From Negative 5Y5Y To $2200 Gold?

Tyler Durden's picture

For the first time on record (based on Bloomberg's data) 5-year / 5-year forward inflation expectations turned negative today. This kind of deflationary impulse has occurred twice in recent years and each time has been accompanied by dramatic Federal Reserve easing. The anticipation of the move by the Fed has caused Gold each time to surge higher on yet more expectations of the fiat-fiasco unwinding. Given the 5Y5Y inflation print currently, we would expect action from the Fed and one could argue that this would cause the price of Gold to rise to $2200 per ounce as the deleveraging continues.

The red arrows show the deflationary impulse (5Y5Y inflation is inverted) and the orange curve arrow shows the reaction function post Fed reaction to the blue arrow levels of the deflationary impulse.


Chart: Bloomberg

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veyron's picture

Who else is buying gold hand over fist?

nope-1004's picture

Fed is in a conundrum.  No easing -> markets tank, pensions tank, financials tank, insolvency shows.  Fed eases -> inflationary pressure builds, PM manipulation has to increase, JPM swaps further exposed, and Ben exporting inflation becomes a defense dept problem.  Other nations not impressed, but neither are most awake US citizens.

It's all Bush's fault anyway, so who cares.  "Hope and Change!"


Mark123's picture

The problem goes wayyyy back before Bush, Reagan, Carter, Nixon etc....they all just played their part in a very well organized looting of the incredible wealth that was America.


The only difference with Obama was that some people initially believed he was an outsider that beat the 2 party selection system since he was black.  Turned out he was as bad as all the rest.  In my books that was the last chance we had to turn things around.  All Obama did was to signal full speed ahead.

RockyRacoon's picture

...wayyyy back before Bush, Reagan, Carter, Nixon etc....

Maybe it's just me, but I see some common denominators in all those administrations.  A shining example of that common factor would be Larry Summers, et al.   The same folk are leading and operating the parade.  All we see are the fools waving and grinning from the floats.  They throw us a cheap string of beads now and then just to distract us.

nmewn's picture

"Maybe it's just me, but I see some common denominators in all those administrations."

No, it's not just you Rocky.

What is needed is common sense, not pinky fingered extended, pedigreed prima donnas with awards and plaques hanging from their walls.

Government can no more spend what it doesn't have to spend than families can...not on a long enough timeline anyways. Debt must be extinguished/written off or paid...and the government crossed the threshold of paying it off a long time ago.

So now, who among them has the cohones to tell the Ben Bernank that the bonds they bought are now worthless? ;-)

FeralSerf's picture

Bernanke knew those bonds were worthless when the Fed bought them.  They were just window dressing to show the public they really weren't just giving the money to their banking friends which is what they were doing of course.

DoChenRollingBearing's picture

@ veyron and the whole ZH gang.

I bought gold just today.  Eating my own dog food!



+ 1 to all above comments.  Lots of blame to go around, though some have caused more damage than others.

living on the edge's picture


You are out of control buying all that gold and I wish I was there buying with you again. Be well...

PS. I am buying too..



Alpo for Granny's picture

I am eating my own dog food too sonny!!!!

BKbroiler's picture

bring on the junks, I just don't buy it.  Obama was handed the keys to a lamborghini on cinderblocks.   Rob the place blind, split with the money and blame it on the black guy, totally original.  He is a politician, and he does pander, but I truly believe he wanted to do good.  There's just no room for that shit in the world today.

tarsubil's picture

I believe he might have honestly wanted to do good up to the community organizer task of finding union workers from a closed plant jobs. People that sat at a press and pulled a knob got paid 35-40 an hour and they had no real job skills. Obama realized then that everything was a total joke and sold out completely for the benefits. He doesn't give a shit and he hasn't given a shit for a long time.

BKbroiler's picture

People that sat at a press and pulled a knob got paid 35-40 an hour and they had no real job skills

Agreed there, but the flip side of that coin is competing with 30-40 cents an hour overseas.   Unions keep stupid people employed.  Yes, it sucks and makes no sense in a purely capitalistic system, yes it's socialist, but you all have a stupid brother, sister or cousin.  That guy.   What are you gonna do with him?  He'll cost society more in entitlements or in jail than in union dues.   There will always be the slow, the dumb, the mediocre, and they will always make up more than 50% of the population.  You can't theory them out of the equation.  It's either school, work, or jail, or someone's couch. Beat down the unions down but don't kill em.

tarsubil's picture

Did you read the part about the plant closing down and the people losing their jobs and being unemployable?

dark pools of soros's picture

The police and government unions are by far more corrupt than any private unions. 

Look at the non-union jobs, the outsourcing of them are at a ridiculous pace and for what? Short term gains and bonuses? 

Everyone wants to be a plantation owner again with a team of slaves and child labor

Globalization can suck my dick




Diogenes's picture

I've worked in factories and all I can say is, if the so called smart people in charge were as smart, honest, hard working and as good at their jobs as the union workers we would not be in this mess now.

Oracle of Kypseli's picture

People are on to you and unions.

Wisconsin's governor won recall election overwhelmingly tonight.

kralizec's picture

Wisconsin's governor won recall election overwhelmingly tonight.

By 7 points, the outfits predicting a 6-8 point margin were dead on, and The Regime knew it, which is why they didn't send in Duh Wun to get tainted by trying to support Barrett.

Ookspay's picture

socialism is expensive and unsustainable

Machination's picture

Hey BKbroiler are you really that ignorant?

There is a complete difference from "wanted to do good" and "told everyone he wanted to do good", he did the latter.  From his actions it is clear there was no intent to carry through on what he said, he was either 1) lying when he said it, or 2) a complete sociopath and prone to 180 degree swings in all his core beliefs at any momment for no reason, or 3) is not the one making the decisions, and is doing a very fine acting job.  I am going to give him the benefit of the doubt and go with #1.

Now as to your analogy, you forgot to finish it so I'll do that for you:

  • Obama was handed the keys to a lamborghini on cinderblocks.
  • The wheels and tires were being used in overseas "theaters of conflict", instead of driving economic, social and educational infrastructure in his front lawn.
  • Instead of getting the wheels back, he proceeded to gut the wiring harness (the constitution), take it to the pawn shop, and get pennies on the dollar for it, take the money and buy more wheels and tires for use in overseas "conflict theaters".  
  • He then proceeded to take a loan out on the car from the mob, and use some of the proceeds for even more wheels for "conflict theaters" and the rest he dumped onto a new paint job because his paint shop buddies were going out of business (banks).  
  • Then he went back to the lenders and said look, the car looks fantastic with this new paint job, better up the loan capital you front me for this car.  Then took that money, threw more money at "conflict theaters" while simultaneosly gutting the undercarriage. 

And here were are today, the banks have been bailed, citizens fleeced, the defense budget is bloated as ever, and funny enough, Obama did nothing that he said he would do while on the campaign trail, he did the total opposite.  He is a professional politician...go figure.


Ookspay's picture

+ 1000 -Fucking Brlliant!

The Monkey's picture

The biggest open market purchases may be ahead, but that doesn't mean they will do much of anything.

GernB's picture

With all due respect, there was nothing in Obamas past to indicate he would be even slightly fiscally conservative, much less more fiscally conservative than Bush. Just the oposite, as an admirer of Rules For Radicals and critic of capitalism, he seemed much more likely to want to crash the system so he could engender revolt and get the fundamental change he was constantly referring to.

ultraticum's picture

And the New Years Eve NDAA signing is how he crushes the "revolt" you mentioned he engenders? 

Just another authoritarian Fascist, but this one's wearing Acorn Marxist clothing.

Ranger4564's picture

I didn't want to spoil the surprize, but since everyone is guessing and embarrassing themselves, I decided to step in and reveal the truth.  Obama is really an Occupier on Wall Street, but we sent him to Washington to pass all those unconstitutional laws, to throw off the banking cartel nutjobs, who just want to cheat / steal / smirk... looking at the comments here, I think that tactic worked.  No one but you suspect O is an occupier.  Please don't tell anyone else or you'll ruin the master plan, a surprize communist takeover of government.  We have a new flag ready.

You're right that his history suggests a different outcome, but it turns out He's a freaking right wing capitalist nightmare, masquerading as a left wing commie bastard, so that the right wing go even more nutso right.  His job is to drive the nation to the far right, and good god it worked.  Every American hates every other American, and can't wait to dick the first jerk he comes across.  Women too, this is an equal opportunity dicking. The fiasco is so blatant, the far right is robbing us blind, complaining about left wing entitlements, spins everyones head around, they continue looting. 

They're distracting you and everyone else.  They have initiated a class war, but they have you and others fighting over scraps.  They're watching, laughing, as we quibble over how much so and so doesn't deserve their wage, while they're sitting pretty giving themselves raises on raises on the bonuses they collected, while firing tens of thousands, and otherwise stagnating the global economies.  Please for god's sake, focus your frustration and anger against the oligarchs / wealthy bankers who are stealing, defrauding... you can deal with the union workers later, if we still have a union.  Get a grip people.

Clashfan's picture

I'm not sure what you mean, Ranger, with words like communist and capitalist above. I do think, though, that this is class warfare. I do think one of the reasons why I'llbombya has been thrust upon us is to help the divide and conquer distraction as you indicate. I do wholeheartedly agree with your conclusions. I am glad to see someone on this site pointing this out.

Ranger4564's picture


Obama presented / presents himself as a man of the people, and is often criticised for being socialist, but he's actually a right leaning, capitalist enterprise supporting plant.  In addition, don't get fooled by things like the health plan, it's the same timebomb as was NAFTA... brought to you by another popular scumbag... with NAFTA, even though millions of people opposed the plan for the correct reasons, even though millions predicted the outcome, the oligarchs pushed that policy through and we're where we are.  Everyone knew what would happen, even though the oligarchs claim no one could have known.  And similarly, millions opposed the health plan, for the wrongish reasons this time... people do deserve a lot of things for being alive, because we as a society can provide those things... we just need to put that as our focus and that sort of support is achievable... but lots of people worried about expense, and that concern was corrrect but misplaced.  The reason the health plan passed was not to insure the poor, it was to rob the middle class insured people of even more money.  Insurance premiums went up 25% first year and 40% second year, or vice versa, for me, for example.  No improvement to health care for anyone, reduced benefits to me, higher cost to me.  What's the lesson?  This was an engineered heist to exrtact money from the insured, to shovel it to the insurance companies. So it's not a health plan, it's a wealth plan, their wealth.  Which unemployed family can afford $500 / per mo / per pers premiums?  That's the gist of the health plan.

People need to start reading between the lines, as I've said, the truth sits behind the lies.

hoos bin pharteen's picture

The righy word is "feudalist.". The difference is that lefties claim to support the "common man" and the righties at least, where hypocritical, just lie about whether the playing field should be even.

Ranger4564's picture

What is Feudalist?  If you're saying the system they're reconstructing for our benefit is feudalism, you definitely don't need to educate or convince me of that, I've been saying that for over 10 years.  Probably longer.

I know what the argument between the left / right ideologies are.  I don't know what people think is happening or think I said, but I stand by what I wrote... i.

Dr Paul Krugman's picture

It isn't just about the markets, although they play a role because of internal funding mechanisms such as pensions, etc.  It is about getting out of a recession, and as I have been declaring for quite some time, the way to spur growth is to keep markets liquid while we recover.  And the way to do this is through government spending.

Government can provide the ways for the means.  By future revenue we can solve the economic problems now.  Without the present, afterall, there is no future.  We must make our future by using the policies that have always solved the problems.  Grow now, and pay later.  Without growth now, their is no later,and by that time we will have recovered and can pay for the growth.

Of course government spending has risen, but obviously not enough.  The Federal Reserve Bank has pushed things along, with the help of the Treasury, but this is the world's greatest economy, not some tin can.  We must create growth now, or else suffer the consequences.

Deflation would be an end all to the recovery we have hoped for.  We must fight deflation tooth and nail.  Now that Europe is affecting the U.S. we must remedy the problem by lifting the U.S. up above, and this will help Europe's problems too.  No, we can not solve their problems for them, but we can help, and by helping ourselves.  At the very least, we can not sacrifice our future because we didn't do enough, and also because of Europe's policy mistakes.  We must create growth, and we must do so now.

Umh's picture

If it's not you then good job. If it is you then why don't you read some of the comments here and learn something.

RockyRacoon's picture

The name, avatar, and views all match.  What are we to conclude absent a /sarc?

MsCreant's picture

Same puppet master as MDB.

Bay of Pigs's picture

This guy is halarious. Definately <sarc>, probably one of the Tylers having some fun.

Likstane's picture

Nah, just another hack.  The word 'there' is mis-used in the second paragraph.  These intellectual types pride themselves on using correct grammar and syntax, even if they can't figure their ideas are hogshit.

Clashfan's picture

Good eye, Likstane. I was going to point that one out. There (yes t-h-e-r-e) are other errors, too, that indicate that this poster is an im-poster.

Missiondweller's picture

Bullshit. Let the markets clear.

There's a reason nobody talks about the depression of 1920. The market was allowed to function.

Artificial spending just prolongs the pain of deleveraging and our social safety nets are not set up for a 10 year deleveraging, its set up for brief recessions/depressions.

Bicycle Repairman's picture

In 1920 they let the markets clear very early in the "game".  To do it now would be worse than 1938.  I'm not saying not to do it, but I am saying this is decidedly not 1920.

jeff montanye's picture

particularly true of the too big to fail banks/counterparty risk syndrome.  if the banks don't know who is solvent, and they don't, lending for efficient, practical purposes cannot happen so puts off organic recovery.

for twenty years plus japan tried what the u.s. and europe are trying.  it did not work/has not worked.  in a similar banking crisis the nordic countries did real reorganization of banks and recovered (and got back all of the government expenses) in five years.  

government has a crucial economic role in this crisis, just not the incredibly stupid one the u.s. and europe have taken on for themselves.  if one can't figure out the future, at least learn from history. 

Everybodys All American's picture

You call it growth when in reality it is all inflation. This Keynsian growth plan is nothing more and nothing less than printing and is debasing the US dollar which is going to eventually end up in hyper-inflation. Good luck then...


We must create growth now, or else suffer the consequences.


Dumbest post ever! What would you produce besides air? There are NO factories in the USA. They are OVERSEAS working for .50 an hour. Can we do it for .40? LOL. There is no Future, lets collapse everything already. we''ll sort it out later.

Oldrepublic's picture

50 cents an hour is not correct for China;

base salary of Foxconn employee is around $4.35/hr;

average state employee gets $3.48/hr 2011

average private employee gets $1.96/hr 2011

prole's picture

Hey what's wrong with you Old? You're not keeping to the narrative!!

Don't you know? Foxconn BAD!! Foxconn human slave labor bad!! Apple Bad!! Expoiting slaves BAD BAD BAD!!!

OK are we all back on the same page again?

/Sent from Iphone

Beam Me Up Scotty's picture

You can only pull so much future demand into the present. If I dont need a new car until two years from now but you force me to buy it today, then I won't be making a purchase in two years. Where does that leave the economy? All you advocate is a bigger house of cards. The bigger they are the harder they fall!!

trebuchet's picture

Pardon my naivete but why would deflation be an end -all to the recovery we hope for?

Becuase it would lead to a deflationary wage price spiral in an economy?

Or might it provide the much needed savings as the MPS of households expand, provding much needed capital to the banking system, while asset prices that matter to the average household such as houses  go through a much needed "correction" in value?

also,  please could you enlighten us about which economies collapsed from deflation compared to the number of economies collapsing rom hyperinflation?

Unique Snowflake's picture

Most people are so stupid that they'd cry like babies if the number on their pay packet went down, even if the goods and services they buy with it all went to zero. Inflation make more money richer.

FutureShock's picture

This is almost a logical argument for Europe they don't have the private sector like the US with the Gov. doing it all.  They will still bring a reckening in the future but arguably it could buy time for growth with deep austertiy and some fiscal sanity.

In the US this is flat out stupid. Cut Gov. spending and shrink the size of Gov. Term limits and end Union and Political Cronies, Let private sector take the ball in a stable enviornment.

Oh and end the Fed - Private elites are making all the interest money, we don't need this, google Colonial Script.



Soul Train's picture

Hey, this is in reply to "Dr Paul Krugman" :

Horseshit. Let's start with making sure that the crooks go bankrupt first, and quit having us bailing us the banksters, who have been in bed with the Fed and Washington DC politics for years. Once all the crooks are gone, then we start with a clean slate. We the people can eat rice and beans. The fat boys from Jersey, Long Island, Lower Manhattan and the Hampshires with their side mansions in West Palm can't survive. They wilt and die. Once the rats are gone, we the people take it back.

Let's let those organizations "too big to fail" go bankrupt, and get rid of the root of the problem. This means JPM, GS, MS, BAC, AIG, and all the rest of the crony money bite the dust. Goodbye dirt.

You think you are so smart. Get you head out your ass. If deflation means the end of the crony central planned mess we are in now, then bring deflation on. Bury the form of crony capitalism we have today.

Fight Club Rules.

shovelhead's picture

Sounds zany enough to be the real deal.

Ok, I'm in. Let's grab about 3 trillion and create hundreds of new Executive Branch alphabet agencies to move vast piles of paper through the system.

The untold amounts of resulting GDP from real Govt. wealth creation will allow us to give trillions more to fix Europe.

There. All fixed.

Please don't embarrass me by a Nobel nomination...

I do it only for your love and devotion.