Hyperinflation investing themes

Quote from scriabinop23:

But M3 is merely one part of the total equation. You forget about velocity. If velocity of money halts (from pullback of credit), then it takes a lot more M3 to keep price at the same level. Thus the justification of fed policy.

And as far as money supply is concerned, what do you think about all of the monetary destruction that has occurred (in house deflation and people walking away from debt/credit) ?? I don't think those M3 #s tell the whole story, nor are necessarily correct. Accounting games can make them look larger than they are. How have 100s of billions of bank losses been accounted for in money supply? What about all of these credit markets seizing up? Nowhere do I see those #s. Its not as if homeowners in foreclosure made out with free houses (they are penniless as well).

Challenge what you read - its not necessarily true, and search for the answers.

http://www.sparknotes.com/economics/macro/money/section2.rhtml
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If all of this is true, and obviously the market is forward looking, why is the dollar so weak? Why are commodity prices increasing so rapidly? Everything you say is stating that the market is wrong. The commodity and currency markets are stating that there is dollar inflation and you are telling me that the market is wrong and we have to worry about deflation? LOL.

The market already KNOWS about the housing bubble popping, about credit contraction, about economic weakness in the US and Europe. The markets are always forward looking. Its a discounting mechanism for all available information, and how that projects out into the future. And you know what the scary thing is? The dollar is still weak and commodities are getting more expensive despite those factors being known in the market. Inflation is still high despite all that.
 
Inflation is high right now, but where will be 1 year from now?

The credit/bond and stock markets do not agree with the commodity markets, by the way. I'm passing no judgement.

If inflation was the consensus, then don't you think the ten year and 30 yr yields would be high to match it? 8%?+ Instead, we're at 3.9%.

Last I checked, y/y inflation rates have been way higher than 3.9% everywhere.

So it looks the markets are betting that this will not continue (not me). I'm just reading the tarot cards.

As far as the dollar --- last I checked (the last 3 months), the dollar is actually holding its ground right now. Its gone nowhere relatively quick. Who's to say it all can't reverse!
 
Quote from scriabinop23:

Inflation is high right now, but where will be 1 year from now?

The credit/bond and stock markets do not agree with the commodity markets, by the way. I'm passing no judgement.

If inflation was the consensus, then don't you think the ten year and 30 yr yields would be high to match it? 8%?+ Instead, we're at 3.9%.

Last I checked, y/y inflation rates have been way higher than 3.9% everywhere.

So it looks the markets are betting that this will not continue (not me). I'm just reading the tarot cards.

As far as the dollar --- last I checked (the last 3 months), the dollar is actually holding its ground right now. Its gone nowhere relatively quick. Who's to say it all can't reverse!
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"Inflation is high right now, but where will be 1 year from now?"

Even higher:D There is no way the government's 2% core inflation can be true (well if you don't eat, don't travel and don't use anthing metallic:D).


WHy are long term treasury bonds are not following commodities moving up? Have u heard about our new budget for next year? the U.S. government is getting increasingly financially irresponsible and bond buyers (both domestic and foreign) are feeling unsecure buying them.
 
if some1 is thinking about hyperinflation and comparing the USA to argentina I dont think they have it all together upstairs.

In my opinion they belong in a nut house.

Just a thought.
 
Quote from regal_2012:

if some1 is thinking about hyperinflation and comparing the USA to argentina I dont think they have it all together upstairs.

In my opinion they belong in a nut house.

Just a thought.
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Yeah, Argentina at least had a strong export sector allowing an eventual recovery each time they debased THEIR currency.

But no, nothing can happen here - it's the USA, we are immune to the laws of economics. Yaaay! Pass the cheese doodles and gas up the SUV, Daddy got a VISA credit extension and he's going to Disneyland!
 
Quote from scriabinop23:


As far as the dollar --- last I checked (the last 3 months), the dollar is actually holding its ground right now. Its gone nowhere relatively quick. Who's to say it all can't reverse!
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Well axe that comment...
 
Hyperinflation is said to be “a very rapid, very large increase in the price level". Hence, when the interest rates are low and the value of the dollar drops, this causes the prices to rise, which is not good. This means that if the dollar loses 10% of it's value and you are getting just 3% annual interest, you are losing 7% annually!

Therefore, if the dollar is losing value, you need to increase the interest rates in order to get a risk free rate of return of at least 0 (ideally a few percent). Thus, reducing interest rates and falling dollar causes hyperinflation.

Considering, the US Government official numbers of CPI (Consumer Price Index), and PPI (Producer Price Index), they are calculated with tricks to depict much lower levels than actual. Thus, the actual inflation is in reality about 10%, which means that a 30 year bond should have a 15% rate not a 5.5% rate.

For more information, considering this issue of CPI versus the actual figures, please have a look at the following links:

- An Alternative Inflation Index

- What's the real rate of inflation?

A point to note that the Government prints paper money and makes metallic money, but the same is no more backed as earlier (backed against gold). Thus, the US Government can just print money, and this is why the dollar loses value. This creates a vicious cycle, of printing more money and this pushes up inflation. Since, we are spending more money than what we are getting in from taxes, so we need to print more money to make up for the difference. This extra money becomes worth less and this pushes the rates; which is inflation.

This is what is happening with the Oil and Gold prices spiraling upwards with the falling dollar value.
 
Wow, looks like hyperinflation is dangerous! Imagine burning currency notes as they are worthless than wood (this is what happened in Germany).

See the following links:

http://en.wikipedia.org/wiki/Hyperinflation

http://www.sjsu.edu/faculty/watkins/hyper.htm

http://www.rogershermansociety.org/yugoslavia.htm

http://emagazine.credit-suisse.com/app/article/index.cfm?aoid=179052&fuseaction=OpenArticle&lang=en

http://www.germannotes.com/hist_inflation.shtml

http://www.schoolhistory.co.uk/studentforum/lofiversion/index.php/t2139.html

http://www.bbc.co.uk/schools/gcsebitesize/history/mwh/germany/crisis1923rev3.shtml

http://www.historylearningsite.co.uk/hyperinf.htm

http://www.historylearningsite.co.uk/weimar.htm

Moreover, USA is supposed to be following in the same steps as seen below:

"The many parallels between 1924 Germany and present-day United States are cause for concern. Though the U.S. has not yet reached the depths to which Germany descended in that era, few can look at the constant depreciation of the dollar since the early 1970's and fail to be alarmed. It seems contemporary America differs from 1924 Germany only in the duration between cause and effect. While the German experience was compressed over a few short years, the effects of the American inflation have been more drawn out." (Link: http://www.usagold.com/germannightmare.html)

Moreover, "German State-Owned Banks on Verge of Collapse" shows that USA is not alone (Link: http://www.spiegel.de/international/business/0,1518,536635,00.html)
 
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