This page has been archived and commenting is disabled.

Prominent Deflationist Schilling Sees Deflation, A China Hard Landing And 800 On The S&P

Tyler Durden's picture


When one compiles the annals of the great deflationists of the early 21st century, they will be hard pressed to decide who is deserving of the title most ferocious deflationist in a runoff between David Rosenberg and Gary Schilling. And while David did not have much notable to say today, despite his daily release of interesting and insightful commentary from his perch atop Gluskin Sheff, Gary Schilling took advantage of the media vacuum to appear on Bloomberg TV and preach, what else, deflation. Among the topics touched upon were the #1 issue du jour - the Chinese hard landing, presented earlier here, and the resulting collapse in copper, on bond market volatility, on investing and speculation, and lastly on the S&P, which just like Rosenberg, he see as deserving of a 10x multiple applied to a soon to be revised S&P 500 EPS of 80 (do the math). All in all sensible stuff except for one thing: his statement "Inflating away is an excess supply world is almost impossible, even for the Fed" leaves a little to be desired. While he may be spot on, it does not mean the Fed will not try. And try it will: we expect rumblings for full blown LSAP to commence in a few days, and QE4 in which the Fed will pull a BOJ and buy ETFs, REITs (in addition to MBS and Agency bonds) early in 2012, after which it will be time to quietly depart from these continental US, or else load up on lead, spam and precious metals.


Schilling on how much further the 30-year Treasury bond yield could fall:
"I think [the 3-year Treasury bond yield] might go back to 2.5%. That's where it was at the end of 2008 in the aftermath of the Lehman Brothers meltdown. That's my target for now. I think we are looking at deflation. As I said back then, I think that will be the media chatter by the end of the year. Plus, the weakening economy here and abroad. The long bond, the 30-year Treasury, is the ultimate safe haven in the world."
On why Schilling sees deflation on the horizon:
"In my new book, I identify seven different types of deflation. Now five of those are already in place -- we're having financial asset deflation, tangible asset deflation, commodities are coming down, wages are coming down. The one that hasn't kicked in yet is goods and services deflation. The point is that the whole world is really marking down assets. It's marking down the whole spectrum. I don't think goods and services are going to hold up in terms of inflation. I think that will move to deflation fairly soon."
On whether the Fed will decide to try to accelerate inflation:
"In effect, [the Fed] tried to do that with QE2. Because you remember at the time they were worried about deflation… That was one of the objectives. Of course, they spurred commodities, they spurred stocks and they got a temporary offset. But I think the forces of deleveraging in the world are greater than the Fed can handle. We're marking things down to equilibrium. Look at government sovereign debts around the world. They're much greater than taxpayers can handle. You either have to mark them down or get somebody else to handle them, like the Germans, or try to inflate them away. Inflating away is an excess supply world is almost impossible, even for the Fed."
On volatility in the bond market:
"In the portfolios I manage, we've maintained our 30-year bond positions. We haven't really changed them. We've changed them a little bit over time. When they got to 2.5% at the end of 2008, I said, we've gotten every pullback….It is awfully tricky to do this on a daily basis. At this point, I don't see anything that has fundamentally changed either in stocks or bonds. You have this volatility, this event-driven market. It's great for the latest news. Is Greece like to pass a law to tax itself or not? Markets jump up and down 100 points on the Dow. That is ridiculous. That is whipsaw. It shows a lot of day trading. It shows a lot of program trading. It doesn't show a lot of investing."
On other places to see a safe haven outside the Treasury market:
"There are some [safe havens] in the real estate area. We like medical office buildings. That's because of aging populations, the new medical health care bill, and improving technology. Also, 55% of physicians work for hospitals. Private practices with a storefront are disappearing. They're moving into campuses… Another one is rental apartments. People are deciding a house is no longer a sure shot investment. Prices can and do fall. They have, for the first time since the 30's…Rental apartments will continue to be very attractive."
On metals like gold, silver and copper:
"I'm agnostic on the precious metals. We have in our portfolios been short copper. Copper peaked out in February and it's down about 25% from its peak. I think it will go a lot lower. As you pointed out, copper goes into almost anything manufactured. It's a great indicator of global industrial production. What I think will really knock the pinnings out from under all commodities is a hard landing in China, which is what we're forecasting."
"[The Chinese] are trying to cool off a red-hot economy. They're worried about the property bubble and the high inflation rate. They are affecting a soft landing and with their crude economic tools it's tough. Bear in mind, the Fed, with more sophisticated tools, tried, by my reckoning, 12 times in the post World War II era to cool off the economy without precipitating a recession. They only succeeded once. What are the chances for China?"

On whether the stock market will go down: 
"I think it probably is [headed back down] because the economy here is slowing, and it's global and of course a lot of the S&P 500 companies have their earnings predominantly overseas. In that kind of environment, we're going to see disappointing earnings. The Wall Street analysts always optimistic, of course, crank down their numbers….If you put a ten multiple on it, we'd be at S&P 800."
"We had a big sell-off but I really suspect that this is a pause before things drop further."


- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Wed, 09/28/2011 - 16:26 | 1719561 GeneMarchbanks
GeneMarchbanks's picture


If I had a shilling for every time Gary called deflation!

Wed, 09/28/2011 - 16:40 | 1719624 Herd Redirectio...
Herd Redirection Committee's picture

"A world of excess supply"  EXCESS SUPPLY of what?  Fiat currency?  Debt slavery?  Yes, if there were bankruptcies there would be deflation.  But when the bankruptcy is the nation that has the world reserve currency, what then?  

Are all the (supposedly) sovereign nations going to declare bankruptcy, or monetize their debts.  The third option of balancing the books is politically off limits.  Cuts to the Pentagon/DoD/Defense budget are apparently out of the question, even when EVERYTHING else is on the table. No one knows for sure, other wise you could make a large amount of money from that knowledge, then again, there would be no other side of the trade, as either Treasuries would immediately plummet (if bankruptcy was imminent) or Gold would soar (if monetization on a large scale was/is imminent).

Check out the latest from the Capital Research Institute: "Consequences of a Trillion Broken Promises"

"Who doesn’t want to see America re-industrialized, and the Greece dilemma settled in a just and fair manner?   The people who have the most to lose, obviously.  The same people who made money outsourcing the Middle Class, the people who are making money as we speak from sweatshop labor in Vietnam.  People who lent the Greek government billions, and now want everyone, any one, to take their bad debts from them.  A 100 cents on the dollar, of course.

Which is ridiculous, the antithesis to what our society claims to espouse, evolution and capitalism.  Survival of the fittest.  Keeping your winnings all to yourself also means accepting  personal responsibility for your losses.  When a society allows losses to be socialized and gains privatized it is firmly in the hands of an Oligarchy.   So who lent all this money to the Greek government any way?  Well, turns out it was the financial institutions and governments of Europe!  French banks just could not keep their snouts out of the trough.  But who are the major investors in French banks?  The financial institutions of Great Britain, United States of America, and Germany!  Well doesn’t that just spell it out for you, why ‘contagion’ will not be allowed to spread?  Why losses on Greek debt must be ‘contained’ and prevented from ‘cascading’?"

Wed, 09/28/2011 - 16:56 | 1719711 Duffminster
Duffminster's picture

They will try to contain them but there are still some nations where Democracy is not fully corrupted, starting with Germany.  In Germany it seems evident (and according to their Supreme Court) that anything resembling Euro Bonds including the mirrage of the SIVs and the EFSF and their new convuluted Eurobond proxy will not fly with the people of Germany. 

Will the Fed return to QE 3, 4, 5, ... N.  Yes, but only after there member banks are even further on the ropes and there is no political will for TARP 2 in Washington with the influence of the Tea Party being so strong.  Long term, one would hope that the ruling banking (financial amalgamations) Oligarchy are not able to further pull the wool over the eyes of the people.  

Either way, in the end, even monetization will not succeed and as Fischer of the Fed has been discussing, the efficacy of monetizaton seems to become proportionally less effective as the monetization becomes a greater and greater percentage of all debt purchases and for that matter of any other asset class purchases. 

Long term, gold and silver become the global reserve currency.  Short term, everything gets sold, even gold and silver.  I'm not selling my physical precious metals but I did sell my ETFs and for the short term, my miners because China is looking really weak and especially its banks and the political grid lock in DC makes immediate bailouts look much less likely.

Wed, 09/28/2011 - 17:11 | 1719790 Comay Mierda
Comay Mierda's picture

CPI is running hot at 11.4% right now using 1980 methodology before the BLS suggested we can all eat dog food instead of real food and changed the methodology.  and this asshat is saying there's deflation.  How much does he get paid?  fuck him

Wed, 09/28/2011 - 17:40 | 1719836 flacon
flacon's picture

TRUTH is the enemy of the STATE! If the TRUTH were told there would be a revolution by tomorrow morning. The last duty of a Central Planner is to tell the TRUTH!


I have absolutely no doubt that the government will place in front of every American a beautiful steak dinner every day. Here's how:


1. Government visits this link:

2. Hit CONTROL-P (x300,000,000)

3. Fold paper and insert in envelope

4. Go to FedEx and mail the letters to all citizens




....OH, you wanted a REAL steak? That was NOT in the contract. It said "Steak Dinner" - here is your steak dinner. Now eat that paper and rejoice, fucker!

Wed, 09/28/2011 - 19:17 | 1720189 Ahmeexnal
Ahmeexnal's picture


A recently published book, by one of the most influential German newspaper publishers, is pleading for a transition toward "less democracy." The "voice of the people" and the "emancipatory Zeitgeist, putting everything into question," has too much of a "paralyzing influence" on current governance, writes the publishing house in its blurb for the book. The author therefore demands to "correct the system" for "more efficient policy making." These "corrections" must include the dismantlement of democratic participation.

The book, recently published under the title "Dare Less Democracy" is being heavily promoted by public broadcasting stations, for example the Westdeutsche Rundfunk (WDR), with close affiliation to the Social Democrats. For some time, influential circles of the German elite have been demanding dismantlement of democracy in Germany. The recently published book will bring this debate into a broader public.



Wed, 09/28/2011 - 23:51 | 1720794 Pinto Currency
Pinto Currency's picture


Gary Schil forgot to mention that when he is talking of deflation, it is of the price of goods measured in silver and gold.  From that perspective I totally agree.

He just had a seniors moment.

If you look at the 15 year chart here and can't see deflation, Gary has some special deflation glasses to sell to you:





Wed, 09/28/2011 - 17:39 | 1719879 Hugh G Rection
Hugh G Rection's picture

CPI 11.4%, how dare you! Real inflation is measured by the dildo/Ipad index, as long as people can still afford to fuck themselves there is no inflation.


Stagflation bitchez!

Wed, 09/28/2011 - 17:55 | 1719942 DonutBoy
DonutBoy's picture

You're right about CPI, but there is deflation in some assets, like housing.  Things purchased with debt are deflating, necessities purchased with cash are inflating.  It's not a straightforward picture with a single metric. 

When Greek bonds are officially defaulted, and the bank balance sheets crater - money in the fractional reserve dissappears - it's gone.  Is it possible that waves of defaults extinguish money faster than the Fed and ECB create it?  Yes - that's possible.

Wed, 09/28/2011 - 16:57 | 1719717 macholatte
Wed, 09/28/2011 - 18:02 | 1719967 narnia
narnia's picture

who is anybody kidding here?

the debt of soverign nations (direct or indirect through contingent obligations on deposit insurance on fractional reserve funded assets of the banking sector) cannot be written down to their FMVs.  this debt can only be extinguished by printed cash from central banks.

this is true whether the governments of the world don't spend another dime tomorrow, whether all the budgets are balanced, or whether they continue to deficit spend and print.

Wed, 09/28/2011 - 16:41 | 1719629 Pladizow
Pladizow's picture

What happens in a deflationary environment where the sheep lose faith in fiat?

Wed, 09/28/2011 - 16:44 | 1719647 GeneMarchbanks
GeneMarchbanks's picture

Ummm... war.

Wed, 09/28/2011 - 19:33 | 1720234 Hugh G Rection
Hugh G Rection's picture


Good answer from the fractal smurf vagina.

Wed, 09/28/2011 - 17:30 | 1719852 bid the soldier...
bid the soldiers shoot's picture

They sing Bach:

Sheep may safely graze
where a good shepherd watches.
Where rulers govern well
we may feel peace and rest
and what makes countries happy

Schafe können sicher weiden,
Wo ein guter Hirte wacht.
Wo Regenten wohl regieren,
Kann man Ruh und Friede spüren
Und was Länder glücklich macht.

Wed, 09/28/2011 - 20:04 | 1720301 MsCreant
MsCreant's picture


Wed, 09/28/2011 - 16:42 | 1719635 tlil5774
tlil5774's picture

Eeerrrrrr, what about if you added to your long bond holdings every time Gary called deflation......?

Thu, 09/29/2011 - 08:02 | 1721401 covert
covert's picture

deflation is a theroy that never materializes


Wed, 09/28/2011 - 16:25 | 1719564 mynhair
mynhair's picture

He can see with those eyes?

Wed, 09/28/2011 - 16:29 | 1719583 Cheesy Bastard
Cheesy Bastard's picture

He can't see very far.  He can see step one (deflation), but misses the next step altogether.

Wed, 09/28/2011 - 16:54 | 1719698 WonderDawg
WonderDawg's picture

Missed the next step or just didn't project that far? Hard to say what's going to happen after a deflationary collapse.

Wed, 09/28/2011 - 17:22 | 1719821 Cheesy Bastard
Cheesy Bastard's picture

Then the Fed will print us right into a currency crisis.  First dollar strength on euro weakness, with more downside in equities and commodities.  Then hyperinflation. 

Wed, 09/28/2011 - 19:16 | 1720186 scatterbrains
scatterbrains's picture

yea but how tricky will it be knowing when to flip from short to long though ?

Wed, 09/28/2011 - 19:26 | 1720214 Cheesy Bastard
Cheesy Bastard's picture

Around the time we retest the 666 lows of March 2009.  Silver at $18 or so should be around bottom.  Remember they will be talking about $4 silver at that time..

Wed, 09/28/2011 - 21:14 | 1720513 akak
akak's picture

No, silver will never drop below $5 an ounce --- because, you know, that is the cost to dig it from the ground.

(At least a former wannabe sportscar owner used to tell us that here all the time.)

Wed, 09/28/2011 - 23:56 | 1720805 poor fella
poor fella's picture

I'm thinking $12 is when ALL the weak hands really lose their grip. But I have no problems buying on the way down to those levels or at higher levels (just on a smaller basis). It really is a win-win for the patient investor (which most of us probably are since we use OUR OWN MONEY!!!)

Wed, 09/28/2011 - 16:56 | 1719710 tlil5774
tlil5774's picture

That's simply disrespectful in the extreme - he's on record for having been long the 30 for years and short copper in 2011, so wouldn't it make sense to let him cash in on those bets before he tells you what "the next step" is? Or for a different take, it might be better for you to ignore my take on this and just remember the quote from Paul Tudor Jones in his Market Wizards interview (p. 131); "Judge not, least you be judged".

Wed, 09/28/2011 - 17:28 | 1719847 Cheesy Bastard
Cheesy Bastard's picture

If I disagree that the fed cannot inflate, that is not disrespectful.  I am tempted to tell you what I really think of you, that would be disrespectful.  Judge till your little heart's content, now.

Wed, 09/28/2011 - 16:32 | 1719572 mynhair
mynhair's picture

30-yr fall back?  Didn't today.  Was slapped like a red-headed step-child.

Been there, done that, barely escaped.  (TMV)

(Yes, I sold too soon, damit!)

Wed, 09/28/2011 - 16:45 | 1719655 pslater
pslater's picture

"(Yes, I sold too soon, damit!)"  Me too.  No one ever went broke taking profits....

Wed, 09/28/2011 - 16:28 | 1719573 spartan117
spartan117's picture

Agnostic on gold and silver?  Maybe he doesn't want to rock the boat because he still has friends in the paper industry.

Wed, 09/28/2011 - 20:28 | 1720378 Bicycle Repairman
Bicycle Repairman's picture

His whole presentation is a bunch of weasel words.  Agnostic on gold and silver?  Give me a break.  We're talking about the whole game here and he has no opinion or discussion?.  And he sees deflation ..... for the next six months.  Thanks for the trading advice Gary.

See you in 2012.

Wed, 09/28/2011 - 21:16 | 1720516 akak
akak's picture

When it comes to these deflationists, I see ...... dead people.

Thu, 09/29/2011 - 03:19 | 1721027 bid the soldier...
bid the soldiers shoot's picture

"We're talking about the whole game here."

Spot on, Bike Guy

Wed, 09/28/2011 - 16:28 | 1719576 Tsar Pointless
Tsar Pointless's picture

Nobody can do the Shilling like he do!

The S&P @ 800 is still overvalued by roughly 800-ish points.

Wed, 09/28/2011 - 16:28 | 1719577 kato
kato's picture

"They" did not call it 'Inflation' on the way up - housing prices are not part of inflation stats -, so now that housing prices are going down, it is not 'Deflation'. Food prices are up. The Cabal is wedded to housing prices NOT going down, so "They" call it 'Deflation'.

Wed, 09/28/2011 - 16:46 | 1719659 Pladizow
Pladizow's picture

I think housing accounts for 42% of the CPI - but I could easily be wrong?????

Wed, 09/28/2011 - 16:50 | 1719684 kato
kato's picture

So too could I be wrong. I am quite sure that housing prices are not factored in, while rent prices are.

Wed, 09/28/2011 - 17:30 | 1719853 Rainman
Rainman's picture

Correct....equivalent rents. Dropping also, but a trailing indicator for housing prices in the sand states.

Wed, 09/28/2011 - 20:30 | 1720386 Bicycle Repairman
Bicycle Repairman's picture

A trailing indicator?  Yeah, I think so. 

And put me down for some rental housing when rents are going to be falling for a decade.

Wed, 09/28/2011 - 23:18 | 1720732 UP Forester
UP Forester's picture

Uncle Sugar has tent you can rent.  Only cost you 11 hours a day cutting timber, planting pine trees, and maybe building a dam or two.  Free meals of potatoes and whatever gets scraped off the road that day.

They don't know whether to call their rentals "Worker Protection Associations" or "Consumer Consolidation Camps."

Either way, renters will be protected from wild animals, Al Qaida and roving deflation by barbed wire and guard towers.


Come on, do it for the children....

Wed, 09/28/2011 - 16:31 | 1719588 Deadpool
Deadpool's picture

"quietly depart from these continental US, or else load up on lead, spam and precious metals." hey! has Tyler been reading our posts on Simon le Black?

Wed, 09/28/2011 - 17:36 | 1719869 Robot Traders Mom
Robot Traders Mom's picture

@deadpool-your posts have no point except to spread bullshit lies that the US is the greatest country in the world and nowhere else is safe. Or the last one, where you called the supposed 'terrorist' in DC a dumbass, as if you give credence to the false flag garbage spread by the gov't.


Play this one off, because you are a fucking gov't troll.


Like I said earlier, go fuck yourself.

Wed, 09/28/2011 - 18:14 | 1720007 schadenfreude
schadenfreude's picture

Too many distraction from too many strange people.....has this site been hijacked by clowns and trolls?

Wed, 09/28/2011 - 18:34 | 1720071 New_Meat
New_Meat's picture

In general, t'were always more or less a free for all.  But, well, Mom needs a new razor and is kinda' bitchy these days.

- Ned

Wed, 09/28/2011 - 19:21 | 1720203 Robot Traders Mom
Robot Traders Mom's picture

@newmeat-yes, you are correct that it has been kind of a free for all. My problem is that the trolls before, like Robot, just lacked social attention and try to get it on a financial blog. The new trolls are sneaky, knowing not to stir the pot, but to say something believable by people learning about the mess we are in and people who don't think.

Knowledge is power and he clearly has an agenda and is one of the 'others.' He usually tries to laugh it off, but he is spreading pure bullshit.

I did have a razor but my dumbass kid took it.

Wed, 09/28/2011 - 16:32 | 1719589 Trimmed Hedge
Trimmed Hedge's picture

EPS for gold & silver = 0

Wed, 09/28/2011 - 16:37 | 1719605 mynhair
mynhair's picture

So buy NFLX, and STFU!

Dam non-traders never look at the AGQ and ZSL range per day.  Sick of these klowns.

Dumbass Denninger wannabes.

Wed, 09/28/2011 - 16:37 | 1719608 Sequitur
Sequitur's picture

Yep. My bets are on food, utilities, medicine -- the shit the world needs and will pay for, even in a deflationary environment. This post is spot on, this is the future. Deflation.

Wed, 09/28/2011 - 17:37 | 1719873 oddjob
oddjob's picture

Deflation in an enviorment of fleeting USD hegemony is truly wishful thinking. You'll get your S&P 800, just dont count on shit you need being any cheaper.

Wed, 09/28/2011 - 16:52 | 1719691 traderjoe
traderjoe's picture

And therefore requires no payment of taxes on fictious 'income', i.e. dividends.

Wed, 09/28/2011 - 17:06 | 1719759 SilverRhino
SilverRhino's picture



  • EPS for gold & silver = 0
  • Silver: $29.92 / Gold : $1611.60
  • Peace of mind and no counterparty risk:  PRICELESS
Wed, 09/28/2011 - 16:33 | 1719592 Zola
Zola's picture

Nothing will make me happier (in investing) than when the bond bubble bursts and these deflationist get finally taken to the woodshed.

Wed, 09/28/2011 - 16:34 | 1719597 kato
kato's picture

Schilling has a bullshit, pick and choose definition of 'inflation/deflation'. Ad hoc ergo propter hoc.

Wed, 09/28/2011 - 16:37 | 1719600 Duffminster
Duffminster's picture

I wrote this earlier on a different post but it is germane to this article (incidentally, deflation in this nation will ultimately lead to US sovereign debt default and the dollar will also be deflated as tax revenues drop like a rock and the debt spikes):

After much reading, research and trying to challenge my own paradigm, it seems apparent to me that everything hinges on China and whether Europe can pull together and this from the standpoint of the EU, ECB and the internal political workings of the various governments and it depends on whether China has a hard or soft landing, which part has to do with their credit markets and their ability and willingness to devalue their currency to support their own banks.

At the end of the line I see a currency war and all fiat currencies being devalued. In the short run (next 18 months) I see a hard landing in China, Europe unable to find common ground to bail its banks out and the Fed having its hands tied to go into more QE (a blessing a curse).

As a result, while I will not sell any physical precious metals, I am for the time being selling my ETF positions in my retirement accounts because I see a complete wave of combined failure to monetize and hence defaults and a derivatives and concurrent stock market melt down of large order on the horizon. At the end of all this the only real money left standing will be gold and silver and barter for that matter. In the short term I see a massive derivatives based meltdown in just about every asset class, much like the Lehman debacle.

I am taking a large loss on my ETF positions from their highs but a significant gain since I started investing in them several years ago. I should have seen this coming sooner and I was wrong. I am going short the stock markets. I could be wrong again here but I want to share my thoughts with those who listen to me. I hope that I am not created in the Narcissistic model of Darwin. I want to be able to view my mind and if I find that there is a mistake in my reasoning, which in this case was "that Europe would be able to Monetize its own bad debt and would do so willingly, and also that China would continue to be able grow even as the rest of the major economies are contracting." At this point, it appears that the Central Banks simply don't have the ability to overcome the derivatives markets through monetization and that in the process of broad based default, starting in Europe and finally returning to the United States, the stock markets will begin to reflect the future economic depression that is coming and all asset classes, including commodities, stocks, and even gold and silver will be sold down. The difference is that gold and silver will rise from the ashes as the true money but in the short term US Bonds will be the short term recipient of inflows and so will the US dollar, unit it becomes evident that the US is also heading towards a depression and will default and then all bets are off and gold will be the only investment to be in.

I could be wrong about all this but I have enough gut level feeling about it that I sold my retirement gold and silver ETFs today and am going short the general stock indexes.  I don't believe anything short of direct government hiring can put American's back to work quickly and stimulate the economy and given the total gridlock between the Tea Party and the President, I don't think the government will be able to do anything effective quickly. I am very sad about what I see and also I am happy that my analysis of what the central banks and governments could do to monetize debt was for the time being wrong.

I will shift back to my previous paradigm if I see all of the following occuring:

1. China moving towards a resolution of its banks developing liquidity and GDP contraction problems
2. Anything that looks vaguely politically feasible for the EU to come together to monetize their un-repayable debt.
3. The Federal Reserve Stepping Up with QE 3 on Steroids
4. The US Government Actually doing Something that Will Actually Stimulate Economic Growth.

For now, I see all 4 points being relatively solid "No's". The more I look at it, the more I see that the lynch pen, China, appears to be going down and without strong growth in China, all bets are off as far as growth in Europe and the US.

Again, I could be wrong. I am sharing with you so that you can weigh these thoughts for yourself. Evolution requires questioning the prevailing paradigm. In this case I am questioning my own paradigm, my own wisdom or lack thereof.

Hope this post is of benefit.


Wed, 09/28/2011 - 16:43 | 1719643 Deadpool
Deadpool's picture

all I read was your first paragraph because you're confusing deflation with debasement. A currency crash is inflationary (hyper-inflationary) because the dollars lose purchasing power. See Belarus, Zimbabwe, Wiemar Germany....if copper falls to $2 that's deflationary...if it takes $1000 US$ to buy a pound of the red stuff that's inflationary. k?

Wed, 09/28/2011 - 16:50 | 1719681 Idiot Savant
Idiot Savant's picture

Thanks for posting; I agree with your sentiments. However, I don't see Ben accepting defeat and deflation. Be careful shorting.

Wed, 09/28/2011 - 16:57 | 1719714 HpDeskjet
HpDeskjet's picture

Ben has no choice but accepting it. QE2 was already deflationary for assets since it caused oil/commdoties to rise in price while wages were flat or down => less money left to spend on those assets. The FED "gets it" now, and has lost the political support to do anything significant

Wed, 09/28/2011 - 19:30 | 1720218 scatterbrains
scatterbrains's picture

I wonder if they might throttle the printer in cycles..say 800 s&p commence printing until gold gets back up towards 2k then ease off, let things collapse again back down...smash the pedal to the metal again to pull us out of a collapse, on and on until it gets us through or it collapses in a heaping pile of shit.

Wed, 09/28/2011 - 22:14 | 1720588 FEDbuster
FEDbuster's picture

Benron has stated many times "no deflationary deppression on his watch".  I think you are right about the QE cycle rate, I would add a couple bad bond auctions in a row would be a trigger, too.  The problem he faces is how to run the printer and maintain some value in the dollar.  The whores of D.C. are not going to change the current deficit track for sometime, and like a black hole they will suck up capital from the entire financial universe.  The roller coaster ride continues....

Wed, 09/28/2011 - 17:26 | 1719829 bulldung
bulldung's picture

I gave you a + because of your well thought out and written plan. The problem I see is with #3. QE3 on steroids will happen very quickly, held closely until an announcement, then short positions will be devastated. You have faith in the fundamentals and should be right.However, the politics in America is being determined behind closed doors by an elitist "super committee", in our Congress. Do the Republicans have the courage to cut entitlements?defense spending?govt payrolls?their own slimy benefits?No,No,No,No.Do the Democrats have a problem with spending the fruits of other peoples labor? No. I suspect that capitulation will come from the jobs committee and the printing will resume. Politics, history, and math support this. Credit Chris Martensen for the math.

Wed, 09/28/2011 - 17:37 | 1719870 HpDeskjet
HpDeskjet's picture

Politicians will do anything to get re-elected. They don't care if that will be printing+spending or cutting. Suppose rating agencies downgrade the US credit Rating to let's say A- before the next election and the debate about budget deficits becomes the nr 1 topic. If it is possible to "sell" a cut spending story to the public because of a scapegoat (rating agencies), and that becomes the only way forward, they will do it...

Wed, 09/28/2011 - 17:32 | 1719859 rosiescenario
rosiescenario's picture

"At the end of the line I see a currency war and all fiat currencies being devalued."


It is going to be like the trades wars leading to the 1st. Depression but this time fought through currency has already begun.

Wed, 09/28/2011 - 21:12 | 1720483 zoomer
zoomer's picture

Thanks for the thoughtful post, I found it enlighting. Hopefully your insights and honesty will help raise the level of comments on ZH to their former excellence.

Wed, 09/28/2011 - 16:34 | 1719601 HpDeskjet
HpDeskjet's picture

And try it will: we expect rumblings for full blown LSAP to commence in a few days, and QE4 in which the Fed will pull a BOJ and buy ETFs, REITs (in addition to MBS and Agency bonds) early in 2012, after which it will be time to quietly depart from these continental US, or else load up on lead, spam and precious metals



Wed, 09/28/2011 - 16:41 | 1719627 mynhair
mynhair's picture

Depart?  And go where exactly on my meager net worth?  Antartica?  Got news for you:

Wed, 09/28/2011 - 16:37 | 1719611 QEsucks
QEsucks's picture

At, something I've not seen before:

Call for prices as most services prices are not updating correctly, Currently.

Wed, 09/28/2011 - 16:44 | 1719649 BrocilyBeef
BrocilyBeef's picture

umm... rutrow

Wed, 09/28/2011 - 19:43 | 1720245 DosZap
DosZap's picture


I have at my Dealer an online ordering sytem, and they have(never seen it before),shut down their BUY/SELL Gold page, and today, closed down the Silver Buy/Trade page.

BEFORE the normal business hours.They are a large dealer, and are short Silver.(people are buying at this $30.00 range like nuts).A mistake I believe.................I still think we see it back into $20.00 area,even before a/the melt down.................

I have not lost money ever on physical Gold buy/sells, but Silver got me good this last drop.

Need to see some real low prices before I peel off more frn's for it.

I will stick w/Gold before I get a Silver thrashing once more.

Wed, 09/28/2011 - 16:40 | 1719623 G_T_A_44
G_T_A_44's picture

1. Global Hyperinflationary Depression.


2. Global Hard Landing


3. SPX 850


4. $600+ Trillion OTC Derivative Apocalypse.


5. Global Currency Crisis.


6. Global Bond Market Implosion.


7. Gold - $5,000-$5,500


8. Silver - $ 300+


9. $USD -  52-55


10. Global Civil Unrest







Wed, 09/28/2011 - 17:21 | 1719817 Idiot Savant
Idiot Savant's picture

Ummmm, no; deflation has the upper hand at the moment. I hope you saved some cash.

Wed, 09/28/2011 - 16:41 | 1719628 carbonmutant
carbonmutant's picture

Greece has "exhausted" its ability to pay more taxes to cover budget gaps, its deputy prime minister has declared, adding that he himself cannot pay a new emergency tax without selling property.
Wed, 09/28/2011 - 16:57 | 1719716 Gordon Freeman
Gordon Freeman's picture

What self-serving shite!  Fuck the lazy, criminal greek freeloaders...

Wed, 09/28/2011 - 17:15 | 1719802 THE DORK OF CORK
THE DORK OF CORK's picture

So says a "Freeman" who benefits from a currency that can print to cover their Greek scale deficit.............. imagine paying for the real price of oil ......... just imagine.

I LOVE THIS CRISIS - it brings out the best in all of us.

Wed, 09/28/2011 - 16:42 | 1719633 economicfreefall
economicfreefall's picture

The elites have wars to fight, bankrupt buddies to bail out, bonuses to pay, and a world to control - they need and want as much purchasing power, and real power for that matter, that they can take.

No better way to ensure the steady flow of capital to the perceived safety of government bonds than to scare the hell out of investors by pulling the deflation card out of the sleeve and into the media. Nothing in the financial spectra frightens people more than the thought of their savings buying more goods and services. It would mean that no one would buy anything, just wait for even lower prices, which in turn leads to mass layoffs since companies can't sell anything, right?

Even if that were true, you don't have to worry. The general public actually believes that deflation is for real. I've got news for you - it's not, at least not for your family. The deflation/inflation debate is preposterous from the average person's perspective. Have you seriously ever felt a decline in prices across the board during your lifetime? Have you seen milk prices plunging 50%, gas getting cheaper and cheaper month after month, or felt how little your insurance bills cost in comparison to the prior year? Didn't think so.

The simple fact is that there hasn't been a single New Years Day in the United States since 1955 where consumers could start off the new year by shopping at lower prices than a year earlier. Here's a link where you'll find all data going back to 1913, courtesy of Keep in mind though that this is the government's own statistics so expect the reality to be much worse, since it's widely known how numbers are skewed to understate inflation...

Wed, 09/28/2011 - 17:07 | 1719764 Duffminster
Duffminster's picture

I believe we get short term deflation, cascading sovereigh defaults, followed by massive QE efforts (because Ben Lightyear) is more afraid of deflation than anyone else, and then we get "pushing on a string" and as I have long believed, a crash in the global economy coupled with hyper inflation.

Inflation and deflation can co-exist.  I just got a major hike in the companies medical premiums and at the same time have seen my gold prices drop from $1900 to $1610 or thereabouts and looking at the big picture, Europe, China and US economies and the politics of Europe and the US and I don't see anything workable that will stimulate economic growth.  

Ultimately, I agree, Gold 5000, Dow 5000, silver 400, but not before we seek Gold 1450, silver 20, Dow 8500 shorter term.   Physical gold and silver are the long term play.   The paper proxies will take a short term hit in my opinion. 

I am fully aware that the exchange stabilization fund will be in the market every day but given who the member banks who help facilate that are and the squabbles between Goldman and the Fed and other internal entropy, I don't think there is any upside in the stock market short of Germany passing a new constitution and the Tea Party having a major change of heart on Quantitative Easing.

I don't know a dam thing.  But I feel that we are about to see a major liquidity based melt down in equities and that nothing will be immune short term.


Wed, 09/28/2011 - 17:07 | 1719765 Duffminster
Duffminster's picture

I believe we get short term deflation, cascading sovereigh defaults, followed by massive QE efforts (because Ben Lightyear) is more afraid of deflation than anyone else, and then we get "pushing on a string" and as I have long believed, a crash in the global economy coupled with hyper inflation.

Inflation and deflation can co-exist.  I just got a major hike in the companies medical premiums and at the same time have seen my gold prices drop from $1900 to $1610 or thereabouts and looking at the big picture, Europe, China and US economies and the politics of Europe and the US and I don't see anything workable that will stimulate economic growth.  

Ultimately, I agree, Gold 5000, Dow 5000, silver 400, but not before we seek Gold 1450, silver 20, Dow 8500 shorter term.   Physical gold and silver are the long term play.   The paper proxies will take a short term hit in my opinion. 

I am fully aware that the exchange stabilization fund will be in the market every day but given who the member banks who help facilate that are and the squabbles between Goldman and the Fed and other internal entropy, I don't think there is any upside in the stock market short of Germany passing a new constitution and the Tea Party having a major change of heart on Quantitative Easing.

I don't know a dam thing.  But I feel that we are about to see a major liquidity based melt down in equities and that nothing will be immune short term.


Wed, 09/28/2011 - 16:42 | 1719634 ivars
ivars's picture


Vote down!


My recent quite succesful research that lead to successful prediction of Silver (in March 13) and Gold (in May 6th) spot price movements over last 6 months in these silver and gold price charts:

Silver prices 2011-2013

Gold prices 2011-2013

and further analysis has lead to a conclusion-explained here:


an interesting hypothesis emerges that , starting from q2 2012, in H2 2012 commodity prices in USD will rapidly converge towards a certain Bancor equilibrium for the first time, and than fluctuate around it in future, where:

1) the price of paper USD will be de facto determined by amount of a commodity it can buy in this equilibrium rather then the commodities price is as to today will be determined by the value of a certain currency set by exchange rates;

2) In fact, it will be the basket of all commodities that will serve as the ultimate reference medium of exchange for all paper currencies, and will de facto replace thus USD as world reserve currency;

3) the USD price ratios between different commodities will change so that to reflect the monetary ability (i.e. availability, longevity) of a given commodity to be the part of this world reserve currency, exchange medium for trade, not only its utility. Hence the price ratios IN USD between different commodities may differ quite radically ( as seen in example with gold/silver ratio and silver/copper price ratio) from what they are today;

4) if the logic of exchange medium effect on USD price ratio formation between commodities in USD can be discovered, the prices of commodities in USD can be quite accurately predicted after H2 2012, and ratios may not fluctuate as much as in USD as reserve currency time;

5) In such case, the prices in USD of other assets (land, houses, food, produce, etc) relative to commodities (and, of course, USD ) will also move from their current ratios to represent their potential as exchange medium for trade.

The signal for such conscious or partly conscious move to de facto Bancor system of international reserve currency will be triggered by official data of recession in q1 2012 in the USA (predicted here:DJIA 2011-2012 and the recession in the USA in q1 2012) and the resulting obvious unsustainability of USA debt ( it has already entered bubble precrash phase in 2000, as shown here: USA debt is forming a very soon precrash pattern) which will continue to grow superexponentially ( that is , in equivalent subsequent periods of time increases of debt value in USD will continue to grow) and imminent default (crash correction ) of the USA on its debt in near future.

Wed, 09/28/2011 - 21:23 | 1720529 twotraps
twotraps's picture

really interesting, thanks for that, the charts were well worth it.

Wed, 09/28/2011 - 16:42 | 1719636 ptoemmes
ptoemmes's picture

rental apartments....

When I read this last Sunday I went WTF:

"Wave of apartment construction set to sweep South Florida

Developers are set to kick off a new round of housing construction with plans to build more than 4,000 rental apartments. Five years have passed since the collapse of the housing market brought an end to the condo construction craze that swept the region."

Other than my sense that the article hints a bit at "hig end", maybe not so far fetched.




Wed, 09/28/2011 - 20:56 | 1720454 Bicycle Repairman
Bicycle Repairman's picture

There is a rental housing boom where I am.  The new apartments will go up in areas where condos remain unsold.  In an era when rents will be going down for a decade or more, and it's cheaper to live with mom and dad, will these apartments ever make economic sense?  In a greater sense it guarantees that the residential housing market will never recover.

I have no doubt that the government is encouraging this trend (in some fashion) to create jobs and help the economy.  It smacks of China's empty cities, short term thinking and desperation.

Wed, 09/28/2011 - 16:42 | 1719637 Random_Robert
Random_Robert's picture

Geeeee   zzusss   Christ.

Does anyone on Earth understand the difference between deflation and a contracting economy?

They are NOT the same thing.

I agree with Shilling on one thing: printed paper is re-pricing itself to its intrinsic value. Blank paper would be more valuable, since you can use it to draw happy-faces with your kids in a lazy Saturday morning.

Markets are not collapsing- the world will always have and require active markets.

Wed, 09/28/2011 - 16:45 | 1719656 disabledvet
disabledvet's picture

Fed buys all US debt causing value to soar. And yet Gary Shilling calls a QE a failure. Cue "the deflation beast."

Thu, 09/29/2011 - 00:33 | 1720873 FreedomGuy
FreedomGuy's picture

Exactly right. Hyperinflation is not simply a very high inflation. It is the complete collapse of a currency. With a sharp further deflation all governments begin to default. GE3 could be a 100% purchase of US debt causing a collapse in the currency.

Wed, 09/28/2011 - 16:46 | 1719660 Caviar Emptor
Caviar Emptor's picture

Deflation coming next? Yes, in some things. It's been there all along, and it will pick up. Debt deflation will be with us for a long time. But not everything has the same dynamic. 

Schilling is predicting a global meltdown with another global recession. It's already here. 

It will be important to see if TPTB allow a reset in the economy, which they did not in 2008. 

Wed, 09/28/2011 - 17:46 | 1719915 citta vritti
citta vritti's picture

will that be like the system reboot in Jurassic Park?

Wed, 09/28/2011 - 20:59 | 1720460 Bicycle Repairman
Bicycle Repairman's picture

"It will be important to see if TPTB allow a reset in the economy, which they did not in 2008."

If the stock market is not re-set, what happens to all the pension funds that need an 8% per year return?  What happens to 401ks?

Wed, 09/28/2011 - 16:46 | 1719661 Duffminster
Duffminster's picture

The question is how soon Ben Lightyear will announce QE 3, 4, ... N and if Ron Paul Becomes President, what happens to the Fed?  

Wed, 09/28/2011 - 16:51 | 1719688 meatball
meatball's picture

Fuck that. I won't be happy until S&P is 450.

Wed, 09/28/2011 - 17:17 | 1719720 NotApplicable
NotApplicable's picture

This is the theme to Gary's show...

Wed, 09/28/2011 - 17:03 | 1719740 buzzsaw99
buzzsaw99's picture

...we expect rumblings for full blown LSAP to commence in a few days, and QE4 in which the Fed will pull a BOJ and buy ETFs, REITs (in addition to MBS and Agency bonds) early in 2012, after which it will be time to quietly depart from these continental US, or else load up on lead, spam and precious metals.


Wed, 09/28/2011 - 17:03 | 1719745 rambler6421
rambler6421's picture

So you get deflation initially.....JPM and co go Gold and silver go through the roof after the short squeeze. 


And yea....False flag attack as well. 

Wed, 09/28/2011 - 21:00 | 1720468 Bicycle Repairman
Bicycle Repairman's picture

Deflation initially then reflation  .... or war.

Wed, 09/28/2011 - 21:31 | 1720539 bid the soldier...
bid the soldiers shoot's picture

Don't forget disestablishmentflation. I know you can work it in to your thesis.

Wed, 09/28/2011 - 17:11 | 1719782 mynhair
mynhair's picture

ZH is going MW:  put the crap show on top you have to mute because of this 'embedded' issue.  How about just a link?

Wed, 09/28/2011 - 17:26 | 1719840 wang (not verified)
wang's picture

they just need to remove the "autoplay=1" from the embed script  or set it to 0 and it should default to no autoplay

Wed, 09/28/2011 - 17:21 | 1719819 tmosley
tmosley's picture

A deflationist sees deflation?  Say it ain't so!

But seriously, no deflation at the consumer level.  NONE.  EVERYTHING costs more than it did last year.  But I guess for those who equate the economy and the markets, I guess it does look like deflation.

Wed, 09/28/2011 - 17:27 | 1719844 wang (not verified)
wang's picture


flat panels





Wed, 09/28/2011 - 18:28 | 1720050 mjk0259
mjk0259's picture

The inflation in medical and college is still +10% a year.  Property tax and insurance keep going up as well. Those are my  biggest costs. House price deflation doesn't help unless you don't presently own a house. Cost of small electronic items is largely determined by how often I lose them, put them in washer, drop them.

Wed, 09/28/2011 - 21:02 | 1720475 Bicycle Repairman
Bicycle Repairman's picture

How about restaurants?

Wed, 09/28/2011 - 17:49 | 1719914 anony
anony's picture

As Shilling said, he has identified 7 different areas of X-flation.  Some goods and services are inflating, others are deflating.  His is the most definitve explanation of what we have all observed over the last 10 years where  X-flation is a many headed Hydra.

Private Houses, for instance, do not cost more this year than last.  Interest rates to buy them don't either. But my Hershey's Kisses cost a third more than last year, and many other of the primary foods do as well.  Batteries, cleaning solutions are all up in price.

Autos seem stable.  Wage rates are definitely deflating.  Attorneys fees are able to be lowered by threatening to go elsewhere, and if more did, those rates would come down substantially, to work around the clear PRice-fixing that has been going on with the shysters for decades.  Ditto Auditing fees for the corrupt statement they issue, if corporations would insist on not subsidizing do nothing partners, retired and active. Lots of room for prices to fall.

I wish I could just consider him an Oracle and buy  S&P 500 Puts with every dime I can beg, borrow or steal,  in the 800 range, and not look at it until New Year's, 2014. 

Wed, 09/28/2011 - 17:28 | 1719849 Caviar Emptor
Caviar Emptor's picture

Clearly we'll be moving in the direction of one world government to better manage the global economy. Else we split into warrior factions that fight all day, live on squirrels and plunder and take slaves. Either way, gold rules. 

Wed, 09/28/2011 - 17:32 | 1719858 the grateful un...
the grateful unemployed's picture

bankstas fear deflation.

deflation narrows the income and wealth gap.

there is relative inflation, when income falls faster than asset prices.

i make 50% less, but houses cost about the same.

the process is being managed to help the wealthy keep what they have.

the process is being managed to deflate labor (goods and services) while inflating commmodities (both are resources. a human being is worth less than an oz of gold, the banksta gods have spoken)

the process is being managed to keep the political class connected to the greatest source of wealth.

i feel your pain (now go fuck yourself)

all populists are made to sound like idiots, homeade tyrants try to sound like populists, while out of sight they redact the Constitution.

yes we can (fuck you in the ass while you're not looking - you never are, anatomically speaking)

guys like me need to pay more in taxes (ha ha, i'm getting rich off taxpayer money that doesn't even exist, which only represents indentured servitude for you and your children)

yes yes you need me, the other guy is crazy. (while the other guy is as sane as i am, and will do the same thing when he or she is elected. this is the job, you don't change the job, the job is running the country for their benefit. the banksta gods have spoken.)

deflation is our only hope. Rastani is an unlikely hero, but if we all dream of that thing maybe it will happen.

twilight of the banksta gods



Wed, 09/28/2011 - 20:01 | 1720282 scatterbrains
scatterbrains's picture

and what if they've all ready shifted enough of their debts onto the tax payers back with the next step being re-set, collapse, deflationary spiral and then they ease back in from private money pools and offshore accounts scooping everything up for pennies on the dollar.

I mean if they are as sinister as folks say then I would expect them to collapse the system into a depression and then scoop up the real money (gold) on the cheap.

Wed, 09/28/2011 - 23:03 | 1720705 the grateful un...
the grateful unemployed's picture

in the great depression there was a massive transfer of farmland from private hands to corporate hands, this time around the deal will be sealed. political candidates steal money from taxpayers (give it to financial institutions, who kick it back to them) Iraq was not a war, it was a massive political kickback scheme.

Wed, 09/28/2011 - 20:52 | 1720438 twotraps
twotraps's picture should hsve been the guy on BBC instead of Rastani, just telling it like it is.  +100

Wed, 09/28/2011 - 23:05 | 1720709 the grateful un...
the grateful unemployed's picture

i'm a horrible trader...

Wed, 09/28/2011 - 17:39 | 1719876 rosiescenario
rosiescenario's picture

While Schilling is obviously far, far smarter than I am, I still have trouble buying deflation. When the largest debtor of all owns the printing press, and deflation hurts the debtor, just why will they not run the presses?


Add to that the monkey at the control panel for the presses has informed us he will run them full tilt....even got his PhD on this subject.

Wed, 09/28/2011 - 19:20 | 1720199 Sad Sufi
Sad Sufi's picture

Rosie and Tyler:

While the “biggest debtor” (US of A) does have a printing press, the bankers are the lenders, and for them the best solution is “slight deflation:” getting paid back in dollars worth more, rather than less. Hence, deflation may be the end game.

Wed, 09/28/2011 - 17:40 | 1719880 TyIer Durden
TyIer Durden's picture


Wed, 09/28/2011 - 18:38 | 1720087 jomama
jomama's picture


Wed, 09/28/2011 - 20:17 | 1720351 tmosley
tmosley's picture

Member 4 weeks, 8 hours?

WTF is this?

Wed, 09/28/2011 - 17:43 | 1719896 reader2010
reader2010's picture

Just empty talk, basically. Let's watch price actions of the market instead.

Wed, 09/28/2011 - 18:17 | 1720016 Tuco Benedicto ...
Tuco Benedicto Pacifico Juan Maria Ramirez's picture

Just another paper pusher.  As an "agnostic" on gold he is in effect saying that he neither affirms  nor denies gold's existence.  Brilliant!

Wed, 09/28/2011 - 17:51 | 1719923 i love cholas
i love cholas's picture

I wish he had a cooler sounding voice.

Wed, 09/28/2011 - 17:51 | 1719925 jmcadg
jmcadg's picture

Am I missing something? Copper is a great indicator of economic growth. Umm doesn't The Morgue own 80% of the market. So how can it be now, they can manipulate it however they like, so it surely it doesn't have any resonance.

Wed, 09/28/2011 - 17:55 | 1719932 Poor Grogman
Poor Grogman's picture

Folks you cat have more QE without at least a credible threat of deflation.

Hence the last two weeks

Remember these immortal words


"If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around them (around the banks), will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered." Thomas Jefferson, Letter 1802 to Secretary of the Treasury, Albert Gallatin Well we are amost there, just need a couple more bursts of each type of 'flation. At least we can all be homeless and broke together eh?
Wed, 09/28/2011 - 18:13 | 1720004 MethodMan
MethodMan's picture

Price inflation is not monetary inflation. Why do we conflate the two? The arguments go in circles until people use the same definitions.

Overall, the group outside the bankster/elite circle is deflating (that's US). That is, the total base of money and credit WE have available is deflating. In fact, the larger the price inflation, the more we have to spend and the faster our available money deflates.

It also simply makes no sense to lump the entire economy's money supply into one entity, which completely glosses over the fact that it has bifurcated. One group is the banksters/elites, who through cronyism and the Fed have kept their paper "assets" price up, and their own money supply inflated. They have used that access to risk-free money to front-run and help deflate the other group.

By the way, that makes government handouts, jobs, and subsidies an ever better transfer of wealth to the elite in that it keeps prices inflated. So to make the model more accurate we'd have to further divide the non-banksters' economy/money supply into who are mostly on the government teat and those who not, but that is big twisty blurry line, just the way they like it.

Wed, 09/28/2011 - 18:21 | 1720028 James T. Kirk
James T. Kirk's picture

Every time I listen to a deflationist I get heartburn. It is like the word "fiat" means "absolute intrinsic value" to them. Like trying to talk to someone rationally when they insist that black is white. Then, based on this false premise that fiat money has some kind of guaranteed "absolute intrinsic value", they proceed to discuss all the "deflation" we are going to have when the money supply shrinks via debt implosion. They don't mention that printing presses and helicoptors will respond to that implosion. They also don't mention the 14 trillion dollar response by the Fed that stopped the first implosion 3 years ago. They also don't mention that true hyperinfation is not about math.

The ONLY thing that gives fiat money its value is TRUST in the issuer of the money supply. However, the US dollar's value is no longer based on a stable, genuine trust grounded on the merits of an honest government conducting its affairs in integrity, or big business trying to build a stable economy on our own soil. The current "trust" in the US dollar is based on two things: 1. habit (common people who don't know better). and 2. greed (traders of ALL sizes who have turned Wall Street into a casino). One fine day, when fear overcomes greed and habit, it is game-over. Unlike historical examples of hyperinflation, thanks to our computerized instantaneous trading abilities, we will simply go "poof" in a few moments.

Wed, 09/28/2011 - 18:38 | 1720089 Quinvarius
Quinvarius's picture

These guys all use deflation and recession interchangably.  0% credit to any big company or bank that wants it. Our problem is not deflation.  Our problem is recession/depression caused by 30 years of job export and fascism.

Wed, 09/28/2011 - 21:04 | 1720485 twotraps
twotraps's picture

James T Kirk....really well done.  Totally agree.    I do wrestle with some outcomes however...things that can put downward pressure on prices could be: job loss causing liquidation of things, house, car etc., the need for necessities, need to liquidate from stock mkt for boomers not wanting to sit through another downdraft,     Things that strain the faith in the dollar are just what you mentioned, and the most important thing is Speed.  You Never hear it discussed.   I would bet that many trading desks cannot believe this thing has not crashed yet, on top of that, the article on ZH about Limit Down levels adjusted practically broadcasts or at least tempts the fates with a crash.  My main concern simply understanding the current environment and some possible outcomes to avoid getting wiped out.  

Wed, 09/28/2011 - 18:32 | 1720066 Ostapuk Ivano
Ostapuk Ivano's picture

Any ideas on what country to escape to?


Wed, 09/28/2011 - 19:59 | 1720121 bid the soldier...
bid the soldiers shoot's picture


Wed, 09/28/2011 - 20:47 | 1720425 N57Mike
N57Mike's picture the world of spirit

Wed, 09/28/2011 - 18:35 | 1720073 DavosSherman
DavosSherman's picture

fucking douchebag moron

Wed, 09/28/2011 - 18:37 | 1720081 tkinfo
tkinfo's picture

If Gary is correct and my hedge fund is positioned for a continuing fall in equities vis a vis the money center banks and brokers, we may find ourselves backing out of the gold position that makes up half of our fund. The precious metal is loved by everyone and a deflationary trade I would think maybe the reason why the metal is beginning to find less support as it moves lower. The bounce down Sunday night got our attention, but was it just the door bell ringing before it gives way?

Wed, 09/28/2011 - 18:42 | 1720101 Quinvarius
Quinvarius's picture

Most bad traders sell the dips. 

Wed, 09/28/2011 - 18:40 | 1720094 chump666
chump666's picture

He is shorting copper...good for him.

China goes, and it is, US fed money printing won't do anything.  Pure doomsday trade

Wed, 09/28/2011 - 19:18 | 1720194 bugs_
bugs_'s picture

seven different kinds of deflation?????  SHAAAAA WING!!!!

Wed, 09/28/2011 - 19:36 | 1720240 Kina
Kina's picture

If TPTB are so worried about gold and silver and the recent take down actions has been a lot of their work, and continuing, I can only assume they are preparing for a super massive QE print job to save the world. The final hail Mary hospital pass.


By the same token if Asia sees the Euro and US heading into the jungle and perceived greater than expected troubles with China then to preserve their wealth they would run into gold silver and I guess USD. However BB will be doing his best to weaken that currency if it gets too strong.


You would think that if BB is worried about a too strong USD continuing that he would encourage buying of PMs in the absence of a believable Euro alternative. Maybe at the end of the day if the Euro looks like it is entering the plug hole the Fed will print to buy PMs.



Wed, 09/28/2011 - 20:03 | 1720296 PulauHantu29
PulauHantu29's picture

A 400 S&P is what I see.

Wed, 09/28/2011 - 20:46 | 1720423 Woodyg
Woodyg's picture

There's a saying in bear country - aka Montana- that when hiking you don't need to be faster than the bear - only faster than your slowest hiking partner.

Wed, 09/28/2011 - 21:22 | 1720528 Stuck on Zero
Stuck on Zero's picture

Don't you think that if China's economy decelerates rapidly the people will get restive?  A bit of social unrest will cause the government to blame the USA and nothing would focus the minds of the people faster than a military move on Taiwan.  The US would respond with a task force or two.  There would be lots of posturing and both nations would have to be put on a "war footing."  All the necessary changes to government spending, social security, medicare, etc. would be jammed into place and bye bye to our freedoms.  It would be a dream for both governments.  Scary.

Wed, 09/28/2011 - 21:48 | 1720568 Justaman
Justaman's picture

So, deflationist Schilling is agnostic on the metals.  How can you be agnostic on the only historical currencies that have stood the test of time.  Wasn't he around back in biblical times?  Doesn't he know the history of money.  What a fiat fool. 

I also have some sage advice for Grandpa Gary and all you deflationists, get out of your basements and go shopping once in a while, or even pay a restaurant bill out of your own pocket.  Bi-stagflation is alive and well.  Get prepared, bitchez. 


Wed, 09/28/2011 - 21:50 | 1720572 malek
malek's picture

Inflating away is an excess supply world is almost impossible, even for the Fed.

It's not so hard to strangulate excess supply...

Wed, 09/28/2011 - 22:33 | 1720630 Hal M
Hal M's picture

"Inflating away in an excess supply world is almost impossible, even for the Fed." So the Treasury can send every American a $10,000 check every month (courtesy of money borrowed from the FED) and there will be no consumer price inflation.  Sounds like a plan to me.

Wed, 09/28/2011 - 23:09 | 1720719 gwar5
gwar5's picture

I would agree with Schilling except the CBs have announced loud and clear that Plan A is to print their way out of the problems. And print like mad they have/will.


Stealth Plan B is to fall back on a gold standard for the West since they (allegedly) have the biggest stockpiles of gold. The more they print, the more the gold is worth in nominal $$ ? 



Wed, 09/28/2011 - 23:11 | 1720721 snowball777
snowball777's picture

"it shows a lot of day trading, a lot of program trading, it doesn't show a lot of investing"

Spot on. The Momo Shuffle.

Thu, 09/29/2011 - 01:55 | 1720970 htp
htp's picture

There's no hard landing in China.

Construction has slowed down a bit in some places, but in other places they are still building at blistering pace.

If there were a hard landing you'd see millions laid off. That's simply not happening.

China is happy to see commodity price come down though, which would help bring down inflation somewhat.

These price movements are not due to macro-economic fundamentals. They are controlled by the PTB, just like Rastani was saying.

Thu, 09/29/2011 - 05:42 | 1721153 chindit13
chindit13's picture

I like his way of thinking by and large, but I would not touch rental property.  Too many people have become accustomed to not paying the monthly nut.  At first it's on their own home, at least until they get foreclosed.  I fear they simply take that habit with them, unwilling to give up the "extra discretionary income" they have been enjoying for a few years.  Renters will study the eviction laws, then play the same free residence game.

I'll leave the headaches to Mr. Shilling.

Thu, 09/29/2011 - 11:15 | 1721998 the grateful un...
the grateful unemployed's picture

headline my regional newspaper this AM, SoCalifornia "Apartment Rents Rising, Housing Woes Cited

of course demand is up, people are losing their homes, and must move into rentals. the cost of maintaining an apartment is going up. the myth hs been that foreclosed homes would compete with apartments, but that has no credibilty, in the first place no one is sure who owns these homes, even if the bank is doing the short sale or whatever, and no one will want to rent a home which is also for sale.

this process is taking a long long time.

the labor market is doing a slow fade. last night the news did a feature, oh boy Kolls is hiring (retailer) for the holidays. Interview with the personal director, "yeah be sure and tell them you're ready to work nights, oh and if you shop here already and you know the store, that helps you too. what a lot of crap, why not just say, when you come in here looking for a job, be ready to bend over and spread your buttcheeks.." all i see is more of these crap jobs and people getting farther behind in the income disparity curve

and everyone living in 400 sq foot apartment by 2020

Fri, 09/30/2011 - 20:15 | 1727901 No More Bubbles
No More Bubbles's picture

SPX 800 is still clown bullish, particularly when corporate earnings will collapse.

Do NOT follow this link or you will be banned from the site!