Inflation, deflation, gold and currencies

[vincecate]

The Everyday Price Index, or EPI, for last year is up 8%. This has everyday things like food, electricity, gas, telephone, etc. It does not have big things like house, car, refrigerator. During hard times I think the EPI shows the inflation rate for the things most people are really buying much better than the CPI.

http://www.cbsnews.com/8301-505144_162- ... you-think/
http://www.aier.org/article/7557-epi-re ... mic-change

Part of how Keynsianism helps get rid of unemployment is by printing money and inflating prices when salaries don't go up, making it more profitable for companies to hire people. Keynes said this in the first dozen pages.

[Higgenbotham]

The Everyday Price Index, or EPI, for last year is up 8%. This has everyday things like food, electricity, gas, telephone, etc.

Part of how Keynsianism helps get rid of unemployment is by printing money and inflating prices when salaries don't go up, making it more profitable for companies to hire people. Keynes said this in the first dozen pages.

More Americans said they struggled to buy food in 2011 than in any year since the financial crisis, according to a recent report from the Food Research and Action Center, a nonprofit research group. About 18.6 percent of people -- almost one out of every five -- told Gallup pollsters that they couldn't always afford to feed everyone in their family in 2011.

One might assume that number got smaller wrapped up with the national unemployment rate falling for several consecutive months. In actuality, the reverse proved true: the number of people who said they couldn't afford food just kept rising and rising.

Bernanke says he is trying to raise asset prices on things like houses. He has to know better. When he hands "free" money to his wealthy bankster friends, they don't use that money to buy houses because houses aren't exchange traded at the click of a mouse. But oil, gasoline, wheat, corn - and milk - are. These are things that poor people - and babies - need to live. Also, if basic necessities rise in price, that's less money people have to put toward a monthly paymernt for a house, so house prices will fall. So now that we know what Bernanke is doing, the next question is - why are people letting him get away with it? There were even bonafide presidential candidates that called Bernanke on this, but they are nowhere to be seen at the top of the polls.

So I see two choices - either get the hell out of the US and go to a country that has a real currency, or get way out on the edge and use alternative currency and barter. I would say the average person needs to be implementing one of those two options by about year end - if they don't want to chance starving to death in a few years.

[Higgenbotham]

Before this Bernanke talk there had been several in a row where each time he opened his mouth silver shot up. So it looks to me like I was not the only one expecting him to say, "we will print more money" and cause silver to go up again. The truth is he will print more money.

I used to give you a long list of things that would prevent hyperinflation. But in the past year, none of those things have happened. Probably, within the past year, hyperinflation has become more likely than not. In other words, at this point, it can't really be stopped, or it's not optimal to try. That may be why Europe caved - the setup was such that sticking to their guns and implementing real austerity was no longer an option due to the previous events. Interestingly, had Europe come to last fall's crisis point sooner, they may have done the right thing. There is no way to really know. In practical terms, I will be putting my money 50/50 between deflation and hyperinflation, probably by the end of the year or sooner. But in real life, in terms of where someone chooses to live and what they do, it's probably best starting next year to operate as if the world currency system will be destroyed. I used to tell you a year or two ago that the bar of Bernanke chewing through the entire US bond market and destroying it was the bar for hyperinflation and it was too high. That's no longer true in my estimation. A lot of damage has been done in the past year, and nothing good has happened to prevent further damage.

As far as more immediate things like the price of silver, I still believe that we will see lower prices than last year but, as you have said, purchasers who buy around here will do OK. The market has been quite choppy. I think that's to be expected as the transition from quasi deflation to inflation to hyperinflation takes place. The transition may take longer than we expect. Also, these are just words really. The idea is that the world currency system is being systematically destroyed and the destruction is accelerating beyond the point where it can be reversed - in my opinion.

[vincecate]

The market has been quite choppy. I think that's to be expected as the transition from quasi deflation to inflation to hyperinflation takes place. The transition may take longer than we expect. Also, these are just words really. The idea is that the world currency system is being systematically destroyed and the destruction is accelerating beyond the point where it can be reversed - in my opinion.

Yes, it is hard to say how long till hyperinflation starts. However, once it starts I think it will be exceptionally fast. Many times hyperinflation takes years before everyone gets all the way out of that currency. I think this is mostly because people don't understand hyperinflation and don't realize that hyperinflation ends when the currency is worthless and hardly ever any other way. But if the US dollar starts to get hyperinflation I think the whole Internet and TV and print will be a buzz trying to understand hyperinflation. And then people will understand. And they will dump dollars fast. Once started it will not last years. It could be less than 6 months for US dollars to be completely worthless.

[Higgenbotham]

Yes, it is hard to say how long till hyperinflation starts. However, once it starts I think it will be exceptionally fast. Many times hyperinflation takes years before everyone gets all the way out of that currency. I think this is mostly because people don't understand hyperinflation and don't realize that hyperinflation ends when the currency is worthless and hardly ever any other way. But if the US dollar starts to get hyperinflation I think the whole Internet and TV and print will be a buzz trying to understand hyperinflation. And then people will understand. And they will dump dollars fast. Once started it will not last years. It could be less than 6 months for US dollars to be completely worthless.

Agree, it won't last years once it starts and it may not even last 6 months. I'd guess it will take longer than we would think, then happen faster than we would think. It may only take days to weeks for the dollar to become completely worthless once hyperinflation starts. The government can be very effective in using the paper markets to slam gold and silver down and administer sort of an electroshock therapy on people who bet on hyperinflation. You'll notice that in the past when that has happened Bernanke has a little smirk on his face as if to say, you didn't REALLY want to buy gold and silver, did you? There will come a day, though, when these delaying techniques are no longer effective. That is dangerous because once the genie is out of the bottle after some years of effective management, the lid will blow off fast. Plus, as long as the government is effective at keeping the lid on through paper management, they will proceed as if they can do that forever, as they are doing now. It's apparent that the message did not get through in time and the government is attempting to cheat the death of the currency instead of heeding the warnings. This has never worked and won't work. And this is why I now think the US debt downgrade was the beginning of the crisis.

[Marc]

Well, if hyperinflation is quite likely in the cards in the near future, maybe a promising entrepreneurial venture would relate to the manufacture/distribution/investing regarding wireless-controlled, business-card-or-smaller-sized LCD displays for retail use: those bananas, canned beans, blue jeans, tampons and mobile gadgets could all have their prices almost effortlessly updated in real time, and thus save store managers and employees some real headaches.... —Regards/Peace, Marc

[Trevor]

I've been listening to the debate about whether we're headed for hyperinflation or a deflationary spiral. Personally, I learn towards the latter, but things can always happen. Alternately, some countries may go on one path and others may follow the second. There's no way to know for sure until the collapse comes.

[Marc]

Whether the financial endgame is deflationary or hyperinflationary or actually a combination of both largely rests with government policy, I strongly feel. I do feel that hyperinflation would very possibly destroy the banks, so I can see an awful lot of resistance towards allowing it to happen, insofar as disallowing it to happen is possible. Yet, I can see enormous political pressure to eschew austerity and to keep coming up with mega-fancy monetary and quantitative-easing tricks to which central banks do their frenetic best to modulate. If hyperinflation occurs, it may heavily be not because our currency has had faith lost in it as a store of value, but heavily due to faith lost in it as a unit of account: in other words, we go into, say, a post-deflationary super-volatile environment in where we just don't know by the minute how much money is "approximately out there" due to crazy hoarding-and-release patterns, and we can only make "huge range guesstimates" in regards to how much is out there, leading to sellers demanding increasing quantities of money for goods and services to ensure they get their "compensation's worth." What I can say with certainty at this juncture is that the grand chapter to all this will be very interesting. —Regards, Marc

[Trevor]

No matter what, a lot of the banks are going to be destroyed. I've said it before: the day of reckoning is coming. You can't carry on forever ignoring the consequences of reality. We've pumped trillions into the economy, but we're still weak. Greece is doomed and we don't know for sure just what a default will do to the world economy.

On another topic, China's military spending for 2012 is 106.4 billion, pretty close to what I'd predicted.

[Marc]

Europe (and the world) really need to watch it with Greece. Trying to shove all this austerity down Greece's throat, as most of us know here, won't work. It could simply cause Greece to adopt a highly worrisome non-democratic government. It may make more sense to let Greece completely walk away from its bond obligations while also trying to give it some sort of international aid, while furthermore planning for a future Greece that is more entrepreneurially dynamic through some sort of achievable incentives. You just don't change a national economic and social culture overnight, and by the way, that's not to diss the Greeks: many things have happened in their modern era that have caused them hardships and led to cronyism/protectionism that is going to take awhile to break. And, from what I hear, it is way easier to spontaneously make friends in Greece than it is in Northern Europe, meaning that Greece likely shines as an important source of European social capital, despite its doomed economy. —Regards, Marc