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Hyperinflation Vs Hyperdeflation: Take Your Pick
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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roubini is right i'm afraid. gold performs because of fear of collapse of banking system in a deflationary environment
He's only partially right. And he has called gold a bubble about $500 ago
who listens to an economist's market calls?
who listens to an economist's market calls?
Hehe
Same as WTI back in 2008 when panicked investors didn't know where to put their money. It crashed hard and fast after a 10 year parabolic rise. Difference is that WTI is energy whereas gold is a store of value.
Roubini has also called for severe inflation back in 2009, during the still-stalled economy, and again in February 2011. I don't know what he's thinking because he does not even seem to know.
Deflation is the symptom, inflation is the Fed's cure. It's up to the Fed what continues to happen.
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FUBR by the Fed. Public hanging of bernanke (refuse to capitalize his name) for treason at 11 am est. Not "almost".
Don't forget Greenscam!
Both Greenspan and Bernanke have completely ruined this nation, two of the most destructive Americans that ever lived.
Are they both Jews?
yes they are. Should have listened to their brethren Mises + Rothbard rather than John Maynard "petophile" Keynes.
we would be a lot better off
Phil Gram ain't, and it was his (shared) legislation that paved the way....
Yup, we can villify administrators but it is our legislative and executive that create, feed, and reward these monsters. True, they are fed by other ogres much larger than themsevles but they are ultimately the ones that make or ignore the rules. Nothing is fixed until we take out these cage handlers.
There is not one single example in all of history of hyperdeflation in a fiat currency system.
If you can find one, please, enlighten us all.
Rather, we only really get deflation in gold and gold-backed currencies. In a severe enough economic collapse, you might get what you would call hyperdeflation, but again, that is in terms of GOLD ONLY. For example, there is that famous anecdote of an entire block of downtown buildings being sold for a single ounce of gold. Of course, I have never seen any evidence that such a transaction ever occured, so who can say if even that happened?
Hey TM... you spout some stuff about Ionic liquids and disappear... bad form
#1568420
Kudos on a valid, well reasoned argument. However, economies of scale are EXTREME in chemical manufacturing. What might cost $1000 a gram for ten grams costs $20 a gram for 100 kilos, or $2 a gram for 100 metric tonnes. Further, in this particular application, the ionic liquids are infinitely reusable to the extent that they are recovered.
Cross posted:
Lets assume that you can get it down to 0.25 per gram. The volume of ionic liquids has to at least 25% of the volume of oil to separate out.... A ton of oil is ~7 barrels, 2 million barrels of oil is 285000 tons, you need at least 70,000 tonnes of this stuff and at .25 a gram you get 6 billion dollars.... less than I expected, but I was very liberal with my cost and volume estimates....
From my mining experience, liquid recovery will likely top out at around 97% so there is a marginal cost factor....Given that you still have all the heavy equipment cost of mining the bitumen, oil would have be to very expensive to amortize the capital costs of the liquids....current tar sands infrastructure is ~$125,000 per bpd capacity. This adds an additional $71,000 of capital cost per bpd capacity assuming 0.25 per gram...
I wouldn't assume a floor at that level. Instead, you should look at similar products that are produced in great bulk (as this product would have to be). Think about a product more like acetone (where the price you quote is more like that of the bulk cost of an easily produced specialty monomer like HEMA which is used in contact lenses). Also remember that purity isn't really very important here, soemthing that cuts the cost even more. $500 a tonne (or 1000 L if you like) is more likely, with prices declining (in real terms) as time goes on. But that is just from my experience. If there are peculiar problems with this material's synthetic route, then it could bottom out much higher. However, there are a LOT of ionic liquids, some of which are bound to be cheaper and easier to produce than others.
Also, in tar sand applications, if they choose to mechanically move the sand, they should be able to put it into a container that would allow the sand to be washed with a bit of cold water, which will increase IL recovery to nearly 100%, according to Pitt researchers. Of course, pumping the stuff into (mostly) dead wells will give a lower recovery rate, probably much less than that 97%. I guess it mainly depends on whether the stuff floats or not.
Very nice job on calculating out the costs. It makes things much easier to work with real numbers. I think your estimate is probably a good one for the initial use of IL in oil recovery, but it will likely decline quickly to somewhere around my estimate.
Admittedly organic chemistry is not my strong suit, but the feedstock for the IL appears to be benzene or ethylbenzene. This puts a hard floor on any cost. As I expected a gallon of the feedstock is about the same cost as gasoline...
It may be viable, but I don't think it can increase the flow rate. It may be better enviromentally.
This is also a classic example of receding horizons, i.e. the feedback where the input costs rise as fast, if not faster than as the value of the product produced.
Edit: Good exchange... thanks.
Good point.
We are conditioned to look for what the market is telling us, but the interpretation of an overtly manipulated market is different from that of more or less freely traded market. There is too much money in existence to represent the goods and services available at current prices. The operative concept is that real stuff will be in short supply compared to what people with current money believe they will be able to buy.
A manipulated market could be easier to predict if you know who is manipulating it and what they are up to.
Legendary speculator Jesse Livermore said if he did not see signs of insider trading in a stock, he would not buy it. He reasoned that if the people who knew the company and its prospects best, did not want the stock, neither did he. Or, if it was a good stock and they did not have the resources to buy it, that told its own story.
Of course this was years before the SEC outlawed insider trading.
WTI-Brent is blowing out again $24.50 as I type.....
That is very interesting. Reminds me of the disparity between the price of physical and paper PMs. When the price of paper PMs plunge, the physical doesn't always follow.
Do you know what the record is for that spread, and when it occured?
Record was last week, IIRC it topped out just below $25... Clearly, a decoupling has occured considering the rules for WTI delivery once stated that Brent could be used at 0.50 discount.... Brent and WTI are essentially the same quality...
God, what joy to see the US financial empire collapsing. It may mean the end of the fuicking stupid wars sooner rather than later. They are all idiots in government now, and at the Fed, and on Wall Street. Greedy fucking idiots, and I rest easy cause I got the gold six years ago.
CIA actively selling Afghan opium poppy fields to the Russians
they've been involved in drug sales for over forty years
There is hyper-deflation of assets if you price in gold. We used to have gold backed currency so deflation was possible, but not anymore. Now we have paper dreams.
Depends on how you measure inflation/deflation. At 9% unemployment, no way that the current bout of fuel/commodity inflation will translate into wage inflation. Hence deflation. I'm seeing oil going to $50.
You think wage rises cause inflation? So, nothing to do with the trillions of dollars that the Fed is magicking into existance every year then?
Good grief.
No, no no... "inflation" happens when both income and prices rise. That's not the case right now (wages have been very flat for a long time). So no sustained inflation. If wages don't increase then prices (at least for non-essential items) will fall.
Do you think you can have an inflationary cycle with out wage increases? If all that money that's being shoe horned into the system doesn't get to the end consumer then the price of stuff and services is irrelevant. With out wage increases how is the money going to get to the end consumer, fall out of the sky and land on their head?
Good grief
OT: Funniest shit today from the unelected "president"
08-18 10:08: EU Council President Van Rompuy says we do not foresee a recession in...
"We are all stand-up comedians now."
What the heck is hyperdeflation?The fed is completely out of bullets.,because low interest rates only fuel the psychology that a depression is in the cards.We need to let the banks fail and then we can start all over.
"Hyperdeflation" is the cure to all of this, ironically. It is over in about a week if they would just fucking let it happen.
DOW/Gold is at 6.0
This all starts to recover when DOW/GOLD is 1:1 according to Bill Bonner, so plan accordingly...
All you "Hyper" boyz and gurlz are gonna be disapointed.
We won't see red, we won't see blue. We'll only get the hazy grey of Biflation. Where a bit more inflation and a bit more deflation in all the wrong places combine to crush the economy in the US and most developed countries. Won't be the same everywhere. Because of the nature of our current global economy, we won't see hyper.
Gold will keep performing as the ultimate hedge
I freakin Love it. Spread betting on Gold in US dollars so moves getting amplified, yet own physical bullion too + live in Ireland. So fingers crossed, I might survive to spend it too...MUHAHhahahhha MUAHhahahahhaha MUAHahahhahahha
The book "Gold, The Once and Future Money" describes in detail every step we are taking in this collapse. its like a crystal ball or.. book
Simultaneous hyperinflation and hyperdeflation. WHAT THE FUCK AM I READING?!
As the world's currencies all implode with such force as to turn them into black holes, remember the Four Media of Exchange (really seven, but work with me here):
Skills and knowledge first. Food and tools second. Silver and gold third. FRNs dead fucking last.
I gots mad skills.
Got preps? Amen, brother. Preach on.
Cramer taken "off air" this morning --- after colleagues call him out on his lack of credibility -hilarious
Hyperdeflation thankyouverlittle....
It's either no one knows... or both.
Gundlach last week said that he has positioned his company's holdings for both inflation and deflation... which should tell you something about the state of the markets.
My sense is that there are so many potential black swan events that may occur, that we could see both. Deflation can be fueled by collapse in global consumer demand (China is showing a slowdown, let along Europe along with the US). All we need to have happen at the same time is a collapse of SocGen, fall apart of Euro, or some other systemic event and all global liquidity starts to move rapidly driving up commodity prices for safe haven.
So far, we've seen the Germans and Chinese playing nice... all we need is a change in leadership, which could start to unwind matters, and watch how uncoordinated global economic policy would become.
Hedge gold with usd for safety ?
Your icon bugs me.
Seriously. What an asshole.
Learn to love again, raki_d!
I'm thinking it's going to be like this:
Both hypers hit--costs go up, assets lose value, nobody can pay for anything
Political upheaval on a global scale, fill in the blanks to taste
Repudiation of debt on massive scale, global economy freezes and fails
Local, regional economic systems begin restarting the engine, your guess as good as mine on the players or basis
The whole thing will take a generation at least to get to stable. But it will, in some form or another. There's just no guarantee who the players will be, and on what terms.
And yes, for us living through it, it will Suck Beyond Imagining.
Flash Robs will seem so quaint. Ah, the good ole days.
They may become impossible as we know it--good luck maintaining a 'modern' communications infrastructure under those conditions. Hell, any 'modern' infrastructure.
It's called STAGFLATION - A situation in which the inflation rate is high and the economic growth rate is low.
The reality since Ben Bernanke announced his QE2 policy in August 2010 is: http://usawatchdog.com/zero-interest-rates-lock-in-inflation/
• Unleaded gas prices are up 45%.
• Heating oil prices are up 46%.
• Corn prices are up 71%.
• Soybean prices are up 26%.
• Rice prices are up 13%.
• Pork prices are up 31%.
• Beef prices are up 25%.
• Coffee prices are up 38%.
• Sugar prices are up 48%.
• Cotton prices are up 13%.
• Gold prices are up 42%.
• Silver prices are up 115%.
• Copper prices are up 23%.
And guess what... once the economy tanks all these prices will fall.
Yeah, just like they fell in Zimbabwe, right?
"once the economy tanks"
Uh.
Look at your list, and think. Corn, soy, rice, pork, beef, etc. et al are affected more by weather and production than economic growth. Oil based products are a production controlled commodities. Any, and I repeat any, one thing made from oil is based on the cost of producing end products - which require chemicals, precious metals, and a slew of other manufatured goods. So the price of coffee, sugar and cotton and all other farm based comodities are *also* impacted by cost of production, which heavily relies on - you gussed it, oil. Fertilizer? Oil product. Deisel fuel for your tractor? Oil product. Diesel for your ship? Oil product. So on and so on, ad infinitum, ad nauseum.
Silver and copper are manipulated to hell and gone.
The one, and only thing that shows the true state of the hyperinflating US economy is the price of gold.
Got preps?
Tend to agree with those who see gold more as money than a commodity. It’s the only thing that has potential to protect you in either extreme condition, hyperinflation or hyperdeflation. No wonder dealers are trying to buy it from you on late night T.V. just as frantically as they are trying to sell you their worthless kitchen appliances. Gold, it really does store your wealth nicely. And, if you buy now, you get this inflation insurance policy absolutely free.
The Fed's current policy is for 'controlled' inflation, but the Fed has the power to slam things into reverse and let massive deflation play out. So, unfortuantely, it's all about the Fed central planners and what they decide.
Since the Fed acts in their own self interest, at the expense of everybody else, we have to start there. It's been said the Fed itself can actually go insolvent with the cards they currently hold because they've painted themselves into a corner, so this is a dangerous animal.
Scenarios are: If the Fed prints to infinity, losing WRC status, all the printing won't really matter and they're irrelevant and effectively out of business. But they could go the other way and dramatically raise interest rates, like Volcker did, but they will go broke losing money on all those low yielding UST they now hold, not to mention crushing member banks by crushing the economy and the real estate mortgages. (anybody got the actual analysis?)
So, looks like more of the slow drip of 'controlled' inflation will continue until an 'event' drives the USD into losing WRC, at which point there will be a banana republic style overnight devaluation of the USD (50%?), which will effectively be sudden hyperinflation, like in Belarus.
The politicians and the Fed will play the victim, scapegoating the external event to deflect blame from themselves, just like in every other banana republic.
The ASSumption being made here is (most people extrapolate the past into the future linearly) that the FED is in total control. In fact they are not. If they were, we would not have any declines in equities and the economy would be humming along like a fine tuned machine. The bond market is correctly calling deflation and in fact we are having deflation of assets across the board with the exception of equities that has started to decline recently. What the equity market did was absorb all the funny money that the Fed created over the last two years and nominal values of equities went up. This dynamic has now changed.
I think at some point here as the equity collapse progresses, the BOND market will start to drop in anticipation of perhaps the Fed attempting to monetize (as that might be their only option) bad debt but more importantly it will reflect a LIQUIDITY crisis. The drop in bonds on the long end will in fact RAISE long interest rates and will nullify any attempt by the FED. So as the liquidity crisis deepens, interest rates on the long end will go up as lenders become scared to lend and credit collapses. The Fed will be powerless to do anything at that point. It is only AFTER the collapse, the Fed may at the behest of government, attempt to monetize frozen liabilities but the major collapse will have already occurred and most of the debt wiped away. The debt to cash ratio in our system is about 50:1 which speaks to why the Fed is powerless in the big picture
The VP probably said something stupid over there.
Is this a suggestion to short both treasuries and gold? Why does that just feel wrong?
Hyperinflation is a simple negative feedback loop of lost confidence in the fiat.The lost confidence feeds on itself increase the depth of lost confidence.
The result is an accelerating.accelerating devaluation of the fiat.
It looses its value so quickly that people demand the value of the service they sell plus their estimate of how much the fiat will devalue by the next day/week...and so on.
What to look for is the phase shift period, the series of events that gives the first push into the lost-confidence linear accelerator. It is that short quiet period from when the wick goes out, and the thing explodes.
Its not about inflation. And hyperinflation is simply the effect of condidence dying.
Problem is the USD is not the only ugly fiat around. It has competition.
You can not have hyperinflation without wage inflation which is not going to happen so plan on delfation and corp profits falling massively.
Of course the Fed wants to say there is deflation because they can't afford to raise rates and pay out the TIPS so there HAS to be deflation or disinflation.
My other favorite precious metal is lead. Buy it in packages of 25. Very simple to exit the market out the end of a barrel.
A pack of 25 won't even get you out the front door. You'll need about 10 -- 15,000 packs a week. Teach your little girl how to fill a clip. If you do get to Walmart, I hope they're not out of Spam. God Bless.
Monetary inflation and asset deflation often go hand in hand. For example, nominal housing prices went up a lot in the 70s, but real housing prices actually decreased. Much of the "inflation/deflation debate" is actually people talking past each other without defining their terms. Dan Amerman has written cogently at length about this topic in a refreshingly non-polemical way.
I think we inevitably get hyperinflationary depression in the U.S. but not until the dollar loses reserve currency status. Until then we will continue to seesaw with bouts of deleveraging with China and the U.S. manipulating FX's to capture the lions share of daily sustainable production and distribution of resources. I think the U.S. is barking up the wrong tree in squeezing Europe as it is the U.S. that needs to reduce consumption to allow for a continuation of status quo growth in emerging markets.
I think Europe will eventually be forced to align with China against the dollar and that is when the hyperinflationary chips fall where they may. Within 2 years bitchez. I have for many years spoken to the lack of sustainability of our economic model but never put a time frame on it's demise. I am now saying the global economic model predicated on the U.S. dollar as worlds reserve currency will collapse within 2 years.
It makes sense to me. Treasury notes are the safest investment if your performance is measured in US dollars. E.g. a note that matures on May 6, 2023 for $1000 absolutely will be redeemed on that day for that price.
So if the stock market is dropping, fund managers are quite happy to invest other people's pensions and insurance premiums in "safe" US Treasuries, while putting their own savings into gold bars and farmland.
silverflation http://dont-tread-on.me/money-banksters-and-august-2011-%E2%80%93-the-co...
We are in a deflationary spiral. Interest rates don't collapse in inflationary environments. Gold goes up during deflation since the market anticipates government dilution of the currency to stave off deflation. During inflations banks don't run out of capital. In a credit driven economy the only thing to drive high inflation is increasing bank loans. Last I checked banks were sitting on their cash. Oh by the way, during inflation, banks don't sit on cash. The get rid of it and turn it into real assets
Count me in the deflation camp. Asset price deflation. I doubt consumer prices will significantly deflate.
It's both. Without intervention....Flight 93 (allegedly)
With intervention. Apollo.
But we all know Bernanke chooses to print. He chooses to print in this decade or any other. Not because they are hard, but because they are easy.
Who wins? All about timing.
It seems....until QE3 is greenlighted from the fed after political cover is given we need a bout of hyperdeflation.
When we print it will widly swing the other way, which is hyperinflation, even if the first legs are only recovering from 'losses'.
At some point, the madness stops....if the proper plans aren't in place, then things will further collapse. If the right plans are in place, we can easily recover. Much easier now than then.
The question is...will we get control of the situation by impeaching Obama, and all the bankster minions of the dem/repub/tea party BEFORE or AFTER they hyperinflation becomes extreme?
Of course they'll try to keep it from full on weimar, but it'll come nonetheless. Japan's equity market in the 90's-ish will seem very, very tame by comparison. Again, eventually weimar...worldwide! So much worse than the great depression. Because the monetary emissions will be coming from everywhere and infecting everything. Worldwide Weimar.
I say fuck it all. It's bullshit.
Pass Glass-Steagall and hold evey dumbass accountable until they do.
It's a sliding scale, the sooner we do this, the less the above happens. The longer we wait, the more of the above (and undoubtedly more than this good but not perfect explanation) will transpire.
Glass-Steagall: wipe away the fraud before either hit.
Printing won't work. Cutting won't work. Taxing won't work. Attack the problem. The problem is fraudulent debt. In our anti-american MONETARY system. (keynesian or austrian or other...just more left right small paradigm like but different and separate from repubs and dem debate....same type of debate...in another area).
http://www.marketwatch.com/story/sears-posts-wider-loss-it-shuts-29-stor...
More of the Great American Recovery!
Here's the problem in a nutshell.
If you hold 50 lbs of Gold and the shit really hits the fan and I hold a loaf of bread and a gun, who has the most valuable possession?
In the end it doesn't matter if gold is worth $8000 an ounce on paper because it is only worth what someone is wiling to trade you for it when you need to get rid of it. That is why I believe that all the central planers know what they are doing will not work in the end but they know if they stop the wheel from turning the only outcome is mass anarchy.
The years of debt fueled greed have given us the only outcome of WWIII. The elite class isn't finished with their middle east citadel and can't afford for the system to crash just yet. They know the protection is not in place for them to have an escape route and they won't make it out with their lives.
odds are most metal holders are armed as well.
see how long you last robbing everyone to survive.
i'm guessing it won't be very long.
Here's YOUR problem in a nutshell. Bread lasts one week. Good luck eating after you have nothing to trade.
Ultimately it doesn't matter whether ZH picks hyperinflation or hyperdeflation because this matter will be decided by the American Federation of Billionaires. The executive committee will be mailing out ballots next week.
The decision will be announced on Halloween.