Are we headed for hyperinflation?

Spungo

Diamond Member
Jul 22, 2012
3,217
2
81
We're in a rather odd situation right now. An important thing to keep in mind is that inflation and deflation depend on who is buying US debt or holding US dollars. If someone like you or me buys US treasuries, this doesn't cause inflation or deflation because there isn't a net gain or loss of money in circulation within the US. $100 leaves you, it goes the government, then the government spends it on EBT cards or something. Our status of being the world's reserve currency has a deflationary effect. Money leaves the US and is used for international trade. More than 60% of all US dollars are outside of the US. As Peter Schiff would say, our ability to export inflation (or import deflation) is why products are so much cheaper in the US. People in Australia or Canada or the UK need to export things in order to import things. That doesn't really apply to the US because US dollars are the product we export. People want dollars because you need US dollars to buy oil or trade with other nations.

Enter the fed. Real demand for US debt is very low, and the fed is currently the biggest buyer of treasuries. This has a significant inflationary effect because those bonds are purchased with newly created money. The fed prints money, uses that money to buy bonds, then that money goes into circulation through things like EBT cards, medicare, social security, government wages, etc. You might not care too much about this inflation because your wage is in US dollars and you naturally assume that your pay will scale with inflation. People around the world see it differently. The rest of the world is sitting on trillions of US dollars that are worth less every single day. What do you do when a stock or a bond is declining? You sell it as quickly as possible. The same logic applies to money. If you're holding a trillion US dollars and the value is dropping, it would make sense to sell those US dollars in exchange for something else like gold or real estate. That's exactly what is happening. China has been buying lots of gold and real estate. Not just American real estate, but everywhere around the world. This creates a second kind of inflation. While the fed is causing inflation by creating new money, China and other countries are causing inflation by bringing US dollars back to the US. Having more in circulation within the country means each one is worth less. Worst case scenario, the price of everything could double because that's how many US dollars could potentially come back home after the world abandons the petrodollar.

So the solution is to stop inflation by stopping QE, right? Not quite. This is where we've really painted ourselves into a corner with an incredible amount of debt. Our debt is sustainable as long as interest rates stay low. What determines interest rates? Just like your own personal debts, this is controlled by supply and demand. If you're a top quality borrower, lots of people want to lend you money, so you get loans with very low interest rates. When fewer people are willing to lend you money, you need to offer higher interest rates. Another layer of complexity is that bond prices are inversely proportional to bond yields. Think of it like the government holding an auction for a bond that pays $100 in 1 year, and it goes to the highest bidder. If people really want that debt, they'll pay $99 for that $100 bond, so the yield is about 1%. What happens when people don't want that bond and are only willing to pay $50 for it? The price of the bond drops from $99 to $50, and the yield would go from 1% to 100% because it still pays $100 after 1 year. QE is intended to keep the interest rates on US debt low by creating artificial demand. That seems like a good thing, but remember that QE made every bond in circulation more valuable. What happens when QE ends? The value of bonds already in circulation will go down. Just like anything else, people will sell if the think the value of something will go down. That's exactly what happened in June:

http://www.reuters.com/article/2013/08/16/us-usa-economy-capital-idUSBRE97F02T20130816
China and Japan led an exodus from U.S. Treasuries in June after the first signals the U.S. central bank was preparing to wind back its stimulus, with data showing they accounted for almost all of a record $40.8 billion of net foreign selling of Treasuries.
.

So now we're in a situation where QE inflation is causing countries to abandon the US dollar, but we can't stop QE because stopping QE would make interest rates go up and make the interest on our national debt consume the entire federal budget. How the hell do we get out of this?
 

Jaskalas

Lifer
Jun 23, 2004
33,381
7,444
136
...
That's exactly what happened in June:

http://www.reuters.com/article/2013/08/16/us-usa-economy-capital-idUSBRE97F02T20130816

So now we're in a situation where QE inflation is causing countries to abandon the US dollar, but we can't stop QE because stopping QE would make interest rates go up and make the interest on our national debt consume the entire federal budget. How the hell do we get out of this?

That's a brilliant summation of why a financial currency crisis is just around the corner. I've never had enough of a grasp on it to fully appreciate the trouble we are in, or to articulate it so well as you did. Thank you.

Considering I didn't have those specifics until just now, I'm at a loss to immediately explore this further. Perhaps others can share some thoughts in the meantime. I'll simply serve as a bump to help them see it.

I mean... if it all comes down to being trapped - we'll have to choose which way to go. We'll have to pick a painful path and stick with it - but our country is adverse to making tough choices. We simply cannot do it. If we're going off a cliff - the inevitability of it is cast in stone.

This looks to be the bubble to end all bubbles.
 

sao123

Lifer
May 27, 2002
12,648
201
106
We're in a rather odd situation right now. An important thing to keep in mind is that inflation and deflation depend on who is buying US debt or holding US dollars. If someone like you or me buys US treasuries, this doesn't cause inflation or deflation because there isn't a net gain or loss of money in circulation within the US. $100 leaves you, it goes the government, then the government spends it on EBT cards or something. Our status of being the world's reserve currency has a deflationary effect. Money leaves the US and is used for international trade. More than 60% of all US dollars are outside of the US. As Peter Schiff would say, our ability to export inflation (or import deflation) is why products are so much cheaper in the US. People in Australia or Canada or the UK need to export things in order to import things. That doesn't really apply to the US because US dollars are the product we export. People want dollars because you need US dollars to buy oil or trade with other nations.

Enter the fed. Real demand for US debt is very low, and the fed is currently the biggest buyer of treasuries. This has a significant inflationary effect because those bonds are purchased with newly created money. The fed prints money, uses that money to buy bonds, then that money goes into circulation through things like EBT cards, medicare, social security, government wages, etc. You might not care too much about this inflation because your wage is in US dollars and you naturally assume that your pay will scale with inflation. People around the world see it differently. The rest of the world is sitting on trillions of US dollars that are worth less every single day. What do you do when a stock or a bond is declining? You sell it as quickly as possible. The same logic applies to money. If you're holding a trillion US dollars and the value is dropping, it would make sense to sell those US dollars in exchange for something else like gold or real estate. That's exactly what is happening. China has been buying lots of gold and real estate. Not just American real estate, but everywhere around the world. This creates a second kind of inflation. While the fed is causing inflation by creating new money, China and other countries are causing inflation by bringing US dollars back to the US. Having more in circulation within the country means each one is worth less. Worst case scenario, the price of everything could double because that's how many US dollars could potentially come back home after the world abandons the petrodollar.

So the solution is to stop inflation by stopping QE, right? Not quite. This is where we've really painted ourselves into a corner with an incredible amount of debt. Our debt is sustainable as long as interest rates stay low. What determines interest rates? Just like your own personal debts, this is controlled by supply and demand. If you're a top quality borrower, lots of people want to lend you money, so you get loans with very low interest rates. When fewer people are willing to lend you money, you need to offer higher interest rates. Another layer of complexity is that bond prices are inversely proportional to bond yields. Think of it like the government holding an auction for a bond that pays $100 in 1 year, and it goes to the highest bidder. If people really want that debt, they'll pay $99 for that $100 bond, so the yield is about 1%. What happens when people don't want that bond and are only willing to pay $50 for it? The price of the bond drops from $99 to $50, and the yield would go from 1% to 100% because it still pays $100 after 1 year. QE is intended to keep the interest rates on US debt low by creating artificial demand. That seems like a good thing, but remember that QE made every bond in circulation more valuable. What happens when QE ends? The value of bonds already in circulation will go down. Just like anything else, people will sell if the think the value of something will go down. That's exactly what happened in June:

http://www.reuters.com/article/2013/08/16/us-usa-economy-capital-idUSBRE97F02T20130816
.

So now we're in a situation where QE inflation is causing countries to abandon the US dollar, but we can't stop QE because stopping QE would make interest rates go up and make the interest on our national debt consume the entire federal budget. How the hell do we get out of this?

you have explained exactly why a pure financial services economy can never be sustainable.

1) a balanced federal budget. net surplus at the end of year = paid debts.
2) restore our manufacturing & exporting industry. less imports = less debts. more exports = less debts.
 

glenn1

Lifer
Sep 6, 2000
25,383
1,013
126
Doubt true hyperinflation is coming. Right now, QE easing is preventing widespread asset deflation and keeping the 2008 era bubble from popping catastrophically and resetting to true value. Meanwhile, those same actions are exacerbating general price inflation.

In short, if you own stock in a food company or home builder, current Fed actions are helping prop up your portfolio value at the same time they're making more expensive the food you buy to put in that house and the oil you use to heat it.
 

Attic

Diamond Member
Jan 9, 2010
4,282
2
76
The Fed balance sheet will have to continue to expand at 85 billion a month. A few months back it wasn't a question of whether that 85 billion would be scaled back or not, it was a question of how much.

The no taper is the most important thing going on in the country now. It tells us this is the new norm. The fed buying up most of issued treasuries to keep interest rates low on national debt.

What drives inflation is government spending/debt. In short the unbalanced budget drives inflation. I'd say that it is really government inefficiency that drives inflation that hurts folks purchasing power. When government puts out so much money (debt money) into the economy and delivers so little, the results should be clear. It may simply be the more control government takes from people and the free market that this is inflationary.

The Fed does what it thinks is needed, if they exit and QE and the economy/monetary system implode the id rather have QE. QE is a symptom of other problems, it's not really a solution if it has become the status quo of running our economy.
 

fskimospy

Elite Member
Mar 10, 2006
83,717
47,406
136
We are not headed for hyperinflation and demand for US treasuries is not low. If you look at the history of QE since 2009, including times when the US stopped buying treasuries alltogether, interest rates remained low.

Additionally, US inflation over the last few years has been very low, too low in fact. The best thing that could happen to the US is modestly higher inflation. This is in fact one of the current goals of fed policy.
 

Kwatt

Golden Member
Jan 3, 2000
1,602
12
81
The Fed balance sheet will have to continue to expand at 85 billion a month. A few months back it wasn't a question of whether that 85 billion would be scaled back or not, it was a question of how much.

The no taper is the most important thing going on in the country now. It tells us this is the new norm. The fed buying up most of issued treasuries to keep interest rates low on national debt.

What drives inflation is government spending/debt. In short the unbalanced budget drives inflation. I'd say that it is really government inefficiency that drives inflation that hurts folks purchasing power. When government puts out so much money (debt money) into the economy and delivers so little, the results should be clear. It may simply be the more control government takes from people and the free market that this is inflationary.

The Fed does what it thinks is needed, if they exit and QE and the economy/monetary system implode the id rather have QE. QE is a symptom of other problems, it's not really a solution if it has become the status quo of running our economy.


So, if I understand. You don't think QE will end? Ever? If it does not end will it grow in your opinion?

I have read on other sites that say it won't end and still others say it will be cut no later than 2nd quarter 2014.


.
 

Anarchist420

Diamond Member
Feb 13, 2010
8,645
0
76
www.facebook.com
yes, there will be hyperinflation (if it collapses from within) or if the u.s. govt ever has to surrender to another govt, then there will just be colonization of America (meaning that the frn is no longer accepted because no govt is left to enforce it) because the U.S.D./FRN is the world reserve currency and those dont last forever no matter what the keynesians say.

there was near-hyperinflation after the u.k/bank of england pound lost its status as the world reserve currency.

im going to be sol when the frn returns to its intrinsic value of zero because my parents have well over a million of them but they're too stupid to buy something of value... we just consume everything we buy, we dont make more money off of it (like real estate) and theyve invested in blue chipshits while still having a mortgage to pay. what they should've done was pay off their mortgage, cancel their credit card debt so their credit rating would drop to zero, bought up property they could rent out while housing prices were still low, but they were too stupid to do so (i sure didnt far fall from the tree).

and really, to be honest, my parents deserve to have nothing of value when the dollar collapses ifthey continue to trust the govt so much. and i hope ill be able to trade my belongings for chemicals that will definitely and painlessly kill me since there wont be a govt to outlaw them.
 

Capt Caveman

Lifer
Jan 30, 2005
34,547
651
126
Based on the OPs other incorrect death watches with piss poor analysis, this is no different. Again, are you in high school or college?
 

LegendKiller

Lifer
Mar 5, 2001
18,256
68
86
yes, there will be hyperinflation (if it collapses from within) or if the u.s. govt ever has to surrender to another govt, then there will just be colonization of America (meaning that the frn is no longer accepted because no govt is left to enforce it) because the U.S.D./FRN is the world reserve currency and those dont last forever no matter what the keynesians say.

there was near-hyperinflation after the u.k/bank of england pound lost its status as the world reserve currency.

im going to be sol when the frn returns to its intrinsic value of zero because my parents have well over a million of them but they're too stupid to buy something of value... we just consume everything we buy, we dont make more money off of it (like real estate) and theyve invested in blue chipshits while still having a mortgage to pay. what they should've done was pay off their mortgage, cancel their credit card debt so their credit rating would drop to zero, bought up property they could rent out while housing prices were still low, but they were too stupid to do so (i sure didnt far fall from the tree).

and really, to be honest, my parents deserve to have nothing of value when the dollar collapses ifthey continue to trust the govt so much. and i hope ill be able to trade my belongings for chemicals that will definitely and painlessly kill me since there wont be a govt to outlaw them.

You haven't achieved a single meaningful thing in life and you are calling your parents stupid?

ROFL.
 

LegendKiller

Lifer
Mar 5, 2001
18,256
68
86
We're in a rather odd situation right now. An important thing to keep in mind is that inflation and deflation depend on who is buying US debt or holding US dollars. If someone like you or me buys US treasuries, this doesn't cause inflation or deflation because there isn't a net gain or loss of money in circulation within the US. $100 leaves you, it goes the government, then the government spends it on EBT cards or something. Our status of being the world's reserve currency has a deflationary effect. Money leaves the US and is used for international trade. More than 60% of all US dollars are outside of the US. As Peter Schiff would say, our ability to export inflation (or import deflation) is why products are so much cheaper in the US. People in Australia or Canada or the UK need to export things in order to import things. That doesn't really apply to the US because US dollars are the product we export. People want dollars because you need US dollars to buy oil or trade with other nations.

Enter the fed. Real demand for US debt is very low, and the fed is currently the biggest buyer of treasuries. This has a significant inflationary effect because those bonds are purchased with newly created money. The fed prints money, uses that money to buy bonds, then that money goes into circulation through things like EBT cards, medicare, social security, government wages, etc. You might not care too much about this inflation because your wage is in US dollars and you naturally assume that your pay will scale with inflation. People around the world see it differently. The rest of the world is sitting on trillions of US dollars that are worth less every single day. What do you do when a stock or a bond is declining? You sell it as quickly as possible. The same logic applies to money. If you're holding a trillion US dollars and the value is dropping, it would make sense to sell those US dollars in exchange for something else like gold or real estate. That's exactly what is happening. China has been buying lots of gold and real estate. Not just American real estate, but everywhere around the world. This creates a second kind of inflation. While the fed is causing inflation by creating new money, China and other countries are causing inflation by bringing US dollars back to the US. Having more in circulation within the country means each one is worth less. Worst case scenario, the price of everything could double because that's how many US dollars could potentially come back home after the world abandons the petrodollar.

So the solution is to stop inflation by stopping QE, right? Not quite. This is where we've really painted ourselves into a corner with an incredible amount of debt. Our debt is sustainable as long as interest rates stay low. What determines interest rates? Just like your own personal debts, this is controlled by supply and demand. If you're a top quality borrower, lots of people want to lend you money, so you get loans with very low interest rates. When fewer people are willing to lend you money, you need to offer higher interest rates. Another layer of complexity is that bond prices are inversely proportional to bond yields. Think of it like the government holding an auction for a bond that pays $100 in 1 year, and it goes to the highest bidder. If people really want that debt, they'll pay $99 for that $100 bond, so the yield is about 1%. What happens when people don't want that bond and are only willing to pay $50 for it? The price of the bond drops from $99 to $50, and the yield would go from 1% to 100% because it still pays $100 after 1 year. QE is intended to keep the interest rates on US debt low by creating artificial demand. That seems like a good thing, but remember that QE made every bond in circulation more valuable. What happens when QE ends? The value of bonds already in circulation will go down. Just like anything else, people will sell if the think the value of something will go down. That's exactly what happened in June:

http://www.reuters.com/article/2013/08/16/us-usa-economy-capital-idUSBRE97F02T20130816
.

So now we're in a situation where QE inflation is causing countries to abandon the US dollar, but we can't stop QE because stopping QE would make interest rates go up and make the interest on our national debt consume the entire federal budget. How the hell do we get out of this?

So Japan and China sell a fraction of their treasury holdings, publicly, and people go chicken little? LOL.

There will be no hyperinflation.

In order for China to sell even 1/4 of their TSY holdings their economy would need to already be a complete consumer economy *and* they can't rely on the US for any meaningful portion of their exports.
 

Spungo

Diamond Member
Jul 22, 2012
3,217
2
81
yes, there will be hyperinflation (if it collapses from within) or if the u.s. govt ever has to surrender to another govt, then there will just be colonization of America (meaning that the frn is no longer accepted because no govt is left to enforce it) because the U.S.D./FRN is the world reserve currency and those dont last forever no matter what the keynesians say.
The chinese don't need to invade. They can save the trouble by purchasing the land. Warren Buffet predicted this many years ago. It starts with a country of producers and a country of consumers. Eventually the consumers run out of money, so they borrow from the producers. The country of producers buys the nation of consumers with all of the money that has been stockpiled over the years. The Chinese are buying a lot of land along the west coast. When people talk about a real estate bubble in California or Vancouver, they're talking about land purchases by the Chinese.

there was near-hyperinflation after the u.k/bank of england pound lost its status as the world reserve currency.
Yup. A lot of people are going to lose their savings if we lose our world reserve status, and this process has already started.
Australia switches from US dollars to Chinese yuan.
Japan and China drop the US dollar
South Korea, Indonesia, Malaysia, Singapore and Thailand drop the US dollar in favor of the Chinese yuan

im going to be sol when the frn returns to its intrinsic value of zero because my parents have well over a million of them but they're too stupid to buy something of value... we just consume everything we buy, we dont make more money off of it (like real estate) and theyve invested in blue chipshits while still having a mortgage to pay. what they should've done was pay off their mortgage, cancel their credit card debt so their credit rating would drop to zero, bought up property they could rent out while housing prices were still low, but they were too stupid to do so (i sure didnt far fall from the tree).
Paying debt early is actually a bad idea if you're anticipating inflation. When the bank demands their money, just hand them one of these:
liberty_trillion_dollar_billa.jpg



Based on the OPs other incorrect death watches with piss poor analysis, this is no different. Again, are you in high school or college?
Tesla has already dropped 17% from its peak.
 

Jaskalas

Lifer
Jun 23, 2004
33,381
7,444
136
Based on the OPs other incorrect death watches with piss poor analysis, this is no different. Again, are you in high school or college?

Has he? This OP appeared concise and well written.

Even if he's wrong on the subject matter I'd like to hear why, not just blind dismissal.
 

LegendKiller

Lifer
Mar 5, 2001
18,256
68
86
Has he? This OP appeared concise and well written.

Even if he's wrong on the subject matter I'd like to hear why, not just blind dismissal.

Because he scratches the surface and doesn't bother to really understand why his scenario is impossible. I have posted on this several times.
 

OverVolt

Lifer
Aug 31, 2002
14,278
89
91
QE IMO much to legendkillers protest I believe leads to deflation via low wages and plummeting money velocity. All you have to do is look at Japan. Among alot of others things (cultural/social), like those with jobs being overworked and an entire class of people on welfare, plummeting birth rate, high cost of living, etc etc.

The excess reserves and high corporate savings all represent pent up potential inflation.

So long as they run QE I don't think there will be hyperinflation.

QE is what is enabling those things to begin with.
 
Last edited:

shady28

Platinum Member
Apr 11, 2004
2,520
397
126
I think to actually have an intelligent discussion on this, you have to go back to before 2008. Back to 2001 at least, and really the whole picture goes much farther back.

I am fairly sure this is part of a normal 60 year business cycle, extended but not dead by fiat currency intervention.

We had a massive debt driven boom that went from the early 1980s until 1999. This resulted in the .com bubble and the initial market collapse in 2001. This sounds much like the Autumn plateau of the cycle :

"Autumn: the financial fix of inflation leads to a credit boom which creates a false plateau of prosperity that ends in a speculative bubble"

The Fed and the US gov't stepped in by running huge deficits, injecting hundreds of billions into the economy, and lowering interest rates resulting in the housing boom.

Then in 2008, the housing boom cratered just like debt driven speculative bubbles always do. The wealth that people thought they had in home equity disappeared overnight - it was never really there.

A lot of people look at the stock market and say the 2000 'Bear' died a long time ago, but that's rather disingenuous. We have never recovered from the initial drop, not in real dollar terms.

We have been in a downward trend ever since 3/31/2000.

You see this, and you can see why things 'arent right' and 'not getting better'. The dollar has been devalued faster than the market rose, which is masking what's been happening.


10-7-13-spx-inf-adj.png



Just like the stock markets, Real income has declined for 14 years.

These are adjusted using CPI. Every single segment of the US population has lost 'real' income over the last 14 years.



advisor-perspectives.png



So what's next? Well, according to the business cycle the next phase is economic 'Winter' :

"Winter: excess capacity worked off by massive debt repudiation, commodity deflation & economic depression. A 'trough' war breaks psychology of doom."


Commodity deflation, debt repudiation.

Anyone noticed how gas and oil prices are working their way down rather rapidly?

Just might want to keep an eye on this commodities index chart :

http://www.bloomberg.com/quote/CRY:IND
 

Kwatt

Golden Member
Jan 3, 2000
1,602
12
81
... 60 year business cycle, extended but not dead by fiat currency intervention.

So, is implying that the 2001 or 2009 fall should have fallen further? In order to complete the 60 year cycle. But, was blocked by intervention?

If so, can the fall be held off permanently? Or can another fall be ahead?
And what can be done to avoid it or must it be ridden out? Is there anything a single person can do?


Thanks for this info.


.
 

DucatiMonster696

Diamond Member
Aug 13, 2009
4,269
1
71
The moment the US loses it petro-dollar hegemony (i.e. Middle-Eastern nations like Saudi Arabia stop accepting solely dollars for oil) in the middle-east the tables will start to turn.
 

shady28

Platinum Member
Apr 11, 2004
2,520
397
126
So, is implying that the 2001 or 2009 fall should have fallen further? In order to complete the 60 year cycle. But, was blocked by intervention?

If so, can the fall be held off permanently? Or can another fall be ahead?
And what can be done to avoid it or must it be ridden out? Is there anything a single person can do?


Thanks for this info.


.

I don't think that anything the Fed has done has really impacted things, certainly not as much as one would think.

Printing money really doesn't do anything except destroy savers. It doesn't produce anything, it doesn't cause anything to be produced.

Consider: If the money had not been printed, then we would have had deflation. At the same time, wages would have gone down much more.

So we would have made less, and things would cost less, but we would be losing income more than the decrease in costs.

Instead we make more, but things cost more than the extra we make.

No one knows if we'll have hyper inflation or deflation in the currency. That's up to the money presses. But as in the above example - the net result will be the same either way.

But it's pretty much for sure we have another 4-6 years left in this business cycle before things bottom. Even Soros and Buffett have alluded to this many times over the last decade.
 

Doppel

Lifer
Feb 5, 2011
13,306
3
0
Hyper? Not any time soon. A few years ago I thought there was a good chance we'd see some pretty strong inflation, but I was wrong. IIRC I thought it would either be strong inflation or flat/possible deflation. Really, neither happened.

NPR this week Delta CEO was talking about their growing business and how the inflation some had said would be coming down the pike just never really materialized.
 

LegendKiller

Lifer
Mar 5, 2001
18,256
68
86
I don't think that anything the Fed has done has really impacted things, certainly not as much as one would think.

Printing money really doesn't do anything except destroy savers. It doesn't produce anything, it doesn't cause anything to be produced.

Consider: If the money had not been printed, then we would have had deflation. At the same time, wages would have gone down much more.

So we would have made less, and things would cost less, but we would be losing income more than the decrease in costs.

Instead we make more, but things cost more than the extra we make.

No one knows if we'll have hyper inflation or deflation in the currency. That's up to the money presses. But as in the above example - the net result will be the same either way.

But it's pretty much for sure we have another 4-6 years left in this business cycle before things bottom. Even Soros and Buffett have alluded to this many times over the last decade.

It doesn't produce anything but it allows borrowers to borrow very cheaply. As far as the "savers", who are these mythical beasts? If you look at the total amount of assets (~188tr, financial assets are ~45tr) and deposits are only ~7tr. That's including all very short-term deposits, such as business deposits (which make up the bulk of deposits), so really, the impact to "savers" is minimal.

This whole "inflation hurts savers" bullshit is such a false canard that I can hardly stand it.
 
Last edited:

LegendKiller

Lifer
Mar 5, 2001
18,256
68
86
QE IMO much to legendkillers protest I believe leads to deflation via low wages and plummeting money velocity. All you have to do is look at Japan. Among alot of others things (cultural/social), like those with jobs being overworked and an entire class of people on welfare, plummeting birth rate, high cost of living, etc etc.

The excess reserves and high corporate savings all represent pent up potential inflation.

So long as they run QE I don't think there will be hyperinflation.

QE is what is enabling those things to begin with.

The high savings represents potential inflation but only if it actually goes into the system without matching production/demand with an amount of credit creation equivalent to the reserves.

QE has led to some inflation and some deflation. However, it hasn't really made much of an effect in either direction, nor will it. Why won't it? Because all of the dollar creation has created a void in the banking system (reserves) which isn't being filled by consumers borrowing and consuming. Mish believes that this is because there aren't any credit worthy borrowers. That is probably partially true considering the hollowing out of the middle class. On the other side the rest don't want to borrow, there's simply no stable jobs/economy or reasons to borrow, even with rates as low as they are.

QE has done one thing for certain, it's caused a lot of inflation in China.
 

schmuckley

Platinum Member
Aug 18, 2011
2,335
1
0
There will be hyperinflation..and martial law..
before Obama leaves office;He's not stupid.
 

Kwatt

Golden Member
Jan 3, 2000
1,602
12
81
It doesn't produce anything but it allows borrowers to borrow very cheaply. As far as the "savers", who are these mythical beasts? If you look at the total amount of assets (~188tr, financial assets are ~45tr) and deposits are only ~7tr. That's including all very short-term deposits, such as business deposits (which make up the bulk of deposits), so really, the impact to "savers" is minimal.

This whole "inflation hurts savers" bullshit is such a false canard that I can hardly stand it.

I have been called a "beast" before and a whole lot worse. Never been referred to as "mythical" before.

What is the correct term for someone who has zero debt? Except for a recent reshingle of the roof last month. That will be paid for this month.


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Svnla

Lifer
Nov 10, 2003
17,999
1,396
126
So what will people like me (zero debt -no CC, no car or house note, and have some money in the banks with excellent credit score) to do?

Go out and buy a house (30 years mortgage) and a new car (with 5-6 years car note) because of low interest rate? What else is there to do to financially protect myself?