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Guest Post: A Tale of Two Charts: Are We 2007 America Or 2006 Zimbabwe?
Submitted by John Rubino of The Dollar Collapse blog,
The US equity markets are back in record territory, at least in nominal terms.
The last two times they spiked this way, the following year was pretty brutal. See the next chart, which tracks the S&P 500 and margin debt, the amount of money investors are borrowing against their shares of stock to buy more stock. The chart seems to show that when investors are optimistic enough to use leverage to invest in already-risky stocks, then the good times have pretty much run their course and something nasty is imminent. If recent history is our guide, it is now time to either take some money off the table or short the hell out of the big indexes – or whatever else you like to do when the market looks overbought.
But this conclusion is only valid if we’re in the same stage of the credit bubble as during those two previous sentiment peaks. In 2000 and 2007, to take just one measure of financial stability, the federal government’s debt was $6 trillion and $8 trillion, respectively, versus $17 trillion today. Plenty of other leverage metrics are also way up, indicating that the US is much further down the path of currency debasement than it was just a few years ago. So the question becomes: at what point does a quantitative difference become qualitative? When does the phase change occur? The next chart shows why this question is more than academic. In the early stages of Zimbabwe’s epic hyperinflation its stock market rose from 2,000 to over 40,000 in one year. Presumably a lot of indicators similar to margin debt were by then pointing to a blow-off top and screaming “sell” to students of history.
Then the market proceeded to run up to 4,000,000. What happened? The country ran its printing press flat-out and inflated away its currency, so the price of pretty much every tangible asset, when measured in Zimbabwean dollars, went parabolic. Since equities represent part ownership of companies, and most non-financial companies own tangible assets, their value went up as well. Not enough to increase in real terms (versus gold, for instance) but enough to make shorting that market a really bad idea.
So are we 2007 America or 2006 Zimbabwe? A lot is riding on the answer.
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When it was all over, you could trade your whole portfolio in for an egg.
Gotta wipe with something...
It looks like one and the same
Looks like elevation profile of K2. Hard climb, steep ascent (look Ma - I'm on top of the world) and descent. Most climbers die on the way down. I guess that is what happens in a correction, most investors die on the way down.
We is 1933 Germany.
Sept. 1938...?
TD...where is the you are here arrow?
We're the united States of America in 2014.
billy joe and his zimbabwe fortune...the mr. panos of zimbab currency..
http://www.youtube.com/watch?v=1ivL3HB3fp8
No.
For Ameriika to go Zimbabwe, we need a mechanism to increase wages with inflation.
The opposite is the case. Ain't happening.
Keep in mind that Zimbabwe had more or less incalculable inflation AND about 85+% unemployment.
With 85%+, perhaps 95% unemployment, did that stop Zimbabwe's inflation?
America's problem is that too many people have faith in the currency, which drives velocity of money to near zero and since velocity of money can be thought of as the same thing as quantity of money regarding inflation we are actually more negative even after all this printing.... WHICH ODDLY ENOUGH IS THE EXACT SAME PRECISE PROBLEM THAT GERMANY FACED IN WEIMAR. THE MORE THEY PRINTED THE ***** LESS **** MONEY THERE WAS!
.... until there was no money at all.....
If Keynes had a grave I'd shit all over it.
Welcome to the death of the dollar. Both the Zimbabwe dollar and the American dollar.
http://www.planbeconomics.com/2013/10/the-death-of-us-dollar-timeline-an...
http://mikewismer.blogspot.ca/2013/10/oct-132013-harare-zimbabwe-in-move...
They are starting to get it
Zimbawe is just a step from Kenya. Why do you guys hate Obozo so much?
typical ignorant americans....
zimbabwe fixed hyperinflation with US Dollar.....that's how bad they were.
economy consists of raw material export to china.
Out of the frying pan.........
http://mikewismer.blogspot.ca/2013/10/oct-132013-harare-zimbabwe-in-move...
They are starting to get it
High tech food adulteration has and will continue to conceal inflation until it morphs into a form of intentional societal culling.
The world is rapidly losing the need for workers, cannon fodder and voters. TPTB need to do something with all those unnecessary mouths.
Soylent Green
http://mikewismer.blogspot.ca/2013/10/102413-washington-d.html
wtf
wtf 2
wtf3
lo siento
Zimbabwe had collapsing productivity and infrastructure as a result of the white flight. There are few similarities.
As I write this, the price of gas is declining. The price of housing is falling. Wages are a sick joke, and health care is about to get redefined in some hideous, but unknown manner.
The deflationary scenario is never popular here, but it's useful to consider the alternative. One of the more surprising factors in recent years is Ben's failure to get systemic inflation as opposed to asset bubbles going in the real economy.
All hyperinflationary episodes are the other side of the coin of hyperdeflation where the currency goes to zero either by going to zero or by going to infinity.
Yeah I know it's fucked up, that's why Keynes was mentally unstable in the end.
That is a really good point. It makes me realize that I don't really know how the hyper-inflation happened in ZIM. Also, the OP article is really good, too. The hazards of shorting the market in a period of inflation, given that the shorts are also denominated in the same inflating currency.
Prices do seem to be going a bit nuts. Everyday this week I've received glossy fliers from real estate companies begging to list my house, showing the astronomical prices in my neighborhood (I live in Brooklyn, NY). And going out just today, buying bubble wrap, buying electrical plugs, eating out for lunch, whatever -- everything seems really expensive. Prices for things are going up. No question about it.
It's feeling a bit crazy.
I guess we have the same chart folks in the Dow because althougb on a much longer time frame the dow indu went from what 50 to 15, 000 in 80 years....same story...different time frame
Not quite the same - 300 times increase on the Dow over 80 years, 2000 times increase in Zimbabwe in 2 years. However, it's the same concept - true enough. That's frightening, and also a sign to keep stacking, buying what's real, and getting 'real' in how you and your family deal with the economy. Trying to time this collapse is going to be tough - the FED's a bit tougher (criminal) adversary than the CB of Zimbabwe...
simultaneous co-located markets
to figure out the value of a dollar, I go to the store and buy an item
if I pay with cash, the cost is 1 dollar
if I present a customerLoyalty card, the cost is 0.9 dollar
if I present an EBT card, the cost is 0.0 dollar
if I pay with a silver eagle, the cost is 22 dollar
or 1 dollar
that is quite a spread
and now I want to determine the value of the dollar with respect to a share of a pool of shares of corporate entities scattered around the globe
good thing there's cnbc to help!
I'm confused. 1933 was when Hitler took power. 1923 was when the hyperinflation ended. 1919 was arguably when it started.
He was saying we are at the start of the American equivalent to the Nazi era.
There are similarities to Weimar Germany, in the sense that the currency is being destroyed, but also to the UK of the pre and post WWII era, when it lost reserve currency status.
How were they able to finance and build one of the largest Militaries in history shortly after their currency was destroyed?
That question is VERBOTEN.
http://www.amazon.com/From-Cooperation-Complicity-Degussa-Third/dp/05210...
MEFO Bills were part of an elaborate system used.
http://en.wikipedia.org/wiki/Mefo_bills
re: "We is 1933 Germany."
No shit! March of 1933 to be exact.
Zimbabwe wasn't the world's only super power. Neither was 1933 Germany. Far from it. We are Rome 10 BC.
When Rome fell, technological progress stopped and took a step back for a rare time in human history. Even during the dark ages, technology progressed but it took 1000 years to achieve the same logistics of Rome. All things die and are reborn even the universe.
Things will take a step back but the American Empire is evil and thus will fall as it is up against the universe. This will be to the benefit of mankind even Americans who will no longer have to send their sons and daughters off to die for thieving banks. Perhaps Americans will even grow to understand the value of their children.
"American Empire is evil and thus will fall as it is up against the universe" tarsubil, do you really think the universe is somehow concerned with humans' concept of good and evil?
"When Rome fell, technological progress stopped and took a step back for a rare time in human history. Even during the dark ages, technology progressed but it took 1000 years to achieve the same logistics of Rome."
Longer. The city of Rome's population was over 1 million in 100AD. This was not equalled again until London hit the 1million population mark.....in the early 19th century.
Based on world dependency on the US for food production alone, the body count would be in the billions worldwide in the event of social/political/economic collapse in the USA. When dominant empires collapse the effects aren't pretty.
"We are Rome 10 BC.
When Rome fell"
...You mean 4 centuries later?
Or perhaps you just meant the Roman Republic... which ended well before Rome reached its height...
"This will be to the benefit of mankind even Americans "
Didn't quite work out that way for the people of the Roman Empire and the northern frontier.
The comparison with Wiemar Germany is asinine. Wasn't a true superpower, far less so than the German Empire (Hohenzollern Dynasty) which lasted like what half a century (if we're being honest, and yes, I know the Hz clan goes back a millennium).
"Americans who will no longer have to send their sons and daughters off to die for thieving banks." Right cause no one else has ever done that.
"Perhaps Americans will even grow to understand the value of their children." In the manner of various previous and contemporary cultures in which children's value is economic and social, determined by their ability to financially support parents (we already have this in the form of perpetual debt secured against claims on future labor/wealth of the unborn) and/or marry partners of sufficient socioeconomic status, or failing that, be sold off to the highest bidder or given away to a monastic order, or just sent off to die for religion and unequal profit? Lol.
Let's all just move to China, which I'm told is the next superpower. I'm sure they're not engaged in any of these American citizenism citizen practices (I hear they value their kids a lot!) and will do so much better, what with this "progress" and "death and rebirth" talk I'm hearing.
Careful what you wish for.
Don't talk about 1000 or 2000 years time, we can't know nothing about. Only read the introduction.
http://books.google.de/books?id=YcjFAV4WZ9MC&printsec=frontcover&hl=de&s...
The question is how much longer can they keep gold capped out of fear it confirms this.....
Until GLD has no more inventory. Interestingly, over the last several days inventory's been dropping even on days when the price of gold was up. 876.52 tons and counting...
http://www.spdrgoldshares.com/
Let's go QEing now
Everybody's learning how
Come on and Zimbabwe with me!
At least over there you could mine a dab of gold for a loaf of bread....that ain't happening in Kansas.
Or, you can get a crisp, uncirculated $10,000,000,000,000.00 note for only $3.95:
http://www.providentmetals.com/zimbabwe-10-trillion-dollar-note-uncirculated.html
"Or, you can get a crisp, uncirculated $10,000,000,000,000.00 note for only $3.95:'
I fear in the not too distant future that the ZMB 100T Note will be worth more than a 100T US FRN!
i promise you will like billy joe and his zimbabwe fortress....
http://www.youtube.com/watch?v=1ivL3HB3fp8
Nothing wrong about your thought. Just remember these notes you speak of are nothing more than pieces of paper. At best they are nothing but 'notes of debt, because this is what they represent. What is it in the human condition that would make such a thing as this have value? Why would we wish to trade in 'debt notes' instead of something with real value? True value, debt notes are not. So just pick one by which print you like best.
I can print the same for about 1 cent.
Why can't we just have other people's stuff?
Oh...we're already doing that, aren't we?
I'm a buyer of wheelbarrows!
If you watch these 4 videos, you will get an answer that USA is on a gradual declining slope. US will not become immaterial but compared to a decade ago, it has lost a lot of its moral and financial weight.
Why is US economy under major debt pressure and how did US get here, according to the ex-in charge of the OBL unit at the CIA: http://www.youtube.com/watch?v=egnsDDJdKuk
Is USA really the greatest country in the world: http://safeshare.tv/w/UAGOcLSuLX
If such videos keep coming from the US public and senators then we already know the answer, don't we? Spying for no reason on EVERYONE makes no sense except indicating paranoia for control prior to a collapse. http://www.youtube.com/watch?v=aGmiw_rrNxk
Russel Brand speaks on behalf of all of us: https://www.youtube.com/watch?v=3YR4CseY9pk
Getting seriously bored of seeing that Russell Brand video circulating the web. The man offers no alternative, only suggests a Zeitgeist-like utopia, with no detail of how this would be implemented, or who would be in charge "of the admin-bots".
Alternatively, you know, you could allow financial institutions to collapse.
I agree with you, but one thing he can do, what many have not done yet: HE IS SPEAKING UP, for which he gets points. Also, more people will listen to him and the word gets spread. If only, people would ask themselves WHY, is when everyone will become aware.
More people who question to the authorities as to WHY so many Americans are dead in unwarranted wars? WHY does US have so much debt (at USD 55k per capita approx) that all countries put together probably don't have? WHY drones are striking in far away lands killing mostly innocents creating more terror? WHY so many people are incarcerated in US jails? WHY Obummer has not yet closed Guantanmo Bay that he promised pre 2008 election? WHY banks get bailed out but a bankrupt individual gets no loan for 7 years? WHY economics with debt is created to control so many? Russell also raised a good point: WHY should anyone vote? So many WHYS and a query for all is: WHO does all of this to so many and gets away with controlling many and what motivates them?
All humans are born equal so WHY some are subjugated to others? Another WHY!
Even Jon Stewart asked: WHY does everyone outside the US hate the USA? http://www.thedailyshow.com/watch/thu-october-24-2013/everybody-hates-u-...
"HE IS SPEAKING UP, for which he gets points"
Every demagogue gets free points?
"If only, people would ask themselves WHY"
... Then they can begint to be actively misled rather than passively ignorant, and thus reach erroneous conclusions which suggest "solutions" that, at best, solve nothing.
"WHY so many Americans are dead in unwarranted wars?"
Not nearly as many as on the opposing side, or on the part of allies, whether you include civilians or not. You can't have an empire without some war, the trick is to get your enemies to fight amongst themselves as much as possible.
" WHY does US have so much debt"
Because the US adopted a debt-based fiat currency (to complement its privately owned central banking system) in 1913. You can't obliterate the competition (in the energy, raw materials, and labor markets, to name the biggest three) if you're paying "full and fair price" in resources, precious metals (including hard coin), jewels, etc. The empire needs theoretically unlimited purchasing power. The greatest weaknesses of would-be empires are of course lack of resources and insufficient ability to pay and maintain large militaries (pawning the crown jewels, etc.). You get the point.
"WHY drones are striking in far away lands killing mostly innocents creating more terror?"
Because it's more palatable, and easier, than having infantry do it by hand, with all the supply lines that would require. Any amount of force is worth expending to maintain empire.
"WHY so many people are incarcerated in US jails?"
To keep the prison and justice systems funded.
"WHY Obummer has not yet closed Guantanmo Bay that he promised pre 2008 election?"
Why would he, or anyone in his position? Why would anyone believe an unenforceable verbal campain promise which runs directly counter to both precedent and national interest?
"WHY banks get bailed out but a bankrupt individual gets no loan for 7 years?"
Systemic risk (risk of cascading defaults and such) and ROI (as partners fused at the hip, enterprise and empire unite in common cause as per enlightened self-interest, i.e. maintaining power).
"WHY economics with debt is created to control so many?"
Answer is within the question. Control.
"WHY should anyone vote"
Game theory. The pie is only so large, and everyone wants or even needs some-size helping. It may be reasonably assumed that most or all other players will use voting to increase their share. Optimal strategy within the rules (e.g. without incurring unilateral losses and penalties): vote yourself more swag.
"WHO does all of this to so many and gets away with controlling many and what motivates them?"
Everyone. Power is not a thing something some people possess and wield against others who don't. It's a network comprised of every living person. Just like money, some have more, some have less. Power is its own end (technically speaking, individual and reproductive success are their own ends, power is how they operate).
"All humans are born equal so WHY some are subjugated to others?"
This concept has never been taken seriously by virtually anyone, much less put in practice. If it is your premise, you're already on the wrong track. Does everyone have equal access to literally unlimited resources and faculties? Of course not, and we never have. The ones with more TOOK IT by force, and then wrote history so as to justify their actions.
"WHY does everyone outside the US hate the USA?"
Everyone outside the empire hates the empire. Everyone with less power hates those with more power. If there are 3 pieces of bread to split between your neighbor and you, and he takes 2, he's outcompeted you and damn right it's not fair... which is totally irrelevant. It matters not one iota who is at the top, not their names, identities, religion, creed, party, ideology, nationality, ethnicity, color, language, or anything else - those are all distractions deployed to divide the populace. All that matters is that there is a top, which means there's a bottom and a middle as well.
Well done reality check.
Damn are you ever dialed in tonight. +1
That's one rotten nest egg..sheesh!!
We are in who gives a fuck territory. That can be the only reason the thieving bastards are not hanging from very high tree branches
I think that's why they stretched this collapse wayyyy out. It wore out everyone paying attention to the point that they just don't care anymore and they have become desensitized to the daily absurdities. It also worked on those not paying attention as things slowly disintegrated around them instead of suddenly, making it all nearly imperceptible.
In history, it was the peasants who ended up hanging from trees (and anything else), after the revolt (pick one, any one) was thoroughly and resoundingly crushed.
I prefer the light poles on Constitution Avenue in DC
Buy the dip then?
Buy it then, buy it now, buy it in the future.
Is the top chart a blueprint for a new roller coaster at Busch Gardens?
Looks like one hell of a ride...
DaddyO
<------2006 Zimbabwe
<------2007 America
When you have Jews and Chimpbama running your country, what do you expect?
Submitted by Zero Hedge on 05/10/2013 14:24 -0400
inShareRacism, to include any religious affiliation, will not be tolerated in ANY FORM on this site, including the disparagment of people in the comments section.
To report any form of discrimination, please right click on the comment number, copy the link to the comment, and send the comment link to abuse [at] zerohedge.com.
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You have been warned.
fuck the ADL..........free francis_sawyer
~~~~~~~~~~~~~~
You have to speak in code around the interweb anymore. The lizards have their talons into just about everything. Silence has been mandated. Speak no truth, focus on green shoots, and get to work you fucking slaves!
Sometimes you're surfing on a particular website and low-behold, guess who owns it? --> http://oi41.tinypic.com/2ds0axl.jpg
thats why VD(vastdom) went after FS and now William Banzai7.............Banzai is getting to close to the truth
check out VD(vastdom ADL) attacking William Banzai7..........
http://www.zerohedge.com/contributed/2013-10-19/jammin-banksys
In the cage with WB7. VD didn't stand a chance, submission is the only way out. Tap bitch.
Went on a fishing trip with a bunch of business associates and friends this summer. One of them, a successful businessman who happened to be Jewish, told me with a straight face that "the Jews were behind 9/11". I smiled and waited for him to crack a smile or breakout laughing. But that never happened.... Weird. I am not 100% sure he was serious and believed that, but I think he did.... Just an anecdotal story - I'm not taking any position on it, just noting that there are different perspectives.
One of my Dad's best friends is one of the most successful personal injury lawyers in the country. He grew up with a lot of Jews and they joke about him being a house goy. Only one of his Jewish friends works in a productive job. The rest are either bankers, lawyers, or pickers. I've been to more Bar Mitzvahs than weddings in my life.
The thing about being a house goy, is that you get to see the inner workings and are privilege to inside conversations.
One of my dad's friends told him there was going to be an attack on 9/11 and to not be anywhere near NYC. Prominent Jews all knew there was going to be an attack, and how they could profit from it.
I've had a Jewish guy tell me that the Suadi's are the property of the Jews. They control them and use them as the sword. Which is why the USA protects Saudi interests. It isn't because of the Saudis, but because of the Jewish bankers, like Goldman who are really behind everything.
Good stuff ADR........
here is an OP_ED from the 'Voice of Russia' website........
"The planners are clearly known but the executors have always been a mystery. A mountain of evidence exists that 9-11 was a joint US/Saudi/Israeli effort but now with the revelations that the Saudis control US created Al-Qaeda, and the long record of “cooperation” between (wants-to-be-king) Prince Bandar and the Bush family, it has become unquestionable that the Saudi role has been much greater than was once believed."
Read more: http://voiceofrussia.com/2013_10_25/The-end-of-the-US-empire-no-hegemony-forced-accountability-5492/
"I've had a Jewish guy tell me that the Suadi's are the property of the Jews. They control them and use them as the sword."
Well, yeah. Just look at Silverstein's insurance policy on the Twin Towers (insured against terrorism two months BEFORE 9/11). Look at the options trading. Look at who didn't show up to work at the WTC that day.
As for the House of Saud, its not well known here in North America, but in the Middle East they are suspected of being of Jewish origins.
Yeah, the way you guys generate BS, I'd have guessed you work for the Fed.
Even if some knew something of 9-11 in advance that doesn't mean they had anything to do with it. It is important to be logical and not conflate the two. We know the Mossad is very good. They are the best at what they do. There is circumstantial evidence they followed the 9-11 hijackers in the US, and may have known something of the plot. It certainly would not have been in Israel's interest to stop such a plot, so they would observe it and avoid interfering. This is true for other national spy services as well. I'm sure the USG would want to hide the fact that other countries knew of 9-11 in advance if that was in fact the case, because disclosing this would be bad for foreign relations.
LOLOLOLOL
Good for the Jews then. If we Gentiles are truly that stupid then we should be controlled.
As for your dad's friend......sounds like a real loser. If your dad believed it.....then he is a loser too.
As for you.....if you believe that shit too.....then your dad should have kept his dick in his trousers and saved the world the trouble of having to put up with another dumb fuck like yourself.
The Jews are .2 % percent of the world's population. The Masters of the Universe portion of that .2% are a tiny fraction of that.
And somehow we Gentiles let that tiny fraction of .2% percent control everything.......is THAT what you and your ilk REALLY fucking believe?
Ok......good on the Jews then.
Fuck Francis Sawyer and fuck you Dick
Translation...
Racism, ta include any religious affiliation, aint gonna be tolerated up in ANY FORM on dis crib, includin tha disparagment of playas up in tha comments section. I aint talkin' bout chicken n' gravy biatch.
To report any form of discrimination, please right click on tha comment number, copy tha link ta tha comment, n' bust tha comment link ta abuse [at] zerohedge.com.
Any user found ta be discriminatin against ANY race, religion, or affiliation, is ghon be banned immediately, n' have they comments removed from tha system.
Yo ass done been warned.
You've been here how long?
Chill out.
Fuck you. It's the rules. Tyler....man up and do your job.
Its the rules as supplied via the jurisdiction which was most amicable in supporting the site as it was forced to leave its parent country under similar legal threats.
The rules were imposed by an outside entity, or at least that is what is to be believed.
At the beginning there were no rules. Bring back tyler's alter egos chumba & cheeky. Now that was entertainment!
duplicate
Mi Naem is Lickspittle...
They aren't the ones running the country. Think more along the lines of Luciferian Oligarchs, who veiw us as useless eaters. Then it make more sense.
Maybe not the country, but certainly the legal system, the banking system, the main stream media and entertainment industries...
When you have stupid, useless Gentiles who believe that .2% of the world's population and one black man are the reason their lives suck then you deserve to be controlled.
Fuck you..loser. Turn your own life around and fucking quit blaming everyone else. Man up.
Drop dead.
I fart in your general direction. LOL !!!!!!
Oy vey! How dare these goyim forget the 6 billion who died in da shoah.
Lighten up Francis!
This is hyperbole.
More like asymptotic, like around a singularity.
Hyperbolas are defined by asymptotes. Same thing.
Look VENEZUELA stock index....and venezuelan inflation lol
Next Argentina CRASH....
LATAM to explode
Isolated countries yes. Resource rich countries not too much
"Isolated countries yes. Resource rich countries not too much"
Venezuela is a resource rich nation and was a major oil exported before chevez screwed it up. The Soviet Union was also a very resource rich empire and it also collapsed.
Misallocation of labor, capital and resources will always lead to collapse sooner or later. We got pretty much all 3 going on at once right now.
IBVC: Year To Date: +360.76% 1-Year: +503.34%
VEF/USD 1-Year: -30.43%
Still a massive gain in USD, or am I missing something?
Use DISCIPLINE for gods sake......TURN OFF THE GREED. It's a tractor beam these days but short term v. long term.
Don't get sucked in folks! I care!
finally a reasonable article about the stock market. it's not going down. qe4eva. will finish in the stratosphere somewhere. we'll be like those poor zimbabweans trading in briefcases of fiat for a sandwich.
Step one is debase the economy with unbacked currency.
Step two is to promise entitlements that will eventually bankrupt the country
Step three is to create fear of terrorists to enable the voluntary surrender of freedoms
Step four it to put an African in charge along with all of his African sycophants to set a glide path to the bottom. Everyone knows it can't be a black man's fault, right?
Get your AMZN now while it's cheap. P/E only 1,300.
AMZN going to 3,000 soon.
From a 2003 ep of Futurama. Ya know when the 1999 dot com bust wasn't "ancient history".
Hermes Conrad: Dwight, the boots only cost me 299 dollars and 99 cents. Here, you spend the penny on whatever you want.
Dwight Conrad: Thanks, dad. I think I'll invest it on five shares of Amazon.com.
Hermes Conrad: A risk taker. That's my boy.
Let's start a rumor: Amazon will start accepting EBT cards...now you will know ahead of time what the parabolic move in the stock is about today.
I would answer by comparing charts of monetary velocity in the U.S. and Zimbabwe. Presumably velocity in Zimbabwe went parabolic up as people learned to spend currency the moment they received it, while our velocity is collapsing. I don't think you can have hyperinflation or a collapsing currency simultaneously with collapsing velocity.
http://research.stlouisfed.org/fred2/graph/?id=M2V
That chart still says massive deflation is coming. If that chart reverses, I might change my mind, but that chart says it is not the currency that is collapsing, but the credit bubble, and as that collapse unwinds, demand for actual currency should be massive. Massive, like you will be buying RE for dimes on the dollar in 2020.
Can you provide an example where in history massive printing has resulted in deflation, im not being sarcastic, I havent found one yet and would be interested. Cheers.
I'm not sure I can explain it, but I think there is fundamental difference between printing scrip like Zimbabwe and distributing it your people, and printing reserves in a debt-based system which then have to be injected through credit markets. The dynamic is very different, so it's not correct to compare the two.
I think the answer is that we are experiencing massive deflation but it is being masked by the printing. Maybe at some point the velocity reverses as society is inundated by new money and begins panicking in response to rising prices. But I think at that point the panicking would lead to rising long-term rates, overwhelming the Fed's ability to repress the curve, and the rising rates and forced austerity would start another deflationary round.
As long as the Fed is the transmission mechanism for printing, if we are truly at peak credit, any way I work it out it eventually ends in deflation. But then I never thought the Fed would go to the extents it already has to avoid deflation, so I think anyone who truly thinks they understand how this is going to play out is kidding themselves.
The answer is very simple, as indicated by the still negative slope of the Phillips curve, meaning credit is collapsing faster than the Fed has been expanding the money supply. Thus the rational hypothesis Yellen must increase the velocity of monetary expansion very soon. Yellen is fighting two head winds: housing and the US congress/administration never ending demand for increasing levels of deficit spending. Bearnanke with his anemic QE response to date has only managed to fund the UST on a day to day basis by absorbing all the new Treasury issued each week. Yellen is going to have to double down to have any measurable effect beyond keeping the lights on in Washington.
Totally agree D. $170B monthly and negative real interest rates for the banks starting in March? How does that play out? Deflation is beaten but at the cost of the $US which drops by at least 10% and the fueling of more bubbles in RE, Stocks, PM's, commodities, etc.......... My guess is that this will happen and will 'work' for a short while but will result in a crash that will make 2007 look tame in comparison.........
We know the Fed will increase QE, and may even double it. It will goose the stock market, but otherwise won't do any good. We already know that QE does not help the real economy, and more won't do any better. The only way to stimulate Main Street is to increase actual Federal spending. Doubling QE will be a sign that the Fed is becoming desperate.
Food for thought:
Would the economy get a real good boost if the Fed simply printed to raise wages? or simply sent checks to the citizens?
QE as is it is now is conspiracy against the poor because its transfer of wealth to the bankers and politicans.
No shit it doesn't improve the economy!
We would go directly to Zimbabwe. Do not pass go, do not collect 1,000,000,000,000 dollars.
People would begin to buy goods, so demand on goods would go up. Prices would rise to meet demand, so that supply could keep up.
As soon as the program stops, then purchasing power would cease to exist, while at the same time suppliers would have to keep their prices up in order to pay for warehousing the extra product they've been carrying (to keep up with prior demand).
So you would end up with high prices and no ability to purchase goods. Pure Zimbabwe.
I knew I would come to see this.
I remembered I wrote about this last week, and about how money velocity + an increase in monetary base is the true cause of inflation. It doesn't matter who spends it, just that when new currency enters the main economy, prices rise.
You are right.
see Ka-Poom theory.
Deflation, folowed by (massive) inflation.
Credit may be on a down-slope, but velocity is not. Witness the move to computer-computer monetary functions. The velocity of individual transactions is increasing (towards the speed of light) while overall exchange is reducing. We are in a precarious balance between inflation and deflation and have been for some time. As the FED actually prints a very small percentage of money, my theory is that the system will freeze up at some point and physical cash will once again be king. After that, as emergency measures are taken to free up the payment systems, inflation will rage and PMs will be king. Physical cash and PMs, that's all.
Actually this is not correct:
The Administration demands massive stimulus, but the House won't bite. The deficit has actually been going down. Divided government will do that to you. Massive stimulus spending is the only channel that can get the Fed created dollars into the hands of the general public in the absence of a lending boom. If the Dems retake the House next fall, you should expect humongous stimulus, and a collapsing dollar, followed by high inflation. If that doesn't happen, expect a deflationary collapse at some point. The wildcard is if the deflationary collapse happens before the Midterm - this could actually push the voters into electing the big stimulators again.
Maybe dems should be called inflators and repubs called deflators.
@ Speaker.. Well said! You appear to understand the Hole in QE.
But their All doing it and levering up. Lots of Holes
Your question would be valid if the fed were actually printing, which it isn't. It is creating credits that are sitting on the banks' balance sheets. This is why money velocity is important. We will not see any horrific inflation unless the banks start lending and "money" gets into the hands of the people. Until that happens we will continue to see some price inflation, but it won't take off. The real threat we face is if the world decides to dump the dollar en mass, but that comes with it's own set of ugly consequences for everybody.
The Fed is financing the USG deficit. Purchasing ~90% Treasury issuance is printing.
If we get a fully Democratic Congress and they start "stimulating", that will put the cash into the hands of people who will spend it.
You have money going into 2 pools that are not really interconnected. Pool 1 is the stock market, Pool 2 is main street. The spigot aka velocity and flow is going primarily into Pool 1, we see inflation there in price aka stock market overall value while Pool 2 is being pumped dry and it will manifest itself as deflation sooner or later. It is all about allocation of capital in this case. When the dam breaks or the foreign tide rolls in you'll see the general trend reverse until equilibrium is achieved. Water finds it's own level holds true in this case.
Deflation in goods that are purchased by the former middle class, on credit. So cars, (mid range) real estate, college tuition etc will see deflation.
But energy, food, goods targeted at the poor, and the top 1% will continue to experience inflation. Thats a basic summary.
A lot depends on how leveraged foreign speculators are with their dollars. We don't have good information in this department. There are too many dark zones.
At some point they shut off the printing and we have deflation like the great depression. The forewarned (a la Silvermanstein) will be in cash and buy when there's blood in the streets. For now though, there is no deflation. Prices of everything are rising. The stock market correlates nearly perfectly wiht fed balance sheet. Stocks go down in deflation.
I won't buy on margin or take on more debt cause I'm not in the club and won'tbe warned when the rug is about to be pulled. No debt, tangible assets, real world skills, friends with same.
What people are not understanding is this:
What we'll probably have is both inflation and deflation at the same time; the value of goods and services droping against PMs, bitcoin, and other non-QE MoE (EUR, CNY?), but with the value of everything going parabolic in terms of USD, JPY, GBP, ect.
I would love to see an explaination that proves how this can't happen!
USD, JPY, GBP........ All printing. .This does not end well.
Massive printing has resulted in massive inflation followed by deflationary depression many times. It is really a question of time order - whether we have deflation, inflation, deflation or inflation, deflation; and at what point do you get a coup or revolution.
Agree, I just don't think that "actual currency" = FRNs.
The hyperinflation will come suddenly when all the dollar holders around the world decide they don't want the toilet paper anymore, and try and buy anything that isn't nailed down with their dollars. Probably by the end of next year or so.
BTW much of the velocity here has been going into the stock market, because the general public uses that as an economic indicator. I don't know if they'll ever let it go down.
It's mildly amusing how so many answers all start out "it's very simple" and then say different things.
"http://research.stlouisfed.org/fred2/graph/?id=M2V That chart still says massive deflation is coming."
Chart only show M2V inside of the US, not external. Most of the dollars in circulation are overseas, used to buy crap from China or import Oil. Sooner or later those dollars will flood back home and the game will be over. The Dollar status as the reserve currency teaters on the edge of the Petro-Dollar. The US is pissing off every major oil exporter and its likely a matter of time before they choose to price oil in anything else but US dollars.
Plus, the Fed also prints what it wants you to see and believe. I would put to much stock into believing this information is correct.
I hope you are right. But hope is not a plan. If the Dems retake the House in 2014, Federal Spending will go parabolic until the public is induced to spend, spend, spend. Obozo wants stimulus, and will get it if he gets full control of the government again.
obama won't last until the next election cycle, his hc website is bringing him down hard. he has no legacy, they cut SNAP bennies today. best guess is the fiscal probity group will take away his welfare army, and the votes he bought with food stamps will turn into boos. start your office pool now, day he resigns
Sheiiish, and I thought Obama and Benny were delusional?!?
sunny
Does it really matter at this point?
Meanwhile the chinese keep stacking gold, buying water rights and building infrastructure in resource rich nations. But the DOW sure is high, god bless 'murika.
And 'merica keeps waring so we can protect our masters in israel.
Good plan guys.
Rosetta Stone --> Mandarin. now.
I'm learning french so I can surrender more effectively.
j'ai tue l'amour ... may work for a while
It's not Israel ... It's Saudi Arabia, UAE, Qatar ... the Petrodollar is King and money and men are use to protect it and those that accept it
Shit sandwich.
Zim zima who got the keys to the Bimmer
Trillion dollar platinum coin will take care of all this; and some wheelbarrows.
Remove $85 billion a month and see what things look like. THis is just a paper mache structure.