Anybody read: Debunking the Hyperinflation of Peter Schiff...

Moo!

 

^^^^
+10
Moo back



REDBACK

 

as I as trying to get my head arond this discussion...

'Hyperinflation is generally considered to be an increase of over 50% in price levels. This increase is caused by decisions on the part of the central bank to increase the money supply at a high rate leading to a loss in its value. Per basic economic principles, an increase in supply of a good will cause a drop in its value. This loss in value is usually exacerbated by an increase in the velocity of money (how fast it is spent) as people rush to exchange (or spend) it for almost anything else. In extreme cases this can cause a complete loss of confidence in the money, similar to a bank run. This loss of confidence causes a rapid increase in the velocity of spending, as people rush to get rid of what they perceive to be a rapidly devaluing asset in exchange for almost anything else of value, causing a corresponding rapid increase in prices. For example, once inflation has become established, sellers try to hedge against it by increasing prices. This leads to further waves of price increases.[9] Hyperinflation will continue as long as the entity responsible for increasing bank credit and/or printing currency continues to engage in excessive money creation. In severe cases, legal tender laws and price controls to prevent discounting the value of paper money relative to hard currency or commodities can fail to force acceptance of the rapidly increasing money supply which lacks intrinsic value, in which case hyperinflation usually continues until the currency is abandoned entirely.' (Wikipeadia)

 

The ultimate conclusion is still very much up in the air as to how exactly it will go. I'm leaning away from hyperinflation personally, I just don't think they'll push QE that far personally. Although, if it comes down to the solvency of the US govt...

What is pretty much assured is that there will be a currency crisis at some point.

It seems to me, that ultimately it will come down to is, do the US people get sacrificed for the sake of their govt(hyperinflation), or does the govt get sacrificed for the sake of the people? While things have clearly been going down the path of the former, I tend to think when the crunch comes it will be the latter. We'll see...

 

Sooo do we sell our precious metals asap then?

I've heard people say Deflation is the prelude to hyperinflation in the sense that governments/central banks or those in charge of monetry policy will try to recreate that velocity of money by printing because that is the direction that would benefit everyone the most - it's about kicking the can further down that road and Deflation doesn't allow that. They have gone so far already with the QEs etc since 2008, why would they stop all of a sudden after trying so hard to keep it going?

Also, Deflation seems to suggest that the purchasing power of the USD and other currencies will rise as their supply contracts, but are their economies not so far into debt that they will collapse irregardless? I don't see the burden of their interest repayments disappearing in any situation whatsoever. Energy will also continue to become more scarce and so we will never see the growth required to fix any of these problems. A deflationary scenario isn't going to fix the eventual death of the USD or YEN IMO, when they breakup i feel like Gold and Silver would still get their run.

 

You can do what you like. I'm holding onto mine.

It is exactly can-kicking but I don't think there's much political support for it any more.

There'll still be a crisis in confidence. Look at the US debt. Look at the growing deficits. Look at the interest rate. If the world loses faith that the US will pay it's debts do you think that might lead to a crisis? Maybe there might be a few people/countries who usually buy US bonds looking for somewhere to put their money. Somewhere where the price has been going up regularly for years now at a nice rate...

 

Hmm no political support? It's hard to say isn't it, really is a lot of speculating in that regard but i'm sure there would be an outcry for more bailouts as people start losing more jobs, large businesses go bust etc etc, it would be pretty easy to gather the momentum for continued printing if it is what those in charge of the policy want and can use the loss of jobs etc as the scapegoat. Also, inflation is favourable to the banking sector, so I would be inclined to say they in that case would love to keep the QE tap running and have a lot of influence in the matter.

Agree with the crisis in confidence, something has to bust either way and all that energy pent up in those currencies needs to go somewhere. Who's gonna keep buying US bonds? Japan won't be able to afford to and China is jumping out as we speak. Unless a country is forced to buy them, i can't see them going in that direction. It's gonna get harder to maintain that confidence in the USD, once it is lost, we will see a mass sell off and its value decrease dramatically.

 

I think Earthjade is close to the money. The Fed will keep printing money while everyone but government is de-leveraging. There is certainly a net deflation going on right now and Bernanke et al is shit scared of what the deflation will cause. I think this will go on as long as the USD is the world reserve currency and the US bond market is still in a huge bubble. This can't go on for ever and the printing will eventually cause the holders of said USD and bonds to abandon them. As Earthjade has said, all that cash is sitting in big banks and other countries as foreign exchange funds....

Japan will HAVE to dump US assets (2nd Largest holder) in coming years to cover their own huge debts when they have to be at the mercy of foreign markets to fund their huge debt. China will eventually have to turn towards internal growth and also they will soon grow tired of holding continually devaluing US assets. When these things happen, the hyperinflation will come. Deflation first..... then the confidence will be lost through the large printing,.

 

My two cents on some of the earlier comments, mostly book related. Sorry I cannot take time to respond to all!


<<And now we got a BOOK dedicated to smash Schiff! Wow... the banksters must be desperate.>>

I have no connection whatsoever to the government, the financial industry or any bank, or the economics academia. I write as an independent investor with a Finance & Banking degree and as someone who has studied economics avocationally for a long time. I actually wrote the book in late 2008, just as things looked bleakest. I viewed the doomsayers such as Peter Schiff as extremely dangerous if their ideas were to gain enough traction: let everything fail, 'haircuts' for US Treasury bondholders, dismantle most government, etc. We neared an abyss and the 'extreme & sudden austerity' folks would have pushed us in. One reason for the book was to expose some of their economic fallacies and half-truths in hopes to help stem the chances of impending meltdown. At the time markets were in free fall with no end in sight and the world was staring at the possibility of total financial collapse, you will recall.


<<anyone who names a single individual [in the title]>>

Fair enough criticism but there's a reason. My idea to write the book occurred quite suddenly as a reaction to the unfolding 2008 crises. I felt that as an unknown I would have to target a particular pundit in order for the book to be found (search results). I would suggest considering the perspective that, years from now, it is the highly popular 'dollar collapse' books, with the oodles of glowing reviews, that will look very silly. Consumer prices, on average, will likely increase at rates not so very different from the past, despite substantial QE being likely.


<<Prices are going up at an staggering rate here in Australia. But only in non-descretionary items>>

Often we get used to fairly stable prices or quite low inflation in certain commodities or goods for a decade or more. We are then enjoying producer cost reductions due to increasing scale, technology gains, low cost foreign outsourcing, etc. Producers are in stiff competition and thus afraid to raise prices much, so they trim costs, margins and try to expand markets to glean scale economics. At some point however this strategy reaches a maximum and then there is an industry-wide shift up in prices, like a sudden shift along tectonic plates. Then there is often a new relatively stable price level for some years. So I would not assume that price hikes you've recently seen will continue to rise at like rates. Chances are the prices will plateau and then low inflation resume.

Some recent years' food price hikes have been due to bad crops while food demand has surged from global middle class growth. It's a mistake to point to several rising prices and project them rising ad infinitum, or to make the claim that the cause is money supply expansion. It's also quite easy to take notice of the prices that ARE rising quickly while completely overlooking the many prices that are not. Inflation and purchasing power in general have to be viewed as an average over many consumer goods and services, not just a few. Often that is forgotten.


<<Please provide an alternative fiscal and monetary scenario for the USA>>

'Fiscal' I cannot say as spending is up to Congress.

Most likely overall scenario, nutshell version: considerable Fed monetization sooner or later, positive surprise in no high consumer price inflation as a result, no dollar crisis (near or long term), tax revenues leaping at some point (with or without rate hikes), no stampede out of US Treasuries (ample demand), real estate prices fully recover, US growth resumes, stock market has a great 2010-2020 decade while gold and silver prices tank. The crisis was 2008/9; no SHTF is ahead. Unemployment levels I do not predict.


Thanks for all the lively discussion. I'd love to visit Australia sometime--no marsupials in my neck of the woods!



Richard Moheban

 

I hope you're right but sorry I can't see that version of a future, and apart from a couple of points below, my reason is summed up by two words : derivatives and greed.

To see what might happen you have to think like a banker. What do they want? Profits and to hence be the big boy on campus - in this case Wall Street, Washington or wherever - and they are a herd. They'll stampede straight over the cliff without a second thought. After all they have their piles of gold, their rural retreats and their island getaways if all tumbles down. There was a thread on here about psychopathic behaviour. Goes with the banker gambling territory.

That is the single flaw in your nutshell version. I agree, in a perfect, no insider trading, no naked short selling, no fraudulent transactions, no theft culture, higher purpose financial world that it is possible that things will settle down, the worst will have passed and we'll return to the good old days. But then add in a giant ponzi scheme of derivatives and all the tricks that the absence of moral hazard allows, and you have a giant disaster pending.

I'm afraid I see at the best, a repeat of the 1970's and at worst the most horrific economic collapse ever seen. Wall Street is untrammelled in its excesses and will just jack up the interest rates as soon as Bernanke 'returns to the norm', and play him for the academic theoretician he is, and then starts the inflation-wage push and we're off and running - or some black swan brings the whole derivatives house of cards crashing down before then.

And possible oil shocks from Iran haven't even entered the picture yet.

My single hope is that the governments of the world, with all their inside knowledge, insulate us from the coming storm with the actions currently underway - cruel and unjust as almost all are, but I'm afraid that the cancer of financial manipulation and political corruption has gone too far and the debasement of the empire's currency is almost complete. There will be a system reset, just as there was with the currencies before the USD. USA can look to UK for a handle on its future. The rest of us should be relatively OK if we're not too tied into the USD - and I'm afraid derivatives make that involvement a very scary question to ask. But of course the derivatives collapse could start in Europe, then all bets are off. All those dollars out there start heading homeward at warp speed. It would be those dollars to inspire hyperinflation, not the ones safely locked up earning interest for the banks in the USA.

I think hyperinflation/deflation is simplifying the issue to the detriment of both sides of the argument. The issues are systemic and all traditional explanations are just a shadow play for the real events taking place.

http://www.silverbearcafe.com/private/01.10/thinklikeabanker.html

 

So what you are saying basically is that printing money works? That it can solve our problems with, seemingly, no adverse effects?

As for SHTF, it all depends on how you define it. As most define it on SS, (virtual collapse of civilization) I would agree it won't happen. If it is defined as a currency crisis, then I disagree.

 

Its amazing who drops in to SS to answer things

 

Hyperinflation is not a simple progression from high inflation.

Hyperinflation results from a loss of confidence in a currencies ability to act as a store of value. Everything else is a symptom or response to that.

Misunderstanding what hyperinflation actually is is why these discussions go around in circles.

Also, name one central bank who is not petrified of a deflationary spiral (ala paradox of thrift).

Source: FOFOA amongst others.

 

Successful thread is successful

Thanks to the author for coming on here to answer a few Q's.

At $15 trillion and rising, inflation will make this debt easier to pay off for the reserve currency producer.

While I am not convinced that hyperinflation will occur, I am sure that we will more likely get significant inflation over any deflation for one simple reason:

You cannot tax deflation.

 

Incidentally, I personally believe there will be some deflation before it heads the other way. Many seem to think this will be an ideal time to pick up PMs cheap and would rather hold fiat until then.

Question: what if there is no deflation?

Question: what if there are no PMs available at the deflated paper price of PMs?

Something to think about.

 

Question: What if lead times blow out to 6mo, at the time you really need PMs and all you got is a promise of delivery?

 

The problem though, is what if flooding the system with money fails?
Look at it this way - we all know that banks have mountains of toxic debts that will never be repaid and would destroy them if they needed to be marked to market.
This is essentially currency that has been destroyed.
Turning on the monetary tap might not actually be adding to the money supply, but merely replacing what was wiped out in 2008.

Look at Japan - they have been in a deflation for 20 years.
Interest rates are at zero and the government has flooded the economy with money.
Where is the hyperinflation in Japan?
They had 20 years for it to come about!

There is something wrong, or at the very least missing, from the current predictions of hyperinflation.

 

I am now going to go to my favourite cooking / food recipe forum, and evoke RM to visible appearance, and all of the cooking forum attendees will be astonished at this magic. We're not just talking food recipes here, we're also evoking spirits to visible appearance

Behold... I command you to appear...