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Guest Post: The Path To Hyperinflation
Submitted by Jordan Roy-Byrne of Wall St Cheat Sheet
As we’ve discussed recently, persistent deflationary forces do not augur for a repeat of Japan circa 1990s or the US in the 1930s. Instead, because of the inability of governments to finance their current and future debt burden (there is a dearth of domestic savings and global capital), deflationary forces will ultimately lead to severe inflation or hyperinflation. In today’s missive, we explain how this will happen but in various stages.
In the first stage, the economy enters a recession after a large credit bubble. The recession and end of the credit bubble lead to deflation. As a result, the US Dollar and US Treasuries outperform. Think 2008.
Policy makers (a term for interventionist bureaucrats) then provide stimulus via monetary easing and deficit spending. Gold (NYSE: GLD) and gold stocks (NYSE: GDX) outperform with silver not far behind. Think late 2008 to early 2009.
The economy gets a bump from the stimulus and economically sensitive markets such as commodities and stocks outperform. Think 2009.
This brings us to where we are now. The market is starting to sense that Europe’s debt burden is too high as its economies struggle to recover under the weight of excessive debt. The market is beginning to sense a rising probability of default. Precious metals are soaring against the Euro, the Pound and the Swiss Franc.
Meanwhile, with money moving back into US Treasuries, the US will have the ability to attempt another stimulus and announce further quantitative easing. Europe is currently ahead of the US on its track to currency depreciation, rising inflation expectations, and rising CPI/PPI. The US still has time before the market begins to worry about its debt burden.
The next stage is the transition from the initial outbreak of price inflation to severe inflation. Inflation accelerates due to a loss of confidence in governments and currencies. A failed economic recovery leads the market to realize that the debt burden is too large and will ultimately be defaulted upon or inflated away. At this juncture, all commodities begin to perform well again. It may take anywhere from six to 18 months for this stage to be evident.
Finally, inflation is exacerbated as supply shortages emerge. Tight credit restricts new production and consumers begin to hoard. During such a period, precious metals and commodities will continue to perform well but the agriculture sector will be the real leader.
In order for an investor to maximize returns, they must be able to hold their convictions and adapt to the changes in the coming cycle of inflation. Currently, precious metals are obviously far and away the best play. While more and more investors are waking up to gold, they are not embracing it enough. If it is clear that Gold is a safe haven, why are you only devoting 5-10% of your portfolio to it? Moreover, why do you have zero or 5% exposure to gold stocks when their outlook is superior to commodity stocks and emerging market stocks?
Of course market timing is important and we are here to help. Our combination of technical analysis and sentiment tools has allowed us to catch the last two short-term bottoms in the precious metals sector. We also use the same techniques in our Macro newsletter. If you’d like professional help in navigating the coming mania in the gold and silver stocks, then consider a free 14-day trial to our premium service.
Good luck and protect yourself!
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Nice summary.
You would think we would already be seeing deflation, but I am not seeing it. Food prices are dramatically on the increase. You would think car prices would be deflating, due to credit crises, but I am seeing no particular motivation to deal among car dealers.
In timing a car purchase, it is hard to know whether you should buy now, before inflation sets in, or wait for more desperate times, and a motivated seller.
The answer is always drive your old car in to the ground. eek every last penny you can out of it before getting ripped off anew. :-)
I tend to buy used vehicles (around 3-4 yrs old) and drive them right in to the ground (the plan). I've got a 2001 Infiniti QX4, and a 2005 Nissan Maxima, that are driving just great (150k on each of them, fully paid off, and my plan is to get 5-7 more years out of each (minimum). This would mean the QX4 cost me 4k/yr to drive and the Maxima 2k/yr.
I hope to get more out of the cars - but I don't count on it. (costs include maintenance and repair expectations), and all costs are done in Canadian dollars - so I likely paid a lot more for the used vehicle than anyone from the US is.
That has been my plan..I have never owned a new vehicle..Driving a 04 dodge ram 1500 now and will until the wheels come off, wife is on an 03 camry..
Agreed. I always buy a 3-4 year old car, with low miles and in excellent condition, and then take care of it, and drive for 10 years. Issue is that Mrs. Rebel's pickup is 10 years old, and about time to replace. Could squeeze another few years out of it, but given uncertainties, would like to go ahead and get something that would last another ten years. Would really like the Natural Gas Civic, but it is impossible to buy one of those. I am very interested in the Nissan Leaf, 100% electric, but am nervous about buying first year production of such a radical new technology. So, first choice now is a Toyata pickup.
Why not a diesel? You can convert it to SVO or biodiesel, and even a wood gassifier if things get crazy.
I'll never buy anything but a diesel again. More fuel options alone make it worth it to me.
I like Diesel. Unfortunately, the Diesel trucks are big, and in the interem before TSHTF, mileage is poor, and Diesel is high. If things fell apart, I would get a 70's pickup running on LPG. Too bad there is not a small, high MPG diesel pickup.
http://www.autoblog.com/2008/02/11/mahindra-appalachian-diesel-pickup-ar...
Rated 30mpg highway, has the bed capacity between a 1500 and 2500 and will be in the low 20's for cost.
My dad has the ultimate vehicle cost to own. 1997 ranger he got with 10,000 miles and still drives it to this day. Was $12k.
Sorry about the junk Rebel, damn IPad buttons are so small. I've been saying for the last 5 years Kubota should make a pickup truck. Or at least have Toyota or Nissan start importing their diesel pickups into the US. I cruise Mexican and Costa Rican Craigslist once in a while and see those trucks and it pisses me off that Americans are too stupid to realize how good diesel engines are. Just watched 2012, if that's what we've got to look forward to I'm buying a friction' Escalade screw the mileage!
I would love to see a small diesel pickup with windows you roll up and down with a crank, rear view mirrors you adjust by cranking window down, reaching outside, and adjusting with your hand, 5 speed manual transmission. No electronic gadgets. The two creature comforts I would want on it would be cruise control, and air conditioner. No cheap plastic trim. Maybe it is just me, but I would like a rock-solid, reliable, no frills vehicle like that.
Would really like the Natural Gas Civic, but it is impossible to buy one of those. I am very interested in the Nissan Leaf, 100% electric, but am nervous about buying first year production of such a radical new technology. So, first choice now is a Toyota pickup.
Get a golf cart, enclose it, add a radio. Then you have a good idea of what the Nissan Leaf and the LNG Civic are. Much cheaper too.
Still, I do about the same, just with a 2001 Oldsmobile Aurora, from General Motors. I didn't let the bailout or the sanctimonious hate for them sway me.
Unless your wealthy to a point, where your set for life, NO one should buy a NEW car.
Always buy used........let some other smuck take that 25% haircut off the floor.
2003 Jetta and 2006 Malibu Max here....both paid off. Will drive both into the ground then buy a certified pre-owned vehicle unless I can find a motivated individual seller with something I want. Cars are a rip off for most people. Don't get me started on the lease con-game.
My 1992 Sub just died a few months ago at 300,000miles that I bought in '95 for $5k, got 33mpg. Still driving 1990 HOnda Civic, 131,000mi, getting 40mpg that I bought for $500. New cars are for suckers. I like the small gas tanks too, even with higher fuel prices, it is still manageable to fill up. Use my legs and my bicycle for most of my needs, autos are mostly just for work, but I do have to travel a lot for work.
Many moons ago, had a Datsun pickup, ran forever on 10gallon tank, got 50+mpg on that sucker. Was my most fave vehicle I ever owned, until it rusted to death. Japs weren't too good about that back then.
But what about housing prices, commodities, stocks or electronic that have all been deflating in the past 3 years and stagflating in the past decade. I think we are seeing deflation right now and inflation will be in 2-3 years when everyone really panics.
Seems like things that are optional are staying constant or maybe deflating. Things you have to have are through the roof. . . food, energy, visit to the Dr, are all up considerably.
At the end of the day hyperinflation and Deflation are opposite sides of the same coin i.e. DEFAULT or COLLAPSE. The question now how does the current debt issue resolve. Deflation hurts those in debt the most, hyperinflation hurts everyone. The reason it is seen as a solution is because those who are drowning in debt think that their assets will appreciate high enough to make them solvent again. Our govt is at the top of this list. The only problem is that while assets prices may rise, the value of the medium of exchange i.e. dollar, collapses.
The best solution is for the Fed to do NOTHING. Ultimately that is exactly what they may be forced to do by the market.
Prices on most things except food have been staying close to the same. Why is food going up so much even with oil not going through the roof again ? Now they give you the same size container with a lot more air in it.
Food costs are pretty much the same or down here for me. I cook my food from scratch though. I believe the food cost of prepared food is up because people got use to prices when they went up in the oil over $100 days and then never came back down. Walmart despite the hatred for them has cut the prices of even snacks and semi prepared food from what i've seen. The good old days was when pilgrims pride went bankrupt and I could get chicken breasts for 50 cents a pound...
I need to start going to WalMart I guess. Vegetables have really went up it seems where I go...
I say you'd better start growing. I've been planting fruit trees for a couple of years now. This year, we have vegetables. It will get to the point that all you can afford is mass produced processed food because fruits & vegetables will be too expensive. I started noticing that a few years ago with apples.....from 2.50 per 3 lbs to $5 per 3lbs. Much too expensive to purchase.....better to grow.
The problem is that you'll end up getting more than you bargained for. Melamine in milk, lead in other things, and organics that only a Chemistry major would love(but still wouldn't eat).
That's what you get with Wal-Mart. Lower wages, lower prices, lower quality, lower standards.
Next time your in the store (food) check the Ounces per $, and you will see a smaller amt, and a higher price.
Inflation on food is thru the roof........where you used to get 4pkgs of an item, (bubble pks), now you get 3.
Due to the idiots in D.C., the use & increase of Ethanol, is the issue.
Corn, is a staple of almost ALL you eat.( Used for feed, and making food).
Also, the idiots are going to increase the Ethanol content to 15% in gasoline, not 10%(as most is now).
15% Ethanol, will destroy a cars engine,(unless it's a Flex-Fuel vehicle) if it's newer than 10-15yrs old.
Automobile dealerships in the DFW area, are making a killing.......on new, 1-2 yr old vehicle's......on engine repairs.
The EPA is dead set on changing it.........even though the damages are well documented.
Just one more step in the renter society. Rent your car, house, body, and life from corporations, aka the State.
GB GB GB, give me the hibi gb's!
I still see a significant time of depressed commodity prices when we double dip soon and think the real inflation is years away at the earliest. Some even say we will see deflation and the govt will just do a revaluation eventually to default on a lot of the debt so it will be a one time real big hit on purchasing power.
I agree. Gold will go down w/ another leg in stocks. Inflation needs demand. There is no consumer demand. Equity outflows. Employers not hiring permanent workers. You can run commodities up on fear and speculation, but that will crash and punish any recovery prospects.
I wouldn't think there was too much demand in Weimar Germany except for basic staples.
The idea that gold is a commodity still is just about gone. It is being used and viewed as currency and now that it is seeing the light of truth will not be put back in the dark.
I see somebody received an "A+" in their Keynesian Bullshit 101 class.
No shortage here..............Gold Coin Demand up 195% in last 10yrs.
http://uk.ibtimes.com/articles/20100529/gold-coin-demand-shoots-195-indecade.htm
Employers not hiring permanent workers
Easy fix. Make contracting away or temping away cost as much (if not more) as a full-time employee. Then make it easy enough to rat out on the employer yet still not endanger the applicant.
Dirty pool by employers can be answered with giving them nowhere to run.
Most government debt (world-wide) is in structural promises made to the citizens and it's own employees. Since every government action is predicated on the next election cycle - you'll never see a politician allow that type of default (wouldn't get re-elected) until there is a system collapse and it no longer makes a difference. You can see that we are not addressing any important issues in a meaningful way.
When most of the debt shall dissappear like dust in the wind... then they will inflate or maybe hyper-inflate... but at this point the dollar will be so high it will be a different situation than today
The government is defaulting now, thru the excess creation of money.They will never DEFAULT, while they have the ability to increse the supply.When all hell breaks out, is when the $ is no longer considered the Reserve currency.
The SAFE haven myth, will be dead.( should be now).
Hmmm...well written, well realized.
A few points of interest, firstly inflation and deflation are measures of monetary supply, prices are the symptom of the combination of the confidence in that money supply (its "acknowledgement in the collective consciousness of being inflated:" for example), and then a host of market forces concerning the supply and demand for particular goods within the market. So, for example, inflation could be very high, but home prices (massive malinvested segment) could be coming down. The home segment would then be called (by ignorant persons) as being in "deflation."
Actually the total equation for the home is not in deflation at all. The amount paid, say, $.5M, is in a note to the Bank. The amount that the homeowner can realize by sale is $.3M, but still $.5M is owed, so the total supply has not deflated, merely $.2M was transfered from homeowner's gross assets to Bank.
The pain of this "transfer," the "I made a big mistake!" is what is NOT allowed in our present system. This leads to a lack of learning. And a lack of learning can be seen everywhere. To say, "Hey I lost money, why?" is the beginning of the trail that many will not take up. The answer is "I didn't know that, gee I want to know more!"
Nice summary (the above article), though.
Not true. Many are asking why I lost money and many are strategically defaulting. It's in the early innings.
"Many are asking why I lost money".
And they are the IDIOTS.
Amazing summary. The author would have blown up shorting government bonds in the 1930s USA, 1990s Japan, 1992 Sweden, 2002 Germany and 2008 pretty much everywhere around the world with the exception of Iceland.
Oh I know this time is different and the terrible loss of confidence in fiat currencies will surely bring about hyperinflation.
How is John Williams at Shadowstats doing with his 2010 prediction of hyperinflation in the US. He looks like a joke now but then again the inflation hawks will never say they were wrong they were simply "too early".
Mike "Mish" Shedlock has been on the money calling for deflation, of all blogs I read.
I don't know if the hyperinflation hawks are all wrong, since there is bound to be hyperinflation somewhere, sometime. That would make their prediction pretty damn accurate if it ever happens.
Higher prices are as a result of tightening of subsidies to industry, which are widespread in the economy. Usually they are piled on with municipalities' strategy of keeping businesses and jobs in their area by providing any kind of tax break or service that corporations don't want to pay for. But that won't mean lower property taxes, because of municipalties' exposure to credit default swaps.
Hyperinflation would probably result from some political necessity to raise interest rates contrary to the markets. We haven't seen that yet. If we have a bond market collapse, this wouldn't necessarily create hyperinflation either.
Theoretically speaking, a negative interest rate on short term treasuries, or perhaps the repo or overnight rates will create or replace aggregate demand for long term treasuries, so a decline of long term rates probably implies negative short term rates as it stands.
So I pretty much expect lower interest rates as a matter of course. But that means very much higher corporate lending rates. Higher corporate lending rates mean much lower interest rates on short term treasuries as money comes out of the junk bonds into treasuries. (gold is a benefactor of this dynamic)
Its been like that for years now.
I am about to increase my gold/silver exposure to 66% - of original cash holdings.
Is 33% at the moment.
Wait for the Market to drop to 6-8k, or lower...........your dollars will get you a lot more metals.( and it's on the verge as I type).
Being early is the same as being wrong
Rather be a YEAR early, than ONE day late.
Funny how it's the permabulls who always end up needing a bailout after the crash takes everything they made in the bull market and then some besides. But hey, at least they were "right" for a longer period of time. Of course, the bears who take their money must have done something underhanded and illegal rather than just being patient.
Exactly!!
This is very weak "analysis". In hyperinflation, wages skyrocket. Please explain how wages will skyrocket from today's levels. Home prices skyrocket in hyperinflation. Please explain how home prices skyrocket from today's levels. We have a massive deflationary threat straight ahead and all those Goldbugs listening to the infomercials are going to get burned badly. LMFAO!!!!
How do they do things like property taxes under hyperinflation. Would they still re-asses once a year? How could local government services like fire/police/teachers wages be adjusted under hyperinflation if property taxes are assessed once a year?
Not sure if they are allowed to do it more than once a year but they sure had no issue taking in those extra housing bubble dollars when housing had all that inflation in places like Florida.
In Florida, we have a 3% "Save our Homes" cap on the amount that homesteaded property can increase annually. So in hyperinflation, they can only increase the property vale by 3% until the politicians change that. Our property tax appraiser actually devalued our home for tax assessment purposes.
This is one of the most important points/questions brought up:
How will the gov'ment reassess property taxes under hyperinflation? What about deflation? The problem is that many governments (federal and state) reassess so SLOWLY that they are always behind the trend. There are many things in the tax code and elsewhere (like TIPS) whose indexes - be they property values, inflation rates, or cost of living adjustments - are adjusted so slowly after the fact that their increase/decrease is out of phase with the economic reality thereby always causing an unfair valuation.
The government does not have real-time updates to its indexes. There's always a delay - sometimes by years. Should be interesting to see how all this plays out.
And specifically, how will local governments support what most of us would consider rational and needed services . . . police, firemen, teachers. Walmart can adjust prices, and employee wages on a minute by minute basis, but if local governments assess once a year, how to they provide wages to critical services, such that fireman decides it is worth driving to work.
I am having trouble understanding how local/county governments can manage budget in such a hyper inflationary environment.
Local governments can't manage their budgets now. Our teachers won't open their contracts or freeze wages even with town revenues down. I'm sure that with hyper-inflation, they will be demanding that their contracts be opened and their wages be increased. I can't wait to tell them to pound sand.
skyrocketing? nothing is skyrocketing here, except bank CEO's bonuses. we have to cut employee's hours because of lack of enough work.
+1000
Thats true, no wage spiral leaves on adage on the table..."nothing cures high prices like high prices". Deflation is operative.
Something about hyperinflation that some don't realize is that unlike deflation and inflation it happens extremely rapidly. It is not something that can be predicted as much as it can be seen as an inevitability.
There may be deflation and inflation simultaneously as I think is happening now. Hyperinflation supercedes both.
I am not sure what he said is true. for that matter I don't understand why so many people calling hyperinflation. There are many many unemployed in this country, and they will work for mexico salary. The housing bottom is not close to over. as long as wages low, and housing or renting is low, how can we get a hyperinflation?
If we follow japan, as many argued, do you see Japan having hyperinflation?
If the debt is a problem, which I agree, subprime, greece, spain UK and all of other countries, would default be the main concern? The central banks will not raise rate, because, if they do, their debt and interest payment will be up. they will not shoot themselves in the foot.
are these people calling for hyperinflation biased? or they are holding gold and talking their book?
You are stuck, like so many people, in the belief that hyperinflation can only occur as the result of a wage-price-increase spiral.
Please show us the wage-price-spiral preceeding hyperinflation in Germany or Zimbabwe.
Hyperinflation occurs when confidence in a currency is completely lost, which also needs the power elite to allow it to happen (if not activley supporting it, at least passively.)
However, in the US today most of the masses (the "sheeple") are indebted up to their eyeballs. Hyperinfaltion would actually decrease their burden, so it is not in the interest of the power elite. This makes hyperinflation in the US less likely, but not impossible.
It's different in some European countries though, where they still have a lot of savers that can be robbed.
If people in the U.S. are so willing to work for Mexico salary why are there people illegally immigrating into the U.S. and why hasn't the flow turned the other way around? There should be people heading out of the U.S. for work and any kind of wage.
As far as Japan they have their own problems like the increased crimes perpetrated by the elderly that have no income and have no place left in society. Their economy, if it weren't for their own currency and the savings of their people, is very dependent on the consumption of the U.S. and would/should crash.
the problems with these viewpoints is that governments of the world HAVE started to reduce debt/correct budget problems.
austerity plans are hitting europe. usa next.
imagine if we get real job growth or new sectors coming to life to create jobs and wealth
hyperinflation is not the only end to come
Austerity? That's a hoot. Not even a drop in the bucket.
From the latest issue of The Privateer, hot off last night's press:
GDP was the next fallacy that Bill Buckler took on but I hesitate to post more excerpts from a subscription issue without permission.
What is funny with theses tax increases is that it scares investors away and actually reduce the tax revenue, another step toward defaulting.
Julien,
Exactly........this is the MAIN reason why the unemployment, and slow (to non-existent GDP is where it's at).
As I said before, there are more millionaires in the USA now, than ever before.
Many people want, and need, to make major purchases, investments,improvements,new hires, in their companies,and private lives.
Everyone is holding OFF, because we have an out of control Administration, and people will NOT let loose of capital, until they know the score.
Like everyone else, I make purchases only on things I HAVE to.......to do otherwise will cost you big time...........
By the way, Wal mart just cut the price for some soft drinks and et..
Speaking of soft drinks....Coke-a-cola has changed their formula...again. Do you remember that "aaahhhhhh" taste you used to get after drinking a coke? It has been changed to "Uuugh". I think they have reduced the sugar and acid (citrus??) content of their drinks. It also has a faint "artificial sweetner" taste.
Mexican coke in bottles still tastes 'right'...http://www.drsoda.com/mexicancoke.html
Updated DOW charts :
http://stockmarket618.wordpress.com
http://www.zerohedge.com/forum/latest-market-outlook-1
Fair amount of confusion here about deflation, inflation and hyperflation.
Deflation is the force we are fighting now- economy moribund, heretofore overinflated assets prices spiraling down (but hidden by extend and pretend and FASB rule changes).
Tax receipts spiral downward also, leading to US Gov't issuance of debt to fund govt operations and fiscal stimulus per the Keynes recipe. All fine, as long as you can service the debt and refinance/roll it over. If either or both of those requirements begin to be challenged, the risk of hyperinflation shows up, which is simply the drama whereby the common faith in the currency as a storage vehicle for value erodes, and that is a slippery slope. Why does it erode? If tax receipts are not enought to pay interest and principal, and no one will take the debt back to roll over existing debt (since it cannot be paid off on demand), then FRNs have to be printed to ensure No Default. Once word is out the FRNs are being printed, the dilution of the currency has begun and it would be difficult to turn back. This is why there will never be a failed auction, only a tacit realization that the auction was in effect a scam.
In inflation, more dollars chase fewer goods (as sellers have pricing power). In hyperinflation, more dollars are required to buy the same level of goods, because the faith in the currency is lost.
Whatever you do don't listen to Tyler on your question. He thinks inflation is increasing, hahaha.
Inflation is the increase in the money supply.
Deflation is the decrease in the money supply which what is going on for the last 1-2 years.
Price inflation can simply increase when someone refuses to sell and price goes up... you don't need more money supply, you can just have someone refusing to sell. If the don't believe in the credit worthiness they certainly might refuses to sell but it doesn't have to have anything to do with outstanding money supply.
"Inflation accelerates due to a loss of confidence in governments and currencies."
More bong smoking I see.
Sorry Tyler you can't even get simple definitions correct.
Inflation is the rise of the money supply, you use credit as money. How you got from that to your statement above is mind-boggling.
I think you are meaning to refer to as credit worthiness. The credit system is deflating and people could lose confidence that they are going to get there capital back is what I think you are trying to say.
Either way crying about it is not going to solve your problem.
Too many stupid Peter Schiff books have lead to this backwards thinking.
Inflation is the increase of the money supply, money supply is decreasing not increasing.
The reason confidence will be lost is because of the lack of inflation of the credit system ie deflation.
You will not get out of this.
You seem to be splitting hairs, and Tyler didn't write the article.
I thougth debt was money. How can money supply decrease while debt is increasing. Or does that FACT not serve a purpose to this piece of the puzzle pretending to be a whole puzzle.
Au contraire on the bong smoking, little man. Inflation DOES accelerate when consumers lose confidence in currencies, and not because they lack belief in further expanding of the money supply. That is crazy talk. When people lose confidence, they want to convert to tangibles, fungibles and edibles ASAP. They will dump that paper with a quickness, thus accellerating the rate of inflation as the sell side is adrift on a sea of worthless fiat that lacks the confidence of it's holders. Do you really think people will be more apt to be long cash when QE really begins in earnest??
So reguardless of supply deflation is when you can't get people to spend money and inflation is when you can't get them to stop and velocity of money is more important than supply. And the static economists go. Look at how big our wings are. We are flying now!! While they sit on the runway and dynamic economists go... Oops the wings just got ripped off.
I do not understand why some people still do not understand what hyperinflation is..
It is loss of confidence in the currency....your can sense when a country is going in that direction but it is hard to pinpoint...it all depends on the perception about the country, his productivity, ability to export, etc..
Case in point is Japan.....they can still keep hyperinflation at bay with a debt/GDP ratio approaching 200%....most of that debt is funded internally, the country is very productive and it has a healthy trade surplus....there is still "confidence" in that economy....now think UK......they will/would blow up at a ratio much less than 200%....they are already having official inflation close to 5% (and no growth, no jobs....so the deflationist assumption: No spending = No inflation doesn't hold water here), UK has less "margin" so to speak.
Every country has a breaking point which is different from nation to nation....US is definitely helped by the reserve currency role of the dollar and the implied backing of 10 battle carriers groups circling the oceans...these, for example, are factors beyond the mere measurement of dbt/GDP ratio, fiscal deficit, trade deficit, etc.....factors that are very important on the "psychology side" of the markets...
The moment when the perception that you cannot grow out of your debt sets in, you are done....either default or hyperinflate away....
inflation is "close to 5%" in the UK because the exchange rate has gone from 2.10 to 1.45! At the end of it all the UK is an open economy and, guess what, thats what floating exchange rates are supposed to do. For this to stick here you need to see pressure in wages, and I doubt you'll see that in a hurry.
Exchange rate influence inflation of course.....if the pound is going down is because there is less trust in it (think the recession, QE, etc...)
You guys feel it even more because you do not produce basically nothing anymore...
I think UK is a good harbinger of things to come in the US...
A very good, well explained definition, cause, effect, etc. summary regarding hyperinflation can be found here on Wiki. Read it well, study it well, then ask yourself, this sure sounds like what is happening in the U.S. again. Bernanke has put us on the path on purpose, refusing to admit defeat.
http://en.wikipedia.org/wiki/Hyperinflation
The best paragraph of this article, articulates what the FED is already engaged in right now.
Governments will often try to disguise the true rate of inflation through a variety of techniques. These can include the following:
None of these actions address the root causes of inflation, and in fact, if discovered, tend to further undermine trust in the currency, causing further increases in inflation. Price controls will generally result in hoarding and extremely high demand for the controlled goods, resulting in shortages and disruptions of the supply chain. Products available to consumers may diminish or disappear as businesses no longer find it sufficiently profitable (or may be operating at a loss) to continue producing and/or distributing such goods, further exacerbating the problem.
let me know when we actually go through the deflation required to bring about the hyperinflation everyone seemed to be thinking that was right around the corner a few weeks ago then oops, 10yr UST yields came a hair away from 3% on its way to 2.5%...we need 2008 to happen on a much bigger scale to wipe out all this credit so then finally we get some demand for credit then....welcome to Weimer, USA
according to williams shadow statistics
the rate of inflation in the good ol US of A is 9%
it measures the stuff that goes up in price ,,like food, medical, services, and wholesale prices of iron, cement , wire , rubber, plastics all the stuff that make the modern life style ,
i quess if the way to keep inflation down is to substitute dog food for steak , beet greens for vegtables , pigs feet for pork chops , lard for olive oil,
"I guess if the way to keep inflation....." Dumpster-diving! ;)
Obivously Williams has no clue what he's talking about because accroding to his "stats" the US has been in a constant recession (real GDP negative) since the mid 1980s. Which is obviously a preposterous notion even to the most biased mind.
Given the declining REAL wages of the average American, the steadily rising REAL cost of living, and the steadily rising REAL rate of unemployment/underemployment since the mid 1980s, I would say that Williams is just about right on track in his assessments.
But please, go on believing the fairytale numbers put out by the US government on all these economic metrics if it makes you feel good --- I hear that ignorance is bliss. Let me know how that strategy works out for you.
Actually his data has the US at neg GDP growth in '91, '01, and '05 to now which is correct given that there were recessions during those periods.
Looks like you're the one sans clue.
I'll keep it simple
DEFLATION IS A MYTH
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