Hyper Inflation.

[iGas]

So where is the indicators that lead to my broker suggesting that I should move into precious metals and hyperinflation protected bonds?

Or, could it be that my broker is using the excuse to move money around to generate cash for himself?

I lived through the Vietnamese hyperinfation period of the mid-late 70s at more than 73,000% inflation, and so far I haven't seen many indicators that lead us to that extreme.

There is a need for redistribution of wealth, but there isn't a revolution or will of the people to make it so, therefore the hyper inflation isn't going to happens.

Interests is at an all time low, but the banks aren't unfreezing credits.

Gold price hasn't move up above $1000, and have been suggested to be $3000-5000 in a hyper inflation market.

Food and all import commodities hasn't jump as predicted.

 

[Krynj]

Precious metals will always be a money maker.

 

[Savij]

Originally posted by: FetusCakeMix
Precious metals will always be a money maker.

Until they lose money but right after that they'll make money again...till they lose money...

 

[Christobevii3]

Everyone is devaluing the currency to stimulate their economies, so it isn't a typical hyper inflation setup. That usually happens when only a few devalue and others dont. So i don't see high inflation being tagged on unless everything bounces back overnight or something nutty.

 

[TehMac]

We're in for some sort of inflation, how much, I'm not sure. I'm just glad we're not in stagflation areas...yet.

But I think Bernanke knows what he is doing.

 

[masteryoda34]

Well the number of US dollars that exist have tripled in about the last 8 months.

 

[MovingTarget]

:music: Just got paid today....got me a wheelbarrow full of change! :music:

 

[Special K]

Originally posted by: FetusCakeMix
Precious metals will always be a money maker.

Precious metals get slaughtered by stocks in the long term, i.e. decades.

 

[BrownTown]

Originally posted by: masteryoda34
Well the number of US dollars that exist have tripled in about the last 8 months.

yeah, its pretty simple math. The USA is producing MORE dollars (due to this huge defect spending) and the USA is producing less goods (due to the economic slowdown) So its pretty obvious if the amount of money goes up and the amount of stuff goes down that the amount of money per item is going to go up. Inflation pretty much HAS to occur. However thats not always a huge deal since money is relative, the real question is if wages will keep pace which is unlikely given the amount of unemployment.

 

[LegendKiller]

Originally posted by: FetusCakeMix
Precious metals will always be a money maker.

Really? Check out gold in 1982, then check it out now.

Compared to equities, metals is a losing position.

 

[LegendKiller]

Originally posted by: BrownTown

Originally posted by: masteryoda34
Well the number of US dollars that exist have tripled in about the last 8 months.

yeah, its pretty simple math. The USA is producing MORE dollars (due to this huge defect spending) and the USA is producing less goods (due to the economic slowdown) So its pretty obvious if the amount of money goes up and the amount of stuff goes down that the amount of money per item is going to go up. Inflation pretty much HAS to occur. However thats not always a huge deal since money is relative, the real question is if wages will keep pace which is unlikely given the amount of unemployment.

Yes, but what about the trillions in assets that have evaporated? Isn't this currency removed? What about the deflation from credit contracting? What about the Fed's ability to contract the dollars outstanding?

I swear, people only look at one side of the equation and it is really ridiculous. They also think that once a dollar is created it cannot be destroyed. Sheer insanity.

 

[LegendKiller]

Originally posted by: iGas
So where is the indicators that lead to my broker suggesting that I should move into precious metals and hyperinflation protected bonds?

Or, could it be that my broker is using the excuse to move money around to generate cash for himself?

I lived through the Vietnamese hyperinfation period of the mid-late 70s at more than 73,000% inflation, and so far I haven't seen many indicators that lead us to that extreme.

There is a need for redistribution of wealth, but there isn't a revolution or will of the people to make it so, therefore the hyper inflation isn't going to happens.

Interests is at an all time low, but the banks aren't unfreezing credits.

Gold price hasn't move up above $1000, and have been suggested to be $3000-5000 in a hyper inflation market.

Food and all import commodities hasn't jump as predicted.

Personally, your broker doesn't know jack shit. He is probably reading some gold bug report and trying to pawn off actual investment thought so that he can churn and burn accounts. Most brokers are just snake oil salesmen anyway and have very little actual knowledge or ability to beat the market.

Ask him why he thinks there will be "hyper" inflation. I'm sure he'll list off creation of money, but then fails to consider its destruction (as has been done many times in history).

Then ask him what the correlation coefficient is for gold+inflation compared to gold+economic crisis.

if he knows what he is talking about he's going to back off his gold+inflation silliness quickly.

 

[FelixDeCat]

Eye opener.

 

[LegendKiller]

Originally posted by: FelixDeKat
Eye opener.

What's that got to do with anything? The derivatives are a zero-sum game, for every dollar somebody loses in the play, somebody has gained.

 

[Cattlegod]

If hyper inflation is a risk, how come people are getting 4.x% mortgage rates.?

 

[FelixDeCat]

Originally posted by: LegendKiller

Originally posted by: FelixDeKat
Eye opener.

What's that got to do with anything? The derivatives are a zero-sum game, for every dollar somebody loses in the play, somebody has gained.

I dont mean to be offensive but to say that these instruments that caused a $ 9 Billion dollar loss last quarter alone (just 90 days!), and $ 180 Billion dollar loss to AIG produces "zero sum gains" is asinine.

The bucktooth jackasses who put their money on the line cant honor the bets they made and continue to make! Dont you know that they rely on each other to make good on those bets? Thats why AIG COULD NOT FAIL. They HAD to pay the likes of the rats at goldman sachs so they could honor their bets and GS could honor theirs and so on. IF one big domino cant pay up, they all FAIL, regardless of all the worthless promises they made on paper (now up to $ 200 TRILLION worth)!

That stupidsh*t should make anybody who understands it like I do very mad. :|

 

[LegendKiller]

Originally posted by: FelixDeKat

Originally posted by: LegendKiller

Originally posted by: FelixDeKat
Eye opener.

What's that got to do with anything? The derivatives are a zero-sum game, for every dollar somebody loses in the play, somebody has gained.

I dont meant to be offensive but to say that these instruments that caused a $ 9 Billion dollar loss last quarter alone (just 90 days!), and $ 180 Billion dollar loss to AIG produces "zero sum gains" is asinine.

The bucktooth jackasses who put their money on the line cant honor the bets they made and continue to make! Dont you know that they rely on each other to make good on those bets? Thats why AIG COULD NOT FAIL. They HAD to pay the likes of the rats at goldman sachs so they could honor their bets and GS could honor theirs and so on. IF one big domino cant pay up, they all FAIL, regardless of all the worthless promises they made on paper (now up to $ 200 TRILLION worth)!

That stupidsh*t should make anybody who understands it like I do very mad. :|

It isn't even close to that bad. Sure, there are risks, but it wouldn't cause a $200tr loss. You're over-stating the problem dramatically.

Although, I personally think that they should just shut down the whole CDS market as it currently is structured.

What does this have to do with hyperinflation anyway?

 

[FelixDeCat]

Originally posted by: LegendKiller
What does this have to do with hyperinflation anyway?

Let me start by saying Im not a goldbug, I have no money invested in anything at all at this time long or short, gold or otherwise. I have always disliked naysayers and negativety and earlier this decade thought that risk could be spread around effectively. That was until 2008. I thought I would never see the world banking system meltdown and all lending come to a near halt requiring world wide bank takeovers, nationalizations, etc. Now that my eyes have been opened I got a rude awakening about how bad this can get.

As you know, America's ability to repay its debts depends heavily on the strength of the economy, its producers and consumers (aka taxpayers). With unemployment now surpassing 10% in many states, a record $11 trillion dollar national debt, declining receipts to the Treasury and massive deficit spending to do a number of things (the most important of which was to simply stabilize the banking system, for now), our credibility and ability to repay our debts is being questioned by our largest foreign debtholder - China - and for good reason. I dont know what the solution is but it has to involve raising taxes /revenues and cutting spending somehow.

If foreign governments start to say "enough is enough" and wont pony up for treasuries anymore what then? What will the dollar be worth? I dont know and I pray to God we dont find out, but Im afraid a worse case scenario will be hyper inflation. But again, I pray this doesnt happen.

All these people that think they are pretty smart by buying gold have to realize they still live in America, and alot of hungry and angry people do not nice neighbors make.

 

[QurazyQuisp]

One of the things that people fail to realize, (in regards to how the FED works) is that they can pull money out of the economy just as fast as they put it in. There is no physical dollars to show this increase... it's all numbers on a computer.

Back during 9/11, the FED within an hour or two of the two planes hitting the towers dumped about 500 billion (which very few people knew about, as it wasn't all over the news) into the economy. Within a few months they had pulled it all out again.

I wouldn't worry tooooo much they are smart people.

 

[LegendKiller]

Originally posted by: FelixDeKat

Originally posted by: LegendKiller
What does this have to do with hyperinflation anyway?

Let me start by saying Im not a goldbug, I have no money invested in anything at all at this time long or short, gold or otherwise. I have always disliked naysayers and negativety and earlier this decade thought that risk could be spread around effectively. That was until 2008. I thought I would never see the world banking system meltdown and all lending come to a near halt requiring world wide bank takeovers, nationalizations, etc. Now that my eyes have been opened I got a rude awakening about how bad this can get.

As you know, America's ability to repay its debts depends heavily on the strength of the economy, its producers and consumers (aka taxpayers). With unemployment now surpassing 10% in many states, a record $11 trillion dollar national debt, declining receipts to the Treasury and massive deficit spending to do a number of things (the most important of which was to simply stabilize the banking system, for now), our credibility and ability to repay our debts is being questioned by our largest foreign debtholder - China - and for good reason. I dont know what the solution is but it has to involve raising taxes /revenues and cutting spending somehow.

If foreign governments start to say "enough is enough" and wont pony up for treasuries anymore what then? What will the dollar be worth? I dont know and I pray to God we dont find out, but Im afraid a worse case scenario will be hyper inflation. But again, I pray this doesnt happen.

All these people that think they are pretty smart by buying gold have to realize they still live in America, and alot of hungry and angry people do not nice neighbors make.

The motivation to keep buying is so they don't lose massively either.

 

[miketheidiot]

Originally posted by: masteryoda34
Well the number of US dollars that exist have tripled in about the last 8 months.

and the amount of money has stayed relatively stable.

 

[sjwaste]

Originally posted by: BrownTown

Originally posted by: masteryoda34
Well the number of US dollars that exist have tripled in about the last 8 months.

yeah, its pretty simple math. The USA is producing MORE dollars (due to this huge defect spending) and the USA is producing less goods (due to the economic slowdown) So its pretty obvious if the amount of money goes up and the amount of stuff goes down that the amount of money per item is going to go up. Inflation pretty much HAS to occur. However thats not always a huge deal since money is relative, the real question is if wages will keep pace which is unlikely given the amount of unemployment.

You're not considering currency retired by the Fed as well, though.

Also, remember that the money supply isn't just dollars in circulation. The money supply, in a good economy, constantly expands because lenders make loans against their deposits. Their required reserves aren't 100%, they're more like 20%, meaning that for every dollar taken in, the money supply might expand by $5 due to lending. Problem now is that nobody's lending. There is demand for dollars, but the supply is tight because lenders don't want to take on the risk.

Therefore, the Fed is expanding the money supply to meet the demand. That's why you're not seeing crazy inflation right now as they're injecting trillions. They're doing what the banks would ordinarily do by buying up risky securities, which in-turn frees the banks to take their normal risks.

At least, that's how its supposed to work. Lending will lag the expansion, so we'll know soon if banks reopen the window or not.

 

[OverVolt]

In our economy paper money accounts for a pretty small portion of the total money pool. The majority of the money in our economy comes from loans, just numbers in a computer at the bank.

Many people never actually see or use much cash, and just use credit cards/debit cards, direct deposit, etc. A slowdown in lending directly correlates to a slowdown in money creation. Creating more physical dollar bills is really just trying to offset the slowdown in lending, but overall, our money pool has actually shrunk IMO.

If the money pool was expanding, people and companies wouldn't be defaulting on their debt let and right.

 

[sjwaste]

Originally posted by: OverVolt
In our economy paper money accounts for a pretty small portion of the total money pool. The majority of the money in our economy comes from loans, just numbers in a computer at the bank.

Many people never actually see or use much cash, and just use credit cards/debit cards, direct deposit, etc. A slowdown in lending directly correlates to a slowdown in money creation. Creating more physical dollar bills is really just trying to offset the slowdown in lending, but overall, our money pool has actually shrunk.

Correct. Well, the last part is true through interest rates. Creating more money, paper, electronic, whatever means a larger money supply. Money works just like any other good. Supply up, price down. Interest rate down, in the case of money, too. Lower interest rates means the cost of money, the cost to borrow that is, is lower. Lower cost to borrow means more borrowing, IF lenders will lend their money.

Right now, we're not putting money into the money supply to increase demand for loans as much as we are trying to shift some of the asset default risk to the government away from the banks so that they can go out and make more loans and still keep a balanced portfolio (because banks, as we know, always keep balanced risk portfolios, otherwise it'd be a financial nightmare... wait.)

 

[KnickNut3]

LegendKiller has said the smartest things in this thread by far. I was going on tilt reading some of this stuff, but he is fighting the battle I would try to fight perfectly. Rock on, brother.

We're actually at risk for deflation unless the fed injects enough liquidity equivalent to another 8% cut in the fed funds rate. GS recently published a great piece on the subject--not sure if it's publicly on the internet, but if anyone can find it, that'd be great to reference.