Guest Post: A 5-Year Scenario: 2011-2016

Tyler Durden's picture

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Lost My Shorts's picture

This sounds like the same deflationist thesis which has been articulated umpteen times before and was supposed to happen yesterday already.  Probably it will be repeated over and over, with an incrementally delayed timeframe, until it finally comes true, sometime between tomorrow and never.

Henry Chinaski's picture

I read something somewhere about "on a long enough timeline..."

Herd Redirection Committee's picture

I just don't understand how it would even be possible for the dollar to rally, never mind relative to what.  How is money created out of thin air going to become REALLY valuable again? The only way is if the supply of USD shrinks significantly.  This means the end of all liquidity provided by central banks (not going to happen) and the Fed (and China) would have to sell every Treasury they own, in order to soak up 'excess' dollars.

malikai's picture

Hyperinflation was also supposed to happen umpteen times already as well. Either or both are still quite possible.

MachoMan's picture

Everyone, in the end, is a hyperinflationist...  we just put on different coats based upon our daily forecast of the weather.

downrodeo's picture


I've observed the same thing lately. Even some of the more die-hard deflation callers have started to change their tunes. History, it would seem, sides with hyperinflation.

jswede's picture

yea - there's no deflation out there - housing is skyrocketing for example

Herd Redirection Committee's picture

And after housing what is your best example of deflation???? Is there a 2nd example even?  There is credit-related deflation right now, meaning, deflation in everything that is bought with 90%+ credit, and inflation in everything else (groceries, energy, insurance, tuition, health care costs, etc.)

ciscokid1's picture

Anyone bought a car lately...prices are coming down.

Herd Redirection Committee's picture

Bought with 90% credit, right? So yeah, the price will be down vs the price in the middle of the credit boom.  People are saturated with debt, already, lessing the appetite for additional debt, and thus, driving down demand for credit-based purchases.

Lord Koos's picture

Coming down because there is no demand, people can't afford new cars.

DosZap's picture

Credit is not cash, and creating credit is not the same as printing cash. Shoveling $1 trillion in zero-interest credit into the banking system does not necessarily mean that $1 trillion flows into the real economy--that can only happen if someone or some entity borrows the credit.

I agree with your premise, but the money is ( a shit load) missing, and lent out, and not to banks.

Thats distribution its in the system, therefore it is real dollars running amuck, where, ALL it went we do not know.

But companies have been  handed it hand over fist.


If it were not loose, then why not call it back in from the banks and we have solved the issue of the 3.5 Trillion in debt we have incurred?.

When your loaning FRNs to McFracking Donalds, who the hell else is getting it, besides GE?, Uh Huh, and where is the 800,000.000.00 thats missing?,no one has a clue.

hedgeless_horseman's picture

It sounds like you are just arguing how long and how deep deflation lasts.  If this scenario were to gain any traction, then Ben would drop hard currency from helicopters.  He said as much.

That is why many say deflation/stagflation first, then hype-inflation.

Sudden Debt's picture

This article actually predicts deflation on a massive scale but says inflation out loud.

I'll give this article:


SheepDog-One's picture

Yea any 5 year prediction I dont pay much attention to. This article assumes a lot of things, and leaves out a lot of reality such as the dollar being replaced as world currency, its already happening. -1

oddjob's picture

He assumes dollar hegemony like its some sort of right.

DaveyJones's picture

silly, it's the same right that allows us to target the dictators who need toppling.

william the bastard's picture

Fredric Mishkin said this morning on CNBS, "Not a snowball's chance in hell for QE3"


tmosley's picture

He said the same thing about QE1.

Bob's picture

As if they'll have any real choice.

jus_lite_reading's picture

What if hell froze over? I mean, everything normal is upside down...

snowball777's picture

Beware the sixth sigma snowball!!

eddiebe's picture

But the bankers need more money and the derivatives monster needs to be fed, so Benny and the inkjets need to give more to keep the bond high to finance the . So no, the assessment is all wrong, the theory ass backwards.

 There will be Q.E. III and IV. and the dollar will be managed lower and commodities and stocks will continue to rise, and the poor around the world will starve, and the elite will become richer and more powerful.

grunk's picture

And if QE3 does happen, he can blame his epic fail on the snow.

bunkermeatheadprogeny's picture

"...the wheels fall off the debt-fueled global "recovery"..."

New preschool song for all babies born this year:

"The wheels on the press go round and round, round and round, round and round..."

InconvenientCounterParty's picture

"the hated/loathed U.S. dollar confounds almost everyone by breaking out of technical resistance levels"

The Bernank is declared man of the year again and goes on to directly monetize another 2-4 trillion of U.S. deficit spending on the back of USD strength. Quoted as saying "how do you like me now?"

snowball777's picture

The answer comes in a volley of gunfire from angry exporters.

InconvenientCounterParty's picture

In the U.S.? I think not. The spigot of tax cuts and what not will be opened far enough to keep USD trending at some down slope determined by the sophists.

I'm no PhD, but in my world model, we are 40 years into WW3 and the U.S. is winning.

First-mover advantage still rules the day.


snowball777's picture

Ah, destroying our manufacturing base, becoming beholden to foreign creditors, and debasing our currency to support pointless wars were just clever feints!


snowball777's picture

As frightening as it is prescient. Bravo.

bunkermeatheadprogeny's picture

WTF is happenin to Priceline?

hedgeless_horseman's picture

Sunset.  The sky is always prettiest right before nightfall, when the GS alumni rotate out of one "chosen" position, and into another. 

The heard must move on, it is the way of the wild.  The 401k managers will buy it high for one end-of-quarter window dressing, and then stay long for many more quarters as the preferred clients are rotated out.

401k is the freshman water carrier whose parents are happy just to see him out on the field wearing the team colors.

bunkermeatheadprogeny's picture

Let's see, Disney posted record profits for 2010 citing recovery, attendence to parks, ad revs. (thanks to the Bernanke put).

This morning, around 5am, I learn that Starwood was shed by institutional investors in Q4, Marriott to spin off timeshare unit.

Frontrunning a downturn in the overall economy this summer? Me thinks so.

DosZap's picture

Home Depot is hiring 80,000 this summer..................$2.00 a day, most likely.

Same money Lil Indoogoo Obama makes in Kenya, as his own half brother King of the Universe won't give the time of day.

orangedrinkandchips's picture

analogous to insulin resistance

Our fat cells, the Govt fat cells, are so big that it takes so much insulin to "manage" and do it's job. With a smaller fat cell it's easier but as it gets to be the size of JDSU's market cap now (1999 anyone? but it's diff this time! swear!)
but the fat cell gets so large you cant get enough NATURAL insulin to work it so you have to shoot up.

solution? lose weight.

easy. really.

waterdog's picture

And let us not forget that during this same period, China will execute 400 million citizens, the US will not cause any wars, 90% of the US population will be able to read at last on the fourth grade level, advertisers will stop using television as a source of revenue, and, college football will have the same racial mix as the racial mix of the campus.


Hearst's picture

3/Q4 2011-2012: extend and pretend fails

"Gold and Silver swoon as per late 2008 as raising cash become paramount."

Does the author mean paper Gold and Silver?  I'd love to see the premiums next time around on physical if this does happen.

snowball777's picture

He meant physical. Swoon as in in dive to the 700s.

Hearst's picture

Not sure if he meant physical.  I could see the ETF's selling off (even more than now) to raise cash.  But I think most of the bullion currently resides in strong hands or at least much stronger than the 2008 shake out.

Lord Koos's picture

Yes this was my take as well.

c-rev with a twist's picture

Not sure about deflationary outcome, who could be?  This article assumes alot and ignores too much.

Thunder Dome's picture

For this to happen the overlords need to go broke--not gonna happen.

lynnybee's picture

......... luv Charles Hugh Smith, read everything he writes, can't get enough of his articles.     

jus_lite_reading's picture

One caveat- the contradiction with the inflation/deflation proposal.

In his best efforts to stave off deflation, Dr. Deficit will 'print' endlessly. It is a catch 22 situation however, and according to my calculations, the wheels fall off this year. Social unrest explodes, the EU implodes and China assumes top dog position, with the US putting up a big fight. In short, WWIII is imminent.

spinone's picture

Care to share your calculations?