A Tale Of Two Extremes: Global Inflation In One Chart

Tyler Durden's picture


While Europe, and the bulk of the Developed World is struggling to dig out of its unprecedented credit crunch (in which central banks are the only source of credit money which instead of entering the economy is stuck in the capital markets via the reserve pathway) and resulting deflation, the rest of the Emerging Market world is doing just fine. If by fine one means inflation at what Goldman calls, bordering on "extreme levels." This is shown in the chart below which breaks down the Y/Y change in broad prices across the main DM and EM countries, and which shows that when talking about inflation there are two worlds: the Emerging, where inflation is scorching, and Developing, where inflation is in a state of deep freeze.

What is notable here is that despite hopes for a convergence between the inflationary trends in the Developed (downside extremes) and Emerging (upside extremes) world for the past year, what has happened instead is an acceleration of the process especially in recent weeks as EMs have been forced to devalue their currencies at an ever faster pace in order to offset the impact of the taper, leading to surging inflation as Turkey, Argentina, and Venezuela among many others, have found out the hard way in just the past month.

And as inflation in EM nations continues to roil ever higher not only does the implicit exporting of deflation to the DM accelerate, but it means that their societies approach ever closert to the tipping point when the citizens decide they have had just about enough with their government and/or their currency and decide to change one and/or the other. Hopefully, in a peaceful matter.

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Thu, 02/13/2014 - 18:06 | 4434017 kill switch
kill switch's picture

U.S Most effective export!!!

Thu, 02/13/2014 - 18:15 | 4434052 superflex
superflex's picture

American exceptionalism will bankrupt you.

Thu, 02/13/2014 - 18:37 | 4434067 SafelyGraze
SafelyGraze's picture

OT -

when you push your vehicles onto dealers, that's channel stuffing

but when you push your houses onto fema/dhs, that's preparedness


let the New Housing Starts and the New Houses Sold abound!


Thu, 02/13/2014 - 19:22 | 4434277 zaphod
zaphod's picture

It's been 3 generations of the FED exporting inflation. 

When the dollar breaks, all that inflation is going to come back to the US very very fast. Most will have zero idea how to live with their new reduced purchasing power. 

Thu, 02/13/2014 - 20:20 | 4434497 philipat
philipat's picture

Partly because inflation figures are calculated more honestly in EM's (Argentina being a notable exception). That is because in most EM's, food and energy are all that really matter.

Fri, 02/14/2014 - 07:46 | 4435875 wintermute
wintermute's picture

One of the EM countries will soon experience hyperinflation. It will be interesting to see if the public latch onto Bitcoin, because for the first time in the collapse of a fiat system a better alternative exists.


Thu, 02/13/2014 - 18:12 | 4434041 machineh
machineh's picture

Regretably LatAm's twin duncecaps, Argentina and Venezuela, had to be excluded since their bars are about 8 and 12 inches beyond the top of the chart, respectively.

Thu, 02/13/2014 - 18:32 | 4434107 kaiserhoff
kaiserhoff's picture

True, but at least their student loans are toast;)

Thu, 02/13/2014 - 18:15 | 4434044 0b1knob
0b1knob's picture

Current US inflation (real rate) is about 9%.



Thu, 02/13/2014 - 18:34 | 4434112 TORNasunder
TORNasunder's picture

Exactly, and I would assume that the European nations real inflation rate is significantly higher as well.

We can assume that Goldman knows the 'real' inflation rates and therefore their 'extreme levels' is an accurate statement, even if the chart is a bunch of bullshit.

Thu, 02/13/2014 - 18:55 | 4434194 nickels
nickels's picture

Make your own deflation. Check out MOHU, OOMA, HOLA, HULU. Hint: these are not ticker symbols. Personal knowledge, they work.

Thu, 02/13/2014 - 18:15 | 4434048 coastalwn
coastalwn's picture

why do i smell one world governess coming?

Thu, 02/13/2014 - 18:17 | 4434055 Sudden Debt
Sudden Debt's picture

no chance in hell that will work.

Thu, 02/13/2014 - 18:27 | 4434091 Smegley Wanxalot
Smegley Wanxalot's picture

And .... you think that fact alone will stop it?

Thu, 02/13/2014 - 18:45 | 4434145 machineh
machineh's picture

'one world governess' -- Hillary 2016!


Thu, 02/13/2014 - 18:24 | 4434075 giggler321
giggler321's picture

It's already here and called American foreign policy

Thu, 02/13/2014 - 18:20 | 4434065 RaceToTheBottom
RaceToTheBottom's picture

Kinda shoots the goal of all Federal Banks Racing To The Bottom at the same rate all to Hell, doesn't it?

Thu, 02/13/2014 - 18:23 | 4434068 buzzsaw99
buzzsaw99's picture

i don't have to outrun the bear (inflation) i just have to outrun you. demand destruction bitchez.

Thu, 02/13/2014 - 18:28 | 4434086 Rising Sun
Rising Sun's picture

check back in 12 months for the DEFLATION update

Thu, 02/13/2014 - 18:32 | 4434093 Wait What
Wait What's picture

while I'd be the last to commend the Vampire Squid for its efforts, Exhibit 1 is a good synopsis of what I've been trying to explain to people for months. half the world's population (the poor half) is getting hammered by inflation while the other half (the not poor half) is benefiting from the hammering. next chart: on the right side of the scale, inflation-adjusted returns from each country's major bourse. i am fairly certain that chart will be inversely correlated with a coefficient nearly 1 without even looking at the data.

Thu, 02/13/2014 - 18:34 | 4434102 AdvancingTime
AdvancingTime's picture

Whether by design or merely as a byproduct of globalization we have weaved a web of financial transactions that circle the globe. Over the last several years as money was printed by the central Banks it was not contained in the countries where in was printed. This money flowed across borders influencing and distorting markets and prices across the world.

Some people have been calling for a "world currency" for years. the saying "one should never let a good crisis go to waste" means a meltdown with high levels of fear would present a perfect opportunity and catalyst to advance this agenda down the field. Remember many people with agendas have a lot to gain when a major shift in the currency markets takes place. More on this subject below,


Thu, 02/13/2014 - 18:48 | 4434172 BandGap
BandGap's picture

And why wouldn't this be something along the lines of BitCoin?

Thu, 02/13/2014 - 19:24 | 4434281 Occident Mortal
Occident Mortal's picture

Because Bitcoin is broken and nobody knows/trusts where it came from.

Remember that big horse that turned up outside Troy. Did anyone ask where it came from?

Thu, 02/13/2014 - 19:27 | 4434291 NemoDeNovo
NemoDeNovo's picture

Check this out......



So bit coin can be hacked, thought it was Bullet Proof............

Pagin fonestar

Thu, 02/13/2014 - 18:34 | 4434113 RaceToTheBottom
Thu, 02/13/2014 - 18:36 | 4434119 X_mloclaM
X_mloclaM's picture

Da, Japan's most coveted

Thu, 02/13/2014 - 19:26 | 4434289 NemoDeNovo
NemoDeNovo's picture

I know this is OT, but is even Bit[shit]coin safe?????? 




So bit coin can be hacked, thought it was Bullet Proof............


Pagin fonestar

Fri, 02/14/2014 - 07:47 | 4435879 wintermute
wintermute's picture

FFS, is the dollar unsafe because somewhere someone robbed a bank?

Thu, 02/13/2014 - 19:42 | 4434343 Duc888
Duc888's picture



There is no inflation, Ben told me so.

Thu, 02/13/2014 - 19:48 | 4434345 earleflorida
earleflorida's picture

ya know, when you've got the home team advantage of creating and simultaneously buying $85bn/ month at near zero % rates and letting the TBTF do the FX thingy... you'll never lose the over/under or the point spread! emphasis on point spread!

what liquidity trap(?)? what liquidity trap there was has gone with the, winds-of-change 'TBTF Knighthood via 'Dodd-Frank Act'!  indeed, when your hegemony is 70% of the world's cash-n-carry on hand... it's nice to be a EM and/or *DM (*baggard thy neighbor) Kingmaker!

remember the spread... be it points or over/under means nothing except to the 'VIG'!!!

lastly, inflation/ deflation... recession/ depression mean shit to the money changers

so go with the flow,...     http://en.wikipedia.org/wiki/Foreign_exchange_market#Market_size_and_Liquidity       http://en.wikipedia.org/wiki/Foreign_exchange_market#Trading_characteristics

$4.5tn/ daily FX and USA ~ 87%


Ps. as tyler says so often,... on a long enough timeline we'll all be dead-- or something like that

Thu, 02/13/2014 - 20:36 | 4434544 theliberalliberal
theliberalliberal's picture

australia leading the DM pack


Aussie Aussie Aussie!!!!!!!

Thu, 02/13/2014 - 23:21 | 4435171 benqbiggis
benqbiggis's picture

Real inflation in Brazil is something around 15%-20% a year. Government manipulates numbers.

Thu, 02/13/2014 - 23:47 | 4435186 novictim
novictim's picture

Wealth inequality is increasing to such a extent that it is crashing the consumption side of the Production-Consumption equilibrium.

As a result we have a vicious cycle whereby lack of consumption leads to higher unemployment and further idling of productive/factory potentials.

And now production capacity is so unneeded that it is no longer pursued except where innovative magic can still happen.  Production as a whole awaits consumption to catch up.


The only means to increase consumption is to take money from the "winners"/capitalists/investors and funnel it back to the "loser"/worker-consumers/wage-slaves.


There are three peaceful means to do this: INFLATION--TAXATION--CONFISCATION

And there is one bloody tool: REVOLUTION

Which will you choose?  There is no going forward without making a choice.

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