Scary conspiracy theories and paranoia about hyperinflation abounds

Reaper

Don't know about hyper inflation but history always points out that when Central Banks run the printing press like there's no tomorrow we get inflation some time down the road.

I keep hearing the currency printing presses are burning the midnight oil but is there any evidence of this? They are borrowing more which adds to the money supply but that is very different from printing more which devalues the currency.

According to the Bank of England web site the latest figures (September) are:

Seasonally adjusted, notes and coin outstanding in September were, on average, 0.7% higher than in August. The twelve-month growth rate was unchanged from August at 5.1%.

If the growth rate in currency is similar to inflation then there is not much going on. Now I grant you things may have changed since these figures were last compiled. So if people could refer me evidence of currency printing I'd be grateful. Either that or lay this rumour to rest.

wombat42_2

wagdog wrote: »

Jim Rogers is a firm believer in the Austrian School of Economics. Many Austrian economists have concluded that government intervention will eventually lead to hyperinflation a la Weinmar Republic. They are backing their beliefs with cash by buying up a lot of gold and other commodities as a hedge -- i.e. they are betting against the dollar in the long run, even though in the short-run they are all losing.

Ron Paul holds similar beliefs, however he also believes in a number of conspiracy theories such as the NAFTA superhighway. The number of Austrian School fans that believe in conspiracies such as New World Order, The Amero, and Global Government, is rather disturbing especially when they hopelessly intertwine simplistic economic reasoning with fantastical conspiratorial speculation. It threatens to taint in a very bad way what might otherwise have been an intriguingly compelling economic theory.

Yeah OK but no one is expecting hyperinflation for a couple of years. Jim Rogers is much more than a theorist. He has been putting his money where his mouth is for decades and as a result is now very rich.

wombat42_2

Reaper wrote: »

I keep hearing the currency printing presses are burning the midnight oil but is there any evidence of this? They are borrowing more which adds to the money supply but that is very different from printing more which devalues the currency.

According to the Bank of England web site the latest figures (September) are:

If the growth rate in currency is similar to inflation then there is not much going on. Now I grant you things may have changed since these figures were last compiled. So if people could refer me evidence of currency printing I'd be grateful. Either that or lay this rumour to rest.

In a couple of years not now. :mad:

wombat42_2

More from Bob Chapman who tells it like it is
:eek:
http://theinternationalforecaster.com/International_Forecaster_Weekly/Toxic_Waste_Buyout_to_Fuel_Hyperinflation

Reaper

wombat42 wrote: »

More from Bob Chapman who tells it like it is
:eek:
http://theinternationalforecaster.com/International_Forecaster_Weekly/Toxic_Waste_Buyout_to_Fuel_Hyperinflation

To save you all from reading this pile of dog's poo here are the good bits:

fascist Bosch pigs... Bataan Death March to corporatist fascism, an Orwellian police state and a one-world government... the Illuminati weave their webs of deceit...we put God back at the center of our culture where He belongs and pass laws that honor Him... We no longer need the income tax... corporatist, fascist police states under the umbrella of a one-world government with a one-world currency, economy, religion and social order... a Marxist communist with ties to terrorist and militant groups...

You couldn't make this stuff up... except he did.

Come on Wombat, I know you are desperate for an economic crisis to help your gold investments but can we stick to the real world and skip the raving looneys?

GeorgeHowell

I haven't the time or inclination to read this stuff. But remember that economists are about as reliable in forecasting as meteorologists. And amateurs who try their hand at economic forecasting are about as reliable as those who try to forecast the weather by touching seaweed, watching cattle or birds, or monitoring sunspot activity.

If there is going to be a real catastrophe, be it hyper-inflation, hyper-recession or whatever, the last time we should expect it is when people start forecasting it. Nobody saw this banking crunch coming -- some may try to pretend that they did, but did you see anything in the prominent media to that effect ?

The internet of course, for all the wonderful facilities that it provides, serves to to magnify and enhance the transmission of all the bullsh*t that there is in the world, including conspiracy theories. It attracts attention seekers, grievance peddlers, contrary malcontents, and plain simple wierdos and nutters like moths to a candle.

We may be heading for economic disaster in the foreseeable future, but if we are it will almost certainly come at a time, from a source and cause, and in a form that we least expect.

wombat42_2

Reaper wrote: »

To save you all from reading this pile of dog's poo here are the good bits:
You couldn't make this stuff up... except he did.

Come on Wombat, I know you are desperate for an economic crisis to help your gold investments but can we stick to the real world and skip the raving looneys?

Try this one for size then

http://seekingalpha.com/article/101107-first-comes-deflation-then-comes-inflation

First Comes Deflation, Then Comes Inflation

The key to my fundamental analysis of the markets is money supply: is money supply going up (inflation) or down (deflation)? As I've noted in a previous article I wrote for SeekingAlpha, I'm very much in the inflation camp.

While I am still an inflationist, it is clear we are in a deflationary environment, which I was not expecting; I was simply expecting the ongoing expansion of money supply to find is way into an asset class (stocks, commodities, housing, etc) and push prices up in that asset class, as is normally the case. Instead, the market's attempts at deflation -- at purging the overinvestments and malinvestments that have been created through excessive expansion of the money supply, thus returning money supply to the level that the market demands, have proven to be dominant. This results in falling prices, a rising currency, and deflation. The Federal Reserve has tried to inflate the markets with all its might, as recent money supply calculations suggest, but banks have been refusing to lend that money, and thus the deflationary forces have been winning.

Analyzing Where We're Headed
So how much longer will deflation lasts? Depends on what happens:

1. If the Fed resists the temptation to increase the money supply, it will likely be very sharp but relatively short. The dollar bubble is a 37 year bubble, which started once the dollar fully abandoned the gold standard in 1971. Here in my opinion is an excellent article on the implications of that.
2. If the Fed continues to intervene but deflationary forces prove to be stronger, it will likely be steady deflation for a long time. This is similar to what happened in Japan when the Bank of Japan tried to resist deflation. However, Mike Shedlock chimes in with some key differences if America goes deflationary.
3. If the Fed is able to successfully inflate, it will need to find a market to put a bubble into. Given that the US has terrible economic fundamentals -- GDP is faltering, high private and government debt -- it is hard to foresee a bubble in US markets. Perhaps international markets, like commodities, precious metals, foreign stocks, foreign currencies, etc -- will get an influx of US dollars, thus creating bubbles in those markets. This will result in significant dollar devaluation, as those newly created dollars will just be sold and put into non-US markets. This will push the price of US imports up, and thus will result in lots of price inflation for consumers. It could create an opportunity for US export-based businesses.
4. If the Fed inflates but the market realizes the Fed is just printing with no signs of self-constraint, we'll see hyperinflation. In other words, the Fed will have tried to purge the toxic debt by creating junk money, which devalues everything. Just as banks don't want the toxic debt and are not trading with each other because of it, no one will want "the toxic dollar." In other words, there will be a massive run on the dollar in this scenario, which will send dollar-denominated prices through the roof. This is the Argentina scenario.

My Opinions
I think there's going to be a combination of #3 and #4. It is critical to note, though, that foreign markets are experiencing a similar problem, and they are taking the central banking solution of trying to inflate the solution away. We are seeing bubble-type activities in certain markets, such as the Japanese Yen, evidenced particularly by big moves in EURJPY. Dennis Gartman has stated he views EURJPY as a great indicator of the global economy, which I found to be a compelling insight. EURJPY volatility has been huge of late.
In the US, deflationary forces are winning, as evidenced by the rallying dollar, falling commodity prices, and MZM as a money supply indicator, which former inflationist-turned-deflationist Stefan Karlsson commented on. Other money supply indications, reports of shortages and price suppresion in precious metals markets, and attempts on the part of government to force banks to lend to each other, which Mike Shedlock has commented on, are, on the other hand, inflationary arguments.

I do not expect deflation reign for much longer. Government's desire to inflate markets, which is essentially a way of taxing those who hold the currency of the respective economy and transferring wealth to the recipients of the newly created money, is why I'm generally very biased towards viewing inflation as the primary concern. Bernanke has admitted deflation is not really possible, which suggests he will do whatever it takes to inflate the market. Bernanke has also acknowledged inflation is a tax, so he seems to favor this viewpoint with the knowledge that he is taxing the public.

Meanwhile, members of Congress have reported that they were threatened with martial law if they did not pass the Paulson Plan, which was eventually passed. Furthermore, we do not see government spending being cut. So, the diminishing tax base is coming as government spending is increasing, which will either require further inflation of the money supply or the sale of additional US debt. As debt is now largely held by foreign countries with tenuous geo-political relationships with the United States -- namely China and Iran -- there is the possibility of economic warfare; foreign debtholders can refuse to continue buying debt, which would also fuel inflation, as the debt would be paid for through further expansion of the money supply.

The always insightful Agora Financial has stated that it expects oil to go to $50 and then $200 within 36 months. I like that assessment quite a bit.

Thoughts on Trading This Environment
My primary concern is wealth preservation. With that in mind, I'm primarily looking to protect against dollar devaluation. As a result, here's what I'm doing:

1. I'm viewing deflation as a great opportunity to accumulate precious metals. Gold and silver are great hedges against inflation, and even in deflationary environments, they fall less than other asset classes, and thus still offer opportunities for those who own gold and silver to gain purchasing power (i.e. gold and silver may be falling in price, but everything else is falling faster). I don't trade precious metals, but I "invest" in them -- meaning I accumulate them and don't plan on selling until at least a few years out. Stock market traders should look for precious metal ETFs and mining stocks as well.
2. I'm particularly concerned with dollar devaluation, and thus look for markets in which excess US dollars would find their way into. For a while, EURUSD was great for this. Now the Eurozone clearly has its own problems, though I think Asian currencies are going to pick up some dollars, and thus I've been trading the Yen. Stock traders will want to look for corresponding ETFs, like the FXY.

In deflationary environments, I'll be trading less, and will largely be out of the market, instead looking for opportunities to accumulate precious metals and cash. If you're into trading deflation, markets where the money supply is being pulled from may prove to be great short opportunities. As money supply contractions have a natural tendency to come from bubble markets, financial instruments and the US housing sector are natural opportunities. For those who believe the US recession of 2002/2003 was not complete -- meaning the NASDAQ bubble was not fully deflated -- US tech stocks may have some room to go down.

As an inflationist, I'll be in foreign currencies and precious metals. I'll buy and hold metals, and will enter currencies when they look bearish for the US dollar, my home currency. I also previously noted some ETFs on the US stock markets that I thought would be worth considering in an inflationary environment.

StevieJ

Reaper wrote: »

To save you all from reading this pile of dog's poo here are the good bits:
You couldn't make this stuff up... except he did.

Come on Wombat, I know you are desperate for an economic crisis to help your gold investments but can we stick to the real world and skip the raving looneys?

Wa all have our Angels and Demons.

StevieJ

GeorgeHowell wrote: »

I haven't the time or inclination to read this stuff. But remember that economists are about as reliable in forecasting as meteorologists. And amateurs who try their hand at economic forecasting are about as reliable as those who try to forecast the weather by touching seaweed, watching cattle or birds, or monitoring sunspot activity.

If there is going to be a real catastrophe, be it hyper-inflation, hyper-recession or whatever, the last time we should expect it is when people start forecasting it. Nobody saw this banking crunch coming -- some may try to pretend that they did, but did you see anything in the prominent media to that effect ?

The internet of course, for all the wonderful facilities that it provides, serves to to magnify and enhance the transmission of all the bullsh*t that there is in the world, including conspiracy theories. It attracts attention seekers, grievance peddlers, contrary malcontents, and plain simple wierdos and nutters like moths to a candle.

We may be heading for economic disaster in the foreseeable future, but if we are it will almost certainly come at a time, from a source and cause, and in a form that we least expect.

I hope you don't mean Willy Wombat there, he seems likeable sort of guy, just a bit keen.

wombat42_2

And one from Bloomberg:
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aloQWaKlGBNE