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Gonzalo Lira vs Rick Ackerman: "Slicing Up" The Logic Behind The No-Hyperinflation Argument

Tyler Durden's picture




 

Submitted by Gonzalo Lira

Talk About A Big Gap In Logic!—Slicing Up Rick Ackerman

So Rick Ackerman posted a piece that I spotted on Zero Hedge—which surprised the hell out of me. Either Tyler and his gang of merry pranksters are losing their nerve about the downward trajectory they think the U.S. economy and monetary policy is headed in—or they ran the piece for shits and giggles.

Ackerman’s piece said, in effect, that dollar hyperinflation was
impossible. His post was titled “Big Gap in Logic Weakens Hyperinflation
Argument”.

I’ve got a rep for being a hyperinflationist—which isn’t exactly true:
I’m a dollar hyperinflationist, but a euro deflationist. A friend called
me an economic agnostic, which is pretty accurate (and kinda cool,
actually): I look at the data, look at the political realities
influencing macro-economics, look at the arguments, then make up my
mind, regardless of what the various sects of the religion known as
Economics deem orthodox.

I suppose my heterodoxy comes from my education: I was trained in
philosophy, with emphasis in epistemology (theories of knowledge),
Hegel’s political philosophy, and formal logic. That background makes
you not want to join a crowd—any crowd. And it makes you willing to
question even your most prized assumptions.

So when Ackerman said he had proof positive that hyperinflation in
America was impossible—that he had, as he claimed, found a “big gap in
logic”—I was like, “Cool: Show me.”

So Ackerman . . . well, he tries. In his piece, he writes:

Hyperinflation occurs when people,
fearing their money is about to become worthless, panic out of currency
and into physical goods. This is highly unlikely to happen in the U.S.
for several reasons, to wit: 1) Whereas Germany’s hyperinflation took
several years to ramp up, today’s financial markets are primed for a
catastrophic collapse that could conceivably run its course in a week,
if not mere hours; 2) under the circumstances, there would be no
shifting of financial assets into hard goods simply because any
financial assets one holds at the time of the collapse would become
worthless before one could sell them; and, 3) at that point, there would
be insufficient currency available to drive a hyperinflation, since
mattress money is likely to be scarce and because branch banks keep only
about $25,000-$50,000 in cash on hand. All of which implies we will go
straight to deflation without the emancipating, hyperinflationary
interlude that some mortgage debtors might be hoping for. 

Then Ackerman adds:

My argument is simple, and I will not yield ground to any
hyperinflationist who fails to explain, if the system collapses, where
the money will come from to bid tangible assets skyward. 

For
situations like this, never use a hatchet to chop somebody down—always
use a long, fine, sharp knife. After all, you don’t gut a fish with a
hatchet—you have to slice it up thin as a ribbon. And for that, you need
a long, fine, sharp knife . . .

To begin: Ackerman’s argument in the above paragraph looks like a valid argument—only it’s just not sound.

Sorry to get all philosophy geek-speak—let me quickly explain: The
classic deductive argument “All men are mortal, Socrates was a man,
therefore Socrates was mortal” is both a valid argument (in that the premises follow one another to the conclusion) and a sound argument (in that each of the premises is true, and therefore the conclusion is true).

But the argument “All toilets are television sets, all television sets
make you stupid, therefore using the toilet makes you stupid” is an
example of a valid argument that is unsound: The two premises lead to
the conclusion, even though all the statements are false. (FYI: An
unsound argument can arrive at a true conclusion. For instance, “All
parrots are a type of beaver, all beavers have wings, therefore all
parrots have wings.” Such an argument—though it arrives at a true
conclusion—is an unsound argument, and therefore fails.)

Ackerman’s “argument” is completely unsound: Once you begin to unpack it, it’s really quite obvious.

His very first sentence which he uses to set up his
argument—“Hyperinflation occurs when people, fearing their money is
about to become worthless, panic out of currency and into physical
goods.”—is actually more or less correct—but only insofar as the end
stages of hyperinflation are concerned. And this fleeing from the
currency is not the cause of hyperinflation—it’s merely an
effect, when the population as a whole has realized that the jig is up,
with regards the currency. 

The cause of hyperinflation is always the same:
Spiralling prices that cannot be reigned in with traditional monetary
policies of interest rate hikes. But Ackerman doesn’t see this: In his
piece, it’s clear he doesn’t realize hyperinflation is an effect of rising prices. Eventually people
realize the money itself is to blame—but only eventually, at the end.
That’s why Ackerman’s first sentence sort-of makes sense, but not
really.

But although Ackerman is partly right in the first sentence, his second
sentence? That it’s “highly unlikely that this will happen in the United
States”?

Brother, a panic in the dollar that leads people to exit it for
commodities has happened already—and not that long ago: In 1979-’80,
when inflation crossed the double digits but before Volcker slammed the
brakes via interest rate hikes, people were beginning to get out of the
dollar and into anything else, especially commodities, especially gold
and silver.

But be that as it may, Ackerman goes on with his “argument” and puts up
his first premise: “1) Whereas Germany’s hyperinflation took several
years to ramp up, today’s financial markets are primed for a
catastrophic collapse that could conceivably run its course in a week,
if not mere hours.”

The reference to Germany is of course the Weimar Republic. Ackerman has a
handy list included with his piece, showing the price of gold in German
marks from January 1919 to November 1923. Let me reproduce his list: 

Right away, his own chart betrays him: The charts that he cites says
that gold went from 170 marks per ounce in January 1919 to 499 marks in
September 1919—that’s a trebling of its price, a 200% rise in nine
months. Repeat after me: Triple in price in nine months. Then by
January 1920—a mere three months later—the price of gold had trebled yet
again. Weimar was able to hold off more hyper-i during 1920—call it a
pause in the moonshot—but by 1921 it was off to the ionosphere: Gone,
baby, gone.

“Several years”? By Ackerman’s own data, Weimar Germany’s slide into hyperinflation started the second the Great War ended.

(By the way, deflationistas always point solely to Weimar Germany, as if
it were the only country to have ever experienced hyperinflation. Or
rather, as if the Weimar experience is the only way by which
hyperinflation can happen. Very irritating. That’s like saying that
there is exactly one and only one route from Los Angeles to New York, a route that necessarily passes through Miami—patently untrue. But I digress.)

In Ackerman’s first “premise”, the Weimar reference is actually a
subordinate clause to the whopper he springs on us, the poor reader:
“[T]oday’s financial markets are primed for a catastrophic collapse that
could conceivably run its course in a week, if not mere hours.”

Who says this? How is this very wild conjecture—nay, this very wild guess—suddenly a statement of fact? Last I checked, in the Global Financial Crisis of 2008—the last real market panic—the fall took about six to eight weeks: And that was a full-on, the-world-is-ending—save-yourselves-now!
panic with a capital-P—a panic to put hair on your chest, especially as
that particular panic was outfitted with all the latest technological
trimmings of high-speed trading and various computer accesories. And it
still took about six weeks, from peak to trough (depending, of course,
on where you set the interim peak).

Ackerman boldly—and without a shred of proof or even a modicum of
evidence—claims that the “financial markets are primed for a
catastrophic collapse!” Okay, there was no exclamation mark in his
original piece—but there might as well been one. Such an inflamatory
premise begs at least some proof—some reasonable argumentation.

Alas, there is none. And since Ackerman’s entire argument rests on this particular . . . creative outburst if you will, then the rest of his argument pretty much goes out the window right here and now.

Even if we grant that Ackerman is somehow right about this baseless,
brazen claim, we have to ask the obvious: How is a market crash relevant
to hyperinflation? What—if stocks fall you can’t have hyperinflation,
or vice-versa? Because that is simply, empirically not true: I can point
to three separate cases of hyperinflation—Chile in ’73, Brazil in the
’90’s, Argentina in 2001—where the stock markets all collapsed, even as
hyperinflation was rampant. Ditto with real estate—here I explained how housing prices can collapse even in the midst of high- or hyperinflation.

That pretty much gives lie to Ackerman’s seemingly formidable paper-tiger premise one.

So let’s go on to his second premise—to quote: “2) under the
circumstances, there would be no shifting of financial assets into hard
goods simply because any financial assets one holds at the time of the
collapse would become worthless before one could sell them.”

Ackerman is supposed to be a trader—or at least someone who teaches
people how to trade. (Those who can’t do . . .) Anyway, as any trader
knows, no asset—be it stocks or bonds—suddenly has a valuation of zero.
It might well trade all the way down to zero—but it takes time, because
even if an asset is suddenly discounted by, say, 20%—rather, especially
when an asset is suddenly discounted by a big double-digit chunk—there
are always buyers who think that this drastic fall is a momentary panic,
and that the asset will rebound.

Great traders have met their ruin, chasing a market to the bottom.

By the way, practical experience shows that what Ackerman is positing
simply isn’t true: Even when a specific stock collapses—say because a
teetering company didn’t get FDA approval for some crucial drug, or
because a seemingly solid company was discovered grossly cooking its
books—there are always traders willing to take on the asset, even as it
slides all the way to zero. And that slide is never instantaneous—it
always takes time.

So premise 2? Fuhgedaboudit!

Finally, Ackerman hits us with this whopper: “3) at that point, there
would be insufficient currency available to drive a hyperinflation,
since mattress money is likely to be scarce and because branch banks
keep only about $25,000-$50,000 in cash on hand.”

My knife-hand is dithering: Where to begin to slice! Where to begin to slice! 

First off, to dispute an obvious error of fact: As anyone with even a
passing knowledge about commercial banking knows, most branches carry
$200K to $1 million in cash—and that’s the small branches. For crying
out loud, the lobby ATM carries a hundred G’s, easy.

Second, the amount of currency in circulation is not the issue, in a
hyperinflationary crisis: It’s how hot that cash becomes to its holders.

Thirdly—and most importantly—hyperinflation is a pricing issue: Prices are rising
in hyperinflation (obviously), so buyers have to find the cash to buy
what they need. If food for your family goes up from $1,000 a month to
$5,000 a month, by golly you’ll find the money somewhere—and if you have
to sell your $20,000 Harley Davidson for a paltry $2,000 in order to
get cash to buy groceries? Well, you’ll do it, of course: You can’t eat a
Harley, but you sure can starve to death.

Ackerman’s premise 3? Unsound.

So to recapitulate: Ackerman’s argument is: 1) There’s going to be a
sudden collapse of all financial markets, all of them happening
simultaneously and instantaneously. 2) The collapse will be so sudden
and complete that no one will have time to exit financial assets and
find safe haven in commodities or other hard assets. 3) There simply
won’t be enough money to make hyperinflation possible, because banks
don’t have that much cash.

Strictly speaking, of course, this isn’t an argument: This is just a
series of premises without a conclusion. The conclusion Ackerman does
posit in his post, as I quote above—“[W]e will go straight to deflation
without the emancipating, hyperinflationary interlude that some
mortgage debtors might be hoping for”—does not at all follow from these three premises: First of all, these three premises don’t argue for deflation—they just argue against hyperinflation. So the first part of his conclusion is invalid from the premises he presents.

And even if we allow for the weaker, implicit conclusion that Ackerman
is positing—“There will never be hyperinflation in America”—it’s not at
all clear that that follows from these three premises he presents.

Besides, these three premises are all incorrect, as I think I’ve shown.

Notice, by the way, that Ackerman doesn’t present an argument for
deflation: He just claims at the last minute, “No
hyperinflation—therefore deflation!” But that’s no argument—that’s
simply a false dichotomy that is demonstrably untrue. After all, you can
have an economy where there is neither deflation nor
hyperinflation—obviously. But Ackerman seems to think that “proving”
hyperinflation can’t happen is the very same thing as proving deflation will happen—which is of course nonsense.

I had the privilege and pleasure of arguing with Nicole “Stoneleigh” Foss about deflation. I didn’t agree with her, but at least she had an argument for her position. But Ackerman has none—and really doesn’t have an argument against hyperinflation either, as I think I’ve shown.

Ah, but Ackerman does throw down a gauntlet at the end of his
piece. He wrote, as I quoted above: “My argument is simple, and I will
not yield ground to any hyperinflationist who fails to explain, if the
system collapses, where the money will come from to bid tangible assets
skyward.”

Apart from the obvious fact that he presented no sound argument against hyperinflation—or even a valid argument—the
answer to his “challenge” is simple: The money will come from the
Federal Reserve by way of the Federal government.

In fact, the money is coming right now from the Federal Reserve to the wider economy, by way of the Federal government’s spending.

As I have shown elsewhere—and this isn’t controversial or anything
anyone seriously debates—the Fed is monetizing roughly 50% of the
Federal government’s FY 2011 deficit by way of QE-lite and QE-2. That’s roughly $100 billion a month that the Fed provides, $75 billion of which it is printing out of thin air.

The Federal government needs this money printing—as I’ve said
repeatedly, Washington is a junkie, and the Fed is its friendly
neighborhood dealer. Washington can’t afford to go off the horse—the
Federal government would go broke if it did. Broke as in bankrupt—broke as in full government shut-down. Broke as in no more money to pay for entitlements, the military, or regular government services.

Broke as in broke.

Think it through: If the Fed suddenly cut off it’s $100 billion monthly
purchases of Treasuries, where would the Federal government get its
funding? From China? They’re selling Treasuries and getting into
commodities. From Japan? They’ve got Fukushima to deal with. From
Europe? They’ve got Portugal on deck, Spain and Italy warming up.

There’s no one to buy the massive amounts of Treasuries the Federal
government needs to sell in order to fund its deficit. The Federal
Reserve is the Treasury Department’s buyer of last resort. Scratch
that—buyer of only resort.

That’s why QE-2 will never end, come June when it’s supposed to
end—it’ll just keep on going: The Bernank and the Fools at the Fed will
just keep on printing money, month after month, propping up a literally
bankrupt government, because they have no other choice.

This bankrupt government, of course, will spend this money—it’ll get
this paper from the Fed, and then go pump it out into the wider economy:
And this is how the Federal government will be helping to raise prices
across the whole economy. That $800 billion that the Fed is printing out
of thin air, and then ramming up the economy? That $800 billion of new
money—which is close to 6% of total GDP? That is what is bidding up stuff.

That is where the money is coming from right now. And that is how prices will rise—are rising right now.

And that is how I answer Ackerman’s “argument”, and his challenge: That is how we will get hyperinflation.

If you’re interested, you can check out my recorded presentation, “Hyperinflation in America”, where I discuss the specifics of how I think the dollar will crash. 

My!, but that was a delightful meal! Been a while since I had fish.

 

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Tue, 04/05/2011 - 13:31 | 1137724 I Am Ben
I Am Ben's picture

Hyper-what now?

Tue, 04/05/2011 - 14:18 | 1137898 Hard1
Hard1's picture

-All that glitters is not gold.

-Gold glitters

Therefore gold is not gold

(Is that a sound argument Gonzalo?)

Tue, 04/05/2011 - 14:26 | 1137959 CrockettAlmanac.com
CrockettAlmanac.com's picture

"All that glitters is not gold," means that not all glittering things are gold. It does not mean that nothing that glitters is gold as you seem to interpret the statement.

Tue, 04/05/2011 - 14:55 | 1138006 Hard1
Hard1's picture

Dude... you seriously need to lighten up. I obvoulsly understand the sophism in my argument, you don't seem to understand something that us humans call a joke. Or did you really think that I just convinced myself through logical steps that something is not itself?  You can stop scanning the news and go back to trading Mr. Algo.

Tue, 04/05/2011 - 15:49 | 1138294 CrockettAlmanac.com
CrockettAlmanac.com's picture

Elaine - Well you don't have to dissect if you can just tell me why this is suppose to be funny?

Mr. Elinoff - Ha! It's merely a commentary on contemporary mores.

Elaine - But what is the comment.

Mr. Elinoff - It's a slice of life.

Elaine - No it isn't.

Mr. Elinoff - Pun?

Elaine - I don't think so.

Mr Elinoff - Vorshtein?

Elaine - That's not a word. You have no idea what this means do you?

Mr Elinoff - No.

 

http://www.youtube.com/watch?v=g_4M1Tz_SdM

Thu, 04/07/2011 - 08:49 | 1144727 dirtydog
dirtydog's picture

Whoosh.

Tue, 04/05/2011 - 14:40 | 1137900 Hard1
Hard1's picture

(deleted double post)

Tue, 04/05/2011 - 14:22 | 1137931 sdmjake
sdmjake's picture

"In a social democracy with a fiat currency,
all roads lead to inflation."

 —Bill Fleckenstein

Tue, 04/05/2011 - 14:51 | 1138057 falak pema
falak pema's picture

then to monetary over-dissipation which leads inevitably to deflation... as we saw with John Law...

Tue, 04/05/2011 - 15:23 | 1138197 Pladizow
Pladizow's picture

"There will come a time when a person who finds a penny in the street, wonders whether it was a dime when someone dropped it." - James Dines.

Tue, 04/05/2011 - 14:23 | 1137935 financeguru500
financeguru500's picture

You know what's funny?

Many people in the U.S. don't even realize how much control we have over things like the price of oil. If you even mention that people should consider being responsible about their personal fuel usage they quickly reply back how it's their God given right to use however much fuel they feel like using.

Consider this for a moment. If every driver in the U.S. could cut their gasoline usage by 1/3rd each day, we could cut U.S. oil consumption by 3 million barrels. That would be enough of a cut to start bringing the price of oil back down. Considering the U.S. consumes around 18-19 million barrels of oil each day and world oil production is around 80 million barrels per day 3 million barrels is a lot. Roughly 4% of world oil production. If every driver ocould cut fuel usage by half each day it would be roughly 4.5 million barrels or almost 6% of world oil production. Imagine if all the sudden there were an extra 4.5 million barrels of supply sitting around each day. That is a huge amount of oil and the price of oil would plummet. We could see $1.50 gasoline again.

The impact that the U.S. citizens have is tremendous. We are the largest consumer of oil in the world and we have the chance to change prices for ourselves. Rather than trying to hold politicians accountable we need to hold ourselves accountable. This bull crap about God given rights to consume as much as possible will result in unaffordable gas pretty soon.

I know no one will care about what I say and there is no way to change the U.S. citizens to think about things like this. But I just wanted to bring up that it is under our control and we can make a difference.

Tue, 04/05/2011 - 14:32 | 1137985 I Am Ben
I Am Ben's picture

 

All is under control. Carry on.

Tue, 04/05/2011 - 15:43 | 1138295 DoChenRollingBearing
DoChenRollingBearing's picture

FOFOA just picked apart Ackerman too at his latest post.

fofoa.blogspot.com

Wed, 04/06/2011 - 02:49 | 1139930 Heavy
Heavy's picture

He did more than pick him apart, he wrote something highly educational which everyone reading this should read immediately.  I sent it to everyone I know as soon as I was halfway in.  Very to the point and a very sharp point at that.

Tue, 04/05/2011 - 14:46 | 1138034 Arthor Bearing
Arthor Bearing's picture

You are entirely correct. I only reply to emphasize one thing you said, that it's time to stop trying to hold our politicians accountable. They're not accountable. We cannot count on political solutions, nor should they even be attempted at this point. It's up to us as individuals to try to structure our lives in a sustainable and responsible way. The politicians and most people will stand in our way for a long time but once they begin to understand how high the stakes are everyone will figure out ways to drive less (e.g. bring jobs back to local communities to end the commute) and consume less (backyard gardens in suburbs, for one thing). I'm gonna spoil the ending: good wins out over evil.

Tue, 04/05/2011 - 15:57 | 1138351 NotApplicable
NotApplicable's picture

Amen! Politics (and political "solutions") are evil. The only solution for us (as individuals) is to stop feeding the beast with our support.

I'm going to unspoil your ending: there is no end, but rather a constant vigilance to be maintained (in the form of education) to ensure evil is not given free reign by becoming yet again empowered via an institution of control.

Freedom is the answer! Now what was the question?

Tue, 04/05/2011 - 16:57 | 1138555 Dental Floss Tycoon
Dental Floss Tycoon's picture

+++++

Tue, 04/05/2011 - 14:58 | 1138084 Abitdodgie
Abitdodgie's picture

Every year in the western world 4-5 million drivers get of the road , however in the developing nations ,China, India, etc 40 million drivers take to the road per year , so it is of little consequence what the western world does now .

Tue, 04/05/2011 - 15:04 | 1138119 Flakmeister
Flakmeister's picture

All fine and dandy.... price goes down and people say, hey I can drive more because it is cheaper...  Do you still write letters to Santa?

Tue, 04/05/2011 - 15:12 | 1138149 Arthor Bearing
Arthor Bearing's picture

But once prices rise people will find ways to get along without it. I don't usually recommend drugs for people's problems but you might benefit from Valium

Tue, 04/05/2011 - 15:21 | 1138185 Flakmeister
Flakmeister's picture

Naw... am partial to cannibis though.

We will see how America deals with $6 then $10 gas.... The kicker is that any demand destruction here is more than compensated by increased demand elsewhere. The US no longer drives global oil demand...

Tue, 04/05/2011 - 15:28 | 1138225 Arthor Bearing
Arthor Bearing's picture

"partial to cannibus" that makes two of us mein freund 

Wed, 04/06/2011 - 00:59 | 1139817 baby_BLYTHE
baby_BLYTHE's picture

x3!

Wed, 04/06/2011 - 02:55 | 1139940 Heavy
Heavy's picture

You know what pitchforks are good for right?  (other than improving governance by improving governments) ...Pitching weed into the new American economy by the shovel full!  Selling pitchforks here!!!  (for silver)(not selling weed because the price is set to drop (relative to silver), can I somehow short weed...never mind that does not seem ethical...)

Tue, 04/05/2011 - 15:26 | 1138212 Pladizow
Pladizow's picture

Yeah, and IF my aunt had nuts she'd be my uncle.

Tue, 04/05/2011 - 16:28 | 1138447 Flakmeister
Flakmeister's picture

If your uncle had that rack, I'd wish he were my mother...

Tue, 04/05/2011 - 15:38 | 1138270 Banjo
Banjo's picture

I assume by "we" cut our consumption by 1/3rd each day, you mean "we" the people.

I would be intrested in breaking down how much oil is used by

  • Industry
  • Government including Military
  • Private i.e. "we" the people.

In the private section can you find the spectrum of people in the 20% that control 80% of the nations income and wealth and contrast their fuel consumption against the remainder of the population the 80% or roughly 240 million people that control 1/5th of the nations wealth.

Then run fuel and oil reduction numbers.

I am guessing that most of these lower income and asset holding American citizens take less vacations (especially involving airline travel) and they probably don't spend and extra 30% of fuel driving for the sake of driving after all you do have to get to work to pay the bills, I would guess they have less fuel consuming toys like, boats, jets, sports cars etc..

It would be an interesting data series to filter out and examine.

 

Tue, 04/05/2011 - 16:44 | 1138493 DoChenRollingBearing
DoChenRollingBearing's picture

Yesterday here at ZH there was an article that had a pie chart showing that the bottom 80% held only 7% of the nation's wealth.

The top 1% held something 40% plus.

Anytime something like this that is so much more extreme than the ubiquitous 80 / 20 rule is a sign of trouble ahead.

Wed, 04/06/2011 - 12:51 | 1141509 Huskybritches
Huskybritches's picture

How would one go about cutting fuel consumption by 1/3 if all you do is drive to and from work every day?  Would you park your car on the side of the road when you're 2/3 of the way to your destination?  Furthermore, how would one cut it by half?  Would you drive to work and walk home, then the next day walk to work and then drive home?

Tue, 04/05/2011 - 15:03 | 1138114 Manthong
Manthong's picture

Hedge your bets.. Hyper-Stagflation.

Best protection is a diversified portfolio; Ag, Au and Pb.

Tue, 04/05/2011 - 16:46 | 1138497 DoChenRollingBearing
DoChenRollingBearing's picture

+ $39

+ $1450

+ 9 mm

+ 7.56 x 39

Tue, 04/05/2011 - 17:35 | 1138670 HK
HK's picture

I saw the chart yesterday and meant to comment.  Let's say those are dollars instead of marks.  In Jan 1921, gold was at $1349, similar to today.  Less than 3 years later, it was at $87 trillion dollars.  Imagine that, we'd all be rich!  (sarc/off)

 

Yes, I understand that the ounce of gold would buy a nice suit in either case, but can you even fathom the surrealness of that sort of situation?  I mean, what comes after a trillion, because 12 ounces would get you there.

Sat, 04/09/2011 - 18:53 | 1153976 Banjo
Banjo's picture

The thing is if you have gold you have a "real" store of value.

You may or may not be rich it depends on what you can "exchange" it for.

There is the story of a German bellhop and this may be pure BS however it was crazy times and people were desperate.

http://www.gold-eagle.com/editorials_00/morgan120800.html

The combined money supply rose from 12 billion marks to 63 billion marks during the war. Prior to the hyperinflation of Weimar Germany a bellhop was given a gold coin as a tip. He saved this coin (Gersham's law) and continued about his business. During the worst of the hyperinflation this same bellhop bought the entire hotel at which he was once employed, for that same gold coin he had saved earlier.

Tue, 04/05/2011 - 17:37 | 1138675 goldsaver
goldsaver's picture

+ 7.56 x 39

DoChen... did you mean 7.62 x 39? Unless you are into some serious handloading and bullet casting.

Tue, 04/05/2011 - 13:34 | 1137743 disabledvet
disabledvet's picture

"Cats and dogs living together.  TOTAL CHAOS!  But you Lenny..you could be saving the lives of a MILLION REGISTERED VOTERS."

"Get that guy outta here."

Tue, 04/05/2011 - 13:35 | 1137745 Pladizow
Pladizow's picture

Wher u bin, Lira?

Tue, 04/05/2011 - 14:53 | 1138065 falak pema
falak pema's picture

he can be excused...he's been looking at your boobs too long!

Tue, 04/05/2011 - 13:38 | 1137752 jswede
jswede's picture

you're.  so.  freaking.  wrong.

promise to come back here by the end of the year -- after all, you guaranteed hyperinflation in America by the end of 2011.

Tue, 04/05/2011 - 13:51 | 1137806 Popo
Popo's picture

I hope Lira likes the taste of crow.

Tue, 04/05/2011 - 14:14 | 1137899 MachoMan
MachoMan's picture

I asked him to make a falsifiable hypothesis and here she is:

http://www.zerohedge.com/article/guest-post-hyperinflation-part-ii-what-...

Methinks MushyMan has lain down the gauntlet? I doth think he has!

 

I already said what I think will happen, but I have no problem saying it again: A Treasury bust and subsequent run to commodities, sparking hyperinflation, before the end of 2011—but very possibly this coming Fall. 

 

See, I got balls and a big ol' cock-ring wider than a silver dollar, and have no problem showing them off. 

 

Any questions?

 

GL

 

Tue, 04/05/2011 - 15:03 | 1138112 pazmaker
pazmaker's picture

Thanks Machoman.  One must be accountable for their words.

Tue, 04/05/2011 - 17:43 | 1138689 goldsaver
goldsaver's picture

You do realize that there are 9 more months this year.... right? Claiming victory the first inning is not wise grasshopper

Tue, 04/05/2011 - 21:03 | 1139347 Metropolis_Minx
Metropolis_Minx's picture

Last time I looked, it was only April of 2011. Lira has months to be right or wrong.

Tue, 04/05/2011 - 13:38 | 1137754 Tense INDIAN
Tense INDIAN's picture

we are so close to trend lines::

 

http://markettechnicals-jonak.blogspot.com/

Tue, 04/05/2011 - 13:40 | 1137765 LawsofPhysics
LawsofPhysics's picture

This "flation" debate goes nowhere.  All that matters is buying power.  Some will have it and some won't.  It does not matter if we are talking about individuals or companies.  What is coming is beyond both inflation and deflation.

 

hedge accordingly.

Wed, 04/06/2011 - 03:13 | 1139953 Heavy
Heavy's picture

Try taking out "buying"...in order to shorten to "power".  And, after some additional improvements, we have:

"The 'flation' debate only leads us to views of the void.  All that matters is power.  Some will have it some will not.  Individuals, corporations, bankers, IMF, BIS... all, in the end, are held in the firm grip of physics.  What is coming is beyond any of us.

Act accordingly..."

 

There...that should be pretty junk proof... :-)

In the long term, Power=Energy=Electric&Oil  Have a nice day.

Tue, 04/05/2011 - 13:43 | 1137772 lieutenantjohnchard
lieutenantjohnchard's picture

not sure who is right. therefore i buy silver. thus all silver is right. or something like that.

Tue, 04/05/2011 - 13:44 | 1137774 hannah
hannah's picture

who cares if we have hyperinflation for a month and then a depression for 100 years....i call that a depression.....we cant have hyperinflation for a long period of time. oil goes to $200 and we crash into a depression.

i dont get what the arguement is...?

 

Tue, 04/05/2011 - 13:49 | 1137788 spiral_eyes
spiral_eyes's picture

you can very easily have a hyperinflationary depression. what counts is the quantity of money weighed against goods and productivity. keynes' dogma will keep the fed pumping and dumping through a depression to "raise aggregate demand".

Tue, 04/05/2011 - 19:00 | 1138972 hannah
hannah's picture

you didnt 'say anything'...? printing money doesnt raise demand...that is stupid. we have record suppies of oil yet oil is up in price because of speculation...not supply and demand. you cant bump up demand with money printing.

Tue, 04/05/2011 - 19:57 | 1139156 Flakmeister
Flakmeister's picture

Quit your fixation on Cushing....Cushing is a pimple on the ass of the oil market now

Tue, 04/05/2011 - 13:43 | 1137777 jkruffin
jkruffin's picture

Hell YEAH!!  Where do I sign up?  Check out this email I just got! Oh Daddy! It's bad when they are spamming food stamps.  WTF is wrong with this country?

 

JXXXX,

President Obama's new budget, released last month gives 11% more money for SNAP (Supplemental Nutritional Assistance Program), the new name for Food Stamps.

With 1 in 8 adults, and 1 in 4 children now depending on Food
Stamps, this is great news
. It's also easier to get your benefits.

A report out by the Food Research and Action Center last week showed that in some areas of the country, more than 1 in 4 people are going hungry because they can't afford food. This is unnecessary since In some states, only half the eligible people are receiving this important benefit. If you need food money, continue reading.

In the past, applicants were asked to register and return the following day just to get an application. Today, state governments are making application processes faster, to accommodate more people who are asking about food stamp benefits.

Can anyone qualify for food stamps?

As a rule, a United States resident or a person who has non-resident status but has a Social Security Number is qualified to apply for food stamps. Qualification is also based on the family’s annual income. Other guidelines may differ from state to state.

Generally, the new SNAP program will pay more benefits. For example, a family of six previously receiving $250 a month may now be eligible for $606 a month.

Go to this page to find an office in Waldorf and download your application for Food Stamps. fns.usda.gov/snap/outreach/map.htm

The average benefit in the latest period reported is $101 per person, per month. That means a family of 6 can collect $606 per month.

Tue, 04/05/2011 - 13:47 | 1137784 jkruffin
jkruffin's picture

Hell, when is Obama gonna start paying for my gas and my mortgage?  Hell YEAH! 

Tue, 04/05/2011 - 13:53 | 1137812 TruthInSunshine
TruthInSunshine's picture

Can SNAP cards be used to buy edible Gold?

Tue, 04/05/2011 - 13:56 | 1137816 Note to self
Note to self's picture

Hey - How come I didn't get that e-mail.  What list are you on that send that sort of thing?

Tue, 04/05/2011 - 15:31 | 1137846 Pladizow
Pladizow's picture

I got the same email from the desk of Jamie Dimon over at JP Morgue.

What demodraphic can't afford food but can afford a computer and the power bill?

Tue, 04/05/2011 - 13:44 | 1137780 GottaBKiddn
GottaBKiddn's picture

Inflation is when the monetary supply is inflated. Prices rise well after inflation. So far, the monetary supply has been hyperinflated, and we will surely have hyperinflation. If you wait for prices to rise to see if inflation is occurring, you missed it. Ackerman is hot air, which dissipates quickly.

Tue, 04/05/2011 - 15:16 | 1138095 akak
akak's picture

Inflation is when the monetary supply is inflated. Prices rise well after inflation. So far, the monetary supply has been hyperinflated, and we will surely have hyperinflation. If you wait for prices to rise to see if inflation is occurring, you missed it. Ackerman is hot air, which dissipates quickly.

Funny how so many conventionalist, center-thinking sheep and pro-Establishment parrots refuse to acknowledge this simple historical fact that has already been demonstrated countless times throughout monetary history.

Ackerman, like every other deflationary flat-earther, is a pompous ass who truly believes that "this time it's different!"  Well, no, it is NOT.  There has never, NEVER been a single example of a true deflation under a fiat currency regime (and no, Japan was not one either), and I am comfortably willing to bet that the USA will not be seeing the very first such event any time soon, or ever.

Tue, 04/05/2011 - 15:26 | 1138213 Duuude
Duuude's picture

"One of the most famous quotations of Austrian economist Ludwig von Mises is that “There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion or later as a final and total catastrophe of the currency involved.” In fact, the US economy is in a downward spiral of debt deflation despite the bold actions of the federal government and of the US Federal Reserve taken in response to the financial crisis that began in 2008 and the associated recession. Although thevicious circle of debt deflation is not widely recognized, precisely what von Mises described is happening before our eyes."

 

http://www.gold-speculator.com/ron-hera/30706-into-abyss-cycle-debt-defl...

Tue, 04/05/2011 - 15:39 | 1138274 akak
akak's picture

You say "tomAYto"

I say "TomAHto"

You say "deflation"

I say "crashing fiat currency purchasing power"

Deflation ... Crashing .... Deflation .... Crashing

Let's call the whole thing off.

Tue, 04/05/2011 - 22:45 | 1139541 Mark McGoldrick
Mark McGoldrick's picture

Sorry to inform you, but your understanding of deflation is horribly misguided.

The near deflationary collapse that we experienced in in 2008/9 was NOT due to crashing fiat currency purchasing power.

Not at all.

Your analogy doesn't work.  Tomayto and tomahto are two versions of the same.  Deflation and "crashing fiat currency purchasing power" are opposites.

Deflation can mean three things:  a decline in money supply (popular among Austrians, like Schiff), a decline in asset values (popular for everyone else), or a slow leak in your inflatable girlfriend (popular for you). 

It never means a decline in "purchasing power of fiat money" - that's inflation.

Please make a note of this, and stop spreading misinformation.

 

 

Tue, 04/05/2011 - 23:45 | 1139628 Mark McGoldrick
Mark McGoldrick's picture

There has never, NEVER been a single example of a true deflation under a fiat currency regime...

Let's compare apples to apples.

Can you please reference a time in history when the banking system was suffocated under a $40T debt overhang and several quadrillion in debt derivatives?

Perhaps, this time, the math is different.

Furthermore, can you please tell me why the events of 2008/9 were not deflationary, since you claim it has never happened.  Had Bernanke not taken unprecedented action, that "true deflation" (your words) would have snapped your spine. 

In a deflationary collapse, there will be a massive shortage of money, and Bernanke could never print his way out of it.

All of you hyperinflation bozos are chasing the wrong rabbit.  Debt overhang, bitches.

And I haven't even mentioned that Weimar and Zimbabwe were totally dependent on FX markets to service their foreign-denominated debt.  Debt in the US is denominated in US dollars - HUGE DIFFERENCE.

Wed, 04/06/2011 - 13:44 | 1141826 akak
akak's picture

So in essence, Mark you uber-troll, you are arguing that the debt-based-currency of a nation already bankrupt, and going hopelessly deeper into debt, is going to suddenly and magically become MORE valuable, not less, as those debts pile up. And of course, "this time is different" is integral to your fantastic, flat-earth deflationary theory as well.

The "logic" of you Keynesian dream-weavers never ceases to amaze me.

Tue, 04/05/2011 - 13:46 | 1137783 Long-John-Silver
Long-John-Silver's picture

and the Titanic is unsinkable.

Tue, 04/05/2011 - 13:48 | 1137786 Hat Trick
Hat Trick's picture

One part of your OWN argument is actually incorrect. I've worked a numerous banks and a credit union in operations; I can tell you absolutely no ATM has 100K in it!! The MOST we ever put into an ATM, and this was before a holiday weekend, was maybe 30K, tops? And this was at our most used ATMs. A few banks probably enter more, but once again, 50K would be huge. And most branches don't hold 1 Million either...small branches may have 100K, and only the largest centralized, distribution center type branches would have more than 300 or 400K. Just sayin'...

Tue, 04/05/2011 - 13:49 | 1137797 spiral_eyes
spiral_eyes's picture

credit cards, bitchez. 

Wed, 04/06/2011 - 03:14 | 1139956 ATG
ATG's picture

Cyberswitch, baches

Tue, 04/05/2011 - 13:58 | 1137840 MachoMan
MachoMan's picture

If branch banks burr up when I try and withdraw $2-3k in cash, then they don't have dick sitting there...  I'd be surprised if it's more than $50k... 

Tue, 04/05/2011 - 14:02 | 1137855 nevadan
nevadan's picture

I would have to agree Hat Trick.  As anecdotal evidence I and a partner of mine finally got paid for some contract work we had performed several months previously from a peckerwood contractor when he got a SBA loan.  It amounted to slightly over $20k and when we went to his bank to cash our checks we insisted on cash money.  The bank had a hissy fit but in the end we stuck to our demands and they paid us, but it nearly broke the bank.  In fairness I have to say this was many years ago but it still came as a surprise that the bank had so little actual cash on hand.  This was in a local economy that was in a boom phase at that time as well.

Tue, 04/05/2011 - 15:08 | 1138141 Abitdodgie
Abitdodgie's picture

If i want to get money out from my bank ,$1000 + they have to order it specially

Tue, 04/05/2011 - 13:50 | 1137793 DavidC
DavidC's picture

Interesting, as I read Ackerman's piece as well. I don't have an axe to grind either way, but I will note the following

1 - HFTs now play a MUCH larger part in the market than they did even in 2007/2008.
2 - The flash crash of the 6th May 2010 did not occur over a few weeks, it occurred in less than an hour.
3 - Even if the US does go into monetary hyperinflation, it will end at some point because it will have to - it will either be at the behest of the Federal Reserve or the markets demanding higher interest rates (I don't suppose Zimbabwean IRs were at 0.25%).

And, finally, spiralling prices are NEVER reigned in, they are REINED in! As with horses and reins, not kings and queens reigning.

DavidC

Tue, 04/05/2011 - 14:56 | 1138086 Shell Game
Shell Game's picture

Yet the market didn't bottom until a full 2 months after the flash crash.  The HFTs do play a role, but nothing close to a human role.

Tue, 04/05/2011 - 13:50 | 1137795 JR
JR's picture

Bernanke denied we had a recession; and now he’s telling us inflation will only be temporary.  I mean, he’s ridiculous.  It’s one thing to be a liar, but it’s rather more serious to lie when it destroys the free enterprise potential of the American people.  IOW, there’s nothing lower than someone who lies on purpose for his own interests. These bankers posing as too-big-to=fail  have been put up as public servants.  They are not public and they are not servants.  They are lying, self-serving criminals.

When Americans get Congressmen who will represent their interests and not the interests of their enemies, then the American government can be restored to the people.

Tue, 04/05/2011 - 13:51 | 1137798 slewie the pi-rat
slewie the pi-rat's picture

i've learned a lot from both these guys.  rick's hyperinflation piece wasn't his strongest, as GL  has such fun pointing out.  i'd say gonzo is the better economist, rick the better trader.

nice to see them hula together!

Wed, 04/06/2011 - 03:17 | 1139958 ATG
ATG's picture

Gonzo is not an economist

He is a movie maker and novelist from Allende Chile

Tue, 04/05/2011 - 13:55 | 1137804 magpie
magpie's picture

The exercise Big Ben is attempting to emulate or even surpass was begun in stealth monetization during WW1. Afterwards it was continued to pay down domestic debt incurred during the war and as a half-assed attempt to beggar-thy-neighbour, foreign debt / war reparations was of course a different issue and bound to payment via gold or in kind. Escape velocity was achieved by often cited "hyperinflation is only possible by wage increase" i.e. monetization continued and maximized to finance a general strike in the Rhineland caused by the invasion / seizure of factories there by French and Belgian forces.

Tue, 04/05/2011 - 13:53 | 1137805 Cdad
Cdad's picture

OT

Excuse me, but could someone please check the market's pulse?  Seems to me it has stopped breathing.

Tue, 04/05/2011 - 13:57 | 1137829 TruthInSunshine
TruthInSunshine's picture

It's been on a Fed Ventilator, inflated by Bernank's POMO flatulence, for some time now.

I wanted to tell you sooner, but I didn't know how you'd react.

If there's anything I can do...anything at all...please, take my card.

Tue, 04/05/2011 - 13:56 | 1137817 Catullus
Catullus's picture

Holy shit. Would someone PLEASE explain to this retard the difference between cause and effect.

Hyperflation is caused by higher prices or higher prices are the effect of hyperinflation? Or "hyperinflation and inflation are different because they're different words. Duh, winning."

Economic autistic, not agnostic.

Ackerman is off the mark too. This like reading the economics special olympics.

Stay out of these -flation debates. You can only revealed as a moron. There will be inflation so long as the fed inflates the money supply. Eventually, they will either stop inflating or they will inflate to the point where no one will accept the dollar (not panic from it).

Tue, 04/05/2011 - 14:04 | 1137862 mule65
mule65's picture

LOL

Tue, 04/05/2011 - 14:57 | 1138076 falak pema
falak pema's picture

you're not supposed to laugh like your avatar! for better reasons!

Tue, 04/05/2011 - 14:50 | 1138026 depression
depression's picture

Dont let these two Keynsian goofballs confuse you.

Inflation is an expansion or increase of the total availability or supply of money and credit.

The Fed can pump $600 Billion into the system, but in this case it never reached the economy, main street, most of it went straight into the US Treasury market in order to fund continuing operation of the Federal Govt. This is not inflationary, because it is in essense a balance sheet transfer from one branch of government to another. The money never ends up in Joe 6-Packs hip pocket. As close as it gets to him is his untouchable 401-K goes up a few percentage points (in USD terms, still negative in real money terms). Unless you want to count the $70 billion that goes into the SNAP credit card program as inflationary.

 

Tue, 04/05/2011 - 15:23 | 1138195 Eternal Student
Eternal Student's picture

Well, I think the term "goofballs" is a bit strong. But I'd agree that Ackerman's piece was weak; and Lira's response consequently missed the mark.

Kudos for mentioning money + credit. But it's interesting that the Fed actually was able to increase M3, though it's still down YOY. Inflationists see this as an increasing money supply, and deflationists see this as still decreasing. Keynesians see this as proof that the Fed can indeed offset deflation. All have valid points within a specific narrow view.

One thing that all arguments (especially Mr. Lira's) ignore is the question of what would have happened had the G7 not intervened when the Carry trade was in the process of collapsing a few weeks ago? Do they think that we wouldn't have seen a huge margin call, followed by a required dumping of assets? This includes PM's.

That was starting to be deflationary. And if it continued and spread, we'd be seeing even more of it. I find it amusing that Mr. Lira claims to be a realist, and yet this point goes unaddressed.

Sadly amusing though. As it strikes me that we're going to see much more of this. It's as if the propping up of the House of Cards has recently taken a new phase, and one which is much harder to handle.

Tue, 04/05/2011 - 17:57 | 1138770 goldsaver
goldsaver's picture

So your argument is that the 600B never reached the economy because it was loaned to the Federal Government and the Federal Government spent it... in shovel ready projects, additional unemployment benefits, SNAP cards, etc. ?

Umm.... think for a second

Tue, 04/05/2011 - 13:56 | 1137818 ouchtouch
ouchtouch's picture

Forget the flations, the question is what do you want to be holding when it hits the fan?  Cash.  But what currency?  Can/will the Fed devalue the dollar versus other currencies in its efforts to fight deflation/prop up the US government's debt?  Seems like it can if it tries hard enough.  Will other fiat issuers fight this by devaluing theirs?  Yes.  What currency can't be devalued?  Gold.  Silver for a speculative play makes sense too.

Tue, 04/05/2011 - 13:54 | 1137819 ouchtouch
ouchtouch's picture

Forget the flations, the question is what do you want to be holding when it hits the fan?  Cash.  But what currency?  Can/will the Fed devalue the dollar versus other currencies in its efforts to fight deflation/prop up the US government's debt?  Seems like it can if it tries hard enough.  Will other fiat issuers fight this by devaluing theirs?  Yes.  What currency can't be devalued?  Gold.  Silver for a speculative play makes sense too.

Tue, 04/05/2011 - 13:54 | 1137820 ouchtouch
ouchtouch's picture

Forget the flations, the question is what do you want to be holding when it hits the fan?  Cash.  But what currency?  Can/will the Fed devalue the dollar versus other currencies in its efforts to fight deflation/prop up the US government's debt?  Seems like it can if it tries hard enough.  Will other fiat issuers fight this by devaluing theirs?  Yes.  What currency can't be devalued?  Gold.  Silver for a speculative play makes sense too.

Tue, 04/05/2011 - 13:54 | 1137821 ouchtouch
ouchtouch's picture

Forget the flations, the question is what do you want to be holding when it hits the fan?  Cash.  But what currency?  Can/will the Fed devalue the dollar versus other currencies in its efforts to fight deflation/prop up the US government's debt?  Seems like it can if it tries hard enough.  Will other fiat issuers fight this by devaluing theirs?  Yes.  What currency can't be devalued?  Gold.  Silver for a speculative play makes sense too.

Tue, 04/05/2011 - 18:00 | 1138776 goldsaver
goldsaver's picture

there is no place like home, there is no place like home, there is no place like home...

Tue, 04/05/2011 - 13:56 | 1137822 realitybiter
realitybiter's picture

I am so sick of the discussion: Inflation vs Deflation. It bores me.

Do you need a bigger sign of deflation than gold going to an alltime high, like today????Only a moron would see higher gold prices as an indication of an inflationary environment.

Copper 60 cents to $4.30
sugar, corn, oil, whatever. Up, 3-6 times!
There is no national currency that is sound. Only unsound currencies and commodities.

JBTFD. Bitchez

But God bless the arguments for deflation. I should send Prechtor 10 or 20 k. He has kept so many buyers of the PMs and mining stocks at bay.....like domestic oil reserves trapped in a protected national forest.....they will be buyers one day, at much much much higher prices. Somebody has to be the greatest fool.

Tue, 04/05/2011 - 14:38 | 1138012 Shameful
Shameful's picture

Have to agree. Love guys arguing for deflation. Like the Fed cannot overwhelm credit collapse and already said they would do so. Since the Fed has the ability to create basically infinite dollars in an instant I think the Fed wins the contest, unless the deflationists argue that credit destruction will happen instantly and for infinite amounts...and good luck with that. And have to ask the question "Will the Fed let the TBTF fail?" if yes, then by all means bet on deflation. If not then trust the Fed and their ability to save the banks at the dollars expense.

But I'm all for it, everyone pile into cash and bonds. I'll sit in metals and take my chances. That is until Zimbabwe Ben figures out how to print physical gold and silver, then I'm totally screwed. But I figure he will print physical oil first :)

Tue, 04/05/2011 - 16:49 | 1138510 DoChenRollingBearing
DoChenRollingBearing's picture

+ $1450

+ $39.00

Tue, 04/05/2011 - 19:06 | 1138993 Bow Tie
Bow Tie's picture

it really is that simple. the political logic behind a dollar hyperinflation being likely is far from complicated. when it comes to the wire, will they print while they still can, or call it a day and go home. my money is on print, bernank has said he will do it already, why the big debate? it's only a couple of numbers on a computer screen.

and fofoa did a much better job at pointing out the gaping holes in ackerman's 'argument'.

Tue, 04/05/2011 - 14:58 | 1138088 falak pema
falak pema's picture

to flate or not to flate...that is the question...in or out? 

Tue, 04/05/2011 - 13:57 | 1137825 ouchtouch
ouchtouch's picture

Forget the flations, the question is what do you want to be holding when it hits the fan?  Cash.  But what currency?  Can/will the Fed devalue the dollar versus other currencies in its efforts to fight deflation/prop up the US government's debt?  Seems like it can if it tries hard enough.  Will other fiat issuers fight this by devaluing theirs?  Yes.  What currency can't be devalued?  Gold.  Silver for a speculative play makes sense too.

Tue, 04/05/2011 - 13:55 | 1137826 Hephasteus
Hephasteus's picture

He's missing the basic group psychology dynamics.

1 percent of the people see the trouble, get out of the system. They are ridiculed greatly by the majority. They turn out to be right a few months or years down the line. They are such a small part of the equation it is NOT A SELF FULFILLING PROPHECY. Because of the numbers of conciousness. They convert 10 percent into getting out of the system. They cause further problems because though still insignificant they represent a security blanket of numbers.

It runs along with people entrenching and trying to hold up against the flow of things in a fixed fashion. As the underlying trouble knocks out pillar after pillar of these fixing forces to keep the flow moving towards the conclusion.

The US dollar has been in hyperinflation for slightly less than 100 years. The only variable affecting it is the rate of change.

Tue, 04/05/2011 - 13:55 | 1137827 ouchtouch
ouchtouch's picture

Forget the flations, the question is what do you want to be holding when it hits the fan?  Cash.  But what currency?  Can/will the Fed devalue the dollar versus other currencies in its efforts to fight deflation/prop up the US government's debt?  Seems like it can if it tries hard enough.  Will other fiat issuers fight this by devaluing theirs?  Yes.  What currency can't be devalued?  Gold.  Silver for a speculative play makes sense too.

Tue, 04/05/2011 - 13:57 | 1137832 Lord Peter Pipsqueak
Lord Peter Pipsqueak's picture

Bloody hell,that Gonzalo is good.I just hope Mish and all the other deflationists could read the above.

The US govt will eventually destroy America,its currency and its economy,aided and abetted by the Fed.Don't think so?Ask yourself which party will balance the budget.It makes no difference who wins,Wall St will win either way,and the government debt and the Fed balance sheet will once again regain their vertical trajectories.

Tue, 04/05/2011 - 15:39 | 1138276 DoChenRollingBearing
DoChenRollingBearing's picture

FOFOA just picked apart Ackerman too at his latest post.

fofoa.blogspot.com

Wed, 04/06/2011 - 03:25 | 1139962 ATG
Tue, 04/05/2011 - 13:57 | 1137837 Teaser
Teaser's picture

"First off, to dispute an obvious error of fact: As anyone with even a passing knowledge about commercial banking knows, most branches carry $200K to $1 million in cash—and that’s the small branches. For crying out loud, the lobby ATM carries a hundred G’s, easy."

 

Sorry Gonzo, good article.  But this is not True, Ackerman is right, here, and only here.  I have first hand knowledge of it.

Tue, 04/05/2011 - 14:00 | 1137843 nah
nah's picture

print more money screw some people sell people on destructive interest rates

.

if you can convince people with any real power they are better off and should shut thier mouth and love paper

.

well then the lord sayeth we built the roads with paper

Tue, 04/05/2011 - 13:59 | 1137845 ouchtouch
ouchtouch's picture

Sorry all, is there any way to delete my own junk?

Tue, 04/05/2011 - 14:16 | 1137916 Teaser
Teaser's picture

A knife, and some anesthesia, or a bottle of scotch. 

 

Why would you wanna get rid of your junk?

Tue, 04/05/2011 - 14:32 | 1137977 SME MOFO
SME MOFO's picture

funny

Tue, 04/05/2011 - 14:22 | 1137932 tickhound
tickhound's picture

It's time the American people start asking the same question...

Just click the junk button again...

 

A wise man was once asked... "How do you feel about the FOMC's overall execution regarding this recovery?"  "I'm in favor of it", he replied.

Wed, 04/06/2011 - 03:29 | 1139964 ATG
ATG's picture

edit it to a .

click once and wait

it's a long way to immortality

Tue, 04/05/2011 - 14:01 | 1137847 JawsMusic
JawsMusic's picture

Short version:

For the last 30 years the U.S. has been buying "real stuff" from other countries and paying for it with IOU's.

At some point as we devalue our IOU's people will say I will not trade "real stuff" for paper IOU's no matter how big the number on the IOU.

IE I can send my tanker of oil to china in trade for "real stuff" or I can send it to America in trade for T-bills or FRN. (IE IOU)

When people outside of the U.S. decide they will not trade "real stuff" for FRN or T-bill then we have our hyper inflation, its not that there will be lots of dollars to bid up the price, it will be that  dollars can't be used at any price.  The prices in germany started rising because people wanted more and more paper marks for the "real stuff" as they could see that "real stuff: has value, paper not so much.

The U.S. is not the center of the world, there are other people who would like to have the "real stuff" we are recieving, and its even possible that they might have something of value to trade for it.

Also where are the dollars that are currently bidding up the CRB, gold and silver comming from ??????

 

 

 

 

 

 

 

 

 

Tue, 04/05/2011 - 14:09 | 1137874 hambone
hambone's picture

Winner winner chicken dinner.

Tue, 04/05/2011 - 19:26 | 1139055 hamurobby
hamurobby's picture

   ++

  No one else around the world wanted Weimar currency, eventually the Germans figured that out.

Thu, 04/07/2011 - 04:28 | 1144453 Two Face
Two Face's picture

"That's as good as money, sir ... those are IOU's.  Go ahead and add it up ... every cent is accounted for."

http://www.youtube.com/watch?v=7GSXbgfKFWg

Tue, 04/05/2011 - 14:04 | 1137856 mule65
mule65's picture

The markets can't collapse in a day?  You must have missed May 6th.  Trash.

Tue, 04/05/2011 - 14:05 | 1137858 Chump
Chump's picture

Hyperinflation occurs when people, fearing their money is about to become worthless, panic out of currency and into physical goods.”—is actually more or less correct—but only insofar as the end stages of hyperinflation are concerned. And this fleeing from the currency is not the cause of hyperinflation—it’s merely an effect, when the population as a whole has realized that the jig is up, with regards the currency.

Mr. Lira, if this is one of your  requirements before we see hyperinflation then we will not be seeing hyperinflation.  The American public actively seeks to avoid factual information, with regards nearly everything.  I mean, pull a classic and go try to sell a 1 ounce gold coin for a hundred bucks on the street.  I bet you can't even get 50.  This nation is as dumb as a bag of hammers and we will cling to our FRN delusion through hell.  The second weakness of the quoted statement is that it's not just the country's population that would need to "wake up," so to speak, it's the entire world's.  The dollar underpins everything.  No hyperinflation until we are no longer the reserve currency, and deflation will kill us before that happens anyway.

That’s why QE-2 will never end, come June when it’s supposed to end—it’ll just keep on going: The Bernank and the Fools at the Fed will just keep on printing money, month after month, propping up a literally bankrupt government, because they have no other choice.

 

I would be very careful about throwing around absolutes like "they have no other choice."  Did you see this many rounds of QE coming in the first place?  Did you foresee TARP?  TALF?  MBS purchases?  POMO?  While I don't think this farce will last much longer, the past 4 years have taught me that I don't really have a damn clue what the evil trolls at the top can think up next.  And they're relying on a clueless public who doesn't give a shit, while you rely on that same public to suddenly care and demand a sound currency.  Are you taking wagers?

Tue, 04/05/2011 - 14:18 | 1137915 waylon153
waylon153's picture

+ 1913  Absolutely correct.  I'd love to see a camera on the streets with people passing on $50 gold coins.  As for foreseeing the financial instruments used by the government, didn't see those coming and lost a lot of money.  I expect to see more from bizarro world as we speed towards this trainwreck.....

Tue, 04/05/2011 - 14:28 | 1137960 Dr. Engali
Dr. Engali's picture

There is a lot the evil trolls can do. There is still a lot of personal property to nationalize (IRA's,gold, property etc..) for your own benefit of course. As mind numbed as the majority of the population is they can keep it up for a long time.

Tue, 04/05/2011 - 16:05 | 1138369 malek
malek's picture

But you can't fool all the people all of the time...

When inflation really hits in everyday goods, the population will become clear-sighted astonishly fast. And you ain't seen nothin yet.

Tue, 04/05/2011 - 14:04 | 1137860 Village Smithy
Village Smithy's picture

Nice rebuttal, I am with GL on this. HI has already started, that is why the markets refuse to yield to any bad news. Panic buying is starting. Anything that has upward momentum is going to have money thrown at it. The difference between this HI event and historical ones is the huge imbalance in the net worth of this nation's citizens. We have a huge majority who have either no equity at all or are net debtors, and a very small minority of wealthy elite who can shift that wealth around, very quickly to protect themselves from HI.

Tue, 04/05/2011 - 15:39 | 1138281 DoChenRollingBearing
DoChenRollingBearing's picture

FOFOA just picked apart Ackerman too at his latest post.

fofoa.blogspot.com

Tue, 04/05/2011 - 16:10 | 1138386 akak
akak's picture

It is actually not hard to pick apart the simplistic, academic and historically-refuted arguments of the deflationary flat-earthers such as Ackerman and Denninger.

Gonzalo actually brought a howitzer to a knife fight here, with predictable results.

Wed, 04/06/2011 - 03:32 | 1139965 ATG
ATG's picture

Show us the inflation:

http://research.stlouisfed.org/fred2/graph/?s[1][id]=M2V

Tue, 04/05/2011 - 14:06 | 1137863 sundarb
sundarb's picture

Why is there a constant bickering among the bloggers to figure out what "flation" we're going to have?

Isn't hyperinflation in the dollar really a deflationary depression in gold?

It is going to be a depression nevertheless. How we get there is going to be a long and windy path, but eventually it will lead us there. Constantly, these bloggers (Mish, Gonzalo, Stoneleigh) try to see this economic reality as black or white and they give good arguments..but don't get to the reality. Reality is that economy is multi-colored...with deflation in some assets (housing) and inflation in some other assets (food, oil etc.) happen at the same time. 

I thought FOFOA's argument against Rick was much better.

http://fofoa.blogspot.com/2011/04/big-gap-in-understanding-weakens.html

Deflationists (Keynesians) like to view the economy as a machine. They think "this money here must reach this quantity and then flow there and only then that will happen." But the economy isn't a machine. Machines don't have emotions like greed and fear, but the economy does.

Tue, 04/05/2011 - 14:41 | 1138022 NotApplicable
NotApplicable's picture

As always, FOFOA reduces the entire thought process down to a single question.

"What are you more afraid of, running out of dollars or dollars becoming worthless?"

 

Wed, 04/06/2011 - 03:44 | 1139968 ATG
ATG's picture

running out of dollars of course

ie debt default deflation as Irving Fisher discovered after he was wrong about 1929 hyperinflation and stocks

Tue, 04/05/2011 - 14:09 | 1137872 janchup
janchup's picture

You have to drop the snotty supercilious obnoxiousness of tone, Gonzalo. I quit reading you months ago.

Try a little humility and realize you don't have all the answers.

Tue, 04/05/2011 - 14:18 | 1137923 augie
augie's picture

i'm sympathetic to his arugment but you are correct. The arogance is obnoxious.

Tue, 04/05/2011 - 14:32 | 1137982 NotApplicable
NotApplicable's picture

Well, given the arrogance he was responding to, it's not surprising. Ackerman set himself up for a big fall with yesterday's piece, complete with "Flat-Earther" ad hominem attacks.

The only value from Rick's article was the display of the limits of his understanding.

Wed, 04/06/2011 - 03:46 | 1139969 ATG
ATG's picture

With profits, get thee understanding

Wed, 04/06/2011 - 13:08 | 1141592 augie
augie's picture

Before you seek revenge dig two graves

Tue, 04/05/2011 - 14:23 | 1137934 Gonzalo Lira
Gonzalo Lira's picture

If you quit reading me months ago and think I'm a supercillious snot, then why are you commenting here? 

 

GL

Wed, 04/06/2011 - 01:32 | 1139861 bozzy
bozzy's picture

Lira, if you post in a public forum, you risk that others will exercise the same right, including some who do not share your own elevated opinion of your amateur economic analyses. This regardless of whether they choose to follow those same analyses anywhere else.  

Tue, 04/05/2011 - 14:10 | 1137878 nah
nah's picture

http://www.latimes.com/news/politics/la-pn-budget-meeting-20110406,0,280...

In a statement released after leaving the White House, Boehner's office said there was a "good discussion" but that Republicans would not accept a deal "that fails to make real spending cuts."

.

deflation and an end of the Federal Reserve is closer than you think... all it takes is for people to grasp that they have already been lied to by unelected globalists

.

and we believe in the US Constitution no buts... run these clowns out of town and deal with the pain of new meaningful contracts... yes the world would have to change from the current print and spend and steal and lie... just cuz cops dont promote equitable justice dont mean up and comming political realists wont

Tue, 04/05/2011 - 14:14 | 1137888 tmosley
tmosley's picture

The currency for the wheelbarrows comes during and after the hyperinflation, after prices for basic commodities explode (as they have), when the government realizes that there is a simple choice--either they do nothing and starving people tear them apart in the streets, or they print, and people can try to scramble for food, and use up all their energy doing so.

Tue, 04/05/2011 - 14:26 | 1137946 Dangertime
Dangertime's picture

GL is right.

It is all about MONEY VELOCITY in hyperinflation.  That faster it turns hands, the higher prices will go.

Why is this?  Because it artificially increases the money supply (people turn their money over faster) while restricting the goods available for sale (the money is chasing fewer and fewer goods as they disappear from the shelves).

Once money velocity goes higher than the speed at which the supply chain can restore goods, you are on the cusp of hyperinflation.

Tue, 04/05/2011 - 15:08 | 1138144 depression
depression's picture

I see no evidence of velocity of money in the system.

Can we simply have a secular bull market in Gold without instantly jumping to the hyperinflationary conclusion.

Tue, 04/05/2011 - 15:19 | 1138180 tmosley
tmosley's picture

What, you don't know anyone who runs out to buy groceries and fill up the car as soon as they get paid?

I do.  Hell, I do it myself.  The only dollars I hold on to are for fixed price bills.

Tue, 04/05/2011 - 16:08 | 1138377 romanko
romanko's picture

The potential for monetary velocity in an electronic age is exponential - the amount of physical cash is irrelevant.

Take this hypothical case: Fed announces a 5trillion QE3 tomorrow at market open; will hyperinflation be constrained by the amount of cash in ATMs - no - you and I and every one else with computer access is going to empty out our bank and paypal accounts buying whatever we can - hyperinflation could happen in minutes!

Wed, 04/06/2011 - 03:50 | 1139970 ATG
ATG's picture

Where's the velocity?

http://research.stlouisfed.org/fred2/graph/?s[1][id]=MZMV

Wed, 04/06/2011 - 01:34 | 1139869 bozzy
bozzy's picture

Excellent point, one which should and perhaps would have found its place in Lira's discussion, had he not been so preoccupied with touching himself.

Tue, 04/05/2011 - 14:28 | 1137961 magpie
magpie's picture

Perhaps Ben, Turbo Timmy and Obama can learn even more from the monetary machinations of Reichsbank and Imperial/Weimar governments. It was a conscious decision to print instead of raising taxes (which was only done by those vile democrats in France and the USA anyway, the UK had mark to fantasy bank balance sheets). So print away, and profits of big business and war contractors were meant to be taxed, but alas they invested theirs in real estate as "vital company assets".

Ben are you listening ?

Tue, 04/05/2011 - 14:27 | 1137966 Jonas Parker
Jonas Parker's picture

Why is it that I have these reoccuring nightmares of Robert Mugabe replacing Ben Bernake as head of the Fed?

Tue, 04/05/2011 - 17:34 | 1138668 Milestones
Milestones's picture

Crap-read it wrong--AS head.           Milestones

Tue, 04/05/2011 - 14:27 | 1137968 Troublehoff
Troublehoff's picture

Very good article, and along my own lines of thinking. I wasn't in gold or silver from the start of the housing boom but around the time you had TARP and we in the UK had £200 billion of QE I became fascinated by economics, read a great deal quickly and decided I needed as many hard commodities as possible.

So I bought some. Even though Gold and Silver looked as though they were bubbles at that point I decided to trust my own intuition and I'm glad I did.

Nobody knows for sure what is going to happen... we can still have deflation, if the FED stops printing.

I don't think we'll have hyperinflation, but we could. I do think we'll have very high inflation until the money supply has swelled to the point where:

1) REAL wages are half of what they were in 2008 but maybe significantly higher nominally.

2) The US government has got its spending under control by only raising expenditure at their phoney inflation index rate while real inflation surges ahead.

3) The Euro has broken up and the PIGS devalued

 

However, I have no faith in this diseased system anymore and so anything is possible. We need to start from scratch in the same way you need to reinstall your OS every once in a while.

The hard drive is thrashing and the system is groaning under the weight of malware.

Tue, 04/05/2011 - 14:28 | 1137971 bozzy
bozzy's picture

Gonzalo -

1 stop gratifying yourself and get with a partner. You will calm down and stop dreaming of guttin' people with filleting knoves.

2 Have you actually used a filleting knife? - (I think this is the sort of knife you meant, used by people who work their days with fish - and for cutting thin slices they use A SUSHI KNIFE!)

3 Idiotic, pseudo intellectual, self justified and disrespectful bullshit such as this only comes from one type of fool: a complete cunt

I hope you have to do manual work soon.

Tue, 04/05/2011 - 14:35 | 1138002 Waterman Jim
Waterman Jim's picture

+  

Tue, 04/05/2011 - 16:14 | 1138401 Calmyourself
Calmyourself's picture

Your related to Jim then..  This little rant cannot be serious, Fillet vs Sushi, really..

Wed, 04/06/2011 - 01:23 | 1139847 bozzy
bozzy's picture

Very serious. I object to the distinctly "ad hominem" style of Lira's attack, and also that he has done exactly what he accuses Rick Ackerman of doing - introducing unsupported opinion as "fact". That, even after granting his reader an introduction to some formal philosophical discipline which has little bearing on the debate other than to gratify some sense of self importance, and to lend a stronger illusion of credibility to what he says subsequently.

No-one knows the future, not Rick Ackerman nor Gonzalo Lira nor Tyler Dan. I think I would prefer to hear constructive suggestions about reshaping the US economy in the first instance, rather than the wholly destructive attempts to decompose someone else's work, combined with the throwaway and in my own opinion slight analysis which was presented by GL in his own piece. A rigorous analysis worth the description would attempt to consider all important possibilities, rather than simply adducing a conclusion from a favourite personal selection of suitable economic scenarios. Weimar vs. Argentina etc etc demands more than a few sentences if the comparison is to hold any value.

Last, I consider that if you write a piece which leads in with metaphors from the kitchen, you should at least get the tools correct.

Odd that you should describe what I wrote as a "rant" - I felt it was a dispassionate, carefully chosen and completely personal slander in which I made useful suggestions as to how Lira might improve his metaphors and self image without resorting to destructive comment.....

He does not make himself taller by chopping away at someone else's legs.

BTW I think you mean "You're" not your in your own post...

I hope you enjoy your day. 

 

 

Tue, 04/05/2011 - 14:31 | 1137975 Waterman Jim
Waterman Jim's picture

Clearly there are strong deflationary forces when a currency crisis hits, you said it yourself.

 If food for your family goes up from $1,000 a month to $5,000 a month, by golly you’ll find the money somewhere—and if you have to sell your $20,000 Harley Davidson for a paltry $2,000 in order to get cash to buy groceries?

even in your example a five times rise in food prices could mean a ten times decrease in asset prices.

Im thinking deflation and inflation are inseparable at this point. 


Tue, 04/05/2011 - 14:31 | 1137980 Caviar Emptor
Caviar Emptor's picture

We sure as hell could reach a point where (hyper)inflation and deflation co-exist. They're no longer mutually exclusive in a world where the concerns of the real economy and those of the Financial Sector have been compartmentalized and separated. Their fates no longer rise and fall together. 

There are decades worth of imbalances that have not been redressed. The economy is over-financialized. In order to keep it afloat while the real economy languishes, there will need to be money printing as far as the eye can see. There are too many dollars in foreign hands due to 4 decades worth of trade imbalances. The demand-side of the economy is in florid depression while the supply-side is flush (and sending lots of that money overseas). 

Tue, 04/05/2011 - 14:43 | 1138024 SmittyinLA
SmittyinLA's picture

agreed, I see hyperinflation in portable commodities (food & fuel) and deflation in non-portable commodities (housing/real estate) and non-necessities (I-pads, cellphones, TVs, pickup trucks).

We'll also see wild distortions in wages (up down sideways) until the population removes the portability of wages (immigration moratoriums and unions).

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