Hyperinflation

[zdreg]

Quote from scriabinop23:

...
And finally, as our debt levels are unsustainable, a continued deflationary move will have a horribly negative effect on tax revenues when we are continuing to spend at furious rates. Today we can not afford a great depression, since we now have surpassing 70%+ debt to GDP, not to mention social security and medicare entitlements weighing us down. In 1929, debt to GDP was 16.3% (16.9B of debt against 103.6B GDP). Near the trough of the depression, debt ballooned to 27B against 66B of GDP, a debt to GDP ratio of 41%. Consider this: This was in a time without social security or medicare obligations.

During the great depression, the GDP moved from 103.6B to 56.4B (falling 45%). Now, with over 10T of debt against 14.4T of GDP, we are at 70% debt to GDP ratio. If we saw GDP fall 45% (to 8T) and merely maintained our debt level, new debt to GDP would be 125%. If we repeated a similar scale of debt increase (+70% from 10T), our new debts would would be at 17T against an 8T GDP with no meaningful personal savings backdrop. At 5% interest (very optimistic), our debt service cost alone would be $850B/year! All against tax revenues at most around 1.5T (reflective of an 8T GDP). We spend that alone on Medicare and Social Security right now!


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http://scriabinop23.blogspot.com/2008/11/unsustainable-bubbles-deflation.html

thx for intersting statistics instead of that dribble from portl385 that "Jim Rogers is a clown"

 

[Landis82]

Quote from canuckrookie:

What is this magical process of "sterilize" and how does it work? Cand they make a How it's made show on this sterilize process?

It's quite simple.
The FED engages in monetary operations such as "matched-sales" to take money out of the system.

 

[jprad]

Quote from EMRGLOBAL:

But Inflation to match the Carter years...you can bet on that.

Only happens if the US continues to print money after everyone else stop printing.

Right now everyone's presses are running full-tilt, so it's a net wash.

 

[jprad]

Quote from Landis82:

It's quite simple.
The FED engages in monetary operations such as "matched-sales" to take money out of the system.

Huh?

Matched-sales drain the Fed's reserves.

They're the reverse of a repurchase agreement, which is used to increase reserves.

 

[zdreg]

Quote from jprad:

Only happens if the US continues to print money after everyone else stop printing.

Right now everyone's presses are running full-tilt, so it's a net wash.

interesting theory if everybody destroys their currency together there is no inflation.
who is chief proponent of this wisdom?
it makes sense if all men from all nations jumpfoff the cliff there will be no more wars.

 

[TraderD]

Quote from jprad:

Only happens if the US continues to print money after everyone else stop printing.

Right now everyone's presses are running full-tilt, so it's a net wash.

net wash currency wise - yes,
but commodities will rise.

and as far as continuing printing money...it appears to be a policy thing. They knew about all the problems with lending and hosing. But kept rates and regulation policy's the same. Now policy is to bail and inject cash...

Look, they (gov) appear to be dumb, but they really are not They do have access to best research, but choose not to listen to it based on immediate political or personal interests.

When I talked to WAMU loan officer in 2006 and he told me that he was giving huge loans to families which can't really afford it. Then he said that he himself would not get such house, while making twice as much as that family. If I, they guy from the street, knew that, they (gov) did as well. But kept going - once the policy is adapted, it just rolls...Now, we see the show. They look for reasons and act surprised.

So, US inflates, creditors and people loose part of their investment, but the party keeps going. And foreign creditors will forgive as they did before, it is just part of the game. And many steps of the game are known in advance.

My take today.

 

[clacy]

Quote from TraderD:

net wash currency wise - yes,
but commodities will rise.

and as far as continuing printing money...it appears to be a policy thing. They knew about all the problems with lending and hosing. But kept rates and regulation policy's the same. Now policy is to bail and inject cash...

Look, they (gov) appear to be dumb, but they really are not They do have access to best research, but choose not to listen to it based on immediate political or personal interests.

When I talked to WAMU loan officer in 2006 and he told me that he was giving huge loans to families which can't really afford it. Then he said that he himself would not get such house, while making twice as much as that family. If I, they guy from the street, knew that, they (gov) did as well. But kept going - once the policy is adapted, it just rolls...Now, we see the show. They look for reasons and act surprised.

So, US inflates, creditors and people loose part of their investment, but the party keeps going. And foreign creditors will forgive as they did before, it is just part of the game. And many steps of the game are known in advance.

My take today.

I agree with most of what you said.

In this case much of the rise in commodity prices will be mitigated due to demand destruction early on. Once the wold economy starts rolling again, due to easy money, then inflation kicks in???

 

[Susannah]

Quote from nazzdack:

The US will experience hyperinflation because the "government" will initiate that in response to a deflationary spiral.

Exactly what I think. All countries are wanting that right now. Market wants it, too.

 

[jprad]

Quote from TraderD:

net wash currency wise - yes,
but commodities will rise.

Oil, which is a finite resource with declining reserves, is down over 65% from it's all-time high.

That was a speculative bubble and it went on long enough to create demand destruction. It's going to be quite a while before we see $140/bbl again.

as far as continuing printing money...it appears to be a policy thing. They knew about all the problems with lending and hosing.

You're right, our debt-based monetary policy requires the printing of money to service existing and newly minted debt.

But, that has nothing to do with the abject malpractice that went on in the mortgage lending business.

The driver there was loan origination fees to the underwriters and sales commissions for the structured instruments that Wall Street created and sold everywhere.

Which is exactly why we are where we are today -- printing money everywhere to keep banks solvent.

Look, they (gov) appear to be dumb, but they really are not

Don't kid yourself, the average Congress-critter is immeasurably stupid, yet smart enough to look out for the interests of those that can keep them in office.

They do have access to best research, but choose not to listen to it based on immediate political or personal interests.

There's two kinds of government research; the kind that gets money appropriated like NASA or the DoD, and the kind that's done forensically, after some policy goes tits-up in the worst possible way.

One requires intelligence to comprehend, which is what keeps the lobbyists in business -- to tell Congress what it means, the other is used for CYA ops by Congress.

 

[thriftybob]

The problem is that the money they are handing out isn't getting lent to anyone, so as a result the "sterilization" increases the rate of deflation.

To add injury to that insult, we the taxpayers need to pay interest on borrowing the money, and if it doesn't get repaid, we are stuck with the tab.

Deflation and depression or Hyperinflation, take your pick. Either is a sad ending for what once was a noble nation.