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Hyperinflationary great depression it is... although I find the outrageous remark about the Zim notes reaching the Andromeda Galaxy (2.5MM light years) a bit far flung... my calculations suggest that Alpha Centauri (4.37 light years) is achievable however...
All depends on the weight of the paper. Is our currency 1-ply or 2?
Japan's debt to GDP is much higher than the US. Yet Japan has been experiencing deflation for nearly 20 years.
If any modern industrialized country is going to have hyperinflation first, it is going to be Japan. So watch Japan carefully. If the BoJ cannot or will not print money and hand it out on street corners, you can be certain that the Bank of Bernanke will not be dropping money from helicopters.
What about the fact that Japan is not in debt, but is a net creditor nation?
Or that the Japanese own most of the Japanese debt, and their external debt/gdp is quite small?
Isn't amount of external debt/gdp and being a net debtor the red flags we should be looking for?
It is not going to be that straightforward...
First off, Japan is fine because they are a creditor nation. They are not going to implode first...
USA is fine for now as well because it owns 3 times more Gold than any other country.
A big country which is guaranteed to be screwed is the United Kingdom.
It has only 310 tonnes of Gold to show for its external debt of 12.6 Trillion dollars.
There are many other countries in the Euro zone which are in big trouble(Ireland, Netherlands, Belgium to name a few...). Chinese and Japanese are basically going to take over these countries when they repeatedly default.
External debt is not a good measure either - it's only half of the equation. All countries have external debt, but they have external assets as well. What matters is the balance between those.
For instance, $2.2 trillion is a huge external debt for a small country like the Netherlands, but they have even larger investments abroad, and the Netherlands have a healthy net foreign asset position - the world owes them more than they owe to the world.
Also, don't ignore internal assets. Many W-European nations have big and well-filled coffers (pension funds, social funds, etc.) and their people tend to be savers rather than lenders.
Also, don't ignore internal assets. Many W-European nations have big and well-filled coffers (pension funds, social funds, etc) and their people tend to be savers rather than lenders.
The debt of the Netherlands is nowhere near $2.2 trilion.
€ 346,687,000,000 is the official debt according to eurostat.
or $ 530,000,000,000 just over half a trilion dollars.
The debt of the Netherlands is about
$ 530.000.000.000 or just over half a trilion dollars.
I actually support all Anonymous' comments ...
...hell, the UK digs up that much Gold every year in Africa.
Prepare for more nation-states, which are now to be foreclosed and liquidated in a wave of sovereign defaults.You just thought we owned America.The orientals will be picking our bones in foreclosure like so many vultures on a shopping spree. according to the bible, "the rich ruleth over the poor, and the borrower is servant to the lender." Our so-called leaders will be all too willing to sell us out even further (re: calif. garage sale), to insure their parasite / host status over Americans. And these traitors will crouch down and lick the boots of America's new financial overlords. From the land of the free to perpetual debt slaves in less than a generation.
The number of countries which are currently in jeopardy, due to their own bankruptcy is extensive. On Nov. 30 alone, the following nations were mentioned: Ireland, Greece, Hungary, the Baltic States, Ukraine, Pakistan, Romania, Bulgaria, Spain—and the United Kingdom and the United States. The least unto the greatest.
You might want to read what you can on Peter Bernholz, an economic academic,( book: Monetary Regimes And Inflation) who has spent all of his adult life researching the collapses of the 28 largest fiat money systems.The one salient point of his work might be distilled into this; all these fiat currencies had in common this tipping point into oblivion, WHEN THE DEFICIT EXCEEDS 40% OF EXPENDITURES .
The U.S. of A BORROWING is now at this level, and the congress and senate are still digging in the hole, 2 trillion more on cap extension just last week and more in the pipeline. When the other nations can't or will not buy any more of our debt, the curtain comes down on this pathetic America. The fat lady is tuning up in the wings, making ready to sing.
God have mercy on u.s.
WATCHING FOR THE FED TO RETALIATE AS A LESSON AGAINST AN AUDIT
still does not address Japanese example raised, is Japan exceptional because debts or more internal or not? Primary reason to inflate currency is external debts...foreign investors have influence, no doubt, but except for extreme case of international war, in times of great economic distress, foreigners are less of a threat to politicians than domestic populists at home who vote or riot. If politicians have to choose, they typically choose to default from debts by inflation, not good in many ways, but technically better and quicker than debt slavery.
according to research you mention, has every nation that has deficits over 40percent of expenditure tipped to inflation, as Japan seems to have not, or is it, that no country has tipped into inflation unless hit 40 percent, but some 40 percenters did not tip into inflation.
Also, I think its important to note that not all inflation is due to govt printing press.... as deflationists argue, credit is money, so it seems some inflation could come just as easily from private banks, as they are the manufacturers of leverage credit..and seemed to be the case in Weimar, banks printing money to short currency actually was a major issue.
I find monetary issues very interesting but from just the little I have read, there seems to be a lot more going on with fiat money value than government deficit spending and government printing digital dollars.
AS MR. VOLCKER APTLY PUT IT , I PARAPHRASE, THE ONLY WORTH WHILE THING THESE BANKSTERS HAVE CONTRIBUTED IN THE LAST 20 YEARS, ATM MACHINES.
EXPRESSED ANOTHER WAY, WHY REINVENT THE WHEEL AND CALL IT FINANCIAL INNOVATION, WHEN IT IS MERELY BABYLONIAN BANKING @IT'S CORE.
AS IT REGARDS JAPAN'S FINANCIAL FOLLY, I BELEIVE THEY WERE INSTRUCTED BY THE USUAL SUSPECTS, FOR THE STEPS THEY SHOULD UNDERTAKE. IT SEEMS OBVIOUS BECAUSE AMERICA IS HEADED DOWN THE SAME PATH. EITHER AMERICA IS THE HEAD OR JAPAN IS WAGGING THE DOG.
That would be "ATMs", Bravo.
Calling them "ATM Machines" is literally calling them "Automatic Teller Machine Machines" ---- redundant.
And curiously, I had my first ATM card back in 1980, so even Paul Volcker is wrong on this one.
I'm not an expert, but it seems that national economies are complex situations, so any single causal factor is too simplistic to be true. So the US problems are a combination of various (corporate, private, government) debts, deficit spending, corrupt banking, an apathetic populace, central banks, a horribly abused world reserve currency, an out of control printing press (drug addiction analogy), a forced and failing petro-dollar standard, and literally hundreds of other causal factors.
Japan has its own conditions, unique to itself. One of the major ones, I think, is the yen carry trade. This had a similar effect of the US world reserve currency status - exporting inflation instead of the monetarist hope of pumping the economy up. The idea here is that the government debt binge merely side-stepped the real economy of Japan.
Boy, some of you guys aren't getting it. Japan won't follow America. America will follow Japan. You think something "bad" will happen and the only bad thing you can think of is hyper-inflation. Because you've never experienced deflation.
All the US conditions are either exactly the same or worse than Japan 1997.
Convoy of zombie banks – checkLiquidity trap – checkRising unemployment – triple checkNo new lending – triple checkGovt. indebtedness – checkBailouts – checkv. low biz sentiment – quadruple checkno white knight industries left - check Deflation a-comin’... for the next 15 years.
agreed, Japan seems the best corollary in modern world to our current situation...one thing I wonder though, is/was Japan consumer zombified like US consumer? I think of the banks offering to extend interest only payments on mortgages indefinitely so homeowners become like renters, but are paying over market rates for "rent" (interest). If more deflation is on its way, then this will work itself out, but wonder how much they can/have thwarted deflation to date by bank/Fed policies...not that they can stop it, but like Japan, they can drag it out.
Also, I want to know, once Japan had bubble and was going to crash, was their zombie ways the worse choice? Sure our economic "geniuses" mocked them but would a sudden crash have been better than their gradual erosion? I get that it is better, for say housing prices, to quickly bottom, so then people can enter market without worrying about losing money in future as they might not make any money on asset but won't lose 50 percent either...however, Japan populace in general seems to have done fairly decently over last 20 years, not great, but not impoverished either, of course not like bubble times, but really, has it been that bad for Japanese middle class?..they seem better off than us, now...just wondering.
And yes, I understand all the reasons its not good to have zombie economy, but a crash is harmful too, the question to me seems obvioius, which is worse for for regular people: spreading the harm over decades and increasing the overall costs accordingly or suffering a quick brutal crash and starting up from the ashes? It seems we went in for the more quick brutal crash in early 1930s than we have in 2001 or 2008, so what is objectively worse choice?
MM, I BELEIVE IF WE SEE ANY DEFLATION, IT WILL BE SHORT LIVED. WE ARE SAILING UNCHARTED FINANCIAL WATERS. 1/2 DOZEN BRILLIANT ECONOMISTS WILL SAY THIS AND 6 MORE EXPERTS WILL SAY THAT.
JAPAN SEEMS TO BE WAY BEHIND THE LEARNING CURVE,AS IT CONCERNS "SAVING" AMERICAN DEBT INSTRUMENTS. THEY SEEM TO BE HEADING TOWARD THE CHINESE MODEL OF DIVESTING FOREIGN EXCHANGE @ ABOUT 50-100 BILLION A MONTH, INTO TANGIBLE ASSETS, ALONG WITH BECOMING THE PAWN BROKER OF THE PLANET. OR CONVERTING THE IOU'S AND SPENDING THEIR WINNINGS DOMESTICALLY. CHINA ALSO DECREED THEY WOULD NO LONGER HONOR THEIR "INNOVATIVE" DERIVITIVE CONTRACTS DUE TO THE FACT THAT THE SELLERS WERE OFFERING NO PERFORMANCE. WALL STREET WAS USING THEM AS A LONG TERM PROXY SHORT SELLER IN GOLD AND SILVER. SO THE CHINESE WERE CAUGHT IN A WALL STREET SQUEEZE. THEY COULD NOT BUY GOLD BECAUSE OF THE SHORT DERIVITIVES THEY HAD PURCHASED, THEY COULD NOT CONVERT LARGE NUMBERS OF TREASURIES OR THE VALUE WOULD PLUMMET.
JAPAN HAS CHANGED LEADERSHIP RECENTLY AND WILL SEEK A NEW FINANCIAL APPROACH, I BELEIVE.
JAPAN AND CHINA MAY FEEL LIKE THEY COULD BE HOLDING CONFEDERATE DOLLARS AND HAVE TO WAIT FOR THE SOUTH TO RISE AGAIN.
THERE WAS STILL SOME CONFEDERATE CURRENCY AROUND WHEN I WAS A YOUNGSTER.
INFLATION= CURRENCY WORTH LESS
DEFLATION= CURRENCY WORTH MORE
BOTH OF WHICH ARE IRRELEVANT IF ONE IS UNEMPLOYED.
THE BIG BAD WOLF AT THE DOOR IS NO JOB, NO LIVING FOR YOUR FAMILY.
"MONEY IS THE GOD OF THIS WORLD,AND ROTHSCHILD IS HIS PROPHET."
What!!??? I can't hear you, type louder.
HUM....could you please tell me where the deflation is:
the water department (up 20%)
the electricity department (up 17%)
ATT ( up 13%)
my property tax collector (uP 25%)
drivers license ( up 200%)
hamburger ( now mixed with 20% water)
chicken ( now injected with 20% water)
ice cream ( now 1 1/2 quarts but says 1/2 gallon)
pound bag of chips now 13.5 ounces
gas with 15% corn syrup
Medium "flat rate" USPO box ( up 20%)
and, on and on and on and on...
all within the last year AND that is just the tip of the iceberg. Look around, you don't think there is inflation under your nose, then open your eyes. The only 'deflation" is the number of people this government is claiming are loking for jobs..and that too is trickery to fool and deceive. Blindfaith gets you into trouble, keep your eye on the bottom line.
I believe that this price inflation is due to the bleeding of customers from all of these places. It cannot last and it is a different symptom of the deflationary spiral--deflation on a macro scale refers to the extinction of massive amounts of credit which was acting as money. It's gone. The price inflation you are talking about is a direct result of that massive loss.
CERTAINLY YOU ARE NOT SUGGESTING THAT LESS MONEY/CREDIT, CAUSES INFLATION. THE CONCEPT IS OXYMORONIC.
"CERTAINLY YOU ARE NOT SUGGESTING THAT LESS MONEY/CREDIT, CAUSES INFLATION. THE CONCEPT IS OXYMORONIC."
- always underline your post, that way it stands out.
- then you must sign it, like this;
by R.S. ; I AM A MORON.
I agree completely. For more than a year all I've seen is prices going up. Pet food up 40%. Food packaging down 25% but prices stay the same. All my utilities went up. My school and property taxes are going way up to pay for raises and pensions the PA state gov't voted itself 7 years ago! And next month the cap comes off the electric company--estimates are bills will go up 50%.
I am running out of money to pay all these costs even though I have cut back on everything. I buy nothing new (more people like me are probably the main reason retails stores are closing). I bet you will see lots more people freezing to death this winter.
What's been deflating? Real estate and paper IOUs of various sorts. Depends on your definition of inflation and timeframe, but how about contracting credit which is necessary to keep the Ponzi Scheme alive. And where is all of that newly printed money? Sitting in reserves at the FED. Velocity of the green confetti is quite damaged! Deflation. I feel very alone... therefore, I must be right.
I hear people say things are more expensive but this has not been my experience other than the price of oil/gas. I called Comcast 2 months ago and said my hours at work had been reduced and needed to save money, I got a 45 percent reduction in my TV/internet bill...since I've got several pets including me in the house that love sports, movies etc, we had almost whole package, so this was significant savings.
Elect and nat gas prices, while still high, are lower than many past high years.
Construction labor and construction materials are down greatly, meaning bids on everything from remodels to commercial building to new highways are down 30, 40 percent from just a few years ago. Caltrans and school districts have been shocked and ecstatic about how low bids are coming in for projects they budget estimated two years ago.
Margins at grocery stores are lower and coupons are better, restaurants are offering way better deals.
Travel, in spite of higher oil prices, is way cheaper..see Travelocity adds comparing vacation packages prices from 2008 to 2009, leisure and business travelers I know have saved tons on hotels and flight, as mnay hotels are barely making it. Cruise ships have been offering packages for 30-50 percent less than just two years ago.
Land prices, cost to build houses, are way down, rent is way down.
regular folks earnings are lower, we are 70 percent of economy, and credit is tighter, stimulus and military spending can't make up the difference,
That's just it: now is a GREAT time to have money. If you have the cash (or someone will give you credit), there are plenty of deals to be had all over.
Therein lies the rub: fewer people are able to come up with the cash because they're losing their jobs. Credit card companies are cutting off credit (and raising minimum monthly payments, also contributing to the cash squeeze).
I read an interesting blurb about the great depression that there was plenty of food available, but people couldn't get it because of lack of cash (it rotted in the fields or farmers burned it for heat).
Whether prices go up or down, it's inconsequential to the person who doesn't have the money.
Hmm...how about gasoline? (down 40%)
House prices (down 35%)
Rent prices (down 20%)
and, on and on and on and on...
Inflation and deflation tend to be excessively simplified concepts that masks a great number of different measures. Deflation in the macro-economic sense indicates that large scale assets - houses, commercial real-estate, vehicles, shares in corporations, wages, etc., reduce in value. Such deflation usually accompanies a credit crunch, because it is harder to buy when there is little credit, and at the same time buyers anticipate that prices will fall farther.
Food, energy, and consumables don't always follow this trend short term, though they do longer term - food prices may rise dramatically as the cost of production rises, but eventually this forces excess out of the market first. We're at that stage now. Additionally energy, which is a primary input to these prices, tends to go up as well as suppliers reduce inventories (there's also Peak Oil to factor into this), but eventually you get too much supply in the market and prices drop again. I actually think we're seeing a localized commodity boom right now due to a number of factors, which will also hurt the economy.
What about insurance, health care, package distribution, cable, and taxes?
Most of these are about recovery costs, and represent a point where the system is effectively broken. If you're looking for the next major crisis points, these are a good place to watch. The insurance industry is in nearly as desparate straits as the banks, largely due to the same reason - significant malinvest that has disappeared. Health care is on the verge of implosion - when you have 30% or more of the population (and climbing) that can't afford health care, it either will have to become more affordable or the companies providing these services will go out of business. When demand ultimately collapses (as it is), the health industry will go with it.
Finally, taxes. Tax allocation ultimatey lags economic conditions because most tax bonds are set over several years. Moreover, when you have strong economic conditions, this is the best time to impose taxes, because you can raise money and put it into a rainy day fund. Then, when economic conditions deteriorate, you first spend down the fund in order to reduce the tax burden when it's most painful, and even cut taxes if at all possible.
Unfortunately, we've had an attitude in the US that seems to run precisely counter to this position, where surpluses developed at a time when the economy was running at high speed are distributed back as tax cuts, typically resulting in a lot of malinvestment (oh, hey, I can take a vacation to Maui!), rather than this being saved for bad times ahead.
As a consequence, now that the bad times are here, there's no money in the pot, and government services (schools, libraries, emergency relief, unemployment insurance, road maintenance, etc.) have to be cut AND taxes have to be raised, at the worst possible time. There are people on this board who likely would cheer the government cuts, and while gov't can periodically grow unwieldy, without a profit motive most gov't work is actually notoriously low paid, stressful and in many cases far more dangerous than for profit work.
We're definitely in deflationary territory right now, and will be for some time to come. Money has become scarce, assets are generally falling in price, and ultimately services that are overpriced will be forced to go down or go out of business.
In the long run, deflation is probably a good thing; it's the market's way of redistributing highly unstable distributions of wealth, of forcing localization on the markets (globalization becomes less competitive), of eliminating the inefficient, the obsolete and the corrupt, of instilling a regime of savings, thrift and fiscal responsibility, of opening up new markets that had hitherto been blocked by established players, and of laying the ground for the next major growth period.
Of course, right now, everything is being done to fight it, because at the end of the day it means that people who have a lot of money (and who benefit most from the status quo) typically lose a lot of money, while those who have little are usually able, in the main, to get by. It's not pleasant for anyone, but it's brutal to those who had power and lost it.
Here's where both Austrians and Keynesians get things a bit wrong, however. The Keynesian impulse is to borrow from future revenues (i.e., when the economy has recovered) with higher taxes and inflation put off later in order to protect the most vulnerable today. Financial Keynesians, however, rather pervert this viewpoint, and argue that it is best to recapitalize the banks first, in order for them to return to a point where they can effectively function to increase the velocity of money.
However, what we had during the 2000s was a financial services bubble - in real estate, investment, and insurance (esp. health insurance). This means that this sector has to go through a recession - banks need to fail, and large banks have to fail the hardest, in order to break up the inefficiencies and malinvestment in the market. Until that happens, we're Japan, all over again, save that we don't have the requisite savings that sustained that country through a couple of decades. Once it does happen though, one or more of the majors will likely disappear, and a lot of small, agile, technologically savvy companies will replace them, with an inbred ethos that "this will not happen again".
Hyperinflationary great depression it is NOT.
Good god, how on earth do you even get inflation out of this, let alone hyperinflation?
Where is the increased liquidity coming from? To date we have seen plummeting monetary velocity. We have massive unemployment, and we have decreasing household income.
We have a massive (MASSIVE) overhang in productive capacity, and we have continuing credit-destruction on an epic scale.
Until I see mom and pop America suddenly flush with hordes of cash, I'll call it like I see it: DEFLATION.
Anyone calling for inflation is also calling for a return to the fast money days of 2006. Anyone? Anyone?
Exactly... who else is left to leverage up? Dave Ramsey's audience? Iceland? Greece? Dubai? California?
Hyperinflation in other countries happened when there was a flight of capital. People dump their currency in favor of something else, such as US$, foreign assets, precious metals. They tried to dump it faster than it becomes completely worthless. This causes their country to get flooded with local currency that no one wants. A vicious circle.
In order to have hyperinflation in the US there would need to be a compelling reason and a destination for capital to flee.
Actually, I just did the math and came out with ~2.7 million light years assuming each bill was 10 mils thick That would mean a stack of 100 bills is about 1 inch. (6.3 million per mile, or 3.7x10^19 per light year). This is quite reasonable considering there would be almost no gravity to compress the bills after the first couple billion of them.
Sounds like we had better dramatically increase NASA funding so there will be some way to stack these bills high enough for a trip to the supermarket in the future.
2.7 million light years it truly was... my paws must have hit the wrong keys.
My apologies :)
Not one man in a million understands deflation,
including our friend John Williams.
People tend to lose a lot of money when they
extrapolate recent trends, ie the 86% collapse in
the dollar versus gold since 2001.
The last default-driven deflation America had was
in the 1930s, when very few living today were old
enough to comprehend what was going on. Bernake, Romer
and Summers claim they studied the bug D, but so far
they are receiving failoin g grades with the neoKeynesian rostrums.Nope, this one will call for the painful cycle
of creative destruction of Schumpeter, with the lower
taxes of Adam Smith and Aristotle, for the savings of
Ricardo and the reward of labor of Marx...
There was still a light "peg" to the gold standard during the 1930s. On commodity based systems of course there will be deflation. On fiat systems with trillions in derivatives outstanding there will be hyperinflation
Bernanke is not a keynesian by the way, he is a Friedmanite. The chicago school is not much better if not worse than the keynesians.
Bernanke is more Keynesian than Keynes.
As Norman Markowitz said in 2008 in Bernanke and the Return of Keynes, “Ben Bernanke announced that the Federal Reserve supports a Keynesian solution, a fiscal stimulus package.”
Said Markowitz on the Political Affairs Editors Blog, “When the chairperson of the Federal Reserve calls for a fiscal stimulus package, you know, as Bob Dylan famously sang, ‘The Times they are a changin.’
"'Fiscal stimulus' approaches to fight business cycle downturns derive from the thinking of John Maynard Keynes, the British economist who, after WWI, contended that the capitalist system faced a 'secular crisis' which called for state fiscal policies to sustain mass purchasing power in the economy in order to counteract stagnation that would produce decline.”
And as Mish said in January of this madness and Undeniable Shift to Keynes even though every such attempt in history has failed, in Bailouts Breeding Something for Nothing Economic Policy: Bernanke has come out blazing with 8 new policy tools, including the TALF, TARP, PDCF, ABCPMMMF, CPFF, TAF, and MMIFF to go on top of Open Market Operations, Discount Rate setting, and setting reserve requirements."
And concluded: Bernanke's policies are going to make this depression worse. Yes, I used the word depression. It may not be as big as the great depression, but the word "recession" does not do justice to what we are in and what is coming down the pike.
Bernanke is a monetarist who believes that printing money can solve any economic crisis. The deregulation and bailing out of banks is clear chicago school. Bernanke is now even complaining about fiscal deficits at this point, apparently there is not enough money to go around for the people and the banks, the banks and investment houses of course get first priority.
Either way both the keynesians and the chicago schoolers have been discredited. It is not a mere matter of consumption or aggregate demand that drives an economy nor is it a matter of the money supply. It is the amount of industrial production that a nation is capable of. This is what -separates (used to anyway) the first world and the third world.
Not as far flung as suggested, but based on available data the stack of Zimbabwe notes would reach about 46.4% of the way to Andromeda.
As for Alpha Centauri, that many notes would stretch over 265 thousand times that distance.
Thanks! John Williams did a very good interview on Eric kings site the other week.
Which included some steps to take including stocking up on miniatures ;-)
I have heard him say in several interviews that he stores whiskey for the coming barter economy.
I think he is drinking it now.
Can you say Quack
Yeah, except for his intellectual capacity, his education and his training.
What's intellectual about spouting beliefs which are utterly unsupportable by empirical evidence?
Deflation is everywhere you look. His charts are pretty, but his conclusions are utter tin.
"Deflation is everywhere you look." except the grocery store (sans corn)
The charts were proven to based on fraudulent input data to begin with. The whole ability for banks to create loans via credit derivatives without counting them in their capital ratios was already hyperinflationary. The same derivatives that are artificially keeping the treasury market from collapsing.
Hyperinflation is a currency devluation, asset prices can still go down even in the initial stages of hyperinflation.
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