To cut or not to cut, that is the problem... and why you wanna be in gold 100%.

When (not if, and it looks like it's going to be soon) the criminals in charge lose the confidence of the masses, it'll all happen damn fast.

This is 100% correct, guaranteed.

http://www.telegraph.co.uk/money/main.jhtm...cninflat113.xml
UK inflation expectations soar to a record

By Edmund Conway, Economics Editor
Last Updated: 6:01pm GMT 13/12/2007

Experts issued a major warning to the UK on the possibility of inflation bubbling over in the economy after fresh figures showed that households' expectations for inflation have jumped to the highest level on record.

...

"Increased inflation expectations highlights the fact that a further Bank of England interest rate cut as soon as February is far from a 'gimme,"' said Howard Archer of Global Insight. "The bank will be very wary of the risk of a wage-price spiral developing."

I think they will cut a lot in the next year, perhaps down to 4.00%.

However, I think (1) consumer sentiment is hardening and it will be difficult if not impossible to create demand as asset prices fall (vicious circle) (2) lenders will continue to hoard capital and have a heightened sensitivity towards credit risk (vicious circle - asset prices fall so will costs per default).

Thought about buying gold for about 6 months. Couldn't figure out how it would play in a deflation scenario.

Still waiting for the price to fall as the CB's sell off their gold. The IMF is looking at offloading tonnes of gold. Hopefully they'll pre-announce it and that'll provide an opportunity.

http://afp.google.com/article/ALeqM5ioeomv...RwHDm_p6Ikz_36g

It is conventional for inflation to cause prices to rise - not fall.

Not that I'm a proponent of either fascism or communism, but isn't the free, unregulated market exactly what's caused the credit crunch?

[quote name='X-

Not that I'm a proponent of fundamental libertarianism, but one can argue both that the crunch has been caused by too much and too little regulation.

It was regulation itself in the first place that provided the bureaucracy requiring credit ratings - and the reassurance that led to unjustified public confidence in financial institutions.
It was a lack of regulation of the ratings and of mortgage originators which lead to calamity arising from public complacency.

If we are going to have a laissez faire (small government) system, then it must go all the way and people must take responsibility without relying upon regulators.
If we are going to have a regulated (big government) system, then it must not chose "light touch" for privileged players.

The credit crunch was caused by having the worst of both the centrally controlled model and the free-market model.

LIBOR SAYS NO!!!!! look at the 1 month go!!!

Emergency rate cuts soon to be deployed across the world in a last ditch attempt to avoid a K Winter.

http://www.bloomberg.com/apps/news?pid=206...&refer=home



This is serious serious business. It reminds me of Space Odessy 2001. LIBOR is HAL and it's running the ship on crash course with the sun.

No. Every major market, and in particular the bond and interest rate market, is and has been heavily rigged since at least the early 1980s, and increasingly so in the last 10 years. That is the real cause of the mess we're in.

It can hardly be considered unregulated if the banks know they will be bailed out should problems arise as in the case of NR, or that the CB's will provide unlimited liquidity should inter-bank markets freeze up. In a free market the reckless will go bankrupt leading (hopefully) to a far more cautious approach to lending, in effect self-regulation.

can I ask you zinny01, are you very worried about this situation ?

from a global perspective, not you personally.

But the banks didn't know they'd get bailed when they were buying up dodgy CDOs did they?

Greed and the herd mentality has caused the credit crunch, both from consumers and banks alike. I can understand the sheeple falling for it, but I'd have expected the banks to have some highly paid and intelligent forecasters who might've seen the writing on the wall. Much like many less well paid "average Joes" did on this website quite some time ago.

Exactly right.

And as both austrian theory and every real world experiment has proven, massive regulation results in mass starvation and total economic collapse, so the only logical answer is complete and utter removal of the maximum amount of regulation.

I agree, it's totally counter intuitive, but so are most really good ideas.

The most basic regulation being the unit of currency itself. Make pounds/dollars/yen etc optional and this "crisis" will solve itself in about 3 weeks.

As we will shortly see when people begin to repudiate those currencies.

Have you read about the Secondary banking crisis of 73/74? It was at the 3rd attempt to rescue the banks that the BofE provided (virtually) unlimited liquidity to solve the crisis. 25 banks were insolvent within 18 months, had they acted sooner the crisis may have been averted. One thing is for sure the BofE learned a great lesson during that period and they will not make the same mistake again.

Did the banks know they could expect to get bailed out should the SHTF? Well they all know the consequences of inaction.

And that unlimited liquidity later fuelled massive price and wage inflation....

Now you are getting there - free means free from monopoly and free from globalism. Strength comes from small to medium sized companies - Globalist Companies and Bankers pose the greatest threat to freedom and the free markets the world has ever seen.

Do you have a good link or book recommendation?

No one is talking a out massive regulation - we just want to see fraudsters caught and sent to jail. Things have to be at least accountable - clearly this was not the case with the strange and toxic instruments they created. We cannot allow this to happen again - also lack of regualtion got us where we are so there is a very viable argument for real personal punitive action for any action that threatens the integrity of banking or financial services...

This is my personal belief why we are going to see severe inflation. Please feel free to pick holes in this argument.

The Dollar, Sterling and to a slightly lesser extent the Euro's currencies will depreciate when we enter a recession. Our interest rates will be too low becuase our debt levels are so high and central banks will pour huge amounts of liquidity into the system. (Yesterday being evidence of this). For decades we have been fortunate enough to receive cheap goods such as food and cheap manufactured items from abroad. The reason for this is that countries have dollar pegs in order to export goods to the USA, but ourselves and Europe are benificiaries of this also.
When America and Europe simultaniously go in to recession they will no longer be able to purchase these cheap goods from abroad in anything like the quantity they have done for the past decade or so. As the dollar gets weaker they will have no choice but to drop these dollar pegs, this means that all these countries purchasing power will increase substancially relatively to ours. Due to the increase in the value of these foreign currencies such as the yuan, and some of the middle east currencies demand will increase for items such as food, oil, gold etc and the price of these things will rise dramatically over the next decade then level out. Say for example oil $300 per barrel gold $3000-$5000 per ounce (these are hypothetical figures).
I also believe Uk house prices will fall substancially despite this inflation as the British people will spend more on essential and have less to spend on housing. The people with the increased wealth such as the chinese will spend their money on a nice new car or some gold jewelry not a 3 bed terrace in merthyr tydfil.

This is the theory on which I have based my investments I have substancial holdings in precious metals and aggricualural commodities. I am happy with this position at the moment but I admit I may be wrong but I am prepared to live with the concequences if that is the case.

Half of every transaction in the world involves paper fiat currency - the regulation on it was removed in '71 - so there can't be any meaningful regulations until restraint on the printing press is restored. The removal of the Gold standard has resulted in never ending booms and busts and currency speculation and attacks. The problems we are seeing are deeply rooted in the monetary system.

http://www.guardian.co.uk/business/2007/se...y.northernrock3

Try this one for a cheap rough guide,

Robert Beckman - Crashes

Also The Secondary Banking Crisis by Margaret Reid (also available at Amazon) is the definitive guide.

The problem with that is you then have a group of people (bribable, bribable people) who are doing the guarding and regulating.

How are they funded?

How are they chosen?

Basically, the idea that you can regulate the rich long term is a pure fantasy.

The only way to effectively police them is to make the systems they create voluntary, that is anyone can walk off from them at any time.

This is how hyperinflation happened in Germany 1923, from wikipedia:




Whilst the situation isnt exactly the same, ther are some worrying similarities...............

I'm not actually GOM though it's a good question. I'm worried about how those who have felt it's the goverments responsibility to solve their problems will deal with the potential crisis that is about to happen.

I don't believe people have any idea about the hardship that is to ensue over the next few years.

They will fight like dogs to keep them




Never emergency anything=panic, the once a month review of intrest rates will not change.




I will settle for anything outside the banking system - a house without a mortgage and well stocked with anything you will use up yourself.




The market will win in the end




Agree absolutely, well meaning regulation is the father of unintended consequences which are usually bad.

The road to hell is paved with good intentions.

Sensible stuff. But tell me what are 'aggricualural commodities'...things like traktors or weet?

I will not and shall not speculate on food. HPI and the coming HPC has done so much damage to good working people, a speculative bubble in food prices will KILL people.

I am also a bit dyslexic - but that aint important.

Personally i think things are going very bad, i don't watch the govnerments spin through the bbc which they controll and i read most of my news on the net,the newspapers etc are painting a very gloomy picture of events after pushing all the property porn crap,maybe they are doing this to protect themselves.

Besides cgnao there are plenty of others reckon a financial tsunami is upon us.
Among other interesting ideas raised by Schultz in his intense, somewhat terrifying introduction: recession, possibly depression; bank failures; exchange controls; housing prices down by 50%; credit card company failures; money market fund dangers; tripling of U.S. jobless numbers; federal bail-outs for Fannie Mae (FNM:
Fannie Mae and Freddie Mac

Alive or not, Schultz must feel like he's been resurrected. Systemic financial fears, dollar doubts, gold gains, seeping stagflation - a word Schultz claims he coined - all eerily replicate the 1970s, which he began as a derided crank and ended victorious over the financial establishment. (After which, significantly, he was notably quick to say the storm had passed).

buy some gold folks
Schultz is a trader and his specific market advice is nuanced. He writes: "Direction of global stock markets uncertain. Balance stock holdings between long and shorts to counterbalance draw-down risks, and/or hedge exposure via puts, futures, or bear funds ... Exposure to gold shares and bullion should be a minimum of 35-45% of your total portfolio, with at least 10% in physical gold bullion and coins
http://www.marketwatch.com/news/story/schu...266821FC09AB%7D

Due to the high increases in wheat this year there has been increased planting of wheet so I think next year there were be a fairly good crop so I have not invested in any. The extra wheat acreage will be at the expense cotton, corn and soyaeans and these are areas I have invested in.

http://www.bloomberg.com/apps/news?pid=206...&refer=home

Citigroup to Consolidate Seven SIVs on Balance Sheet (Update1)

By Emma Moody

Dec. 13 (Bloomberg) -- Citigroup Inc. will bail out its seven structured investment vehicles, bringing $58 billion of debt onto its balance sheet in the biggest move yet by a bank to rescue the failing funds.

Citigroup followed HSBC Holdings Plc and WestLB AG in saving the funds and averting forced asset sales. The New York-based bank said it made the decision after Moody's Investors Service and Standard & Poor's indicated they may cut the credit ratings of the SIVs.

Chief Executive Officer Vikram Pandit announced the decision a day after being named to the post. Moody's said Dec. 3 that it is preparing to cut ratings on $105 billion of SIV debt, including $64.9 billion of commercial paper and medium term notes of six managed by Citigroup.

``It's good to see that they're doing the right thing,'' said Christopher Whalen of Hawthorne, California-based Institutional Risk Analytics, a research firm. ``HSBC set the example.''

SIVs, which sell short-term debt to buy longer-term, higher- yielding assets, were shut out of the short-term market as losses on subprime mortgage securities prompted investors to retreat from all but the safest of securities. Three SIVs have defaulted and others are being bailed out by their sponsors. The world's 30 SIVs have about $300 billion of assets.

``After considering a full range of funding options, this commitment is the best outcome for Citi and the SIVs,'' Pandit said in an e-mailed statement.



And I guess most of these assets will be eligible collateral that Citi can use to post to borrow from the Fed - what a coincidence !

Does not solve them still being shy of capital - dividend cut anyone ? Just the start

I've become addicted to this thread and fascinated by how the doom & gloom scenarios appear increasingly possible as time goes on - so thanks to all contributors (except for the bickering bits which are sadly distracting).

I know this will be a dense question to some of you but I'll take the risk and ask it anyway..

If - for the sake of argument - the deflationists turn out to be right, what would happen to the price of any gold I might have bought - is it as simple as 'the price goes down' or is it much more complicated than that?

Over the last 6,000 years gold has always had substantial value. It's a heavy and scarce element -- not paper, plastic or electronic bites. Don't worry. No one will start heating with gold.

just one wafer thin mint...

http://www.youtube.com/watch?v=BlK62rjQWLk...feature=related

the clear up after this collusion by the central banks is likely to be equally messy.

TLM

Can someone do a 2 sentence exec summary of this 86 page thread?

Thanks in advance.

MF

Yes. We're fcuked.

ty

Gold tends to hold it's value and has done so for centuries - the value has not changed much over the long term even when civilizations have collapsed.

In inflation it loses value - the loss of value in the last few years attests to this - the inflation has been in assets but there has been inflation the gold price of a house was 700oz not long ago.

In deflation it tends to gain value - the depression is an example. Everything got cheaper but not gold; it gained value.

In the longer term the price of gold returns to normal.

Gold gains value in a financial crisis, one is coming now hence the buy gold mantra on here.

The US government is very powerful and is energetically supressing the price of the gold this is making gold a bargain now - so buy it.

Measuring the price of gold in dollars or pounds can be deceptive so much of the gold price increase in dollars is really a measure of the dollars loss of value.

Nobody gives a sh1t about gold, but if they suppress the price of petrol then bushie loses less votes.

Just thought

MF..

06:10

http://www.youtube.com/watch?v=legyuH3mHPQ




edit - i hope orion gets around to posting the final 2 vids because I can't remember what happened! I was about 7 at the time they showed this in the UK.

Be more use to the average man

I think the armies in the gulf may be an attempt to to acheive it.

Also, in the last known great deflation (during the Great Depression) the price of gold went UP. Here is the data:

http://www.onlygold.com/TutorialPages/prices200yrsfs.htm

1935 $35.00
1934 $35.00
1933 $32.32
1932 $20.67
1931 $20.67
1930 $20.67
1929 $20.67

http://news.bbc.co.uk/1/hi/business/7143823.stm

No, no, no, how can this be if we are in a deflation?

http://news.monstersandcritics.com/busines...mps_in_November
German inflation jumps in November

Dec 14, 2007, 9:44 GMT

Berlin - German inflation bounded ahead in November breaking through the 3 per cent mark for the first time in 13 years, data released Friday showed, as a result keeping up the pressure on the European Central Bank over interest rates.

I don't see a conflict between asset deflation and cost of living inflation. If anything, they are positively correlated insofar as asset prices decline as a greater proportion of income is deovted to fixed costs like food and energy.

Part of the reason for the asset bubbles is that there has been a lower cost inflation than wage inflation due to cheap Asian manufacturing and the impact of technology at the same time as economic boom. As the factors which depress inflation go away, there is less in the pot for financing assets, as opposed to "running costs".

That being said, I also don't see hyperinflation as an outcome - the banking industry is on it's knees as it is, and that would finish it off - where is it going to come from? Wages will be, if anything, depressed by increasing unemployment.

Money market says no and is rejecting (due to inflation) the low rates set by the ECB.

Central banks are fighting a battle against free markets which will see no winners, only losers.

http://www.bloomberg.com/apps/news?pid=206...&refer=home
Two-Week Euribor Soars to Highest Since at Least 2001, EBF Says

By Gavin Finch

Dec. 14 (Bloomberg) -- The cost of borrowing euros for two weeks soared to the highest since at least October 2001 as banks sought funds to cover their commitments over the year-end.

The euro interbank offered rate banks charge each other for such loans rose 80 basis points to 4.95 percent, the European Banking Federation said today. That's 95 basis points more than the European Central Bank's benchmark rate.


http://www.bloomberg.com/apps/news?pid=206...&refer=home
European Inflation Rises More Than Initial Estimate

By Fergal O'Brien

Dec. 14 (Bloomberg) -- European inflation accelerated more than initially estimated in November, to the fastest pace since May 2001, preventing central bankers from cutting interest rates as economic growth slows.

Totally agree. Also cost of living inflation and at the same time money supply deflation is possible, I would say.

With sand, no fluids.

Again, this endearing assumption that you will always be able to afford to buy the stuff you need.

Bread can go up to £50 a loaf and wages stay static! It's called starvation.

Gas can go up to £300 a week and wages stay static! It's called freezing to death.

Mortgage payments can go up to £5,000 a month and wages stay static. It's called homelessness.

There's always lag between the expansion of the money supply and the increase of general prices.

CPI/RPI will probably continue to rise for a couple of years, even if the money supply is shrinking. We don't have the money supply shrinking quite yet, but it is probably only a matter of time.

Maybe the Fed stopped publishing M3 because of the upcoming deflation, rather than hyperinflation? Both are just as damaging, both will cause panic, but in different ways.

There mutliple possible outcomes, and none are 100% correct guaranteed at this time. Other than house prices are falling short term