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Dylan Grice Finds Value Within The Printing Orgy

Tyler Durden's picture




 

This weekend's must read note, from SocGen's Dylan Grice - Print baby, print... emerging value and the quest to buy inflation

 

 

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Sun, 05/30/2010 - 11:43 | 382207 DosZap
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Excuse me for this lame question, as I am a dummy.

Are we REALLY printing money?.....or merely adding/extending artifical dollars?.

M3 is lower than it's been in many years................That leads to Deflation.

2/3rds of all US currency, REAL PAPER, is not even in this country...........

I am having a tough time figuring out where we're doing anything except adding Zero's to a computer screen.

As I figure, since real physical dollars are not entering the system, QE is/would simply be a matter of removal of Zero's.

Seems like this is adding Credit..................not dollars.

 

Sun, 05/30/2010 - 12:10 | 382238 sweet ebony diamond
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are you alan greenspan?

 

 

Sun, 05/30/2010 - 13:26 | 382321 spekulatn
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Dr. Ben doesn't bother with  M3 data. Too "eratic."

http://www.telegraph.co.uk/finance/economics/7769126/US-money-supply-plu...

Scary shit, I know.

 

Sun, 05/30/2010 - 16:16 | 382495 Hephasteus
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Ya weird how a bit of funky accounting can drastically affect our mythological M3. All you gotta do to retire is LIE HARDER.

Sun, 05/30/2010 - 15:14 | 382437 RockTime
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It is surprising to me that the never-ending debate about "is it inflation or deflation" does not seem to look into some basic analysis that asks a few slightly more in-depth questions:(1) inflation or deflation of what (food, fuel vs. stocks, housing, durables), and by extension for whom (2) what is the inflation rate for someone making $15,000 per year? versus $150,000 per year?

When answers to these questions are found and analyzed, the next question should be (3) so what does this mean for the future of the US (world) economy, spending behavior, etc.?  The reason why the US Gov is happily reporting benign CPI levels (apart from lying and manipulating the numbers through the Reagan-era gimmicks of "substitution", "quality adjustments", etc.) is because this is an average of an average of an average - i.e. meaningless and useless. Life is not average. If food went up in price by 20% over a period of 1 year -- someone with the income of $150,000 did not notice (the overall economy probably did not notice either) and did not care -- but someone with the income of $15,000 noticed All Right... that family or person has just gone from being able to afford meat once per week to eating it once per month or worse.

The fact that a big component of CPI - housing - went down in price due to collapsing housing prices is a great academic fact for this person or family with no real bearing on his/her every day life (unless their rent went up too). The fact that food is inflated however is a big deal and a big blow to the standard of living and future purchasing behavior.  So, the fact that some of these so called "economists" (I wish I thought of this myself and joined this absolutely useless profession which has no responsibilities and can just blabber all day long without any recourse for being wrong or right) estimate their little cozy "deflator" at 0% "on average" is as meaningless as the economists themselves at this stage. So I wish some of them raised their fat assess or maybe pulled their collective heads out of that dark hole and actually started dissecting the so called CPI (real CPI, not the US gov BS) and determine what it really means for the economy and its various sectors.

As for the M3 and the Helicopter Ben not being able to create inflation -- I disagree. The US gov is transferring astronomical amounts of money from ... the printing press (who do you think is still buying their debt?) directly to the economy in the form of stimulus, Federal and now State unemployment benefits, road constructions, etc. etc. Of course one could argue they are just barely replacing what the private sector stopped paying. No doubt - for the moment. But give them some time, and they will crank up that printer and those unemployment benefits, that cash for clunkers, and that cash for houses and washing machines, cash for this and for that in no time...

Sun, 05/30/2010 - 11:49 | 382212 Quinvarius
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Good deals get better.

Sun, 05/30/2010 - 13:37 | 382336 Flounder
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Right.  This is the sick list of stocks.  That separation from IV is there for a reason.

Sun, 05/30/2010 - 11:53 | 382214 Janice
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Orgies ~ I love zero Hedge

Sun, 05/30/2010 - 12:02 | 382224 Bob Sponge
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"When will they stop?"

I have been wondering if their goal is to create currency crises which could lead to the masses submitting to their rumored goal of a one world currency/government or at least submit to the Amero which would be a step in that direction. You need a big crisis to necessitate a big change.

Sun, 05/30/2010 - 13:26 | 382320 three chord sloth
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One big problem with that theory -- the current Euro crisis is due to forcing a one-size-fits-all currency on to somewhat diverse nations with somewhat diverse economies... and everybody knows it. To use this crisis to advance one world currency would be met with bafflement by all. The world is far more diverse than Europe, and if it isn't working there...

Brussels is much more likely to use this crisis to push for further political unification and try to grab the power to tax and make transfer payments across national boundaries.

Sun, 05/30/2010 - 13:54 | 382355 ZeroPower
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Amero in theory wouldnt be a world currency but merely for North America (CA US MX).

Sun, 05/30/2010 - 15:09 | 382435 three chord sloth
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Correct, but that would face the same problem as the Euro -- it would hurt Mexico (a la Greece, Spain, etc...). That would force Canada and America to shovel transfer payments down south.

I have no illusions... our overlords in DC would probably love that outcome, but the cat is out of the bag now. They couldn't sell it as a win-win; too many folks see what happened in Europe and would freak if that was tried here.

Sun, 05/30/2010 - 15:32 | 382460 silvertrain
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+10   the cat is out of the bag..Its a flat no go now, and like bp, they dont have a backup plan..EVERYBODY I talk to now is waking up..And like all bullies, once they get smaked back they dont know what to do..Look for all out chaos..Prepare accordingly..

Sun, 05/30/2010 - 16:08 | 382487 ZeroPower
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Yup same problems would be inevitable, you don't impose the same restrictions on so many classes of citizens without facing the consequences which we are seeing now unfold. What works for Germans had no hope of working for the Spanish or Greeks (in the long-run).

A simple economic community (as it started in the EU anyway with its EEC) is more plausible, though NAFTA is almost a good substitute for this. As soon as any mention of political cooperation would start, i believe this would be the catalyst for law makers to start subtly introducing the thought of 1 nation state across N.A.

Doubtful but, you never know. The transparency elected bullshitters give to the masses is pretty much zero.

Sun, 05/30/2010 - 16:22 | 382501 thisandthat
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Unless the actual goal is centralized economic policy/budget in view of centralized government (which both they've been crying for) and currency is just a/the tool.

Sun, 05/30/2010 - 13:27 | 382322 e1618978
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If that is the goal, they are doing a bad job.  The problems with the Euro has pretty much put a stake in the heart of any multi-country (or "one world") currencies.

Sun, 05/30/2010 - 14:57 | 382422 Bob Sponge
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I hope you are right, but....Just because something is not working well somewhere does not mean it will not be implemented somewhere else. Socialized healthcare is an example. It has never worked anywhere yet the US just implemented it.

Sun, 05/30/2010 - 12:08 | 382231 thesapein
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Why not?

Free markets are actually harder to predict, no?

Sun, 05/30/2010 - 12:46 | 382283 sawyer
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We have already experienced inflation in asset prices resulting from massive credit expansion this world has never seen before. To keep this Ponzi market going QE or additional credit expansion will have to be greater than the previous credit expansion. My belief is Governments and Central Banks will run out of time before they are able to implement any significant QE. Society (baby boomers turning savers from spenders) had enough of this credit expansion and dilution of the value of money. We will see, in the next few years, major political repercussions from the current financial crisis. 

Sun, 05/30/2010 - 14:10 | 382379 Julien
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+1

 

they are running out of time and the public will not let them print 35 trillions $ stimulus anyway

Sun, 05/30/2010 - 15:34 | 382461 silvertrain
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And this time when they try and use scare tactics to take the market down people will say, go for it, were in G O L D ....

Sun, 05/30/2010 - 16:12 | 382481 Kali
Kali's picture

lol.  I would like to see that.  Face it, all these cyber dollars don't flow to the average person.  As Bubba keeps waking up to this reality, I think more and more people will be inclined to invest in "hard" assets (food, PMs, guns, land, toilet paper, etc).  So, eventually, if not very soon, Bubba will not care if they threaten "suicide", those elite schmucks will be the only ones holding that phony wealth.

Sun, 05/30/2010 - 12:53 | 382291 bob resurrected
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Instead of a catastrophic collapse now or artificial growth by reflation: Why not print just enough to slow deflation, with no expectation for real growth in the OECD until enough deleveraging, foreclosures, bankruptcies and liquidations has been purged from the system over time? Wouldn't inflation expectations make that even easier? The great danger to this is, of course, fiscal imprudence on the part of OECD governments. But, Uncle Ben, IMF and Germany are sounding that alarm, right? With so much of government obligation indexed, wouldn't it be impossible to inflate out of this Depression anyway?

Sun, 05/30/2010 - 13:30 | 382324 exportbank
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So they report 2% inflation (and index on that) based on the fact that the RCA Victor color TV you got in 1961 cost 10 times as much (inflation adjusted) as the 42-inch you just bought - hence lower inflation. That food and every other thing you purchase daily has gone up 7% isn't material - it's that the TV is cheaper and computer memory costs less. Inflation as report by governments is a scam.

Sun, 05/30/2010 - 13:48 | 382348 thesapein
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But then there would be no point in having the dollar at all. Hard money comes with that "print just enough" feature built-in, except its "produce just enough."

Your hardline approach voids the intent of fabricating the USD.

It's honest folks like yourself that want to put an end to our double accounting party.

Sun, 05/30/2010 - 13:55 | 382356 trav7777
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Real growth?

That's the problem...you guys are always looking for a "solution" that leads right back to growth!

Growth has STOPPED and contraction is the name of the game for the foreseeable future.  Any systems, monetary or otherwise, dependent upon continuous growth to exist are FINISHED.

We are exiting the Age of Growth, and are at a significant epoch, relatively unprecedented in human history.

Sun, 05/30/2010 - 14:51 | 382417 thesapein
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i'd trade innovation for growth

Sun, 05/30/2010 - 16:07 | 382485 Kali
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I'd invest in that!

Sun, 05/30/2010 - 16:49 | 382524 anony
anony's picture

I read one  economist's take on how to grow an economy and one of the two ways he concluded was, get this:  Increase your population.  No follow up on that. The other was to increase the existing population's productivity.

I had to stop reading at that point because I figured I'm just wasting my time.

Few seem to get your point that growth has stopped. That there are not enough jobs to do, businesses to create, careers to enter into that will be able to absorb the billions, or the thought (and glaring fact) of a globe already awash in too many people.  It's as if there is a blind spot in the field of economics that does not allow for 'maintenance' as a model or possibly the opposite of growth, a withering, and therefore nothing in the field to deal with this new paradigm.  The economists are at  a complete dumbfounded loss.

Sun, 05/30/2010 - 18:32 | 382644 Mr Lennon Hendrix
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+1

Mon, 05/31/2010 - 09:59 | 383432 Crime of the Century
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Kondratieff Winter...

Sun, 05/30/2010 - 14:02 | 382373 snowball777
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You've presumed that they can 'print just enough' to combat the debt deflation from a 3-decades-in-the-making credit bubble and somehow clear 1 in 10 mortgages without a collapse. We already have more residential RE in the hands of banks than in the hands of citizens.

Inflationary expectations only help when the choice is between buying/investment and saving, not when credit is nowhere to be found, period.

Fiscal prudence may be beneficial to limiting inflation, but would cause higher unemployment and slower growth (watch the effects of 'austerity' on Greece's GDP over the next decade).

I think your plan would get you a slowly building stagflation at best.

 

Sun, 05/30/2010 - 15:18 | 382445 bob resurrected
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I am presuming a lot, that is for sure.

Fiscal hawk, monetary dove.

Fiscal prudence not to limit inflation, but to keep the bond vigilantes away.

Printing enough to keep the system functional while it clears, and no more.

Is there any way of avoiding higher unemployment and slower real growth, no matter what we do? Just trying to figure out the least of evils. And, naive or not, hope that path is chosen.

Sun, 05/30/2010 - 20:32 | 382773 StychoKiller
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After "Adjusting" CPI figures, and other lies upon lies upon lies, just where is the target?  You give Govt too much credit if you think they have any inkling on what to do at this juncture!

Sun, 05/30/2010 - 14:06 | 382364 Cyan Lite
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They may be "printing" money, but it's NOT getting past the large commercial banks.  Look at the reserves of the large banks, it's exploding to the upside.  The newly printed money needs to reach consumers before it has a chance to make a difference.  

Sun, 05/30/2010 - 14:16 | 382386 Julien
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thoses banks building reserves for their "new start" when they will restructure their debts

Sun, 05/30/2010 - 15:15 | 382441 Spitzer
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Not true. Everything the Fed or the banks buy puts real money in the hands of sellers. That includes treasurys.

Sun, 05/30/2010 - 17:27 | 382585 snowball777
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Does that include the toxic sludge sold by the banks TO THE FED?

Sun, 05/30/2010 - 20:16 | 382749 Onehunglow
Onehunglow's picture

Eventually the money will get past the large commercial banks. Helicopter Ben will fight deflationary pressures tooth and nail. As we enter a deflationary death spiral he will go nuclear with the printing presses. Also the only way out of our massive debt is default or inflation with the later being my bet for the choice they will make. If BSB goes nuclear with the presses the money will get into circulation and hyperinflation will ensue. Just my .02

Sun, 05/30/2010 - 14:03 | 382374 Sudden Debt
Sudden Debt's picture

HE TYLER! Monday news:

France Francois Baroin, minister of finance says that keeping France's AAA rating will be very challenging in the near future:

http://babelfish.yahoo.com/translate_url?doit=done&tt=url&intl=1&fr=bf-home&trurl=http%3A%2F%2Fwww.slimbeleggen.net%2F&lp=nl_en&btnTrUrl=Translate

http://www.slimbeleggen.net/

http://www.reuters.com/article/idUSTRE64R35J20100530

Sun, 05/30/2010 - 14:19 | 382389 Flounder
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Contacted by Reuters, the Budget Ministry later clarified that the target was "a demanding (objective) which we're committed to."

http://abcnews.go.com/Business/wireStory?id=10783219

Move along now...nothing to see here.

Sun, 05/30/2010 - 15:03 | 382428 Trichy
Trichy's picture

And then you wonder why France wants to bail out those already in the shit?!?

Sun, 05/30/2010 - 15:17 | 382444 Spitzer
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The french and germans are fools, they should have let Greece et al fail and then bail out their banks.

Sun, 05/30/2010 - 14:58 | 382423 Trichy
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The only thing I read out of his chart dating back from the stone ages was that every time we have a rise in inflation it is followed by a major war.

Please keep on thinking equities are cheap!

Sun, 05/30/2010 - 15:33 | 382457 Oracle of Kypseli
Oracle of Kypseli's picture

When you print print print, something has to give. Food, Precious Metals, Agri-Land, fuels and good artworks, must go up.

Why is it that when governments print the money only goes to banks?

Yes. Some of it goes to unemployment benefits, food stamps, which is for the working class and maybe lower middle class. But how about some government loans for small business to stimulate employment and Made-in-America goods? That will accelerate the velocity of money and thus accelerate the recovery. The banks bury the money.  

 

   

Sun, 05/30/2010 - 15:44 | 382468 Kimo
Kimo's picture

This is play from Goldie's own book.  Undervalued equities?  Sure.  SG is looking for someone to take the other side of their sell trade.

Sun, 05/30/2010 - 22:32 | 382929 cymro33
cymro33's picture

BP is in there and he has a boatload of this shit company to sell us!

Sun, 05/30/2010 - 21:46 | 382877 Troublehoff
Troublehoff's picture

GDP and thus 'growth' is any old bullshit that involves passing money back and forth regardless of value..

I could buy sweet FA off my friend for a dollar 1 million times and he could buy it back 1 million times. Look! 2 Million dollars of GDP.

What the growth is doesn't really matter economically, our standard of living as measured in terms of human happiness could decline just as long as this bullshit fractional reserve, Keynesian nightmare is perpetuated :(

Mon, 05/31/2010 - 11:30 | 383672 jmc8888
jmc8888's picture

So the psychopaths think the soverign debt crisis is a perfect opportunity to 'be first in'.  Sad.  Push everything over the cliff, stocks will only go up.  Print as much money and bailout every nation.  It will only push prices up, and thus our bets.  What idiots.

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