How Hyperinflation Will Happen
Right now, we are in the middle of deflation. The Global Depression we are experiencing has squeezed both aggregate demand levels and aggregate asset prices as never before. Since the credit crunch of September 2008, the U.S. and world economies have been slowly circling the deflationary drain.Iar pentru ca ma intreba cineva ieri despre burse si FED avem un articol bun si pe tema asta:
To counter this, the U.S. government has been running massive deficits, as it seeks to prop up aggregate demand levels by way of fiscal “stimulus” spending—the classic Keynesian move, the same old prescription since donkey’s ears. But the stimulus, apart from being slow and inefficient, has simply not been enough to offset the fall in consumer spending. For its part, the Federal Reserve has been busy propping up all assets—including Treasuries—by way of “quantitative easing”.
The Fed is terrified of the U.S. economy falling into a deflationary death-spiral: Lack of liquidity, leading to lower prices, leading to unemployment, leading to lower consumption, leading to still lower prices, the entire economy grinding down to a halt. So the Fed has bought up assets of all kinds, in order to inject liquidity into the system, and bouy asset price levels so as to prevent this deflationary deep-freeze—and will continue to do so. After all, when your only tool is a hammer, every problem looks like a nail.
Yields are low, unemployment up, CPI numbers are down (and under some metrics, negative)—in short, everything screams “deflation”. Therefore, the notion of talking about hyperinflation now, in this current macro-economic environment, would seem . . . well . . . crazy. Right? Wrong: I would argue that the next step down in this world-historical Global Depression which we are experiencing will be hyperinflation.
Most people dismiss the very notion of hyperinflation occurring in the United States as something only tin-foil hatters, gold-bugs, and Right-wing survivalists drool about. In fact, most sensible people don’t even bother arguing the issue at all—everyone knows that only fools bother arguing with a bigger fool.
A minority, though—and God bless ’em—actually do go ahead and go through the motions of talking to the crazies ranting about hyperinflation. These amiable souls diligently point out that in a deflationary environment—where commodity prices are more or less stable, there are downward pressures on wages, asset prices are falling, and credit markets are shrinking—inflation is impossible. Therefore, hyperinflation is even more impossible.
This outlook seems sensible—if we fall for the trap of thinking that hyperinflation is an extention of inflation. If we think that hyperinflation is simply inflation on steroids—inflation-plus—inflation with balls—then it would seem to be the case that, in our current deflationary economic environment, hyperinflation is not simply a long way off, but flat-out ridiculous.
But hyperinflation is not an extension or amplification of inflation. Inflation and hyperinflation are two very distinct animals. They look the same—because in both cases, the currency loses its purchasing power—but they are not the same.
Inflation is when the economy overheats: It’s when an economy’s consumables (labor and commodities) are so in-demand because of economic growth, coupled with an expansionist credit environment, that the consumables rise in price. This forces all goods and services to rise in price as well, so that producers can keep up with costs. It is essentially a demand-driven phenomena.
Hyperinflation is the loss of faith in the currency. Prices rise in a hyperinflationary environment just like in an inflationary environment, but they rise not because people want more money for their labor or for commodities, but because people are trying to get out of the currency. It’s not that they want more money—they want less of the currency: So they will pay anything for a good which is not the currency.
This recovery is not going to happen—that’s the news we’ve been getting as of late. Amid all this hopeful talk about “avoiding a double-dip”, it turns out that we didn’t avoid a double-dip—we never really managed to claw our way out of the first dip. No matter all the stimulus, no matter all the alphabet-soup liquidity windows over the past 2 years, the inescapable fact is that the economy has been—and is headed—down.
In other words, Treasuries are now the New and Improved Toxic Asset. Everyone knows that they are overvalued, everyone knows their yields are absurd—yet everyone tiptoes around that truth as delicately as if it were a bomb. Which is actually what it is.
So this is how hyperinflation will happen: One day—when nothing much is going on in the markets, but general nervousness is running like a low-grade fever....
The Elites Have Lost The Right to Rule
I do not have a clear window into the highest levels of power in many areas such as the military or the intelligence community but I do have a very good understanding of it when it comes to the financial system and the economy. At the end of the day everyone knows that those who can create the money and credit have the ultimate power over any political system. Therefore, at the top of the economic power of the world is the Federal Reserve and at the top of that is Ben Bernanke. This is why I took a great deal of interest in reading the full text of his speech today. Much will be written about it but I want to tackle it from two points. First, who is Ben Bernanke?Ultima este despre un nene care nu mai are grija burselor, a economiei si a banilor in general:
You can really see into his head from reading this speech. He is an academic who thinks he is smarter than everyone else which is why he is in the position he is in. He thinks the key to monetary policy is to trick people into doing things that will hurt them in the end. He believes the mal-investments he intends to push people and institutions into equals economic growth. What surprises me so much about the investment community and the American public in general is that so many fail to understand that we live in a top down centralized economic system much more similar to China in more ways than people want to admit. We look at how the government steers the economy in China and sneer. How are we so different right now?
As far as the speech itself, it confirms something I mentioned several weeks ago. Banana Ben absolutely wants to do a massive QE2 program. The only thing holding him back is gold is near an all time high. What he wants is gold much lower and stocks much lower to give him cover. Gold has not cooperated so he is in a bind. He cannot print a massive amount of money with gold here and stocks at 1055 because what happens if gold soars and stocks sell-off in the days that follow such an announcement? What if the response in the treasury market is not as desired? He is scared to do it here and he is right to be scared because such a reaction would be the end of the Fed right then and there. The Fed will be gone anyway within a few years in my opinion but it’s going to fight hard to survive and if you want to make money in this market you need to understand that. The most powerful institution in the world is fighting for its survival. Never forget that.
I think that with the Fed in a bind they will accelerate and become ever more aggressive in behind the scenes games. This will make markets even more volatile and extraordinarily challenging. This is financial war make no mistake about it. The only way in my opinion to survive this is to buy all dips in precious metals, agriculture and oil. It is in these three areas that I expect to see the most price inflation as money eventually figures out the end game. The end game is more and more people will eventually wake up to the fact that the markets are a hologram put in front of you by the magicians at the Fed. That what constitutes real wealth in the years ahead will be owning food, energy and a means of exchange that will be accepted should a black market economy arise as it has in virtually all nations at one time or another throughout history.
Omul care a renunţat la bani: "Sute de români vor să ştie cum e"
Mark Boyle, un economist care a decis să trăiască fără să se mai folosească de bani, spune, într-un interviu acordat EVZ, că în ultimele zile românii au început să-i îmbrăţişeze ideile.P.S. Rog luati in considerare ceea ce spuneam AICI inainte de adaugarea unor eventuale comentarii. Va multumesc.
Tânărul irlandez Mark Boyle (31 de ani), absolvent de studii economice, a renunţat încă din 2008 să mai folosească bani. Presa britanică l-a privit drept un erou ciudat şi a relatat cum trăieşte "natural" lângă o fermă ecologică din Bristol, într- o rulotă, cum mănâncă ce cultivă, cum găteşte la foc, afară, cum împarte tot cu cei care vor să ajute.
Singurele "luxuri" tehnologice de care abuzează ar fi un laptop de pe care "alimentează" un blog al comunităţii "freeconomy" - concept lansat şi numit de Mark "model economic" care a strâns peste 20.000 de utilizatori, bazat pe ideea de a trăi cu cât mai puţin şi de a împărţi cu cei din jurul tău de la cunoştinţe tehnice, obiecte, la locuinţe etc. - şi un telefon mobil pe care poate doar primi apeluri. Atât laptopul, cât şi telefonul sunt încărcate cu energie de la un panou solar.
Inspirat de Gandhi să trăiască cu cât mai puţin
Mark susţine că munceşte ca voluntar pe la ferma vecină pentru fructe şi legume, că se tratează de orice suferă cu plante şi că propovăduieşte, pe unde e întrebat, viaţa fără bani. Acum câteva zile a lansat şi o carte, "The Moneyless Man" ("Omul fără bani"), pe care, în ciuda filosofiei sale, o vinde. "Banii merg însă în scopuri caritabile", explică irlandezul.
Într-un interviu acordat EVZ, Mark povesteşte cum l-a determinat "lipsa de respect" faţă de mediu a oamenilor să arunce banii pe fereastră. Şi cum, deşi iniţial se dorea a fi un experiment de doar un an, i-a plăcut viaţa asta atât de mult încât a decis să nu se mai atingă de "ochiul dracului" niciodată.
Tânărul recunoaşte că nu a fost primul şi nici singurul care a renunţat la bani. Spune că Gandhi l-a inspirat şi că e conştient că sunt pe lume oameni care, de nevoie, duc aceeaşi viaţă, cu mai puţin entuziasm însă.