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Will It Be Inflation Or Deflation? The Answer May Surprise You

Tyler Durden's picture


Submitted by Michael Snyder of The Economic Collapse blog,

Is the coming financial collapse going to be inflationary or deflationary?  Are we headed for rampant inflation or crippling deflation?  This is a subject that is hotly debated by economists all over the country.  Some insist that the wild money printing that the Federal Reserve is doing combined with out of control government spending will eventually result in hyperinflation.  Others point to all of the deflationary factors in our economy and argue that we will experience tremendous deflation when the bubble economy that we are currently living in bursts.  So what is the truth?  Well, for the reasons listed below, we believe that we will see both.

The next major financial panic will cause a substantial deflationary wave first, and after that we will see unprecedented inflation as the central bankers and our politicians respond to the financial crisis.  This will happen so quickly that many will get "financial whiplash" as they try to figure out what to do with their money.  We are moving toward a time of extreme financial instability, and different strategies will be called for at different times.

So why will we see deflation first?  The following are some of the major deflationary forces that are affecting our economy right now...

The Velocity Of Money Is At A 50 Year Low

The rate at which money circulates in our economy is the lowest that it has been in more than 50 years.  It has been steadily falling since the late 1990s, and this is a clear sign that economic activity is slowing down.  The shaded areas in the chart represent recessions, and as you can see, the velocity of money always slows down during a recession.  But even though the government is telling us that we are not in a recession right now, the velocity of money continues to drop like a rock.  This is one of the factors that is putting a tremendous amount of deflationary pressure on our economy...

Velocity Of Money

The Trade Deficit

Even single month, far more money leaves this country than comes into it.  In fact, the amount going out exceeds the amount coming in by about half a trillion dollars each year.  This is extremely deflationary.  Our system is constantly bleeding cash, and this is one of the reasons why the federal government has felt a need to run such huge budget deficits and why the Federal Reserve has felt a need to print so much money.  They are trying to pump money back into a system that is constantly bleeding massive amounts of cash.  Since 1975, the amount of money leaving the United States has exceeded the amount of money coming into the country by more than 8 trillion dollars.  The trade deficit is one of our biggest economic problems, and yet most Americans do not even understand what it is.  As you can see below, our trade deficit really started getting bad in the late 1990s...

Trade Deficit

Wages And Salaries As A Percentage Of GDP

One of the primary drivers of inflation is consumer spending.  But consumers cannot spend money if they do not have it.  And right now, wages and salaries as a percentage of GDP are near a record low.  This is a very deflationary state of affairs.  The percentage of low paying jobs in the U.S. economy continues to increase, and we have witnessed an explosion in the ranks of the "working poor" in recent years.  For consumer prices to rise significantly, more money is going to have to get into the hands of average American consumers first...

Wages And Salaries As A Percentage Of GDP

When The Debt Bubble Bursts

Right now, we are living in the greatest debt bubble in the history of the world.  When a debt bubble bursts, fear and panic typically cause the flow of money and the flow of credit to really tighten up.  We saw that happen at the beginning of the Great Depression of the 1930s, we saw that happen back in 2008, and we will see it happen again.  Deleveraging is deflationary by nature, and it can cause economic activity to grind to a standstill very rapidly.

During the next major wave of the economic collapse, there will be times when it will seem like hardly anyone has any money.  The "easy credit" of the past will be long gone, and large numbers of individuals and small businesses will find it very difficult to get loans.

When the debt bubble bursts, cash will be king - at least for a short period of time.  Those that do not have any savings at all will really be hurting.

And some of the financial elite seem to be positioning themselves for what is coming.  For example, even though he has been making public statements about how great stocks are right now, the truth is that Warren Buffett is currently sitting on $49 billion in cash.  That is the most that he has ever had sitting in cash.

Does he know something?

Of course there will be a tremendous amount of pressure on the U.S. government and the Federal Reserve to do something once a financial crash happens.  The response by the federal government and the Federal Reserve will likely be extremely inflationary as they try to resuscitate the system.  It will probably be far more dramatic than anything we have seen so far.

So cash will not be king for long.  In fact, eventually cash will be trash.  The actions of the U.S. government and the Federal Reserve in response to the coming financial crisis will greatly upset much of the rest of the world and cause the death of the U.S. dollar.

That is why gold, silver and other hard assets are going to be so good to have in the long-term.  In the short-term they will experience wild swings in price, but if you can handle the ride you will be smiling in the end.

In the coming years, we are going to experience both inflation and deflation, and neither one will be pleasant at all.


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Thu, 05/23/2013 - 22:35 | 3594556 THX 1178
THX 1178's picture

Kyle Bass tells us that the US will "kill the dollar". That only happens through Hyperinflation. Deflation would lock the economy up and Paper money would become scarce. I'm literally putting money on Hyperinflation.

Thu, 05/23/2013 - 22:40 | 3594587 economics9698
economics9698's picture

Dollar devaluation, less imports, foreign countries demand gold or real imports for their exports, domestic supply exchanged for trade = higher prices.


Any questions?

Thu, 05/23/2013 - 22:52 | 3594624 markmotive
markmotive's picture

First deflation.

Then inflation.

Then the machines.

Thu, 05/23/2013 - 23:02 | 3594660 THX 1178
Thu, 05/23/2013 - 23:49 | 3594740 sunaJ
sunaJ's picture

That is viscerally their insane idea, isn't it: to attempt to ride the wave of deflation by creating "controlled" ie explicit and manipulated/secret/hidden inflation?  We have heard the term "soft landing" applied to the US now.  This is the monetary and fiscal conclusion of idealogues lost outside their broken paradigm.  They will be driven to control more, because they will need to financialize and subsidize more to keep the ponzi going.  I would expect in this kind of environment for the category "The Government And Its Contractors" to rapidly dominate the U.S. economy.  When you cannot recognize the difference between corporate and government power, you have fascism, or so I've heard...

Fri, 05/24/2013 - 01:47 | 3595024 francis_sawyer
francis_sawyer's picture

"For my birthday I got a humidifier and a dehumidifier. I put them in the same room and let them fight it out."

~Stephen Wright


- "I bought some batteries, but they weren't included. So I had to buy them again."

- "My buddy got busted for counterfeiting. He was making pennies. They caught him because he was putting the heads and tails on the wrong sides."

- "Last week, I went to a furniture store to look for a decaffeinated coffee table. They couldn't help me"

Fri, 05/24/2013 - 02:05 | 3595062 Pinto Currency
Pinto Currency's picture


When you see the bond market crash because of fear of c.b.'s, where will investors run?

Cash?  Maybe for a day or two.

Fri, 05/24/2013 - 08:55 | 3595471 jekyll island
jekyll island's picture

If the gubmint controls the situation according to plan we will have inflation or hyperinflation.  If they screw it up we will have deflation first.  How confident are you that the government will do things correctly, at least according to their agenda?  Have some gold, have some cash, that way you will be protected and will even be able to take advantage of whatever situation they create.  Just don't count on your cash being in your retirement account, me thinks the gubmint will want to protect it with their high quality US Treasuries when TSHTF.  

Fri, 05/24/2013 - 11:06 | 3595904 Pinto Currency
Pinto Currency's picture


Perhaps we can sum is up as we have a large mess and plan for the worst given the parties involved.

Fri, 05/24/2013 - 11:20 | 3595950 donsluck
donsluck's picture

I agree, but I'll take it one step further, keep ONLY cash and pms. Everything else is a worthless promise.

Fri, 05/24/2013 - 12:01 | 3596084 Creepy Lurker
Creepy Lurker's picture

Exactly. If you can't hold it in your hand at a dead run, you don't own it.

I have a friend I've known for many years. Out of friendship, I've made sure he knows everything I've learned. He claims to believe and agree with me, yet he takes no actions. Still contributes to the 401k, company stock program and mutual fund retirement program. He's going to lose everything. I worry about him.

Fri, 05/24/2013 - 02:08 | 3595068 Meat Hammer
Meat Hammer's picture

One thing this article fails to mention is all of levels along the supply chain where .gov (fed, state, & local) normally exacts its pound of flesh that currently don't have flesh being fed into them.

Fri, 05/24/2013 - 07:18 | 3595267 andrewp111
andrewp111's picture

That is when local cops go rogue and extract the pounds of flesh on their own.

Fri, 05/24/2013 - 07:44 | 3595309 DanDaley
DanDaley's picture

That's called Mexico or Chicago...don't leave home without bribe money.

Fri, 05/24/2013 - 06:28 | 3595216 lord of the flies
lord of the flies's picture

GUYS WE HAVE A SITUATION HERE! let's define some words: sofar we don't live in a linear economy inflation or deflation can't only be the result of the growing or shorted amount of legal tender currency! so what is it we are talking about?

first: when people loose faith in the paper currency there is no limited pace at wich the paper can circulate and be sure the printing press at that time will never follow... that's usually how paper currency scum finaly termites itself: hyperinflation of prices with hyper-acceleration of the circulation of bills that no one wants anymore in hands when the musics stops !

but befor that final stage is reach hyperdeflation can manifest for the reason that people earn no money and wait for prices they can afford to go down! remember in real world inflation is depending of the number of times a coin or a bill changes from real consumers hands in 1 day more than the total amount of credit issued by banksters that usually feeds speed trading (or dating?) robots and bubbles than real people salaries!

so u see know banksters can decide to create money they dont have can create bubbles but cant make people trust phony money neither buy higher prices when their nominal wages go down; that leads to both hyperdeflatioary circulation of currency with hyper inflation of printed wothless toileet paper for virtual bubbles masturbation!

the question is not anymore what prices gold and silver in paper bull shit but rather who will have precious metals in its hands when nothing will be exchangeble for fake paper money anymore!

Fri, 05/24/2013 - 11:48 | 3596047 Winston Smith 2009
Winston Smith 2009's picture

"I put instant coffee in a microwave oven and almost went back in time."

"I went to a restaurant that serves 'breakfast at any time'. So I ordered French Toast during the Renaissance."

"You can't have everything. Where would you put it?"

"What's another word for Thesaurus?"

"It's a small world, but I wouldn't want to have to paint it."

"Whenever I think of the past, it brings back so many memories."

"I have the world's largest collection of seashells. I keep it on all the beaches of the world... perhaps you've seen it."

"I went down the street to the 24-hour grocery. When I got there, the guy was locking the front door. I said, 'Hey, the sign says you're open 24 hours.' He said, 'Yes, but not in a row.'"

"I poured spot remover on my dog. Now he's gone."

"When I was a little kid we had a sand box. It was a quicksand box. I was an only child... eventually."

"If you shoot at mimes, should you use a silencer?"

"Ever notice how irons have a setting for permanent press? I don't get it."

"If God dropped acid, would he see people?"

"The other day I... uh, no, that wasn't me."

Steven Wright

Fri, 05/24/2013 - 10:19 | 3595742 daxtonbrown
daxtonbrown's picture

GDP = M * V has two variables. That means there is no way to predict inflation or deflation, only to predict massive distortion as the informational value of money collapses. What you get is a Biflationary Depression.

Fri, 05/24/2013 - 06:54 | 3595234 lord of the flies
lord of the flies's picture

it's not the machine it's the way wealth creation is transferred!

Thu, 05/23/2013 - 23:18 | 3594707 Stoploss
Stoploss's picture

Massive deflation first.

This shines the light on where the debt is, (as if we dont already know), for all to see. Then comes the debt jubilee, or there will be default. This time is not different.

Massive hyperinflation comes after the debt jubilee, or default, whichever choice is made.

That will most likely require interest rates in the forty percent range based on the monetization that we know about..


So, the usual bond market implosions, stock market implosions, imploding implosions upon implosions, it's looking more an more like i picked the wrong decade to stop drinking..

Thu, 05/23/2013 - 23:38 | 3594762 Manthong
Manthong's picture

"debt jubilee" ??   more likely just massive defaults and withholding of payments by those that still have capital and will sneer as the debt miesters eat themselves.

Thu, 05/23/2013 - 23:49 | 3594786 Spitzer
Spitzer's picture

Hyperinflation is not the printing of money. It is the loss of confidence of the money that has already been printed.


For details, see the Asian financial crisis

Fri, 06/07/2013 - 11:44 | 3633833 El Viejo
El Viejo's picture

So the gold mongers have been casting doubts on the currency to increase the valuation of their assets??

HMMM original.

Thu, 05/23/2013 - 23:59 | 3594808 Stoploss
Stoploss's picture

Staring down the vortex of deflation with the wind at your back would result in some strange shit. Always happened before in some form or fashion.

There are many more variables now with the development of the new financial weapons.

Either way we're going to find out whether we like it or not.

Fri, 05/24/2013 - 02:53 | 3595097 Lore
Lore's picture

Janszen's "Ka-Poom" model. I hope he gets recognition for it in posterity, as I think he was the first.  Unfortunately, it won't be so neat as all that, since third parties are about to pull the rug out.

Fri, 05/24/2013 - 08:40 | 3595432 j0nx
j0nx's picture

What third parties? Do tell. Anyone that pulls the rug out gets tripped up along with those who they pulled the rug out from under. It's called MAD.

Sun, 05/26/2013 - 17:01 | 3600106 Lore
Lore's picture

When rules keep getting changed, the only logical recourse is to stop playing a rigged game.

Fri, 05/24/2013 - 03:29 | 3595125 anonnn
anonnn's picture

Which is more likely?

Classic debt jubilee? or

Government-brand of debt jubilee?

E.g. Student debt-- forgiven if join the military.

Credit card debt-- forgiven if volunteer for radiation contamination cleanup.

Utilities debt--  forgiven if volunteer for mediical experiments.

Auto loanr debt-- forgiven if donate body parts.

Mortgage debt--forgiven if volunteer for assassination teams.

Other debt-- volunteer as FEMA guards, dishonorable snitches,  disappearance teams, goon squads, house-to-house gun seizure teams, etc. 

C'mon. The best and brightest from Harvard, MIT, etc csn easily create  attractive and workable options as needed. Real win-win stuff.

For TPTB, what's not to like?


Fri, 05/24/2013 - 05:47 | 3595199 espirit
espirit's picture

Geez.... I hope you turn down that high-ranking .gov job when offered.

Your thought train is scary.

Fri, 05/24/2013 - 06:57 | 3595240 new game
new game's picture

or you can be herded onto the train...

hey, what if you or I was, say, not in this fucking country? huh, like sittting near the beach in a far away country...

then, i ask? do you really care? only if it spreads to wwIII and comes knocking, and that is why picking the right spot is omni-important...

ie. marc faber and the other goof ball with the bow tie

Fri, 05/24/2013 - 08:12 | 3595347 samcontrol
samcontrol's picture

yet , nobody is interested in my self sufficient farms.

Fri, 05/24/2013 - 09:31 | 3595603 cro_maat
cro_maat's picture

Community farms (solar & wind powered, with water / mineral rights) will be islands of hope in the chaos. However, the Monsanto sponsored goon squads, rain police, DHS and other yet to be created farm confiscation SS will make for a lively countryside!

Fri, 05/24/2013 - 06:41 | 3595223 eddiebe
eddiebe's picture

There is one thing we all seem to be leaving out: Bail-in.

Fri, 05/24/2013 - 07:27 | 3595283 ATM
ATM's picture

Our "bail in" is going to be massive money printing. That steals accumulated wealth. No need to get involved in messy negotiations between debtors and creditors and equity holders at all. They just print and anyone with dollars is forced to bail in. Much easier politically and gives these thieves cover so they can blame all the usual suspects.

Fri, 05/24/2013 - 11:25 | 3595971 donsluck
donsluck's picture

I will stick to my guns and propose that the EU is healthier than the US BECAUSE of bail-ins. This is how a bank bankruptcy SHOULD work!

Sat, 05/25/2013 - 02:22 | 3597992 Lord Koos
Lord Koos's picture

I think you are correct.  Bank fails, people lose money.

Fri, 05/24/2013 - 07:59 | 3595330 Urban Redneck
Urban Redneck's picture

or Derivatives, or Taxes- or any other competing claim on the limited money supply, that the FED will be "forced" to respond to at the end of the second act... 

Fri, 05/24/2013 - 23:29 | 3597821 MrSteve
MrSteve's picture

you omitted currency revaluation or reissue of a new, sound currency. That has happened...

Thu, 05/23/2013 - 23:42 | 3594769 Ignatius
Ignatius's picture

"Then the machines."

Back in the 80s I would joke that we're all gonna be either money managers and restauranteurs.

Funny then, but the algo's are seemingly already burying the money managers.

The point of an economy in my mind has always been about serving the people at large.  Maybe Ted Kaczynski was on to something....

Thu, 05/23/2013 - 23:57 | 3594803 Stuck on Zero
Stuck on Zero's picture

What's safe?  I don't believe that it's possible to hold cash unless it's in the form of $100 bills in the mattress.  You may think you have cash in the bank but the bank loaned it out or purchased bonds with it.  People think they have safe cash in Switzerland but it's likely the Swiss loaned it out to none-too-safe Euro deposits.  You may think you have gold in an ETF but probably it has been loaned out or rehypothecated.  You may think you own property but the state can tax it away from you in a blink - like they did in the depression.  Buy physical and make friends.


Fri, 05/24/2013 - 02:06 | 3595063 HulkHogan
HulkHogan's picture

If you live in Canada, and banks will honor them with cash value, buy those new $100 silver coins and stuff them in one of your many moose heads hanging on your wall.

Fri, 05/24/2013 - 03:57 | 3595138 The Heart
The Heart's picture



Thu, 05/23/2013 - 22:55 | 3594634 lasvegaspersona
lasvegaspersona's picture


Robert will be right...for his 15 minutes (h/t fofoa)

He will then be wrong again...Deflation has NEVER EVER happened to a fiat, purely transactional currency...EVER!!!

The central bank can just buy up debt for cash and the collective suffers the cost via hyperinflation!

Thu, 05/23/2013 - 23:10 | 3594676 Pool Shark
Pool Shark's picture



But there has never been so much global debt.

What's the USA's official debt? $16 trillion? If you add in unfunded entitlements and liabilities, maybe $75 trillion?

Okay, how much currency (M0) actual cash and coin is there in existence? About $1.5 trillion?

When the debt comes due, there isn't enough paper to pay even 2% of our debt (not to even mention private debt). How much cash do you have as a percentage of your total net worth? 1%? 2%? 5%? Even if you include bank deposits, how much actual 'money' do you have? Now imagine all your streams of income are stopped; how long could you survive on the cash/bank deposits you hold? Maybe a couple months? Do you think the price of things (with the possible exception of food & fuel) could actually go up in such an environment?

Our debt isn't even backed by paper!

When things collapse, cash (FRN's) will be in very short supply (just like they were in the 30's).

When the collapse comes, it will be deflation: 'The Destroyer of Worlds."

Fri, 05/24/2013 - 00:49 | 3594919 All Risk No Reward
All Risk No Reward's picture

The proper context for analysis is that of a societal asset stripping operation.

The Fed is a Trojan Horse and this is a classic, Sun Tzu Art of War operation in order to seize control of their prey/

How to be a Crook

Renaissance 2.0 - Financial Empire - Full Length - Damon Vrabel

JP Morgan is very high up in the POWER CHAIN.  They are not giving out 3.5% 30 year loans because they are dumb.

Their OWNERS control the system...  and they are lending 30 year money at 3.5%.

They are lending 3.5% money to further indebt society in anticipation of bankrupting society and rolling up that property under their TBTF front corporations.

Your community's bond slavery will not have been an accident or oversight.  If you remember one thing, that's it.

Fri, 05/24/2013 - 05:21 | 3595189 Squid-puppets a...
Squid-puppets a-go-go's picture

ergo, the solution is:

0) allow every insolvent corp & bank to go bust & default on the dollar

1) revolution

2) debt jubilee

3) nationalise all the assets stolen by the jp morgan type assholes 

4) provide genuinely govt banks to reissue credit at non-usurial rates

5) transition towards re-privatisation over a period of around 20-30 years - but this time without multinational oligarchic monoliths to overpower the will of the people and politicians


this, of course, is dependent on the $US being replaced with a new currency that is low enough to be reflective of america's diminished power, thus enabling reinvigoration of manufacture and trade balance

Fri, 05/24/2013 - 06:57 | 3595239 Marco
Marco's picture

How do you identify the jp morgan assholes in general? Other than being rich that is.

Fri, 05/24/2013 - 08:43 | 3595440 Urban Redneck
Urban Redneck's picture

The government is a very poor provisioner of credit and lacks the skills to accurately gauge risk-  so the inevitable result would be more 0% loans for Solyndra cronies who couch their graft in policies that appeal to "social good" and no money at any cost for people extracting and manufacturing wealth.

I have the suspicion that most American sheeple are so addicted to ZIRP credit, that if they were confronted with real (unsubsidized) interest rates they would scream bloody usury...

Sat, 05/25/2013 - 10:31 | 3598257 blindman
blindman's picture

you need a finer brush to paint that picture.

Fri, 05/24/2013 - 05:34 | 3595193 zhandax
zhandax's picture

They are not lending their 30 year money at 3.5%

Fri, 05/24/2013 - 07:29 | 3595286 drdolittle
drdolittle's picture

It's a no lose if you have no soul. You buy treasuries then use them as reserves, invent money and buy stuff. As long as you get to make money out of thin air, any return is ok, even if you get defaulted on. Hell, especially if you get defaulted on cause nowadays you can get the fed to buy your worthless crap on a dollar for dollar basis, courtesy of the taxpayers backstop.

Fri, 05/24/2013 - 07:13 | 3595261 andrewp111
andrewp111's picture

Especially if all banks are shut down because Congress can't agree on increasing the debt ceiling by 5 T so the FDIC can make good on its committments, or because Obama makes a demand that Congress chokes on.

Fri, 05/24/2013 - 08:57 | 3595475 Weisshaupt
Weisshaupt's picture

Paper cash isn't an issue.  Most "cash" in America is digital. Its "printed" digitally, spent digitally, transported digitally. The government is doing everything it can now to make sure almost everyone has an EBT.  As long as the electricity is on, everything is fine. We need more cash in the system?  Put $1,000,000 on every EBT. (don't worry, if you have a job, they won't help you. You have to default on your home and be unable to pay your taxes first,  then they wil give you an EBT after they take all of your property in payment. )    Keynesian Stimulus at its finest. (Prediction:  $1,000,000 on each EBT WON'T be "enough"   By defintion, every  Keyenesian stimulus is too small- because every Keyensian stimulus fails to accomplish its stated goal ( perhaps there is an unstated goal, which is why they keep doing it again and again?) . Next Month lets put $2,000,000 on those cards..damn. Still not "enough") 

Fri, 05/24/2013 - 23:23 | 3597809 MrSteve
MrSteve's picture

Fool! Check out Fiat Money Inflation in France, a small, old book. Inflation and currency debasement ended in deflation and revolution. google "John Law". post again in six months when you get some education in history and finance.

Fri, 05/24/2013 - 02:00 | 3595054 HulkHogan
HulkHogan's picture

Robert Prechter has never been right.

Fri, 05/24/2013 - 02:54 | 3595099 Lore
Lore's picture

Exactly. People are still badly hung up on the definition and context of the word "Deflation."  Damn it!

Fri, 05/24/2013 - 07:54 | 3595320 tarsubil
tarsubil's picture

Essentially credit will implode then money will be printed to make the banks whole then people lose faith in money as they see it printed at incredibly high levels. Call it whatever you want but isn't that how it is destined to go down?

Thu, 05/23/2013 - 23:17 | 3594701 enloe creek
enloe creek's picture

lower imports would be a sign of deflation especially with a devalued dollar

Thu, 05/23/2013 - 23:25 | 3594722 G-R-U-N-T
G-R-U-N-T's picture

That's an easy question if one is familiar with history!!! Almost all Great Empires have fallen due to DEFLATION!!!

Fri, 05/24/2013 - 11:29 | 3595988 donsluck
donsluck's picture

Huh? Sources?

Thu, 05/23/2013 - 22:43 | 3594591 DormRoom
DormRoom's picture

The same deflation/inflationary tension occured during the inter-war years.  Hyperinflation harms the 1%.  While hyperdeflation (great recession) harms the 99%.


The 1% control nearly all channels of power & influence.  They will not allow hyperinflation.  The most likely outcome is hyperdeflation managed by a police state.


"don't drone me bro".

Thu, 05/23/2013 - 22:45 | 3594604 economics9698
economics9698's picture

Deflation helps people afford goods and services and liquidates assets that are in oversupply.  We want deflation so we can end this bubble economy.

Deflation hurts capital owners and helps consumers.

Thu, 05/23/2013 - 22:58 | 3594647 GMadScientist
GMadScientist's picture

Who cares how cheap it gets if you don't have a job?

Thu, 05/23/2013 - 23:10 | 3594679 THX 1178
THX 1178's picture

With Bernanke at the helm there is no way we'll see deflation. No FRICKEN  WAY. You saw what BOJ did the instant the Nikkei crashed? That's the way it'll be done. You may want deflation but you ain't gonna get it. We're paying our debt off... believe you me, we're paying it off.. MWAHAHAHAHAHAHA!

Fri, 05/24/2013 - 05:25 | 3595190 Squid-puppets a...
Squid-puppets a-go-go's picture

and how do we do that when they wont let wages rise?


they want inflation on assets but deflation on wages? I'm long guillotines

Fri, 05/24/2013 - 09:13 | 3595539 Weisshaupt
Weisshaupt's picture

Actually, I am pretty sure we are seeing the deflation RIGHT NOW- as Stagflation .Economic Depression is Balancing the monetary inflation- which is why gas is still $4 a gallon while consumption of the substance is way, way down. There is a glut - in WY storage tanks are full, and employees are being laid off. Yeah yeah,  "Price Fixing!" - why not fix it at  $5 or $10 then? Oh right, because you make money when your product   actually sells, not when it sits in tanks because it is too expensive.   Obviously even at $4 isn't not selling in the quantities it  used to- because the depression continues in the real world no matter how hard the govt tries to manipulate the statisitics.  Deflaton is the reason gas isn't $10 a gallon.  But it can't keep up forever. When you hit bottom,  the deflation can't get worse, and if the govt is still printing money, its eventually going to dominate. 

Thu, 05/23/2013 - 23:39 | 3594763 LetThemEatRand
LetThemEatRand's picture

"Who cares how cheap it gets if you don't have a job?"

Economics9698 is talking his book.  He has a government job, and his pay is therefore fixed.  So he's happy to see deflation.  

Fri, 05/24/2013 - 02:23 | 3595079 John_Coltrane
John_Coltrane's picture

That's what savings is for.  If you have none you can't survive in deflation for even a few months.  Its evolutions way to deal with the "grasshoppers" of society.  You need enough in real cash for at least a year.  And real skills to go along with that.  Even primative tribes who didn't smoke meat or fish for the winter perished. 

Fri, 05/24/2013 - 11:32 | 3595999 donsluck
donsluck's picture

True. I am a gardener, at least 3/4 of my sowing is for storage. Potatoes, dried beans, winter squash, cabbage, roots of all kinds.

Thu, 05/23/2013 - 23:06 | 3594671 DormRoom
DormRoom's picture

Deflation is manageable.  Persistent deflation is worrisome.  Hyperdeflation is when shit gets real.


Hyperdeflation leads to mass unemployment because of the simple accounting identity that wage-income = revenue for businesses.  Someone losses a job, spends less, resulting in  less revenue for a business.  business cut prices.  Lower prices doesn't generate necessary net income.  Lay off people.  More ppl spend less. Even less revenue for business. Thus the deflationary sprial.

Low price for a  good is great, but lower prices for a group of goods is not necessarily beneficial for the collective.

Hyperinflation vaporizes wealth because it unanchors price from exchange-value AND use-value. Ultimately, hyperinflation is the systemic failure of price discovery.

Thu, 05/23/2013 - 23:12 | 3594688 NidStyles
NidStyles's picture

There is no such thing as Hyperdeflation. It's a BS term that has no possibility of being real

Fri, 05/24/2013 - 01:10 | 3594980 JLee2027
JLee2027's picture

The Monetary Endgame Score To Date: Hyperinflations: 56; Hyperdeflations: 0

Fri, 05/24/2013 - 02:58 | 3595101 Lore
Lore's picture

Re: "[Hyperdeflation] is a BS term that has no possibility of being real"

It sounds good and lets people feel like they're contributing.

Fri, 05/24/2013 - 03:07 | 3595110 NidStyles
NidStyles's picture

It just adds to the cognitive dissonance that real economists have to cut through to make a point though. Honeslty this feel good nonsense is just annoying, if people want to contribute they should start reading up on economics. Hayekian methodology would be a decent start in the least. Reading some work by the Austrians would be better. Bastiat is really good, Menger is better. Mises better still, but Rothbard is still the best. 

Fri, 05/24/2013 - 07:09 | 3595255 andrewp111
andrewp111's picture

Sure there is. If the banks are allowed to fail in any major country, a wave of bank failures could sweep the earth. It may be unlikely because TPTB fully understand the consequences of allowing mass bank failures, but it is not impossible.

Fri, 05/24/2013 - 07:18 | 3595268 Ghordius
Ghordius's picture

no country is yet willing to let their banks fail first - and megabanks have no real "home"

Fri, 05/24/2013 - 07:43 | 3595307 ATM
ATM's picture

Where have you been for the past 5yrs? Banks will never be allowed to fail. That is exactly what all the bullshit we have lived through has been about. The banks are all broke and everything that has been done since, the expanded CB balance sheets, has been to save the bankers, and theoretically the people.

Governments have printed and bought worthless debt. You think they will suddenly change course and let the SHTF? Absolutely not! If they do it will be easy to pin the blame on Government and gov nevers takes blame it can deflect towards other parties. That is simply the nature of gov.

We will get a wave of deflation but gov has a printing press. They will react to save their own skin and power by printing, then printing more, then printing to oblivion, because they can and because that is all they have.

Thu, 05/23/2013 - 23:34 | 3594756 Bastiat
Bastiat's picture

Hyperinflation does not vaporize wealth stored in gold.

Thu, 05/23/2013 - 23:34 | 3594757 Bastiat
Bastiat's picture

Hyperinflation does not vaporize wealth stored in gold.

Thu, 05/23/2013 - 23:44 | 3594776 Jim in MN
Jim in MN's picture

Hyperinflation does not vaporize wealth stored in gold.

Fri, 05/24/2013 - 00:35 | 3594886 Overfed
Overfed's picture

Or silver, lead and brass, water filtration, land, and non-perishable food. Get ready to ride the storm out.

Fri, 05/24/2013 - 02:28 | 3595083 Simplifiedfrisbee
Simplifiedfrisbee's picture

Hyperdeflation? It will never happen. Please spare myself and more than half of all zerohedge readers the thought that our current bubbles would burst and as a result, price discovery would blossom. That would be the best case scenario for all humanity. Yeah, banks going bankrupt, the fed losing power, housing becoming affordable, etc... Everything subsidized would go up in price but those who prepare are ready for it. Deflation is nothing to fear. Either way let it be.

Fri, 05/24/2013 - 06:30 | 3595219 Moe Howard
Moe Howard's picture

Hyperinflation does not vaporize wealth stored in gold.

Fri, 05/24/2013 - 07:05 | 3595249 andrewp111
andrewp111's picture

Hyperdeflation (all banks shut down) will make your gold worthless unless it is US legal tender. Then your one ounce coin is worth $50 - equal to one Grant note. But hyperinflation will make the Grant note worth much less than your eagle.

Fri, 05/24/2013 - 10:56 | 3595866 Not My Real Name
Not My Real Name's picture

Hyperdeflation (all banks shut down) will make your gold worthless unless it is US legal tender.

Sure it will.  /sarc



Worthless gold. Is that like "jumbo shrimp"? 

Fri, 05/24/2013 - 23:10 | 3597782 MrSteve
MrSteve's picture

Incorrect statement here. Deflation boosts a currency's buying power which is helpful to capital holders. it hurts debtors because they must repay debts in a more valuable currency, the flip side of what everybody knows, that inflation favors debtors. You need to keep the basics straight, there are a lot of ignorant people voting here.....

Thu, 05/23/2013 - 22:48 | 3594612 Dr. Engali
Dr. Engali's picture

It doesn't harm them if they channeled all their assets into tangible things in preparation for the next system.

Thu, 05/23/2013 - 23:00 | 3594652 Savyindallas
Savyindallas's picture

They will allow hyperinflation once they own all the assets through a deflationery depression  -they'll buy them all up on highly leveraged credit -then inflate away the debt.

Thu, 05/23/2013 - 23:14 | 3594693 NidStyles
NidStyles's picture

All depressions have been due to inflation. Depressions occur because workers are priced out of the market.

Fri, 05/24/2013 - 23:03 | 3597770 MrSteve
MrSteve's picture

fact: every inflation has ended in a sudden deflation, an insight from numismatic history.

Thu, 05/23/2013 - 23:55 | 3594797 AGuy
AGuy's picture

" Hyperinflation harms the 1%. While hyperdeflation (great recession) harms the 99%."

Thats absolutely incorrect! Inflation and hyperinflation does no impact the top %1 as they do not hold cash! The %1 own businesses and infrastructure that retains value. Its the bottom 99% that lose from inflation as they must live hand to mouth since the costs for the basic necessities consume their entire daily wage. The 99% will not be able to borrow nor will they be able to save. hyper-inflation turns the entire working class in neo-serfs, forced to work just to eat.

Deflation isn't the disease, its the cure, as bad business are forced to restructure, wages decline to make it cheaper to hire more workers, and the cost for goods become affordable. Deflation does hurt those in debt, but the 99% can still declare bankruptcy (except perhaps those with student loans). Deflation is bad for the US gov't since it owes too much and would be forced to restructure. Of course deflation for a heavy indebted gov't means default, which results in hyper-inflation as the currency of a defaulted nation become worthless overnight.

There will be no significant deflation in the US since the US gov't can print currency without any laws or internal ramifications. If the gov't doesn't print and permits a default than it light-out in Washington, and all those cronies loose their jobs and power. Its inconceivable that they will simply give up and permit any meaniful restructuring until the dollar is dead. Either they will drive the dollar into the ground or they will start WW3, but no deflation. Name one crony politican pushing for deflation!

"The 1% control nearly all channels of power & influence. They will not allow hyperinflation."

No! its deflation that they want to avoid at all costs. Most companies have borrowed heavily. Inflation errode debts and increases corp. profits. deflation would result in many failed businesses and make existing debts a severe drag. its the 1% that are driving the Central banks to print and print!



Fri, 05/24/2013 - 00:43 | 3594901 All Risk No Reward
All Risk No Reward's picture

One word to highlight the fault in your logic.

WHO owns trrillions in debt holdings, along with all those tangible goods?

WHO owns trillions in cash rolled up in their front corporations, along with those tangible goods?

WHO will lose BIG on those 30 year, 3.5% mortgages that being doled out right now?

Your idea that burning, literally burning, the value of multiple trillions of debt holdings and cash holdings won't hurt the wealthiest people on the planet is probably related to your serf mindset.

The people at the top WANT IT ALL, not what they have now.

They want your indebted chit...  and they will bust society to take via their debt holdings and buy up what is left for pennies on the dollar.

How will you know they are don't buying stuff up and will hyperinflate to "balance their books?"

Nobody you know will own a d*mned thing.

If they own something now, the oligarchs want it.

“When a government is dependent upon bankers for money, they and not the leaders of the government control the situation, since the hand that gives is above the hand that takes. Money has no motherland; financiers are without patriotism and without decency; their sole object is gain.”
? Napoleon Bonaparte

How to be a Crook

Renaissance 2.0 - Financial Empire - Full Length - Damon Vrabel


PS - The government doesn't print money.  The government borrows money from a private international banking cartel.  If you don't understand that point, let alone its myriad of ramifications, you will not reach sound conclusions regarding the effects of the system.

Fri, 05/24/2013 - 06:23 | 3595211 espirit
espirit's picture

+1 AGuy

Our third world manufacturing base exemplifies your theorem.  Currently China has crushed our small business in the U.S. and those neccessary things deflated are manipulated by .gov.

My vote is for hyperinflation.  While basic neccessities for the plebes may be in short supply during this period, a Soviet model is worthy of study.  It is unfortunate though that the U.S. is diminishing it's effort to "make things", but perhaps those cheap trinkets will be the things we can do without.

Food, fuel, and transportation will be .gov subsidized under the "new" model - and of course the MIC war machine.  The rest?

  You're on your own.

Fri, 05/24/2013 - 06:59 | 3595242 andrewp111
andrewp111's picture

Congress can always issue trillion dollar coins. They can always inflate away hyperdeflation. But the sequence of hyperdeflation followed by hyperinflation can wipe almost everyone out.

Fri, 05/24/2013 - 07:13 | 3595262 Marco
Marco's picture

Do you really think they want the whole nation to pay off their mortgage with one wellfare check? TPTB are top creditors ... they want the collateral, not paper.

Thu, 05/23/2013 - 22:45 | 3594605 seek
seek's picture

I believe nearly all hyperinflationary episodes are preceded by deflation. First asset prices collapse and the velocity declines sharply (and this is a feedback loop), and then the real devaluing starts and velocity skyrockets.

The charts unfortunately show we're following the historical pattern, which really is both in the sequence of deflation-hyperinflation.

Thu, 05/23/2013 - 22:47 | 3594608 economics9698
economics9698's picture

Crack up boom.  That point when people realize their money has no value.

Fri, 05/24/2013 - 03:22 | 3595121 Herd Redirectio...
Herd Redirection Committee's picture

Inflation in cash goods

Deflation in debt-based goods (housing,cars)

Assuming the debt-based goods aren't subsidized and bought up by the gov't, of course.  In which case its inflation all round.

I remember trying to explain to some people years back, the transmission mechanism for inflation, even when people are not making much money, or trying to save more, pay off more debts.  The answer, in large part, is the Federal Government.  The remainder of the answer is, foreign holders of USD, due to its (current) reserve currency status. 

Why will the Federales be the transmission mechanism?  Because the State has its finger(s) in all pies.  They buy food (food stamps).  They buy education (providing student loans).  Housing?  Check.  Auto industry? Check.  Military Industrial Complex?  Check. 


Fri, 05/24/2013 - 07:29 | 3595288 espirit
espirit's picture

+1 Herd

You're on the right track.  Focus on the macro.

Thu, 05/23/2013 - 22:59 | 3594651 jon dough
jon dough's picture


100% agree.

Thu, 05/23/2013 - 23:16 | 3594699 NidStyles
NidStyles's picture

What people think of as deflation is merely the period before tangible assets are being chased by an already inflationary currency. This causes extensive velocity but there is no real such thing as deflation because that currency does not decrease in supply at any point in time.



Really wish some of you would at least open a book on economics.

Fri, 05/24/2013 - 02:08 | 3595064 Element
Element's picture

NS, think I remember you from CW comments section a couple of years ago, anyway, just keep pointing-out the basics, it does help.

Fri, 05/24/2013 - 02:08 | 3595067 Jafo
Jafo's picture

Your thinking is way too narrow.  We are not living in a cash based economy but in an economy based upon expanding debt.  Credit becomes fungible debt if the credit rating is high enough and a bank will accept it in lieu of cash.  Compare the value of M3 with M0.  Granted that the whole difference is not made up of debt/credit but a lot of it is.  While the cash may not decrease in supply at any point in time the availability of credit (and the fungibility of debt instruments) can evaporate overnight.

If no banks will accept paper obligations in lieu of actual cash then the available money supply will necessarily decrease to the amount of available cash.  That is when you get deflation.  This condition lasts until the central bank steps in and prints the money to make up the shortfall ...

Fri, 05/24/2013 - 03:23 | 3595118 NidStyles
NidStyles's picture

The economy is not just the means of transaction between established firms. It's every single exchange done by humans.


This right here on ZH with you and me exchanging ideas is part of the economy. I am spending my time to give utility to others with information. All exchanges done by all humans fall under the guise of economics.


The economy is not the government's declared means of taxation. It's something no one can control or influence for significant amount of time without creating instability.


So no sir, my thinking is not too narrow. In fact it's the opposite in this instance.



Additionally, since that credit really doesn't exist in the first place, and if it was not already exchanged for a good which immediately makes it a real amount of currency, it's not real anyways. So it's not a shrinking of the money supply when it evaporates without being exchanged for a physical good... Only exchanges in the physical realm matter, and that is the largest issue that is present here and now. Deflation is not a possibility, because the currency that already exists will not go away.

Fri, 05/24/2013 - 04:36 | 3595161 tradewithdave
tradewithdave's picture

Really glad you haven't read any books on triple entry momentum accounting and how it resolves Irving Fisher's Money Illusion.

Fri, 05/24/2013 - 22:31 | 3597701 NidStyles
NidStyles's picture

Really glad Irving Fisher turned out to be a crank.

Fri, 05/24/2013 - 09:11 | 3595525 Urban Redneck
Urban Redneck's picture

Perhaps you should read some better economics books, the size of the money supply and the size of the supply of money available as a medium of exchange for goods in and services in the marketplace are distinct, and the latter is almost a discrete set within the former.  

Deflation is a reduction the general price level of goods and services, not the volume of the money supply.


Fri, 05/24/2013 - 22:32 | 3597706 NidStyles
NidStyles's picture

No when you are seeing the decrease of prices it's an INDICATOR of deflation. That measn deflation is something else.


I read the same books you did, or at least if you made it to the Post-Grad level I did.

Sat, 05/25/2013 - 07:42 | 3598101 Urban Redneck
Urban Redneck's picture

Well, you didn't qualify exactly what type of deflation you were arguing couldn't happen, which leaves us with debating the merits of a Dismal definition.  However, the drop in the velocity of money that that you referenced when arguing that deflation doesn't really exist can lead to a deflation.  Unfortunately, most of the academic debate on deflation seems rather dated (or I'm just getting older and more out of touch since the State-subsidized academia wants me to pay twice for its mostly-overrated mental drivel).  "Hoarding" of money sounds quaint today, but the phenomenon, and its mathematical impact impact to the equations remains the same (hence the almost discrete set)- meanwhile the financial sector has grown at a rate far exceeding the growth rate of the broader economy, and its (potential) scale now dwarfs the other sectors of the economy m0/m2/GDP/Gross Notional Derivative Exposure  1.1t/10.5t/16t/223t, it would only take a small disturbance in the farce, to create hoarding on a scale previously unimaginable to the neoclassicists, monetarists, krugmans or austrians. 

Fri, 05/24/2013 - 10:42 | 3595830 AE911Truth
AE911Truth's picture

NidStyles said: "there is no real such thing as deflation because that currency does not decrease in supply"

Yes, however the velocity of that currency does decrease, and this causes economic activity to decrease.

To make matter worse, the currency circulates within eddies (banks, fed, megacorps) which benefit the top 1%, while the bottom 99% of the population suffer from lack of funds, loans, jobs, while the prices of the things they need to survice, increase.


Fri, 05/24/2013 - 22:33 | 3597709 NidStyles
NidStyles's picture

Which means that it's just no velocity, not deflation...

Fri, 05/24/2013 - 00:03 | 3594817 Professorlocknload
Professorlocknload's picture

 I don't think deflation will happen first. It's garlic to vampires. The deflation scare already took place. Hank and company turned the psychology with TARP/Moral Hazard.

On the contrary, we are well beyond the choice between default and destruction of the currency, and into the preliminaries of the Crackup Boom. The means are there, just need to light a fire under V, and it's official.


Fri, 05/24/2013 - 06:55 | 3595236 andrewp111
andrewp111's picture

Mass bank failures are the key to deflation. If this is allowed to happen in any major country, there will be deflation.

Fri, 05/24/2013 - 09:16 | 3595549 Urban Redneck
Urban Redneck's picture

I don't agree with your premise, the vampire always wants MOAR-MOAR-MOAR blood from its victims, and deflation is a useful tool to that end.

Take a look at the "deflation" in PM money, they are stringing up the serfs and shaking the loose coins and silverware from their pockets, while making the PM producers easier takeover targets, in the paper money world the same is achieved by bankrupting the serfs through their paper debts and decreasing the prices of equity~ blood in the streets.  

Thu, 05/23/2013 - 22:53 | 3594629 fockewulf190
fockewulf190's picture

On a long enough timeline, the survival rate for fiat currencies drops to zero.

Thu, 05/23/2013 - 23:20 | 3594712 Scro
Scro's picture


You get the idea

Thu, 05/23/2013 - 23:59 | 3594801 Right-on Left-off
Right-on Left-off's picture

"Kyle Bass tells us that the US will 'kill the dollar'. That only happens through Hyperinflation. Deflation would lock the economy up and Paper money would become scarce."

Yes Kyle is right and yes, money will be scarce in the sense of more unemployed who are now less able to pay off their debts ... Voila! Deflation to those holding debt, the banks and the Fed.

Thu, 05/23/2013 - 23:57 | 3594804 Jim in MN
Jim in MN's picture

I vote for GRRRRRflation.

Fri, 05/24/2013 - 03:47 | 3595134 cnmcdee
cnmcdee's picture

I think the only way they are going to 'kill the dollar' as a reserve currency is to cause a world wide coordinated shutdown of banking (giant false flag / middle east in nuclear flames.) However if they even end QE it will cause interest rates to shoot to 4%, mass defaults, and 1500 point DOW plunges that happen just as quickly as it happened in Japan.


Get ready people the fun bus is coming to town!

Fri, 05/24/2013 - 06:53 | 3595233 andrewp111
andrewp111's picture

One way to "kill the dollar" is for Obama to take advantage of a semi-permanent global bank holiday to transfer sovereignty to the UN, and initiate a world currency that replaces all national currencies. A global all-electronic currency that has no physical representation at all. It would allow the Socialists (Obama is one) to fulfill their wettest dream of true sovereign world government, and everyone under the complete control of a central authority.

Fri, 05/24/2013 - 07:42 | 3595304 tradewithdave
tradewithdave's picture

Such a global currency network could never be built out... costs too much...takes too long... Wait a minute, I almost forgot - Bitcoin. Yeah, but Bitcoin access could never be regulated. Oops wrong again. On second thought I see your point. But Bitcoin is fringe and will never get the big time backing from billionaire investors from "The Valley."

Drats. There's a final hope. You'd have to control the Internet to control Bitcoin and to do that you'll need its inventor, Al Gore, to run things. Gore's the lynchpin, or maybe Kim Dotcom with his two-factor authentication patent. Wish I had seen this Bitcoin thing coming two years ago...then I could have written 75 articles ago since May of 2011 about Bitcoin.

Even with an Al-Kim ticket in 2016, you'd still have to crack PGP and they'll never be a computer network powerful enough for that even when they're done mining gone it. Can I have a do-over?

Fri, 05/24/2013 - 09:23 | 3595569 Urban Redneck
Urban Redneck's picture

Let's see IMF, SDR, SWIFT, BIS members... what's left to build (other than a network of EBT terminals in the pre-emerging markets)?

After doing the coding and testing the for the reintroduction of the DM, they even have the updated post Y2K IT handbook ready... 

Fri, 05/24/2013 - 08:38 | 3595420 Silveramada
Silveramada's picture

deflation will trigger money printing orgy 2.0 and when the bubble burst money will have to find refuge in something real this time: PM's

Thu, 05/23/2013 - 22:35 | 3594558 LetThemEatRand
LetThemEatRand's picture

I think I read this same article four years ago.  Not that it isn't going to happen, but....  When.

Thu, 05/23/2013 - 22:38 | 3594575 Schlomo Bergstein
Schlomo Bergstein's picture

July 18th 2013, 1:15PM EST

Thu, 05/23/2013 - 22:44 | 3594595 LetThemEatRand
LetThemEatRand's picture

Okay, I get it, no one knows the date.   But my wife's grandfather when she was a kid talked about days when you would need a wheelbarrow full of money to buy bread.  He was right as far as this author is concerned, but he died a long time before it mattered to him.  

Thu, 05/23/2013 - 22:57 | 3594642 Schlomo Bergstein
Schlomo Bergstein's picture

I know it's frustrating to know this collapse is coming but not being able to predict when but I'd rather be a year early than a day late when it comes to preparing for something like this.

Thu, 05/23/2013 - 23:46 | 3594778 FEDbuster
FEDbuster's picture

"Preparing" is the key word.  The longer they can keep the matrix up a running, the more time you have to prepare.  Some days there seems to be so little time and so much to do.  The beans, bullets and bullion investment strategy still makes sense to me, so I will continue to "horde" the items needed to help weather the coming shit storm.

Thu, 05/23/2013 - 23:59 | 3594810 Jim in MN
Jim in MN's picture



Hoard v. Horde

Wonder who wins?   I still hope we don't find out.

Take the motherfucker back or reap the whirlwind.  Those are the only paths it seems.

Fri, 05/24/2013 - 00:06 | 3594822 FEDbuster
FEDbuster's picture

Opps, Freudian fat finger on the keyboard?  Or the bottle of wine with dinner tonight?  Their I go again....

Fri, 05/24/2013 - 01:52 | 3595047 Mongoose
Mongoose's picture

Damn! I had it down for the 19th @ 11:20

OK, back to killin' snakes,

Thu, 05/23/2013 - 22:55 | 3594635 grunk
grunk's picture

August 29, 1997.

Fri, 05/24/2013 - 00:07 | 3594823 Professorlocknload
Professorlocknload's picture


If we knew that it would spoil the surprise ;)

Thu, 05/23/2013 - 22:36 | 3594565 SGS
SGS's picture

2 words : TONER BEN.  Baby.  Fuck yeah.

Thu, 05/23/2013 - 22:46 | 3594573 lasvegaspersona
lasvegaspersona's picture

There is another option.

If the gold market collapses then the dollar could find itself suddenly worth a lot less in terms of gold.

In a heartbeat we could see a revaluation of gold (upward..a lot..), a collapse of the dollar and a whole new world.

We would need a new USA currency...

There might be no time for the usual hyperinflation to work it's way through the system. In a single day we could see it all change.

There are already huge cracks in the gold market...physical is drying up and the natural tendenct of a paper gold market is driving the 'paper' price lower. All it will take now is for a large buyer to announce he cannot get physical...goodbye GLD, COMEX, LBMA and other paper derivatives...hello physical only market...

Thu, 05/23/2013 - 22:50 | 3594619 THX 1178
THX 1178's picture

That would DEBTonate the COMEX and LBMA AND their custodians. That is a chain reaction of epic proportions. Goodbye world financial system.

Thu, 05/23/2013 - 23:00 | 3594641 lasvegaspersona
lasvegaspersona's picture


and hello new monetary system

It is worth your time to try to figure out what the new one will look like. I am betting it will look a lot like the Euro. In other words gold will be a wealth asset used to support currencies but not monetized. It's value will be market based, not set by the banks or governments. A wealth asset for all, large and small.

Thu, 05/23/2013 - 23:31 | 3594747 THX 1178
THX 1178's picture

What about silver? Govts really dont own that.

Fri, 05/24/2013 - 01:02 | 3594964 lasvegaspersona
lasvegaspersona's picture



neither do I

Fri, 05/24/2013 - 03:51 | 3595135 mkkby
mkkby's picture

Never happen.  The paper gold exchanges are just for paper speculators.  Everyone of size who plays knows it's leveraged beyond the moon.  So nobody who matters is trying to buy physical there.

The large physical buyers are doing so behind closed doors, at prices that we will never know.  The paper exchanges will use what ever leverage they need to keep going -- 1 atom of gold per contract eventually.

Thu, 05/23/2013 - 22:42 | 3594583 RockyRacoon
RockyRacoon's picture

Oh no, here we go with the usual debates in the commentary about in/de/bi -flation.


Gold will suffice in all circumstances -- while the fiat-bugs battle it out.  Great theater.

Fri, 05/24/2013 - 00:18 | 3594839 Professorlocknload
Professorlocknload's picture

Well, what's gonna still be around when the whole thing reverts back to nature?


Mon, 05/27/2013 - 23:54 | 3602705 RockyRacoon
RockyRacoon's picture


Thu, 05/23/2013 - 22:42 | 3594590 ejmoosa
ejmoosa's picture

We've been living with real inflation but it's been hidden.

For decades, we have been substituting cane sugar with High Fructose Corn Syrup.

We've gone from grass fed cattle to hormone laced, corn fed beef.

We've gone from real ice cream to frozen dairy desserts.

Eating crap when we used to eat Real Food has hidden the true costs at the market.  But the health care costs have sky rocketed as a result.

We should have tremendous economies of scale in big cities as their populations increased.  Yet things have gotten more and more expensive for the cities.

The IRS can destroy lives, and that is without even firing a shot.

The systems are broken, and it's time to reset.


Thu, 05/23/2013 - 23:09 | 3594675 PeterLemonJello
PeterLemonJello's picture

I completely agree....except on the corn fed beef part. I have bought all, corn fed, corn finished, grass fed, etc...and I know it's not natural....I know it's not good for them....but dammit, corn fed beef just tastes sooooo much better. 2" thick strip, MR, Jeeesssuuusss, now that's happiness.

Thu, 05/23/2013 - 23:38 | 3594764 Hulk
Hulk's picture

You have not had  properly fed grass fed beef. Theres a lot more to it than just eating grass, it has to be a true salad bar. Annual rye, clover, plantain, etc. A properly fed cow is heads and tails above grain fed beef...

Fri, 05/24/2013 - 00:20 | 3594845 Professorlocknload
Professorlocknload's picture

++ on that. Western Range Fed is what's for dinner.

Fri, 05/24/2013 - 03:59 | 3595140 mkkby
mkkby's picture

You are right.  I still remember beef and pork before it was corn fed.  A steak was a solid hunk of dense, lean meat.  Now it is so full of fat I can hardly find any muscle tissue. It's like Soylent Green, where only the old men remember what real food was like.

Buy grass fed (and finished).  It costs double, but you aren't trimming 1/2 off as thow away fat.


Thu, 05/23/2013 - 23:34 | 3594758 Hulk
Hulk's picture

I had raw milk, from a grass fed cow today for the first time. It was silky and was like drinking ice cream.

Loaded with CLA, night and day from the shit we get in the store...

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