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research24
10th December 2008, 16:59
Jim Sinclair writes this today:
“I believe through the $2 trillion of fiscal intervention stimulation, a number I hear from the inside, the 8.5 trillion total so far is going to $20 trillion. Before this is all over the tremendous liquidity will transmute into inflation without precedent. That is what you heard from Gold today.”

Nice of him to explain where he got this inside tip. There has been a tad over $600 bn in new money creation so far, not 8.5 trillion. Mr. Sinclair should learn how to read a balance sheet and look at the Fed's.

We cannot have general inflation unless banks are lending like crazy and people are getting bigger paychecks. Instead of bigger paychecks, they're increasingly getting no paychecks. Layoffs are coming on like a tsunami rolling across the land; corporate bankruptcies are exploding; more rounds of credit losses by banks are in the works. Note that if you loose $100 and I replace it for you, there is no net gain in money supply, unless I am printing the money, which the Fed is yet to do.

Fiscal stimulus is never inflationary because it sucks money out of private hands and production into government's hands. Ask Japan, it doesn't work. The velocity of money is coming to a screeching halt as the lending crisis continues. We are in rampant deflation now. Banks are not going to lend since all borrowers are under stress, so no money creation from that direction.

However, money is never destroyed, its circulation slows and then it concentrates in fewer hands, which gives the appearance of decreasing money supply. As people have less money to spend, prices drop in what we call deflation. We call rising prices “inflation” unless you're an Austrian, in which case you call it a price increase. Prices can increase for reasons other than money creation. Shortages are a good example as are speculative manias.

There are more dollars outside the US than within. The huge deleveraging and disinvestment of late means that there are a huge number of dollar holders out there looking for a place to park them other than cash. It isn't going to be stocks and bonds, so what else is left? Hard assets that are not debt, which means commodities. Yes, commodities again, this time coupled with large shortages resulting from credit loss and recession.
The second potential inflation avenue would be the buying up of US assets at bargain prices. In the past this has been mainly real estate but could include some corporations.
Monetization of debt puts money into the hands of government, which spends it on political goals with the effect of distorting the economy in whatever direction that money goes, this time probably infrastructure where the price increases will be in materials and equipment.

Oil will likely again become an avenue for “inflation”. This by reason that production is falling faster than demand and within a year this will begin upward pressure on oil that will likely turn into another mania that drives the dollar down and everything else up as it did last year. Within two years I see serious shortages coming.

There will be another round of free money coming from Uncle Sugar by April. We don't know yet how much obama will apportion to cash and infrastructure spending. A trillion in cash would be significant, unlike the prior $300 bn.
Massive mortgage relief is another means of pumping up the money supply, but only if it reduces the amount people have to pay, bailing out defaulting mortgages is net zero effect.

Unless you can prove me wrong, you'll notice that creating inflation during a depression is nearly impossible short of throwing cash out of aircraft. Have I missed anything here?

Richard
10th December 2008, 18:35
Excellent post! This is what I had been trying to describe in some earlier posts I made. And if they are printing, it's not that much, perhaps to sustain this or that bank or institution. That is why I see the next year, or maybe two or three... who knows?... But for now, I'm keeping a conservative outlook for at least one terrible year, or the better part of one at least. We won't get off so easy as a fast devaluation currency crash.

I don't know the right word. Stagflation? Taxflation? Volitile stagnation period? Whatever it is, there's three outcomes...

1) Gold and silver become money again (do not expect this to be their choice!)
2) Devaluation suicide of the currencies, but they know damn well how certain failure down this path is.
3) Brute force

I think for the next year at least it will be brutality. They will circulate and try to maintain things that way. How far they get with this continued sustainance of theft/debt-backed money is anyone's guess. At any time options one and two will be there. But, if three is pressed...

Certainly the government will push it's own agendas in basically buying up all enterprise it can to run them their way. Wheather they make it official or not, that's what is going to happen. Already, the Big Three have thrown themselves onto such policy. That alone is cause for concern. **** gold and silver shortages... if crude oil and all it provides goes into "fuel-efficiency" inspired shortage we're FUCKED for a very long time. I could go on and on, but that is enough. Screw with energy and civilization suffers.

Personally, I'd rather have hyper-inflation followed by a crash and even a new currency after. I wish I could share the optimism that devaluation (towards and past the dollar low this year) will begin soon. At least we'd be on equall footing with them. I'll call this the tie. They don't want it, and neither should we.

They may do that, but with so many things ripe for the taking I can see this going further out. Communism still lives in China and it took a long time for Soviet Russia to revert back to something less brutal. Most people can't protect their wealth and are left with nowhere to run.

Dark Ages are made from these kinds of confusing retreats. That's not a euphemism nor do I mean to sound paranoid-alarmist, but I read other things. Not conspiracy sites, but science sites. Every week it seems the new establishment finds it convenient to dismiss something that was solidly proven, including the scientific method itself, in just about all areas. Coupled with the lost science of money... folks, that IS what the Dark Ages were! Our level of technology is meaningless to the definition, so we are not impervious because of it.

I hope and pray this will not be the outcome, but the enemies of liberty and the free-market are hell-bent on winning. And they know that in all the confusions and destructions they have caused thus far, that they have little to worry about.

There is only one cure, and I solidly beleive that that cure is the ressurection of the real bills doctrine. Such would nesseciate a money of weight and purity. With private credit and private money, we can say to banks and government "to hell with your money and plans!". Break them, and leave THEM with their own worthless and destructive issue. They will not let go otherwise.

prahudka
10th December 2008, 19:09
However, money is never destroyed, its circulation slows and then it concentrates in fewer hands, which gives the appearance of decreasing money supply. As people have less money to spend, prices drop in what we call deflation. We call rising prices “inflation” unless you're an Austrian, in which case you call it a price increase. Prices can increase for reasons other than money creation. Shortages are a good example as are speculative manias.


Aren't you overlooking what is already happening in several economies? They are devaluing their currencies. Cheney said about two years ago that this was US policy, to devalue. How else can you pay the enormous bills, except with inflated dollars?

So, you can destroy currency in effect by devaluing.

research24
10th December 2008, 20:52
That is the argument I have been making for months.

MikeJ
10th December 2008, 21:24
You don't even know what inflation is. Inflation IS NOT RISING PRICES!!!! That is the result, not the cause!!!

research24
10th December 2008, 21:27
You don't even know what inflation is. Inflation IS NOT RISING PRICES!!!! That is the result, not the cause!!!

You didn't read carefully! I said, "We call rising prices “inflation” unless you're an Austrian, in which case you call it a price increase." Meaning inflation is an increase in money supply in excess of value of goods produced. And, "Prices can increase for reasons other than increase of money supply."

research24
10th December 2008, 21:39
Richard, you said that quite well and I think you nailed it. We shouldn't underestimate the power of government to keep things going, however badly. So many here are convinced that there will be instant, massive inflation and their PM speculations will bring them massive profits. Most of us thought the dollar was going to collapse, but it didn't. I figured silver would be $50/oz by now but look where it is now. None of us can predict the future, only map out the possibilities and place one's bets accordingly. But without good information and debate, we're in the dark.

mizou
10th December 2008, 23:46
My 2 cents worth..

Lack of confidence, fear, lost money, negative media, doom and gloom stories, financially tight Chritmas for many across the world....

The domino effect seems to be in progress in all sectors, I believe that interference will be futile as the final outcome will be, the demise of the US$ - and this will be determined, Not by the US, but by the rest of the world.

Fear has set in and the world is waiting for Obama and his team to soon perform some financial miracle and get this engine started, but the people's patience will not stand the test of time required to achieve this miracle.

The rest of the world is starting to realise (and more will start to understand) how that thing call "money" comes into existance and they will learn that this system works in favour one main country, is faulty and is crumbling, because it has been abused to he point that it CANNOT EVER be repaid under this present "democratic" system.

So I can only see the inevitable demise of the US$ and in my mind, this will ultimately lead to Zimbawe style inflation ??

mizou
10th December 2008, 23:49
Sorry, one more thing I left out ....
Unless gold is revalued as per this article (http://news.goldseek.com/GoldSeek/1228935840.php), then we might stand a chance of saving the US$

Richard
11th December 2008, 01:07
Richard, you said that quite well and I think you nailed it. We shouldn't underestimate the power of government to keep things going, however badly. So many here are convinced that there will be instant, massive inflation and their PM speculations will bring them massive profits. Most of us thought the dollar was going to collapse, but it didn't. I figured silver would be $50/oz by now but look where it is now. None of us can predict the future, only map out the possibilities and place one's bets accordingly. But without good information and debate, we're in the dark.

Agreed. What I present is but one possibility, one which I admit until recently I had been too scared to even consider. For now, given the fright going on... it would seem emergency measures are the most likely, and as I heard once before in a movie... "Potter isn't selling, Potter's buying! Why? Because we're panicy and he's not, that's why!"

So many things will have to fall into place before that disaster can be averted. For one, gold will have to start tracking the real money supply. Two, people's wages will have to climb to be able to afford it, which nessicates that the economy recover. And all the swapping about and bits of money creation, if that turns out to be significant, has to take effect.

That's why I'm trying like heck to understand this backwardation business. I just read Antal Fekete's next article on the matter... not sure what to make of it. And ever since his initial alert, everyone's had something to say about it. WHich is good... it's educational, but I'm still in the dark. Thing is... so does it seem everyone else is yet. Some say it's good, others not.

I hang on the hope that this dead-locking will point the way to the solution, the reall bills doctrine. That would solve it all, right there.

In the mean time, I got two seriosuly injured parents here and less than 100 oz of silver, plenty of food and water, and some cash and income. They had to delay retirement to keep their insurance another year until their suit settles. Everything on the timeline... cutting it REALLY CLOSE by my most conservative estimates...

I'm surprised I have no grey hairs yet! lol

Richard
11th December 2008, 01:19
Sorry, one more thing I left out ....
Unless gold is revalued as per this article (http://news.goldseek.com/GoldSeek/1228935840.php), then we might stand a chance of saving the US$

That's the one! I had it confused with the other one he recently posted on goldseek, the second one on the bakwardation matter.

It's funny, but I did conclude that right around the time he was having that debate with Jason Hommel last summer. I didn't quite understand why I thought that, though. Now it makes more sense.

What times we live in, folks!

JoeSixPack
11th December 2008, 01:22
We also have a collapsing $1/2-1 QUADRILLION (notional) derivatives bubble. This is 10-20x the world's GDP tied up in ways we do not even know (it is opaque). The gvt. and the fed have committed $8 trillion + dollars.
Much of it is capital to banks, so theoretically it can be multiplied 10x.

Right now the banks and funds are deleveraging and dumping commodities. This is keeping gold and silver relatively low (I am surprised and pleased that they have not collapsed, and relative to oil and other commodities are hanging in there- there is independent upward pressure).

Once the deleveraging stops (I do not know how long it will take) IF it stops, the holders of cash will go shopping. Then we will see the inflation.

I think there is a reasoanble chance that the dollar or Euro (or even Yen or Yuan or Pound) collapse before the deleveraging stops. The derivatives bubble is so much bigger than the world's GDP, that it may just be luck that some currency (currencies) have not collapsed. If a major currency collapses, then we may instantly see a panicked hyper-inflation.

I believe because of the opaque nature of the derivatives bubble, plus its unimaginable magnitude, we are in a historically unprecedented situation. Once a currency collapse comes, then things may become more predictable once the initial trajectory is mapped out. Once the fake money is gone, things get more down to earth. Until then things are very unpredictable.

www.DerivativesCollapse.com
www.TakeBackTheFed.com
www.FinancialBlackmail.us
www.JoeSixPack.me

research24
11th December 2008, 07:31
Underlying this whole mess is massive debt (350% X GDP or $50 T) much of which cannot be repaid. This debt will be liquidated by default. There is no stopping this.

The only way to avoid total economic collapse is by means of revaluing the currency which spreads the debt loss out evenly amongst everyone. What we want to see is a controlled devaluation rather than chaotic and deadly hyperinflation. Most people think Bernanke is too smart to go the inflation route: I do too. The gold revaluation argument makes sense.

research24
11th December 2008, 07:34
On the derivatives issue, we might see government simply declaring them null and void. That would mean Goldman and JPMorgan vaporize! Hurrah!

JoeSixPack
11th December 2008, 09:51
On the derivatives issue, we might see government simply declaring them null and void. That would mean Goldman and JPMorgan vaporize! Hurrah!


That is proposed in www.TakeBackTheFed.com

They should start with AIG.

prahudka
11th December 2008, 13:24
None of us can predict the future, only map out the possibilities and place one's bets accordingly. But without good information and debate, we're in the dark.

Otherwise, we would be very rich by now.

skijake
11th December 2008, 18:52
On the derivatives issue, we might see government simply declaring them null and void. That would mean Goldman and JPMorgan vaporize! Hurrah!

No way! They would have to make a new Holiday when they get those two to tank. :p

research24
11th December 2008, 20:53
It is very likely that neither one of them will make it, although Morgan is the gvts primary financial proxy for things like manipulating gold and silver, stocks and bonds.

mizou
12th December 2008, 02:44
......... The only way to avoid total economic collapse is by means of revaluing the currency which spreads the debt loss out evenly amongst everyone. What we want to see is a controlled devaluation rather than chaotic and deadly hyperinflation. Most people think Bernanke is too smart to go the inflation route: I do too. The gold revaluation argument makes sense.

Totally Agree with you Research24 and I don't believe that the US would want to pull this on their own and create chaos, and as such I theorise that perhaps those talks are already in progress (Refer to article below) hand in hand with a select few including China who has a very low "know" gold reserve and net importer of gold)..

What are your thoughts on this..

Quoting from Prof Antal E. Fekete's article
"...Anyone who reads the written works of our Fed Chairman will know that Bernanke’s long term plan involves devaluing the dollar against gold. This is the exact opposite of the position of most prior chairmen. He has overtly stated his intentions toward gold, many times, in various articles, speeches and treatises written before he became Fed Chairman. He often extols the virtues of F. D. Roosevelt’s gold revaluation/dollar devaluation back in 1934, and credits it with saving the nation from the Great Depression. According to Bernanke, devaluation of the dollar against gold was so effective in stimulating economic activity that the stock market rose sharply in 1934, immediately thereafter. That is something that the Fed wants to see happen again."

Tlengl
12th December 2008, 07:55
Guys ... look, I'm no expert on this stuff, but my understanding is that whatever they do, it will not involve the "Powers That Be" losing any money or CONTROL ... they are simply too entrenched .... we discuss what they might or might not do but in the final analysis it really is about what is good for the Big Boys .... that is what will eventually be done ... sorry if that is a bit of a downer but that is where we are in history in my humble opinion ...