRAP, ok?

Hyperinflation leads to decreased DEMAND for the currency with respect to goods and services against massive increase in supply.

There is no such thing in reality as monetary velocity; it is immaterial and irrelevant.

It is ALL supply and demand.

Sat, 09/11/2010 - 19:37 | 576144 bigdumbnugly
bigdumbnugly's picture

i'd like to place my bet...

can i box hyperinflation, high unemployment, and large foreign war please?

Sun, 09/12/2010 - 08:54 | 576706 fiftybagger
fiftybagger's picture

+1

Sat, 09/11/2010 - 22:26 | 576145 hedgeless_horseman
hedgeless_horseman's picture

We are in prestidigiflation.  We shall stay in prestidigiflation for quite some time.  Energy and gasoline prices (stuck at $2.49 in my hood for a year?  Odd?) will stay in a VERY narrow trading range, despite the Fed's balance sheet, or the money supply.  Government numbers on the economy, unemployment numbers, and the stock market indices will continue to be manipulated by the magicians in preparation for the coming Big Disappearing Act (debt disappears via inflation).

Later, we'll likely have traditional inflation.  It appears to me that the money printers are preparing their distractions as we speak.  They intend to have the audience focus on the weather (wheat/corn), speculators (cocoa), big oil (DWH type disasters), health insurers (healthcare), and everything but the magical money printers for the increasing prices of goods and services.  Don't blame me says Ben Bernanke.

Sat, 09/11/2010 - 19:46 | 576152 toathis
toathis's picture

"What" is coming? WHAT is the event?

So the stock market crashes, guess what? They will just RUN it RIGHT BACK UP!

yep. The system will never end. People are just going to have to face up to the fact the STATE IS BIGGER THAN YOU!

They print the money and THEY HAVE MASSIVE amounts of fire power!

If you do your homework you will see that they have been training for a "breakdown" event. THEY WILL SHOOT! It not just Americans in the Military Militia. It includes foreigners that WILL FOLLOW ORDERS for a standard of living (money printed by the state)

People like to slam the Nazis, but they were just following orders. That is what our troops do to. THEY CAN PAY THEM! YOU CANNOT!'

So your stuck within this system and nothing is going to change it. Any attempt at revolution will be immediatley co-opted or silenced by FORCE. If the tea party isn't an obvious failure to you, then good luck!

Sat, 09/11/2010 - 20:03 | 576160 hedgeless_horseman
hedgeless_horseman's picture

I'm going to bid on a "gynecology" franchise in the NWO.  Plenty of work in the sterilization business.  Maybe I'll branch out into geriatrics.  You know, Logan's Run?  What areas are you looking at?

Sat, 09/11/2010 - 20:10 | 576193 Hulk
Hulk's picture

You will have to be able to read lips...

Sat, 09/11/2010 - 20:22 | 576217 nmewn
nmewn's picture

Budabump...LOL.

Sun, 09/12/2010 - 00:28 | 576339 Village Idiot
Village Idiot's picture

he still has touch and smell.

 

 

 

edited: for better delivery

Sat, 09/11/2010 - 19:58 | 576170 CrockettAlmanac.com
CrockettAlmanac.com's picture

So your stuck within this system and nothing is going to change it.

Every other empire in the history of man has fallen but you say that it's going to be different this time?

Sat, 09/11/2010 - 20:14 | 576205 spinone
spinone's picture

Your arguement would be more credible if you knew the difference between "your" and "you're"

Sat, 09/11/2010 - 21:44 | 576334 zaknick
zaknick's picture

I know lots of "highly educated" assholes who aren't credible at all. Think common sense and insight is only for the few who could afford a good education? I know not.

Sat, 09/11/2010 - 21:45 | 576336 zaknick
zaknick's picture

"arguement"?

lol

Sun, 09/12/2010 - 02:05 | 576573 Milestones
Milestones's picture

"Brevity is the soul of wit" Hung on his own petard.  Milestones

Sat, 09/11/2010 - 20:18 | 576208 Village Idiot
Village Idiot's picture

"People like to slam the Nazis, but they were just following orders..."

 

That's the best example you can come up with?  Otherwise, the post was thought provoking. Thanks.

Sat, 09/11/2010 - 20:25 | 576218 Ricky Bobby
Ricky Bobby's picture

I agree with you on one thing. If US military is told to fire on our own population they will without hesitation. Maybe 1 out of 10 will have any second thoughts afterward.

Sat, 09/11/2010 - 20:50 | 576258 Frank Owen
Frank Owen's picture

I am not a fan of the US military but I think your comment is wrong. I have met and crossed paths with a lot of people who have served and although there are exceptions I would put most of them in the "top notch" category.

Let's not forget the "tank man" incident in Tiananmen square.

http://www.zencollegelife.com/blog/wp-content/uploads/2009/07/1408_tankm...

Sat, 09/11/2010 - 22:02 | 576348 Big Corked Boots
Big Corked Boots's picture

And the final outcome of that historic event was.... ?

Sat, 09/11/2010 - 22:32 | 576384 Frank Owen
Frank Owen's picture

You're missing the point - that happened in China with their strict training and brainwashing. Now think about people who serve the US military. Freedom, making a difference, fighting the terrorists, etc. Those people are proud of what they do, and to say they wouldn't give a shit if they are blowing away their own people is disingenuous.

Sat, 09/11/2010 - 23:08 | 576434 pan-the-ist
pan-the-ist's picture

Our strict training and brainwashing is more effective.

Sun, 09/12/2010 - 00:44 | 576512 Johnny Bravo
Johnny Bravo's picture

We have the strictest training and brainwashing in the world!

Hoo-rah!  

Sat, 09/11/2010 - 23:32 | 576455 Gully Foyle
Gully Foyle's picture

Frank Owen

Have you met any of those thirty k who use the military to get a Green card? What about those Gangbangers and Racists? You think they have any qualms about opening up on people in the streets?

You ever read the fucking news? Cops, not military but plain vanilla police are offing people young and old by the dozens. And it's only getting worse.

If you think US citizens are safe from the military or police or even each other I want wahtever the fuck you are smoking. Life has become VERY cheap in the US.

Sun, 09/12/2010 - 00:24 | 576497 Frank Owen
Frank Owen's picture

Gully, I became very depressed with the way things were going years ago... I had gotten right into economics, peak oil, and had more general awareness of how fucked up things are than most. At a basic level I lost faith in mankind. I sold my house, quit my job and spent three years travelling. I met people all over the world and was able to be happy again because of how many great people I had met.

You ever read the fucking news? Cops, not military but plain vanilla police are offing people young and old by the dozens. And it's only getting worse. 

Man, there has always been bad shit going on, but if you just watch the news you'll only get to see the worst of people. You'll hear about the 20 protesters who decided to break windows but not the thousands who were peaceful... You'll hear about bent cops and rarely hear about the ones who've actually helped people (I'm sure there some lol).

I know everything is corrupt and getting worse but before you write-off the whole country have a look at at what proportion are good apples. There are still a lot out there.

Do you agree with Ricky Bobby's comment that only 10% of people serving in the US military would have second thoughts about shooting their own countrymen?

How about Taothis' comment:

So your stuck within this system and nothing is going to change it. Any attempt at revolution will be immediatley co-opted or silenced by FORCE.

I'm not giving up no matter how bad things get - I will fight - and I have faith that if I know what is wrong there are others who also know what is wrong. Look around ZH - we don't all agree but for the most part we care, and want to make things better. Again - there are a lot of good people out there... if you just watch/read the news you'll rarely meet them.

Sun, 09/12/2010 - 00:45 | 576515 Johnny Bravo
Johnny Bravo's picture

You say you'll never give up no matter how bad things get, but then make investments based on the collapse of civilization.

Sun, 09/12/2010 - 02:52 | 576595 Hulk
Hulk's picture

"but then make investments based on the collapse of civilization." Frank is obviously an optimist! 

Mon, 09/13/2010 - 03:42 | 577902 faustian bargain
faustian bargain's picture

You call what we've got 'civilization'? See, that's the problem right there.

Sat, 09/11/2010 - 22:33 | 576406 Dadburnitpa
Dadburnitpa's picture

RB-

With all due respect, you are sadly ignorant.  Twenty four years in uniform proved to me that even idiots can sort out the lawful order from the unlawful one.  People who serve are smarter than you think.

Sat, 09/11/2010 - 23:04 | 576430 Maos Dog
Maos Dog's picture

Trust the military?

 

http://www.youtube.com/watch?v=sm5PC7z79-8

 

Never Forget this.

Sat, 09/11/2010 - 23:29 | 576454 Dadburnitpa
Dadburnitpa's picture

The Louisiana National Guard shown in your clip are Title 32 troops.  They have not been federalized.  They are acting under the orders of the Governor of the State of Louisiana.  Don't confuse these guys with regular professional US military.  If you don't know the difference, do a little homework.

Sat, 09/11/2010 - 23:48 | 576463 Maos Dog
Maos Dog's picture

I just did my "Homework" and looked up title 32, and, it's just a designation that gives a particular set of troops jurisdiction to work in the state under the Governor like you said, but, it's still the exact same National Guard guy doing the dirty work. The only difference between this troop and a "regular" national guard troop is a title 32 piece of paper.

So, I don't understand your argument, if they were "federalized" without title 32 they magically would not follow confiscation orders? How do I tell "good" military guys from the "title 32" guys when they are marching down my street?

 

Sun, 09/12/2010 - 00:36 | 576503 Frank Owen
Frank Owen's picture

Hey Maos, Confiscating guns is not the same as killing people. Nice spin though - which party you running for?

Sun, 09/12/2010 - 00:47 | 576517 Johnny Bravo
Johnny Bravo's picture

What does partisanship have to do with this argument?

Sun, 09/12/2010 - 01:02 | 576530 Frank Owen
Frank Owen's picture

"political spin" look it up. I'd explain it to you, if you weren't a total waste of time.

Sun, 09/12/2010 - 01:08 | 576538 Johnny Bravo
Johnny Bravo's picture

There was no political spin in the argument until you brought it into the argument.

Sun, 09/12/2010 - 01:19 | 576551 Frank Owen
Frank Owen's picture

You're a paradox, Johnny... kinda like a retard who won't stop smashing his head against a wall.

Sun, 09/12/2010 - 02:54 | 576596 Maos Dog
Maos Dog's picture

I don't think the guards checked the political party affiliation before breaking multiple laws and causing terror in the local population.

The video I REALLY wanted to post was the one of them slamming the old lady around and assaulting her but that one seems to have disappeared from youtube. I am sure some of you have seen this.

Sun, 09/12/2010 - 07:19 | 576668 ViewfromUnderth...
ViewfromUndertheBridge's picture

The last words on the tape...

"You'd shoot an American?"

"Yeah"

Sun, 09/12/2010 - 08:34 | 576697 Big Corked Boots
Big Corked Boots's picture

Don't need to do homework to see that military forces were ordered to perform unconstitutional takings of self-defense weapons, make illegal searches and illegally detain people - and those forces did exactly what they were ordered to do.

I don't think when someone shows up at my house with a full-auto M-16 that I will ask them if they are Title 32.

Honestly I had more faith in the NG and Army, until that video. "I hate to think about what I would have to do."

 

 

Sat, 09/11/2010 - 23:02 | 576428 tmosley
tmosley's picture

In a given engagement, perhaps.  But how many will desert afterwards?  Probably 90+%.  If there is another military force that ISN'T murdering civillians, they may well join that one. 

Mass murder of American civilians will trigger rebellion, and that rebellion will take shape within days at most.  If a governor or group of governors is involved, it may be hours, as they call up the national guard and declare independance.  Otherwise, it will be a big bloody mess.

Sun, 09/12/2010 - 00:04 | 576483 CrockettAlmanac.com
CrockettAlmanac.com's picture

If I were in the military and an order to shoot civilians came down, my first thought would be about my family back home, who might be shooting at them and how could I get home to defend them.

Sun, 09/12/2010 - 03:29 | 576603 merehuman
merehuman's picture

well said Crockettt, i agree. Say what you like , in actual circumstances fundamentals DO apply. Survival and family first.

Sun, 09/12/2010 - 15:07 | 577026 DoChenRollingBearing
DoChenRollingBearing's picture

Crockett, merehuman!

You guys got it!  While trying to come up with what I thought might happen, you guys nailed it for me.

I have heard, on the other hand, that the US Marines will not fire on the citizenry...

oathkeepers.org I believe is a site that the ex-Mighty Chumbawamba wrote about.

Whatever happened to Chumba?

Sun, 09/12/2010 - 17:17 | 577130 kathy.chamberli...
kathy.chamberlin@gmail.com's picture

wasn't really my fault. i just made a comment about inappropriate talk about another highly regarded member of ZH. it was a little over the top description of some body part getting whacked by another. sorry.

Sat, 09/11/2010 - 19:54 | 576155 sbenard
sbenard's picture

I read Mish' blog almost as much as this one. He has been beating the deflation drum for a long time. I think he's mistaken, and he has cherry-picked some of his data to make his point. This damages his credibility and suggests that he is more committed to his ideology than to facts.

In one of his blog posts, he showed a chart for natural gas futures. If I was ignorant of commodities, and saw just that one chart, I would assume that he was right and that commodity prices were in the tank. Unfortunately for Mish, I'm a commodities trader, so I know better.

One article here on ZH today indicates that the price of corn continues to rise steadily. But many other commodities, especially agriculture commodities, are rising strongly. Even crude oil is more than double the price it reached in Spring of 2009. Here are some others that are near recent highs: corn, soybeans, live cattle, cotton, sugar, feeder cattle, lean hog, soybean oil, oats, rough rice, coffee, and class III milk. There are far more commodities showing strength than showing weakness. Many other commodities that are not futures-traded are also at recent highs. I saw an article yesterday on Seeking Alpha that listed many of them.

Often, Mish may also show a chart for a commodity index to make his point. However, anyone who knows commodities also knows that the commodity indexes are overwhelmingly weighted toward energy, and especially crude oil. Most have weighting toward energy and crude to the tune of 70% or more. Thus, they aren't truly representative of the broader commodity markets.

I love Mish' blog, but I think time is going to prove him wrong. His credibility is damaged in my book because he stacks the deck in his discussion, much the way the government does in reporting economics data.

Sat, 09/11/2010 - 20:02 | 576177 AUD
AUD's picture

Mish & others, Steve Keen comes to mind, seem to base their conclusions on the fallacy that the USD is the standard of measure of value, therefore in any 'deleveraging' it is the dollar that will benefit at the expense of commodities.

Yet the USD is the liability of the Federal Reserve Bank, its value is given by the quality (not quantity) of the assets in its 'vault', which are themselves the liability of the US government & increasingly other even more questionable credits.

Is it any wonder the value of the USD is uncertain?

Is it any wonder that when measured against USD, the price of commodities is uncertain?

Sat, 09/11/2010 - 21:56 | 576226 Village Idiot
Village Idiot's picture

@sbenard

Thanks for the insight, that may be the first post I've read so far that has me thinking differently about Mish.  I don't listen/read his stuff much, but I know a lot of people do.  And he's kind of made a "mainstream' leap, if perception is correct.

 

 

Fewer and fewer people to listen to and trust.  Someone will be right--and in the meantime my level of trust in the financial markets dwindle.  I guess you could say that being neutral on almost anything these days carries as much risk as having conviction.  It's not a pleasant feeling for me.

Sat, 09/11/2010 - 22:18 | 576376 kathy.chamberli...
kathy.chamberlin@gmail.com's picture

S U G A R

Sun, 09/12/2010 - 06:22 | 576651 EscapeKey
EscapeKey's picture

Great post.

Any chance you could link the SeekingAlpha article? I can't seem to find it...

 

Sat, 09/11/2010 - 20:08 | 576188 Kapital Xposure
Kapital Xposure's picture

hyper bitchez

Sat, 09/11/2010 - 20:16 | 576189 sbenard
sbenard's picture

Mish is speaking primarily from his ideology as a follower of Austrian-school economics. I'm also a believer, but I'm not an ideolgue. Mish is! I recently read a post on Mish' blog in which he rejects the idea of hyperinflation solely because it didn't match his definitions based upon his Austrian background.

Gonzalo speaks from experience in a hyperinflationary environment. Which are you going to believe? Experience or ideology? I'm betting on experience!

Sun, 09/12/2010 - 00:49 | 576519 Johnny Bravo
Johnny Bravo's picture

I'm guessing the guy that uses statistics and valid arguments to support his data instead of conspiracy theories from gold sales website.

I'm going to have to go with Mish here.

People have been beating the hyperinflation drum for two years now, and all that's happened is deflation.

Sun, 09/12/2010 - 06:39 | 576656 Hephasteus
Hephasteus's picture

"People have been beating the hyperinflation drum for two years now, and all that's happened is deflation."

Yup. Look at gold it's deflated down to $900 an ounce. Oh wait I forgot you get your data from insane.crazy.rediculous.com.

 

 

Sun, 09/12/2010 - 09:25 | 576699 EscapeKey
EscapeKey's picture

Well, considering you usual line of posting, I suspect it's more a case of you lining up with Mish because it fits your ideological stance.

Regardless of all this "deflation", I still see rising food prices, petrol prices, house rental prices, increasing taxes, rising public sector wages... in fact, the only thing I see falling is private sector wages and benefits.

But perhaps the UK is massively different to the US. Or at least, house rental prices. Because I've read lots of stories coming out of the US agreeing with every other point.

Sat, 09/11/2010 - 20:11 | 576196 mkkby
mkkby's picture

How can we have hyperinflation when investors panic into the dollar every time a market sneezes? Someone has to explain that to me. Yes, the US is broke. But every other gov is in worse shape (expect for a few Asians). For the US to have hyperinflation it would first have to happen in Japan, every country in Europe, Africa and South America.

Hyperventilation is what we have too much of. This is not Zimbabwe or Argentina. Those are small economies that get jacked up and down by very small forces. Put down your religious beliefs and try logic for a change.

Sat, 09/11/2010 - 20:55 | 576270 Dagny Taggart
Dagny Taggart's picture

Logic says that the Fed intends to continue the very acts that lead to hyperinflation... more and more quantitative easing, zero interest rates, more stimulus and entitlements, and those festive POMO days when they monetize our debt. Remember Bernanke and his freakin' helicopters? They said they would print whatever was required. I am pretty sure that is regardless of what the rest of the world does.

You can argue all the angles 'til the cows come home, but the simple fact remains that we can't pay the debt. Add the debt clock plus Fannie, Freddie and "unfunded liabilities" (of ss/medicare/caid) and, and, and... our total is over $60 Trillion. Soon, the US won't be able to cover the vig. Vig is what they call the interest after the lender is forced to go into leg breaking mode to collect. Logic is doing the math. Here is a good place to start. http://mises.org/daily/3541

Sat, 09/11/2010 - 21:56 | 576341 espirit
espirit's picture

Let the Fed print. It just makes my PM's more valuable against their fiat.

Sat, 09/11/2010 - 22:08 | 576359 Dagny Taggart
Dagny Taggart's picture

WTF do you mean "let the Fed print?" That is like saying, "Oh, Yippee! Hyperinflation! My gold and silver will shoot the moon. Screw my retired friends and relatives who go bust, lets book the Bellagio."

I think you have it backwards, we need to stop the Fed from printing.

 

Sat, 09/11/2010 - 22:16 | 576373 zaknick
zaknick's picture

I disagree. Print baby print! This system was never for:

 

"retired friends and relatives who go bust".

 

The money changer system is for them not the people. Silly goose.

 

The fake "Fed's" origins:

http://www.scribd.com/full/37179258?access_key=key-1cuxpp2jlyrgxlh33vds

 

Central banksters robbing middle classes:

http://www.scribd.com/full/37179254?access_key=key-21svhemkujz41r2e6250

 

Sun, 09/12/2010 - 01:38 | 576565 Spitzer
Spitzer's picture

 look what you just wrote !

You just assume that everyone will always pile into the dollar.

pile into the dollar.......

pile into the dollar.......

pile into the dollar......

thats your bubble right there

Sun, 09/12/2010 - 20:09 | 577368 tmosley
tmosley's picture

I see, we're different because we are "large".

And Zimbabwe thought they were too large of an economy to experience what had happened in Hungary.

Sat, 09/11/2010 - 20:15 | 576206 shuswap
Sun, 09/12/2010 - 01:29 | 576558 Eternal Student
Eternal Student's picture

I suppose it's a good article if you like strawmen. Sadly, it leaves out the response of other currencies and assumes that the Fed is the only one which can print. That ought to be a major clue that the conclusions are wrong. Especially given the actions of all the major countries in the world, in trying to drive their currency down. Do you seriously think they would sit idly by, and let their exports become more expensive?

Sun, 09/12/2010 - 15:30 | 577039 Spitzer
Spitzer's picture

You still don't even know that hyperinflation is not caused by printing. Printing is the result of the hyperinflation

Sun, 09/12/2010 - 15:51 | 577057 Eternal Student
Eternal Student's picture

I know that's your view, and I know you made the claim that Bernake staved off hyperinflation by printing. Sorry, I just find your definitions of things not particularly useful or insightful in terms of predictive power. No offense intended.

Mon, 09/13/2010 - 04:09 | 577925 Andrew G
Andrew G's picture

And FOFOA nails it yet again...

Sat, 09/11/2010 - 20:20 | 576213 AUD
AUD's picture

I've posted it before, I'll do it again;

www.prudentbear.com/index.php/creditbubblebulletinview?art_id=10435

Nobody (on the internet) understands credit better than Doug Noland.

Sat, 09/11/2010 - 20:21 | 576214 tyler
tyler's picture

The guy doing the interview talked way to much and interupted to often.

Sat, 09/11/2010 - 20:22 | 576216 Hall 9000
Hall 9000's picture

How can you know where you are going unless you know where you've been?

http://247wallst.com/2010/09/09/the-13-worst-recessions-depressions-and-...

Sat, 09/11/2010 - 20:29 | 576220 toathis
toathis's picture

The Zionist Neo-Con Denninger banned me for saying the dollar was going to die. He got pretty angry. He is also a Gold hater!

 

Hothead blogger Karl Denninger of Niceville, Florida, also known as Genesis, went on an angry, profanity laced tirade today, banning every member of his popular The Market Ticker website, and even someone who does not belong to the site.

The outburst was prompted by a contributor to the site who challenged Denninger’s thesis that gold is not an appropriate investment in the current economic environment.

“Yeah, I mean, all I said was that I thought he was wrong about gold, that ya know, it might be good to have some,” .

“And he went totally off, and banned me from the site, like, forever. It’s not cool.”

But apparently that wasn’t enough to quell the wrath of Mr. Denninger, who then went on to ban every single poster to the forum, before posting a cryptic message on his website.

The message, which has since been removed, read:

“Jesus, when does the idiocy stop? I am sick and tired of people asking the same dumb questions and bringing up the same moronic points. I do not like gold, ok? Got it? Good. It’s a useless hunk of metal and owning it is how you destroy your personal wealth. If you want to talk about useless hunks of metal, go over to the tinfoil hat brigade websites, where they are stockpiling their bunkers for the end of the world. That’s all I have to say on this topic, forever. And to my critics and detractors, **** you, my answer to you is and must be best and most-simply expressed in the following image:

http://randomlyspecific.vox.com/library/post/hothead-blogger-karl-dennin...

My family lived in Germany during this time. Gold was very valuable.

Sat, 09/11/2010 - 20:54 | 576266 Village Idiot
Village Idiot's picture

Now Denninger is a jerk off.  They're dropping like flys on this thread.

Sat, 09/11/2010 - 21:08 | 576292 optimator
optimator's picture

My parents lived in Germany till the late twenties.  The farmers were the ones that had it made.  The ones that moved their Marks to other currencies made out the very best.  The ones that left family behind and took themselves, their work ethic, and their savings to another country never forgot and constantly prepared to see it happen again.  I hope you remembered all the stories of survival your family spoke of and are passing it on to your offspring. 

Sat, 09/11/2010 - 22:13 | 576363 Big Corked Boots
Big Corked Boots's picture

In the late 60's my mother worked as a waitress in a small Long Island restaurant owned by an older German couple. They would examine every coin they got and sort them. Sometimes she would see one of them in a back room sorting through rolls of coins and once in a while she got paid in "shiny new" quarters or half dollars. It took a few years afterwards before she understood what they were doing. You only have to live through the Weimar Republic once in order to learn that lesson.

BTW post-WW1 Germany was not Zimbabwe or Argentina either.

Sat, 09/11/2010 - 23:07 | 576433 Fred Hayek
Fred Hayek's picture

You're correct.  Germany had been the world's third largest economy after the U.S. and U.K.  It wasn't in good shape.  The allies had offered Germany armistice terms to end WWI that said, but didn't promise that there wouldn't be exhorbitant reparations (payments of money by the losers to the winners because, well, they lost) demanded.

There were.  Mostly because of the french and, to a slightly lesser degree, the english.  Idiot candidate for worst president ever Woodrow Wilson went to the peace conference promising to not allow exhorbitant reparations but they happened anyway.  (Way to go, Woodrow!  Having the Fed, income tax, prohibition, the red scare and increasing official segregation fucking up America on your watch wasn't enough, huh?  Got to spread your misery overseas?)

The germans were pissed.

They didn't make payments on schedule.  The french said, okay, we'll just occupy the ruhr.  The germans in the ruhr began an officially sanctioned strike.  With their weakened economy getting next to nothing out of its greatest industrial region, government finances teetered.  The german central bank printed enough money to cover things.  And they were off to hyperinflation.

But, of course, Ben Bukkake would never just print money to cover deficits, right?  And americans and people around the world would never lose confidence in the dollar, right?

Sun, 09/12/2010 - 00:53 | 576524 Johnny Bravo
Johnny Bravo's picture

I can speculate on what might happen too.

Or, I can look at the reality, which is deflation.

The similarities between Weimar and today are nonexistent.

Sun, 09/12/2010 - 01:33 | 576555 Spalding_Smailes
Spalding_Smailes's picture

Think of it this way.

The debt bubble that took 27 years to blow explodes BOOM.

This is like a neutron bomb sucking things toward it as its draws in the available oxygen for the first few seconds, like deflation, this is temporary, until the shockwave of inflation rushes forth in all its glory...

Look at the chart for usa total debt since 1980 this was turbo charged by the shadow banks, securitization market, credit cards, student loans, synthetic cds's all leveraged. This market is gone. The ponzi is low on jet fuel.

Uncle Ben knows this,... its a bird, its a plane, no its uncle ben dropping money, money for all ...

Mon, 09/13/2010 - 06:30 | 577980 1984
1984's picture

A monkey looks at what's in front of him.  Man looks ahead.

Sat, 09/11/2010 - 21:20 | 576303 zaknick
zaknick's picture

I'm gonna go post on his site now. F@ck the Fed/bankster fascist loving scumbags. The dollar should die, "trade" should be radically reassessed, the banksters tried and hanged, the people should control the means of exchange (like Colonial Scip pre-revolution) and I assure you the majority of Americans can have a better life as opposed to the unbelievable inequality rates present today.

 

 

1764

Benjamin Franklin is asked by officials of the Bank of England to explain the prosperity of the colonies in America.  He replies,

"That is simple.  In the Colonies we issue our own money.  It is called Colonial Scrip.  We issue it in proper proportion to the demands of trade and industry to make the products pass easily from the producers to the consumers.  In this manner creating for ourselves our own paper money, we control its purchasing power, and we have no interest to pay no one."

As a result of Franklin's statement, the British Parliament hurriedly passed the Currency Act of 1764.  This prohibited colonial officials from issuing their own money and ordered them to pay all future taxes in gold or silver coins.  Referring to after this act was passed, Franklin would state the following in his autobiography,

"In one year, the conditions were so reversed that the era of prosperity ended, and a depression set in, to such an extent that the streets of the colonies were filled with the unemployed...The colonies would gladly have borne the little tax on tea and other matters had it not been that England took away from the colonies their money which created unemployment and dissatisfaction.

The viability of the colonists to get power to issue their own money permanently out of the hands of King George III and the international bankers was the prime reason for the revolutionary war."

Control of America's money system will change hands 8 times since 1764.

April 19th, start of the revolutionary war in Lexington, Massachusetts.  By this time the colonies had been drained of silver and gold coins as a result of British taxation.  As a result of this, the continental government had no choice but to print money to finance the war.

At the start of the revolution the American money supply stood at $12,000,000.  By the end of the war it was nearly $500,000,000 and as a result the currency was virtually worthless.  An example of this is that a pair of shoes now sold for $5,000 dollars.  This also shows the danger of printing too much money.  The reason Colonial Scrip had worked was because just enough was used to facilitate trade.

 

Sat, 09/11/2010 - 21:28 | 576319 hedgeless_horseman
hedgeless_horseman's picture

It's people like you that cause unrest, which in this case is a compliment. God bless you.

Sat, 09/11/2010 - 21:30 | 576321 Frank Owen
Frank Owen's picture

Toathis, that post was from June 9 '09, and when you quote someone please put it in quotation marks to avoid confusion - I read that as your own comment initially.

Sun, 09/12/2010 - 00:22 | 576496 FoodTiger
FoodTiger's picture

Ticker Forum Case Study: How to effectively destroy a once vibrant forum community.

Sun, 09/12/2010 - 08:34 | 576695 Snidley Whipsnae
Snidley Whipsnae's picture

I used to visit Karl's site often but seldom do these days.

He is in the same camp with Willem Buiter and the others that are in denial about gold and silver.

How can one claim to be an observer and commenter on the world macro economy while being in denial about any asset class? Why doesn't Karl claim that wheat or oil are barbaric relics?

Denninger believes that if enough 'bad guys' are hauled into court that the US will suddenly be back on the 'right economic track' and all will be well.

I never joined his comments section so do not need to be concerned about being kicked off. lol

Sat, 09/11/2010 - 21:18 | 576227 john_connor
john_connor's picture

In a sense we are already experiencing hyperinflation on a relative basis as the Dow would be 5000 and oil at $30 if it weren't for the Fed's "liquidity" measures.  As we know, however, $30 oil will not support certain economies that are net exporters of said oil.  So we simply jostle around in nothingland where net exporters still make out and the US middle class corpse continues to be sucked dry for whatever they have left.  Energy and food supply are, and will continue to be, the game.

But B9K9 makes a great point above, this is a ridiculous argument similar to the Democrat vs. Republican argument.  There is no binary answer, ie its right or wrong, or its hyperinflation or hyperdeflation.  Right now, in fact, we simultaneously have hyperdeflation in leveraged credit assets and relative hyperinflation in commodities and common stocks.

I do applaud Lira, however, for making a credible argument as to how a US dollar collapse/ hyperinflation might occur.  It would take more than purchasing oil futures, however, it would take a run on physical food and gasoline.  This is tantamount to a revolution without a shot fired.  All other arguments using Weimar, Zimbabwe, etc. as proxies for the mechanism of hyperinflation are simply NOT credible unless the US gov hands out cash directly to the people from the Treasury, not via the Fed and their currently broken leveraged credit channel.  The symptoms people describe may be the same, but the mechanism is much different. 

Sat, 09/11/2010 - 20:34 | 576232 ExploitTheMarket
ExploitTheMarket's picture

I have not listened to the audio and I probably won't, but I have read a lot of Mish's stuff, and a lot of the "inflationists" stuff as well.... Not being an extreme subjectivist (solipsist) I look at what I see in the objective world that is independent of my subjective mind and what I experience interacting with that objective world... and what I see and feel is that the prices that need to go up are going down and the prices that need to go down are flat at best, and some are rising (when I go to the grocery store for instance).... WHether you call it deflation, inflation, biflation, stagflation -- whatever, what I see is a decline in the general standard of living for most Americans.

Sat, 09/11/2010 - 21:58 | 576309 Village Idiot
Village Idiot's picture

 

I've asked this question on the board before and haven't gotten an answer --

Can someone tell me if the general level of intensity regarding a major "event" occurring is as acute as it was leading up to the 2008 bust?  The reason I ask is because my head was up my ass leading up to the events of 2008, so I don't even have a reference for then and now.  If this question makes sense to anyone out there, I would appreciate your view.

 

 

 

 

Sat, 09/11/2010 - 22:05 | 576355 mikla
mikla's picture

Can someone tell me if the general level of intensity regarding a major "event" occurring is as acute as it was leading up to the 2008 bust?

Threat of a major event is *far* greater now than leading up to 2008.

Since then, we have levered up far more, solved nothing, and established down-wards momentum (e.g., economic decline and social fatigue).

There's lots more to go along with this, but think, "Black as night".  However bad you think it might be, it is actually *far* worse.  (No, I'm not trying to be funny there.)

Sat, 09/11/2010 - 22:17 | 576375 Big Corked Boots
Big Corked Boots's picture

Also, we have used up our conventional ammunition to solve any economic problems.

The situation now is like lighting a match inside a grain elevator, except this one is being loaded and is "extra" dusty.

Sat, 09/11/2010 - 22:26 | 576394 mikla
mikla's picture

Also, we have used up our conventional ammunition to solve any economic problems.

+1

The situation now is like lighting a match inside a grain elevator, except this one is being loaded and is "extra" dusty.

I like your "grain" elevator metaphor.  The spark is both imminent and inevitable.

Sat, 09/11/2010 - 23:12 | 576440 Village Idiot
Village Idiot's picture

Thank you for the replies.  

Sun, 09/12/2010 - 01:02 | 576531 Eternal Student
Eternal Student's picture

I'd only add that all the signs are still there, if you know where to look. And for that, I'd look to the ones who called the event in the first place. The majority of pundits and PhD Economists said that "no one could see it coming". They lied. There were about 18 or so who did see it coming, and had published prior to the event.

I would start by looking at the ones who called it, and disregard everyone else. And as far as I know, that includes all of those who are now calling for inflation, or hyperinflation.

 

Sun, 09/12/2010 - 01:55 | 576572 Spitzer
Spitzer's picture

mostly "gold bug" inflationists called it.  Schiff, Faber, Rogers, Celente, Puplava, Kieser, Sprott.

Sun, 09/12/2010 - 09:27 | 576722 mikla
mikla's picture

In the "economics" circles (for which I have very little respect), Eternal Student was referencing publications by Keen and a few others that saw the collapse because they considered "debt" as a significant factor.

If you consider "debt", the collapse was obvious.  My principal complaints for the entire field of economics are:

  1. It is mere religion (constructing artificial theories assuming an artificial world) without validation/correlation to the real world.
  2. Debt is not a factor for almost all economic theories.

Most "normal people" are amazed to hear (2), but I'm still amazed at the lack of intellectual vigor for (1).  (IMHO, economists in their current form are worse than worthless, they are dangerous as they encourage the most destructive possible central planning.)

I respect Steve Keen as an economist, though (he saw it coming).

Sun, 09/12/2010 - 10:48 | 576799 Gonzalo Lira
Gonzalo Lira's picture

Please read my piece, "The Prosecution's Case Against Alan Greenspan". I discuss economists and the field of economics—a sorry state of affairs. 

 

http://gonzalolira.blogspot.com/2010/09/prosecutions-case-against-alan.html

 

GL

Sun, 09/12/2010 - 12:49 | 576898 Eternal Student
Eternal Student's picture

Precisely. The people whom Mr. Spitzer is referring to offer no such insight, Correct me if I'm wrong, as I don't follow most of them. But they strike me as offering just religion, and I believe some have been at the same religion, for years, right or wrong.

The only other thing that I'd add is that the field of Economics is just shockingly bad in terms of mathematics. It's all mostly handwaving arguments, with a tad of basic mathematics. The type of math taught in first-year college courses, and just the basics there.

I'd also throw in an odd twist. When a proposed "theory" is put forward, and fails, the failure is ignored, with nothing learned. This is very curious. Perhaps that gets back to your "religion" point? It's very odd.

Dr. Keen and those few others are the only ones I've seen attempting to change that.

Sun, 09/12/2010 - 15:44 | 577051 Spitzer
Spitzer's picture

Debt was a huge part. Schiff talks about it all the time. Schiff just made the mistake of over-estimating the intelligence of the people with money.

You would think that if Citi, BofA, GM, GE, Fmay, Fmac, Wachovia, AIG, GS, ML, BS, WF, LB all went broke, that it would be bad for the dollar. But people are fucking dumb and they ran towards the blast and are now stuck in the dollar, hence this stupid fucking debate.

Do you think if the big 5 Canadian banks all went broke, a couple big Canadian oil companies went broke, that the Canadian dollar would go up ?

 

Sun, 09/12/2010 - 16:27 | 577097 trav7777
trav7777's picture

Bingo...the major economics schools did not/do not consider the essential nature of OUR money as debt.  They just consider it money.

Like look at Friedman and the jokeass monetarist Chicago School...he said to turn it over to computers, create a level 2-3% inflation.

HOW, MILT?  By having the fucking computers BORROW the necessary increased money supply?

I mean if you can't get this basic shit right, you have no basis for opening your mouth.  Fuck him and his Nobel.

These idiots don't understand their own economy; the entirety of it is bullshit.

Mon, 09/13/2010 - 20:52 | 579673 MachoMan
MachoMan's picture

The moral hazard of the remedial measures has created the necessity of consolidation of systemic risk. 

The biggest difference between now and 2008 is that our worst fears have been realized.

Sun, 09/12/2010 - 01:50 | 576569 Spitzer
Spitzer's picture

I think what he meant was, what did it feel like BEFORE the 2008 crash ?

Say late August 08, what where people talking about then ? what where the be subjects then ?

Sat, 09/11/2010 - 22:26 | 576393 CrockettAlmanac.com
CrockettAlmanac.com's picture

Can someone tell me if the general level of intensity regarding a major "event" occurring is as acute as it was leading up to the 2008 bust?

That's a really difficult call. In 2008 I had a good idea that something was going to happen more or less along the lines of what did happen by June or July. I was tuned into Ron Paul and the Austrians which had prepared me for some time before that but in the summer of 2008 four or five major financial institutions released messages saying "something big and bad is going to happen any day. It will be a game changer." I specifically remember this coming from MS and RBS among others.

Today, I'm seeing lots of individuals warning about market, bank or bond failures but I haven't seen the institutional warnings which were like the icing on the cake last time around.

Sat, 09/11/2010 - 23:14 | 576432 Spalding_Smailes
Spalding_Smailes's picture

I was yelling from the house tops in 2005 about the crisis heading our way.

Not that the guys a guru but Eric Jansen on Itulip was posting some scary shit, he was a VC and pulled out of the stock market in 1999. He called the dotcom bust and thought our crisis would start in 2003 but they got the housing bubble inflated with cheap money.

His call was to buy gold in 1999, what a call that has been.

 

As I talked about the things I was reading on the internet people would look at me like I was fucking nuts.

I was being driven around by my brother, he was telling me I was a fool not to buy in (2005) he said the banks were giving away free money. He had purchased a $400,000 dollar house and had leveraged that up into 3 more rental duplex's....

Two of my friends got a loan for 1.9 million to start a condo project on some property one of them already owned, the bank & the project both gone, out of business.They both had nothing of real substance to get that 1.9 million to begin with. Oh ya, they had that land which was purchased in 82' for 40 grand, the bank appraised it for $900,000 in 2006.

 

Sat, 09/11/2010 - 23:16 | 576442 Village Idiot
Village Idiot's picture

I guess my ignorance was bliss, until about October 2008. 

Sun, 09/12/2010 - 09:22 | 576721 Dismal Scientist
Dismal Scientist's picture

No, indeed they are not calling for it. Crisis this time around is centered on sovereign issues, not the banking sector. If the institutions start calling for sovereign failure of a major country directly, they will be hushed up rather quickly, I would imagine. I suspect that behind the scenes, the major bank chiefs in the US and Europe have been told to zip it, or face the consequences.

The market will decide our fate in the end, despite the best efforts of the socialists to increase their control level. The Fed vs. the bond market is the only game in town. Stocks are a sideshow and only for those that have no other options (ie: professional equity investors). The answer remains PMs for individuals, as we all know.

Sat, 09/11/2010 - 23:56 | 576475 web bot
web bot's picture

A great question...

Check out Clif High and web bot technology. He has a language technology that tracks changes in language on the web which is based on the idea of unconscious leakage (Jung's collective unconscious). He comes across as somewhat of a crack... but he does have a hit rate.

He saw release language back in 2007 and 2008, prior to the beginning of the meltdown. He also saw it 90 days before 9/11 in 2001.

To answer your question, there is a collapse in release language in early November. Speculation is that it may be between Iran/Israel, or significant collapse in markets with silver above $600. Also, a disappearance of web language for approx 15 months happens in 2012 and into 2013... speculation is a solar phenomena that knocks out modern communication.

You asked...

Sun, 09/12/2010 - 03:00 | 576490 Village Idiot
Village Idiot's picture

thanks.

 

Edit:  So the rest 2010 doesn't look so good and forget 2012.  Interesting stuff.

Sun, 09/12/2010 - 05:27 | 576637 AUD
AUD's picture

No.

Money market dynamics are completely different to pre 2008.

There's no chance of a 'bust'.

But if you really want to know the future ask your local central bank, they are the market maker.

Sun, 09/12/2010 - 21:27 | 577506 thegr8whorebabylon
thegr8whorebabylon's picture

Ron Paul sent out en email to his groupies summer '08 saying imminent mayhem ....etc. 

Tue, 09/14/2010 - 18:52 | 581928 Geoff-UK
Geoff-UK's picture

If you want to know when the "major event" is happening, tune into CNBC and watch Erin Burnett rip off her blouse and yell "look at these!  Stay tuned!  All is well, all is well!"

Sat, 09/11/2010 - 20:36 | 576236 Carl Marks
Carl Marks's picture

There is nothing but worthless IOUs backing the dollar. If you think the dollar will increase in value because of that, you're an idiot.

Sun, 09/12/2010 - 01:00 | 576527 Johnny Bravo
Johnny Bravo's picture

And the labor force of the United States, and the military of the United States, and the fact that it's the world's reserve currency, and the fact that you need it to buy oil, and the fact that it's the safest and most stable currency investment aside from Switzerland, and on and on.

Oh, and the fact that it's already increased about 12% in value already this year, which is more than gold.

Sun, 09/12/2010 - 03:01 | 576601 Burnbright
Burnbright's picture

Uh lets see how totally fucking wrong you are dip shit. 

Gold was on average at about 990 in September 2009

Gold was on average about 1245 in September 2010

1245 - 990 = 255 / 990 = 25% gain in a year from sep 2009 to 2010

Now lets look at the DXY

Sep 2009 was roughly 77

Sep 2010 is roughly 83

83-77 = 6 / 77 = 7%

 

You are a fucking dumb ass, go back to school for a decade. 

 

Sun, 09/12/2010 - 06:46 | 576660 Hephasteus
Hephasteus's picture

It's the worlds reserve currency. Except the world is dumping it. Oil producing nations who try to dump it get attacked but it's still being dumped day after day, month after month. It's not a question of if the dollar is in jeapardy as the world's reserve currency. It's a question how fast and how far people dump it.

Plus dollars contain 12 percent more fecal matter in their manufacturing process. I'm just making shit up because it's my perogative.

Sun, 09/12/2010 - 14:50 | 577011 ATTILA THE WIMP
ATTILA THE WIMP's picture

Price of gold on Sep. 10th, 2001, the day before the horrible terrible Osama bin Subcontractor attacked us because he hates our Freedom Fries: $271.50. Current price of gold: $1,249 - up 360%.

Price of S&P 500 on Sep. 10th, 2001: 1,093. Current S&P 500: 1,110 - Up 2%

This does not take into account the dividends that one would have gotten from owning the stocks but I doubt that it would make much difference. “Current” price as of 4:30 PM September 10, 2010)

Gold up 360% stocks up 2%

Comrade peasants, we have been at war with the horrible terrible Islamo-fascists for nine years. Show me one war in all history without an increase in commodity prices or without an increase in the desire for gold, just one.

Sat, 09/11/2010 - 20:36 | 576237 Boston Wealth
Boston Wealth's picture

Yeah it is the weekend!

You wanna shadow trade with us.. stocks and ES

http://www.bostonwealth.net/2010/08/15/trading-profits-of-almost-100000-in-5-weeks/

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Sat, 09/11/2010 - 20:41 | 576250 Pillage
Pillage's picture

Just a few minutes in I was surprised to hear the hyperinflation guy argue that hyperinflation can co-exist with falling stock prices. But he goes on to say people sell stocks to buy tangibles.

Sat, 09/11/2010 - 21:02 | 576279 optimator
optimator's picture

If past history is any guide, stocks move up with hyperinflation, but only for around half a year.  Stocks then lose value. 

Sat, 09/11/2010 - 20:52 | 576261 gloomboomdoom
gloomboomdoom's picture

The only reason the Argentina dollar and Soviet rubble were just devalued against the dollar,

What does the dollar devalue against? Air?

The dollar can become worthless overnight. Watch it!

They were successful in 2008 by devaluing against oil. But what happens this time? Does China or anyone else still have faith in the dollar now with the increase debt overhang?

Sat, 09/11/2010 - 20:54 | 576265 Slartebartfast
Slartebartfast's picture

All fiat currencies are merely ideas backed by confidence.  The confidence of the users of the currency that the currency they are given in exchange for their labor will be exchangeable for the product of the labor of others.

Hyperinflation is the loss of that confidence in the currency, nothing more.  Any event which convinces the users of the currency that it is no longer worthy of their confidence will trigger hyperinflation.

In a hyperinflation event the possessors of the currency frantically try to exchange it for anything of real value before the currency no longer has any value.  As Gonzalo observes, that means both hyperinflation and hyper-deflation occur concurrently.  Items necessary to survival (food, energy, etc.) inflate dramatically against the failing currency while non-essential items (large homes, fancy cars, TV's, iPads, etc.) deflate dramatically.  What is considered valuable and what is considered non-essential is entirely up to the population and may not be easily judged ahead of time.  Thus, even though money is leaking out of the system (buying oil and fighting wars) it is what is happening to the curreny that remains in the system that drives the cycle.

The currency eventually vanishes as the entire economy seeks a new model for exchange.  In Russia that meant direct barter of goods at huge weekend swap meets.  In Zimbabwe it means the economy all goes black and operates on some foreign currency.  What foreign currency will the US population accept in place of the dollar?  Maybe, just maybe, silver and gold.  Nothing else.

That is IF there is enough silver and gold on hand.  Who knows about that?  Only time will tell.

Thus economics is not a science at all, but rather only an extension of the human condition.  Eat that chartist dogs!  Just kidding.  I love all the colorful charts.

What I find most specious about Mish's argument is his belief that Govt. at all levels will suddenly become rational and will give a rats ass about doing their jobs and helping the nation to survive.  That will NEVER happen.  All those criminals and psychopaths will be thinking of until their very last moment is how to steal another handful for themselves.

Sat, 09/11/2010 - 21:17 | 576301 gloomboomdoom
gloomboomdoom's picture

Chartist= deflationist?

hmm. I never thought about that. I can see the Trend of which you speak.

Mish and Denninger show us lots of charts

Peter Schiff, Marc Faber, Jim  Rogers and Ron Paul focus on the entirety of the Macro Economic picture, long term fundamentals and history of government behavior

Tue, 09/14/2010 - 18:56 | 581937 Geoff-UK
Geoff-UK's picture

When in doubt as to what a given government will do, bet on history.

Sat, 09/11/2010 - 21:35 | 576324 Village Idiot
Village Idiot's picture

"...focus on the entirety of the Macro Economic picture, long term fundamentals and history of government behavior"

Sat, 09/11/2010 - 21:41 | 576331 enobittep
enobittep's picture

I believe we will see both in their full furry. 

Initially, we will go into a deflationary spiral.  Due to the debt binge the world has been on for the past 40 years, many many people are up to their bottom lip in debt.  They have been able to stay afloat by living off of the succession of windfalls driven by the several market bubbles that have come and gone over this same time frame.  What I remember as I have grown up in the US - childhood in Michigan and adulthood in California:

  1. Nixon suspended redemption of US Federal Reserve Notes into gold - this started the set up phase of the game.
  2. The Regan revolution - we got out from under the inflation and Charter presidency of the 70s.  TEFRA and 401ks - the stock market exploded.  Much of this growth actually had some substance as it was driven by the micro/PC computer revolution along with the tremendous growth in SW applications that made work easier and more effective. The Stock market and real estate bubble additiction began in the 80s.  The Fed has kept these bubbles growing by stepping in to keep them expanding (i.e. 87 market bounce). 
  3. I have to mention the "global economy" line of shit seperately.  I remember this as starting in the 80s.  The manufacturing engine of the US - the rust belt - was dying.  Unfortunately, we began to listen to the graduate business school professors and corporate CEOs spout this crap.  Manufacturing is dead, move all production to Asia and let them do it for 1/10 the cost.  Lets all get into higher value services where the future is.  What a line of shit. 
  4. The 90s - GWB read my lips out, Clinton in with a Republican Congress PLUS the Internet revolution PLUS Y2K PLUS stock options.  Again, this started with some substance - the Internet has been a massive productivity engine for the worldwide economy.  The afterburners kicked in with the Y2K hoax which drove the corporate world to upgrade all their technology infrastructure within a very short window of time.  Cisco an Dell's unbelievable growth in this timeframe was attributable to both the net and Y2K.  Unemployment was at an historic low, just about every stock traded was experiencing mid-double digit growth year-on-year.  What a time - Jay Gatsby would have been right at home in the 90s.  We were hooked on the drug: unbridled optimism, consumerism and debt.  Market bubble poped in 2001.  This shut down peoples stock market ATMs as well as their stock option ATMs.  Not only did the crashing markets shut off the tremendous cash flow from stock options, but the FASB began their war against them with FAS123R - eventually they won.
  5. the 00s.  What were people to do?  How were they going to continue taking those extravagant vacations and keep the newest Escalade in the garage?  The real estate market was the answer.  This bubble really started to expand and people went drunk on the cash they could pull out and spend.  I must note this run up was during a period where their was not significant driver in the economy - not PC revolution, SW application revolution, not internet, etc...   The real estate bubble finally popped in 2006. 
  6. And 4 years later here we are - awash in debt world wide.  Nothing significant on the horizon that portends hope of driving real economic growth.
  7. The elite have set us up.  We are in a liqudity trap.  People are consumig what is left of their CDs, 401ks, stock holdings, etc... to stay afloat.  Many have lost their jobs.  Many more will.  Assets will be thrown onto the markets driving down prices.  The average guy doesn't have access to the Fed discount window or loans from the bankster elite, so they have to sit back and watch the banksters and elite buy up all the cheap good assets for pennys on the dollar.  This is the deflation phase of the game.
  8. Fast forward a few years  Now that the banksters and elite have all the assets along with a ton more debt - what to do?  Hit the reset button - hyperinflation.  The elite now have their assets and no debt.  The taxpayer (thats you and me) are now serfs to the elite once again.

This is only about money to get buy in life for you and me.  To the elite, it is all about power and control over us.

Sun, 09/12/2010 - 05:55 | 576646 anonnn
anonnn's picture

Endgame? Police State. What's not to like?

Having read/scanned comments this far, amazed there has been scarce mention of fraud or justice.

 Inability to confront and handle fraud, and corollary absence of justice, is the anomaly.

I acknowledge the contributions of B9K9 and Zaknick and others in this valuable commentary. Thanks you all.

Sat, 09/11/2010 - 21:58 | 576343 bankonzhongguo
bankonzhongguo's picture

As a small business refugee, who actually has to meet payroll - something all you speculators only read about and wager; the other ticking timebomb which nobody can disarm is all the uncertainty contained in Obamacare.  HOW is this MONSTER going to impact an American family's life considering the following variables?  Under such a cloud, how could anybody grossly predict the future and hence witness all your uncertainty. 

Was this Case Study on your MBA final?  "Knowing the following, please make three princple recommendations for mid-range expectations for inflation/deflation to your board of directors for US operations."  Should your Corporation continue to operate in the United States?

Obamacare Timeline

2010
• States and federal officials review premium increases
• FDA authorized to approve "follow]on" biologics
• Increase brand name pharmaceutical Medicaid rebate (from 15.1% to 23.1%)
• Medicare payments to physicians in primarily rural areas increase (2 years)
• Deny "black liquor" eligibility for cellulosic biofuel producers credit
• Tax credits provided to certain small employers for health care]related expenses
• Increase adoption tax incentives for 2 years
• Codify economic substance doctrine and impose penalties for underpayments (transactions on/after 3/23/10)
• Provide income exclusion for specified Indian tribe health benefits provided after 3/23/10
• Temporary high]risk pool and high]cost union retiree reinsurance ($5 billion each for 3.5 years) (6/23/10)
• Impose 10% tax on indoor UV tanning (7/1/10)
• Medicare cuts to inpatient psych hospitals (7/1/10)
• Prohibits lifetime and annual benefit spending limits (plan years beginning 9/23/10)
• Prohibits non]group plans from canceling coverage (rescissions) (plan years beginning 9/23/10)
• Requires plans to cover, at no charge, most preventive care (plan years beginning 9/23/10)
• Allows dependents to stay on parents’ policies through age 26 (plan years beginning 9/23/10)
• Provides limited protections to children with pre]existing conditions (plan years beginning 9/23/10)
• Hospitals in "Frontier States" (N.D., Mont., Wyo., S.D., Utah) receive higher Medicare payments (fiscal 2011)
• Hospitals in “low]cost” areas receive higher Medicare payments for 2 years ($400 million, fiscal 2011)
22011010

2011
• Medicare Advantage cuts begin
• No longer allowed to use FSA, HSA, HRA, Archer MSA distributions for over]the counter medicines
• Medicare cuts to home health begin
• Wealthier seniors ($85k/$170k) begin paying higher Part D premiums (not indexed for inflation in Parts B/D)
• Medicare reimbursement cuts when seniors use diagnostic imaging like MRIs, CT scans, etc.
• Medicare cuts begin to ambulance services, ASCs, diagnostic labs, and durable medical equipment
• Impose new annual tax on brand name pharmaceutical companies
• Americans begin paying premiums for federal long]term care insurance (CLASS Act)
• Health plans required to spend a minimum of 80% of premiums on medical claims
• Physicians in "Frontier States" (N.D., Mont., Wyo., S.D., Utah) receive higher Medicare payments
• Prohibition on Medicare payments to new physician]owned hospitals
• Penalties for non]qualified HSA and Archer MSA distributions double (to 20%)
• Seniors prohibited from purchasing power wheelchairs unless they first rent for 13 months
• Brand name drug companies begin providing 50% discount in the Part D “donut hole”
• 10% Medicare bonus payment for primary care and general surgery (5 years)
• Employers required to report value of health benefits on W]2
• Steps towards health insurance administrative simplification (reduced paperwork, etc) begins (five year process)
• Additional funding for community health centers (five years)
• Seniors who hit Part D “donut hole "in 2010 receive $250 check (3/15/11)
• New Medicare cuts to long]term care hospitals begin (7/1/11)
• Additional Medicare cuts to hospitals and cuts to nursing homes and inpatient rehab facilities begin (fiscal 2012)
• New tax on all private health insurance policies to pay for comp. eff. research (plan years beginning fiscal 2012)


2012
• Medicare cuts to dialysis treatment begins
• Require information reporting on payments to corporations
• Medicare to reduce spending by using an HMO]like coordinated care model (Accountable Care Organizations)
• Medicare Advantage plans with a 4 or 5 star rating receive a quality bonus payment
• New Medicare cuts to inpatient psych hospitals (7/1/12)
• Hospital pay]for]quality program begins (fiscal 2013)
• Medicare cuts to hospitals with high readmission rates begin (fiscal 2013)
• Medicare cuts to hospice begin (fiscal 2013)

2013
• Impose $2,500 annual cap on FSA contributions (indexed to CPI)
• Increase Medicare wage tax by 0.9% and impose a new 3.8% tax on unearned, nonactive business income for those earning over $200,000 or $250,000 for families (not indexed to inflation)
• Generally increases (7.5% to 10%) threshold at which medical expenses, as a percentage of income, can be deductible
• Eliminate deduction for Part D retiree drug subsidy employers receive
• Impose 2.3% excise tax on medical devices
• Medicare cuts to hospitals which treat low]income seniors begin
• Post]acute pay for quality reporting begins
• CO]OP Program: Secretary of Health and Human Services awards loans and grants for establishing nonprofit health insurers
• $500,000 deduction cap on compensation paid to insurance company employees and officers
• Part D “donut hole” reduction begins, reaching a 25% reduction by 2020

2014
• Individuals without government]approved coverage are subject to a tax of the greater of $695 or 2.5% of income
• Employers who fail to offer "affordable" coverage would pay a $3,000 penalty for every employee that receives a subsidy through the Exchange
• Employers who do not offer insurance must pay a tax penalty of $2,000 for every full-time employee
• More Medicare cuts to home health begin
• States must have established Exchanges
• Employers with more than 200 employees can auto]enroll employees in health coverage, with opt]out
• All non]grandfathered and Exchange health plans required to meet federally mandated levels of coverage
• States must cover parents /childless adults up to 138% of poverty on Medicaid, receive increased FMAP
• Tax credits available for Exchange]based coverage, amount varies by income up to 400% of poverty
• Insurers cannot impose any coverage restrictions on pre]existing conditions (guaranteed issue/renewability)
• Modified community rating: individual or family coverage; geography; 3:1 ratio for age; 1.5:1 for smoking
• Insurers must offer coverage to anyone wanting a policy and every policy has to be renewed
• Limits out]of]pocket cost]sharing (tied to limits in HSAs, currently $5,950/$11,900 indexed to COLA)
• Insurance plans must include government]defined "essential benefits " and coverage levels
• OPM must offer at least two multi]state plans in every state
• Employers can offer some employees free choice vouchers for health insurance in the Exchange
• Government board (IPAB) begins submitting proposals to cut Medicare
• Impose tax on nearly all private health insurance plans
• Medicare payment cuts for hospital]acquired infections begin (fiscal 2015)

2015
• More Medicare cuts to home health begin

2016
• States can form interstate insurance compacts if the coverage with HHS approval (2016)

2017
• Physician pay]for]quality program begins for all physicians
• States may allow large employers and multi]employer health plans to purchase coverage in the Exchange.
• States may apply to the HHS secretary for a limited waiver from certain federal requirements

2018
• Impose "Cadillac tax on “high cost” plans, 40% tax on the benefit value above a certain threshold: ($10,200 individual coverage, $27,500 family or self]only union multi-employer coverage)

PS:  There may be a contraction in corporate credit and American purchasing power may decline.

Sat, 09/11/2010 - 22:04 | 576350 Spalding_Smailes
Spalding_Smailes's picture

They must delete this pile of shit ...

 

 

Sat, 09/11/2010 - 23:04 | 576431 Zero Debt
Zero Debt's picture

Cut here, fund here, got to love central planning.

Sun, 09/12/2010 - 15:39 | 577045 DoChenRollingBearing
DoChenRollingBearing's picture

Thank you, thank you, thank you bankonzh!

Now we get to see the glory of Obamacare.

I hope that we can stop this POS from ever seeing the light of day.

Excellent reporting!

+ $1240

Sun, 09/12/2010 - 15:40 | 577048 liberal sodomy
liberal sodomy's picture

I'm not signing on for this.  IRS agents are going to have short life expectancies.

Sat, 09/11/2010 - 22:05 | 576352 RobotTrader
RobotTrader's picture

Right now, inflation is winning the cage fight.

 

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