This page has been archived and commenting is disabled.
Deflation As A Precursor Of A Weimar-like Inflation
Most people consider deflation the biggest enemy of the gold price, as gold is generally seen as an excellent hedge against inflation. Whilst this is generally correct, it doesn’t mean that a (short) period of deflation is a prelude of a crashing gold price.
As the very low inflation rate (and as there’s even official deflation in Italy and Belgium at this point in time), the European Central Bank is taking additional measures to pump several hundreds of billions of euros into the financial system which should theoretically boost the consumption pattern of the Eurozone citizens. It’s no secret the ECB wants the inflation rate to be ‘close to but not exceeding’ 2%, which is deemed to be the most sustainable number by several economists. At an inflation rate of 2% companies can increase their revenues fast enough, without the consumers being hit too hard.
The ECB has no problem to expand its balance sheet to the level of 2012, when the total balance was approximately 1000 billion euros higher than where it is today. On top of purchases of asset-backed securities, the ECB will directly pump cash in the banking system by making 400B EUR in 4-year loans available for the banks of the Eurozone at a cost of 0.15% per year. This should lead to an increased spending and increase the inflation rate as well, until the inflation rate is out of the danger zone and is hovering around the 2% mark again.
Not everybody in the board of the ECB is happy with this, and the president of the Bundesbank has openly criticized the ECB for causing inflation. In several interviews, president Jens Weidmann has stated that the ECB shouldn’t really intervene to actually create inflation. One would think that the governing council of the ECB would listen to a man whose country has experienced the worst inflation nightmare of all industrialized countries, less than 100 years ago.
If you look back at the official statistics of the horror-inflation during the Weimar-republic, it’s clearly visible that after a first bump of inflation there was actually a period of deflation before the snowball effect started to work. In a working paper, Steven Webb was able to gather all data from the period 1919-1923, and as you can see on the next image, the period of inflation was paused for a few months when there was deflation. Thereafter, the inflation rate picked up again and actually accelerated to a level of 7100% (yes, more than seven thousand percent) in October 1923.
Granted, the velocity of money, which is one of the key drivers to induce inflation, was much higher back then. But this is also the main reason why we think the ECB is pushing too hard to create inflation and will very likely overshoot its target the moment the velocity of money returns to more normal levels.
Allow us to explain this. The inflation rate is mainly determined by two parameters, the amount of money (‘money supply’) and the velocity of the money. There’s absolutely no disagreement that with the recent rounds of Quantitative Easing all over the world, the money supply has increased by a large factor. The only reason why this money-printing tactic hasn’t showed up in our ‘official’ inflation estimates is because the velocity of the money has been decreasing, which has more or less neutralized the danger of the money-printing. Because the velocity is lower, it will take the ‘new’ money longer to get fully in circulation. And this velocity is still decreasing. There are no official numbers from the ECB, but the following chart from the Fed clearly shows a continuously declining velocity of money.
So the ECB is trying to counter this decreasing velocity rate by printing more money. This is theoretically the correct measure to create the inflation, however, this is a short-term measure. If you look at the longer term picture, the average velocity of money supply is much higher than the current velocity. So even if the velocity would return to normal levels, the ECB and its counterparts all over the world will have printed too much money, and even if the money supply would gradually decline again, this won’t be sufficient to counter the effect of a much higher velocity. This is the main reason why we believe the ECB is on its way to overshoot its target as the velocity of the money supply will return to normalized levels sooner rather than later.
One would think the ECB would listen to Jens Weidmann, that it’s dangerous to create inflation as there are more parameters involved in inflation than just the money supply. As it’s very clear that during the Weimar republic there has been a period of deflation before the inflation rate shot up with triple and even quadruple figure inflation rates, we are afraid the ECB is making the same mistake all over again by increasing the money supply even further.
This case study shows that investors in the precious metals sector shouldn’t dump their holdings in a (short) period of deflation, as historically, deflation has been preceding a period of higher-than-normal inflation. As the velocity of money can’t really be influenced by the ECB, its only possibility is to increase the money supply. However, if the velocity returns to the historical average, the ECB and other central banks will have created a ‘perfect storm’ which could lead to the next Weimar-like inflation in Europe. This means that even in a deflationary period, gold and gold-related assets should continue to be a part of any investment portfolio.
As is evidenced on the previous image, the price of gold in Weimar-marken increased faster than the inflation rate, and in just 5 years time, the value of a gold mark expressed in Reichsmarken increased by almost 1,000,000,000%. Yes, that’s 1 billion percent. It’s also clear that the exchange rate decreased during the deflation period in 1920, which might be exactly what we’re experiencing now. Don’t be scared of gold during short periods of deflation. If the ECB really overshoots its inflation target, your gold-related investments will definitely have an increasing value.
** Check out our latest Gold Report!
Sprout Money offers a fresh look at investing. We analyze long lasting cycles, coupled with a collection of strategic investments and concrete tips for different types of assets. The methods and strategies from Sprout Money are transformed into the Gold & Silver Report and the Technology Report.
Follow us on Twitter @SproutMoney
»
- advertisements -
The only way deflation could now result is by rapidly smashing the money supply which means having a lot of credit vanish. I'm not seeing it as a start, but a symptom, of the big strike that will actually happen.
If anythiing the last 30 years have seen whole populations in the west maxed in debt while at the same time money has been created through leverage. If this money had not been created the velocity of money would have been falling decades ago.
In 2008 the issue after all this easing of decades how do you justify massive levels of debt with falliing incomes? You don't. Now it is how can you increase the level of maxed debt without a significant increase in the income level? You don't. Increasing the mimimum wages achieve little as everything retains the same % cost overall and you are still poor in such a position.
After applying austerity economies contract resulting in an even lower level of debt that can be supported but if the debt is brought down equally it is still at the MAXED DEBT LEVEL so little to no change there.
All ready for round 2 of the UK austerity should be intertresting as the 1st round achieved the above and all the 0 increases in welfare spending it to try and halt the debt, the economy contracts as excpected, the prices because of the restriction have to fall else no spending occurs that overall after this ONCE MORE THERE WILL BE LITTLE TO NO CHANGE AND STILL RUNNING AT THE MAXED DEBT LEVEL.
Consumption as a fix is a one time action only after that it fails.
With consumer income levels dropping consistently, it's hard to see how aggregate demand is going to increase velocity. It's also easy to see how the CB's could overprint in an effort to stimulate aggregate demand, with an outcome like Japan's. But with BRICS undermining the USD, one can see a cross-current of eroding confidence in the dollar (inflationary). I feel like someone inside a tornado trying to figure out which way the wind is blowing.
So I stockpiled gold/silver the past 5 years, but am now stockpiling dollars in a savings account to hedge against what may be an initial deflationary cycle (it's interesting to see the data on Weimar shows a year of deflation before the big blowout).
Recently read a book on the democraphic forces at work around the world (Japan is ten years ahead of us demographically). We are going over the demographic cliff now, along with Germany, and the deflation should continue for a few years..... so that's a big downdraft.
I also read that interesting analysis of complexity theory ("Trade Off: Cross Contagion between Banking Collapse and Supply Chain Disruption). With $700T in derivatives outstanding, once can see a complete collapse coming if interest rates/ forex moves significantly).
Really feels like a tornado.... can't really say which way the wind is blowing, but it's blowing pretty fucking hard.
So I stockpiled gold/silver the past 5 years, but am now stockpiling dollars in a savings account to hedge against what may be an initial deflationary cycle ... Really feels like a tornado.... can't really say which way the wind is blowing
For you determining which way the wind is blowing should be pretty easy. Since you're holding dollars "in a savings account" it's blowing DOWN! for you, The word for today is "BAIL-IN"
(Oh... and from the inside of a tornado it's really easy to see which way the wind is blowing... if you're on your feet, I believe it's blowing left to right. After having the first wall pass by, deciding which direction you're facing might be a problem.)
Correct, an the way you tell that the deflatinary period is ended is when prices are very low, but it's really hard to actually take delivery of those low-priced things. Once you pass that point, look the fuck out.
I am in the hard currency camp. My concern with accounts at the banks is confiscation. My belief is that we will not return to QE in the US. Instead of QE/bailout it will be customer deposits/bail ins. Though, look out for laws prohibiting hard coin and currency. That would ensure everything is within reach.
Okay, so I guess this is a stupid question, but can somone explain to me why the velocity of money is going to "return to normal levels"?
I mean seriously, I'm not that knowledgeable, I admit, but I just don't see that happening.
I mean, like, ever.
When users of a currency start to see price increases on a monthly (The keen) weekly (higher than average) daily (general population) basis - they begin to funnel everything they have into hard assets. Cash becomes sort of a hot potato, and it's value - like sand in one's fist. Nobody wants to hold the dollars, just get the goods that will appreciate - or at least hold their value.
This is the point where it becomes obvious to the general population that the government has lost control. As people scramble to dump their currency, and buy hard assets - they bid up the price of those assets, which increases people's desire to dump currency, and buy hard assets.
Manufacturers, and raw materials producers go broke, because their hedging operations fail, and they can't continue to operate using last month's currency value.
I personally do not feel like velocity will increase. Velocity going down is a function of there being a substantial increase in money/currency supply that is not making it's way in to the real economy thus GDP remains weak. So, instead of banks lending the money for houses, cars, capital expenditures and improvements, etc., the currency is either staying in reserve and not being lent out or is going into the financial markets to buy stocks and or bonds (it certainly is not being used to stash commodities either).
Absent massive government programs to, let's see, put 2 Porsches in every garage (because everybody deserves 2 High end luxury vehicles), buy everyone a house, supply HD tvs to every teen, for free (the government buys it for you whether you want it or not), they shove it down your throat, velocity will actually drop further because while more currency may lead to a short term blip the long term impact economically is zero. Now, stocks and bonds may continue to rise, but velocity will not.
The situation in Germany, BTW, IMHO is often mischaracterized as a disaster for Germany. They were fucked no matter what. They were highly indebted to other countries after WW I much the same way the southern tier of Europe is indebted today, though probably worse admittedly. The Germans had 2 choices, live as debt slaves to the rest of Europe forever, or flip them the finger and print their way out. Germany chose the latter, and who can blame them. BTW, the Euro was created, solely I believe, to give Italy, Spain, Greece, etc. no way out. The citizens of those countries should be hanging their leaders for giving up their sovereignty and right to ultimately declare bankrupcy via the printing press.
The Germans had 2 choices, live as debt slaves to the rest of Europe forever, or flip them the finger and print their way out
Sorry. that dog won't hunt. German debt was denominated in GOLD marks - ie, payments had to be in GOLD, not hyper-inflated Marks. A "gold mark" was valued according to a specific amount of gold - ie it could not be inflated.
"But this is also the main reason why we think the ECB is pushing too hard to create inflation and will very likely overshoot its target the moment the velocity of money returns to more normal levels"
This NORMAL you speak of could you explain in todays environment of epically mismanaged capital flows and CB intervention this ever takes place again?
I don't put anything past our "leaders", but absent shoving products and services down everyone's throat at the sole cost of government (because the citizens do not want, need, nor would they be willing to pay for the said products and services) is the only way velocity is going to return to normal levels.
A couple of comments:
1. Deflation in today's environment, will likely occur through debt destruction (including sovereign defaults just like Argentina, but in more 'developed' countries). This will mess up the credit markets quite badly
2. It is hard to see where the inflation will come from with a crippled global economy and a global credit market in disarray. Inflation will need money creation - in the form of debt in the modern economy.
3. Hyperinflation is possible since this is a psychological phenomenom where no one wants the currency in question at any price. This would require, post deflation where currency 'buys' lots of assets compared to today, that suddenly a majority of people who use that currency, to decide that they no longer wanted it (sounds like a black swan event is required to me).
4. Weimar was against a different economic and global background than today.
"4. Weimar was against a different economic and global background than today." -- Yes, they still had plenty of undiscovered and easy to access fossil fuels. Not so today. In order to actually do anything, you need calories to burn, period.
"2. It is hard to see where the inflation will come from with a crippled global economy and a global credit market in disarray. Inflation will need money creation" -- Bullshit. See your own #3. If I no longer accept your funny money for my corn or soybeans or nuts or OIL, you will have fucking hyperinflation overnight.
The economies in real terms are shrinking (deflating). The amount of money (credit) in the system is increasing (inflating). The offical "inflation-measuring-baskets" are a JOKE. As more people lose their jobs, and/or their salaries are down in real terms, the less is their purchasing power. This is at the heart of the low money velocity. The huge amount of cheap credit remains mostly in the hands of the CBs, the big banks, and the elite's and 10% paper "assets" - stocks, bonds, and real estate, where as the underlying economy - whih depends on the remaining 90% is crumbling. Are the costs of living really getting cheaper anywhere for the 90%? Not really, since the costs of procution, goods, and services are UP. This is cost-push inflation 101, at work on a global scale now. The producers of commodities are hurting already, as this asset class is getting hammered. E.g corn at 320 is at 4-yr lows and testing 8-yr support of ~300. I doubt farmers make good money at current prices, but who cares? The paper pushers set the prices, they probably think lower prices helps the economy... HAHAHA. Are your cornflakes for breakfast any cheaper now than 2 years ago when corn prices were 700 ? Oh this system is so FUBAR. The debt overhang of the governments around the world cannot, and will not be repaid, at least not with (fiat) currency of todays purchasing power. So either the debt is defaulted upon - then you have MAJOR deflation, or you get some sort of hyperinflation of the currencies. Nothing in between can reslove this, and both events lead - after the fact - to similar outcomes. There's some rough sailings ahead. I'm already in the harbor, well towed, with yellow and shiny anchors all around.
For some resaon whenever I think about this deflation/inflation argument, I keep remembering that scene from "War of the Worlds" with Tom Cruise, when they first saw the aliens.
They were all gathered arouind this crater. First, it sunk into the ground a little bit, then it exploded up and out of the ground and killed everybody.
Central Bankers steal hundreds of trillions of dollars worth from us every day. Hyperinflation is here. But who cares. Ebola will get the bankers too.
I'm disappointed at some of the comments on this article. It's like since 2008 many haven't learned anything. There's probably been hundreds of articles on inflation on this site alone since then.
Let's get a couple things straight:
There are two types of inflation (and even more derivatives from that): Inflation and Hyperinflation, they are hardly the same. Inflation is the normal response between money velocity and quantity of currency units. Raise the quantity of units, and inflation eventually occurs.
Hyperinflation on the other hand is loss of confidence in the currency by the holders. It's like an avalanche or bridge collapse. It happens very fast. Hyperinflation does not necessarily have to be quantity related, but often is.
The other thing is that the FED cannot tolerate deflation. They are highly leveraged to deflation (revenue, i.e. confidence of holders), and the entire US government would fall apart if real deflation occurred in terms of USD. On the other hand, deflation is dead easy to prevent when you can print units of currency that debt is denominated in. You simply devalue, or print. Banks also benefit from inflation, and are leveraged negatively to deflation.
Do you really think Goldman is going to allow the US Gov to produce a deflationary environment and consequently hurt them? really? It's simply not going to happen. Money supply also comes out unevenly, primarily first at the banks. So you can have small whirlpools of deflation while in the midst of an inflationary crisis. Which is largely where we are.
The western and US playbook is to inflate at a steady rate, then if something goes wrong, dump the USD into an IMF backed SDR currency. But that won't work. Just like in inflationary periods in France and Germany, they backed the currency by real estate (stolen from the church), then several years later (or sometimes much less) that currency blew sky high.
France is likely a much better model than Weimar Germany. They were a pseudo reserve currency like the US. Germany was not. We are following the same steps of pre-revolutionary France. Sleep tight.
Peter Bernholz's book "Monetary Regimes and Inflation" is a must read. So is "Dying of Money" by Jens O'Parsonns (a pseudonym for a east coast, high power attorney). "When money dies" is an interesting read and everyone should read it, but it doesn't get to the mechanics of the how and why. It's more like a hyperinflation reality story.
"On the other hand, deflation is dead easy to prevent when you can print units of currency that debt is denominated in. You simply devalue, or print. Banks also benefit from inflation, and are leveraged negatively to deflation"
That all sounds fine in theory, but there is a thing called "in practice".
Someone has to borrow in order for the FED to print.
FDR stopped a deflationary spiral in 1933 in one day. Deflation is easy to stop. You just devalue, or multiply the currency.
"Someone has to borrow in order for the FED to print"
Are you sure about that? They can print any amount they want at any time. Its all infowars right now. They could tell you they are printing nothing yet print a trillion a month. When is the last time you audited the Fed? When is the last time ANYONE audited the Fed? They have taken full control of the printing press, of both physical dollars, and digital dollars. You know what you can do with infinite dollars if you have the control? ANYTHING!! You can make anything go up OR down in price. As long as the herd believes what they tell you the official "CPI" is they can get away with it. I for one, don't believe a word they say.
Inflation? Already here, mostly in food and necessities, in a let them eat cake style. Let the commoners suffer more so that the US gov can stay solvent.
Hyperinflation is unlikely without a catalyst--I find it hard to believe that overnight, billions of people will look at that $100 bill as being near worthless, or something that they have to get rid of before it loses more value (even if they should). I doubt even an executive proclamation would change people so quickly.
Deflation is already here in some things, and should be here for more. Some years ago I was playing in a home poker game...two of the guys were drunk and started exceeding our small change table limits. This guy kept on going double or nothing, double or nothing. He lost his shirt but of course he couldn't pay it back...it was more than a months pay for him. When the guys sobered up the next morning they decided to write off the drunken bets to preserve their friendship. I think it's that simple if people get their egos out of the way.
I'm hoping for a default...I want no part of the shit they've been buying with the "money" anyways...
Thank you for mentioning these two books, I will read them.
IMHO, neoclassical monetary theory is flawed; current over-printing is concealed by the fact that velocity of money is this low - although velocity of money itself is a poor concept, just like the price index; trying to compress a lot of information into one single number -.
In Production Engineering, I have come across Theory of Constraints; according to which a whole system or process is governed by its constraint. Overproduction - producing more than the constraint or bottleneck is able to absorb - does no good.
I may not have enough knowledge to apply these concepts to the Economy as a whole - plus, the Economy as a whole would be not only "a process" or "several processes" but a more complex thing - however, I think some insight could be achieved thanks to this. Low velocity of money is functioning as a bottleneck that prevents the whole economy from viewing the inflated monetary base. Once this constraint is removed or evolves in the future, the scenary may change drastically.
Hyperinflation could thus be viewed as a sudden removal of a monetary bottleneck, once throughput value of the currency reflects the real quantities of money stock - leading to monetary chaos.
Government has already and will continue to remove the bottlenecks you reference. It's called FNMA, government takeover of student loans, government backed small business loans, gigantic budget deficits, etc. problem is, there are too many forces working against an inflationary environment in the US. Without government intervention we would have been in recession since 2000. There would have been massive PERMANENT GDP declines, massive profit and stock market declines and massive drops in RE prices. In the long term this is exactly what is required, but the future is being sacrificed to protect the current wealth holders.
Agreed, the velocity of money is a complicated subject and most economists get it wrong. I think they mostly get it wrong because they view money velocity as a mechanical metric. It is not. It's rooted in human behavior.
It has more in common with epidemics than an economic textbook. The only ones who get this right are the Austrian economists. Their take on these metrics can be described in one quote:
"The curious task of economics is to demonstrate to man what little they know about what they imagine they can design." - F. A. Hayek
Oh and to correct an error in my previous comment I didn't notice when writing it: France tied the assingat to the Church's stolen real estate, Germany used the gelt mark.
The thing is, the CBs are using the gold price manipulation to change market behavior. It's like fixing the speedometer of your car at 65 with superglue. Compounding this, CBs are goosing the stock market i.e. putting some device under the car to make the wheels turn while the engine is not running and pieces are falling off of it. The goal being to show the car to the public and convincing them to buy it. It's only a matter of time before trust evaporates.
Yes, as Antal Fekete puts it "velocity of money is trying to set a linear equation for a non-linear phenomenom"
Thanks,
Why is the velocity of money assumed to be constant throughout the economy?
Money given to Banksters to shore up their reserves that does not see the light of day, except by increasing their risk apetite to where it was before the FED increased their reserves, is not the same as money given to some poor chap who is going to spend it on his next meal.
Why are they assumed to be the same?
A good analogy is that of a Tsunami, where the ocean first withdraws and then advances
"Deflation As A Precursor Of A Weimar-like Inflation"
It doesn't work that way. Deflation is the down phase of the inflation/inflation cycle. Kondratieff Winter then moves into Kondratieff Spring.
If the Fed hadn't been pumping billions into the economy the last six years the US would be in a deflation (not that I think the Fed pumping was a good idea.) imho
That money ended up in the markets and in hard assets. When that money comes out of the market and gets put into more hard assets you'll see inflation of 30-40% a year, year after year. It feeds on itself.
Well, there is an interesting thing about today. Most of the printing is digital. No physical paper notes to deal with. This presents the opportunity for "unprinting" the money. Of course, the law of unintended consequences applies in spades here.
I don't know if we will see hyper-inflation or not. I do believe that quality goods and services will become more difficult to obtain thereby increasing unrest. The .gov crowd has been spending billions (no cross that out) trillions to prepare for civil unrest. They are hardening everything they can think of. This leads to a curious question. Was the White House incursion staged to create yet another scandal and justify even more security expenditures by fearmongering???
At any rate, it's starting to look a bit ugly... Vaya con Dio,
I contend the primary reason that inflation has not raised its ugly head or become a major economic issue is because we are pouring such a large percentage of wealth into intangible products or goods. This includes currencies. If faith drops in these intangible "promises" and money suddenly flows into tangible goods seeking a safe haven inflation will soar. Like many of those who study the economy I worry about the massive debt being accumulated by governments and the rate that central banks have expanded the money supply.
The timetable on which economic events unfold is often quite uneven and this supports the possibility of an inflation scenario. A key issue being one of timing. If the price of gas jumps to $8 a gallon overnight do you buy gas and not make your car payment or stop driving the twenty miles to work? Answer, it could be months before your car is repossessed so you buy gas.
It is important to remember that debts can go unpaid and promises be left unfilled. If this happens where does it leave us? Chaos and major disruption would result from such a scenario. As we have seen from the economic crisis of 2008 and following many other unsettling developments legal actions can continue to drag on for years. More in the article below.
http://brucewilds.blogspot.com/2014/04/inflation-seed-of-economic-chaos....
I contend the primary reason that inflation has not raised its ugly head or become a major economic issue
ahhh... but it HAS! The secret is that the govt is lying out its ass about the inflation rates. For three years I personally tracked a market basket of commonly purchased foods in several major chain grocery stores. I came up with a CONSISTENT inflation rate of between 20 and 30% per year.
So the secret to keeping "inflation" down is for the Fed and the Treasury to LIE about it (which involves things like shuffling the "contents" of the "representative" "market basket" used by the govt., etc)
Have you ever wondered why the CPI, GDP and employment numbers run counter to your personal and business experiences? The problem lies in biased and often-manipulated government reporting.
http://www.shadowstats.com/
"Most people consider deflation the biggest enemy of the gold price, as gold is generally seen as an excellent hedge against inflation"
That would be false. From 1980, there was inflation, all the way to 2001. Yet the price of gold fell for 20 years. people are complaning about inflation being above the official rate, yet gold has fallen from 1,900 to below 1,300, since 2011.
Your point is misleading to people who don't know better.
Inflation hardly started in 1980,more like it started ending then. It started in the early 70s...as a result of oil prices,and Vietnam War deficits and money printing to pay for same. Gold moved 10x in that period, to 1980, and naturally turned into a speculative bubble, which deflated in 1981 when inflation began to be brought down quickly to the low single digits under Volker's leadership at the Fed.
Gold way outpaced the inflation flare up in that period...So, opposite to your
contention.
Inflation hardly started in 1980,more like it started ending then. It started in the early 70s...as a result of oil prices,and Vietnam War deficits and money printing to pay for same.
And let's not forget LBJ's "Great Society" spending! He kicked off over 40 years of socialist expansion... the spending for which is still expanding.
"Your point is misleading to people who don't know better.
Inflation hardly started in 1980,more like it started ending then."
My point is not misleading at all. I never said inflation started in 1980. From 1980 to 2001, how much did prices inflate? Quite a bit over 20 years. Yet the price of gold went from 850 to 250. If gold was a good hedge for inflation, it should have been higher than 850 in 2001, from the accumulated inflation from 1980 to 2001.
Check the price of gold rise from 1970 to now...or from 1913 to now.
Hedged inflation really really well.
Part of what determines the value of gold and silver is the interest rate (adjusted for inflation) because that filters directly into the carrying cost. High interest rates crushed gold and silver in the 80s.
High rates killed inflation so gold not required
Inflation is not dead, they are just hiding it in the basement...
Glenn Beck mentioned this concept in 2011.
I mentioned it here years ago because there seems to be no one who understood it.
Seems most are catching on. But do remember, hyperinflation at the end is optional.We could be already on a new currency before the dollar dies so any holdings in PMs could be on a new 40 year track.
Ahhh,but the FED andThe Bank of England and the ECB ....have all learned from history........haven't they?
Case tudy of recent hyperinflation and it's cosequences. See
http://andreswhy.blogspot.com/2009/05/fractal-collapse-of-societies.html
The way to spend your way out of deflation . Not banks .
Pyramids! See
http://andreswhy.blogspot.com/2009/02/room-at-top.html
Gold is headed below 1000 as this July prediction of lower prices correctly anticipated:
http://www.globaldeflationnews.com/gold-elliott-wave-update-for-july-2014/
10 YR yields are about to skyrocket:
http://www.globaldeflationnews.com/10-yr-treasury-index-yieldelliott-wav...
As is the U.S. dollar (after a multi-month correction finishes later this year:
http://www.globaldeflationnews.com/category/stocks/usdollar-charts/
The pivot is the velocity of money. With the US government holding firmly on the economic brakes (raising regulation and taxes) the velocity here should continue dropping. Europe on the other hand is an amalgam of countries, some with their foot on the economic brakes but some pushing the accelerator, (lowering regulation and taxes).
Should be a wild ride... we live in interesting times.
You’ve heard about Inflation and Deflation. But, did you hear the Fed has coined a new term, Deinflation? Basically it describes the process of ignoring price increases in the inflation calculation whenever people can no longer afford to borrow and buy the stuff even at the old lower prices.
When Money Dies
Adam Fergusson
comfort reading for doomer porn fans