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Welcome To Hyperinflation Hell: Following Currency Devaluation, Belarus Economy Implodes, Sets Blueprint For Developed World Future
"A ‘91-style meltdown is almost inevitable." So says Alexei Moiseev, chief economist at VTB Capital, the investment-banking arm of Russia’s second-largest lender, discussing the imminent economic catastrophe that is sure to engulf Belarus following the surprise devaluation of the country's currency by over 50%, which we announced on Monday. "Unless Belarus heeds Russia’s call for mass privatization
of state assets, it is headed for “hyperinflation, massive un-
and under-employment, and a shutdown of production" Moiseev concludes. Ah: "privatization" as Greece is about to learn, the lovely word that describes a fire sale of assets to one's creditors, courtesy of a "globalized" new world order. Ironically, this is precisely the warning that will be lobbed at each country in the developed world, as the global race to devalue currencies, first against each other on a relative basis, and ultimately against hard currencies, or on an absolute basis, as the world realizes that there simply is not enough cash flow to cover the interest payments on a debt load, in both the public and private sectors, that continues to rise at an astronomic rate, even as the world prepares to exit from the latest transitory, centrally-planned bounce in the Great Financial Crisis-cum-Depression that started in earnest in 2007 and has been progressing ever since. Ultimately, Belarus will succumb to hyperinflation, as will each and every other government seeking to devalue its currency (hint: all of them): "Unless Belarus heeds Russia’s call for mass privatization
of state assets, it is headed for “hyperinflation, massive un-
and under-employment, and a shutdown of production,” VTB’s
Moiseev said. The ruble will slide to 10,000 per dollar, he
added." Of course, this is the primary side effect of attempting to avoid formal bankruptcy through currency devaluation. And all those who continue to believe deflation is an outcome that will be allowed by the Fed, need to look just to the former Soviet satellite to see what lies in store for everyone currently doing all in their power to devalue their currency.
First look at the Belarus Ruble chart below: this is what always happens to every country that resolutely continues to live outside its means. Always.
And here are some additional observations from Bloomberg on the country that everyone in the media continues to ignore, yet which will very soon be the model for virtually everyone else engaging in central planning warfare.
The Belarusian central bank let the managed ruble weaken by 36 percent versus the dollar on May 24 as demand for dollars and euros from importers and households threatened to derail an economy already laboring under a current-account deficit equal to 16 percent of gross domestic product. Russia and other former Soviet partners last week agreed to give Belarus a $3 billion loan and urged President Aleksandr Lukashenko’s government to sell $7.5 billion of assets to replenish the state’s coffers.
Finance ministers from former Soviet nations agreed in Minsk on May 19 to give Belarus up to $3.5 billion over three years, with the first $800 million payment expected in the week after a separate meeting on June 4, Russian Finance Minister Alexei Kudrin said in Moscow yesterday.
The Nationalnyi Bank Respubliki Belarus set its official dollar-ruble rate at 4,931 for today’s trading, from 3,155 on May 23, according to its web site. Trading of foreign currency between companies, banks and individuals needs to stay within a 2 percent range of the daily rate, the regulator said May 23, when it announced the devaluation and reintroduced restrictions lifted on the interbank market on April 19 and for households on May 11.
Devaluing the currency will only worsen the situation for Belarus, VTB’s Moiseev said.
“The main problem is that the economy produces goods which consist of little else than a combination of imported spare parts,” he said. “So devaluation only makes things worse.”
Belarus’s economy effectively collapsed in 1991 as the disintegration of the Soviet Union eliminated natural markets for the country’s exports of farm machinery, textiles and agricultural products.
The catalyst for the country's imploding economy: socialism and price controls. Sound familiar?
Lukashenko reintroduced controls on prices and the currency and re-nationalized some companies and infrastructure after coming to power in July, 1994, on a platform of “market socialism.” The nation’s economy returned to growth in 1996, according to World Bank data.
At the Minsk Refrigerator Plant Co. shop in the capital today, about 20 people queued in drizzling rain to use their rubles to buy fridges. While the shop didn’t open on the day of the devaluation, most of the models in the store already had ‘Sold Out’ stickers on their doors.
“I came on Saturday and it was a nightmare, the store was stormed by people who wanted to spend their rubles because of rumors about the devaluation,” said Nikolay, a 74-year-old pensioner who declined to provide his last name. His entire savings of 6 million rubles now buy one fridge compared with three before the devaluation, he said.
The people are not happy...
The devaluation lifted the local price of automobile fuels as much as 24 percent, according to Belneftekhim, an industry group for the country’s oil sector. Last night, about 50 people protested the price increase in the car park of a Minsk hypermarket.
“I can’t describe how I feel without using obscenities, this is all our government’s fault,” said Sergey, a 32-year old attending the protest who works for a computer importer. “The whole world tells them, guys, you have economic problems, you should do something, and all they did was live off getting more and more loans.”
Who can blame the country if it devolves into civil war: as a result of Monday's decision the average salary was "1.6 million rubles
in April, according to the government statistician. Converted
into dollars, it fell to $325 after the May 24 devaluation, from
$507 a day earlier, using central bank exchange rates."
Naturally, the IMF wuz here:
Both the IMF and the EBRD have blamed Lukashenko’s spending before last year’s presidential election for much of the economy’s woes. Lending was increased by 38 percent last year and public-sector salaries rose by about 50 percent, the Washington-based IMF said in a March 9 report.
Belarus got a $3.5 billion bailout loan from the IMF during the global credit crisis and the country has more than $2 billion of ruble and dollar debt outstanding. Foreign-currency reserves hit a 1 1/2-year low in March.
“The ruble is probably still too strong, but devaluation hurts the average consumer through imported inflation and deteriorating purchasing power,” Sanna Kurronen, an economist in Helsinki at Danske Bank A/S, said by e-mail yesterday. “There is really no easy way out of this economic distress and the only way is to do a major reform in the country.”
Here comes hyperinflation...
The price of children’s diapers has “gone completely insane” in Minsk, said Natalia, a 24-year-old mother also queuing outside the refrigerator store. “I used to buy a pack for 69,000 rubles, now they cost 140,000,” or almost half the 343,260-ruble monthly child benefit paid by the government, she said.
“We have become paupers,” said Tatiana, a 70-year-old woman in the line who also declined to give her last name. “We have been squeezed into a corner by this devaluation.”
Belarus’s dollar debt has been buoyed by news of the Russian loan, with the yield on the government’s debt due 2015 dropping four basis points to 9.881 percent by 6:35 p.m. in Minsk, the lowest since March 14. Dollar-denominated notes due 2018 yielded 10.38 percent, down six basis points.
The country has raised its refinancing rate twice since April 20 to 14 percent, the highest in Europe. The central bank also stopped selling foreign currency out of its reserves in March and will continue to stay out of currency markets, spokesman Anatoly Drozdov said by phone in Minsk yesterday.
...And following that, complete socio-economic collapse
Unless Belarus heeds Russia’s call for mass privatization of state assets, it is headed for “hyperinflation, massive un- and under-employment, and a shutdown of production,” VTB’s Moiseev said. The ruble will slide to 10,000 per dollar, he added.
Unemployment was 0.7 percent in December, according to government data. Inflation accelerated to 14 percent in March, the fastest since April 2009 and more than neighboring Russia’s 9.6 percent in April. Imports into Belarus exceeded exports by $7.3 billion at the end of 2009, according to the latest annual data available.
Russian media are creating a “flurry” of speculation about the nation’s asset sales so they can “make good at our expense,” Lukashenko said today in Astana, the capital of Kazakhstan, according to comments reported by state news agency Belta. “But we will not throw anything to anybody for nothing.”
Note the parallels to Greece, which would follow the same fate if it were to make the choice of returning to the drachma.
Alas, there is nothing left to add: this is the future, and it is coming to a developed country near you.
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High but not hyper-inflation? Really, Akak? Tell me, how do TPTB make that knife's edge work? Where in history, under similar debt and econonomic conditions as we are currently in, has a regime ever stopped at high inflation and kept their currency intact w/o going HI?
A: never.
In all probability HI is the endgame, son.
Well, Shell Game, I could point to the UK and USA in the 1970s as an example of high inflation that did not progress to hyperinflation, or France in the 1920s, and there are other examples as well. Partly, it of course depends on just how one is willing to define "hyperinflation" --- is it an annual rate of 20%? 50%? 100%? 500%? I don't honestly know just where to draw the line.
But you are correct, rising inflation has led to hyperinflation and/or currency collapse far more often than it has been nipped in the bud.
Yes, but during those periods there wasn't the same amount of debt in the system
Debt is NOT money!
Just because our fiat currency is issued as debt, that does not imply the converse is also true, that ALL debt is equally money. That seems to be the argument you are making, but if so, forgive me but I find it absurd and untenable.
dude, what are you talking about. I already explained myself thoroughly further up in respond to your post.
forget the difference between money and credit for now and just understand that when you take out a loan to buy something, that you affect the price of that something - namely, you drive the price UP
Therefore, MONEY AND CREDIT/DEBT as i have said before, is the basis for inflation or deflation. contractions in both are deflationary and expansions in both are inflationary
what on earth don't you understand about this?
DK, you are correct --- "when you take out a loan to buy something, that you affect the price of that something" --- but I find your argument simplistic and erroneous, as there is NOT a one-to-one direct relationship between credit and actual money, and you can NOT treat them as totally fungible and functionally equivalent within the broad economy.
If you believe that a crash in the levels of credit/debt within our economy foretell a resultant crushing deflation, then you will have to show me the crushing inflation that we must have correspondingly suffered in the last ten or fifteen years.
I am honestly not trying to be belligerent with you, but my point is simply that the collapse of an asset bubble does NOT constitute deflation, in the same way that the blowing of that asset bubble does not constitute inflation.
by akak
on Wed, 05/25/2011 - 19:22
#1310872
akak, in a fractional reserve banking system, debt = money.
I think this is the impediment, for whatever reason, that even some very intelligent people who understand finance, get hung up on, and while treating 'money' as a inflationary/deflationary catalyst (depending on expansion or contraction), don't similarly treat 'debt' as an inflationary/deflationary catalyst (depending on expansion or contraction via issuance or destruction, in exactly the same manner as money, which it is).
It's actually very basic. How many people here know that loan forgiveness is a taxable event, which requires the filing of a 1099 in the U.S., and that the amount of money forgiven is treated as ordinary income for tax purposes?
I disagree.
Yes, our "money" (fiat currency) is issued as debt. But that does not automatically make the converse true, that ALL debt is therefore money. The two are NOT functionally equivalent within the economy.
Pretty much everyone on ZH understands this. I think the point is that not all money is debt.
Yes, yes, yes and yes - a parabola. Honestly, I don't know how one draws the line. The difference between inflation and HI is that inflation is currency debasement, while HI is currency collapse. When the tipping point arrives it will be a waterfall effect, nothing gradual about it. It will look different, feel different, it will be different.
Can't have a sustained period of increasing inflation, with double digit unemployment, dropping tax revenues and a decimated economy before that tipping point comes knocking..
liftoff
Comparing anywhere to Belarus is a stretch.
Belarus is truly a special case, the last Soviet dictatorship in Eurasia. It has not reformed or significantly altered it's economy since Gorbachev took the helm in Moscow...
Next winter is going to be a disasterous if Russia and Ukraine refuse to transfer petro and LNG.
Belarus couldn't pay for it's energy costs in 2008, how can they afford to pay for it now?
Belarus has cute hookers. Does LA or NYC?
Pics or it didn't happen.
how many more countries are going to be busted out by this jew confetti?
States like Colombia are funny; the Spanish banks own the nation and charge the natives rent, essentially.
Now when Spain goes under a bigger fish will acquire their assets. Like a big game of Monopoly. All for PAPER.
Times like this you should thank your lucky stars you are in the FRN zone. Our day will come but it's fixing to be one of the last days. In the meantime you can acquire vicarious shares of other people's nations.
The entire system of debt is an attempt to get something for nothing. This is the crux of why usury is historically reviled and usurers hated.
Why do you insist on confusing NYJoos with Israel?
What's the difference?
Not much considering the popularity of dual citizenship these days. Honestly citizenship is such an idiotic idea in the first place. That's what creates these endless manipulations and wars.
Only trav7777 can say it "like it is"...
@Trav7777
States like Colombia are funny; the Spanish banks own the nation and charge the natives rent, essentially.
Please elaborate.
Interesting point - surely the economy that holds out the longest against hyperinflation wins all assets?
@trav7777
It is well known that you hate jews and blacks and a whole variety of others.
However, do you think a christian who issues a loan to another christian is guilty of sin, and do you think christian bankers will go to hell if they don't repent? Furthermore, if you sign for a mortgage or use a credit card, are you equally complicit in violating the commands of Jesus Christ, especially if a Christian banker is issuing the loan?
The rules are somewhat murky:
Thou shalt not lend upon usury to thy brother; usury of money, usury of victuals, usury of any thing that is lent upon usury
Deuteronomy 23:19
Unto a stranger thou mayest lend upon usury; but unto thy brother thou shalt not lend upon usury
Deuteronomy 23:20
What in tarnation is meant by "thy brother"? Does this imply that usury is only a sin if a Christian loans to another Christian, whereas loaning to a non-Christian is permissible? Why would Jesus allow Christians to be parasitical on non-Christians? This seems very unJesus-like.
So many questions, so few answers....
Hey Redneck Repugnicant, you were much more amusing in your latest sockpuppet persona when you were pretending to be a semi-literate rube whose greatest financial concern was the rising price of dog food at Wal-Mart.
OH MY GOODNESS, ARE YOU A REAL PIRATE??
!!!!
Aye, matey, and we pirates do not look kindly on scalliwags comin' into this forum and pretendin' to be fellow bucaneers, when we know that they really be the King's minions instead, here on a mission to convince us to walk the plank under our own volition.
All religions are to be equally hated, anybody that takes direction from fictional characters are weak minded idiots.
So...what do you believe in?
judaism is the clan religion of jews, the ethnicity. Most of the jews do not follow the tenets of judaism. Hell, look at all the raving homo jews out there like Dave Geffen or the guy who invented "racism" as a term.
The situation in media and finance does not break down along religious lines.
Do you believe there were negroes, aztecs and eskimos in the Ark of Noah?
Of course! But they had to sit in the back of the ark.
+1 Now that shyte was funny.
TG, you're mixing the Old and New Covenants.
The examples you cite are but two of over 600 laws prescribed under the Old Covenant.
Jesus replaced all that with two commands:
1) Love the Lord your God;
2) Love your neighbor as yourself. (Can also be stated as "Do unto others as you would have them do unto you"..)
Living in this way will keep you from doing wrongly in your dealings with others.
That's not correct.
Please read & study the letter to the Hebrews by Apollo. It's good read--YAH ordered me to read it.
you're not dumb enough to think this trollbait shit is gonna work, do you?
A littany of non sequiturs
Really --- RNR is just becoming a parody of himself at this point.
Like HamyWanger, but on meth and hopium.
As long as we hold the world at the barrel of a gun, can't the Fed just keep up the charade ?
We'll never wind up like Belarus because if you don't take our Treasuries, we'll destabilize your government.
I'm looking for China to step up and side with whomever our whipping boy of the week is. When China says, "Enough", then you will begin to see the dollar truly slide. But given all China has invested in US, will they shoot themselves in the foot this way?
China recently supported Pakistan against further US harrassment. Maybe that's the gauntlet we all want thrown down so our long PM trade really begins showing dividends.
>we hold the world at the barrel of a gun
>we'll destabilize your government.
Ridiculous. We're bankrupt. We can't even defeat a bunch of Afgahni goat herders.
We can't keep our buddy Mubarak in power or save him from his death sentence.
bullshit..we could level Afghanistan. We just cannot "nation build" and "hearts and minds" our way to a victory. If we get truly bloodthirsty, look out. Our ability to destroy things is unmatched.
+ 1
Adios m0therfuckers who serilously messes with Team USA, but what comes after Team USA?
"We" - Uncle Sam - already has leveled it. Over and over again. But 'winning' isn't the objective in Afghanistan.
Creative destruction, baby! That's Capitalism.
Uncle Sam wants control of the drug trade, and it wants a dagger to use against Pakistan as it kills women and children there.
Thinking that you can "win" and economic war against china, is like those studies back then, who claimed that a global nuclear war can be won: Both will be devastated... M.A.D.
I was too young to take much notice at the time but based on my studies since, this is all very Asian Financial Crisis-esque. I noticed on the financial news last night that Asian markets are down big time & there is trouble on the docks here, very 1997-98. There was also much trouble in Central Asia at the time, coming out of some kind of EU debt crisis in the early-mid '90's.
The big difference now is the USD itself is fraying at the edges. It would seem the stakes are far higher now.
The stakes are the same; yet the breakdown in the suspension of disbelief appears to be autocatalyzing.
"The catalyst for the country's imploding economy: socialism and price controls. Sound familiar?
Based on what happened in Weimar, employment can become full in an hyper-inflationary economy. Exports become increasingly cheaper for other nations to buy. No, it doesn't end well, but the first stages can be livable.
The only ones that do well are the ones with hard currency and have the ability to keep and receive creidts outside of the country. Oh yeah, and farmers. The middle class will be devastated and state workers will starve. The intelligensia will be impoverished.
Better go back and see how the Weimar farmers fared once the urbanites began trolling the countryside.
Like I said, it didn't end well. Still, the farmers did well overall. They learned how to protect themselves after the first few attacks.
we really don't produce much so exporting will be for the few....maybe crops
I really don't want weimer thats a disaster for even us that are prepared
For this alone, it will be worth it.
Where is the rolls' eyes emoticon?
Victims of their leaders. Forgive the people, for they know not what they do. They will revolt, they will die, but....
What? Is their humanity greater than the destructive force of greed? Time will tell. I wish the Belarussian people the best. Have strength in the face of evil.
They are bitching about the cost of Pampers? Send them to CA.
Have no old clothes to use and wash? They sound like a pack of dufus Libs!
“But we will not throw anything to anybody for nothing.”
Early stages of denial. Give them time, they'll be eating cats like in Argentina.
Hey! Watch it, bud!
Lol...just sayin, I would stay away from Belarus if I was you.
No chance of going there. I don't do TSA, and the sailboat has a frozen thru-hull on the engine intake.
What? You never had a gato taco in Tijuana?
Is that like a waitress sandwich Libs love?
I believe most men call them "meat curtains".
Pic related...
http://content.nastyshit.com/media/pictures/d6d0183569f8954fd7b5ce1cdeb7...
One good wind, the sails would fill and launch her across the ocean on fortunes luck.
errrrm...I take it back.
Can't believe anyone actually clicked on it, the link was auspicious in the first place.. LOL! That's my night right there.
Fair winds fair traveler on the fix sails on thy maiden bidden to thee. Especially on her meat curtains. :D Yarrr!! You could put a pearl necklace on her booty me thinks!
Is this a Minsky Moment?
Kudos to anyone who gets it....
The chain of events is plausible, but not falsifiable.
someone needs a good ass kicking over this
There are not so many parallels with Greece.
If I were Greece, I would fancy my chances going it alone with the Drachma. I wouldn't sell any of my assets, and would tell the German, Italian & French banks to go whistle for their bounty. I would invite back all the Squidmen who expropriated the ports, airports, transportation systems, and I would lock-em-up just for the fun of it.
Greece has a much more viable economy the Belarus. It does much more than 'assemble foreign parts'
Foreign currency from Tourism, the embarrassment of seeing how old-enemy Turkey is marching ahead of them in manufacturing, and a solid agricultural export sector will all help the Greeks wake up from 50 years of tax-free laziness.
Pity all the rich Greeks spirited their Euros out of the country a long time ago.
Have to agree, now how will they get that gold back from New York?
On a planet of "first world" nations that are broke ass pirates, who would you trust to ship it?
piratebay, lol.
This is only meant partially as a joke..... in a social setup like this, the biggest "outlaws" sometimes become the most trustworthy middlemen.
Experienced Russian oligarchs must be salivating. Probably cheaper to bribe and buy everything at "auction" than research.
very good observation
That actually deflation you're seeing, just ask Mish.
It is. Ironically, deflation in dollars for now.
'Nations of the world. You must sell everything you own. Bailing out your bankers doesnt come without a price'
Or you can just stand up like Iceland and just say no way.
Only by the grace of Russia has this country (via cheap oil and gas) made it this long. Lukashenko is a regular on the top 10 list of dictators and despots.
Centralization of power during Crises; Countries losing their economic and political independence.
Remains to be seen how long the imperial centres survive their crumbling peripheries.
Belarus?
"Andrei Arlovski's gonna be pissed."
"Oh yeah? Well maybe Andrei's just gonna have to stay home tonight!"
Welcome to germany during the introduction of the euro.
Very nice. High five!
http://www.youtube.com/watch?v=_j9QeUoPOi4
So in a currency "devaluation" the debts stay the same and the currency goes to half...nice...!
Such a tiny little country.
Market cap of LULU or LNKD probably exceeds the entire country's GDP.
The whole country could evaporate and have no impact on world stock markets.
Just like if LNKD filed BK tomorrow, it wouldn't matter to the S & P 500.
And if you, RoboLemming, were hit and killed by a car tomorrow, it would make not one iota of difference to anyone or anything --- except for making this forum that much less polluted with your shallow stockpumping bullshit.
Amen. I sometimes wonder if he is a litmus test for market sentiment. I mean really, how much else to pulse put vs. call than create a false persona on a frequented message board and judge reaction.
Oh, I'm sorry, that still requires people outside of institutions buying/selling and the average 'Joe'; forget the decisions of 401(k)'s that 'Joe' doesn't want to bother with. Not to mention the PTT and other market manipulators.
Go find some bitch that used to be a dude around the FOX plaza Momo, because anyone with half a human brain cell isn't buying your shill.
Now this is an omen, for sure. Don't think it can't happen here!
Got GLUU ... ?
http://finance.yahoo.com/echarts?s=GLUU#chart1:symbol=gluu;range=1y;indi...
Didn't your momma ever tell you not to sniff GLUU?
Maybe you should run upstairs and ask her why.
Updated Monday, March 28, 2011 8:46 pm TWN, By Douglas Busvine, Reuters
Belarus devaluation would be 'good idea': IMFMOSCOW -- Belarus would be well advised to devalue its currency to tackle unsustainable external deficits resulting from excessively loose economic policy, the International Monetary Fund (IMF) said.
It is not too late, however, to stabilize the economy of the former Soviet state by cutting the budget deficit and hiking interest rates, IMF Belarus mission chief Chris Jarvis told Reuters.
“We do think a devaluation would be a good idea,” Jarvis said in a telephone interview late on Thursday.
“That said, a devaluation is not the only way that Belarus could adjust. An alternative would be to impose tighter fiscal, monetary, credit and wage policy.”
__
posted no comment Muir
No wonder these bastards hate gold and silver so much!
listen to the russians comrade
Ah well, there are probably people in Greece who would have greeted them as liberators from the ECB / IMF yoke, but same old same old privatize this seize that...
"Unless Belarus heeds Russia's call for mass privatization of state assets..."
Fuck him in the right ear. Another wannabe empire building slave.
Yep - this is all based upon the word of a parasitical Banker-Gangster who probably lost his ass when the devaluation was announced.
hypermarket?
felicitous.
I talked about the potential for an oscillation between staflation and deflation with Reggie Middleton in my recent interview with him on Sound Money 91.5FM NYC. Here is the link:
http://coveringdelta.wordpress.com/2011/05/25/sound-money-podcast-interv...
When the price of what you own goes down, that's deflation. When the cost of what you need goes up, that's inflation. Who owns jack anymore?
Douchinger loses.
And the world's best performing currency last year was ..?? +drumroll
The Mongolian tugrit....rose 15% against the dollar...beats dollar, Euro and Ren
Home to the Dyu Tolgoi mine....one of the world's largest untapped copper and gold deposits.
It's all good when you live on top a mountain of metals.
It's a beautiful country. Just a shame it's stuck between two large countries that will just invade the minute it becomes politically viable and the resources are needed.
Market Socialism Bitchez!!
there will be a second crash, a oh shit point where the deflationary forces will be so large, and so complete they will not be able to pump the fiat fast enough. Further attempts at monetary easing will further prop some assets, primarily held by the rich, when others become virtually useless. this time it will be different, and the same depending on the historical view one will choose to subscribe to.
there will be certain levels of stagflation this generation never thought possible on our soil. Strong men implimenting martial law and punative taxation. then and only then in the final desperate hour the elites will hit the doomsday printer power button. In the attempt to prop up some type of last ditch growth they will lose the confidence of the few left listning to them and there will be blood in the streets. You can bet on everything from gold consfication to continued conflict in order to keep people from seeing the true nature of our problem.
Complete and utter corruption of the banking and political class.
- couldn't have said it better.
Ah, Belarus. Maker of fine instruments of death. Pick up a 1MOA spec-ops scope for your AK while they're half price.
On where?
Like an AK will shoot 1MOA.
wolf ammo! 300 yards! all day baby!
bumb fire your pistol for sub moa.. why buy high dollar brass when a stamped reciever will do the job better for you?
I'll pose the following questions regarding inflation/deflation
1) Govt has zero expenditures and raises taxation, will this inflate or deflate the economy?
2) Govt prints up $100million in fiat, and then buys a stockpile of missiles from a contractor with said fiat. inflation or deflation?
3)Said $100million worth of missiles gets fired off at most recent evil dictator. inflation or deflation?
4) Velocity of money..... isnt this the greatest issue relating to inflation/deflation? If there is minimal velocity then dont prices deflate to capture the limited available movement of money? If money is freeflying then dont prices inflate to capture an excess of money flow?
5) didnt the QEs simply set up a hyper environment because the fiat has yet to genemove with substantial velocity. That is to say QE money velocity has yet to equal money velocity pre-QE.... or has it?
Honestly I'm a noob to this, only begun studying any type of economics after finding this website reading up on fukushima because I saw in March the pacific ocean was about to die. Any info would be helpful because I think most of the inflation/deflation arguments I've been reading neglect the dynamic nature of the money supplies.....
Couple more questions....
Person works and gets paid direct deposit. Pays bills online, buys groceries and other items with a debit card, never carries cash
6) Is this person living with and using M1 or M2 money? does it matter?
7) Can there ever be a run on the banks in the digital money age we live in? If so how does it pan out? Bank has no physical cash to acquire but walmart still takes and runs the card.... insolvent but the FED can back them overnight?
Thanks for the beat down and calls of stupidity in advance!
Woody,
If you are going to go down the rabbit hole I suggest going to Chris Martenson web site and take the crash course (free).
You have ask very important questions, #6 and #7 have not been discussed much, if at all. I will defer to the Z Hedgers. For I am but a layperson.
http://www.chrismartenson.com/
I'll try and answer some.
For your first 5 points, yes, that's basically what the Austrian train of thought is here. A corollary is the budget deficit and national debt. Right now it seems like , hey we can pay 3% interest so lets load up as much debt as we want, its 'only' 3%. The problem is eventually you get to a point where there's so much debt that a single basis point increase takes away every last $ in tax revenue in interest expense. Congress seems to be trying to hit that PVBP (Price value of a basis point) target of $2 trillion.
So the whole thing with QE etc right now is its a loaded gun. Inflation has been 'tame' because of the low velocity of money. But the scene has been set. The instant the velocity picks up the Fed won't be able to pull back (by raising interest rates) as they'd like to believe. Why? because it will instantly destroy the value of their holdings (Maiden Lane II). Now you can argue they can 'hold-to-maturity', but they can't both hold-to-maturity AND withdraw liquidity. They will have to SELL their assets at such time to 'withdraw liquidity' (actual cash) from the market, but they've injected $600bn in QE2 at 100, and if they try to withdraw those exact same assets at say 90 (since rates have increased) that's still $60bn that's sitting out there that they cannot control. But by now the velocity has picked up so that $60bn is $600bn in itself. (and remember this is assuming the Fed can sell ALL those assets at 90c instantaneously).
The thing is no one knows how long this spring can stay coiled. 3 years? 5 years? 2months?
Lastly, actual cash does matter. Although banks just use digital debits/credits on a daily basis, they do still net settle (not sure the exact timing anymore). That's why Brinks still drives around with hundreds of millions in cash.
With WaMu we didn't see a physical run on the bank, but walmart will NOT be able to run the card. Your debit card (or even credit card) will be REJECTED at the point of sale since the bank is insolvent.
Not to cheerlead the dollar, but our situation is different from a backwater former soviet satellite. Profoundly different. I don't say that happily--the destruction of that dollar to cover the crimes of a bankster mob is a tragedy. But I seem to have little say in such matters.
Gimme a minute--I gotta call my boy Glen Beck on that question.
How do you jump the rails of reason like that?
Akak is right.
Deflationary periods in the United States (>1 year CPI contraction)
With US on some sort of gold standard
1783-1789 1797-1799 1815-1821 1823-1824 1828-1833 1838-1840
1842-1843 1848-1849 1883-1886 1889-1899 1908-1909
With a US Fiat Currency
1866-1879 (First US use of fiat money - Greenbacks 1862-1879)
1921-1922 (Floating fiat US currency 1915-1925)
1927-1933, 1938-1939 (Floating fiat currency 1931-1945)
http://www.measuringworth.com/index.html
The deflationist arguments are a triumph of theory over reality. We will not have extended deflation.
The latest argument seems to be that we won't have hyperinflation because the wealthy and the Fed won't allow it. Why do deflationists assume the Fed has any control at all over the situation? It's out of the Fed's hands.
Hyperinflation is misnamed anyway. It should be simply called "currency collapse". It's a panic out of a currency (see Belarus, 2011).
We've already in effect HAD hyper-inflation since 1913, we just had it over 100 years, instead of 100 days. The next 95% devaluation will happen quicker.
A flight from the dollar has of course begun, and will accelerate once the Chinese and others decide to trade most of their pieces of US paper in a vault for energy and food, so they won't end up like the ruler of Tunisia.
(the following is the reply - cannot disable italics because comment-software is bugged)
to be fair, that argumentation style DOES fit to SOME (not all) ZH posters, who are in a weird love/hate relationship with their overlords - after all, they are super-perfect and rational gods, so if something is stupid, why would they do something stupid?
Still, i do someway agree with your conclusion. I'm not sure if every currency in the line of fire will be destroyed via hyperinflation.... i am however certain, that rapid inflation will be one part of the process that will trigger trashing of the currency.
Everything collapsed in deflation in 1929. But then FDR confiscated gold in 1933 and the government promptly revaluated gold -- 40% higher.
Wasn't that effectively a government sponsored devaluation of the USD? Thoughts, asking.
Also, seems the default position of the central planners is to always inflate their way out of crises to keep reserve ratios legally adequate and because it is much harder to tax deflation. Taxes make their world go round.
The Feds stated goal is to inflate their way out. I guess the question may be, can they inflate fast enough to prevent deflationary collapse? The massive derivatives market (>600 Trillion USD) is a relatively new phenom. Since it's a dark market, and the cloaking device works pretty well, I'm not sure how that house of Ponzi cards will fall. I just know it's a squid squisher and it's got them spooked, for sure. Thoughts, asking.
From DJ news, 20 minutes into the future:
* 20:43 SEN BOXER DEMANDS ZH POSTERS LIST
* 20:44 BWANY FWANKS DEMANDS SOURCE OF PHOTOS FROM ZH
* 20:48 SEN bOXER DEMANDS ZH UNPHOTOSHOP PICS OF HER BEING SHORTER THAN jOPLIN,MI YELLOWPAGES
* 20:49 SEN CHUCKY SCHMUCKY SCHUMER DEMANDS HIS LIKENESS REMOVED FROM CHUCKY CHEESE
* 20:54 OBAMA OBJECTS TO BEING CALLED BLACK IRISH
* 20:55 SOS CLINTON OBJECTS TO BEING CALLED A MORON
* 20:55 VAN JONES OBJECTS TO BEING CALLED VAN JONES
* 20:56 MOOCHELLE NEEDS $500 MIL FOR A NEW WARDROBE
* 20:56 MOOCHELLE: MY ASS GREW WHEN I WASN'T LOOKING
* 20:56 MOOCHELLE: WOULD NOT HAVE NOTICED IF BARRY DIDN'T USE IT FOR A SHELF FOR HIS QUINNESS
Sometimes I think you must be a republican party operative.
Does 'byte me' help? As opposed to the Lib shill you are.
So suck my dick. On principle, only.
But seriously, why do you crow in that anti-lib groove? You sound cheap. And severely out of step with the dominant ethos of independence around here.
It just sticks out. It's little, but it's strangely erect. And glowing proudly red.
God bless ya, mynhair. You do have a special somethin' aboutcha.
I hate Goobermint. Never saw a Lib of the same mindset. Libs lie a lot, hence hopey-changey.
You have an example of a smart Lib?
Well, it would be natural enough to jump back at you with Newt, Ryan, Walker et al, who have made the truly dizzing lie as familiar as breathing.
But, really, the better comparison would be conservatives. And I have known too many highly prinicpled and honest conservatives to slam them with a ridiculous slander like that.
It's too bad you have so little real experience with actual liberals. They're the guys who actually care if they're lying. Barry and his ilk are clearly not liberals, btw.
"You have an example of a smart Lib?"
Try Chris Hedges, although you might need someone to explain it to you.
I've known piles of "Libs" who are smarter than anything you've posted here.
You might consider wandering a little further than the trailer park and 7-11 for smokes and beer. Then you might run into people who are liberal and smart. However, in your defense, I'm not sure you are capable of actually comprehending a smart person of any political persuation if you did encounter one.
Amazing you still are able to breath. Gotten a PET scan yet? Oh, you can't, your Lib heroes say you ain't eligible. Where do you morons come from? I keep using Home Defense!
My last reply to absolute ignorance....I'll bet my IQ easily comes in 20 points higher than yours.
Thank you for once again proving to me that Libs are almost always, in every way, much better and more decent people who are infintely more interesting and witty than know-it-all, know-nothing Conneds like you. Again, such folks are beyond your comprehension to understand, so feel free to wallow in your own ignorance...you have the right to do so thanks to Libs. HAHA!
There are no smart libs. There are no smart reps. There are no smart individualists. There are no smart collectivists.
There may however be smart people, who don't restrict themselves to any of those camps, yet who for strategic reasons for now play in one of of those camps.
disclaimer: the individual posting this mesage is true neutral
I see you guys are still running with the lib/con, rep/dem distraction. Have you heard of the new ideologies spreading like wildfire? Tweedle Dee vs. Tweedle Dum are rocking out with their cocks out, get on it.
* 21:12 TSA MOLESTS PUPPY AT AIRPORT
* 21:13 PUPPY PEE CAUSES MAJOR INCIDENT
* 21:15 BLEACH CLEANERS RESTRICTED
* 21:17 TSA DOG FINDS PUPPY POO IN RESTROOM, PUPPY ARRESTED
* 21:18 OSAMA BIN BOMBIN' BOARDS FLIGHT 526
* 21:19 PUPPY RELEASED, FLIGHT 526 MISSING
* 21:22 LOCAL OFFICIALS ARE COLLECTING DNA EVIDENCE
* 21:22 LIB TERRORISTS SUSPECTED
* 21:23 ALGORE MENTIONED AS SIGHTED
I'm a gulch!
Sorry wrong message board.
As the PMs emerge as a medium of exchange and store of value......prices in terms of PMs will go down !!! As fiat and fiat credit are inflated......prices in terms of fiat will go up !!! It will be like a wedge of cold Canadian air lifting up a wave of hot moist Carribean air ! The hot moist air rises and cools and collapses and sucks up everything in a maelstrom of tornadoes, lightning and rain ! Maybe it wasn't necessary to paint that picture ! I guess I mean there will be simultaneous inflation and deflation as the PMs (cold Canadian air) displace fiat (warm moist Carribean air) ? Monedas 2011 I never claimed to be an economist !
What? O, in terms of PMs, never mind.
- Rosanne Rosanadana
Nice take on meteorlogy. Took 3 reads. when a hurricane comes up the Gulf on the west side of FL, can you email me were the sagging stalled front is?
2004, Charley, 24 hours before. 1 fucking channel had the front's sag. I called book.
That guy south made a DVD off the same report.
1 station with a dude ready to report, in 1 report, in contradiction of all the morons.
I just need the location of the stalled front. Lost the center of the house, but I wasn't here.
Silver (paper) is back over $38.
Yeah yeah... physical (got it) but its hard to mark its value without the paper market.
Just keeping on stacking despite the price, it is entertaining watching the overnights though. Lets see if Europe runs it up again today.
Try www.truesilverprice.com. Pricing engine is being constantly improved with addition of real time prices.
I think someone earlier on summed up the situation brilliantly when commenting on the 'fiatness of the system vs the fractional reserveness of the system'...cash vs credit. One dwarfs the other, and that is where the pressure release valve will go off=deflation. Just my view.
There are some nice debates here about deflation vs. inflation. I'm not sure which we will see, but I'm guessing both.
From my observations of history and present day life in this country, we will get whichever of these two that will keep as much wealth and power in the hands of those who currently have both for as long as possible. How either inflation or deflation might affect the average working folks will have no bearing whatsoever in their decisions.
If too much deflation allows the peons to walk away from the their debt slavery, it will not happen if they can avoid it. Yet, if too much inflation hurts their wealth and power due to being paid with worthless paper, we will not have it either.
My guess is we will muddle through for as long as possible with the Powers That Be doing all they can to maintain their wealth and power, and that of their owners, while making any needed adjustments with insider knowledge, something the rest of us won't have. I will bet my own money according to this model using any information I can find.
It's so simple. You rich? No prob.
You own stuff? You be hurting.
You need food? You really hurting.
You can't 'muddle through' this shit. It's way too late. The Kleptos have already stolen any savings you had. It's dog-eat-dog time. Kats excluded, or die.
No credit?
Bad credit?
No problem!
I agree. It's barter time for most of those folks.
For anyone who wants to know how to cope (plan) for an economic collapse, the best way is to investigate what people in other countries have done in the past and to watch Belarus. Google and check out examples such as Argentina, Russia, Mexico, Iceland. Weimar is a very extreme example but who knows. Those that know what is coming, and who network, and make plans fair the best.
If you plan and the worst never happens, you're still OK.
I've looked at this topic over the years. Dmitry Orlov covers the Russian collapse pretty well and has made several comments about a potential collapse in the US. However, one difference he does point out is the concept of Private Property here in the US. Heavy individual debt coupled with nearly everything in this country being private property adds a different dimension to a collapse in the USA. That, plus the sense of rugged individualism here in the States instead of us possibly working together through the collapse (gasp! it might be consider communism to do such a thing) could lead to so seriously interesting times here. Maybe not, but it's a consideration.
Yep, think West will do better too. It'll onlyy be as bad as central planners make it. Worry is, the more they drag it out, the worse the required correction will be. Methinks they are looting the Titanic before they kick the women and children our of the lifeboats.
Western democracies with private property and sense of entrepenuership will no doubt fair better and be less violent. Many of the same private charitable groups who helped others in the past will continue to step up and expand their efforts. The government orgs will not be there.
I fear for our urban parts of the country run by the party of Marx. They'll find no amore' when the Utopian Mysticism falls from the sky, like a big pizza pie.
BTW, is Orlov the guy who predicted the USA would break up into 5 regions, or the guy who worked with dogs? (snort...!)
Who owns the central bank?
Zeus, Poseidon and Hades.
Look, it's simple. You want Bwaney Fwank running your life, or can you do it better? What is the fukking problem?
I'd take him over some Bible-thumping, Geeezus-spewing, self-righteous, know it all Conservative hypocrite asshole. Sorry, there's a lot of redundancy in that sentence.
You want someone telling you what to do?
Definition of Sheeple.
Oh, puh-leez. Stop with the Keith Olberman approved sterotypes already. Recall, he was the one that was booted for being most of those things.
You might have also included: hard working, productive, tax paying, law abiding, and self reliant.
Here's the facts: conservatives earn 60% more college degrees than democrats (every single year since 1955 when records first kept), pay more taxes, less likely to cheat on their taxes, give more to charity (by far) and are more tolerant of other groups and demographic profiles -- except violent anarchists.
It's obvious, and not even counterintuitive when you strip away the liberal propagandavision -- that's why democrats need endless free stuff from the government at others' expense all the time and fill up our prisons. 95% of prison inmates identify with the democrat party. Our prisons are not bristling with evangelicals running around thumping people instead of bibles.
In fact, the gap is so large that if democrats stayed in school and kept up with the other side, they would create the utopia they seek. There would be no national debt and social problems would be nil.
A career criminal contributes to society -$2 million per lifework vs. +$2 million per lifework for a college grad = net $4 million delta. The USA has about 5 million career criminals (excludes banksters!).
Yep, it's the big number, starting with a 20.
"Rhetoric vs Reality... Democrat vs Republican" Joseph Fried, 2008.
It's funny how much I hear conservative saying over and over again how much happier they are, when all they do is bitch and moan about non-conservatives...incessantly. But then, perhaps that is one of the things that makes them happy.
It's funny how my life experience has been completely counter to those stats.
Sneetches are a group of vaguely avian yellow creatures who live on a beach. Some Sneetches have a green star on their bellies, and in the beginning of the story the absence of a star is the basis for discrimination. Sneetches who have stars on their bellies are part of the "in crowd," while Sneetches without stars are shunned and consequently mopey.
In the story, a character named Sylvester McMonkey McBean, calling himself a "fix-it-up chappie," appears, driving a cart of strange machines. He offers the Sneetches without stars a chance to have them by going through his Star-On machine, for three dollars. The treatment is instantly popular, but this upsets the original star-bellied Sneetches, as they are in danger of losing their method for discriminating between Sneetches. Then McBean tells them about his Star-Off machine, costing ten dollars. The Sneetches formerly with stars happily pay the money to have them removed in order to remain special.
However, McBean does not share the prejudices of the Sneetches, and allows the recently starred Sneetches through this machine as well. Ultimately this escalates, with the Sneetches running from one machine to the next,
This continues until the Sneetches are penniless and McBean departs a rich man, amused by their folly. Despite his assertion that "you can't teach a Sneetch," the Sneetches learn from this experience that neither plain-belly nor star-belly Sneetches are superior, and they are able to get along and become friends.
http://en.wikipedia.org/wiki/The_Sneetches_and_Other_Stories
Tyler, man you must be smoking some crack. there is an output gap in the country so according to the bernanke there can't be inflation. (LOL).
I believe privatization and fire sale of state assets as well as the assets of broke citizens was the goal all along, this is going to happen in America but not until every American has been completely strip-mined of all their capital and ability to earn a living, then the fire sales begin and millions of new foreign "landlords" will pop up everywhere along with millions of foreigners all willing to work for less than any American.
Oh ya the elite foreign land & capital owners will all enjoy tax privileges that Americans don't as is already the case with the use of imported foreign workers which are exempt from SS taxes but eligible for benefits and subsidies should they need them.
ok i'll have a go..
To the hyperinflationists... should I load up on as much debt as possible now and buy physical? $ backed debt will be super cheap to pay off in the future. Should I take out HELOC, max out all my credit cards and wait?
To the deflationists... When will I see the price of assets, other than housing, come down? Will gas be cheaper next week? will food be cheaper next week? What do I eat in the meantime? iPad2? Should I go long bonds, even at 0% interest, since my real rate of return will be positive?
<junk away>
Belarus’s economy effectively collapsed in 1991 as the disintegration of the Soviet Union eliminated natural markets for the country’s exports of farm machinery, textiles and agricultural products. (End Paste)
they have this thing with the russians, eh?
one might ask why they devalued before taking down the heretofore guaranteed loans? $800 mil on tap, year 1 of 3 years? huh?
the loan oligarch bankster consortium will get the xtra cash flow right off the bat, i wld think, when the loans get funded. wouldn't you think? these bela's want to spend the $800 mil in this lifetime, do they not?
soviet style discount rate adjustment. BiChFlation, c.o.d. belarus.
a good bankster will now to use the annuitiZed loan payments, with the extra bela stamps, to purchase "state" assets, such as may be useful. with the depreciated currency, certain hard-to-sell exports may become "cheaper" internationally.
who knows? the people are probably in shock. depending on their circumstances, of course. PMs probably ok, wldn't you think?
Wow have government agents infiltrated Zerohedge? I've never seen so many deflationists around here. I've still yet to hear a really convincing argument for deflation. All signs point toward inflation. The path of least resistance is inflation. Banking on deflation is like trying to short the S&P since QE drove it sky high. Many were left flattened stepping in front of that steamroller.
To have deflation first and foremost the criminals in D.C. have to stop taking on debt and spending money. Unfortunately the lobbies that benefit from all that debt are firmly entrenched and there's nothing we can do to cut them loose. Plus there are millions (probably hundreds of millions) of people who depend on handouts either because they were promised handouts (social security) or because they are simply destitute (welfare, etc.).
If you're a short-sighted, mentally-handicapped politician, are you going to get elected running on a platform of cutting social security, medicare, medicaid, welfare, and military spending? Most couldn't even get away with cutting military spending since 9 out of 10 voters are convinced the most grave threat to their safety is some boogeyman overseas yet to be murdered.
So yes, if the people suddenly wake up and realize they're fucked sooner or later and opt to get fucked sooner, and thus elect politicians who agree to do the fucking, and the Fed is forced to allow things to play out, then we will get deflation, and a horrendous butt-fucking deflation the likes of which the world has never seen.