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Hyperinflation Vs Hyperdeflation: Take Your Pick

Tyler Durden's picture


The market is now at a very simple crossroads: bonds are pricing in the hyperdeflation that the resumption of the global depression brings in, while gold is pricing in the central planning policy response to that hyperdeflation, which is nothing but print, print, print. Anyone who feels like arbing the spread on the trade (which has a very unpleasant end in either case), should go ahead and do it now.

10 Year - at a record:

Gold - also at a record:


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Thu, 08/18/2011 - 10:13 | 1572719 trav7777
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Hyper, bitchez

Thu, 08/18/2011 - 10:16 | 1572737 Thorlyx
Thorlyx's picture

The rest of my money is on hyper too. No way that the CBs will allow deflation.

Thu, 08/18/2011 - 10:34 | 1572819 flacon
flacon's picture

When priced in gold (money) everything is deflating at parabolic speed and has been since about the year 2000. Priced in the US Dollar (currency) we have price stability because the Ben Bernank said so, and if prices drop he will enforce that price stability because it his mandate. He is going to need leeway to print trillions more dollars to make his imaginary money system appear stable. 


Meanwhile... When priced in gold (money) everything is deflating at parabolic speed and has been since about the year 2000. 

Thu, 08/18/2011 - 11:49 | 1573293 CrashisOptimistic
CrashisOptimistic's picture

I got yer inflation right here, rufus.

I watched a 2 Liter bottle of pop at Walmart go from $1.25 in mid July, to $1.38 in late July (that's 10%, sports fans).

This week that same bottle is now $1.58.  

Pepsi, Coke and Dr. Pepper sort of leap frogged each other along that time period.  They are all syncing up now at $1.58, just to avoid confusing the consumer.

Thu, 08/18/2011 - 13:01 | 1573608 Calculated_Risk
Calculated_Risk's picture

I have a picture from 2 years ago of a recyling vendor next door... aluminum $.40 a lb, today $1.00 lb.

Thu, 08/18/2011 - 16:27 | 1574508 malek
malek's picture

Who cares what the regular price is. The lowest sale prices are of interest.

Looking at that I see tendencies in the last few weeks, there are NO more Coke sales at $0.99 and only a few Pepsi / Dr. Pepper at $0.99 here in NorCal.

Thu, 08/18/2011 - 12:22 | 1573453 narnia
narnia's picture

fact:  you would be much better off with $1,800 FRNs under your matress than an ounce of gold if hyperdeflation is the outcome.

opinion:  you'd be better off living in a free, safe, energy independent area with no gold or FRNs under your mattress than in a big city with 1,000 ounces of gold or $1,800,000 FRNs under your bed, in the event of either hyperinflation or hyperdeflation.

Thu, 08/18/2011 - 13:01 | 1573609 tmosley
tmosley's picture

Yeah, same goes for if gravity reverses.

There is no such thing as hyperdeflation in a fiat currency.  PERIOD.

Thu, 08/18/2011 - 14:00 | 1573848 akak
akak's picture

There is no such thing as hyperdeflation in a fiat currency.  PERIOD.

You beat me to it, T.

Anyone who non-facetiously discusses the absurd concept of "hyperdeflation" has just instantly disqualified themselves from being taken seriously.  There is neither any historical nor any theoretical basis to believe that "hyperdeflation" is anything other than a pro-fiat disinformational line and smokescreen to hide the only REAL threat we face, that of ongoing and very likely escalating currency depreciation.

Thu, 08/18/2011 - 14:25 | 1573930 narnia
narnia's picture

hyperdeflation is exactly what the market is saying.  all government promises & any enterprise dependent on them are worthless.

hyperinflation is the consequence of central planners trying to make worthless assets unworthless.

hyperinflation is the most likely outcome for political reasons. hyperdeflation is not entirely implausible.


Thu, 08/18/2011 - 15:14 | 1574093 Smiddywesson
Smiddywesson's picture

Inflation or deflation, gold is real money and people in either situation flee to real money. 

There are other safe currencies, but as all the survivors swarm into those lifeboats they swamp them, causing the SNB to club them over the head and intervene in the swissy.

This will end with only two lifeboats, gold and the USD, and one of them is being debased (guess which one?)

Each debt ceiling increase and easing measure will take us progressively closer to there being only one lifeboat, gold.  In fact, I would say we passed that point a long time ago, but the chickens don't know their heads have been removed yet and they keep running to treasuries for "safety."

This is not an academic argument.  This is money.  Inflation or deflation, gold is the only safe currency, and soon the central bankers will have complete command of the last lifeboat and will begin clubbing the people in the water without gold.

Thu, 08/18/2011 - 16:33 | 1574543 malek
malek's picture

When government promises, i.e. things like pensions and SS, are in the process of becoming worthless, the official currency hyperinflates at the same time.
(Holders of gold will then likely see prices deflating measured in gold.)

So pick if this is then hyperdeflation or hyperinflation to you.

Thu, 08/18/2011 - 15:32 | 1574173 Inspector Bird
Inspector Bird's picture

Not entirely true.

The fiat currency ITSELF could not deflate.  That is accurate.

But once it is so undermined and devalued as to be worthless, it can only deflate....down to zero, and require a "new" currency.

Thu, 08/18/2011 - 16:03 | 1574358 e_goldstein
e_goldstein's picture

I can think of only a couple of scenarios... The first would occur after a period of hyperinflation. At the end of the life cycle of the currency, after everyone has lost faith in the currency during a hyperinflationary bout, then no one would accept the currency for payment. Instantaneous 100% deflation. Not sure if that really meets the technical definition of hyperdeflation (whatever the hell that is) though.

The second would be if the CBs raise interest rates to 99-100%... but that would put them out of business, so I doubt that would ever happen.

Thu, 08/18/2011 - 16:33 | 1574548 malek
malek's picture

Yeah, same goes for if gravity reverses.

ROTFL, you made my day!

Thu, 08/18/2011 - 10:27 | 1572820 Quintus
Quintus's picture

Gold IS money.  People are running to gold because in deflation or hyperdeflation you want money above everything else.  

You now have a choice.

You can flee to the kind of money that is held for you on a computer in a financial institution that will not survive deflation, and which will lock you out when a Bank Holiday is declared.


You can flee to the kind of 'Traditional' money that you can hold in your hand, will never go bust, will never close its doors and refuse to grant you access, and which can be spent in any country on earth.

That is why both bonds and gold are rising at the monent.  There is no conflict, just people making choices about which type of money they want to shelter in.

Thu, 08/18/2011 - 13:31 | 1573747 aerojet
aerojet's picture

No, people are running to gold because they are dumb herd animals.  I am resolute that nothing in the financial world is ever cut and dry.  Gold looks promising, so that is where the masters will strike at you from after they drive everyone they can to buy there.  Then the gold bubble will pop, leave all of you wondering what the fuck just happened, and it will be on to something else.  Nothing obvious ever works in the investing world--nothing.  Ever. 

Thu, 08/18/2011 - 14:11 | 1573872 akak
akak's picture

Study history and take a wider perspective, and you will see that the broad moves in monetary matters ARE in fact rather self-evident and obvious --- at least to those who are not brainwashed by the Establishment powers into ignoring them, as the vast majority of those who are forced to suffer the monetary depredations of fiat-issuing governments invariably are.

Thu, 08/18/2011 - 15:20 | 1574118 Smiddywesson
Smiddywesson's picture

Aerojet, that is a good rule of thumb for trading during the life of a monetary system, but this is the end of the old system.  The central banks are buying, and they sure are not doing so because they expect the gold they have to drop in value.  They are not plowing much needed cash into mere tradition in the middle of a crisis for no reason.  And, they are all doing so, at the same time, all over the world.

The old system is done.  They HAVE fooled most people.  Most people have no gold.  So TPTB have won again.

Thu, 08/18/2011 - 10:28 | 1572825 Spitzer
Spitzer's picture


The Austrian definition of inflation is the expansion of the money supply. If the Fed wrote a check to me and you for 800 billion dollars today, that would be an expansion of the money supply(inflation). The moment we spend or invest the money is when the inflation is noticed. If we slowly bought treasuries over the next 5 years(assuming there is no run), consumer prices and commodities would not go up. There would be minimal realized price increases(realized inflation). If we spent or invested it all on commodities the day we got the money, there would be realized price increases right away. If we wait 2 years and then spend or invest in commodities, there would be realized price increases in 2 years. The fact is, the inflation happened when the check was written.

The inflation in the US already happened. There doesn't need to be any more money printing for hyperinflation to occur. There only needs to be a reallocation of the inflation that already happened. A lose of confidence the inflation that already happend, a loss of confidnce in treasuries.

Thu, 08/18/2011 - 10:32 | 1572862 centerline
centerline's picture

You very well could be right on this.  Which is a profoundly scary concept.  Say, all the dollars circulating the world as reserve currency suddenly flood home too quickly.

Thu, 08/18/2011 - 11:00 | 1573020 MachoMan
MachoMan's picture

A single dollar in circulation is enough for there to be hyperinflation of said dollar under this concept.  I think this is the "credibility" FOFOA talks about, which forms the peg or underpinning of the currency...  Once the crediblity is gone, well...  you get the idea.  And, every day, our policy makers trade a little bit of crediblity for another day of existence of the currency.  Just a matter of time.

Thu, 08/18/2011 - 13:33 | 1573751 Koffieshop
Koffieshop's picture
I figure the gamble here is that the military strength is perceived as enough to back the currency. 
This is why almost no one is talking about cutting the armed forces expenses.
Fri, 08/19/2011 - 10:20 | 1577011 MachoMan
MachoMan's picture

We've been relying upon military strength to back the currency for quite some time...  this strength is waning and prospective competitors are becoming wiser and bolder.  Ultimately, a sudden move hurts everyone (hence cooperation through this point among the world's central banks), but the wheels have already started turning for slow change, which may give rise to quick change at any time...  Either way, the end result is certain.

Thu, 08/18/2011 - 15:43 | 1574252 Inspector Bird
Inspector Bird's picture

This IS the problem. Inflation around the world is getting out of hand.....but when those dollars start coming home, OUCH.


Consider this - if part of the attempt is (and I think it is) to make the dollar as cheap as possible to "boost" our manufacturing base (and to some degree this is happening, however small that boost is so far), other nations will begin to buy our stuff.

This will be good for the economy, creating jobs, etc.  But the flood of returning dollars, and the increased demand for goods, will only spark massive inflation.

That is only one of several scenarios in which "dollars come home".  None end very well.  As for the "gold bubble" - everything bubbles at one point or another.  Certainly this IS a bubble.  But only until it pops.  The question is when, and at what level, will it pop?

History says AT LEAST 3,000.  But given the activity, it's worth thinking higher is possible.  But if it's a shell game by Wall Streeters to shift wealth, you never know.  Could be about 2,000.....wait for the support levels to break.  Then worry about that.  Right now, it's game on for gold.

Thu, 08/18/2011 - 10:42 | 1572931 Freewheelin Franklin
Freewheelin Franklin's picture

According to Palyi, hyperinflation, or "galloping" inflation is a repudiation of the currency.

Thu, 08/18/2011 - 10:57 | 1572997 Spitzer
Spitzer's picture

When loss of confidence hits treasuries and capital flys out and hits anything of perceived value, the buzzword on the street will be hyperinflation.


Thu, 08/18/2011 - 12:46 | 1573562 pods
pods's picture

If that happens in the US then the only buzz you will hear on the street is the bullet that just zipped past you.


Thu, 08/18/2011 - 13:45 | 1573789 Oh regional Indian
Oh regional Indian's picture

Nicely said Spitzer.

Thu, 08/18/2011 - 10:45 | 1572949 Freewheelin Franklin
Freewheelin Franklin's picture

It is the inflation of the money volume-paper
currency. and bank deposits-that creates the fact
and maintains the expectation of a disproportion
between the total supply of goods for sale and the
total amount of purchasing power people have
and are ready to use. Hence the definition; Moneycreation
· is inflationary when the additional purchasing
power has no counterpart in goods and
services people want to buy-when too much
money chases too few goods.

Thu, 08/18/2011 - 11:00 | 1573021 Spitzer
Spitzer's picture

Treasuries are not assets, they are debt. Debt is the essence of fiat, the debt backs the dollar. Nobody is forced to hold these treasuries and debt. They can sell them for CASH anytime they want.

Thu, 08/18/2011 - 11:09 | 1573077 flacon
flacon's picture

CASH is debt too - a NOTE of indebtedness. 

Thu, 08/18/2011 - 11:14 | 1573099 Spitzer
Spitzer's picture

That's right. As debt defaults cash loses value. Look at the value of the Icelandic Krona, it crashed as debt defaulted.

Look at the nations of Thailand, Indonesia and South Korea (300 million people) during the Asian financial crisis. Their currencies fell by for or 60|%, they did not gain.

Thu, 08/18/2011 - 13:33 | 1573753 aerojet
aerojet's picture

Loss of confidence in the soveriegn that issues the cash, would be my guess. 

Thu, 08/18/2011 - 10:46 | 1572951 TheTmfreak
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Right. This is what I was thinking. They what... tripled the money supply already? However it hasn't made its way into actual "circulation."


Thu, 08/18/2011 - 11:02 | 1573032 Spitzer
Spitzer's picture

When you sell a treasury, you get cash. When there is a run on treasuries, there will be a hell of allot of people selling and getting cash.

Thu, 08/18/2011 - 11:37 | 1573220 Chump
Chump's picture

This is where I stop under understanding.  The conditions where a run on Treasuries would occur would pretty much preclude actual redemption, no?  Wouldn't cash then become king because, well, no one can get any?

Thu, 08/18/2011 - 11:44 | 1573265 Spitzer
Spitzer's picture

The expansion of the money supply already happened. Treasuris are denominated in dollars, they are dollars already.

Thu, 08/18/2011 - 12:22 | 1573455 Chump
Chump's picture

They are denominated in dollars, yes, but they are not actual dollars.  Otherwise the act of redeeming one for cash would be nonsense.  I'm saying that a run on Treasuries would make them essentially irredeemable.  Bennie could print physical dollars to cover of course, but why bother at that point?  The world would be burning already.  I'm probably missing something here though.

Thu, 08/18/2011 - 13:42 | 1573772 aerojet
aerojet's picture

Treasuries are bonds, a form of debt that pays interest on a schedule.  The act of the government issuing treasury bonds is not inflationary.  What is inflationary is blatant money printing, obviously.  What is also inflationary, and what is really our problem, is that when banks make loans, they don't hold any reserves against that loan but rather "print" money out of thin air.  What the government has been doing through quantitative easing has been to replace that lost private sector money creation with public sector money creation--as in, the Fed buying T's instead of real people.  It's not exactly the same as Zimbabwe-style money printing, however.  It is a subtler form of manipulation.  The side-effect is that all that new money has to seek a return, and since stocks have been so shitty, that money has poured into commodities, giving is $3+ gasoline, expensive food, etc.  None of those price increases are demand driven anymore--in fact, people are consuming less, trying to keep ends meeting in an environment where their savings is earning 0% for them, and their wages are falling or they have lost their jobs completely.

Thu, 08/18/2011 - 14:41 | 1573981 Spitzer
Spitzer's picture

US debt is publicly traded. Nobody is forced to hold it and they wont. Even primary dealers can quit being primary dealers.

Thu, 08/18/2011 - 14:49 | 1574004 Flakmeister
Flakmeister's picture

The PDs hands are tied.... in for a penny, in for a pound...

Thu, 08/18/2011 - 15:33 | 1574176 Smiddywesson
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Nobody is forced to hold treasuries yet, but a little change to 401k rules could limit what you can hold in those retirement accounts.

Thu, 08/18/2011 - 12:09 | 1573395 shortus cynicus
shortus cynicus's picture

You are basically right, but...

If we slowly bought treasuries over the next 5 years(assuming there is no run), consumer prices and commodities would not go up.

Big Government would immediately spend that money which increases prices.

Money can be buffered only if someone save it in foreign (not domestic) bank accounts or stores cash in a save. It must be foreign account because domestic banks lend that savings out without permission of the owner causing price increases too, foreign do not.

Run away inflation occurs when foreign savers starts to dump flooding domestic market.

Thu, 08/18/2011 - 13:07 | 1573637 Bastiat
Bastiat's picture

Yep. You can have a lag between monetary inflation and price inflation--that lag is what the author of the The Dying of Money called: "latent inflaiton." The trigger to bring it out of latency is an increase in velocity. You get that when confidence in the currency erodes, then breaks.  I've read that China has committed about 1/2 its UST holdings to pay for resource acquisitions. Think about that volume of money coming out of the ice box, just for starters.  It can't be stopped.

Thu, 08/18/2011 - 15:37 | 1574207 Smiddywesson
Smiddywesson's picture

I've read that China has committed about 1/2 its UST holdings to pay for resource acquisitions. Think about that volume of money coming out of the ice box, just for starters.  It can't be stopped.

Right, everybody is playing ball but China.  All the central banks are quietly buying gold and keeping thier citizens in the dark.  China is almost forcing their citizens to buy gold or move to gold denominated accounts.  I thing the Fed and EU are going to screw China and China knows it, so it isn't playing by the rules all the other central banks are using.

That cost BearSterns, central bankers have long memories.

Thu, 08/18/2011 - 10:34 | 1572859 falak pema
falak pema's picture

Whats the cost of a hooker in the Hampton's? I know that is Robotraders speciality. It should be a good indicator, of bi-fellation, stag-deflation, or just an insight into if the WS shills will need some private QEs to quell their market thrills turning into outright terminal chills.

Thu, 08/18/2011 - 13:49 | 1573806 Phillips Capital
Phillips Capital's picture

Does anybody else feel that whats happening in treasuries right now is after a massive rush to safety, we are now in a short squeeze?? Just saying, i have not heard anybody make this point. but christey, look at the charts!!! they are ridiculous. i think its a short squeeze. 

Thu, 08/18/2011 - 10:18 | 1572753 TheTmfreak
TheTmfreak's picture

A very neutral, very zerohedge comment. Well played.

I like this article as it brings up such a great observation. So my question to people, is how is this situation going to de-cock itself without either outcome (or some weird combination of both?). I think we all know the answer to that (its not).

Thu, 08/18/2011 - 10:25 | 1572811 centerline
centerline's picture

Both is a potential outcome in my opinion. It just depends on perspective. In currency terms we might hyperinflate. In real terms we are going to hyperdeflate.

And yes, it is going to suck.

Thu, 08/18/2011 - 10:42 | 1572928 Spitzer
Spitzer's picture

Never has a debtor nations currency risen in the face of an economic implosion. Lets look at the Asian financial crisis for comparison.

The causes of the Asian financial crisis are many and disputed. At the time of the mid-1990s, Thailand, Indonesia and South Korea(300 million people) had large current account deficits.cough..cough..US.. anyway, Many economists believe that the Asian crisis was created by market psychology and policies that distorted incentives within the lender–borrower relationship.(ala China US) The resulting large quantities of credit that became available generated a highly leveraged economic climate, and pushed up asset prices to an unsustainable level. These asset prices eventually began to collapse, causing individuals and companies to default on debt obligations. The resulting panic among lenders led to a large withdrawal of credit from the crisis countries, causing a credit crunch and further bankruptcies. In addition, as foreign investors attempted to withdraw their money, the exchange market was flooded with the currencies of the crisis countries, putting depreciative pressure on their exchange rates. To prevent currency values collapsing, these countries' governments raised domestic interest rates to exceedingly high levels (to help diminish flight of capital by making lending more attractive to investors) and to intervene in the exchange market, buying up any excess domestic currency at the fixed exchange rate with foreign reserves. (Indonesia had foreign exchange reserves of more than $20 billion)
Neither of these policy responses could be sustained for long. Very high interest rates, which can be extremely damaging to an economy that is healthy, wreaked further havoc on economies in an already fragile state, while the central banks were hemorrhaging foreign reserves, of which they had finite amounts.(the US has a wopping 50 billion) When it became clear that the tide of capital fleeing these countries was not to be stopped, the authorities ceased defending their fixed exchange rates and allowed their currencies to float. The resulting depreciated value of those currencies meant that foreign currency-denominated liabilities grew substantially in domestic currency terms, causing more bankruptcies and further deepening the crisis.

In summery, psychology(loss of confidence) caused capital flight which caused the crisis. Central bankers did the opposite of printing and reigned in money with higher rates but that didn't matter, the currencies still fell by 40-60%. Indonesia's strong fundamentals didn't matter either,they got caught in the capital flight.

Thu, 08/18/2011 - 11:45 | 1573268 centerline
centerline's picture

All eyes on DXY.  It could get interesting.  Been painting a bearish picture for quite some time.

Thu, 08/18/2011 - 10:32 | 1572814 Mercury
Mercury's picture

The AU/10yr convergence trade?  Yikes.

I'm partial to what appears to be the ZH best-guess: the economy hyper-deflates (depression) as governments fight back in vain with even more money printing and ZIRP (hyperinflation)

Lot's of flying shrapnel and wounded animals staggering around to add to the excitement too...

Thu, 08/18/2011 - 10:43 | 1572940 TheTmfreak
TheTmfreak's picture

My entire post was prevented from being added so let me just sum it up *sigh..*

I recently read Mish's argument regarding deflation and I find it quite convincing due to the key point of debt and digital dollars(debt). I well and understand the argument about "no currency in history has ever hyper-deflated." To what extent has debt as money been taken into consideration with this? If the fed can hyper-inflate the currency by printing debt and issuing it to banks, how come it hasn't already happened through their actions? If the only real thing the FED can do is issue loans, it requires people to take the loans with the understanding that it will be paid back (even with ZIRP). I'd imagine unless you see the FED opening the ZIRP policy to REGULAR PEOPLE, inflation just doesn't seem to make sense. That is unless banks all of a sudden start buying up assets and bringing digital dollars into "existance."

But what happens when people all of a sudden can't pay for the debts they've incurred which we have already seen? You get massive haircuts on debt (money) and your money supply just like magic vanishes. How can you "hyper-inflate" a currency that is purely backed by debt. I have yet to find the answer to this one, even though "hyper-inflation" seems like the only outcome due to central planning policies. If there was a run on the bank, the ponzi would be over in a matter of seconds and hyper-deflation coming into existance (which I guess could become hyper-inflation if the government decided to print "actual" dollars for everyone to be covered on a bank run").

Am I off base on this?

Thu, 08/18/2011 - 11:01 | 1573029 Mercury
Mercury's picture

You need velocity to produce hyperinflation (or any inflation) with printed money/expanded monetary base.  If the money just sits in an account it won't contribute to inflation.  But it doesn't have to be distributed at the retail level in the form of laons etc. to beget inflation at the retail level - it can be invested in things like commodities and hard assets instead which will drive up nominal prices for those things and  make consumer goods more expensive because their input prices (corn,oil,metals etc.) are going up.

Thu, 08/18/2011 - 11:06 | 1573051 Spitzer
Spitzer's picture

You need velocity to see price increases in essenatial goods. That is not inflation.

Inflation is the expansion of the money supply.

Thu, 08/18/2011 - 11:20 | 1573130 MachoMan
MachoMan's picture

This.  Given a treasury run could come from either inflation (soft default) or deflation (outright default), I see no reason why confidence in the currency should remain in perpetuity (the root of hyperinflation)...  I'm not sure why it is so difficult to get that hyperinflation can come through mechanisms other than wage increases, but this point seems to be lost on most people.

Thu, 08/18/2011 - 12:10 | 1573398 Mercury
Mercury's picture

Exapnsion of the money supply-->velocity-->$12 for a box of ceral that used to cost $5 (inflation).

Thu, 08/18/2011 - 11:50 | 1573298 Calmyourself
Calmyourself's picture

Velocity is a symptom not a cause.  HYPERinflation is a psychological phenomenon primarliy not a money supply/ velocity problem.

Thu, 08/18/2011 - 12:15 | 1573416 Mercury
Mercury's picture

You could say hyperinflation is a  political phenomenon too but whatever...a vastly expanded money supply and at least some velocity has to set that table first -no?

Thu, 08/18/2011 - 12:24 | 1573465 Calmyourself
Calmyourself's picture

No, velocity does not set the table it is the tablecloth ripped from the table.  Joe sixpack is not waiting for sufficient velocity in order to lose confidence in the dollar.  Once that confidence is lost velocity will happen very quickly virtually simultaneously

Thu, 08/18/2011 - 13:05 | 1573627 Mercury
Mercury's picture

Thats true but Joe Sixpack is already seeing some inflation now - and it isn't because the economy is going gangbusters. Yes, at some point inflation and hyperinflation become two different animals but inflation comes first and I don't think it has ever been a government's intention (with it's inevitable endgame) to create a hyperinflationary scenario....they just paint themselves into a corner.

Thu, 08/18/2011 - 13:49 | 1573809 Oh regional Indian
Oh regional Indian's picture

Fascinating discussion and visual/analogy. Thanks.

Thu, 08/18/2011 - 11:11 | 1573084 Debugas
Debugas's picture

"If the fed can hyper-inflate the currency by printing debt and issuing it to banks, how come it hasn't already happened through their actions?"


Because Fed can not print money and give away for free - Fed always prints to lend. And since there are no many willing to borrow the Fed can not hyperinflate.

however Congress does have the right to borrow from the Fed and then give away to the main street but it does not want to do this yet

Thu, 08/18/2011 - 11:22 | 1573151 Spitzer
Spitzer's picture

Enough expansion of the money supply has already happend to have hyperinflation.

Thu, 08/18/2011 - 11:53 | 1573309 Calmyourself
Calmyourself's picture

Correct, but the psychological trigger of no confidence has not been pulled by a large enough minority to create a self reinforcing "run" on the currency.  We here are not indicative of the general population.  Most of them are asleep so the awakening will be incredibly disruptive and probably violent but it will take a while.

Thu, 08/18/2011 - 10:54 | 1572979 Smiddywesson
Smiddywesson's picture

So my question to people, is how is this situation going to de-cock itself without either outcome

Easy, switch to a "gold standard" when the banks hold most of the gold and the banks become solvent, provided they can ramp the price of gold to the moon.  They can, and they are buying.

There won't be any hyper inflation or hyper deflation because the central banks have no intention of waiting for such an event to unseat them from their thrones of power.  They will pull the plug first.

Thu, 08/18/2011 - 11:54 | 1573317 Calmyourself
Calmyourself's picture

Possibly, but they are subject to normative influences as well.  Can they rip up their paradigm so completely.

Thu, 08/18/2011 - 11:55 | 1573320 CrashisOptimistic
CrashisOptimistic's picture

The smash of economic activity and oil demand, that has taken WTI price down, will show up in PPI next month, but nowhere near what they expect because the US runs 60% on Brent, not WTI.

Thu, 08/18/2011 - 10:16 | 1572730 ZeroPower
ZeroPower's picture

Absolute mayhem being heard from bond flow guys right now.

Perspective: USTs are used as a hedge being the most liquid and secure instrument for bond desks everywhere (unless region specific). Since flow guys always have to be making a market, and are more often than not ending the day long due to MM duties, they go out and hedge the shit out of their books with SHORT treasuries. Short treasuries hasnt been working ever since this collapse in August as the flight to safety has pushed prices way up while pushing everything else lower. Hell, even firms which are completely nationalized and will never fail (many to name within the EM space) are being dumped...all in favor of the mighty UST.

Also note the 10yr hasnt been this low even in Lehman times. Fucking crazy stuff.

Thu, 08/18/2011 - 10:22 | 1572795 augie
augie's picture

Anyone who wants some data to coroborate this position:

After reading this paper i'm convinced bill gross is the smartest guy in the room. 

Thu, 08/18/2011 - 10:15 | 1572733 THE DORK OF CORK
THE DORK OF CORK's picture

My money is on hyper but I could be wrong.

Physical dollars are a good hedge for a euro gold holder me thinks.

Thu, 08/18/2011 - 10:25 | 1572770 Thorlyx
Thorlyx's picture

who needs a hedge ? Pussy....

seriously, this $ thinghy make some sense. What about long CHF ?

Thu, 08/18/2011 - 10:47 | 1572954 Spitzer
Spitzer's picture

There does not need to be any more money printing to have hyperinflation. For details, see my above posts.

Thu, 08/18/2011 - 12:42 | 1573550 DaBernank
DaBernank's picture

Spitzer is exactly correct on this. It will be interesting to see how hyperinflation plays out without the need for cash with electronic transactions so pervasive and still possible.

Thu, 08/18/2011 - 10:16 | 1572735 quasimodo
quasimodo's picture

This means I get $3000 gold, and $2 gas?

Bachmann promised me the latter--she is so smart!

Thu, 08/18/2011 - 10:18 | 1572751 Everybodys All ...
Everybodys All American's picture

Vote for Obama ... he'll get you to two dollar gas. You won't have a job or be able to eat. But gas will be two dollars. Real f'ing smart guy though isn't he.

Thu, 08/18/2011 - 10:31 | 1572851 quasimodo
quasimodo's picture

Nah, Bachmann gives good head to corn dogs. She has my vote, plus she won the straw poll by a landslide

Thu, 08/18/2011 - 10:56 | 1572994 Hobbleknee
Hobbleknee's picture

Bachmann is a neocon whore who voted for the Patriot Act and used to work for the IRS.  She only bet Ron Paul by a fraction of 1% in the poll.

Thu, 08/18/2011 - 14:02 | 1573857 aerojet
aerojet's picture

150 votes, wasn't it?

Thu, 08/18/2011 - 12:55 | 1573590 pods
pods's picture

She won by sooo much that nobody even placed second!  


Thu, 08/18/2011 - 10:16 | 1572738 hunglow
hunglow's picture

Blue sky on Au.   Look mommy, an airplane in the sky.

Thu, 08/18/2011 - 10:16 | 1572740 bam_son
bam_son's picture

twitter WAR


Thu, 08/18/2011 - 10:16 | 1572741 FoieGras
FoieGras's picture

The correlation between government bonds and gold skyrockets in deflationary busts.

Gold is NOT pricing in hyperinflation. Gold is money and money is king in deflation. Gold was king in the 30s across the world. This has NOTHING to do with inflation fear. ZERO.


Thu, 08/18/2011 - 10:49 | 1572962 Spitzer
Spitzer's picture

Gold is pricing in hyperinflation. Enough inflation has already happened for hyperiflation to occur.

Thu, 08/18/2011 - 13:01 | 1573610 pods
pods's picture


But hyperinflation could be caused by inflation or deflation.  

In the inflation side, it would be the loss of confidence in private holders due to seeing inflation.  Governments love inflation, so it would be the public loss of confidence that lights the velocity fuse.

In a deflationary-hyperinflation the governement would resort to raw money printing to save the pricing system to stave off deflation.  

Either way it would be a loss of confidence that caused the currency crisis. I think that even having "inflation" in the name causes the confusion, as hyperinflation is a run on the currency into anything other than the currency.


Thu, 08/18/2011 - 14:27 | 1573936 Calmyourself
Calmyourself's picture

"velocity fuse" nicely put, I am  gong to steal that..

Thu, 08/18/2011 - 14:12 | 1573892 Randy Kruger
Randy Kruger's picture

Most assets are still deflating, even as denominated in fiat (never mind gold).  Hyperdeflation is a political impossibility, so long as we live in a somewhat pluralistic society. 

The sequence ahead of us seems to be continued deflation snapping into hyperinflation.  Gold is aniticipating this endgame and benefitting from it somewhat.  The main driving factor behind the current run, however, is not anticipation of inflation but disenfranchisement with savings opportunities, with real yields on cash negative.

In the early 1980's, Volcker had successfully ended the gold run by raising rates, thereby creating a viable alternative for savings.  This is not a policy option today.  There is little else that can terminate a gold run as denominated in fiat under the current circumstances.

Thu, 08/18/2011 - 11:01 | 1573010 Smiddywesson
Smiddywesson's picture

Oops, I thought you were saying gold was going to collapse, so my comments in the other thread were misdirected.  Sorry

Thu, 08/18/2011 - 10:17 | 1572746 Waffen
Waffen's picture

Hyperinflation is end game.

Thu, 08/18/2011 - 10:28 | 1572831 Hubbs
Hubbs's picture

I can see you are biased towards hyperinflation by the inflation of those things on your avatar.

Thu, 08/18/2011 - 10:18 | 1572750 the not so migh...
the not so mighty maximiza's picture

hyper indigestion

Thu, 08/18/2011 - 10:22 | 1572793 Arrowhead
Arrowhead's picture

I just threw up a little in my mouth

Thu, 08/18/2011 - 10:18 | 1572755 oa92000
oa92000's picture

gold is money, government bonds is money., they want both...

Thu, 08/18/2011 - 10:19 | 1572758 lolmao500
lolmao500's picture


Thu, 08/18/2011 - 10:19 | 1572759 LoneStarHog
LoneStarHog's picture

Hyperinflation in life-sustaining items and hyperdeflation in everything else...and...NO, housing is NOT the first but the latter.

Thu, 08/18/2011 - 10:27 | 1572821 j0nx
j0nx's picture

It's called hyperbiflation and it is the scenario which I have been predicting for 3 years now. It is the only possible outcome for numerous reasons, at least until a full out governmental collapse.

Thu, 08/18/2011 - 10:19 | 1572760 Youri Carma
Youri Carma's picture

It's called STAGFLATION - a situation in which the inflation rate is high and the economic growth rate is low.

Thu, 08/18/2011 - 10:21 | 1572783 AngryGerman
AngryGerman's picture

it's called a major fuckup, that's what it's called

Thu, 08/18/2011 - 10:29 | 1572834 Dr. Richard Head
Dr. Richard Head's picture

The Bernank was the pioneer of the fiat donkeypunch.

Thu, 08/18/2011 - 12:35 | 1573517 Ace Ventura
Ace Ventura's picture

Vote for awesomest comment of the day. I'm still cleaning up the coffee I spewed when I read it. LMAO!


Thu, 08/18/2011 - 10:27 | 1572818 Spastica Rex
Spastica Rex's picture

What's it called if the growth rate is negative?

Thu, 08/18/2011 - 10:29 | 1572838 Dr. Richard Head
Dr. Richard Head's picture

Jamie Dimon's wet dream?

Thu, 08/18/2011 - 10:31 | 1572855 LFMayor
LFMayor's picture


Thu, 08/18/2011 - 10:43 | 1572939 pods
pods's picture


Thu, 08/18/2011 - 11:09 | 1573073 scatterbrains
scatterbrains's picture

Bullish for malls and shopping centners.. when you don't have a job and your sitting around bored, go shopping.

Thu, 08/18/2011 - 11:38 | 1573231 Youri Carma
Youri Carma's picture


Thu, 08/18/2011 - 10:36 | 1572894 Herne the Hunter
Herne the Hunter's picture

Only this time, inflation is limited to prices, not wages.

Thu, 08/18/2011 - 12:28 | 1573494 Citxmech
Citxmech's picture

I prefer our comrade in arms newly cointed term:  "HyperBiFlation."

Thu, 08/18/2011 - 10:19 | 1572763 speconomist
speconomist's picture

BIFLATION bitchez!

Thu, 08/18/2011 - 10:19 | 1572764 Dr. Engali
Dr. Engali's picture

Personally I feel that you have the rush to treasuries as the last paper asset for safety. This will end badly too when the dollar finally collapses. Gold is the right play.

Thu, 08/18/2011 - 10:51 | 1572970 Spitzer
Spitzer's picture

The Austrian definition of inflation is the expansion of the money supply. If the Fed wrote a check to me and you for 800 billion dollars today, that would be an expansion of the money supply(inflation). The moment we spend or invest the money is when the inflation is noticed. If we slowly bought treasuries over the next 5 years(assuming there is no run), consumer prices and commodities would not go up. There would be minimal realized price increases(realized inflation). If we spent or invested it all on commodities the day we got the money, there would be realized price increases right away. If we wait 2 years and then spend or invest in commodities, there would be realized price increases in 2 years. The fact is, the inflation happened when the check was written.

The inflation in the US already happened. There doesn't need to be any more money printing for hyperinflation to occur. There only needs to be a reallocation of the inflation that already happened. A loss of confidence the inflation that already happend, a loss of confidnce in treasuries.

Thu, 08/18/2011 - 12:06 | 1573379 tictawk
tictawk's picture

Youre correct, the inflation has already happened.  But that inflation is in CREDIT.  When bond holders decide to dump bonds to get liquid, DEFLATION will occur as that will be the start of the DEFAULT cycle.  Debtors cannot afford higher interest rates now so they will start to default and credit dries up.

Thu, 08/18/2011 - 12:26 | 1573481 Spitzer
Spitzer's picture

When bond holders dump bonds, they have cash that they need to do something with. Lots of it.

Thu, 08/18/2011 - 12:06 | 1573380 tictawk
tictawk's picture

Youre correct, the inflation has already happened.  But that inflation is in CREDIT.  When bond holders decide to dump bonds to get liquid, DEFLATION will occur as that will be the start of the DEFAULT cycle.  Debtors cannot afford higher interest rates now so they will start to default and credit dries up.

Thu, 08/18/2011 - 10:19 | 1572768 shazbotz
shazbotz's picture

Run for Cover!



Thu, 08/18/2011 - 10:19 | 1572769 Franken_Stein
Franken_Stein's picture


Kill or cull.

Rien ne va plus.


Thu, 08/18/2011 - 10:19 | 1572771 Caviar Emptor
Caviar Emptor's picture

Nope. We still get Biflation. There won't be hyper anything because the economy is now global. We'll get a little more of both: More deflation of incomes, real estate, retirement assets BUT we'll get a little more inflation in the cost of living, working and doing business. 

That alone is enough to prolong the economic depression in developed countries. 

Thu, 08/18/2011 - 14:22 | 1573924 Randy Kruger
Randy Kruger's picture

You are describing a wet dream of many in the global political establishment, as spewed out by the media propaganda.   Globalization has increased vulnerability of the system as a whole, not the other way around. 

The reality is that the situation is going to spin out of control economically, politically, and militarily.  For all the conspiracy theories circulating, the world truly lacks a global enforcement mechanism that will contain the situation.  

Thu, 08/18/2011 - 10:20 | 1572774 digalert
digalert's picture

We need a TOTUS broadcast NOW!

nah...never mind

Thu, 08/18/2011 - 10:23 | 1572799 LoneStarHog
LoneStarHog's picture

Please don't interrupt him with silly things like crashing global markets.  He is too busy choosing between a chocolate or vanilla cone.

Thu, 08/18/2011 - 10:20 | 1572776 GetZeeGold
GetZeeGold's picture

Welcome to arbitrage hell.

Thu, 08/18/2011 - 10:20 | 1572777 baby_BLYTHE
baby_BLYTHE's picture


Gold is now the world's defacto reserve currency, this is not 2008.

Thu, 08/18/2011 - 12:06 | 1573378 Vic Vinegar
Vic Vinegar's picture


I am a sick child with a terminal disease.  I contacted the Make-a-Wish Foundation to let them know of my one wish in the world.  That wish is to receive baby_BLYTHE’s comments directly to my iPhone.

They said I should see you about that wish.  Make it happen, buddy.

Alternatively, BB, if you are on twitter let us spacemonkeys know!

Thu, 08/18/2011 - 10:21 | 1572784 ffart
ffart's picture

The way I see it, even in a "hyperdeflation" the US would have to default on its debt sending the dollar into a shallow grave. Gold+silver is a can't lose proposition.

Thu, 08/18/2011 - 10:22 | 1572791 Global Hunter
Global Hunter's picture

I will just paraphrase Rick Santilii a few minutes ago taking some stupid Bernank mouthpiece to task "yea prices go up but nobody can afford them because they're making less".  The women in question said that Bernank had lots of options to make the economy better and he carried a big stick at the Federal Reserve and carries the biggest intellectual stick.  Forget the stupid women's name but she's in for a surprise.

Thu, 08/18/2011 - 10:22 | 1572794 firstdivision
firstdivision's picture

What about "hyperstagflation"?

Thu, 08/18/2011 - 10:23 | 1572801 Caviar Emptor
Caviar Emptor's picture

You're getting a little closer to the truth: Biflation

Thu, 08/18/2011 - 10:28 | 1572830 Spastica Rex
Spastica Rex's picture

Hyperbistagflationary soft spot.

Thu, 08/18/2011 - 10:22 | 1572796 Caviar Emptor
Caviar Emptor's picture

Omg is this the joke of the day!!

Arthur Laffer, "The Father of Supply-Side Economics" on CNBS interview this morning: 


Arthur Laffer, Laffer Associates founder/chairman, who adds that very high income people are more elastic with respect to their income and the government will actually lose money by raising tax rates on them. Raising taxes on lower income earners will bring more money to the government, he says

Also calls Buffet a hypocrite for wanting higher tax rates for billionaires!

Thu, 08/18/2011 - 10:25 | 1572809 falak pema
falak pema's picture

He looked at his curve and it spoke to him like the Oracle. What else can he say!

Thu, 08/18/2011 - 10:31 | 1572841 Caviar Emptor
Caviar Emptor's picture

They're all coming out of the woodwrok this morning! In a related piece: 

In a recent New York Times op-ed article, Warren Buffett asserts that the super-rich do not pay enough taxes. He suggests that any new budget deal should raise rates on the super-rich, especially on their "unearned" income from interest, dividends and capital gains.

Buffett is wrong. Bad government policies play a major role in generating inappropriately high incomes, but singling out the super-rich is misguided. And the policy Buffett criticizes most -- low tax rates on capital income -- should be expanded, not eliminated.


Thu, 08/18/2011 - 10:32 | 1572857 notadouche
notadouche's picture

No matter what else this guy says or does, he has gained my respect by coming out and calling Buffett exactly what he is.  He is a hypocrite, he is a shylock,  see Goldman and  GE terms.   I'm sure Becky Quick was fuming.

Thu, 08/18/2011 - 10:34 | 1572880 Caviar Emptor
Caviar Emptor's picture

Yes, true. But this piece reveals that his "Scientific" Laffer Curve is in fact pure politics: let's pay for lowering my taxes by raising your taxes

Thu, 08/18/2011 - 10:59 | 1573014 notadouche
notadouche's picture

I'm blinded by my dislike of Buffett, or I should say the way the media fawns all over this guy.  He now wants pledges and he wants everyone to pay higher taxes, yet he has stated he will give his wealth away before the government can get it.  It's good for every one else to pay taxes, just not him.  If he feels so strongly, there is no law about giving the government more money, other than what his tax bill is.  Maybe he should take zero deductions and pay a much higher bill.  He's got so many billions.  If he so strongly wants taxes raised, he could give a billion or two to the govenment and never miss it.  I don't know about this Laffer fellow except the unfortunate last name when you want to say something seriously, Laffer is probably not a good handle to have.   I'm waiting for Buffett to come out and try to jawbone gold down again as he is want to do.

Thu, 08/18/2011 - 10:22 | 1572798 Flakmeister
Flakmeister's picture

Long Au, Ag, oil, NG cash flows, fertilizer, convertibles in the resource sector, energy infrastructure MLPS... let the chips fall where they may... Don't get too cute about where the shitshow is going, you will more than likely misjudge the timing...

Thu, 08/18/2011 - 10:34 | 1572882 trav7777
trav7777's picture

ditto...but the moves lately are UGLY even in this space

Thu, 08/18/2011 - 10:42 | 1572929 Flakmeister
Flakmeister's picture

Yes, it has been volatile...The cash being spun off the MLPs helps...

Thu, 08/18/2011 - 12:53 | 1573583 Variance Doc
Variance Doc's picture

This.  Oh, and ammo too.


Monorail, monorail, monorail....

Thu, 08/18/2011 - 12:56 | 1573592 Flakmeister
Flakmeister's picture

Got me a semi-automatic 30-06.... not that it will mean shit if things really get bad...

Thu, 08/18/2011 - 10:23 | 1572800 Spitzer
Spitzer's picture

An inevitable nominal rise in the price of gold over 10 years while world monetary aggregates have gone parabolic, while the Feds balance sheet has doubled is sure as hell not a bubble. It is barely worth calling a bull market.

The 30 year bond bubble is ending like most bubbles do, irrational exuberance.

Thu, 08/18/2011 - 10:25 | 1572810 Caviar Emptor
Caviar Emptor's picture

Don't think it was so irrational, considering the level of fear and risk with alternatives like equities: when fear of defaults are in the air, people just want return OF capital

Thu, 08/18/2011 - 10:23 | 1572803 falak pema
falak pema's picture

inflate to the moon and put six pence on doom. I bet Bernanke is waiting to get the green light to hit QE button. Dow at 10000 will be the red light changer currently imposed.

Thu, 08/18/2011 - 10:25 | 1572808 shazbotz
shazbotz's picture


Radioactive Hydrogen Leaking From Connecticut Power Plant

A radioactive hydrogen is leaking from a US nuclear plant into soil and groundwater has reached the nearby Connecticut River, according to health officials.

State Department of Health Commissioner Harry Chen said water samples from the shoreline near the Vermont Yankee nuclear plant last month tested positive for small amounts of tritium, a radioactive isotope of hydrogen which has been linked to cancer when ingested in large amounts.

Governor Peter Shumlin wants more wells to pull contaminated water from the ground on the Vermont Yankee site. He says he is 'very concerned'.

Tritium has leaked from nuclear plants around the country before. It is particularly problematic for Vermont Yankee as it seeks to renew its licence.

New Orleans-based plant owner Entergy is suing Vermont in federal court over the state's efforts to shut the plant down.

Thu, 08/18/2011 - 11:24 | 1573167 MachoMan
MachoMan's picture

Throw me in the +tritium camp...  love those night sights.

Thu, 08/18/2011 - 10:26 | 1572813 Dr. Richard Head
Dr. Richard Head's picture

Fed's actions to support bond market while suppressing gold/silver market ensures HYPERINFLATION!!!!!!!!

Thu, 08/18/2011 - 10:27 | 1572822 franzpick
franzpick's picture

DAX down 6.85%.  Six point eightyfive%. Had to clean my glasses to confirm it.  ^GDAXI

Thu, 08/18/2011 - 10:27 | 1572823 chrisd
chrisd's picture

As long as equities begin to price in one or the other - I may have to check with CNBC, but both are bad for forward operating multiples I think. 

Thu, 08/18/2011 - 10:28 | 1572826 Debtless
Debtless's picture

It's time to sharpen your torches and light your pitchforks. 

Thu, 08/18/2011 - 10:28 | 1572827 alien-IQ
alien-IQ's picture

I'll take Hyperdeflation with civil unrest and a side of anarchy...and can you make that to go?

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