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From Deflation To Hyperinflation

Expect a market crash followed by helicopter money
Wednesday, September 30, 2015, 11:36 PM

Executive Summary

  • China is rolling over
  • Contagion will eventually take down the core economies, including the US
  • We are witnessing a full-blown collapse of the commodity complex
  • Deflation will win the day over the next year, but then get ready for helicopter money hyperinflation

If you have not yet read Part 1: Deflation Warning: The Next Wave available free to all readers, please click here to read it first.

The Chinese GDP Lie

Right off the top, China is not growing anywhere near the 7% it claims.  That’s just a politically useful lie that the Chinese tell to the world as much as they tell to themselves.

Fortunately, hardly anyone is falling for that particular fib any longer.  Let’s start with the completely obvious manufacturing slump that has hit China:

Chinese Factory Gauge Slumps to Lowest Level Since March 2009

Sept 22, 2015

A private Chinese manufacturing gauge fell to the lowest in 6 1/2 years, underscoring challenges facing the economy as its old growth engines splutter.

A global sell off in riskier assets gained pace after the preliminary Purchasing Managers’ Index from Caixin Media and Markit Economics dropped to 47.0 in September. That missed the median estimate of 47.5 in a Bloomberg survey and fell from the final reading of 47.3 in the previous month. Readings have remained below 50 since March, indicating contraction.

Premier Li Keqiang’s growth target of about 7 percent for this year is being challenged by a slowdown in manufacturing and exports even as services and consumption show resilience.


The way a PMI reading works is anything over 50 indicates expansions and anything under 50 indicates contraction.  Anybody care to explain to me how China can be sporting sub-50 readings every month since March -- that’s five full months -- and still be claiming to be aiming for a 7% annual growth target?  You know, because China is... » Read more



What Awaits Us In The Future Of Higher Interest Rates

Having an action plan will be the key to preserving wealth
Friday, June 26, 2015, 11:53 AM

Executive Summary

  • Expect a bond market bloodbath as rates rise
  • Municipal, corporate and sovereign defaults will soon follow
  • Liquidity suffers as necessary goods prices rise, but securities prices fall
  • The new, nuclear risk of a derivatives market collapse

If you have not yet read Part 1: The Global Credit Market Is Now A Lit Powderkeg available free to all readers, please click here to read it first.

You may remember that what caused then Fed Chairman Paul Volcker to drive interest rates up in the late 1970’s was embedded inflationary expectations on the part of investors and the public at large. Volcker needed to break that inflationary mindset. Once inflationary expectations take hold in any system, they are very hard to reverse.

A huge advantage for Central Bankers being able to “print money” in very large magnitude in the current cycle has been that inflationary expectations have remained subdued. In fact, consumer prices as measured by government statistics (CPI) have been very low in recent years.

When Central Bankers started to print money, many were worried this currency debasement would lead to rampant inflation. Again, that has not happened for a very specific reason. For the heightened levels of inflation to sustainably take hold, wage inflation must be present. I've studied historical inflationary cycles and have not been surprised at outcomes in the current cycle in the least, as in the current cycle, continued labor market pressures have resulted in the lowest wage growth of any cycle in recent memory. But is this about to change at the margin?

The chart below shows us... » Read more



The War On Cash: Officially Sanctioned Theft

How banks & the government are diminishing your savings
Friday, June 12, 2015, 11:07 AM

You’ve probably read that there is a “war on cash” being waged on various fronts around the world. What exactly does a “war on cash” mean?

It means governments are limiting the use of cash and a variety of official-mouthpiece economists are calling for the outright abolition of cash. Authorities are both restricting the amount of cash that can be withdrawn from banks, and limiting what can be purchased with cash.

These limits are broadly called capital controls. » Read more



Steen Jakobsen: Get Ready For The Biggest Margin Call In History

A recommendation to move to cash
Sunday, April 19, 2015, 1:02 PM

Economist Steen Jakobsen, Chief Investment Officer of Saxo Bank, believes 2015 will be another "lost year" for the economy. And he predicts the Federal Reserve will indeed start to raise rates later this year, surprising the market and taking the wind of out asset prices.

He recommends building cash and waiting to see how the coming storm -- which he calls the "greatest margin call in history" -- plays out. » Read more


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The Fatal Flaw Of Centrally-Issued Money

Why the world's current money regimes will fail
Thursday, April 9, 2015, 1:03 PM

Centrally issued money centralizes wealth and generates systemic inequality. This is equally true of all centrally issued currencies.  But the inequity that is intrinsic to this system is politically and financially destabilizing, and so this system is unsustainable. » Read more


A Tough Winter

Strange, hard times are here
Monday, March 30, 2015, 11:25 PM

Last year we had the ‘polar vortex’ which delivered some of the absolute coldest air to our region, so the back-to-back experience is one of relentless cold, snowy winters and short summers.

Similarly, there seem to be a bunch of new economic rules that we have to adjust our thinking around. » Read more



Philip Haslam: When Money Destroys Nations

Understanding how currencies collapse
Monday, March 23, 2015, 4:54 PM

To understand better the anatomy of a currency collapse, we talk this week with Philip Haslam, author of the book When Money Destroys Nations. Haslam is an authority on monetary history, and more recently, has spent much time in Zimbabwe collecting dozens of accounts of the experiences real people had as the currency there failed.  » Read more


Blueximages |

First The Fall...

A Special Report: Deflation is here
Tuesday, February 24, 2015, 12:41 AM

One of the models of the future that I favor is the Ka-Poom theory put out by Erik Jansen of back in 1999.

Basically it states that the end of a bubble era begins with a sharp deflationary event (the ‘Ka’ part of the title), but ends in a highly inflationary blow-off, (the ‘Poom’).

It’s a one-two punch. Down then up. » Read more


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The Approaching Great Unraveling - Are You Prepared?

Greece is just the start of the global insolvency crisis
Thursday, February 5, 2015, 3:54 PM

Executive Summary

  • Which countries are next in line to "go Greek"?
  • Which major countries will be hit by deflation next? Which will instead see massive inflation?
  • How individuals should start preparing
  • Why huge massive losses and wealth transfer are inevitable for many

If you have not yet read Part 1: Greece Exposes The Global Economy's Achilles Heel, available free to all readers, please click here to read it first.

At a high level, the suite of predicaments we face are as obvious as they are serious. 

Perhaps the largest predicament we face is that infinite economic growth on a finite planet is an impossibility and yet that's exactly what our monetary and banking systems require.

Not merely because the bankers and politicians want it, which they do, but because that's how the system itself is designed.  When you loan money into existence, you get an exponential increase of that money over time.  Actually you get an exponential increase in debt too, only at a faster pace which translates into larger quantities.

For as long as debts are growing at an exponential pace, everything is fine with the world, the economy hums along, politicians get re-elected and the big banks churn out profits year after year.

However, when the debt growth stops, financial panic sets in, the banking system threatens collapse, and the fiscal and monetary authorities pull out all the stops in their efforts to prevent these various ills from getting any worse.

What the political and banking folks are desperately seeking to prevent is nothing less than a Great Unraveling.

Their task is impossible.

The Great Unraveling will be a set of related economic and financial crises that end up taking inflated expectations and reducing them to match reality.  Perhaps this process will take years, or maybe it will take decades, or maybe it will take months.  Nobody knows.  But the longer that... » Read more



When This Ends, Everybody Gets Hurt

And the end is uncomfortably close
Wednesday, January 21, 2015, 10:45 PM

Central bank credibility (as fictitious as that may be) is essential to maintaining the current narrative, BUT central banks are rapidly losing their credibility (which should have happened simply via deductive reasoning a long time ago) and the strains are showing.

Their actions are increasingly wild and extreme, and it's our view that 2015- 2016 will mark the end of this long run of overly-ambitious central bankers and over-complacent markets. » Read more