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Hugh Hendry Warns To "Prepare For Hyperinflation"
The endlessly entertaining Hugh Hendry, who gave Jeffrey Sachs a royal beatdown yesterday and pretty much discredited the Columbia professor for life, is back in this interview with Money Week's Merryn Webb, in which he once again is not afraid to make "bold" statements. Such as that hyperinflation is pretty much inevitable, that China is the functional equivalent of the Next fashion chain in the 1980s, that instead of listening to idiots on TV who just talk their high beta books, investors should buy the largest and safest stocks. Interestingly, Hendry actually suggests a viable way to fix America's problems, which would require China to write off its US debt, thus "securing the health and vitality of China's biggest customer." Alas, we don't think it would be sufficient, as China holds about $1 trillion of US debt (at least officially). For the Hendry plan to work, debt repudiation would have to go viral, with all banks, US and European, writing down foreign debts as well. Of course, this would bring about the crash of the financial system overnight which is why it won't happen. And yes, it still will crash, as the financed assets are bled of all their cash flows, but at least the grind into systemic bankruptcy will be slow, painful (for the middle class) and very drawn out. As for hyperinflation, Hendry's view coincides with that of Zero Hedge: "the current deflationary shock will deepen and then create "political legitimacy to go nuclear with hyperinflation" via the printing press."
Click to read the MoneyWeek subscriber only article.
h/t Kevin
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"Bull markets are about forgiveness and Bear markets are about vengeance."
Me likes.
+10
I request another T shirt slogan from Zero Hedge.
<3 Hugh Hendry
the us waits to nuke teheran until its space station interventions have failed?
he might be right about finance but he he is clueless about military strategy. wierd use of analogy.
dude looks like a lady.
Men seldom make passes at girls who wear glasses - particularly if they look like Mr. Hendry.
Uh, Snickers...that's the lady interviewer, not The Hugh Himself.
"The Hugh" :)
I knew that was the interviewer but I couldn't resist. Why do they insist on their picture instead of the subject of the interview?
Agreed; if you believe you're more important than your subject, something isn't right. And, she probably believes she looks like Angelina Jolie.
...who, incidentally, is in the Council on Foreign Relations, for some reason.
because of her daddy, just like in their movie together; Tomb Raider, maybe?
Why not, anyway? She's probably a hell of a lot smarter than Hilary. Easier on the eyes, too.
yes the hugh himself will not possible look like this...just agree with you Flour Grinder
do you mean Meryn Summerset Webb? She is a lady and she is smoking hot. You know us brits wont even look at a lady unless she has something wrong with her teeth.
To clarify: Hendry warns of DEFLATION first, then hyperinflation later. Timing of course, is everything.
+1 timing is everything.
It always is. Preparation and anticipation is key.
thats why you prepare for both..personally - cash and metals/ag now...wait till deflation hits again hard and reload on metals and ag
aurum, what ARE the best Ag plays IYHO?
personally i like CGA very long term...i am prepared to lose half of my vested capital over the next few years with deflation yet again approaching.. but at the moment i am nowhere near fully vested in CGA...i am waiting for the deflation episode and maybe it pushes the stock back to 6 or maybe even lower and i reload...i like their model and ability to deliver results..just my opinion...if they hyperinflate prior to the full deflation that i am expecting, at least i will ride some of it (the purpose of holding the current position)
thanks aurum
Buy GOD I have tried, but all I see, everywhere, is inflation. Someone please show me exactly where deflation is...manufacturing efficiency is no deflation, housing drops are not deflation they are a correction, stock drops that is folks coming to their senses. WHERE IS DEFLATION????
Everytime someone tries to show me an example of deflation, the next day the example shoots back up ( please don't think I am good luck and show me Gold as an example hoping it will hit 5,000 on Tuesday).
So some 'adjustment' in commodities or whatever downward for a microsecond is not deflation. Wages getting cut is not deflation.
R.E. taxes, food, water, electricity, insurance, travel, services, everything I come in contact with is UP.
Deflation is where on a long term basis your money goes farther and buys more. Long Term Basis...a decade, a generation...not two weeks. Deflation is when the cost to produce is higher than the cost to buy the raw materials over the long term. Show me a futures market item that is in a down trend ten years out.
As long as there are printing presses and digital points representing money, they will not be deflation. Your cash may be deflating in value, but that's it.
Take a look at the dropping M1-M3 measures of money supply (formerly provided by the Fed until 2006 or so, now available from ShadowStats) and you'll see a contraction of the monetary base. Just because we're not in the deflationary spiral yet does not mean we won't be soon.
People aren't buying much (slowing retail sales) and certainly not on credit...what little action is seen is bolstered by people who aren't paying their mortgages because of 'extend and pretend'.
When those strategic defaulters have to start paying rent and the banks have to take their 30-40% haircut, you still don't think there'll be deflation? If so, you're nuts.
Deflation is when there is no demand and prices chase customers to the bottom, after which production costs exceed potential revenue, and people get laid off, which decreases demand etc ad nauseam
And when has such a thing EVER happened, even once, under a purely fiat monetary regime, with its government taking on exponentially greater and greater debt? (and no, Japan is NOT an example --- consumer prices have been up EVERY year in Japan for the last two decades.)
Face it: TRUE deflation, under a fiat monetary system, is as likely as seeing angels fly out of Ben Bernanke's ass.
Here's one right off the top of my head. Though of course, as a small country on the Eurozone periiphery, the Republic of Ireland has an odd relationship to its fiat currency regime.
Honestly, if consumer-price deflation were impossible under a fiat currency, wouldn't this in itself be a significant point in favour of fiat money?
To believe that actual consumer price deflation is occuring in Ireland is to assume that one can believe that the stastistics as reported by the Irish government are accurate and unbiased.
If they are anything like the economic fantasy propaganda disseminated by the US Bureau of Labor Statistics, I would not make that assumption.
I certainly haven't done a ShadowStats on the Irish inflation numbers, but having seen the price of a jug of milk drop by 10% in a single day I'm inclined to think there's something to the reported deflation.
Housing is, and will be so more in the future, an example of deflation.
Everyone who debates inflation vs deflation relies on dogmatic absolutes. It's all relative, yo. Some things are currently way overvalued:
houses
healthcare
college tuition
And these will deflate relative to undervalued:
precious metals
food
energy
One way to spot the bubbles that are deflating is to look at what people were buying on credit. No one has been borrowing money to buy groceries so these prices never inflated. Everyone borrowed money to buy homes, so, yeah, they're screwed.
.
Makes perfect sense - ka poom.
Deflation is the systems natural reaction to a credit bust.
Hyperinflation is the central bankers' natural response to try to save their constituent banks.
The pain is coming one way or another, the only question is who it falls on. The central bankers want to make sure it falls on the people.
Yes
And the gold sellers often encourage margin buying because gold will never fall to zero because of it's intrinsic value.
But Margin calls come way before zero --- see the last time we had a certain runaway inflation in 1980 as shown in the chart below
http://www.bullnotbull.com/archive/gold1980.html
Then we got Volker --- when he had power -- and was not just a banjo player looking for an audience
?????
I think you are confusing your Wall Street pump-and-dumpers with those who refuse to engage in such corrupt self-serving practices. I know of NO gold seller who encourages the margin buying of gold, at least not any who actually sell the REAL thing and not just more Ponzi paper promises.
Stupid monex does. Thats who I bought from freddie and fannie went nuts in july 2008. They pestered me like crazy to get into their leveraged revolving gold account. While I kept repeating just ship it. Just ship it.
I stand corrected.
I have heard of many such cases regarding Monex and their pool accounts, yet have also heard from other Monex customers who were never harangued with such sales tactics by their representatives. I wonder why some are, and some are not given the pitch?
If you expect hyperinflation shouldn't you be taking down real estate with 30-year fixed rate financing < 5%?
Hugh must be expecting the banks to Mark to Market...
According to the update from FASB a couple of days ago banks will be required to mark-to-market; effective in 2013.
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a.2B23N9z6VM
Why do today, that which you can put off till after the Mayans have had their say? :)
just sayin'
Why do today, that which you can put off till after the Mayans have had their say? :)
just sayin'
Made my weekend. Thank you. Can I T-Shirt that? = )
You might... especially when real estate takes another nasty leg down during the deflationary wave.
what I im thinking..
Well it depends.
Residential assets? I'd say not yet. There is definitely a double dip coming which could see valuations 20% lower than they are now. Personally I don't like buying things that the government is begging me to buy. (As a side note, along this same line of thinking, buy treasuries until the government makes their coupons tax deductible like munis. Then sell every one you own)
Prime assets/properties in prime locations? At the right price absolutely if you have the cash flows to potentially finance the negative carry that could take place during this deflationary phase.
"If you expect hyperinflation shouldn't you be taking down real estate with 30-year fixed rate financing < 5%?"
Yes, except:
- Not all inflation/deflation is created equal. Some assets will deflate/inflate more than others.
- Housing prices are still very high
- Unsold housing inventory is still at *record* highs
- Unlike things like PM's and stocks - housing is a high-maintenance (i.e. costly) investment.
Give it about 3-4 years - and housing will probably be an excellent investment. Rates will still be low then.
Yes, but if you can buy property with borrowed money at fixed 5% interest, and hyperinflation hits, then you have yourself a house that cost you virtually nothing.
1) If we have a period of deflation before hyper inflation, then the value of the house will drop taking you under water. Also your 5% mortgage will cost more.
2) In hyper inflation, people will be stressed, the value of food will far out pace gold which will out pace RE.
Wouldn't you rather increase your metal holdings instead? Take that down payment, closing costs, etc. and get some more silver. Homes are still way overvalued compared to silver.
Interesting this would be brought up.
I sold "short" my house in late 04 and rented.
Covered my "short" position last year.
Financing 4.85% fixed 30 year, comp next door (2009 sale) was 80K+
hyperinflation requires a COLA enabled workforce.
Outside of .gov drones, few could survive it for long.
Interest rates would shoot the moon bringing house prices down to zilch yes?
I'm still thinking there will be a brief "magic moment" for CASH buyers somewhere between the gears of deflation and a short-lived (for Amerika) hyper-inflationary phase.
Weve hit "uh oh" but we're not quite at "Oh SHIT!" yet....
That is a fascinating hypothesis that is unfortunately not borne out by historical reality. Or did I miss the reports of the rigidly "COLA enabled workforce" in Zimbabwe, or Latin America, or Russia, or in any number of other countries which experienced hyperinflation in just the last 20 years?
I am continually amused by blinkered, ivory-tower Keynesian witchdoctors who endlessly proclaim that hyperinflation is NOT possible in the USA or Europe due to the lack of X, Y, or Z, when the lack of those same factors did not seem to impede its emergence and progression in dozens of nations and examples throughout the world in just the last 100 years.
My one time financial adviser told me about 6 years ago that the inflation of the 70's was caused by unions demanding too high wages - the myth is still floating around. Fired her ass btw.
Akass-
hyperinflation requires a COLA enabled workforce in order to be SUSTAINED.
Zimbabwe uses dollars nowadays. Long before Zim H-inflation hit 4,000,000% people were bartering.
"I am continually amused by blinkered, ivory-tower Keynesian witchdoctors who endlessly proclaim that hyperinflation is NOT possible in the USA"
I said: "... somewhere between the gears of deflation and a short-lived (for Amerika) --hyper-inflationary phase--.
Learn how to read ya "Keynesian" dipshit
"hyperinflation requires a COLA enabled workforce...."
Asset inflation always preceds wage inflation.
I've heard your statement before in other blogs, unfortunately, it's backwards.
Hendry is someone I highly respect. When I was a PM of a fund, I always bench marked my personal performance against his performance. He is truely one of the best.
Wait, Wait, I haven't finished deflating yet...
Highest volume all day was the sell 5 min. into the close.
Wow, haha...ouch:
http://www.futurespros.com/futures-indexes/mini-s-p-500-index?smlID=1090...
If you people want financial protection, buy nickels.
Good for inflation or deflation, just.... invest in a smelter.
There's no need for a smelter.
Just keep them stashed!
http://www.portlandmint.com/nickels.php
Nickel and copper coins are a sure ticket to future bartering...
That is actually brilliant. Deflation = use as currency. Hyperinflation = melt.
the precedent is already set. The guvment will not allow anything to fail/go bankrupt/remove zombies from the system. Not only would that be an admission of failure on the politicians part, but also a gross repudiation of decades of misguided economic thought and policies (rational expectations, efficient market anyone?). Watching an academic who has wasted their entire life studying something only to find out it was a giant waste of time is supremely entertaining.
As the old power mongers are thrown out, we'll usher in "new" ones....although everyone knows it's the same person with the same psychopathic personality disorder. They will continue the charade or else risk losing power. Even if guys like Schiff get in along with Rand, the average 'merican idle watching fat ass won't understand what Schiff et al are trying to say/do.
we're already speeding down the road of inevitability. Jigs up.....
Correction, the govt wants us all to think that they will not allow anyone to go bankrupt. The govt can no more stop the ultimate crash than it can stop a tsunami. Crashes are not manageable events. They are forces of nature - Human nature. When the next leg down begins, the govt can posture and legislate, but they can't do anything too drastic or risk opening the govt up to the attacks of the bond vigilantes. The fastest way to kill the US economy and legitimacy of the US govt is a rapidly rising interest rate. Everything else is just noise.
right...exactly. Hence the road of inevitability. There's nothing they can do which is why they will print, hyperinflate, blatantly lie about CPI/PPI, force currency black markets, and call it a victory. They will not allow IR to rise or the bond market to fall apart, that's when Benron will really flex his muscles and quantitative sleaze us to dow 36,000 promptly followed by dow 36,000,000.
Prepare for hyperinflation...buy 30 year Treasuries??!!!??
Hyperinflation is something that always seems a long way off (I agree it probably is), until it's here (which could be tomorrow and would make your 30 year treasuries worthless).
I agree with his advice but feel he left off one important thing. If you want to sleep well, 10% of your investible assets should be in PM's in your posession.
10%????
I think you missed a zero in there.
Hendry mentioned in previous interviews that the last time he was long gold was in 2003/2004 and he hasn't felt bullish about it since.
tips if you could count on them to give the correct cpi...
This depression will wipe all debts clean. Morons can't listen to advice, for they are smarter then folks like Hendry and must do stuff the hard and painful way.
"US debt is a subprime asset the Chinese can't do much with."
If that doesn't open up your eyes.
Agree. That is an enormous statement.
Cannot sell them, but have to buy them. Cannot use a hand grenade in a room with no windows and a locked door.
Of course it will. Inflation is the ultimate fat tail event that no one really understands, especially "monetary experts" as it takes a set period of time for it to show up. However, if you look at CPI or inflationary data of your choice over the last 100 years you will notice the pattern of events from the depression, balance sheet expansion, to inflation periods, speeding up. Based on my theory inflation will hit in or within 18 to 24 months with an outside chance of 36 months and it will be like nothing we have ever seen before. In other words, pray for deflationary hell so you can buy hard assets on the cheap because you will not see inflation when it hits. You will literally wake up and a Snickers bar will cost $15.
I'm gonna sockpile peanuts and nougat.
that was so funny i almost junk rated just to leave a sign.
ZH need a "AAA" rate button
Absolutely!
+1 sockpile (clean or dirty?)
You guys are freakn great thats some funny shit, thank you
Hyperinflation is inevitable, and it is going to be real. Anyone who believes otherwise, is only kidding themselves. As people have already said, timing is the key to be able to take advantage of it. If you were living in the late 70's then you know what signs to look for and how to take advantage of it. There will be alot of suffering by millions across the country who are not prepared.
I fully believe the next QE for some $5 Trillion will be the ultimate spark. And the next QE is guaranteed, make no mistake about it.
Only way to prevent it, total global default and reset of the system IMO.
As long as Bennie Mae is running the show, you can count on QE being part of the rolling "solution".
The only issue is the timing of the QE... and I would gather asset prices will be popped (again)... before they are propped.
Five trillion sounds like a nice round (odd) number.
I think $5T in new QE might be a bit high, but I think the Fed's balance sheet will hit $5T by the end of 2011. Gideon Bernanke owns 1.25 of 5T of agency MBS, I could easily see him taking another $3T to free up the system to buy USTs, which would put him at $5T balance sheet.
I say: get ready for deflating personal assets, with inflating cost of living. In other words, everything you own will deflate, everything you need will inflate.
All attributable to ongoing fed/treasury policy on top of 3 decades of supply-side orthodoxy.
Buy gold anytime you accumulate enough cash or credit. Hold on to it with a decent time horizon. Hard will beget hard. Hard assets will become the only meaningful store of value, with gold also being a medium of exchange. Paper will beget paper. Assets backed with paper will be worth the paper. And that's it.
Better yet, buy all the gold or silver you can get your hands on with every credit card you have, store it at home, and then don't pay the credit card. That simple. When hyperinflation hits, there will be so many defaults its not even funny, so why worry about paying. Use your credit line now, to your advantage for you and your family sake. At least, that is how I see it. Bankers obvously don't care about you, so why care about them.
Don't forget food!
Food, PM's, Cash, Land, Lead + Dispensers, not necessarily in that order.
Done.
Last year, I had excellent credit and no debt. On one day, I applied for one credit card after another, online. My available credit doubled. Then I maxed everything out on buying gold and silver and tossed the cards in the garbage. I've been "retired" ever since.
More people should do this, not for just a personal bailout, but because IT'S THE RIGHT THING TO DO.
You're all talk and no action if you're not doing anything against the system you so hate.
Throwdown:
If you pay taxes, you're a pussy.
He could be on to something.....scary.
Hello Zimbabwe
Max out your credit cards to buy gold....then default on the credit cards.
Get "REAL MONEY" for free!
Wallstreetpro2, is that you? We've missed you!
Just what I was thinking!
and fight the good fight at the same time.
It does double damage to Santa Oz because by defaulting you're destroying the credit just created while at the same time helping the silver and gold markets.
Someone please argue against the possibilty of our Uncle Ben trying a controlled deflation through just enough liquidity to prevent a full stop. I feel very uncomfortable seeing only one side of this conundrum.
It is possible, but not probable. Zimbabwe Ben believes deflation must be combatted at all cost, even if that cost is hyperinflation.
If he had it his way Sony Walkman's would still cost $200 - deflation cannot be tolerated any way, any where, any how.
Not sure of that. IMO, the FR have "so far" acted prudent to protect their own arses. Sure they want nothing more than to stifle deflation but it's not entirely in their control. Forget the myth of the perpetual money printing machine. There is absolutely no evidence of that "perceived" power being exercised recklessly. Again for their own protection.
It's the US government that's on the spending spree and that's their solution to combat deflation. War, Health care bill etc are means to keep the 15-20% component of GDP from going in the way of falling consumption.
I thought that was what he was trying? (the money supply is declining faster than he is printing and we are all certain he is aware of this fact). Further, it would seem folly for the banks to inflate away our loans. Although, he is rangebound because if the security underlying the loans is deflated to nothing, and the banks are on the hook for the remainder, the banking system will shut down (hence mark to myth). A controlled deflation gives the banks a relatively straight forward ability to systematically get rid of assets over time, rather than a gigantic dump. In other words, this way, they'll lose some limbs but not their lives.
However, his ability to control the decline is directly tied to his pile of dry powder. Ultimately, his powder will run out and the exit will be quick and uncontrolled. The illusion of safety.
The political changes taking place in this country are setting the stage for a vast reduction of dry powder.
In summary, that is what ben is TRYING to do, but obviously that is a tightrope no human has ever bested. The liquidity will dry up and sooner than you think.
I re-read his 2002 paper today as a reminder.
You nailed it on the head here.
As a side note; I was struck by the fact that when referring to the Fed he repeatedly says "... and other government agencies".
You may be right, but Uncle Ben did say that HE was comfortable with a $12tt balance sheet 2 years ago. That is a lot of dry powder. Let the bankruptcies, foreclosures and liquidations happen over time to find the bottom rather than tomorrow.
Fortunately, Ben has limits to his actions. Some may argue he's doing whatever the hell he wants right now. And to a certain extent that is correct. However, what happens when the frog is aware he is boiling midway through the boil and decides to jump out?
Ben may be comfortable with the largest balance sheet ever. But, when Congress shuts down the dry powder (debt limit) and decides to audit, I suspect the rats will feed on each other. Further, I am firmly convinced there are too many people involved in the madness, collusion, and religion. Some of these people will lose their faith and/or blink first. It appears the Germans may be our early whistleblowers.
All these developments are incredibly deflationary. If Hugh is right and we have a prolonged period, I completely agree we will not have the discipline to stand the line. But, I believe Ben will be long gone by then and we'll eventually be boiled by a different cook.
Did you say debt limit? Agreed on everything , but that point. Why stop now, unless we vote in A LOT of new cowboy congress critters looking to pony up. It's gotta come in a different way, politicians won't change (or too few).
We'll stop racking up debt for a number of reasons. One, we're not getting anything for the money. Ben couldn't stimulate some semblance of organic growth if he smeared mold in his beard. Two, we're not getting anything for the money because we've come to the end of the road. We can either take our medicine now and have a shot at keeping some degree of functioning society together or we can keep our foot in the gas and pray (think the end of Thelma and Louise... I'll hold your hand). I think in this sense, you could call it basic risk aversion. We know the future will be bad, but it may be worse under a hyperinflationary collapse. Three, and this will get your gullet, deep down we knew our actions were unsustainable for so long and the babyboomers will ultimately ask for forgiveness as their childrens' puppy dog eyes pierce their overindulged skulls. Four, practically speaking, the only political alternative movement available at this juncture is austerity... a debt rejection movement will be marched with molotov cocktails in hand (and far less organized). We were so desperate for change, we never bothered to ask whether Obama could do the job... we're still desperate for change and, in this case, it means a more fiscally conservative approach and smaller government, which is INCREDIBLY deflationary.
but there is no debt limit on the monetary side?
The Treasury and FED are tied at the hip. I'm not sure it's even possible to draw a distinction between monetary and fiscal policy at this juncture.
I only watch the RBA, controlled deflation has been the order of the day for 12 odd months now, with just the occasional foray into 'easing', I prefer to say 'qualitative' rather than 'quantitative'.
Will this stop the impending depreciation of bank assets. I doubt it. All you'll get for your dollars are empty matchboxes & unfinished real estate.
This tale has been told before.
I'll be contrarian and state that hyperinflation is such a catastrophe that merely holding on to hard assets may not help you out. Owning a business that deals in essentials and building up business relationships may be more valuable than hard assets.
Inflation will inevitably bring more intensive price-fixing, rationing, and dumping of goods. The US lived under that regime for a large portion of the 20th century - especially during WWI and WWII. The US returned to a heavy price-fixing regime in the 70s.
So, there's tons of precedent for that kind of behavior. When that happens, most of the money will be in smuggling food, gasoline, energy, and other products (possibly precious metals) controlled by the regime.
Ideally, though, you want to create a situation where you can live in a reasonably stable country without having to worry about any of that nonsense.
I already barter with some of my clients
I have cashed 401k in bought PM's, canning my garden veggies probably 1yr supply on hand,ammo, have several chickens, goat's,rabbit's,my well is solar powered. But still feel I ain't ready. I have 3 small children to look after. So glad to find ZH but I dont't understand 1/2 the shit ya'll are talkin about. But ya'll sure do make a lot of sense if that makes any sense. My question is what am I missing any adv appericated.
trade off your TV set for somthing useful.
You've been set up your whole life to believe in the infallibility of the system. It is now being deconstructed on purpose to create widespread shock and other spin off mental problems. In the coming crisis TPTB will be there to provide order ( a new world order) that will be demanded by the sheep thru their spokes-persons on TV.
My question is what am I missing any adv appericated.
Binoculars and a one-way ticket to the moon to view the end of the world as we know it. And you will feel fine.
Where does he say "PREPARE" for hyperinflation? He explicitly says buy US and UK government bonds as he sees a long lasting deflationary mess before inflation has a chance to come through.
You're picking at nits. He says hyperinflation is coming (note 'hyperinflation', not 'inflation'), the article's implication is that buying stock in the type of companies mentioned is preparation for that, and that in the meantime you should buy gov't bonds.
I'm not sure how the average person is going to be able to time getting out of bonds before hyperinflation, but maybe he's not talking to the average person.
I'm also not sure how Unilever and P&G are necessarily going to survive a hyperinflationary event, especially with one's shares of stock intact.
In previous interviews Hendry was quoted as saying that hyperinflation is the "last page in the book" and there are many interesting chapters in between. He was comparing today's hyperinflation proponents as those who like to skip a good book and read the last pages first because they're so curious how it all ends.
If only I knew how many pages were in the book.
Faber once explained that stocks in Mexico kept their relative values from before and after their bout of hyperinflation. Maybe?
Hendry certainly gave the odious jeffrey sachs a much deserved "glaswegian kiss" (head butt) in yesterdays clip, but in the following interview (by my interpretation) comes off badly against the telegraph's liam halligan by arguing that QE to infinity is profoundly deflationary. bobbing and weaving, sloughing off ad hominims does not work for hugh here. see what you think;
http://www.youtube.com/watch?v=Eq2_L9x-6GQ
If I heard him correctly he did not mention hyperinflation as a sequela of QE here. He has clearly refined his thinking in the interim.
Hendry's facile view of China's economy is his precept for his facile plan of debt repudiation, and his cited Japanese view is the base of this precept: China shouldn't "repudiate" US debts any more than Japan should prefer US consumers to Chinese ones. As China develops bond markets both liquid and transparent, Japan as the world's primary creditor nation will lend funds to Chinese consumers that had been lent to American ones; thus China could retain US debts and the authority assumed with such great debts and provide goods to Chinese consumers that had been provided to American ones. Hendry's Japanese analyst has more confidence in China's prospects, because the Japanese simply know a lot more about future Chinese funding than does Hendry.
"As China develops bond markets both liquid and transparent...."
are you referring to the country named china as found on planet earth?!?
i bet they put lead and melamine in their bonds.
No, I refer to the China that suffers a trade deficit with Japan, the only G7 nation to enjoy a trade surplus with China.
uh....
"The trade balance in April posted a surplus of ¥742.26 billion, marking the 13th consecutive month in positive territory.
The surplus logged a fifteenfold jump, the second-largest increase since officials began compiling comparable data in 1980. The hefty increase, however, largely reflects a drop in April 2009, when the economy was still reeling from the 2008 financial crisis.
In trade with China, Japan suffered a deficit of ¥21.27 billion."
http://search.japantimes.co.jp/cgi-bin/nb20100528a4.html
Also, the Chinese can do plenty with the US Treasury debt.
Like, have tremendous leverage over the US government, gain free reign in buying up US hard assets, and so on. They can also encourage increased immigration to reduce social pressure on their end.
So really, it doesn't matter that the US will never pay it back in full. It's Other People's Money for the CCP. This ongoing fiasco is potentially a huge (temporary) win for them.
yup
Dont watch to sound racist but typical.
Funny how a USD is worth that much more in the pocket of a foreigner than in the pocket of a US citizen.
It's worth a lot more overseas in American pockets, as well.
Earn in dollars, own your house in cash, hire a staff of domestics to feed you grapes.
No reason why you have to leave imperialism to the bankers alone.
What's the point then?
What the Chinese can do with their USD reserves is open to be done by the US with their credit emitted USD.
And what China has accumulated over thirty years, the US has dwarfed in less than one year through credit emissions.
So what's the point?
That presumes that the US doesn't just find a way to expropriate their property or otherwise make it hard for them to hold onto it.
The worse the economy gets, the more politically viable that becomes with China.
There are plenty of contradictions in this report.
- Hyperinflation is more of a political event than a monetary one. The rapid devaluation in the currency is an effect caused by the lack of confidence in the government. In that case, why would anyone trust the US government, let alone on a 30 year T?
- Debt repudiation enhances your credit as much as a foreclosure.
- The $1T saved would be blown on the next boondoggle and only encourages further reckless deficit sending.
- China needs to buy UST's or other dollar denominated assets. The reason should already be well known.
- Reserve currency status insists that you continually expand the money supply as needed. Currently it's deflating due to lack of internal and global credit demand.
But I do agree with his other points especially relating to social moods driving market trends....but then again that's the bases of EW Analysis.Huh? I thought Hugh was touting DEflation?!?
http://www.youtube.com/watch?v=Eq2_L9x-6GQ
Deflation and then inflation? Everyone always expects to fight the last battle. The tools are available now to stave off massive deflation no matter how bad things get. I think Hugh's forecast of deflation is a boogeyman of his bear market birthing. We will have a depression era misery, but I would lean towards instant incremental currency debasement on demand rather than as a nuclear response to a full blown deflationary implosion. I suspect we get unpredictable, but long term stagnant, stock market action and a continued creep of gold higher and higher. Until we hit critical mass and hyper inflation. Most likely it will be some unforeseen event serves as the match for all the dynamite lying around.
bingo
Here's my problem with ZH's take on things here (and, no, it's not that Hendry is wrong):
1. If you know anything about Jeffrey Sachs (and obviously his employers don't), the guy is as bankrupt intellectually as any talking head alive--the guy single-handedly bankrupted Russia in the early 90s, allowed gangster capitalism to run wild, and walked away with a golden handshake while Putin rose and Russia was in economic (and literal flames).
2. It's not as if Hendry doesn't have a vested interest in seeing the world economy go up in smoke as sovereign proliferates out of control--he's shorting the shit out of Greece et al. precisely b/c he thinks this is going to happen. While I happen to agree with him, the significant profit he stands to gain from these shorts, combined with his very public and voluble (and, yes, entertaining) profile means that he's in a position to convince people towards where he stands--thus subtly but distinctly stacking the odds in his favor. And no, if he's wrong, he's not going to go bankrupt--there are working schmucks out there who will absorb the losses on his shitty deals, and someone else will give him capital to expand b/c (for the most part) he knows what he's doing. He's a bombastic prick, but one that's worth taking heed.
I'm glad you brought that up. Jeffery Sachs was the intellectual-GANGSTER espousing "Shock Therapy" for Russian society.
Imagine privatizing an entire society overnight, with the express purpose of destroying all institutions in a nanosecond to TRANSFORM PEOPLE into A NEW FORM OF HUMAN BEINGS.
Guess what happened? Collapse. No more breadline. Old people going hungry. People were selling things in the streets and oligarchs and mob-men were going crazy PILLAGING the society. One of the hilarious things was giving people shares in PRIVATIZED industries, and imagine people giving them up to raise cash for FOOD.
I am surprised this man gets any airtime. He deserves more than a lifetimes worth of shame.
He smacks of a self-fulfilling prophet for profit, but I'll be damned if I can poke a hole in his prediction beyond China's need to keep the host organism alive.
Our relationship with them is gonna end in one fugly divorce.
Hyperinflation, the last refuge of the goldbug. And they're cheering it on, desperately, despite it being an unlikely event. So much for Bugism = Honesty. May as well stamp "In NOBODY we trust" on every coin. North Korea nukes, hormuz pepperpot, HYPERINFLATION, ...etc, lol, whats left to pump that worthless shit? Asteroid makes dead aim for earth? I think I'll short silver now, ridiculously overvalued.
http://www.youtube.com/watch?v=waacof2saZw
Keep going. I'm sure you can turn a bubble correction in the midst of inflation into a credible deflation thesis. Pefect away.
Banks with printers selling stuff to raise money. What a beautiful story.
I'm going to go buy some $36 dollar barrels of oil. Lasting deflation bitches!!
Ok. God DaMnIT. Where did my deflationary asset prices go.
Yeah but in reality you don't/won't need masses of gold in the even of a hyperinflation to protect yourself so buying a little is like buying insurance. Most insurance contracts don't pay out, but you buy them cause the consequences of the tail event being hit are so awful that it warrants it. Enter gold.
We may not get hyperinflation if there is a incumbent massacre in November.
Oops, I just realized that we have to make it to November first [face palm].
Has anyone here taken a look at this document?
2010: The Beginning of the Real Crisis
http://www.standeyo.com/NEWS/10_Prophecy/100321.2010.prophecies.html
This stuff is scary...
It may seem scary to a Christian, but talking about "God's wrath" and divine judgments just sounds idiotic to most intelligent adults.
It's the correlation between what the economists/analysts and the 'prophets' in this compilation state for 2010 what makes this scary. Hyperinflation and hunger are coming.
You are entitled to believe (or not) whatever you wish.
The Millenarian 'End Time' is always 'real soon now'...like physicists predicting the viability of fusion reactors.
You'll be right at home with the long line of failed prophets of doom:
The year 1000
the Domesday Book in 1086
The 5th Monarchists in 1666
The Millerites in 1843
Newton himself, guessing 2060 (don't attempt to claim his 'math' was wrong on this)
If your 'prophets' had made their claims of 'darkness in 2010' in say 1998, then you'd have a leg to stand on, but as it is, you're merely contributing to fear-mongering and your lord would not be pleased.
thanks for that insight pharaoh....
Here's what kills me about the yawning gap between political science and economics (two vital but discredited professions that I unfortunately wish to bridge as I march solemnly toward the ivory tower)--the polisci geeks have no clue why there's no money and get upset when they're expected to create policy solutions to problems they never learned about in undergrad; and the economists (with the exception of James K. Galbraith--even if you disagree with his proposals, he at least gets what's going on) and finance people don't get that total failure won't happen because a massive global conflagration will occur well before this sucker is allowed to bottom out. This susceptibility of the globalized economy to generalized conflict is accentuated by the presence of fiat money, an American empire that is no longer an unquestioned hegemon but rather in mere 'first place' among nations, and the reading of history by many that "Hey, last time this happened, it took a World War to fix it, it might just work again so fuck it." We're probably two-three years away from that point, but it's not entirely out of the realm of possibility anymore given how structurally unsound the current geopolitical and economic framework seems to be. ZH, do you think we're heading towards an undoing of the Westphalian era and back to neo-feudalism--b/c it sure seems that way to me. I'd love to hear what you think.
Just calculate at what point we will be operating in a sustainable environment. I'm not seeing that happening with both the current population size AND consumption rates- one, or both, will have to give.
Yeah, we'll likely see neo-feudalism.
Nothing catacylismic is going to happen. The silent wars are working perfectly. The laughable FED is losing power while the IMF grows in power. China will sidestep the USA Moron Society via the SDR mechanism. The Mako "Billions dead soon" doomsday prophesy is the most hilarious proposition of them all around here. He says its going to happen because the FED says so. In fact he links to the FED report right on his website. The problem is its all bullshit like everything in this country. Look around, the pinnacles of American power, the housing stock that is complete junk that will have to be bulldozed over, GOOG = Our Univeristies are Full of Idiots, and reams of Business Doods whose grand contribution to mankind is "How cheap you work for me"?
And this is why a gold standard would likely not be very useful right now.
Democracy's greatest failure will be that its politicians had omnipotent powers, and the politician's primary economic advisers recomended to pay later for growth now. The crux of the problem is, you do not buy growth, it just happens. Growth is organic; more than anything it is the fuel for the spirit of capitalism. Unfortanately, a moment before the midnight hour, the Farcist US monopoly kidnapped capitalism under a moonless sky.
Yeah, growth is the function of bacteria and the cancer cell... Capitalism is, therefore, little different than the cancer cell. The outcome was preordained.
Capitalism is merely an idea. Cells live with or without; they die with or without.
Hyperinflation's a helleva drug
http://www.youtube.com/watch?v=9PR_rzF8ofw
Stay of the stuff; those who don't will end up living in a van down by the river!
http://3.bp.blogspot.com/_bGSc2xyuxvs/SbsTpLalMaI/AAAAAAAAEdA/-DvgtuGCEu...
What have we got here dad, a little William Shakespeare?
http://www.youtube.com/watch?v=ZsTTvKWPZGw
Ironic you chose a clip from a guy that died from his coke habit.
FWIW, I remember Hendry saying about a year ago that we'd already had the hyperinflation - take a look at housing prices and the price of gold. And doesn't he make the point that the DOW is up 30x since the 70's (and gold is up 40x - the anti-gold-bugs always compare it's price - unfavorably of course - to the very brief spike to 850 in 1980 - not the $35/oz price it held for more than 30 years). Everybody was terrified of hyperinflation in the 70's, and it's been assumed to have practically not existed for 30 years - Tall Paul killed inflation, right? - but haven't we just had hyperinflation in slow motion? We've all heard that the dollar has lost 98% of it's value since the creation of the Fed in 1913 - but hasn't most of that loss occurred in just the last 40 years?
Prices are but numbers in context, please specifie, for if the dollar was an asset class, it has lost its weigh.
For what is up, when up is down? So what is gold's concern with trillions of pounds?
Damn that is good. poetry. thanks
Bro, I'm digging the avatar. You and Ms Creant have, as a symbol, shown the world we are now living in. (I miss the girls though..lol) and I agree I like the poetry, Shakespeare. lol