Can we really get hyperinflation when the QE money is just circulation in the financial markets?

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Can we really get hyperinflation when the QE money is just circulation in the financial markets?

I mean, the QE program only seems to inflate financial and futures market prices.

OK specualtion on higher prices in the futures market will affect consumer markets aswell someday. But as long as the interest rates stay low and no one is willing to give loans to indebted people, the money introduced through QE program will stay out of real economy. Thus hyperinflation is not possible until people are willing to make more debts and in consequence most important indicator for hyperinflation, the salaries must rise  to get that loop rising into the sky.

The QE money has to reach real economy markets to "hyper" inflate consumer prices, until this is not happening, deflation will become worse and determin our lifes. And most important we will face another hughe price correction in precious metals to the downside.

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Re: Can we really get hyperinflation when the QE money is ...

What if the increases in commodities prices (due to QE and war deficit spending) cause an increase in monetary velocity? I think that might be the potential spark to the tinder....

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Re: Can we really get hyperinflation when the QE money is ...

But doesnt affect this monetary velocity instituional investors only?

Most countries  who sit on ressources have bad agricultural conditions and vice versa. If purchasing power decreases globally, ressource prices cant skyrocket if real economy is in a deflational crisis and salaries stay low..

People who sit on oiul cant eat sand and oil...If Dubai would be able to produce veggies and meat out of oil the would not be insolvent.

Their wealth is dependant on our purchasing power!

There is just more to it than just assuming prices will skyrocket as ressources deplete

just my two coins, i am trying to model the thing like we all try.

just found a picture about gross wages:

in all countreis that have a bigger than 100% rate, we have very strong inflationary tendencies, near to hyperinflation (Bulgaria, Lettland, Romania..) western countries like Germany and USA a far away from that!

PS:

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Re: Can we really get hyperinflation when the QE money is ...

Interesting perspective. If Dubai had entered into an oil for gold agreement as some (FOFOA) have stated Saudi Arabi has done, then perhaps the resource depletion has been a temporarily equal value trade, but with the final monetary unit (gold) under thier control the tables may turn against the edible resource providers. But only temporarily. From a purely fiat currency perspective, it does not matter who controls a resource if the currency is capable of being inflated, it will eventually price a majority of buyers out of the market for the material.

So is it just a matter of time before the buckets of cash at the institutional level start leaking into the real economy through futures market purchases of commodities by manufacturers? (We are seeing this now I think)

Or is the closed loop investment banking system secured from the unwashed masses and unable to trickle down into higher prices at Wal Mart for basic sustainment items...food, clothing and fuel?

I think it is only a matter of time until price action picks up for real goods, leading to an increase in veocity, maybe a flood from the bond markets into commodities, and ultimately a hyperinflation.

But, I have no formal education, so what could I possibly know?

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Re: Can we really get hyperinflation when the QE money is ...

Nope.

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Re: Can we really get hyperinflation when the QE money is ...

Please explain. Or paste a link to your ZH and Turd Ferguson posts....

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Re: Can we really get hyperinflation when the QE money is ...
sosMsos wrote:

I mean, the QE program only seems to inflate financial and futures market prices.

OK specualtion on higher prices in the futures market will affect consumer markets aswell someday. But as long as the interest rates stay low and no one is willing to give loans to indebted people, the money introduced through QE program will stay out of real economy. Thus hyperinflation is not possible until people are willing to make more debts and in consequence most important indicator for hyperinflation, the salaries must rise  to get that loop rising into the sky.

The QE money has to reach real economy markets to "hyper" inflate consumer prices, until this is not happening, deflation will become worse and determin our lifes. And most important we will face another hughe price correction in precious metals to the downside.

A lot of the $1.5T that the banks will get from the Fed in the next year will be given to the government for t-bills. This money will be spent in competition with your hard earned dollars that are already in circulation. It won't be money that is taken out of others hands via borrowing. It will cause inflation; not exactly hyperinflation, but it does represent about 1/8 of a $12T economy being introduced without being backed by anything but a Fed keyboard.

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Re: Can we really get hyperinflation when the QE money is ...

Mish made a good point today:

"Pelley: Some people think the $600 billion is a terrible idea.

Bernanke: Well, this fear of inflation, I think is way overstated.

I happen to agree with Bernanke's last statement (at least on the basis of $600 billion in QE alone). However, it's important to point out that I view inflation as an expansion of credit and I do not see that $600 billion in QE will spur lending.

Nonetheless, the Fed's QE policy is very misguided because it is likely to spur continued speculation in commodities. Think of it this way: China, Japan, or US investors do not have to finance $600 billion of US deficit spending, the Treasury simply printed enough money out of thin air to cover it.

That money will find another home, but I highly doubt it is the home Bernanke wants. There is little reason for businesses to hire workers in this environments and the odds of re-blowing the housing bubble are close to zero."

http://globaleconomicanalysis.blogspot.com/2010/12/lies-half-truths-and-...

QE is an abomination not because of what it portends today, but because it is a genie that cannot be put back in the bottle.... it is short term thinking.  Look at this new "compromise"... no pain at all for us.. only more deficit busting programs.  Hey.. more money in our pockets next year too (maybe) in the form of reduced payroll tax.... now that's inflationary!  This is basically giving away money... a helicopter drop.. worth maybe $5K for my family.   I would much rather have a smaller, but more predictable future than $5K more next year.  Ending QE will mean instant pain in the form of increasing interest rates.. do you think our administration would allow such a thing to happen?  No way... it's total comfort.. no pain.. right up until the moment the currency blows up and the banks close down.  Maybe we will just skip deflation, and hyperinflation, and go right to ... no monetary system at all.  

My contention concerning QE is simple;  It does not matter how big the hole is relative to the QE amount (Mish'es argument above that $600B is a drop in the bucket).  What matters is how big and continuous the QE is relative to total debt (deficit) being financed.... and we appear to be on course to monetize more than 1/2.  To me, that means the market as a check and balance on gov't spending is completely subverted... which allows... well.. the kind of "compromise" that just happened.  This is the final chapter of extend and pretend... it doesn't get any more Grande than this.    

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Re: Can we really get hyperinflation when the QE money is ...
Jim Hannah wrote:

My contention concerning QE is simple;  It does not matter how big the hole is relative to the QE amount (Mish'es argument above that $600B is a drop in the bucket).  What matters is how big and continuous the QE is relative to total debt (deficit) being financed.... and we appear to be on course to monetize more than 1/2.  To me, that means the market as a check and balance on gov't spending is completely subverted... which allows... well.. the kind of "compromise" that just happened.  This is the final chapter of extend and pretend... it doesn't get any more Grande than this.    

Cripes Jim.  You just whapped me along side the head with your keyboard!  I haven't seen anyone put it in those terms before, and you are absolutely right.  Now it is crystal clear why Chris said, "Alert: QE II Has Lit The Fuse".  I understood before, but I understand at a much deeper level now.  Thanks for the excellent insight.

Travlin 

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Re: Can we really get hyperinflation when the QE money is ...

Jim Hannah wrote:

 

My contention concerning QE is simple;  It does not matter how big the hole is relative to the QE amount (Mish'es argument above that $600B is a drop in the bucket).  What matters is how big and continuous the QE is relative to total debt (deficit) being financed.... and we appear to be on course to monetize more than 1/2.  To me, that means the market as a check and balance on gov't spending is completely subverted... which allows... well.. the kind of "compromise" that just happened.  This is the final chapter of extend and pretend... it doesn't get any more Grande than this.

 

I am admittedly ignorant on this. Can you put it in terms that a "layman" can understand please ?

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Re: Can we really get hyperinflation when the QE money is ...

Hi Eric.. I will try;

When we run a deficit, spending more across all slices of the US budget pie than we take in via taxes ( pretty much always), we finance that borrowing by selling treasury debt... bills and bonds of varying duration and correspondingly varying interest rate.  Blended (mean) interest rate across all debt (short term to 30 year) is hovering around 2.5%... and all time low.  

Like all markets in the USA of our dreams.. this was meant to be a free market, where supply /demand dynamics determine the interest rate.  You see this playing out in the Eurozone... as the debt of various countries gets to be more risky due to their fiscal condition.. the markets punish them by their unwillingness to buy the bonds at "normal" interest rates..... rates must go up to get the debt sold.. and finally the situation gets untenable (Ireland most recently) and BAM... bailout needed. 

I did a little back of the napkin calc. the other night... if our total debt blended rate simply reverted to the historical mean interest rate of about 6.5%.... our debt servicing costs would explode to > $800B from a little over $200B today..

In a free market for sovereign debt, the interest rate mechanism acts as a check and balance on a government's ability to continuously spend above its means.  What has happened here is that, not only do we not want to be punished by those nasty bond vigilantes for our spending... we want to keep interest rates at a HISTORICAL LOW while we continue our profligate spending.  The free market would not allow this... so as the crisis has been proceeding the FED has been buying more and more debt, and the game has been getting closer and closer to direct monetization.  In QEI, the FED bought lots of mortgage debt from everyone from PIMCO to China... and you need to realize that even though they were not buying treasuries and putting them on their balance sheet.. they were in fact backfilling PIMCO and China with nice, 'safe" Treasury debt.. hence creating DEMAND.  

The shell game now is that the big Primary Dealer banks use cheap borrowed FED money to buy treasury debt at auction.. knowing that the FED will monetize (buy with printed money, placing them on their balance sheet) a large fraction of said debt some weeks or months down the road, allowing them to profit via fees in the process. 

This is the essence of QEII.  It is perverse, and if you had told somebody knowledgeable in fixed income trading in 2004 that we would be doing this... they would have told you that you are crazy.  Not one person in 1000 in this country has any idea how insane this truly is.        

 

 

 

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Re: Can we really get hyperinflation when the QE money is ...

Jim Hannah said:

The shell game now is that the big Primary Dealer banks use cheap borrowed FED money to buy treasury debt at auction.. knowing that the FED will monetize (buy with printed money, placing them on their balance sheet) a large fraction of said debt some weeks or months down the road, allowing them to profit via fees in the process

Ok.... now my question is, who exactly is profitting from this monetization ? Or is it being rolled into new Treasuries from the bond purchasers, using the $600 billion to pay the interest on the old Treasuries ?

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Re: Can we really get hyperinflation when the QE money is ...
Jager06 wrote:

Please explain. Or paste a link to your ZH and Turd Ferguson posts....

Hey Jager,

I was just offering my opinion on the question posed in the original post ( I hadn't read your post at the time of posting). The inflation/deflation/hyperinflation mindset is just serving the big market players by creating opportunities for them to profit from and exploit market fear. Its all just asset marketing...."get long and get loud"... and is ephemeral in nature because it's simply a trade and nothing more.  Meanwhile, the real economy continues to deteriorate. 

Also, who is Turd Furguson....and when have I ever posted on the ZH happy-hour show? I assume the joke is on me, but please explain so that I can join in on the laughter.

Best....Jeff

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Re: Can we really get hyperinflation when the QE money is ...
Jager06 wrote:

The inflation/deflation/hyperinflation mindset is just serving the big market players by creating opportunities for them to profit from and exploit market fear. Its all just asset marketing...."get long and get loud"..

THIS exactly is my mindset , that why i posted this here. I mean that global heating lie came only into existance to create profit opportunities.

Same i am concerned here, this site deals with fear though everything seem to be based on a solid analysis i cant deny that all offered solutions here supports some hughe business.

Have in mind when a currency reform happens ( most of the time its not  announced) who is buing all that stored gold and silver afterwards.

Everyone who bought pms today and there happens to be a currency reform without  hyperinflation tomorrow, people will be pretty fucked up.

The thing is to sell all pms just before this happens, when the mob is buying, people who forcast all that to be happening early in 2000 will be the sellers of tomorrow. And i dont get rid of the feeling we get some kind abused to buy pms way overpriced.

When you see advertisment in the newspaper to buy any kind of assets, in general its the time to sell that same asset, its nothing else than a forecast of a busrsting bubble. The same what looks like to happen in the commodity markets at the moment.

Everyone is focusing on bonds and stock markets, that based on QE there will arise a hughe bubble that is not founded on solid economy.

But that same is happening in the commodity markets aswell like gold and silver.

As long there is no real threat of hyperinflation only short term trading makes sense. Investing longterm in any kind of trending asset, just leads into being victim of a  new bubble burst.

IMO: trade profitable as long as it is possible and invest your profits in self-sufficient energy and food supply technology.

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Re: Can we really get hyperinflation when the QE money is ...

sos wrote (and I somewhat censored),

"Everyone who bought pms today and there happens to be a currency reform without  hyperinflation tomorrow, people will be pretty xxxxed up."

first off... most people here are not day trading... though I watch my investments like a hawk and I do watch the info flows hour-by-hour.. I don't trade the info.. rather I hone the investment thesis behind my positions.  I view the current drops in PM's as most probably noise... but as you say, a change in direction toward, "currency reform", which I take to mean fiscal sanity, or a newfound respect for spending within our means... would truly be a big deal.  Maybe the bond market vigilantes are going to overwhelm QEII and impose fiscal sanity the hard way?  I will be watching this development.

http://finance.yahoo.com/banking-budgeting/article/111531/bond-vigilante...

For now, I see the bond markets acknowledging increased risk;

http://www.zerohedge.com/article/german-2-year-auction-fails-20-notional...

and my response to this risk continues to be through PM's... as I see no signs of fiscal sanity setting in.  Rather.. I continue to see us heading for the cliff, extending and pretending until we are fully airborne. 

http://www.prudentbear.com/index.php/thebearslairview?art_id=10477

"Much more certainly, Greece should have been allowed to default last spring, with forcible exit from the euro, while Ireland should have been forced into at least a limited default on its guarantee of bank obligations. Again, the losses across Europe would have been large, and the deflationary effect on troubled countries like Portugal and Spain would have been severe – indeed it is possible that one or more of those countries would also have been ejected from the euro, although probably without default as their debt levels are moderate. However such a limited default would have avoided the ultimate risk, that of a full eurozone meltdown, to be joined by Japan, Britain and the United States in universal rich country default."

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Re: Can we really get hyperinflation when the QE money is ...
Stan Robertson wrote:

 

A lot of the $1.5T that the banks will get from the Fed in the next year will be given to the government for t-bills. This money will be spent in competition with your hard earned dollars that are already in circulation. It won't be money that is taken out of others hands via borrowing. It will cause inflation; not exactly hyperinflation, but it does represent about 1/8 of a $12T economy being introduced without being backed by anything but a Fed keyboard.

 

Yep....it won't stay in a cookie jar on a bank's shelf somewhere.  THIS is where the money is coming from to bail out the States, the grants, and public works projects, ( so called Obama Money ) and unemployment extensions ( which will become permanent, like Europe )  This money will work it's way into the economy and cause inflation.

 

Ben is 100% sure he can call it all back in somehow.......I'm 100% sure he can't get more than about 10% of it back....nor will he even try.

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Re: Can we really get hyperinflation when the QE money is ...

http://market-ticker.org/akcs-www?post=174377

from Denninger,

Bernanke lied, "The amount of currency in circulation is not changing."


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Re: Can we really get hyperinflation when the QE money is ...

Re the chart on M1:  M2 and M3 MUST be considered.  M1 is too narrow for our current monetary structure.  Credit must be considered.  M1 is just one tiny peice of information and should not be considered when determining the amount of money in circulation imo.

Another note - mortgage rates are spiking up faster than any time I can remember.  Further, the bond market is tanking.  This is what many predict when they say that the market is bigger than the fed and that at some points, tax reductions/deficit spending/printing money will be rejected by the market and they will be forced to stop.  We seem to be at that tipping point where each additional move the govt or fed makes in spending/printing is met with inverse reactions in the market than the govt intended.

I think we are at the point where the fed and govt can do no more without severe punishment.  Time will tell

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Re: Can we really get hyperinflation when the QE money is ...
Jim Hannah wrote:

"Much more certainly, Greece should have been allowed to default last spring, with forcible exit from the euro, while Ireland should have been forced into at least a limited default on its guarantee of bank obligations. Again, the losses across Europe would have been large, and the deflationary effect on troubled countries like Portugal and Spain would have been severe – indeed it is possible that one or more of those countries would also have been ejected from the euro, although probably without default as their debt levels are moderate. However such a limited default would have avoided the ultimate risk, that of a full eurozone meltdown, to be joined by Japan, Britain and the United States in universal rich country default."

One thing to add to the European meltdown cause i am here in germany:

You have to see that banks who have  financed the debt of the broken countries will try everything against, that those countries will be able to leave the Euro zone. Irland did not want the bailout, basically Ireland was forced to join the ero zone one year ago though they decided another year before through a plebiscite that they dont want to join at all. The Irish government and citizens got blacklmailed to vote for the Euro as long as there will be a majority.

Irish were blackmailed by German government/ banks to take the bail out.  German reserve bankers run the Irish reserve bank at the moment. The same with greece, german banks did have pursued german government for the bail out. german/ irish/ greece taxpayer have now to pay for this what basically is the loss of Deutsche Bank. Though Deutsche Bank is the winner, like Goldman Sachs in the USA. Similar chicken game.

Europe has become a big ecenomic facism place like the US. Our leaders do what big business wants them to do, thus not legitimated by the citizens anymore, thus not legally in office, but they make us shut up with the words like " we are legitimated to do so in what is called a represenative democracy".

 

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Re: Can we really get hyperinflation when the QE money is ...

since the FED does not publish M3 anymore i thought about how M3  is evolving in europe after all these massive bailouts.

And i was pretty surprised, how that is working?

Would be pretty interested in the FED chart though.

http://sdw.ecb.europa.eu/home.do?chart=t1.2

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Re: Can we really get hyperinflation when the QE money is ...

OK Jeff, I mistook you for someone else.

But the link to the Turd Ferguson PM Blog is:

http://www.tfmetalsreport.blogspot.com/

I am not trying to spam tis, just providing another voice that may or may not agree with what we are discussing here.

Jager06

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Re: Can we really get hyperinflation when the QE money is ...

Here is a chart of the US M3, M2, M1 looks like the EZB chart:

so what does that mean? That all the inflationary scaremongering that only use M!+M2 is way overestimated?

http://www.shadowstats.com/

 

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Re: Can we really get hyperinflation when the QE money is ...

 

"The shell game now is that the big Primary Dealer banks use cheap borrowed FED money to buy treasury debt at auction.. knowing that the FED will monetize (buy with printed money, placing them on their balance sheet) a large fraction of said debt some weeks or months down the road, allowing them to profit via fees in the process."  Jim Hannah 12/08/2010 15:53pm

What do you mean by "printed money"? As I understand it the Fed is not printing Federal Reserve notes (greenbacks) but simply adjusting the accounts that Primary Dealer banks have with the Fed. In other words they are creating credit in a circle between the Dealers and the Fed which creates the appearance of new money but there is no "real" new money (i.e. banknotes or greenbacks) being added to the system. It is just a very sophisticated illusion.

The point is that the Fed is a private bank (albeit with a strong government hand due to the way the governors and directors are appointed) and is unlikely to want to commit financial suicide. Member banks are obliged to make good any losses that the Fed makes so they are all in this together. It is the Holy financial alliance of all holy alliances but it is not succeeding. Sure it has appeared to prop up equity markets (to 62% approx retracement) but has not been so successful at rescuing the housing market. Commodities are more of a mixed bag but the Reuters/Jefferies CRB Index has only managed a little over a 38% retracement. Gold bugs keep telling us that gold should be at anywhere from $2400-$10000 but in fact in nominal terms has only overtaken the highs of the early 80s by around $600 i.e. it has not even doubled. Equities multiplied by at least 10 in that time as did housing.

The game is really up but hope is still in the air. I say hope deliberately because it is the mood that driven equities up since the March 09 low although most people will rationalise that QE1 was responsible. During much of the period from Oct 07, when all the bailout money was being thrown at the problem, the markets persistently refused to co-operate and fell heavily. By March 09 the pundits were universally pessimistic but, as usual, were wrong because the underlying mood had changed and the markets were being bought again. The same thing is upon us again but in reverse. General opinion has it that the GFC is over. The rising dollar and the behaviour of gold are telling me something different. The deflation is resuming.

Why anyone would believe anything the Fed or the government says is beyond me. Only a few short years ago inflation was the arch enemy (which it always is because it robs people of their buying power and sends wrong signals to the market) but it was the government and the Fed telling us this, ironically just as they were about to unleash the greatest inflation of all time. Now, apparently, it is inflation that is going to save us and deflation is going to finish us! Hands up those of you who don't like cheaper prices?

Of course, cheaper prices come with a catch. Falling house prices are painful but mainly to those who are over geared. Falling wages are not nice but my guess is that over the next 10 years the price of goods and services will fall faster than the price of labour which will actually redress the pain that the middle classes have suffered over 30 years as inflation has eroded their buying power. It used to take only 1 working family member to house and feed the family. The most interesting question will be what happens to health care and education - the two government services where increased productivity has been hard to achieve but costs have risen dramatically. It is a certainty that such services cannot be maintained without raising real revenue. One way or another I suspect there is going to be an enormous redistribution of wealth or else a wholesale destruction of wealth which will level the playing field (something that used to go on in New Guinea where masses of pigs and cassowaries were slaughtered by rich families to gain face while impoverishing themselves). The classis way for humans to destroy wealth is to go to war against your neighbour or engage in civil war.

 

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Re: Can we really get hyperinflation when the QE money is ...

This chart of the currency in circulation tells me why we will not have a hyperinflation along the lines of Gemany in the 20s or Zimbabwe.

Those hyperinflations were about truckloads of currency notes being released into the system. The majority of people deal in cash and credit cards (which have limits). They are not trying to unload wheelbarrows of cash for a few loaves of bread. Quite the opposite - people are hoarding cash because it is scarce.

Yes, the cash in circulation has risen about 5% this year but that is a small amount in the context of the size of QE1 and QE2.

If the Fed is printing Federal reserve notes to pay for Treasury securities from the Primary dealers then currency in circulation should be rising by about $75 billion per month. I am doubtful that will happen because the Fed is not entirely stupid.

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Re: Can we really get hyperinflation when the QE money is ...
Jim Hannah wrote:

http://market-ticker.org/akcs-www?post=174377

from Denninger,

Bernanke lied, "The amount of currency in circulation is not changing."


This chart of the currency in circulation tells me why we will not have a hyperinflation along the lines of Gemany in the 20s or Zimbabwe.

Those hyperinflations were about truckloads of currency notes being released into the system. The majority of people deal in cash and credit cards (which have limits). They are not trying to unload wheelbarrows of cash for a few loaves of bread. Quite the opposite - people are hoarding cash because it is scarce.

Yes, the cash in circulation has risen about 5% this year but that is a small amount in the context of the size of QE1 and QE2.

If the Fed is printing Federal reserve notes to pay for Treasury securities from the Primary dealers then currency in circulation should be rising by about $75 billion per month. I am doubtful that will happen because the Fed is not entirely stupid.

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Re: Can we really get hyperinflation when the QE money is ...

Timeandtide... thank you for the thoughtful dialogue.. I spoke to some of your points in the newer Inflation thread.  I will admit it... I am a Goldbug.... and you... are a paperbug.  

Have you seen Gonzalo Lira's pieces on hyperinflation? His posts on the subject can be found in the first spots down this page;

http://gonzalolira.blogspot.com/p/directory-of-posts.html

I don't think we will go the route of Trillion $ bills either... but I do think in the end we will see hyperinflation of a sort. 

I will say this - and I have argued, in person, with no less than Nicole Foss (of The Automatic Earth) herself when I attended a talk she gave in Rhinebeck, NY.... there is no way on earth that Gold is going to deflate in the face of a currency crisis.  Again, I believe that many are thinking from the standpoint of the average Joe, who will be scrimping for necessities during the endgame.  The average Joe has little net worth left at this point.  But the top 5% ... those with liquid net worth maybe $1M to... well.... lots of millions... are going to want to hedge.  They are going to hedge with Gold and Silver and other real things.  When this happens you will see the ULTIMATE inflation vs deflation endgame....  Average Joe's with no savings will be dumping chromed out Harley's for pennys on the dollar, while farmland and Gold will be shooting up even more.  This will be the flavor of the endgame IMO.  It is not all or nothing... it will be inflation of the things people need;  food, gasoline, wealth preservation (for some), and deflation of things people don't need (collector cars, boats, other collectibles).           

 

 

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Re: Can we really get hyperinflation when the QE money is ...

 

 Re: Can we really get hyperinflation when the QE money is credit..

 http://mises.org/daily/4312

 Assuming the government tries to maintain the unsustainable...  then yes.. it generates the equivalent of cash when it spends funded by monetized debt...

 ok.. there's a matching (-ve) balance at the FED the governments "overdraft" ... but if there's no limit.. who cares ?

 What's the difference between a printing press (zimbabwe/weimar)  and an infinite overdraft limit... ( US $ ) ?

 In theory, assuming a mechanism to repay and the genuine intent to... there is a huge difference.

 In practice... sovereign debt is "more honoured in the breach than the observance".

  A complication...

 the FED itself is happy to provide gigantic amounts of "liquidity" of it's own volition (apparently). - Was there any treasury consultation or  congressional oversight ?

 So maybe there are possibly two routes to dollar hyperinflation... sovereign initiated (via treasury/congress), and  FED initiated... ?

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Travlin
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Re: Can we really get hyperinflation when the QE money is ...
Jim Hannah, post 7 wrote:

What matters is how big and continuous the QE is relative to total debt (deficit) being financed.... and we appear to be on course to monetize more than 1/2.  To me, that means the market as a check and balance on gov't spending is completely subverted... which allows... well.. the kind of "compromise" that just happened.  This is the final chapter of extend and pretend... it doesn't get any more Grande than this.    

In light of bond declines over the last couple of days, and Chris' report today, it looks like the market is not giving up without a fight. I agree with your statement Jim, so I am pleasantly surprised to see this resistance to driving off the cliff.  Only time will tell if it's enough to make a difference.  http://www.peakprosperity.com/martensoninsider/bond-market-rebels

Travlin 

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sosMsos
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Re: Can we really get hyperinflation when the QE money is ...

@ time and tate: can you please explain this? I dont get the difference to printing money

"As I understand it the Fed is not printing Federal Reserve notes (greenbacks) but simply adjusting the accounts that Primary Dealer banks have with the Fed."

 

@ Jim -> gonzalo lira szenario:

why hasnt the chain reaction not been triggered already 2009? Also at that time money supply was at all time high + all those additional public debts the banking crisis caused...why not that time, why now, whats different now that wasnt already in place 1-2 years ago? Check chart below.

What if the next asset bubble burst like the housing bubble in China or Spain.

To me all those busrting bubbles destroy debt/ capital, do exactly  what our economy needs, they cause deflation. The next bursting bubble will show where we ll be heading to. If the habbit continues that the banks will be financed again through the public, hyperinflation wont be avoidable. If not, and get along with the capital reduction, we will be heading into deeper deflation.

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Jim H
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Re: Can we really get hyperinflation when the QE money is ...

SOS,  The time factor is simply this;  when do we hit the debt wall with Gov't debt?... you are correct that various forms of debt are being destroyed.. but  the fact that all this and more (currently about 12% of GDP per year) additional debt is being added to our National debt.  It's not being destroyed.. it just being placed on the taxpayers back.  Now if it was truly being destroyed, and somebody other than the taxpayers was taking a haircut.. I would start believing in the deflation bunny.. .but not now.  We shall see if Ireland in the end votes to give the bankers a haircut.   

When do we hit the debt wall?  It depends on the combination of total debt, and mean or blended interest rate.  We are currently at or near all time low interest rates... some combination of continuing to add debt at $150B per month, coupled with rising interest rates, will cause us to reach the ultimate tipping point... where TSHTF.     

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sosMsos
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Re: Can we really get hyperinflation when the QE money is ...

Thanks Jim for the your effort.

For my better understanding i have created a simplified model. Appreciate any improvement proposal. Also maybe useful to explain the mechanism to people who are new to economics.

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