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Inflation or Deflation?


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#1 Cuthbert Calculus

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Posted 01 September 2008 - 07:59 PM

Inflation or Deflation Pt 2

With Bob Hoye and Marc Faber

http://commoditywatc...flation-part-2/

#2 G0ldfinger

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Posted 01 September 2008 - 08:01 PM

Finally something to listen to while I am cleaning dishes. laugh.gif My wife will be happy.
You can't tax deflation.
“Currency Induced Cost-Push Hyperinflation” vs “Demand-Pull (non-hyper) Inflation.”
The "no income --> no inflation"-thesis is as wrong as the "price control --> inflation control"-thesis.
Don't TRADE gold! You might lose your shirt in the biggest bull run ever. That would be embarassing. © possibly by Swampy
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#3 G0ldfinger

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Posted 01 September 2008 - 09:15 PM

Both, Hoye and Faber seem somewhat puzzled. That they both think the Dollar might go up makes me a Dollar-Ueber-Bear. I think Hoye is wrong in claiming that Weimar Germany just printed money. I am sure (and remember having read about it) that there was an orderely German credit system in place that bought German treasuries en masse. The claim that we saw a huge bull market in commodities also seems flawed. When you compare the leading commodities indices with current M3 then you'll see that commodities in relation to M3 are possibly 8 times cheaper than in 1960, and maybe still four times cheaper than in 1980.* So where is this huge bull? We're possibly not a quarter through yet in terms of prices. Just MHO.

* This discrepancy is quite in line with Bubbs $400 oil prediction, by the way.
You can't tax deflation.
“Currency Induced Cost-Push Hyperinflation” vs “Demand-Pull (non-hyper) Inflation.”
The "no income --> no inflation"-thesis is as wrong as the "price control --> inflation control"-thesis.
Don't TRADE gold! You might lose your shirt in the biggest bull run ever. That would be embarassing. © possibly by Swampy
Posted Image
Gold, silver, property, currencies, commodities charts.

#4 azazel

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Posted 01 September 2008 - 09:35 PM

Faber sees gold going down to $650-$700

He previously said that it was going up.

Is he right this time?




#5 FLASH

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Posted 01 September 2008 - 10:34 PM

QUOTE (azazel @ Sep 1 2008, 10:35 PM) <{POST_SNAPBACK}>
Faber sees gold going down to $650-$700

He previously said that it was going up.

Is he right this time?


Oh well another years wage off the STR fund would have been better staying in property laugh.gif

#6 dom

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Posted 01 September 2008 - 11:07 PM

QUOTE (azazel @ Sep 1 2008, 10:35 PM) <{POST_SNAPBACK}>
Faber sees gold going down to $650-$700

He previously said that it was going up.

Is he right this time?

I don't see oil getting any cheaper, ever. All commodities will track its price.

#7 Timil

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Posted 02 September 2008 - 12:29 AM

Just got a delivery of Oil today full tank it'll cost about £700 and odd pounds I remember when a full tank used to cost about £100 thats gotta hurt people that increase in less than 10 years. ohmy.gif

But I still think theres going to be some real deflation horror stories as well as inflation. huh.gif
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#8 id5

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Posted 02 September 2008 - 06:38 AM

QUOTE (Timil @ Sep 2 2008, 01:29 AM) <{POST_SNAPBACK}>
Just got a delivery of Oil today full tank it'll cost about £700 and odd pounds I remember when a full tank used to cost about £100 thats gotta hurt people that increase in less than 10 years. ohmy.gif

But I still think theres going to be some real deflation horror stories as well as inflation. huh.gif


Thanks for that sad.gif you have just reminded me that I need to order mine for the winter, did you buy it from a dealer or one of these http://www.yobco.co.uk/ types of groups that have sprung up over the last few years?
The market can stay irrational longer than you can stay solvent. - John Maynard Keynes

I must remember that investing is a marathon and not a sprint!

#9 ares

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Posted 02 September 2008 - 09:53 AM

I welcome Bob Hoye opinion and follow lots of his arguments. However when he talks about the magnitude of the commodities 'bubble' he uses fiat currency measures, while the previous bubbles he refers to were under a gold standard (with fractional reserve banking mind).

These to me do not seem to be a fair comparison, using Gold as a base many commodities certainly far out performed gold's 3-4x move (in USD) but I just don't see how the fundamentals of say Oil and valid adjustments just to keep pace with the expansion of the monetary base are factored in?

If $10 Oil in 1998 wasn't an ultra depressed level what would Mr Hoye suggest is?

I do buy into a lot of the deflationist points, but I also look at the fundamentals for most commodities being pretty strong over the medium to long term (Oil being the prime example). Unless we are going to see the money supply contract in a pretty dramatic fashion (enough to offset the upward price pressure on Oil) I do not see significant (another 10% maybe?) down side to say Oil, Gas, Gold, Silver.

Sure gold could go to 650 (I don't see it that low) but that makes it all the better time to dollar cost average imo

What do you guys think?

#10 G0ldfinger

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Posted 02 September 2008 - 11:19 AM

IMO it is interesting that all 4 guests (over the two shows) basically agree that at least long term gold should be a good investment. The more deflationistic ones see it going down first though.

On another note, I am also not sure if Hoye is right on interest rates in a boom bust cycle. Faber made sense, but was not very specific. Maybe he got scared out of all his Asian investments recently and therefore now preaches the less demand story.

IMO China will go through the mother of all depressions. But that won't mean deflation in commodities since the government will use their savings to prop up the economy. They will build a lot. Just like the Hoover Dam etc. back in the 1930s.
You can't tax deflation.
“Currency Induced Cost-Push Hyperinflation” vs “Demand-Pull (non-hyper) Inflation.”
The "no income --> no inflation"-thesis is as wrong as the "price control --> inflation control"-thesis.
Don't TRADE gold! You might lose your shirt in the biggest bull run ever. That would be embarassing. © possibly by Swampy
Posted Image
Gold, silver, property, currencies, commodities charts.

#11 Steve Netwriter

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Posted 02 September 2008 - 11:43 AM

Welcome ares biggrin.gif

Fiat: What starts becoming worth less eventually becomes worthless.

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#12 qwertyuiop

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Posted 02 September 2008 - 12:01 PM

Deflation in home products and services. Inflation for imported goods and services dependant on them. Currency devaluation. Gold is not a good investment I think - just a retainer of PP. Better to invest your money abroad in countries with savings and current account surpluses.

#13 romans holiday

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Posted 02 September 2008 - 12:02 PM

After listening to the debate, I hear most of them predicting a slump in commodities as well as assets, as the bust phase follows on from the boom. Most have in mind a time line with a deflationary stage hitting everything in the short [medium] term followed on by a a re-assertion of the commodity bull in the long term. They also see monetary metals continuing to do well.

The takeaway for POG is to expect further drops [buying ops] against the dollar as it strengthens in contrast to weakening asset prices. Medium/long term they see fundamental problems with the dollar. The implication here is for gold to strengthen as it regains its monetary function. POG would become an irrelevance then and we would be looking at the purchasing power of gold itself. I found Hoye's point, based on historical precedent, about gold being necessary to re-liquidify the banks interesting.
Modern money "shorts" the currency, and is backed by debt. The debt is real. A debt deflation will lead to a prolonged period of deleveraging, where the short-covering of currencies will strengthen currencies relative to asset prices. At the global level, in the FX market, central currencies will benefit from deleveraging at the expense of peripheral currencies. Due to instability and uncertainty, gold will benefit against all currencies as it continues to be re-monetized.

Hold on to your hats for hyper-deflation, where cash is king, and gold the King of cash.
[Silver? A Volatile Queen].

#14 dooferdog

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Posted 02 September 2008 - 12:10 PM

I'd love to hear Jim Rogers remarks to these views. I know Rogers is a fundamentalist but I'm not sure anout his credentials to discuss monetary influences. I haven't finished listening to the prog yet but seems to me so far into BH's piece I agree with Ares that he pays no attention to the monetary inflation under the current fiat system when assessing the price increases of commodities so far.

#15 Jin

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Posted 02 September 2008 - 12:13 PM

What did Bob Hoye mean when he referred to Gold re-liquefying banks

I didn't understand that bit - how does that work?

Cheers

#16 romans holiday

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Posted 02 September 2008 - 12:14 PM

I would love to hear what Jim Puplava has to say. They "covered" the inflation/deflation thing a few weeks ago, but frankly I thought they did not do it justice and instead attacked a straw man.
Modern money "shorts" the currency, and is backed by debt. The debt is real. A debt deflation will lead to a prolonged period of deleveraging, where the short-covering of currencies will strengthen currencies relative to asset prices. At the global level, in the FX market, central currencies will benefit from deleveraging at the expense of peripheral currencies. Due to instability and uncertainty, gold will benefit against all currencies as it continues to be re-monetized.

Hold on to your hats for hyper-deflation, where cash is king, and gold the King of cash.
[Silver? A Volatile Queen].

#17 romans holiday

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Posted 02 September 2008 - 12:22 PM

QUOTE (Gatesy @ Sep 2 2008, 09:10 PM) <{POST_SNAPBACK}>
I'd love to hear Jim Rogers remarks to these views. I know Rogers is a fundamentalist but I'm not sure anout his credentials to discuss monetary influences. I haven't finished listening to the prog yet but seems to me so far into BH's piece I agree with Ares that he pays no attention to the monetary inflation under the current fiat system when assessing the price increases of commodities so far.

Bob's point, as a market historian, is that what the CB's are trying to do have been done in the past.... with the same outcome; each time banks have tried to reflate, they have failed in preventing a deflationary bust.

I think it is more complicated this time. There will be a deflationary bust, with a temporary strengthening of the dollar. But eventually the inner contradictions of the dollar/fiat, which we all know so well, will lead to the deflation of the dollar itself [inflation in prices].
Modern money "shorts" the currency, and is backed by debt. The debt is real. A debt deflation will lead to a prolonged period of deleveraging, where the short-covering of currencies will strengthen currencies relative to asset prices. At the global level, in the FX market, central currencies will benefit from deleveraging at the expense of peripheral currencies. Due to instability and uncertainty, gold will benefit against all currencies as it continues to be re-monetized.

Hold on to your hats for hyper-deflation, where cash is king, and gold the King of cash.
[Silver? A Volatile Queen].

#18 G0ldfinger

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Posted 02 September 2008 - 01:05 PM

QUOTE (Jin @ Sep 2 2008, 01:13 PM) <{POST_SNAPBACK}>
What did Bob Hoye mean when he referred to Gold re-liquefying banks

I didn't understand that bit - how does that work?

Cheers

I have no clue what he meant with that really. It almost sounded as if he thought that banks/central banks hold enough gold such that they can benefit from a rising price. Sounds like an outright joke to me. Rising gold prices will cause some trouble in the banking system IMO.

EDIT: typo.
You can't tax deflation.
“Currency Induced Cost-Push Hyperinflation” vs “Demand-Pull (non-hyper) Inflation.”
The "no income --> no inflation"-thesis is as wrong as the "price control --> inflation control"-thesis.
Don't TRADE gold! You might lose your shirt in the biggest bull run ever. That would be embarassing. © possibly by Swampy
Posted Image
Gold, silver, property, currencies, commodities charts.

#19 Jin

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Posted 02 September 2008 - 01:24 PM

QUOTE (G0ldfinger @ Sep 2 2008, 02:05 PM) <{POST_SNAPBACK}>
I have no clue what he meant with that really. It almost sounded as if he thought that banks/central banks hold enough gold such that they can benefit from a rising prising. Sounds like an outright joke to me. Rising gold prices will cause some trouble in the banking system IMO.


Yeah - I must admit I found him hard to follow - as far as I could tell he was saying there would big deflation and that after initial falls in the nominal gold price the real gold price would rise - presumably as other asset prices decreased in relation to gold. Right?

anyone care to summarise Bob Hoye's argument as I'm not sure I "got" what he was saying.

Cheers

#20 G0ldfinger

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Posted 02 September 2008 - 01:59 PM

I also don't believe in tightening global liquidity because the trade and current account deficits in the US go down, like Faber does. Let's first wait and see whether this is really the case. My guess is that public deficits will explode.
You can't tax deflation.
“Currency Induced Cost-Push Hyperinflation” vs “Demand-Pull (non-hyper) Inflation.”
The "no income --> no inflation"-thesis is as wrong as the "price control --> inflation control"-thesis.
Don't TRADE gold! You might lose your shirt in the biggest bull run ever. That would be embarassing. © possibly by Swampy
Posted Image
Gold, silver, property, currencies, commodities charts.




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