revisiting which comes first: hyperinflation or deflation

Login or register to post comments Last Post 9512 reads   39 posts
Viewing 10 posts - 1 through 10 (of 39 total)
  • Tue, Feb 09, 2010 - 11:23pm

    #1
    strabes

    strabes

    Status Bronze Member (Offline)

    Joined: Feb 07 2009

    Posts: 58

    count placeholder

    revisiting which comes first: hyperinflation or deflation

I hate to bring this up again, but I’m getting a sick feeling today that I’m wrong that deflation will come first. 

I’m writing an article decribing how the last 30 years has been nothing but false growth via credit inflation thanks to the Wall St / DC system colluding together to extend it.  So if the system works and works and works to extend and extend and extend inflation, why would it not extend it to its ultimate end–hyperinflation? Isn’t that what we saw in Weimar? 

I’m starting to think we got extended deflation in the US during the Great Depression because FDR refused to further extend the system and give Wall St whatever it wanted, by definition then an exponentially inflated system had to deflate.  But this time Bush/Obama/Fed quickly did exactly what Wall St wanted so exponential “growth” could continue. 

Hmmmm……sucks to be hostage to this system, facing impoverishment if we guess wrong.  Proves the lie of “freedom.” 

Is Prechter completely wrong because he’s too much of a nerdy scientist to be able to look at the humans running the show?

 

 

  • Wed, Feb 10, 2010 - 03:37am

    #2
    Peak Prosperity Admin

    Peak Prosperity Admin

    Status Bronze Member (Offline)

    Joined: Oct 31 2017

    Posts: 1612

    count placeholder

    Re: revisiting which comes first: hyperinflation or …

I subscribe to the idea that de/inflation is determined by the money supply (and its speed). It seems that the Fed’s paper never gets into the “real” economy but remains stuck in the “financial” economy generating more “wealth” for the players. So at the moment I think mild deflation is operating but galloping inflation is in our future.

Here in Canada on BNN (business news network) Interactive Brokers is running an ad for forex trading where the voiceover is that Central Banks are printing money and the visual shows the banks on huge mounds of money that keeps spewing out of their mouths. Now is the ad agency that produced that plugging gold or are they blithely unaware? Don’t know if the same ad runs in the US.

 

  • Wed, Feb 10, 2010 - 04:46am

    #3
    Peak Prosperity Admin

    Peak Prosperity Admin

    Status Bronze Member (Offline)

    Joined: Oct 31 2017

    Posts: 1612

    count placeholder

    Re: revisiting which comes first: hyperinflation or …

I believe that inflation is the amount of money, the speed or where it is parked to me is irrelevant.

I think we will wind up in a currency crisis which severely devalues our sore of value. Zimbabwe USA.

 

  • Wed, Feb 10, 2010 - 12:46pm

    #4
    Peak Prosperity Admin

    Peak Prosperity Admin

    Status Bronze Member (Offline)

    Joined: Oct 31 2017

    Posts: 1612

    count placeholder

    Re: revisiting which comes first: hyperinflation or …

[quote=strabes]

I hate to bring this up again, but I’m getting a sick feeling today that I’m wrong that deflation will come first. 

I’m writing an article decribing how the last 30 years has been nothing but false growth via credit inflation thanks to the Wall St / DC system colluding together to extend it.  So if the system works and works and works to extend and extend and extend inflation, why would it not extend it to its ultimate end–hyperinflation? Isn’t that what we saw in Weimar? 

I’m starting to think we got extended deflation in the US during the Great Depression because FDR refused to further extend the system and give Wall St whatever it wanted, by definition then an exponentially inflated system had to deflate.  But this time Bush/Obama/Fed quickly did exactly what Wall St wanted so exponential “growth” could continue. 

Hmmmm……sucks to be hostage to this system, facing impoverishment if we guess wrong.  Proves the lie of “freedom.” 

Is Prechter completely wrong because he’s too much of a nerdy scientist to be able to look at the humans running the show?[/quote]

Strabes,

The credit bubble always comes first, and as you’ve already pointed out we’re emerging from a 30-year bubble.  We then hit Peak Debt, which is when the SHTF and everything fell apart.  Yes, TPTB injected liquidity into the financial system, which could be regarded as inflationary by itself, but the thing is you cannot look at it by itself.  You have to also look at the decrease in credit which offsets the increase in liquidity. 

The banking system can have (and does) all sorts of reserves parked at the Federal Reserve, but people and businesses are still in Peak Debt mode and will not borrow.  In fact, they are paying down debt instead.  With money going to pay debt, it is not chasing goods and services, and is therefore very unlikely to cause inflation, nevermind hyperinflation, in the near term.  Paying down that debt is going to take a very long time, and it will be excacerbated by what is likely to be rounds of increased taxes at every level – State, Municipal, and Federal.  That will leave very little discretionary income in the US consumer’s pocket, making any kind of recovery highly unlikely anytime soon.

I believe inflation and hyperinflation will come, but not until after we get into some serious debt-deflation, which we have only gotten a whiff of so far.  Severe, punishing, ruthless deflation will sow the seeds for public sentiment and political grandstanding to turn on the printing presses like we’ve never seen before, but so far, that ani’t happening.  I believe it most likely will, but don’t see it yet. 

my 2 cents.

  • Wed, Feb 10, 2010 - 03:03pm

    #5
    Peak Prosperity Admin

    Peak Prosperity Admin

    Status Bronze Member (Offline)

    Joined: Oct 31 2017

    Posts: 1612

    count placeholder

    Re: revisiting which comes first: hyperinflation or …

The fact that prices are not falling despite all the unemployment and deflationary events should tell you that inflation isn’t very far away.

  • Wed, Feb 10, 2010 - 03:10pm

    #6
    Peak Prosperity Admin

    Peak Prosperity Admin

    Status Bronze Member (Offline)

    Joined: Oct 31 2017

    Posts: 1612

    count placeholder

    Re: revisiting which comes first: hyperinflation or …

http://www.youtube.com/watch?v=Vdc7v4vkbJI

Jump Strabes! Jump! Don’t give in to the dark (hyperinflation) side Strabes!

No seriously, I think its important to realize that inflation and deflation are simply trades, not macro-economic gospel. Throw out the macro-economic theory that is clouding your perspective and the truth will slap you in the face. When the groupthink is convinced that hyperinflation is the gospel, prepare for the deflation trade. When the herd jumps on the deflation trade bandwagon, position yourself for the coming inflation trade. 

Whatever you do, refrain from identifying yourself as “this” or “that”. Its the only way to get from point A to point B in this bipolar marketplace/society with some capital (and some self-identity) intact.

  • Wed, Feb 10, 2010 - 03:25pm

    #7
    Peak Prosperity Admin

    Peak Prosperity Admin

    Status Bronze Member (Offline)

    Joined: Oct 31 2017

    Posts: 1612

    count placeholder

    Re: revisiting which comes first: hyperinflation or …

[quote=leo0648]

The fact that prices are not falling despite all the unemployment and deflationary events should tell you that inflation isn’t very far away.

[/quote]

I agree with 95% of what you said.  I would just change a few key words:

The fact that prices are not exploding despite all the money printing and liqudiity injections should tell you that deflation is here.

Wink

  • Wed, Feb 10, 2010 - 03:27pm

    #8
    Peak Prosperity Admin

    Peak Prosperity Admin

    Status Bronze Member (Offline)

    Joined: Oct 31 2017

    Posts: 1612

    count placeholder

    Re: revisiting which comes first: hyperinflation or …

Yeah FB I’m generally back in the deflation camp this morning. 

But I’m still unsure of the definition of hyperinflation.  I don’t know if it requires recovery to kick-in.  I look at banks borrowing near zero from the Fed and loaning near 30% on credit cards now as basically turning their big vacuum machine up to a higher speed.  They’re sucking wealth out of the system (from the class of borrower nobody cares about so there won’t be much protest) while they still can.  They know the gig is eventually up.  Makes me think hyperinflation comes when the banks decide to switch the vacuum to its highest power setting and scramble to get 100%, 200%, 500% on their assets from everyone, no holds barred, before the system dies.  It’s the final death squirm of the parasite.  But they would never do that until they thought the host was going to stop paying its 5-30%.  Jamie Dimon would never want to kill the goose as long as it’s laying his $17 million egg.

Don’t know.  Just speculating.

Separate topic: I think what you say about taxes is absolutely true as governments will be just like banks trying to suck liquidity from the system.  This is the reason I think everybody should pay the penalty now and get out of their IRA/401ks.  10% is nothing compared to what government may do in the future.

 

  • Wed, Feb 10, 2010 - 03:45pm

    #9
    Peak Prosperity Admin

    Peak Prosperity Admin

    Status Bronze Member (Offline)

    Joined: Oct 31 2017

    Posts: 1612

    count placeholder

    Re: revisiting which comes first: hyperinflation or …

JAG, I like the counter-groupthink model.  I usually operate that way in life.  Good to remember it’s really no more than that in trading.

When it comes to the nature of society, bipolar is right.  It’s been exhausting me lately which makes me consider another counter-groupthink option…crossing the border for good.

  • Wed, Feb 10, 2010 - 03:51pm

    #10
    Peak Prosperity Admin

    Peak Prosperity Admin

    Status Bronze Member (Offline)

    Joined: Oct 31 2017

    Posts: 1612

    count placeholder

    Re: revisiting which comes first: hyperinflation or …

Strabes,

Banks could be raising interest rates on credit cards because they are insatiable pigs at the trough, or because default rates have risen to record levels with no end in site.  I would say “both of the above”.  Either way, increased debt payments are deflationary as less money is available to chase goods and services, more goes to pay debt, and less people will be willing to borrow at high rates. 

With governments being the only entities willing (and able) to take on additional debt, I am unsure why people worry about “who is going to lend us all this money”.  Corporate debt and consumer debt continues to collapse.  It is being replaced by government debt.  I know it’s all unpayable, but “where the money will come from” to buy the bonds that must be sold does not seem to be a mystery to me.  It’s all out there and nobody else is borrowing it, so the governments will continue to vacuum it all up for the time being, which may be longer than anyone thinks.

When interest rates on US Treasuries start to move up (significantly), then I’ll start to worry about us reaching an inflection point.  Right now, they’re still stuck near zero and may even go lower before they go higher.

 

 

Viewing 10 posts - 1 through 10 (of 39 total)

Login or Register to post comments