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HYPERINFLATION

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That will be defaulted on? :unsure: Why then is everyone printing money like crazy?

 

There is almost the same amount of spendable money available. Nobody is literally printing money.

 

When the feds take ownership of a bond they are swapping a valueable reasonably liquid financial asset for another more liquid financial asset which is a deposit with the feds. The person with the newly created private bank deposit is not in a significantly better position. The private banks create the money for the bond holder but the actual amount of private bank created money available is more or less the same as before the crisis, due to all the losses and debt repayment. The impact therefore is one of reducing interest rates rather than of increasing the money supply. The fed deposits which the private banks own, cannot be spent by the banks unless they are part of the banks capital so since the banks have very little capital, very little of it is spendable.

 

Actual spendable money has not increased. The impact of larger private bank deposits at the fed is more of a psychological one because people know there are sufficient deposits in the system to enable them to get paid out by their bank no matter what happens because the tax payer is standing behind all of the banks.

 

It is quite possible the commodity boom is more about perceptions of inflation than the actual mechanics which make that possible.

 

 

 

 

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oops, here is GF's thesis in a nutshell. Prices in USDs go up as China raises rates.

 

METALS-US copper inches up to record, unfazed by China rates

 

27 Dec 2010 - 15:46

 

* March COMEX copper hits record high 429.85 cents/lb

* Shanghai hit low of 68,310 yuan at start of trade

* Chile supply concerns to underpin sentiment

* Coming up: CFTC trader position data at 3:30 p.m. EST

 

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This could get interesting:

 

BREAKINGVIEWS-War over U.S. debt ceiling could force austerity

27 Dec 2010 - 16:19

-- The author is a Reuters Breakingviews columnist. The opinions expressed are his own --

By James Pethokoukis

 

WASHINGTON, Dec 27 (Reuters Breakingviews) - The Washington skirmish over the expiring Bush-era tax cuts may pale compared to the coming political battle over raising the U.S. government's borrowing authority. Some Republicans want to use the deadline to force spending cuts on President Barack Obama. Investors should steel themselves for more brinkmanship.

 

At some point in the first half of 2011, Congress will need to agree on increasing the federal government's debt authority, currently capped at $14.3 trillion. Not doing so could lead to a shutdown of key government operations or even, theoretically, to the non-payment of interest on U.S. Treasury debt.

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When the feds take ownership of a bond they are swapping a valueable reasonably liquid financial asset for another more liquid financial asset which is a deposit with the feds. The person with the newly created private bank deposit is not in a significantly better position. The private banks create the money for the bond holder but the actual amount of private bank created money available is more or less the same as before the crisis, due to all the losses and debt repayment.

 

A plea for help: Why do the shutters in my ageing brain shut when I encounter such?

Is there an easy I can trick the brain to stay alert instead of it finding solace in such tomes as 'Another 501 Spanish verbs'?

 

No offence intended A&L, just pure admiration

 

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...could lead to a shutdown of key government operations or even, theoretically, to the non-payment of interest on U.S. Treasury debt.

Like under Clinton.

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... When the feds take ownership of a bond they are swapping a valueable reasonably liquid financial asset for another more liquid financial asset which is a deposit with the feds. The person with the newly created private bank deposit is not in a significantly better position. ...

So, that Deutsche Bank alone dumped hundreds of billions of MBSs onto the Fed didn't mean that they were better off afterwards? Then why did they do it? And why are they paying boni to themselves, which they possibly spend in due course (on commodity related investments)?

 

So, that the Fed buys US treasuries is actually not good for the government who takes on all this debt? Then why do they do it? Why don't they just let markets find the fair value of US debt? Could it be that this debt is not worth what the Fed is paying for it? Hmmm, just a thought! And, BTW, the government immediately spends that freshly created ("printed") money (because otherwise why would they go into debt).

 

Your statements make not much sense to me. That the big investment banks are now gambling in the commodities markets (like JPMoron's copper ETF) while they should have gone bankrupt two years ago, is only another sign that you're thinking is flawed.

 

And one more thought: "Money never sleeps."

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So, that Deutsche Bank alone dumped hundreds of billions of MBSs onto the Fed didn't mean that they were better off afterwards? Then why did they do it? And why are they paying boni to themselves, which they possibly spend in due course (on commodity related investments)?

 

So, that the Fed buys US treasuries is actually not good for the government who takes on all this debt? Then why do they do it? Why don't they just let markets find the fair value of US debt? Could it be that this debt is not worth what the Fed is paying for it? Hmmm, just a thought! And, BTW, the government immediately spends that freshly created ("printed") money (because otherwise why would they go into debt).

 

Your statements make not much sense to me. That the big investment banks are now gambling in the commodities markets (like JPMoron's copper ETF) while they should have gone bankrupt two years ago, is only another sign that you're thinking is flawed.

 

And one more thought: "Money never sleeps."

 

You have a point but if one of the richest banks in the world is amongst many other richest banks in the world that has created MBS or bought MBS which has inflated asset prices and then finds the MBS is less valueable the result is a sudden evaporation of the value of those underlying assets which is hugely deflationary.

 

If the feds buy all the toxic assets they dont substantially create any new wealth that was not present at the frothiest moment before the crisis began.

 

Before the crisis the richest banks were 'awash with liquidity' and they traded the MBS like cash. people traded auction rate securities more or less like cash. Even if all of this stuff is bought up by the feds it does not substantially create more liquidity because before the crisis all of this stuff was part of the worlds 'wall of liquidity' that was in circulation bidding up the price of everything in sight.

 

So now the banks have a similar amount of liquidity as they had before.

 

I dont know much about the ETFs but for example Barclays created one of these things before the crisis and Jpmorgans has had a big silver position either on paper or with physical for years. The fact they have not gone bust is just a sign of the amount of effort that has been made to avoid a huge deflationary crash which you for some reason think is hugely inflationary.

 

All of these entities had plenty of money to speculate before this crisis and they are still speculating.

 

And even if the government spends money created by the feds the net result is still that bank losses and repayments balance whatever has been created so there is no extra money being created for some years now.

 

You just seem to be overlooking the massive evaporation of wealth that happened during this crisis which all the various fed actions are only replacing so far.

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This could get interesting:

 

BREAKINGVIEWS-War over U.S. debt ceiling could force austerity

27 Dec 2010 - 16:19

-- The author is a Reuters Breakingviews columnist. The opinions expressed are his own --

By James Pethokoukis

 

WASHINGTON, Dec 27 (Reuters Breakingviews) - The Washington skirmish over the expiring Bush-era tax cuts may pale compared to the coming political battle over raising the U.S. government's borrowing authority. Some Republicans want to use the deadline to force spending cuts on President Barack Obama. Investors should steel themselves for more brinkmanship.

 

At some point in the first half of 2011, Congress will need to agree on increasing the federal government's debt authority, currently capped at $14.3 trillion. Not doing so could lead to a shutdown of key government operations or even, theoretically, to the non-payment of interest on U.S. Treasury debt.

 

don't sweat it.

 

:lol:

 

http://www.reuters.com/article/domesticNew...E57706N20090808

Geithner asks Congress for higher U.S. debt limit

 

WASHINGTON (Reuters) - U.S. Treasury Secretary Timothy Geithner formally requested that Congress raise the $12.1 trillion statutory debt limit on Friday, saying that it could be breached as early as mid-October.

 

"It is critically important that Congress act before the limit is reached so that citizens and investors here and around the world can remain confident that the United States will always meet its obligations," Geithner said in a letter to Senate Majority Leader Harry Reid that was obtained by Reuters.

...

It is expected to issue net new debt of as much as $2 trillion in the 2009 fiscal year ended September 30 and up to $1.6 trillion in the 2010 fiscal year, according to bond dealer forecasts

...

"Congress has never failed to raise the debt limit when necessary. Because members of both parties have long recognized the need to keep politics away from this issue, these actions have traditionally received bipartisan support," he [Geithner] wrote. "This is clearly a moment in our history that calls for continuation of that tradition."

 

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don't sweat it.

 

I'm sorry IRS but you have gone too far. I formally request that an unmissable Health Warning be attached to any post that may disturb a reader's equilibrium.

 

With laptop where it should be, on my lap; drink in hand; M&S Belgian biscuit just inserted into the orifice I read:-

 

"It is critically important that Congress act before the limit is reached so that citizens and investors here and around the world can remain confident that the United States will always meet its obligations,"

 

Being in no position to ROFL something had to give. I wont into detail, but it could have been nasty.

Perhaps I should retrain as a model citizen to avoid any repeat.

Thank you.

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More ways than one to huge inflationary commodity prices it seems. :(

 

Sri Lanka takes on nationwide coconut crisis.

 

http://www.bbc.co.uk/news/world-south-asia-12051074

 

Periapperummal Dalton said the price of a coconut had doubled in two months to as much as 60 rupees ($0.54).

 

Analysts say the shortage has arisen because coconut plantations have been unscrupulously converted for housing development.

 

Production has also been affected by the relatively high cost of fertiliser.

 

The government last week tried to cap the price of coconuts at 30 rupees and rationed their sale in official outlets.

 

But supplies ran out and the coconuts appeared at higher prices on the black market.

SUPRISE SUPRISE.!!

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AT LAST AT LAST I SEE DEFLATION. :lol::lol:

 

http://www.bbc.co.uk/news/business-12082884

 

Pay freeze or cut for many in 2011, says BCC

 

More than half of UK companies plan to freeze or cut their employees' pay in 2011, according to a survey by the British Chambers of Commerce (BCC).

 

ROLL ON 2011 THIS IS GOING TO BE AS NASTY AS I HAD ANTICIPATED. :(

 

 

 

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AT LAST AT LAST I SEE DEFLATION. :lol::lol:

Double whammy, as predicted a long time ago: salaries stagnate while inflation is at 5%. Bammm!

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Double whammy, as predicted a long time ago: salaries stagnate while inflation is at 5%. Bammm!

 

The worst outcome possible and so soon.

STAG-FLATION.

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http://jsmineset.com/2010/12/28/trader-dan...ng-bond-prices/

Trader Dan Comments On Soaring Commodity Prices and Plunging Bond Prices

...

The market interpreted today’s data release as evidence that the Fed’s $600 billion + QE policy would not be ending anytime soon. That brought another surge of fund related buying into the commodity sector with the result that the CCI (Continuous Commodity Index) has now kissed its former all time high made back in the summer of 2008 long goodbye. It shot above 622 and appears to be accelerating, even at the end of the year when we would normally expect to see profit taking in the sector by longs who have profited immensely in 2010.

 

I find it astonishing that fresh money is being committed to the sector as the calendar year winds down. This is highly unusual as this time of year is historically known as the time for book squaring. What it is telling us is that fund managers have no intention at this point of abandoning a strategy that has paid handsome dividends to them and will undoubtedly be looking to up their ante at the beginning of the New Year. Look for fresh highs early next year in the sector based on what is occurring in some of the various commodities. Sugar, after putting in a 30+ year high, has shot to yet another fresh high in today’s session. Soybeans registered a 26 month high. Ditto for corn. Copper is now trading at $4.30 a pound! Crude oil continues to hold above $90.

 

The bond market, after being fiddled with by the monetary authorities in the hopes of hoodwinking the public into believing that inflation pressures are subdued, promptly fell apart plunging a full point as participants are watching with great alarm the surge in the CCI.

...

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Soybeans registered a 26 month high. Ditto for corn. Copper is now trading at $4.30 a pound

 

We could be looking at what is mainly a credit driven event

 

There was a huge run up in many food prices prior to the 2007 credit crisis at a time when China India and other countries were being seen as taking more and more demand from the west and then after 2007 prices fell back and producer countries like Argentina struggled and they began culling their beef herds. But all of the basic food prices fell back and have not recovered so far with a few exceptions like some of the meats since there is now a shortage of animals - which is a combination of culling, drought, demand and what not. Germans like NZ deer for example and Germany is doing ok.

 

In the case of soyabeans Argentina had a record soyabean harvest this Southern hemisphere year and then China banned soya bean imports dues to a trade dispute but in October ended that.

 

Meanwhile Chinese domestic lending was increased astronomically by 66%, and over 550 billion USD dollars was allocated to create demand in the Chinese economy and now they are attempting to deal with the consequences of that as prices have risen. Everybody here knows about the huge increases in Chinese construction spending where that kind of thing gobbles up thousands/millions of miles of copper pipe and wiring and you name it.

 

In theory the ramp up in prices is a global credit driven event, supported also later by a one off spending increase (the 550 billion extra USD) and the additional chinese credit. So we are still dealing with the consequences of that, and food prices will not repeat the 2007 peaks for years to come, because if prices go higher production is going to increase to meet the demand - that is for example what i am hearing about wheat production, because while prices for wheat are far below the peaks of the final blow off prior to the credit crisis, they are still higher than 2006/2007.

 

http://www.indexmundi.com/commodities/?com...&months=300

 

http://www.indexmundi.com/commodities/?com...&months=300.

 

And for copper most people would agree that there is now a surplus of construction around the world that is going to be left hanging around waiting for occupation for maybe decades to come.

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Sure, fiat money is credit, so all that money comes from credit. As for the belief that all this money/credit creation is temporary, you know what I think about that (and what history has proven over and over again). About the part where production can just be ramped up as if it was nothing, I am not so sure. Apparently this was not possible in the past as the chart below (with a longer history than yours) nicely demonstrates (inflation-adjusted wheat prices seem to still be at an almost record low). In the long run, climbing oil prices will mean climbing food prices. I suscribe to peak oil, so I can't quite see how we can get around this.

 

weizen-typ1.gif

 

 

We could be looking at what is mainly a credit driven event

 

There was a huge run up in many food prices prior to the 2007 credit crisis at a time when China India and other countries were being seen as taking more and more demand from the west and then after 2007 prices fell back and producer countries like Argentina struggled and they began culling their beef herds. But all of the basic food prices fell back and have not recovered so far.

 

In the case of soyabeans Argentina had a record soyabean harvest this Southern hemisphere year and then China banned soya bean imports dues to a trade dispute but in October ended that.

 

Meanwhile Chinese domestic lending was increased astronomically by 66%, and over 550 billion USD dollars was allocated to create demand in the Chinese economy and now they are attempting to deal with the consequences of that as prices have risen.

 

In theory the ramp up in prices is a global credit driven event, supported also later by a one off spending increase (the 550 billion extra USD) and the additional chinese credit. So we are still dealing with the consequences of that, and food prices will not repeat the 2007 peaks for years to come, because if prices go higher production is going to increase to meet the demand - that is for example what i am hearing about wheat production, because while prices for wheat are far below the peaks of the final blow off prior to the credit crisis, they are still higher than 2006/2007.

 

http://www.indexmundi.com/commodities/?com...&months=300

 

http://www.indexmundi.com/commodities/?com...&months=300.

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Sure, fiat money is credit, so all that money comes from credit. As for the belief that all this money/credit creation is temporary, you know what I think about that (and what history has proven over and over again). About the part where production can just be ramped up as if it was nothing, I am not so sure. Apparently this was not possible in the past as the chart below (with a longer history than yours) nicely demonstrates (inflation-adjusted wheat prices seem to still be at an almost record low). In the long run, climbing oil prices will mean climbing food prices. I suscribe to peak oil, so I can't quite see how we can get around this.

 

weizen-typ1.gif

 

Wheat could be weaker because the shops are now full of a vast array of different products where things like soyabean must be a fairly new crop?

 

Also for example modern machinery and methods has transformed the costs of food harvesting.

 

Salmon for example shows the same fall in price since the 1980s where even rock stars now own fish farms.

 

Peak oil is a big issue but peak oil and peak credit are also related. Humans went on an epic binge that is not likely to be repeated for years to come. I think also some of the green worries about nuclear are going to be replaced by a degree of realism that humans in cold climates cannot have this modern life without modern heat and transport where the energy has to come from somewhere. (how much snow have you down your way this year?)

 

And people like me are still looking at the economics of ground heat pumps to stop using oil. Nobody is going to be using oil in Finland for heating in a few decades.

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I find it very funny that some people like Erik Townsend claim that 40% inflation over a few years is no hyperinflation.

 

40% inflation over 5 years means that cash loses over 81% of its value. In my book that is catastrophic enough to be called "hyper". What E.T. refers to is possibly "catastrophic hyperinflation", where such numbers turn to 99.999999999% etc.

 

People need to understand that there is no clear definition of hyperinflation. In the end it is the individual who will decide whether the experienced inflation is too hyper to be called "normal" or "good". Some might think so already after they have lost "only" 75% of their savings, maybe some are happy to lose 95% before they think it is hyper (apparently E.T. is). The endless discussion about the definition of hyperinflation is as fruitless as the definition of "island" or "life" or "sea/ocean/continental divide".

 

EDIT: Another trial: "hyperinflation" := "really bad inflation"? :rolleyes:

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German Inflation Unexpectedly Quickened in December

http://www.bloomberg.com/news/2010-12-29/g...n-december.html

 

This is totally unexpected, because if you print money with nothing sound backing it and crappy subprime loans or crappy government debt backing it, usually all these bits of paper should become more and more valuable, until one single piece of paper can buy the whole world. This has happened in history over and over again, and next time it will happen it will be me who will buy the world... hey, wait a minute!?!? :wacko:

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I find it very funny that some people like Erik Townsend claim that 40% inflation over a few years is no hyperinflation.

 

40% inflation over 5 years means that cash loses over 81% of its value. In my book that is catastrophic enough to be called "hyper". What E.T. refers to is possibly "catastrophic hyperinflation", where such numbers turn to 99.999999999% etc.

 

People need to understand that there is no clear definition of hyperinflation. In the end it is the individual who will decide whether the experienced inflation is too hyper to be called "normal" or "good". Some might think so already after they have lost "only" 75% of their savings, maybe some are happy to lose 95% before they think it is hyper (apparently E.T. is). The endless discussion about the definition of hyperinflation is as fruitless as the definition of "island" or "life" or "sea/ocean/continental divide".

 

EDIT: Another trial: "hyperinflation" := "really bad inflation"? :rolleyes:

 

 

Thanks for putting words to some of my thoughts.

 

I think we are already in hyper inflation territory. With that in mind I have secured a nice stable job in a very very rural community. At least I can fill teeth for a few potatoes and milk and or eggs. :(

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Thanks for putting words to some of my thoughts.

 

I think we are already in hyper inflation territory. With that in mind I have secured a nice stable job in a very very rural community. At least I can fill teeth for a few potatoes and milk and or eggs. :(

When my mother in law (in the US) was young, the local doctor would still take a chicken as a payment if people had no cash.

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