This page has been archived and commenting is disabled.
Let's Think This Through Together
Discussion prompted by my recent commentary on hyperinflation continues to evolve and may yet enlighten us sufficiently to produce some useful conclusions about the banking system's looming endgame. Hyperinflation, or deflation? At this point, I'll concede that it could be either that brings us to economic ruin. But I will nonetheless argue in a forthcoming essay that the dollar could collapse without triggering a hyperinflation. Under this scenario, it would not be a question of paying $1,000 for a barrel of oil, or $100 for a carton of eggs; rather, those in a position to supply such basic necessities would simply stop taking dollars. This clearly implies that we would move rapidly to barter, abandoning a currency system that might conceivably have become useless overnight. (The spectacularly bullish implications this holds for gold are impossible to miss). To drive the discussion toward a conclusion, I would urge readers to immerse themselves in this idea. You can skip the commentary itself if you'd like, since whatever insights it might provide at this point pale in comparison to the gems that have turned up in the forum. Simply click on the "Comments" link above to enter the forum.
When you jump into the fray, argue not from theory but from the logic of how you imagine your life would proceed in the wake of a collapse of the banking system and the dollar. You might pretend that the catalyst for the collapse was a Treasury auction at which the Fed was the only buyer amidst wholesale dumping of U.S. paper by...everyone. To heighten your acuity and stimulate the imagination, make this catastrophe a personal one. Pretend, for example, that it is the first of the month, that your employer and your $100,000 job are unexpectedly in dire jeopardy, and that you are about to send your mortgage lender a check for $2000 drawn on an account with $10,000 in it. The evening news is filled with reports that the Federal Reserve will do everything in its power to keep the system liquid, but they note as well that the dollar has fallen steeply relative to other currencies. All interest rates have soared spectacularly, threatening to send your ARM in the same direction.
One Tough Nut to Crack...
If anyone needed convincing that the stock market has become invincible, yesterday was the day. Japan was shaken badly by another big earthquake, crude oil quotes were bounding above $110, Portugal was threatening to topple Europe’s financial house of cards, and the U.S. government was hours from shutting down. How did Wall Street take the news? Like a pro, actually. The stage-managed panic was over almost before it began. Stocks dove on word from Japan — but not in a way that showed even the slightest sign of fear. Rather, the market swooned in the fashion to which we’ve grown accustomed, violently shaking down widows, pensioners and a few other nervous nellies, but few “players.” A precipitous, 100-point loss in the Dow was recouped in minutes, and when the dust had settled it were as though the day’s headlines were no more alarming than the kind of routine stuff that fills the “Daily Roundup” box on an inside page. Now, I’m no Irving Fisher, and I don’t mean to suggest that stocks have reached a permanently high plateau. Far more likely is that they will give back in a week everything gained since 2009. In the meantime, however, it is clear that it will take far more to bring this market down than the latest evidence that the world is indeed going to hell in a handbasket.
(Get my daily market commentary delivered free via email.)
»
- advertisements -
Wrong thread...oops.
Imagine, a paperless America with only electronic currency? Something tells me the world's elite hackers would have something to say about that. No matter what, if the dollar goes under we're royalled F'ed in the A. nothing else to say, let's just hope the flunkies can get something figured out.
www.forecastfortomorrow.com
Rick
you have your own website thats been going how long 8 years. You take peoples money for financial advice. Why don't you go back there and let zh'ers visit you there. you aren't the typical ZH contributor. Whats the saying, there goes the neighborhood.
Nice concession speech. Hyperinflation equals dollar worthless - the exact opposite of your original premise Rick - deflation. It's one way to make a name for yourself - I have to admit - when I saw a new post by you, I couldn't wait to click it.
btw Rick, just giving you a hard time - you have been the catalyst for a much needed debate between two camps that probably have more in common than they realize. Kudos for that.
The market will be taken down by these two words:
"No QE3".
Then, after the crash in which JPM, GoldmanShafts and the other owners of the FederalReserve capture hundreds of billions in profits on their just-purchased massive leveraged short positions, the world will scream in terror!!!
"We need QE3".
Then JPM, GoldmanShafts and the other insiders will liquidate their short positions and purchase massive quantities of massively leveraged long positions... just before the FederalReserve announces,
"Okay, okay, you twisted our arm, so we begin QE3 today".
And there you have it. The usual criminals will steal another few hundred million, if not trillions, from everyone else. Their transactions will be 100% massively criminal based upon insider information (their plans executed by the fed), but nothing will be done, because they control the so-called "legal system".
And the FederalReserve will have gone from being "the bad guy" for causing inflation... to "the savior of mankind" for starting another round of massive ripoff called QE3.
>>Then JPM, GoldmanShafts and the other insiders will liquidate their short positions and purchase massive quantities of massively leveraged long positions... just before the FederalReserve announces.
I have had worries about this, but the market discounts, the real parts of it, that are biding their time. The best shot that the PTB have is a very short half life margin call. They'll all eat each other's hearts out trying to squirm through that needle's eye.
Consider some relative numbers for a moment. The excess reserves of the US banking system that everyone worries about are roughly $1.5 trillion. A lot to be sure, but in the grand scheme of things, maybe not so much. Especially when compared against the totality of debt/credit outstanding that is north of $52 trillion (not including most of the derivatives pyramid). Remember too that every dollar of one person’s indebtedness is someone else’s financial (monetary) asset. If just 3% of that total credit balloon were to be lost to bankruptcy write offs, it represents a wealth evaporation equivalent to the banking system’s entire pool of excess reserves.
This entire inflation vs. deflation debate, in my mind, boils down to what prices AND credit are going to do. Since I don’t know the future, I can’t say with certainty which outcome will manifest. What I can say though is fast-rising prices tell us where money has been flowing. They are a telltale. And the money the Fed has recklessly created for the past 2 years has flowed largely into 2 main areas bidding their prices up sharply: (1) stocks (in part b/c of the primary dealer “demand”), and (2) into commodities (in no small measure b/c of “preppers,” of both the domestic and Chinese variety).
The important thing to keep in mind, however about the endgame, is the moment the Fed stops or slows its monetary inflation even just a bit, the credit house-of-cards begins to implode…again. Rising European and Chinese interest rates may be just the brakes that slow the inflation party that the Fed’s been throwing these last 2 years. I wonder who will be the first guest to vomit on the Fed’s monetary rug?
The endgame for the bankers confuses me right now. Bankers profit by a cycles of exchanging paper for paper. To create wealth the paper must be converted to something tangible (although ownership of something tangible can be expressed through paper).
Inflation & Deflation are measurements of the purchasing power of paper (among other definitions), but both presuppose faith of the market participants in the paper. Hyperinflation occurs when market participants lose faith in the paper.
So what is the Bankers' exit plan for paper if they seek to increase their wealth?
http://www.zerohedge.com/article/us-energy-secretary-expresses-great-concern-due-high-oil-price-saudi-oil-output-declines#comment-1150137
Put on some Eagles and listen to the author. Helps. "They called it paradise, ...sinking in the sea..."
Could be some reworking of money & debt or debasement I can't think of that's in mind. Ranked the post 'poor' but maybe I am missing some monetary trick as an assumption? Hold on, let me read that again (Eagles still going)
"If you call something paradise...kiss it goodbye."
Nope. Sorry multi-attention thing not working. I'll check back later, someone'll explain better.
Why is this guy contributing and humilating himself? Has he done any research at all? So, it isn't hyper inflation if he just calls a worthless dollar plus legal tender laws "not hyper inflation". What is the point he is making here? Hyper inflation has happened repeatedly in the last 100 years. It doesn't take much mor ethan access to Google to find out what is going to happen. Prices are going to shoot through the roof. The government will lie about it and print more money. Repeat sequence.
I am poor so i don't care.
Also, no 401 in Europe.
Maybe start by researching BASIC terminology of economics before posting here.
A collapsed dollar is one which no one wants, has faith in or accepts, that is hyperinflation.
In that scenario, price an iPad in dollars ... it would have lots of 0's
LOL. Your arguments are becoming enjoyable to read now.
So basically, you are saying(if I have this right):
"There won't be hyper-inflation but people with physical commodities will stop accepting FRNs."
Or, put another way:
"The patient didn't die, but it ceased to keep living."
You are mad hedge fund trader 2.0, now. Better go back to the drawing board on this one. Maybe ask your faithful forum followers for some more group-think.
duplicate deleted.
duplicate deleted.
Mr Ackerman appears to be edging closer to a realization. And that realization is that his original essay was marked by broadly insufficient understanding to tackle his chosen subject. Mr. Ackerman's next realization is to become aware that writers have been dealing with this subject for a long time. Since before any of us were born. For example, it's telling that nowhere in Ackerman's first essay does he cite historical writings on inflation. Further, his original essay is severely restricted to the issue of money supply--and not confidence. Mr. Ackerman has alot to learn. We all do. The question as always is: do you hunker down in the cesspool of rigid belief, or do you stay open. Let's allow that while much remains uncertain as to how this plays out, the issue of Purchasing Power for USD holders will remain paramount. At this moment, PP for USD holders is disappearing more rapidly than anytime in the past 10 years. Keep reading, Mr. Ackerman.
GG
"Lets think this through together" is a good title. I've been watching the market and the price of PM's, specifically silver, along with everyone else. I thought the interview with Martensen and the founder of Bullionvault was interesting because it explained how we can have inflation and deflation at the same time. It is not an issue of either/or happening.
As an American I can understand why some hate JPMorgan. I personally hate BofA. I also understand from previous readings why Asians, specifically, the Asian Mafia, among others, would want to see JPMorgan fail. I am not sure why one living in the US would want to crash JPMorgan at this point, or be very vocal about taking part in this movement.
JPMorgan is only one witch and it is not the biggest witch on the globe. It is just the biggest witch in the US. Blythe and co. are not witches they just do the work of the witch as its minions/monkeys. It is possible that all witches at this point are moving in concert, but it is hard to say. I am just a little person, coming late to the PM party.
I am still trying to understand why the talking heads are pushing silver and precious metals all of a sudden if there really is a shortage. I think they are all just mouthpieces of those who know something more than what we are being told. Perhaps they think the masses will settle for ETF's with no physical delivery.
It is important to know who the real enemy is. One thing I am certain of, it is not Planned Parenthood. For that I am sure.
Sorry Awakened, if you ARE a unborned child Planned Parenthood IS the real enemy. Think about for a moment...
Monday 4/11
New currency?
No, the same. Just handed out more selectively.
This is today’s reality;
All those who refuse to participate in the Fedhaus-voucher scam; get bombed [sic], jailed[sic] or branded terrorist.
So, on monday they'll starting to explain the rules.
Here are some;
You barter: 25 year jail, + $3 fine.
Distribute food other than directed: 1 season forced work in the field + $500 bonus.
Standing up against bankers: Crucifixion.
-What they do to others, they will do to you.
"A precipitous, 100-point loss in the Dow was recouped in minutes,"
Said as if in some way this was meant to be a sign of the fundamnetal strength of the US economy and the stockmarket underlying it.No Rick,the market didn't crash because Brian Sack has his finger hovering over the mouse at his Bloomberg terminal waiting to buy the 3 shares that are sold when any bad news appears.Have you traded the market recently?If you did you would know there is NO volume,prices surge in one direction and the in the opposite direction seconds later,the effects of low volume yes,but then amplified by HFT computers frontrunning orders.
The minute Brian Sack is told to stop supporting the market or the Fed has to stop QE,then we will see how efficient, resilient and invincible the stockmarket really is.
The dollar has collapsed and everyone the world over is insolvent - we all simply still see clothes on the Emperor and ourselves.
America won't feel too exceptional without gasoline.
http://apeakunderthehood.blogspot.com/2011/04/house-builders-of-pain.html
House Builders of Pain
Changing the currency seems like a possible escape route for the so called masters of the universe, (the Fed). But do they have the authority to do so? Would our elected officials allow such a maneuver knowing it would most likely lead to all of them losing their seats? Americans would not take kindly to taking such a haircut. So, in any of these scenarios you can see the potential for massive civil and or political unrest. The value of your dollars may end up being the least of your worries for a period of time.
Rick A has been a fade for a decade
Umm, when did we change the defintion of hyperinflation to mean something other than currency collapse?
Hyperinflation is currency collapse.
Hyperinflation is not the opposite of deflation, hyperinflation is not really fast inflation. Hyperinflation is what happens when people lose faith in a currency and the currency thus collapses.
Bravo Rick, you made the case for hyperinflation.
This guy is getting tore up !
Maybe he would be more comfortable posting at fool.com
This blitz of ignorance has come on the heels of his loss to Lira.
Coincedence TD?
Umm, when did we change the defintion of hyperinflation to mean something other than currency collapse?
Hyperinflation is currency collapse.
Hyperinflation is not the opposite of deflation, hyperinflation is not really fast inflation. Hyperinflation is what happens when people lose faith in a currency and the currency thus collapses.
******************
That is true of currency-
It is not true of credit-
Our credit/housing and derivative system was hyperinflated and the currency didn't collapse-
Now our credit system is in deflation and will continue as long as banks don't lend and people don't borrow and asset price values continue to fall out from under debt-
Those assets experienced price inflation. Which can be extreme. The term hyperinflation is akin to the loss in faith of... This is currently not the case for currrency or credit.
Those assets experienced price inflation. Which can be extreme. The term hyperinflation is akin to the loss in faith of... This is currently not the case for currrency or credit.
*************
Those assets were personal and in many cases commercial net worth-
As their price increased-the holders of those assets net worth increased-as equity was built-but at the same time it was being drained and "spent" into the economy ie: the housing ATM-
That was genuine Inflation-
Did those peoples money supply increase?
Yes it did--
Now take the CDO market that hinged totally on house prices-
As the housing bubble grew-so did the value of CDO's-
As the price value grew-so did the CDO leverage-which is another increase in money/credit supply-
Inflation is an increase in the money "and" the credit supply-
If something can be spent and can act like money-it is money-
Credit acts the same as money on the way up-it acts differently when the value it hinges on collapses--
If credit was inflation on the way up
it is defaltion on the way down-
There's no denying there was abnormal inflation especially 2001-2008-gold seen something abnormal-the long bond seen it as well-
Gold is going up today for the same reason it did at the beginning of its bull run-
Default risk-
This debate is less than useless. All that matters is buying power, you and/or company will have it, or you and/or your company won't. Both arguments also seem to ignore the rest of the world and make the assumption that all these economies (including the U.S.) will just keep humming along on $130, $140, or even $150 dollar oil. Sorry, to say both sides of this debate are over simplifying things is putting it mildly. What is coming has not been seen before, could go many different ways at this point. All you can do is hedge your positions in paper and hard assets as best you know how, every day.
What is coming has not been seen before, could go many different ways at this point.
This is what wakes me up at night. The 20th C hasn't seen the collapse of a world reserve currency. How does that change the dynamic? I'm not saying America is TBTF, I'm asking whether if everybody else in the world will take a beating when the dollar falls, won't that affect when/whether everybody else in the world lets the dollar fall? Won't that make this different than everything we've seen before? And if so, how?
I tend to think we are going to deflate. There is no way the bankers are going to let millions of people pay off their debts with worthless money. Once the banks have all the land due to foreclosure the government will nationalize them and become de facto owners of all the private property. In addition there is a lot of other private property for the government to nationalize such as IRA's, gold,and silver. Not to mention all the federal land they have been scooping up nationwide all to preserve a bug or an owl (all of which just happens to live on land loaded with natural resources). That will help keep them operating after they default on there debt. No we won't see hyperinflation we will deflate. If you aren't already you better hide your gold and silver and stock up on beans, bullets, and band aids.
Your reasoning makes sense. But let's see. For these dudes, our debt is their asset. So they want us to keep paying our debts. They also make money when a greater percentage of the tototal federal outlays is interest on the national debt. Go figure. I think we need to see things from a Rockefellerian perspective to have understanding. Otherwise, we're just tilting at windmills.
I agree with your premise but in the end while they are accumulating wealth through debt (while at the same time enslaving the populous)there must be an endgame. I believe the end game will be debt destruction with them scooping up all the land and resources making them land barons and the rest serfs.
FOA on hyperinflation 10/24/00 :
"…in the real hyperinflation that's coming… it's not the borrowing class that's liquefied, it's the lending class! Remember, out there in our vast dollar world, for every dollar a consumer has borrowed, some entity holds the other side of the credit instrument. Our classic deflation begins when these holders are no longer being paid, resulting in the write-down of their assets. Across the land, banks, credit unions, citizens with lend able funds and every other form of lender no longer own a credit instrument that's sellable at par. Hyperinflation begins when pushing on the string no longer is an option."
"I doubt the creditor class as a group is seeking to remove the financial inequalities that separate people through this coming process of hyperinflation. Far from it. As I stated above, the credit hyperinflation has already occurred. It's there, in place as we speak.
"What is now faced by this non egalitarian lending crowd is the choice of: having their debt instruments defaulted on and losing everything,,,,, or playing 'let the fastest runner win the game!'
"My friend this is the choice you get when the currency your assets are denominated in hits the end of its "timeline".
"Human nature has followed this path for thousands of years. You know the old joke about outrunning the bear? Well, these lenders will influence our financial policy as such. They will try to get their debt securities liquefied first, spend the fiat and in this process outrun you and I. Leaving anyone they can beat to the mercy of the hyperinflation bear eating their remaining fiat assets."
The scenario of dollar collapse w/o hyperinflation isn't that easy, especially without wage inflation. If merchants stop taking the dollars, or if there aren't enough in hand to buy goods with dollars, expect the government to step in and do one or more of the following:
1) Force a new fiat currency
2) Jail, seize assets of (or worse) the "profiteers"
Think the Great Terror in France or the communist takeovers. A full collapse would see lots of real blood in the streets.
Get worried the first time a major exporter of oil stops taking dollars. Right now, the leaders of OPEC, Japan the EU and US are in a weird "hang together or hang separately" situation. If someone gets nervous and decides to go it alone and can drive a wedge between the big players, then it's all over for the USD and anything resembling a free USA.
YES, China and Russia are already getting together on making the wedge you speak of.
I agree with it doesn't matter the vehicle that is used, the end result will be the same. I suspect when the dust settles there will be no such thing as CREDIT. The reserve currency will belong to another country,if there's a reserve currency at all. And weather gold or silver is used as an exchange for goods may only be only on an black market basis. No govt. likes competition espically a world govt.
Stock market volumes very low , retail investor still mostly in cash positions after 2008 credit/market decline by 30 % and uneasy with political bickering, fiscal irresponsibility, social insecurity and RE asset meltdown.
Only bright spot is upper 2% earning disparate income pie , financial industry girded by bailout funds working their way into stockmarket and commodities bolstered by overheated emerging markets threatening to burst as soon as Fed tightens or consumer collapses. Question is what will be trigger causing inflation or deflation?
Probably something out of the blue---a political upheval, oil disruption or another credit freeze. Looking around today, anything can happen and dont rely on derivatives to spread the risk.
As much as I wish that it were otherwise .......... The FED is the ultimate guarantor of the World's Financial System. Call it any name you want, but it functions in that capacity under implied or actual circumstances. As a secondary correlation, the US stockmarket has become the worlds wealth proxy. Without full faith in this market, no other market can exist on this planet at this time. Economic reality is for discussion purposes only. the FED will continue to do what it wants with the tacit approval of the worlds central bankers as well as the majority of world governments.
This is really about power and control, not the dollar per se. Those in control will not relinquish their privileged positions by letting the dollar collapse and the financial markets implode. Therefore, markets continue to rise against all reason, and the dollar remains the world's reserve currency. Ackerman is right, imho, that this state of affairs cannot last forever (or even much longer), but I suspect that when the inevitable collapse occurs, the same dominant forces will be dominant still. Meet the new boss, same as the old boss.
Remember, the richest person isn't the one with the most money, it's the one who gets to decide what will be used as money.
And it appears the IMF's SDR is being positioned as the USD reserve currency successor.
Actually, the SDR is just a basket of currencies. I suspect (after reading folks such as Jim Sinclair and Bob Chapman) that there will be a gold/PM/commodity component to this basket in order to make it acceptable. Hence one reason we've seen Central Banks become net buyers of the 'barbaric relic' recently.
Does this mean present PM holders will be on easy street? ... personally I doubt it.
The U.S. (likely the same entities as behind the Fed) basically control the IMF.
We know from experience that they're crooks and bribe governments to do their bidding. No doubt they'd continue attempting to use that power for their own benefit even after the big phase change (not to mention Wall St would be the largest purveyors of SDR bonds & such going forward...there'd be a killing to be made by them in that green field market)
Is the situation then hopeless? Not necessarily. Some of the wisest insights I've come across are the peak oilers who surmise that a crumbling revenue base will level the playing field such that the masses (that's us) have a chance to overthrow the status quo (homeland security will be of little use as banksters goon squad when they're unfunded).
"Remember, the richest person isn't the one with the most money, it's the one who gets to decide what will be used as money."
YES, the 'flation" debate is about as useful as the two party political system as it keeps idiots arguing while the elite make their transfer of real wealth and power. Buying power is all that ever matters. Some will have it and some won't, simple as that.
Hyperinflations don't end in barter; they end in moving to a harder currency.
Bingo. Junk silver, bitchez
Nonsense. The 'collapse' of the currency necessarily includes hyperinflation. It might be begin and end in an hour, but there will be a duration of time between the triggering event and the total loss of purchasing power of the currency. Consider that it takes time for news to reach everyone. If I heard that the dollar was suddenly demonetized, I wouldn't sit calmly, I'd RUN out to the nearest store to buy ANYTHING, hoping the clerk hadn't heard the news yet. So would millions of others.
I read an anecdote from the Weimar inflation where a person who found himself with some quantity of Deutchmarks bought bedpans because it was the only thing he could find that he could trade the money for.
Well, there is nothing that can stop DJIA from tanking in USD terms, and the USA entering second recession in q1 2012. Would that be hyperinflationary? Or deflationary event?
http://saposjoint.net/Forum/download/file.php?id=2608
On average, it should look like this, but DJIA has really been manipulated to the extremes by QE2 when, as Tyler noted, bad news send stocks up ( QE3 coming) while good news send them down ( QE3 not coming) . Well, looking at oil prices and ongoing evolution of events in MENA, QE3 is not coming. So , DJIA will turn down in July definitely once that reality sets in on top of oil price increase ( with a relatively strong USD). But it will drop even before that (Monday?) , with a small uptick in June.