Guest Post: When Will Inflation Really Hit Us?

Tyler Durden's picture

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Hondo's picture

Hard to inflate when the economy is deflating.  Domestic goods and economy deflating.....foreign goods inflating due to deflating $$........net result...lower standard of living for Americans.

msorense's picture

Inflation will strike like lightening if the Fed continues with QE.  I'm not talking about house price inflation, I'm talking about commodity and import inflation.  See the article below:

http://jsmineset.com/2009/08/19/the-countdown-to-the-implosion-of-the-dollar/

The Chinese, Russians, and others are looking for verification from Bernanke the QE is done in early November.  If not, better buy your rice and beans fast!  I'm betting that the author is wrong and that Bernanke is not stupid enough to continue - the implications would be totally disasterous for the economy, the bond market and the stock market.  Giving up on QE just takes out the stock market and hurts the bond market but doesn't destroy it.  Pick your poison - there is no free lunch.  I believe the market is topping out if it hasn't already and will tank imminently.

Anonymous's picture

With respect Sinclair has not been wrong so far and Bernanke is in the pocket of the socialist Obama - he has no choice to continue or face the outright implosion of the US not just the $. The breakdown of the 28 year uptrend in the 30 year bond is the canary that will drop from its perch in the second week of November.

Clancy's picture

M3 supply is deleveraging.  M2 supply (printed) is going up.  So deflation in the short term, inflation in the long.  Or maybe they'll just cancel each other out creating some weird eye-of-the-hurricaine like stability.

Anonymous's picture

Isn't that the central idea of a bailout. The other side effect is wealth redistribution. Rich get the M2 money. Middle class deleverage the M3 supply.

asdf's picture

no inflation until deleveraging stops. That will take years.

 

http://www.bloomberg.com/apps/news?pid=20601068&sid=a5682ThUSwY4

Prophet of Wise's picture

Tyler, as your previous post verifies. Today's "inflation" is not quantified in the fraudulent CPI calculations but rather in destroying the underlying value of the coin of the realm. We're only doubling down on history:

http://static.seekingalpha.com/uploads/2009/5/8/saupload_purchasing_power.png

geopol's picture

Inflation is already out there,, it's looking for a place to settle. It's already hit in segments. oil,food,stocks... But just begining.. Hyper inflationary depression over the horizon..Get out of dollar denominated anything.

Internet Tough Guy's picture

Agreed. These things take years, even the Weimar inflation got a slow start. Once started though, impossible to stop, and we have started.

Watch the big money move out of the country, government impose soft and hard currency controls, people begin to cast about everywhere for a place to save their wealth. The bubbles in stocks and real estate show this; ever more sudden, sharp rallies in asset prices for no discernable reason as the circle gets smaller and smaller.

After that there is only the sudden stop.

 

chumbawamba's picture

The current stock bubble is inflation.  Weimar was hyperinflationary.  Please note the crucial difference between the two.

Inflation is the effect of printing money.  More money = more supply = falling demand = falling value of currency = debasement.

Hyperinflation is the effect of a loss of confidence in that currency.  No confidence = increasing velocity of money = falling value of currency + feedback loop = expired currency.

Two different concepts.

I am Chumbawamba.

chumbawamba's picture

The stock market is currently up because of all the money printing.  More money in equities means more dollars in circulation.

Weimar happened because of a loss of confidence in the currency.  The same as happened in Zimbabwe.  Nobody wanted a note that was backed by nothing that the government kept printing more of.

I am Chumbawamba.

Anonymous's picture

Except isn't the money that is being printed going back into deposits at the Fed, i.e. the money is not leaving the banking system?

There can be no inflation due to printing until the money leaves the banks.

chumbawamba's picture

How about all the hundreds of billions/trillions that went overseas?  The winners of the OTC derivatives?  Etc?  The money is out there.  Maybe not the trillions printed, but inflation has occured.

I am Chumbawamba.

sgt_doom's picture

All your points are excellent, of course, and spot on, but, I'm wondering if we can draw at least some parallels between the future several years in the American economy and what transpired in the Hong Kong economy back in the '90s, after China took it over, and HK experienced hyperinflation, with deflation (if I'm recalling correctly) due to China's offshoring HK jobs to their mainland, while folding the HK dollar into China's currency?

Internet Tough Guy's picture

Thanks for the tip, chimichanga, but the Weimar stock market was initially just like ours; it had a positive real return over certain periods. Eventually everthing became consumed in hyperinflation.

 

p.s. Mexican food gives me ignitable gas.

Anonymous's picture

I don't think neither Zimbabwe nor the Weimar Republic are good analogies. These were isolated nations and versus the rest of the world, their currencies collapsed.

All currencies of the world are collapsing at a somewhat equal rate. And all are in trouble and exposed.

A collapse of the American system will ensure a collapse of all systems.

There is no hiding. At all. In the entire world.

They all know this.

MsCreant's picture

New Gold bug shopping for an opinion.

I have been offered 17 1/10 fractionals @ $125 each. Never done fractionals before. Spot is now 1053.50.

geopol's picture

Are you talking American eagles??? I'll take all of them,,,@that price.

 

B.T.Y.  Fractional's demand higher premiums. as they are more easily bartered..

NumisEX's picture

Screw the premiums on fractionals. Stick to 1oz  or greater with gold. Silver is the fractional.

chumbawamba's picture

Hi MsCreant.

That's not a terrible price.  You're basically looking at a premium of $20 per coin.  For denominations of that size, it's not out of the question.  I was paying $30-50 over spot on 1ozt coins (Maple Leafs, American Eagles, etc.) over the past year at varying times in varying economic conditions, so you could do worse than $20 per coin over spot.

I say buy.

Yours, Chumbawamba.

Internet Tough Guy's picture

Brilliant, pay $200 per ounce in premium as oppsed to $30-50. I have some fractionals to sell you.

chumbawamba's picture

You pay for the fungibility.  These are easily tradable, and will only go up anyway.  Based on what others have said, it seems she's getting a deal anyway, so go drink a six pack and punch yourself in the face.

I am Chumbawamba.

Marge N Call's picture

"so go drink a six pack and punch yourself in the face."

LMAO. Holy shit that was funny. I want to have your baby.

 

Unscarred's picture

Chubby, you fucking rule, dude!

That was tha shiiiiiiiiiiiiit !!!

 

http://www.youtube.com/watch?v=-Q1G76_ysNo

Unscarred's picture

Dude, you just got served by someone's chubby!

http://www.youtube.com/view_play_list?p=563C6C7DB3F8E846&search_query=cr...

All kidding aside, Internet Tough Guy, you completely lived up to your name, to which I say, "BRAVO!"

Authenticity is it's own reward.

Internet Tough Guy's picture

Skip the high premiums and buy ounces. If you are worried about divisibity buy silver.

Gold is for wealth storage, silver is for spending, IMO.

 

starfish's picture

Ah Hah...i think i learned something...

geopol's picture

So you don't get kiled, if they are American Eagles, they are at +premium $142.34 Kitco @16:51:00

Miles Kendig's picture

You're great MsCreant.  You have an answer to last evenings ?

ATB

MsCreant's picture

Yes, I checked back a few times on that one. I would say you are doing very well! :-) Wish a nice fat dooby was legal, I'd surely buy, roll, and share!!

Miles Kendig's picture

And compare some notes on how to spoil a kid that is responsible and respectful.  I would love some additional insights. Lord how I wish it were here as well. I am considering going back to Cali after graduation in May just because. When it is we will.

Gunther's picture

Always something to learn…
Small coins are good to buy something if no other money is available.
As long as you think there will be paper as medium of exchange in the future question is if you want to pay the markup.
On that thought, offer bullion price; that is what the dealer would pay the seller.

Some prices:

Kitco: 0.1 oz Eagle $142.52
https://online.kitco.com/bullion/completelist.html

An usually expensive German coin dealer:
83.50 Euro (=126.25 US$) for 0.1 oz Nugget (other 0.1 oz coins sold out)
http://proaurum.de/edelmetallshop/gold/muenzen_anlage.jsp?action=showPro...

To compare: 1oz maple

Kitco 1140.16$
proaurum 752.5 Eu= 1129.65 $

MsCreant's picture

Thanks to all for your answers. All your opinions were helpful. Everyone. I lost out on one Krug and 16 Eagles because I was too slow. I learned a lot from this experience and your input and feel like I will be ready to pull the trigger when it is right next time.

That was cool having all that support so fast. Thanks again.

chumbawamba's picture

Oh well, take the money and go out and find some nice Pamp Suisse or Credit Suisse 1ozt bars.  You'll pay a much smaller premium (in line with the deal you just passed up) and you'll have metal in hand now, which is crucial.  It may not be available in another few weeks.

I am Chumbawamba.

Anonymous's picture

Those of you hoarding bullion might as well just leave the country. I don't say this to be rude, just practical. There are a handful of countries which will be much better off in the "Mad Max" scenarios you all are predicting: Chile, New Zealand, Canada, Australia, Norway, and Ireland come to mind.

Instead of bartering silver bullion for a loaf of bead, just get out of dodge - or at least sell your property, rent for as long as you can, and get your money out of the country now. Bartering gold coins for sacks of rice doesn't seem to be a very civilized way to live.

Anonymous's picture

A principal reason the fractionals are more expensive per unit weight is, you still have to pay the manufacturing cost of the coin. That is not negligible.

The difference in manufacturing cost for a 1/10 oz. coin versus a 1 oz. coin is not much. Hence, as a proportion of the smaller coin's overall price, the manufacturing cost is a much higher percentage than it is for the 1 oz. coin.

Yes, the "fungibility" argument also comes into play.

If you are planning to buy and hold, I'd say you stand a pretty good chance at recouping the delta based on spot.

Anonymous's picture

buy Silver instead, the premium is lower

Bam_Man's picture

MsCreant-

APMEX almost always has better prices than Kitco and they frequently offer fractional Maple Leafs that have "abrasions" (lightly scratched, not "mint condition -- who cares?) at an even lower preimum.

curbyourrisk's picture

Round 2 of deflation about to happend.  Dollar time to rally!

californiagirl's picture

Couldn't part of the increase in M1 be due to money coming out of the M3 category? Since M3 is no longer reported? How do we know?  Not being an expert or a Wall Street finance wizard, any insight would be welcome.

Anonymous's picture

i love this game. No one knows what the hell they are talking about regardless of who you are. Yet, we all keep proclaiming our opinion hoping to be correct. Inflation can become relevant if the dollar continues to tank or if all this money begins to go to work, or any combination thereof. This, along with geopolitical influences create a most unpredictable environment (like we could even guess when it was more predictable). So here is my guess, the gov'ts of the world are all in this together. The G20 is buying our dollars while they are down ( a double down or so)so that when it springs back some, they will have recovered. This is a calculated plan. QE keeps the rates low while the Asian lenders of our country double down allowing us to finance our big spending spree. How's that for a guess?

sgt_doom's picture

Of course no one knows what will happen - obviously this is completely new territory, with over 3,000 categories of credit derivatives and untold layers and levels of securitization, one can only surmise that deleveraging will take ten, twenty, thirty plus years.

It require complete transparency, several miles of supercomputers and some fairly intelligent analysts to deduce even a modicum of guesswork.

Anonymous's picture

The melt-up is set to start April-ish 2010.

chumbawamba's picture

My opinion is that inflation is already here in the form of equities.  The rise in the Dow just happens to coincide with "Quantitative Easing" (how come that term conjures up intimations of anal sex?  maybe it's just me...)

I believe SOME of the rise in basic commodities (particularly the metals) is the inflationary effect of all this money printing.

I think the post just below this one where Tyler says "Either this is another headfake, this time without a Dick Bove scapegoat, or a dollar renaissance could finally be in the making, with a subsequent drubbing of all dollar-denominated assets" is another clue that the wheels are starting to fall off.  But that's a hyperinflationary indicator.  Because this time, when the shit hits the fan, it's not going to be a repeat of Fall 08.

I am Chumbawamba.

vreporter's picture

The deleveraging that has taken place - and continues - is in a way, the saving grace here. Because of this phenomena, it's very difficult to convert all that printed money into spendable or loanable money; all this while credit standards have been permanently adjusted. Commodities, real estate, art and other "hard" assets have more room to drop. Inflation has many fights to go before it can even win one round!

Printfaster's picture

The Chinese control inflation in the USA.  When they dump their Ts, inflation begins

Until thin, inflation is theoretical concept.

asdf's picture

and China can't dump their treasuries because 

- it would kill their savings

- it would kill their export oriented economy and trigger a chinese depression

 

therefore, inflation is a theoretical concept.

rek's picture

They don't even need to "dump" their treasuries all they have to do is not buy as many new ones as we need. In this way our economy is a lot like a ponzi scheme: we rely on constant new investment to pay off the old investment because in reality we can't afford to do anything else. While I agree that our economy and currency collapsing is clearly not in the best interest of China, that doesn't mean it cannot happen.

At the rate we are racking up debt it's highly likely that China and other foreign countries will not be able to afford to support our debt - even if they want to. Even if everything goes according to the governments best case scenerio plans we're going to rack up trillions more in debt over the next decade. Right now China holds "only" about 800 billion. They have their own economic problems to deal with, think they can really afford to double, triple, quadruple, or more? Not for long.

Exponential growth, in anything, is simply unsustainable. We'll find that out eventually.

geopol's picture

I think the chinese have a very interesting plan for the U.S.. It goes like this... We no longer need your market Yankee dog. Our currencies are going to rise....we buy own stuff.we have 1.2 billion consumers who are now able to by our own washing machines..get it, we no longer need Yankee dog....

 

P.S. Walmart in drastic price reductions for the holidays... =blood bath

 

BTW Where is Walmart going to get it's inventory... not the Chinese anymore....hummm

Printfaster's picture

Not necessarily.  If payments for resources or food come due, then the dollar goes.  Basically the buck is OK unless the Chinese cannot drive a sufficient export economy.  The Chinese are trying to hedge that by buying foreign productive assets.