Investment

» permabear - Re: John Williams on hyperinflationary depression

Jas,

Outside of restaurants, do you deny that people are paying more for food, energy, healthcare, education, insurance and automobiles? Did not CPI rise over 4 percent in the past year, which is a bump up from previous years?

On the economic front, do you deny that measures of money supply, especially M2 and MZM are accelerating in an upward trajectory?

http://investmenttools.com/thefed/mzm.htm

http://www.economagic.com/em-cgi/charter...

Do you reject the relationship between money supply and inflation? Yes the economy is contracting. And generally a contracting economy should lead to disinflation if not deflation. The problem is that the Fed is working overtime to reflate the economy. In doing so they are producing a rapidly accelerating growth in the money supply. If you want to talk about lagging effects. How about the lagging effect between the growth in money supply and inflation? And can you really say that there can not be any contraction in growth while not having inflation at the same time? Just look at the 1970s. Or Zimbabwe.

I see staglation first. And if things really get out of hand, hyperinflation as the worst case scenario.

-- posted by permabear

» Jas_Jain - Unrelenting Inflationist

Unrelenting Inflationist

George Ure: "Bitter? me? Not hardly. Just very disappointed. I'm still hanging onto a pile of commodity options, confident that the inflation tale will become evident by summer."
http://www.urbansurvival.com/week.htm

Now that the long-awaited recession is here my crystal ball is lot clearer. Inflation rate will be retreating big-time beginning in summer. Generous guy that I am I will offer you another bet that is too good for you to refuse. That YoY CPI rate would have peaked by June 2008 (most likely by April) and that it will fall below 2% some time during the second half. Deal or no deal?

"But, did I tell you expect an inflationary explosion, or what"

You are living in the past, George. The explosion is over. Get ready for the implosion. There is nothing like a recession to get inflation rate down. BTW, there is no money being printed, or dropped from helicopter by Ben, that gets to the households other than the checks people will receive from the US Treasury. All that Ben can do is to shower money on Bankrupters and Fraudsters of New York. His fly zone is highly restricted.

Six months after the Peak Debt (time lags in the economy) there will be outright deflation in the US. The household debt might peak during 2008Q2-Q3 led by mortgage debt default. BTW, some time in 2008 we will have a spectacular Commodities Bust. Bubbles always last longer and go farther than bears think, but they sure burst.

It Is the Debt Stupid! (That plays a big role in inflation).

Jas

PS: We have been in 3%+- Controlled Inflation regime for the past 25 years. The big question is: Which way would this regime be violated? My bet is on the downside.

-- posted by Jas_Jain

» Jas_Jain - Re: John Williams on hyperinflationary depression

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"Do you reject the relationship between money supply and inflation?"

This is why I have a very low opinion of inflationists. Rather than asking me why don't you do an analysis of the money supply and inflation rate and then report the results to everyone here.

My analysis clearly indicated that M1 has the highest correlation with the CPI.

M1:

2005-02-01 1373.0
2005-03-01 1373.3
2005-04-01 1358.2
2005-05-01 1364.5
2005-06-01 1380.0
2005-07-01 1367.3
2005-08-01 1376.9
2005-09-01 1377.1
2005-10-01 1374.3
2005-11-01 1376.3
2005-12-01 1374.5
2006-01-01 1379.5
2006-02-01 1380.9
2006-03-01 1385.1
2006-04-01 1380.3
2006-05-01 1384.2
2006-06-01 1375.4
2006-07-01 1370.7
2006-08-01 1370.1
2006-09-01 1361.0
2006-10-01 1367.9
2006-11-01 1371.0
2006-12-01 1366.5
2007-01-01 1372.2
2007-02-01 1367.1
2007-03-01 1369.3
2007-04-01 1377.2
2007-05-01 1374.8
2007-06-01 1365.4
2007-07-01 1368.0
2007-08-01 1369.5
2007-09-01 1366.1
2007-10-01 1369.2
2007-11-01 1365.8
2007-12-01 1366.3
2008-01-01 1367.0
2008-02-01 1370.3
2008-03-01 1372.6

It is flat like a pancake, no?

MONEY SUPPLY IS NOT A CAUSE BUT A RESULT. Money comes into existence via debt and, therefore, the best variable to focus on is debt and understanding lags in the economy. Inflation happens to be a big-time lagging indicator. Watch the inflation rate fall like a rock during 2008H2 as recession asserts itself. The Housing Bubble led household debt increase has been filtering thru and it will implode.

You are living in the past, my e-friend.

Jas

-- posted by Jas_Jain

» permabear - Doug Nolan on why inflation reigns

Excerpt:

A historic inflation in dollar financial claims was the undoing of anything resembling a global monetary system, and now this anchorless "system" of wildcat finance is the bane of financial and economic stability. To be sure, massive and unrelenting U.S. Current Account Deficits and resulting dollar impairment have unleashed domestic Credit systems around the globe to expand uncontrollably. Today, virtually any major Credit system can and does inflate domestic Credit to create the purchasing power to procure inflating global food, energy, and commodities prices.

The long-overdue U.S. Credit contraction and economic adjustment could change this dynamic. But for now there are reasons to expect this uninhibited Global Credit Bubble to instead run to precarious extremes - and for resulting Monetary Disorder to become increasingly problematic. Destabilizing price movements and myriad inflationary effects are poised to worsen. The specter of yet another year of near-$800bn Current Account Deficits coupled with huge speculative flows out of the dollars is just too much for an acutely overheated and unstable global "system" to cope with.

I hear pundits still referring to a "deflationary Credit collapse." Well, the U.S. Credit system implosion was largely stopped in its tracks last month. The Fed bailed out Bear Stearns; opened wide its discount window to Wall Street; and implemented unprecedented liquidity facilities for the benefit of the marketplace overall. Central banks around the globe executed unparalleled concerted market liquidity operations. Here at home, the GSEs' regulator spoke publicly about Fannie and Freddie having the capacity to add $200 billion of mortgages to their balances sheets, with the possibility of increasing their guarantee business as much as $2 TN this year (certainly including "jumbo" mortgages). The Federal Home Loan Bank system was given the ok to continue aggressive liquidity injections and balloon its balance sheet in the process. And now (see "GSE Watch" above) we see that the Federal Housing Administration (with its new mandate and $729,550 loan limit) is likely to increase federal government mortgage insurance by as much as $200bn this year, while Washington's Ginnie Mae is in the midst of a securitization boom.

Together, the Fed and Washington have effectively nationalized a large portion of both mortgage and market liquidity risk. It is, as well, worth noting that JPMorgan Chase expanded assets by $80.7bn during the first quarter (20.7% annualized) to $1.642 TN, with six-month growth of $163.3bn (22.1% annualized). Goldman Sachs expanded its balance sheets by $69.2bn during Q1 (24.7% annualized) to $1.189 TN, with half-year growth of $143.2bn (27.4%). Even Wells Fargo grew assets at an almost 14% pace this past quarter. And we know that Bank Credit has expanded at a 12.6% rate over the past 38 weeks. Meanwhile, GSE MBS issuance has been ramped up to a record pace. And let's not forget the Credit intermediation function now being carried out by the money fund complex - with assets having increased an unprecedented $371bn y-t-d (41.3% annualized) and $900bn over the past 38 weeks (47.7% annualized). It is also worth noting the $184bn y-t-d increase (29% annualized) in foreign "custody" holdings held at the Fed. Sure, the Credit system remains under significant stress, with additional mortgage and corporate Credit deterioration in the offing. But, at least for now, policymakers have successfully stemmed systemic deleveraging. The Credit system is simply not in deflationary collapse mode.

-- posted by permabear

» Jas_Jain - Actual Inflation Trend In the US and What Is Next

http://www.financialsense.com/fsu/editor...

-- posted by Jas_Jain

» Jas_Jain - FW -- Re: Actual Inflation Trend In the US and What Is Next

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FW -- Re: Actual Inflation Trend In the US and What Is Next

GB: "Deflation is hard for many to understand. They see money supply growth..."

Incessant talk of, or focus on, "Money Supply" and myth of "Printing Money" (the boogieman!) is part of breeding economic dopes in America -- taking the attention off the real issue, DEBT. Talking about debt is like talking about sex, it seems.

Inflationists are dishonest to the core when it comes to use of "Money Supply." M1 has the best correlation with the CPI, long-term, and it has been flat like a pancake:

http://research.stlouisfed.org/fred2/ser...

Sort-term (year or two), "Money Supply" is useless in predicting the current and the future direction of inflation, but lazy inflationists never do historical analysis of "Money Supply" data. M3 was useless piece of crap and inflationists want to hang on to crap because that is what they need to buttress their bias.

It Is the Debt, Stupid!

Enjoying the life of deflation right here in the US of A, in California of all places,

Jas

PS: The USG would have to increase deficit spending by $1Tr. (over and above the current deficit) for the next 12 months to counter the deflation brought about by mortgage defaults and drop in home prices. That is possible but highly unlikely because that would take the deficit to more than 10% of the GDP. If attempted, accident will happen in the financial markets way beyond Fed's ability to control. People underestimate the power of markets to discipline the politicians. No, we are not Zimbabwe.

-x-x-x-x-x-x-x-x-

Deflation is hard for many to understand. They see money supply growth, and they think that this new money has been permanently added to the money supply. But it's not true. In the U.S. (as opposed to Zimbabwe), we increase the money supply by increasing the amount of debt in the system. The problem is that debt has to be repaid. It's like some jokester giving you a $5 bill ... but it has a rubber band still attached to his hand. Sooner or later that $5 bill is going to return to the jokester's hand.

Now image $20 trillion, but with each bill still attached to the lender with an extended rubber band. Can you imagine the deflationary force of all of those rubber bands? The pent-up power of deflation is immense, and I agree with Jas. When the effect of the tax rebates wears out, this country could experience a crushing deflationary contraction.

For more, please see my new book, The Reverse Multiplier Effect - When Crushing Deflation Destroys America.
George Blackburne, III

-- posted by Jas_Jain

» permabear - The world's growing food price crisis

-- posted by permabear

» permabear - Inflation isn't limited to the U.S. by any means

Thomson Financial News
Asian inflation at fresh multi-year highs as fuel, food, housing prices climb
04.23.08, 5:46 AM ET

SINGAPORE (Thomson Financial) - Inflation across Asia continued to soar to multi-year highs in the first quarter, driven by higher prices for fuel, food and housing, data showed this week.

The latest readings from Australia, China, Hong Kong and Singapore reflect the repeated records set by crude oil prices and food-related commodities and present a challenge to policymakers across the region.

continued...

-- posted by permabear

» Jas_Jain - Re: Inflation isn't limited to the U.S. by any means

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"Inflation isn't limited to the U.S. by any means"

Was the Scam market bubble limited to the US? Was the housing bubble limited to the US?? People don't understand bubbles.

Credit inflation began in the US and now credit deflation has begun in the US. Credit = money and supposedly more money causes inflation and less money causes deflation.

Don't get fooled by lags. The US Housing Bubble burst is a big event and it will affect lot of things over the next 2-3 years.

Jas

-- posted by Jas_Jain

» permabear - Re: Inflation isn't limited to the U.S. by any means

The long-term cycles and the credit bubble economy definitely support your point of view. The charts included in the following article by the Collection Agency show how overdo the American economy is for a deflationary period:

http://www.safehaven.com/showarticle.cfm...

But...I continue to believe that Ben Bernanke will print as many dollars as he needs to to avoid deflation. Deflation will not occur on his watch. That's why I'm sticking with the inflation scenario.

-- posted by permabear