Inflation, deflation, gold and currencies

[John]

For John and all who post.

Their is much appreciation.On all this site's pages there is ton's of knowledge , personal skill's and experience and powerful thought provoking discussion's .

I don't know of anyother site that offers that ?

Without a fee that is ?

My personal regret is I didn't find it sooner.

But all that have contributed have been benificial to me in things I knew 'nothing' about.

And helped me .

Thank you all.

Keep up the great discussions

Donate if you can.

John the greatest gift of man is being of service to your fellow man unshelfishly,for their benifit.

This site is it !

We are paying attention.

And the one's that wanted to take up time and space arguing and calling you a 'Doom's Dayer' have pretty much thined out.

Keep it up and going ya'all.

To get through all this uncertainty we need each other.

Jusme

Thanks for the nice compliment. I do this for you and for people like you.

John

[John]

> John, you make a very positive impression on those who are
> listening to you and trusting your amazing system. I'd also like
> to point out Higgenbotham who I read a lot of his well written
> posts (I think the "put your money where your mouth is aspect").

> BTW - The US dollar dropped again yesterday so I purchased another
> $7k in USD.

I guess you're saying that the euro is in a bubble, just like
so many other things, and the dollar is in a negative bubble.
What does a negative bubble look like? Is it like an inside-out
bubble?

Both you and Higgie have a lot of guts, in my opinion.

John

[John]

Dear Higgie,

> You've discussed deflation mostly in general terms from the
> standpoint of reversion to the mean, collapse of structured
> securities, less money in the world every day, and interlocking
> global realities that make the deflationary outcome inevitable.

You're leaving out all the generational stuff.

Generational Dynamics is to macroeconomics as macroeconomics is
to microeconomics. Macroeconomics models aggregate microeconomics
model over the entire population, and Generational Dynamics models
aggregate macroeconomic models over time.

Macroeconomics models are completely static in time, and economics
assume that the same macroeconomics model that worked in the 70s
also works in the 90s and today, an assumption which is completely
absurd on its face.

The arguments that people make in support of an inflation view are not
very different from the economic arguments on which Hoover based his
"Prosperity is just around the corner" prediction. Hoover wasn't
stupid; he was listening to very knowledgeable economists who used
1920s models to try to understand the 1930s. Today, economists are
using 1970s and 1990s models to understand what's happening today. As
I've pointed out many times, economists have been consistently wrong
about everything, at least since 1995.

> Another thing I should mention - if you are using a straight line
> log plot to model prices, the ultimate outcome of that is more
> likely hyperinflation because eventually one of the swings back up
> over the line in a rising trend is more likely to become unstable.

Yes, it will. Hyperinflation occurred in the 1970s, and it would be
likely to occur again in the 2040s. However if, as I expect, the
Singularity occurs by 2030, then all bets are off.

John

[Higgenbotham]

The arguments that people make in support of an inflation view are not
very different from the economic arguments on which Hoover based his
"Prosperity is just around the corner" prediction. Hoover wasn't
stupid; he was listening to very knowledgeable economists who used
1920s models to try to understand the 1930s. Today, economists are
using 1970s and 1990s models to understand what's happening today. As
I've pointed out many times, economists have been consistently wrong
about everything, at least since 1995.

http://fofoa.blogspot.com/2011/04/defla ... ation.html

John,

The link above is to the hyperinflation argument that I believe holds water from a mechanistic standpoint. In other words, as I mentioned to Vince a few pages back, if the Fed were to monetize every penny of bad debt (both public and private) then theoretically hyperinflation is possible. Would you be able to read through this and state, according to Generational Dynamics, why this scenario is not possible? I believe in the past several of us have said it would be politically impossible during a fourth turning for the hyperinflation scenario argued in the link above to occur. I've also mentioned that the physical speed of any upcoming debt collapse could outrun the Fed's ability to counter it.

http://www.generationaldynamics.com/cgi ... gd.e081125

[vincecate]

The USA index in the Billion Prices Project is no longer updated. There is a world index that is updated still though. It is looking like about 1% per month the last few months.

http://bpp.mit.edu/world-inflation-index/

[John]

Dear Higgie,

> http://fofoa.blogspot.com/2011/04/defla ... ation.html

> The link above is to the hyperinflation argument that I believe
> holds water from a mechanistic standpoint. In other words, as I
> mentioned to Vince a few pages back, if the Fed were to monetize
> every penny of bad debt (both public and private) then
> theoretically hyperinflation is possible. Would you be able to
> read through this and state, according to Generational Dynamics,
> why this scenario is not possible? I believe in the past several
> of us have said it would be politically impossible during a fourth
> turning for the hyperinflation scenario argued in the link above
> to occur. I've also mentioned that the physical speed of any
> upcoming debt collapse could outrun the Fed's ability to counter
> it.

> http://www.generationaldynamics.com/cgi ... gd.e081125

Of course it's mathematically possible that if the Fed were to
monetize all bad debt, then it would cause hyperinflation.

But that's like saying that if we listen to the Pope and all love
one another, then there wouldn't be any more war.

Your assumption -- that the Fed could monetize all bad debt -- is
literally impossible. It would not be tolerated by the current
constellation of generations, after people have been burned so badly,
and they remember the hyperinflation of the 1970s.

Surely you can see this for yourself just be reading the news. The
hostility to more debt is growing palpably greater every single day,
and that same hostility is being directed at Ben Bernanke (by people
such as yourself) for allegedly allowing too much inflation.

That hostility is a generational trend that will not be reversed. So
yes, your counterfactual assumption could mathematically lead to
hyperinflation, but your counterfactual assumption will remain exactly
that -- counterfactual.

John

[jusme]

My 9 yr old grand daughter took an online quiz 2 years ago.

Question:Choose the one thing in our Country that is the most important to you.

Can't remember what the other 2 choices were ? But I remember She choose "The Economy " !

She's 11 now. Sad isn't it ? It still is.

John I'm up a notch. I'm >%?o$@5F+ ! This is going south fast for the 99%.

jusme

[Higgenbotham]

Your assumption -- that the Fed could monetize all bad debt -- is
literally impossible. It would not be tolerated by the current
constellation of generations, after people have been burned so badly,
and they remember the hyperinflation of the 1970s.

Surely you can see this for yourself just be reading the news. The
hostility to more debt is growing palpably greater every single day,
and that same hostility is being directed at Ben Bernanke (by people
such as yourself) for allegedly allowing too much inflation.

That hostility is a generational trend that will not be reversed. So
yes, your counterfactual assumption could mathematically lead to
hyperinflation, but your counterfactual assumption will remain exactly
that -- counterfactual.

John

There was something I forgot to mention that I had in mind to recount here - when I sold the rest of what I've referred to as my "inflation assets" the past couple weeks, I made 3 trips to the wholesaler. The wholesaler has a counter where you check in the goods and they verify everything before paying or vice versa. Anyway, I noticed something very striking - that all except one of the people transacting this business were around the age of 45-50 and many of them were hanging around the counter talking in a very animated and apocalyptic manner. Some of the discussion was about how high silver and gold would go, and how anybody who was selling (like me) was making a very serious mistake. Now, when those 45-50 year old people were children, they were subjected to the horror of the 1970s gas lines and inflation and my thought was that those experiences had helped bring about the current upcrash panic in silver and gold. There was an elderly Jewish gentleman who was about 75 years of age standing at the counter with a briefcase full of silver to sell (the briefcase had his name on it). He was taking in all of this activity and saying not a word, except to bemoan the fact that this was the longest he had ever had to wait to get checked out. I turned to him and asked him very quietly what he thought of all this. He said very quietly that silver and gold are in a bubble and silver is worth about 1/3 of its current price (then $44) and gold 1/2 (he then gave a figure of $700). The second time I was there, he was there again with another briefcase full.

Getting back to what you said, at the same time there is a lot of fear of inflation among those who experienced it as children, there is also a lot of hatred for Bernanke because he is toying around with a very visceral subject for a lot of people. Due to the fact that the hostility is centered in an age bracket that is tending to become more powerful politically and economically with the passage of time (peak "power" may occur sometime in the 50s I believe) that doesn't bode well for Bernanke's policies.

[vincecate]

Your assumption -- that the Fed could monetize all bad debt -- is literally impossible. It would not be tolerated by the current constellation of generations, after people have been burned so badly, and they remember the hyperinflation of the 1970s.

Surely you can see this for yourself just be reading the news. The hostility to more debt is growing palpably greater every single day, and that same hostility is being directed at Ben Bernanke (by people such as yourself) for allegedly allowing too much inflation.

Anyway, I noticed something very striking - that all except one of the people transacting this business were around the age of 45-50 and many of them were hanging around the counter talking in a very animated and apocalyptic manner. Some of the discussion was about how high silver and gold would go, and how anybody who was selling (like me) was making a very serious mistake. Now, when those 45-50 year old people were children, they were subjected to the horror of the 1970s gas lines and inflation and my thought was that those experiences had helped bring about the current upcrash panic in silver and gold.

It is an interesting point. I am in that 45-50 age range and I like silver. I remember silver being at these kinds of prices back then. One of my father's close friends shorted silver and lost big when it was on the way up. After watching the prices on everything go up so much over the last 30 years, to have silver at the prices of back then makes it seem like it just can't be near the top yet. So it may be more the memory of silver near $50 than the gas lines that gets the 45-50 year olds liking silver.

A minor point John, my definition of hyperinflation at 5% per month or 80% per year is one of the lower ones used. Nobody who studies hyperinflation would count the 1970s with 15% per year inflation as hyperinflation. It would however be fair to say that gold prices back then indicated a fear that hyperinflation might happen.

[Higgenbotham]

It is an interesting point. I am in that 45-50 age range and I like silver. I remember silver being at these kinds of prices back then. One of my father's close friends shorted silver and lost big when it was on the way up. After watching the prices on everything go up so much over the last 30 years, to have silver at the prices of back then makes it seem like it just can't be near the top yet. So it may be more the memory of silver near $50 than the gas lines that gets the 45-50 year olds liking silver.

I think it's the whole backdrop that existed back in the 1970s. It was a favorite hobby of us kids to go through change and see if we could find any silver coins. We could find just enough to make it worth our time, which of course wasn't worth a whole lot. So we'd get on our bikes and head over to the banks and buy a few rolls of dimes or quarters and find some silver dimes or quarters before they finally disappeared. That had the effect of teaching us that silver was very valuable and scarce.

As far as the 1980 price spike of silver to $50, the reality was much different than this time around because the prices realized in practice weren't anywhere near $50 when the market hit that level. I've read accounts saying that anyone who got out of physical silver at $30 that day did pretty well. By contrast, the physical market last week was orderly, though I could not get a call back or any commitment from any local dealers, but only the larger guys I was already dealing with or had dealt with in the past (being either out of town or out of state). Only on Monday, the actual day of the (Sunday night) high did the out of town dealer drop his price much below spot and it only dropped by 60 cents, having gone from 85 cents under to 145 cents under. The older man who was in the wholesaler's office told me his story about the 1980 spike. He said that within a matter of a couple hours (if I remember right) the price dropped from $50 to $11 something (I don't see that when I look at the chart - not even close). I've always felt that the perfect analogy to the 1970s would be for silver to move to almost 3 times the level it achieved in 1980. That's because, for one thing, the respective bull markets started at $1.29 and $3.50 while $5 and $14 represented substantial resistance in both bull markets. But rarely does history repeat itself that cleanly.

I edited my post: no margin hike from Man that I can see.
http://www.mfglobalfutures.com/resources/margins.cfm