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Guest Post: Preparing for Inflationary Times
Submitted by Jeff Clark of Casey Research,
"All this money printing, massive debt, and reckless deficit spending – and we have 2% inflation? I'm beginning to believe that either the deflationists are right, or the Fed's interventions are working." – Anonymous Casey Research reader
The CPI, in our view, does not accurately measure inflation, which accounts for some of the discrepancy our reader is pointing out. However, the proper definition of inflation is "an increase in the quantity of money," which we've had in spades. We've not experienced the concomitant increase in prices, which is what we're addressing in this article.
It's logical to assume that when you create more of something, you dilute the value of what's already in existence. That's exactly what has happened to the US dollar since the 2008 financial crisis hit. Economics 101 says this should lead to higher inflation – yet official Consumer Price Index (CPI) levels remain benign.
It's this unexpected development that led a reader to pen the above quote. Is the inflation argument dead? If so, does that mean gold's big run is over? It's a timely question since the current selloff in gold is largely attributed to low inflation expectations.
This is the first installment in our in-depth series of examining the next big catalysts for the gold price. This month we're looking at inflation. While a low CPI may be puzzling in the midst of massive, global currency abuse, there are three realities about inflation that convince us it's not only coming, but will catch an unsuspecting citizenry off guard.
Let's take a look at why we're convinced inflation will be one of the next big catalysts for the gold price…
Reality #1: History shows that high levels of debt and deficit spending eventually lead to inflation.
This statement makes sense on the face of it, but seminal research has been done that confirms it. A country simply cannot escape high inflation when carrying oversized debt levels and/or running massive deficits. Sooner or later, these sins catch up to you, regardless of what the current thinking may be.
Debt. The first of these historical studies is detailed in the book, This Time Is Different by Carmen Reinhart and Kenneth Rogoff, who've extensively researched the impact of high debt on inflation and gross domestic product (GDP).
Based on a comprehensive study of global incidences, Reinhart and Rogoff gave the following conclusion:
- Debt levels over 90% of GDP are linked to significantly elevated levels of inflation.
When specifically studying US history, they again observed that:
- Debt levels over 90% of GDP are linked to significantly elevated inflation.
When US debt levels met or exceeded 90% of GDP, inflation rose to around 6% – roughly triple current levels – vs. the 0.5% to 2.5% range when the ratio was below 90%.
However, with regard to timing, they state:
- There is no apparent pattern of simultaneous rising inflation and debt.
In other words, inflation is a clear and definite result of high debt levels, but it's not a day-to-day link. This likely explains the current lag between high debt and a low CPI reading.
So are we nearing that 90% mark? Bud Conrad, chief economist of Casey Research, estimates we're currently at approximately 110%. Further, he projected from his research in December that…
- Using my assumptions, gross debt to GDP crosses 120% in 2014. That is well past the danger point of 90% that Reinhart and Rogoff cite. What's scary is that my assumptions are not even close to a worst-case scenario, so the situation could be much worse.
Bud does not expect to see much more deflation. One reason is because…
- In essence, much of the deflationary pressures have been cleared out. Going forward, there should be fewer outright losses from bad loans, and thus less deflationary pressure. For that reason (and many others), I expect higher inflation sooner rather than later.
Deficit Spending. Peter Bernholz is widely considered the leading expert on the link between deficit spending and hyperinflation. He conclusively states from his research that…
- Hyperinflation is caused by government budget deficits.
The US budget deficit totaled $5.1 trillion during Obama's first term in office. The longer deficits last and the bigger they are, the closer a country moves toward very high inflation levels.
The Congressional Budget Office (CBO) recently reported, however, that the 2013 deficit will drop to $845 billion. Good news, right? Not exactly, because the reduction is largely a result of higher taxes. The CBO was therefore forced to admit…
- The fiscal tightening from higher taxes and lower spending will slow economic growth to an anemic 1.4 percent by the end of 2013, causing the unemployment rate to edge back higher.
It turns into a vicious cycle, because if unemployment grows, money printing will continue and even increase. The CBO further admitted…
- Deficits are projected to increase later in the coming decade, however, because of the pressures of an aging population, rising health care costs, an expansion of federal subsidies for health insurance, and growing interest payments on federal debt.
If deficits grow – or even just remain elevated – we inch closer and closer to the hyperinflation Bernholz warns about. Breaking this cycle will be very difficult, if not impossible... at least not without serious consequences.
These studies present clear and direct evidence that spending more than is brought in and continually adding to the national credit card leads to higher inflation. Sooner or later, this type of reckless behavior catches up to an economy. The sobering reality is that avoiding moderate to high levels of inflation in our current fiscal state would be an historical first.
Unfortunately, that's not the only inflationary fear we have to contend with.
Reality #2: History shows that inflation can occur suddenly and grow rapidly.
Not only is higher inflation a near certainty, history tells us that once it grabs hold, it can quickly spiral out of control. Given our crumbling fiscal state, we must consider the possibility that price inflation could kick in abruptly and rise rapidly.
Amity Shlaes, a senior fellow of economic history at the Council on Foreign Relations and a best-selling author, provides some examples from the past century of US inflation that was at first subdued but then abruptly rocketed to alarming levels. Look how quickly inflation rose in just two years from "benign" levels.
According to Shlaes, US inflation was 1% in 1915 (based on an earlier version of the CPI-U). Within just two years, it soared to 17%. As she states, it happened because the Treasury "spent like crazy on the war, creating money to pay for it…"
In 1945, the official inflation rate was 2%; it accelerated to 14% in 24 months. Inflation registered 3.2% in 1972 and hit 11% by 1974.
It's clear that the arrival of inflation can be sudden, and that prices can quickly spiral out of control. Given the profligate amount of money being printed by many countries around the globe, we could easily become victim to rapidly rising inflation. If we matched the increases in the chart, our CPI would register 11%, 15%, and 19% respectively, by February 2014.
Regardless of the timing, though, this is a clear warning from history: expecting the CPI to remain low indefinitely is a dangerous assumption.
Reality #3: Most developed-world governments need inflation.
It is a fact that high inflation reduces the real cost of servicing debt. Our debt levels have grown so high that the only politically acceptable way to deal with them is to inflate the currency. Politicians and central bankers have no incentive to stop, and thus will continue until disastrous price inflation emerges. Just because it hasn't occurred yet doesn't mean it won't.
Other political solutions simply aren't realistic. There is no amount of politically acceptable increase in tax revenue or austerity measures that can meet existing and future obligations. Printing money is the only viable solution. Once you internalize this, an understanding of the most likely consequences becomes clear.
Even if deflation in select asset classes persists or we get another deflationary event like 2008, we can rely on central bankers to concoct more rescue schemes financed with freshly created money. Perhaps just as likely is that the economy does improve and all the money that's been held back enters the system and sparks inflation.
Conclusions
Based on these realities, we can draw some well-grounded conclusions about the coming rise in inflation.
- The onset of higher inflation isn't certain, but the outcome is. These realities make clear that higher inflation is virtually ensured at some point. It's thus imperative we prepare for it.
- What we use for money will experience a significant – perhaps catastrophic – loss of purchasing power. As shown, this is not speculation, but a process of cause and effect observed repeatedly throughout history. As a result, you will likely use some of your gold and silver to protect your standard of living – that is, after all, one of its purposes. The point here is to make sure you own enough ounces to offset a significant decline in purchasing power.
- When inflation begins rising, precious metals will respond and move to higher levels. We don't know if this is the next catalyst for gold, but we're confident it will be a major driver of future prices.
- Keep in mind that gold tends to moves in anticipation of inflation – think of it as inflation insurance. By the time inflation is "high," the big moves in gold and silver will have most likely already occurred.
Stay vigilant, my friends, because higher inflation is coming – and as a result, so are higher gold and silver prices.
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Down the food chain, literally, producers first.
That's excellent, an important detail in an evolving picture.
edit) And cameramen.
.
'For the first time in my life I fear for my country.' The schools from first grade to colleges are run by socialist propagandists, the government is run by power hungry sociopaths, and the banks run everything for the purpose of enriching themselves through deceit and outright thievery. This system in place now is completely foreign to a free people and free market, yet this is where we are,(you could call it tyanny and not be wrong). There is little reason to think there is enough people anywhere, including America, that really understand, much less desire, Liberty. Yes, my fear is that when people finally have had enough, freedom is not where they will turn, but perhaps something even more dastardly than what we have now. "But as for me, give me Liberty or give me death!"
Ribeye, grab a boat and come on over.
I can't even come to the US, coz I'm on the "no fly list
Fly to Mexico. Walk North. So easy, even a Mexican can do it.
+1 and another +1 for a comment on last page you are on a roll!
the kleptocrats are stealing all the money. they will try to jack prices while suppressing wages as they have always done. the people at large have no money which is a prerequisite for general hyperinflation.
And I hope that post offends a few of ye,
That's what it was supposed to do,
didn't see too many down arrows. Better try again ;)
It didn't offend it was just blinkered.
When I first visited the USA as a teenager the guys would say
"How do you like it here? We are free here"
I'd say we r free too in my country
And they'd say "yes , but here we are REALLY free"
That indoctrination and blinkeredness may be your best asset
But you haven't got a monopoly on freedom
Inflation IS here. Smaller packages for same pricing is very common. I can see every time I shop that things don't "cost" more..my money is worth less as I see that money buying less. Anything not in a regular size, like gallons of milk, is being disorted with packaging and the addition of river bound dead pigs, I think.
More commercials per hour of TV. This is inflation that is completely swept under the rug. I have to pay more of my time for the programming (no pun intended).
Not to try to blow holes in the "gold to the mooner's" argument; but my understanding is that when there is hyperinflation people spend their money on frivilous things such as food, clothing and shelter and not on gold. Items that cannot immediately be used tend to dropt in price during hyperinflation.
Gold is for savers. Sadly, the fiatsco ruins most people, and the career politicians and gangsta bankstas profit most.
Gold maintains value in most inflationary periods because people outside your national borders whose currencies are not inflating will still buy it. If inflation is a global phenomenon it might be a different story. In the case of the United states the 1% that owns 40% of the wealth will want to protect their assets. They won't be spending all their money on food, clothing and shelter and will probably want to buy gold. One other point, during hyperinflation it is not food, clothing and shelter that people spend their money on but mostly just food. They wear their old clothes and move in with relatives but still have to eat. At the height of the Weimar inflation people spent 95% of their income on food.
Hell, I can honestly say I've not bought any clothes for almost 4 years (apart from the odd 5 pack of socks and undies) and they are mostly still going strong.It always made me wonder how people would think money would be spent on clothing when TSHTF. Don't a majority of people already have enough damn clothes?
The thing about never giving a shit about fashion and just sticking to simple jeans/boardshorts and tshirts/jackets is A. they last for ages and B. you never care about seeing yaself in old photos because you never fell into the consumerist sheeple rat race of buying ludicrously looking outfits that happened to be the fad of the day.
Until there is inflation there is no reason to expand the supply side of things. The response to inflation is to always raise interest rates which adds just another layer to the cost of products thus causing more inflation. If the easy money just went into creating more production then that would negate much of the effets of inflation in times of easy money. Somehow it never does, because we are driven by a profit motive. Makes socialism makes sense in a degree.
Are you batshit crazy or Paul Krugman?
'Crush the bourgeoisie between the millstones of inflation and taxation,' said Lenin, that other uself nazionist.
"If the easy money just went into creating more production then that would negate much of the effets of inflation in times of easy money. "
It alwasy does. Money is nothing more than a medium of exchange and an accounting mechinism. Money is worthless if there is nothing to buy. It exsit to purcashe something. And for this somthing to exist, somone must produce it. And thus money that is borrowed must be spent, saved, invested, or given away to others whom will do the same and all of shich drive production. What other use can there be other than driving production? Even though wome speculate with it, need a return so that someday they can spend it.
No, money IS something to buy, it is a good.
You’re simply accustomed to being forced to use a thing of zero value as “money”. You were born in the Matrix.
Those who are awoken understand that all goods are money & you buy goods with goods. Happens to be that gold, silver & copper make highly useful money for being elements, being easy & safe to handle, being resistant to time’s ravages. Bricks, honey, lumber, pipes, tools, all have value AS money (not FOR money) but inconvenience as well. Food rots, big things can’t fit in your pocket, tools need repair or improvement (better tools do the job of 3 old ones for example).
"Those who are awoken understand that all goods are money "- not under legal tender laws nor to governments. If this were the case, states would not be able to levy taxes effectivly. Nor, would they be able to pay things like welfare benefits.
And makets historically have created their own standarizations so that verious merchants could trade with each other more effectivly, and over longer distances as it established trading routes.
And it made it easier to account for private trade contracts and oblitgations between markets before of which, people would trade on lines of credit. Gold, silver, tokens, etc allowed for trading of goods and services between people that did not know each other. It is like an extension of credit to the local market so too speak. The was very little bartering in actual history.
legal tender laws are a part of how slavery is induced & maintained.
If I wanted to talk about slavery, I'd have talked about slavery. I wanted to talk about money so I didn't talk about legal-tender laws.
There was very much bartering in history, actually, and gold & silver dust, coin or ingots are a big part of it. That's how money came to exist, not credit.
Taxes are also not the means by which money was made. Taxes could be taken in many ways, not just credit and/or goods. Debts could be taken without credit papers either: debts not repaid could end in execution, robbery or trade of land and/or daughters. Not that I agree morally with it but I'm refering to history & culture of money not morals.
no, History is longer than a 100 years. And again no, there was not much bartering in history as people associted in small numbers, sharde things, a traded freely with each other whome they knew.
Now, I am going back a lot further then few hundred years. Even 10,000 years agao there was money and lines of credit. Often food, like wheat or rice, were considered legal tender, not gold and silver. .
Money did not come into exitence from Gold and silver. It is just the opposite. In many paces there were other forms of money long before, including honor and women, beleive it or not. Gold and silver are only recent froms. Gold ans selver allow for governemtn reconition and concentrations of wealth for the elite few.
Money that you have come to known came about as one village sought to trade with another from far way places. It was used to trade with those whom they did not know. It also came about as large armies would conqure and plunder, setting up there own markets and in their own forms of currency, like gold and silver.
Today taxes are unsed to force a particular form of money (legal currency) into circulation. It allows governments to transerfer wealth, which there would not be. Concentrations of wealth are what is needed to pay for things like large armies. Governments mandate that its own courts reconize debt obligations as a form accounting sop that they have control over the money.
WIthout it, people can settle debts an various ways, including commodities. Without it, governmetn loses it power as it cannot pay for teh armies. Money is not the same as curency as it is a broader definiton.
You really need to look beyond the last 100 years if you are to referr to history. Western civilation was fomr far before Gold and silver were the "accetpted" form of currency.
If we look to the past using that data we are looking at the "old method" of calculating CPI. Given that its now calculated differently what should we be looking for?
Is 4% CPI really equivilent to what used to be 10% using the old method?
Shadowstats says we're at about 6% while the CPI-U says its 2%.
Cold weather folks will soon be happy when they receive a 'lump of coal' for Xmas stockings to keep them warm instead of another iPod or just one more arylic sweater.
Remember, you can't eat iPods ( or even stay warm with them!).
Inflation is generally seen by Joe Sixpack as an increase in prices, but actually occurs as a decrease in buying power. Prices can be manipulated - at least for a while. But eroding buying power cannot be stopped. It isn't about how much you pay for what you get - its what you get for what you pay. Is everybody actually that stupid? Why are we even debating this?
People talk about deleveraging.
Can anybody explain 'deleveraging'.
What is it?
Deleveraging: rapidly selling 'assets'.
That's gangsta bankstas and nazionists offloading their losses on everyone else with the help of their hired career politicians who are venal or stupid. Bailing out or bailing in with other people's money.
See Cyprus as the latest example.
'First they came...'.
All this is writ in the Dodd Frank Bill of 2010 which will bring the final solution to the U.K. and U.S. Kill the kulaks. Save Big Brother.
According to the fed, the m2 money supply is about 2.5 trillion dollars. But there is consumer credit outstanding of about $56 trillion dollars. This is like going to the pub and saying put in on my tab, without having the money to pay for it. Deleveraging is nothing more than not paying the bill; it is defaulting.
How does this happen? Banks expend credit beyond there depsoites causing new money to go into the economy and causing a boom which casues larger profits, markets, assets, and rising tax revenue. BUt money lent must be paid back, even if created out of thin air which meaning that it leaves the eocnomy, which causes a bust and which casuses shrinking profits, markets, assets, and shriking tax revenue.
So, in order to continue and boom and avoid the bus, loan standards are loosened so that more money can be created out fo thin air and lent. But in time this too must be paid back, so even more and so on and so on. Until, at some point they can't borrow any more and this you have a lot of people whom cannot pay the bill.
Simulary, the government, in addition to the national debt, has off budget obligations about obligations of $220 trillion dollars for welfare spending alone. And how will this be paid, assuming there are only 2.5 trillion dollars in the base money supply? People borrowing money inflates the economy but this money must be paid back. How can more than 56 tillian bollars and 220 trillion dollars be borrowed in the economy? How can you turn 3.5 trillion into this? You can't
So, sSomeone will have to get stuck with the bill, whether it be from not paying it or be from printing the money which only means that the poor go withut (getting stuck with the bill.) Hence you have deleveraging or inflating.
that's incorrect
in order to deleverage, an institution needs to lower leverage by raising cash to repay debt. cash can be raised by selling assets or selling equity.
another example: each good delivery gold/silver bar on comex is leveraged by paper derivatives around 1:100 . should retail take possession of that one good delivery bar of gold, 100 x the price of the bar that was delivered has to be unwound (deleveraged) in derivatives.
"an institution needs to lower leverage by raising cash to repay debt" - thus, making my point. Leveraging equates to taking on debt exposure. Deleverageing equates to reducing debt exposure. Reducing debt exposure can take various form like selling assets, rasing cash, paying off obligations, or defaulting upon debt.
??? -According to the fed, m2 money supply is about 2.5 trillion dollars...
I think it's closer to $10.5 trillion. Check St. Louis Fed. Could be a definition issue.
Google "U.S. money in circulation", top response will be from the FRB with 1.18 trillion. Anything over that is a promise to pay an FRN.
Actually, if you subtract all notes/checks that require conversion to FRNs from the reported M2 money supply, you are left with 1.18 trillion in actual cash (over half of that is held overseas) with about 300 billion of that being in USNs and US coin. FRNs are a capital asset from which fractionalized credit currency flows. Credit holds no legal status as a currency, at all, but all debts incurred with its use are legally binding. It is estimated that about 98% of the global currency supply is credit. Here is a counter intuitive point: Credit neither gains nor loses value, you either have credit or you don't.
Leveraging is the taking on of debt... iow, you want to buy $20,000 in stocks, you use $10k your own money and $10k margin (money loaned by your broker) you are then "leveraged" 50%. You want to buy a $100k house...you put down $10k and borrow $90k to purchase....you are then leveraged 9 to 1 on the house.
Deleveraging is removal of debt. The debt can be removed by the debtor paying it (taking a hit to his assets for loan repayment) or by the creditor taking the hit (debt discharged in bankruptcy, short sale write-off, negative equity foreclosure sale).
A lot of current deleveraging is also between financial institutions and financial institutions and their off balance sheet entities.
Short answer:
Margin call
reducing the leverage ratio, i.e. debt to equity.
paying debts off and/or defaulting.
I’m amazed at the horrific and long answers you got.
It’s this simple: you can’t deleverage unless you’ve BEEN leveraged. To be leveraged some of your ownership and/or transactions of property, trades, accounts, etc., has to be on someone else’s dime based on your perceived ability to pay. Whatever you’d pay straight up with no credit, no assistance, divide that by how much you actually paid so far (and could be forced to pay): that’s your leverage. To return to 1.0 ratio (no help), final goal or on the way there, is deleveraging.
I have no debts or margin of any sort, so I can’t de-leverage, for example.
I do trade options without margin, however, which in the end can gain in what appears to be leverage. I won't owe anyone anything, I pay up front, but if the underlying moves enough (e.g. GLD) then the profit I get could be equal to a far greater amount of cash (say, 10x to 40x) using ONLY the underlying in the same period (up or down). I would guess it's fair to say I can't "de-lever" from that since I'm not in debt/margin but I can get leverage if the movement is in the right direction. Otherwise I guess you'd call it a bowel movement :D
I lack a deep understanding as well as the true principles or axioms re: economics. I'm working at isolating and learning the basics so that I can think with and make decisions regarding current events in hope of predicting the future. I'm working towards an understanding. (Not easy when TPTB have worked hard over the decades at making the subject of economics incomprehensible.) Anyway... from what I've learned (or think I've learned) thus far, I would like to posit this concept: "Don't we actually have enough of time to get our ducks in a row?" I ask this based on the following cases in point...
Don't we have time due to such points as...
Japan has been doing QE for two decades and they are now targeting inflation but they haven't imploded yet?
USA is only at 100-110% debt to GDP ratio and other countries have gone beyond that without collapsing?
There are so many out-of-proportion paper claims connected to the finite real wealth (i.e., 100+ trillion in derivatives) that there is still a lot of deflation to go when these claims start going up in smoke?
There is still a lot of bad debt and malinvestments out there that will need to unwind?
What's happening in stock mkt and real estate is just bubble blowing again and both will come down when they pop, causing more wealth and debt destruction?
The average producing American is too anesthesized, misinformed by the MSM, and distracted by circuses to really understand what is going on and it will be quite awhile before the majority of the population actually realize the inflation is eroding their purchasing power and they need to act and transfer their FRNs into tangible assets?
The majority of voters are on government handouts and will continue to keep the Obamas, Bernankes and Congress critters in office, who will continue the political, fiscal and monetary actions of extend and pretend?
The slow collapse of the EU is a continuing deflationary activity?
Global growth is slowing down?
Don't these and other points mean that we have more time to continue to be in the USD, earn more USD, so that we can then afford to transfer over to and build up our tangibles (gold, silver, guns/ammo, tools, real estate, commodities, farm land, businesses that deliver staples or basic services that are essential, etc.) and prepare for the eventual high inflation (or possibly hyper-inflation) that may come in 3, 5, 8 or 10 years?
Your first words were correct: you lack a deep understanding, but blather on anyway...to bore the thread. Apparatchik.
newengland: I'm trying to learn. I'm asking questions. My intention is to survive and do well. You are attempting to punish me for my efforts? Blather? What do you consider your posting is? What is the intention of your post? How is it constructive? How does it help?
Yeah, some assholes think they own the thread. But then again, you're responsible for signing into the fight club.
I took the same interpretation of relative time as you. But while the macroscopic description will likely be the same, the details of circumstance and chronology should be expected to be different. Timely anticipation is everything. Notice how fast ammo became unavialable, and the prerogatives of the Gimmemint to make it so. Notice how once nonholders get the hint that the time to hold PM is now, they're only avialable in paper form. Note the flash crash(es) show how digital information systems can cause whatever time span you may anticipate based on historical precedent to become compressed by orders of magnitude. There may be time, but there's no time to waste.
Odds 'n ends, odds 'n ends, lost time is not found again.
Pet! .... :-)
+1
your not seeing monetary inflation but rising cost due to the end of various subsidies and the closing of various markets, which reduce prices. If printing money alone causing mass monetary inflation, why did the soviet union die of deflation? Why isn't north korea hyperinflating? There are a lot of people who have no idea of what their talking about.
The command economies of the former USSR and North Korea were dysfunctional, and lied to their people...much like today's privately owned corporation, the un-Federal no-Reserve Board whose owners will do quite nicely out of every war, famine and ruinous monetary policy, along with their bribed career politicians.
Read the small print of the Dodd Frank Bill of 2010 and see how Cyprus is the template for the theft of depsitors money planned for the UK and US as well...all to save the gangsta bankstas, and their quadrillion unregulated otc derivatives greater than the entire world's gdp.
The biggest heist in history.
I wish inflation/deflation writers would start factoring in the difference between digital dollars and hard currency. I'm trying to make sense of it because it seems there is no real history with massive increase of digital, while actual currency not so much. The Fed isn't "printing". They just push a button.
Case in point of course, is Cyprus. Holders of digits are the ones getting whacked, while cash hoarders are in the catbird's seat. Cyprus was overwhelmed with debt, but only the digits are paying, be it inflation, or confiscation. Due to the demand for actual cash, I presume many good deals are available for those who actually have it to spend; deflationary for holders of cash.
Now you see why gangsta bankstas and their political pets push people to digital, and computers. Most of the world's money nowadays is digital, not cash.
For a reason: it's easier to steal. The House always wins. That is the game of Monopoly.
There's really not much difference between digital dollars and hard currency...both can be used to shop, both can be used to pay bills, both can be transferred and they're fairly well interchangeable, (although a large conversion from digital to cash may require advance notice to your financial institution's local branch). Digital accounts are more readily available for taking by judgment creditor liens or government confiscation...cash is more readily stolen by muggers or home invaders.
Judging by what is unfolding with new language reflecting bail in capabilities for TBTF, I'll take my chance with "muggers". They make it past 3 dogs, alarm and Mr Boomstick I may just reward em with a silver Troy as the boys have a late night snack of thievish asshole. Did I mention the badass safe?
"...new language reflecting bail in capabilities for TBTF..."
which is not significantly different than it ever was for FDIC takeover and receivership in handling a "regular-sized" failed financial institution...which has happened many, many times...the exception that occurred was the TARP, taxpayer bailout of the so-called "systemically important" monster sized institutions that probably should've been allowed to fail in 2008...
As to the other, cash can certainly be considered more easily protected from broke governments and financial entites than are bank accounts. However, I do not believe a cash dollar will represent higher value than a digital dollar (as I've seen insinuated on other occasions).
So reinstate Glass-Steagall....I agree.
"All this money printing, massive debt, and reckless deficit spending – and we have 2% inflation? I'm beginning to believe that either the deflationists are right, or the Fed's interventions are working." – Anonymous Casey Research reader
I WOULD STAY Anonymous too if I said something that fucking stupid.
Tell my power company it's only 2%.
What a fucking joke.
+1.
My electric supply house said his suppliers raise prices twice annual, average 5%, some more often. I had a $20 bill in my hand hoping/presuming it would cover the bill for seven lengths of heat shrink (each 3' long, average flat width 1/4", only 2-1 ratio, non-adhesive).
Bill including tax was $37+. I know I'm getting older (going on 60) but this is ridiculousness. Bernanke deserves the death penalty, as do about 1/2 our overlords.
I'm not an economist (obviously), but I wonder if what's keeping the lid on inflation in the U.S. has a fairly simple answer, one that tells us something about currerent policy: just keep a significant percentage of the potential consumers -- say, the current unemployed plus those employed, but at the lower end and on the edge -- from consuming (by keeping them out of money or fearing that they soon will be out of money). That is, reduce demand big time. Wouldn't that do it? This would not affect demand for luxury goods, whatever they are, or their prices, or what "rich" people do, but how about everyone else and the overall effect?
It's called credit contraction. The last 40 years of credit expansion has been tantamount to money printing because anyone walking into any store with a credit card or line of credit or ability to obtain merchant financing had the same competetive ability to purchase as anyone walking into same place with cash in hand. (Goes for cars, homes, retail goods, large and small ticket items.) While the Fed is now creating money at a totally irresponsible pace, the repayment and write-off of previously accumulated debt (aka deleveraging of debt money that had been created through credit) is having a counterbalance effect to Fed's money printing.
However, the proper definition of inflation is "an increase in the quantity of money,"
In the context of our fractional banking system (which has no connection to real money), this definition of inflation is incomplete and therefore incorrect. If one correctly includes credit in the definition of money, and the deleveraging that has taken place and the defaults that are to come, we are actually experiencing deflation.
This article gives gold-bugs a bad name.
The promoters want to sell gold, inflation is a marketing pitch.
There are many reasons to own gold (or other assets), inflation is one not-very-good reason. Real estate is the inflation hedge of choice in the US because a house can be lived in.
As it is, the last bit of inflation in this country was the mortgage bubble that ran from 2000-2006.
If gold price increases it will be on account of a short squeeze on bullion banks or capital flight.
You can’t live in it if you can’t afford it. Utilities & taxes are part of inflation. If you’re off-grid you can cut the inflation in utilities. However, in many cases taxes will go up even if services don’t, just from the inflation applied to the land+house value. That makes it a deeper loss. If you can’t afford it, you lose it all.
Gold is an inflation hedge with a giant lag. Silver moves like gold with a giant exponential cash-value multiplier.
Gold you can run with. Silver you can barter plenty with.
Short-squeezes will be the least of concerns. Currency crisis & banking crisis will drive people to cash-in-hand & gold or silver are cash-in-hand. Some people just forgot that. What's used for cash now will flat out be too scary to handle - the day soon will come when using a $100 to get food will feel like trading dime-baggies of cocaine for food. It won't feel right, it will have too much risk attached for too little reward & people will go to natural money, gold and silver.
Hmmm... If we are experiencing deflation, then well known deflationistas such as Shiller, Dent, Prechter and Foss are correct and their strategies for protection might be the ones to heed and follow?
The question is, how will this play out since the USD is still the World Reserve currency.
How much of the inflation is exported first?
JonJon- I would suggest you look past the reserve currency issue going forward. U.S. is slowly, and subject to speeding up losing that stature.
Mexico now has a limit of $1,500 p/mo. exchange limit. 140 countries no longer want the dollar.Cuba won't even take them! Good chance China is buying commodities w/U.S. treasuries. Saudi Arabia now sells Oil using the Yen. Russia and China have new trading pacts. We buy our own treasuries. Iran now has oil/energy export agreements w/China.We no longer are able to export inflation as no one wants the Dollar. Johnny used to work on the docks- Union men on strike-he's down on his luck. Gina works the Diner all day-working day and night she brings home her pay-It's tough-so tough. We're livin' on a prayer.
When did this happen?
"Saudi Arabia now sells Oil using the Yen"
css1971- I just read of it recently but i'm sure you'll find info on this if you look. (search engine)
Edit-
OOOOPS, I meant the Yuan and Saudi Arabia.
Sorry 'bout that.
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Fed shorting gold to support dollar, former Assistant Treasury Secretary Roberts says
Submitted by cpowell on 05:42PM ET Sunday, March 31, 2013. Section: Daily Dispatches
8:36p ET Sunday, March 31, 2013
Dear Friend of GATA and Gold:
Interviewed this week by Chris Waltzek of GoldSeek Radio, former U.S. Assistant Treasury Secretary Paul Craig Roberts says he believes the Federal Reserve is surreptitiously shorting gold to support the dollar in the Fed's low-interest-rate environment, which ordinarily would weaken the currency. The interview is 29 minutes long and Roberts' comments about gold begin at about the 17-minute mark. You can listen to it at GoldSeek Radio here:
http://radio.goldseek.com/nuggets.php
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
"We've not experienced the concomitant increase in prices, which is what we're addressing in this article."
WE HAVEN'T??? LOL! Go ahead--list everything that's gone up in price over the last decade, and everything that hasn't. This should be interesting...
You fools! Buy the Dollar! And the Titanic is unsinkable!
I try and follow two simple rules for investing:
1. Stocks - invest what you can afford to lose.
2. PM's - invest what you can't afford to lose.
It's just sad that rule #1 needs to be amended to include bank accounts.
Deflation in everything you need credit to buy because lending standards have been tightened (only the already rich can borrow now) and inflation in everything else.