Is hyper inflation on the way?

Airtight said:
How do we take advantage of hyper inflation?
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Hopefully it won't come to the Eurozone. The best way to take advantage of it is to move all your funds to a currency / store of value that is safe (Euro? Yen, Swiss Franc ?, Gold ?). Once hyper-inflation takes hold, share prices in external currencies tend to fall to ludricously cheap levels. If you think the government of the state affected can reign in the problem, then you have a massive buying opportunity.
 
Peter Schiff has called these markets right for a long time and is now warning that if the Federal Reserve and other central banks do not start increasing interest rates soon there is a risk of hyperinflation:
Peter Schiff: Stimulus Bill Will Lead to "Unmitigated Disaster"
[broken link removed]
 
Peter Schiff has been predicting hyper inflation for years. He predicted both the subprime lending crash and the housing bubble with great accuracy, but he presumed high interest rates and inflation would prevail as a result, and not low interest rates. Interestingly, he predicted a period of deflation before rapid inflation.

Schiff's main thesis is to get out of the US Dollar as he feels it is going to crash and a prolonged depression is going to set in the US. He also feels once the rest of the world stops supporting the US consumer binge, they are going to be able to thrive by staying away from the US.

A lot of the international news channels are now getting Schiff on their shows, which may show that the hyper inflation threat is been taken more seriously not just by the mainstream media, but also the normal individual?
 
John Williams is the acknowledged expert on hyperinflation and has been interviewed on CNN and other major financial media:


$100 Bills As Toilet Tissue?
[SIZE=-1]Motley Fool - 17 Feb 2009[/SIZE]
[SIZE=-1]Efforts to avoid a deflationary depression will probably produce the opposite — a nasty bout of inflation, says John Williams of Shadow Government ...[/SIZE]
http://caps.fool.com/blogs/viewpost.aspx?bpid=146687&t=01007146184382914537

Hyperinflation Special Report
http://www.shadowstats.com/article/292
 
Damian85 said:
Peter Schiff has been predicting hyper inflation for years.
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Economics is a social science with no right or wrong answer. It is the same as politics and completely subjective. For proof of a subjective socio-science look no further than the Dail with loads of arguing. If you were to put a bunch of high class economists in a room they couldn’t agree on the time never mind a complex matter. What good did all the highly paid economists do in the last 12-18 months who were employed to make forecasts on behalf of large investment houses, hedge funds and banks?

Basically it is clear that forecasting to the medium term on something like inflation IMO is nigh impossible since there are so many interdependent economic factors at play, globally, and these factors are changing on a second by second basis. Short term its likely deflation will continue, especially looking at Japan's economic landscape at present. Wages are deflating globally and order books shrinking with inventories rising therefore the outlook IMO remains inflation free.

Btw inflation is more welcome than deflation since the latter is a jobs killer.

Also since the unprecedented level of easy money sloshing round circa 2006-07 has dried and will likely rebalance at a lower tolerable level following probable banking standards and regulation [no more 8 times salary loans etc] then the capacities in many economies will be reduced by 10%+ according to a recent article in Money week. Not supportive of inflation.

If anyone can predict hyperinflation which is a possibility, maybe they could also advise me if it will be raining next week in London - Friday. Should I take a brolly?

Finally gold IMO may be a bubble and since the abolition of FIAT it's as useful a speculative instrument as pigs testicles. If you invest in Gold then (i) be prepared for it to break the $1000 barrier but (ii) also be prepared to have a nose bleed should it freefall [just as likely an oucome as rising]- trending like other pm’s or commodities yoy.
 
No, I wouldn't agree with that.

Inflation is the most likely outcome for two main reasons;

1) Money is/will have to be printed to bridge deficits and bail out banks as well as stimulating economic activity.

2) Commodities- We will enter a stage never before encountered in human history over the coming years. India, Brazil, and China will have a couple of billion new consumers looking to purchase oil, wood, food etc. Many will be limited resources.

Deflation is not the issue. Deflation has been over exaggerated due to a housing bubble and overvalued stock market.

Schiff has predicted rampant US inflation long before this economic meltdown, and his rationale has been based on housing bubbles, laxed consumer credit, trade deficits, and the US monetary system (eg. power of the Fed). I suppose one could argue that he got lucky as inflation is bound to happen as part of a business cycle, but he's precise predictions have lead to his increased credibility.
 
Damian85 said:
Commodities- We will enter a stage never before encountered in human history over the coming years. India, Brazil, and China will have a couple of billion new consumers looking to purchase oil, wood, food etc. Many will be limited resources.
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Can you explain why the Pearl Delta the engine of China's economy is falling apart at the seams. The lax credit economic model is being rethought by many sources including the America administration with increased regulation. Credit is not wealth - an illusion many fools have just realised through asset depreciation and leverage trapping.
 

China is a developing giant. It is worth noting that the US encountered 15 depressions in the 19th century. China is experencing the economic slowdown tidal wave now because of their over dependency on the US consumer market and hoarding of US bonds as reserves. Once they cut this lending tie with the US over a number of years, they will prospere even more. The short term economic slowdown is irrelevant to the inevitable emergence of the Chinese commodity consumer in the coming decades.

Lax credit standards are just being replaced by stimulus plans to keep consumer binges perpetually constant. Obama stated a few weeks ago that "when your heading for a cliff, you need to change direction". He doesn't seem to be following his own advice. Instead he's just slamming on the accelerator. And the new Treasury Secretary Geithner has been talking about restoring the asset backed securities market!! So I wouldn't put a lot of hope in that administration or proposed regulatory change.

While credit may have tightened up, printing money has not, which could prove detrimental to the value of money.
 
It is worth noting that the US encountered 15 depressions in the 19th century
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Not meaning to be pedantic but since 1797 to date there has only been 19 recessions in America and only three of these were depressions. Under Thomas Jefferson of 1807, protectionist Embargo Act caused a depression that lasted seven years. Next in 1897 a worldwide depression was caused principally by the collapse of the Wiener Börse AG or commonly known as the Vienna Stock Exchange this conker lasted 22 years and finally the Great Depression of 1929 to 1939 caused by margin bets by the man on the street thinking stock markets were a one-way ticket to wealth. Seems cannily similar to today’s recession with property and leverage replacing equity and margin. It had devastating deflation that affected rich and poor alike. The market oracle has recently written an article predicting the globe is in the midst of a second great depression. Google its revealing finding. However hyperinflation may only happen IMO if the tin-foil hat brigade is correct and the giant financial Ponzi deleveraging scheme cannot handle the great unwinding and M0-M4 becomes irrelevant.

However if you want to name the 15 depressions never mind recessions during the 19th century in America then name away and list. All ears eyes.


This economic wave sounds similar to Japan – what happened there over the last 17 years. The Yanks put the brakes on them.


Damian85 said:
Once they cut this lending tie with the US over a number of years, they will prospere even more. The short term economic slowdown is irrelevant to the inevitable emergence of the Chinese commodity consumer in the coming decades.
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Subjective but IMO flawed. America has used China for its own end in exchange for tradable paper contracts yielding 2.5%. The same miracle on the Tiger economies was touted during the 1980's when the East was set to dominate trade and eclipse the West, notably America. America then quickly stopped them in their tracks. H. Clinton has talked on renegotiating GATT /NAFTA and protecting American interest so China's miracle is far from sure. Anyway most of its citizens remain destitute ill-educated farmers and those in the cities are losing jobs at a faster rate than Ireland - their present model only works at 8%+ GDP growth AFAIK.


Did you study the great stimulus plan in Japan. It led instead of an accelerated consumer binge to nothing but a lost decade in the wilderness. US admin is undertaking this along with 0% IR to stave the delationary monster from gripping like 1930's America.

On the second point Abx markets have been around since the Roman times, and because of recent implosions will more than likely have stiff increased regulation to prevent past forrays happening so close again. Re money printing - name me a country not at the presses. The effect is relative albeit it's still a problem. In general commodities over the medium term will probably increase due to supply demands ratios. But to be the cause of hyperinflation is debatable. The oil spike caused the bubble prick in ABX firstly [credit derivatives] then went on to affect the real economy quickly, so how could commodities break through such levels and be sustainable [wage inflation never matches RPI anyway]. The market at certain prices simply says "No" - as what US consumers did when oil spiked i.e. curtailed consumption, considerably.


IMO the great miracle of China has always been touted. But it is the last huge economy that has the possibility of a fracture. A miracle it never did so since the building of its Great Wall.

Because this is a social science it is best to agree to disagree. **Amen
 

The economist ran an article last week about the emerging middle class. They could easily get banished back to poverty in the future environment. That would put demand for commodities in the crapper
 
MichaelDes said:

Because this is a social science it is best to agree to disagree. **Amen
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You'll forgive me, for sort of disagreeing here. The problem is not only does the sheer complexity of the system make it impossible to wholly analyse, many billions of people around the world are working away at innovations that may change everything (for good or bad).

The different analyses (if they are well grounded & intellectually robust) are all still worth something, as a huge element of managing an economy (or your finances) has got be about managing risk / preparing for large scale previously unforeseen change.

There are many economists and investors out there arguing we are facing deflation (e.g. Roubini) and others arguing that we'll end up with high global inflation (e.g. Jim Rogers). Both scenerios are plausible, and it's worth making sure your well informed enough to recognise them as they emerge & agile enough to respond appropriately.

While it will offend the sensiblilities of those who prefer the mathematical certainty of newtonian physics, the key addition to your armoury in understanding the future impact of "social science" is therefore an understanding of randomness and the impact of the unforeseen.
 
Liam Halligan is one of the sharpest around and unlike The Telegraph does not have an anti Euro agenda.

Halligan believes that inflation is the real danger and not deflation:


Inflation is the greatest danger to the British economy
http://www.telegraph.co.uk/comment/personal-view/4742855/Inflation-is-the-greatest-danger-to-the-British-economy.html
Deflation is being used as a spectre to cover a power grab on the Bank of England and the failure to force the banks to come clean, says Liam Halligan.
 
Firstly I know all the economies are linked but how can we not have deflation here with all the pay cuts, job losses, etc. until we get competitive again. I reckon its going to take years to get off this threadmill of bailing out banks, eventually in the not too distant future clear income tax increases, etc.

What about corportaion tax being increased too? Surely thats going to have to be increased soon too lots of these foreign companies will find it cheaper surely to go elsewhere regardless of the low corporation tax, I am just amazed there are as many still here! Someone will have to explain to me how hyper inflation can come about is this if taxes like VAT increase?
 
The reason why inflation is in UK is because sterling has drop in value so much during the last few months therefore it costs a lot more to import goods from abroad which they relay on so much.
 
Joody1 said:
The reason why inflation is in UK is because sterling has drop in value so much during the last few months therefore it costs a lot more to import goods from abroad which they relay on so much.
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It's one reason, not the reason.
 
queenlex said:
Someone will have to explain to me how hyper inflation can come about is this if taxes like VAT increase?
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Inflation is a product of the amount of money available, the rate at which it is being spent (e.g. the same €50 note being spent in a lot of different shops by shop keepers on the same day has the same economic effect as many €50 notes) and the demand for goods and services. If the supply of money increases faster than the demand for goods and services, the value of each unit of currency will decrease and prices will rise (inflation, because there are more currency units chasing the same goods and services).

In order to stave off the threat of deflation, due to the massive destruction of money largely due to the collapse of the shadow banking system in the US, Central Banks around the world, but not yet the ECB, are creating money and using it to purchase bonds. At some point in the future, if demand for debt returns, this excess money could begin circulating quite rapidly, leading to high inflation.

Fractional reserve banking allows banks to increase the amount of money in an economy when there is demand for debt. For example, during the bubble, Irish banks lent out €150 for every €100 they had on deposit, presumably keeping €10 as capital reserves and borrowing €60 on the European wholesale markets. When the borrowed €150 get spent and deposited, the banks deposits increase from €100 to €250 and they can now lend €375 (in total, an additional €125) out if they go back to the wholesale markets. This is probably why Irish property got so overpriced, and with cheap Asian goods keeping the general price level low, you could argue we already had hyperinflation in Ireland.
 
Very good article on increasing likelihood of hyperinflation in the US:
The Joys of Hyperinflation
[SIZE=-1]HoweStreet.com, Canada - 18 Feb 2009[/SIZE]
[SIZE=-1]Welcome to the credit deflation prelude to hyperinflation
[broken link removed] [/SIZE]
 
I've just read today that AIG of Aemerica needs another bailout of 60 Billion dollars. This is the thrid bailout they're asking for. More printing of money by the Fed and a clear indication that the bailouts have failed.
 
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