tag:blogger.com,1999:blog-5936637281134795592.post1326502421189216385..comments2024-03-08T08:55:52.985-08:00Comments on Whispers from the Edge of the Rainforest: Deflation, Inflation or Hyperinflation?Unknownnoreply@blogger.comBlogger5125tag:blogger.com,1999:blog-5936637281134795592.post-21714856501613160902010-09-16T15:04:25.371-07:002010-09-16T15:04:25.371-07:00I don't generally find Mish worth reading as h...I don't generally find Mish worth reading as he makes even basic errors (such as referring to ZIRP as 'Keynesian') but there is so much crap on the internet regarding monetary theory, etc. that no wonder people are confused.<br /><br />Naked Capitalism, Pragcap and others have had excellent pieces on hyperinflation that have unfortunately been largely ignored. I suspect the case of hyperinflation is 'inflated' itself by goldbugs, ideologues and other reasons that have little to do with what's actually going on in the economy..<br /><br />http://www.nakedcapitalism.com/2010/05/mmt-fear-of-hyperinflation.html<br /><br />http://futronomics.blogspot.com/2009/03/hyperinflation-is-impossible.html<br /><br />What it boils down to though is really simple:<br /><br />The US issues debt IN IT'S OWN CURRENCY. In the previous examples of hyperinflation, the country undergoing the event was dependent on external sources for funding and the debt was owed in another currency (such as the Gold standard world of Weimar-era Germany, or the US Dollar ironically, for Zim). In addition, there is the need for a lack of productive capacity versus demand, which is certainly not a likely issue in the US!Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5936637281134795592.post-25630641689900606332010-09-15T08:09:30.828-07:002010-09-15T08:09:30.828-07:00We agree on the end result, but not on the interim...We agree on the end result, but not on the interim. There will be significant inflation, but not until:<br /><br />1) Consumers can again be the catalyst driving money creation by taking out bank credit<br /><br />OR<br /><br />2) There is a complete repudiation of fiat currencies.<br /><br />We will get to #2 before we get to #1, but that's a ways off. I'd bet at least 2-5 years. Also remember that inflation at its core is a monetary phenomenon associated with the aggregate money supply and velocity of said money. It's not a rise in consumer prices, though it may manifest itself as such.<br />Food prices can rise for a variety of reasons not related to true 'inflation' via currency depreciation and increased money supply: Supply constraints due to poor crop or new trade rules (a la Russia, which has driven the most recent bout of price increases)just to name a couple.<br /><br />I've posted about this on my blog. <br /><br />http://financialinsights.wordpress.com/2010/09/06/primer-1-what-is-deflation-2/<br /><br /><br />http://financialinsights.wordpress.com/2010/09/10/can-central-banks-ruin-my-thesis-by-stoking-inflationary-pressures/ <br /><br />Cheers,<br />BenAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-5936637281134795592.post-86252736351346769052010-09-15T06:43:18.048-07:002010-09-15T06:43:18.048-07:00The key to understanding a great deal of the gulf ...The key to understanding a great deal of the gulf between the inflation scenario and how the deflationistas see it happening is the role of credit in the whole thing. If you ignore credit it is very easy to come up with an inflationist scenario that is plausible, logical, likely and even one that I agree portrays many day-day expense projections well. I certainly am NOT expecting deflation in daily living costs.<br />Only if you start with the assumption that money and credit are essentially the same thing in a modern economy and that the rate of credit growth or contraction has profound effects on the economy does deflation start to make sense. Virtually all, at least 95% of our "money" is actually private or government credit. Even the Federal Reserve is actually a private entity, and in the worst case could be cast adrift by the US government. <br />If that private credit growth in Canada ever slows down to a pace merely sufficient to keep up with GDP growth (sustainable), we take an immediate hit to GDP sufficient to drop us almost to depression territory, as defined by a 10% drop, plus the effect on the economy by that sudden drop will assuredly take us into deep depression. Household credit outstanding increased by $103 billion from July 2009-July 2010.<br /> http://tinyurl.com/2vwj8h9<br />Down a touch from the previous year, but still a heady rate of growth. About $3000 per person, babies and old folks included.<br />About $5000 per employed person, or 11% of income.<br />7.9% of GDP.<br />All that does NOT include government deficits, this is just what individuals have taken on. If that credit growth ever slows down, stops os (gasp) goes into reverse, we are in deep trouble.<br />Note: Basic mathematics prohibit credit growth from exceeding wages, GDP or any other intertwined figure indefinitely.alexcanuckhttps://www.blogger.com/profile/08605337369229736033noreply@blogger.comtag:blogger.com,1999:blog-5936637281134795592.post-23117117567317450262010-09-14T11:50:49.043-07:002010-09-14T11:50:49.043-07:00It's important to note what was actually said....It's important to note what was actually said. I haven't listened to the Podcast so I can only quote Mish below from his blog:<br /><br />"Actually what I said is "Hyperinflation Ends The Game" NOT as Zero Hedge stated "Hyperinflation is the endgame". The difference between those phrases is enormous."<br /><br />IMHO, deflation is playing out in the near to intermediate term (next 3-5 years). If it could happen in Japan, it could also happen in the US, despite the low savings rate of the latter. Don't underestimate the amount of faith the rest of the world has in the US and its currency. I know, I know, I'm not a fan either, but the US still has the best fundamental potential to right the economic wrongs, compared with countries like the PIIGS and even the UK.<br />I'll say the chance of seeing hyperinflation in the US is very low because of this: There are many more countries, especially in the developing world, with much poorer economic performance and political instability than the US, yet we are not seeing hyperinflation in those places aside from Zimbabwe. If the US goes into hyperinflation, then God help the rest of the world.ATPnoreply@blogger.comtag:blogger.com,1999:blog-5936637281134795592.post-63005358040275647632010-09-14T11:37:38.839-07:002010-09-14T11:37:38.839-07:00If the stated value, of “Federal” Reserve notes, d...If the stated value, of “Federal” Reserve notes, declines enough with respect to copper and nickel, the 1946-2010 U.S. Mint nickels, composed of cupronickel alloy, could become somewhat rare in mass circulation.<br /><br />The September 14th metal value of these nickels is “$0.0576057” or 115.21% of face value, according to the “United States Circulating Coinage Intrinsic Value Table” available at <a href="http://coinflation.com" rel="nofollow">Coinflation.com</a>.David Wozneyhttp://ocii.com/~dpwozneynoreply@blogger.com