Gundlach Explains Biflation For The Cheap Seats

Tyler Durden's picture


Appropos Bernanke's razor's-edge tight-rope-walk fence-sitting as the not-too-cold-not-too-hot economy reduces the Fed's ability to do anything, Jeff Gundlach of Double Line provided a succinct explanation of the the 'uncomfortable position' the place-of-confusion Fed finds itself in. Simplifying the dilemma to: the Fed cannot raise rates as the dramatic implications for the huge debt load (and implictly the interest expense saving the budget deficit) of the US Government are untenable while at the same time inflation (in the things we need - not just want) is rising notably. However the new bond-king notes rather sarcastically, that the Fed can show that there is only modest inflation thanks to housing and wage growth (and herelies 'the biflation'). The old-school-Fed's efforts at pre-emptive strikes against inflation is simply not going to happen, he states, citing an "intentional attempt to suppress national income - an attempt to stop nominal GDP growing too much - simply won't be tolerated until inflation moves into the 4-5% category".


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Wed, 04/25/2012 - 14:54 | 2374523 SheepDog-One
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Biflation loosely translated means 'bend over'.

Wed, 04/25/2012 - 15:03 | 2374545 Joe Davola
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Whatever you need, gonna go up in price.  Your income, not so much.

Wed, 04/25/2012 - 15:08 | 2374568 SheepDog-One
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Yep, and the FED line is they need 4-5% inflation to show up? So we're really at well over 10% actual inflation using real numbers, FED says its 2%, so by the time the FED does anything to address inflation it will be at a real 25%. Oh thats just great.

Wed, 04/25/2012 - 15:31 | 2374640 TheSilverJournal
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To sum up the vid: rates can never be raised because by doing so, the US goes bankrupt.

Wed, 04/25/2012 - 15:33 | 2374647 Thomas
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Another important point: the second rates start rising, houses start heading back underwater. They may be affordable now but at higher interest rates the prices will go lower. Ya simply can't buy as much if you can't borrow as much. Regression tells me we will, some day, end up with 20% down and >7% interest rates. How does that NOT translate into lower prices?

Wed, 04/25/2012 - 15:37 | 2374657 TheSilverJournal
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More like 50% down with >20% interest rates. When the US goes bankrupt and can  no longer back the mortgage market and the cookies really start crumbling, what private lender is going to loan money out at just 20% down?

Wed, 04/25/2012 - 15:52 | 2374700 insanelysane
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100 year mortgage anyone

Wed, 04/25/2012 - 16:05 | 2374749 Dr. Richard Head
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I will buy your house with my first born and two silver sheckles.


Wed, 04/25/2012 - 15:35 | 2374650 Sockeye
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And rates must be raised in order to tamp down commodity price inflation because by not doing so, the people go bankrupt.
Government vs The People.

Wed, 04/25/2012 - 15:49 | 2374695 youngman
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No because the government..i.e...Politicians can blame the higher costs on greedy corporations....not themselves...and can pass laws accordingly..and the dumb people will fall for it...

Wed, 04/25/2012 - 17:41 | 2374999 ATM
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Austerity has an easily defined enactor. Inflation is an ephemeral boogeyman. Speculators, hoarders, greedy bankers, you name it can and all will be blamed when the real enemy points fingers.

It will all shake out in the end but not before the Peace Frog moment.

Wed, 04/25/2012 - 15:39 | 2374663 Oh regional Indian
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i just had a few holy shite moments reading the link below, and I'm still only on page II of the introduction.

It's totally ON topic, mind-boggling stuff. 

Capital flows.... totally nuts.

Risks; Clearly delineated. Its' THEIR working doc it looks like.



Check it out when you can. You'll be glad. Great Macro of what is under-way! (Notice the marine terminology) ;-)


Wed, 04/25/2012 - 16:02 | 2374739 Canaduh
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What marine terminology exactly?

And what in the first few pages was 'mind boggling' ?



Wed, 04/25/2012 - 16:13 | 2374772 Oh regional Indian
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Canaduh, you're just a piker or I'd engage.

Under-way is a seafaring term. Ship's get under-way. As does everything else in our world. 

Perhaps our minds boggle to different stimuli? How far did you get? It's the 2011 report, latest.... this is pretty much the voice of the IMF/WB cabal. Loaded with hints/reasons, stress indicators. All this in 2 pages... still 260 + to go.

Whatever though....


Wed, 04/25/2012 - 18:06 | 2375035 Canaduh
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Oooh, I think you just lost 3 levels of enlightenment by calling me names.

Under-way? That's the best you can come up with?? Pretty weak. I guess I was under the crushing oppression of the UCC in high school when my teacher told me there would be no talking after the test was 'under-way'.

I read about 30 pages throughout the report. Nothing new or 'mind boggling'. I was hoping you could actually point out some specific things that stuck out to you , instead of your usual circular babble. But I should have known better.

Way to not engage.

Wed, 04/25/2012 - 16:22 | 2374808 LowProfile
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ORI has a tendency to get wasted out of his gourd and present whatever he's stumbling across at the moment as OMG DUDE THIS IS HUUUUGE...

Wed, 04/25/2012 - 18:10 | 2375043 Canaduh
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I don't think he's wasted, I just think he's hyper-gullible, and even though he is supposedly well educated, dumb as fuck. Unfortunately, he feels the need to share the feces he finds by spreading it on the walls wherever he goes, metaphorically speaking.

Wed, 04/25/2012 - 19:19 | 2375216 AgShaman
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Maybe it's documents made by Central Bankers to inform politicians of the 'well in advance' formulated plans to drown the Sovereigns in debt....then let the "chum" in the waters work it's magic in a multitude of linked and desired outcomes.

Central Bankers seem "ego driven" like that....they love to ink it out on paper like it was written confirmation supporting their god complex.

Politicians are inherently low IQ....and easily impressed....they will assimilate any nonsense that has the appearance of "well thought out" and take it as the best of options...being the disgusting sycophantic "yes zombies" that they are.

Page 80:

When defaults occur, debts need to be restructured.

An outright debt default clearly undermines the general strategy of nurturing the confidence of financial markets (referred to as the confidence game).

Sovereigns were meant to be destroyed from the start....the unwashed masses have approached 'maximum potential' and they will need to be "managed".

If I were to guess....2012 is meant to be the calm...where the bankers get all of the traitors on board as to how the Event Horizon gets breached....after of course the debts get applied to the saddles of the serfs that were always meant to bear the burden of this looting in the first place.

Jubilee events....will not be available for the feudal lords need to redress the new millenium's boundary lines in their favor

Wed, 04/25/2012 - 15:49 | 2374691 Belarusian Bull
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Bankrupt? You mean currency destruction via hyperinflation?

Wed, 04/25/2012 - 16:21 | 2374805 G_T_A_44
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Already BK~

Wed, 04/25/2012 - 16:20 | 2374803 G_T_A_44
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Wed, 04/25/2012 - 15:30 | 2374634 MillionDollarBonus_
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This is a good opportunity for me to explain monetary stimulus as well:

  1. Stimulate the economy slowly, until it starts to grow
  2. Once the economy has grown sufficiently, ease further until there is a climax in aggregate demand
  3. Finally create a burst of liquidity to conclude the operation

If our Federal Reserve follows these three simple steps, we will be on the road to recovery in no time.

Wed, 04/25/2012 - 15:42 | 2374669 TheSilverJournal
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If recovery means the end of the fiat ponzi, then you're right. The Fed will blow itself up.

I don't think there's any steps, though, it's just a simple plan of "keep the ponzi system afloat" and that requires the money to be pumped in at ever increasing rates.

Wed, 04/25/2012 - 15:44 | 2374678 Manthong
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"create a burst of liquidity"

I have a suspicion that the obvious "burst" is really a cover for a stealth deluge that we are prevented from seeing.


Wed, 04/25/2012 - 16:45 | 2374871 TBT or not TBT
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And then there is  the troublesome use of the word "climax"

Thu, 04/26/2012 - 01:14 | 2375695 StychoKiller
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Were Secret Service agents involved? :>D

Wed, 04/25/2012 - 15:50 | 2374698 Wannabee
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Fess up, you read the post about Greek men yesterday, didn't you?

Wed, 04/25/2012 - 16:06 | 2374750 TBT or not TBT
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The use of the word "climax" is telling.   It is never innocuous.

Wed, 04/25/2012 - 16:25 | 2374819 ebworthen
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Add equal parts vinegar and baking soda to two liter soda container.

Screw cap tightly.


Wed, 04/25/2012 - 15:11 | 2374575 Dr. Richard Head
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So basically inflation that goes both ways. NICE!!!!!

Wed, 04/25/2012 - 15:02 | 2374540 SHEEPFUKKER

Biflation.....getting phucked by Janet Yellen and the Ben Bernanke at the same time. 

Wed, 04/25/2012 - 15:16 | 2374600 HarryM
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Biflation means that the whole world is coming apart at the seams , but if you short the market , you get fucked.

Wed, 04/25/2012 - 15:31 | 2374644 SheepDog-One
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If you put any money within reach of the criminal cabal it surely will vanish.

Wed, 04/25/2012 - 15:43 | 2374677 TheSilverJournal
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Create a money making machine and you can bet your ass that it will get used...a lot.

Wed, 04/25/2012 - 15:45 | 2374685 Oh regional Indian
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No wonder a guy by the name of HOOVER was at the heart of the start of this round of gangsterism.


Thu, 04/26/2012 - 01:06 | 2375683 The Navigator
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It will surely VAPORIZE

Wed, 04/25/2012 - 15:34 | 2374649 Thomas
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Difference between Yellen and a bowling ball? You could have sex with a bowling ball if you had to.

Wed, 04/25/2012 - 15:02 | 2374542 SDRII
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Wait that means PE ratios will be 6x

Wed, 04/25/2012 - 16:12 | 2374768 CPL
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Bingo. Like an x3 ETF squared then leveraged under a derivative chain. The half life of money in them is measured is nano seconds.


Sounds perfectly reasonable and safe.

Wed, 04/25/2012 - 15:02 | 2374543 kridkrid
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Inflation in the things you need... deflation in the the things you own (including your labor).

Wed, 04/25/2012 - 15:05 | 2374555 Clueless Economist
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I propose we tax millionaires and spend $trillions to stimulate the recovery. 

Wed, 04/25/2012 - 15:08 | 2374565 kralizec
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If I wanted America to fail...

Wed, 04/25/2012 - 15:13 | 2374586 NotApplicable
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I'd vote for more of everythinng.

Wed, 04/25/2012 - 15:35 | 2374651 Thomas
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I would vote myself a trophy wife.

Wed, 04/25/2012 - 15:19 | 2374608 brewing
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krugman's go to guy now... He Goes By  -  's Joe Weisenthal Joins Us On The  Set Tomorrow 

Wed, 04/25/2012 - 15:37 | 2374658 Thomas
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I disagree with almost everything Joe says yet still follow him on Twitter. It is some sort of neurological disorder with the compound adjective "early-onset"

Wed, 04/25/2012 - 15:40 | 2374667 brewing
brewing's picture

i finally dumped him this morning.  he and drudge are becoming unclickabe...

Wed, 04/25/2012 - 15:12 | 2374580 Joe Davola
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You fast, pete-ah-san!

Wed, 04/25/2012 - 15:04 | 2374554 fonzannoon
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Someone please explain how come margin compression does not seem to be affecting earnings (for the most part) in this biflationary environment.

Wed, 04/25/2012 - 15:09 | 2374571 SheepDog-One
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I dont know, other than now earnings are just outright bullshit? Why shouldnt they be, everything else is now.

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