A UN-CHECKABLE DECLINE in the US Dollar ? / The Dollar has No Floor

"A very thin layer of confidence is supporting the U.S. Dollar"

A MUST LISTEN: !
Jim Puplava and Frank Barbera on the (Coming) Great Inflation:
http://www.netcastdaily.com/broadcast/fsn2005-0305-2.asx

FACTORS:
+ More and more players using "the Carry Trade" to keep returns up, despite reduced opportunity in the Financial Markets (example: Yields in Junk Debt are way down, and yet people are gearing them more aggressively),

+ Complacency on the part of Equity and Bond market investors,

+ Greenspan and the FOMC "Perplexed" about why borrowing is not slowing down

+ Some Hedge Funds shuttting down, because the old strategies, and historical arbitrages are not working any more

BARBERA THINKS we are 1-2 months away from a major Top in Bond & Equity markets

- - -
Weimar: Consumer Price Index


In 1933: after the Weimar Hyperinflation:

+ the average German was paying only 3% of his income in Rent

+ It got so bad, the tenants were stealing doorknobs, windows

+ Landlords had to pay everything: maintenance, taxes, water, electricity

+ Politicians were imposing controls, limiting increases in rent

The one PROPERTY sector that held its real value was agricultural land.
Farmers could get Gold, or hard currency for their produce.

In Argentina, the agricultural sector is doing well, after its Currency crisis

VERY SECURE resort communities may do well... Which ones?

- - -
TRADE GAP MEASUREMENTS
Imports $159.1 billion (+ 1.9 percent to a record)
Exports $100.8 billion (+ 0.4 percent to a record)

JANUARY Figures: Moneywatch article


= = =
LINKS:
Try these:
http://www.FinancialSense.com
http://www.Weimar.co.uk

anyone listen?

Comments?

He says:
+ The loss of the manufacturing sector in the USA is a big factor pointing to more inflation,

+ After a Dollar fall, the US is going to be importing good whose prices will no longer be falling, because the dollar will be weaker than the Chinese and Japanese currencies,

+ This will lead to a big jump in inflation, and a rise in interest rates to forestall inflation,

+ The US has lost control of its own currency, and is no longer self-sufficient in energy, nor in its own consumer goods

+ What does the US have that the rest of the world wants???

I still reckon the fundamental problem is that there is just too much money out there, too much debt, interest rates IMO are still way too low (escpecially in the US). Just hope my equities hold out.



An effect of a dodgy inflation measure? Consumers compensating for lower pay rises by using debt?

Thank you for that incredible link; it makes Bruno's predictions seem almost too tepid. Everyone should listen to this.............

Makes for interesting (and worrying!) listening. They reason out their opinions and theories very well.

It would appear that low interest rates have a lot to answer for. They never solve underlying economic problems only postpone those problems. Trouble is, Greenspan does not associate money/credit creation with inflation.

These two analysts seem to think that the major problem to come (hyper-inflation) will manifest itself first in the currency markets. Once the dollar begins to fall then the foreign central banks will speed up their divesting of dollars, and the $ will then be unstoppable. Interest rates shoot up, etc.

If they are proved right then I think we are all in trouble...!!

Just finished, if you have the time I would recommend listening to it. A great find, DrBubb.

What is Most Worrying is...
his view of what happens in a serious hyperinflation.

TOTALLY FORGET IT for BTL:
+ Landlords will have a difficult time finding good tenants (who can pay),
+ Many tenants will be surviving however they can, ripping off anything they can from a property, before they leave without paying the rent,
+ The Have-nots will be running amok: stealing whatever they can, behaving violently,

SAFE PLACES TO LIVE will be:
+ Protected enclaves near big cities (but not in the heart of them),
+ Away from the big Urban areas- but how do you make your living?

Yes, it's worrying. I can remember watching the fireworks in Argentina on the News and thinking, "OK, so the economy is on it's knees, I'm a software engineer, what on earth can I do that would be useful if that happened to me? Hmmmmm, not much.".



The comparison to Germany is uncany, and thinking of the depths that Germany sank to, I certainly hope it doesn't happen!

=In 1933:
+ the average German was paying only 3% of his income in Rent

+ It got so bad, the tenants were stealing doorknobs, windows

+ Landlords had to pay everything: maintenance, taxes, water, electricity

+ Politicians were imposing controls on rentals

The one PROPERTY sector that held its real value was agricultural land.
Farmers could get Gold, or hard currency for their produce.

In Argentina, the agricultural sector is doing well


VERY SECURE resort communities may do well?

Same feeling here, I'm a software engineer too. Switch off the electricity and I useless.

Dr Bubb

I'd have to say that the first half of the show, which you linked to, is rather more convincing than rthe second part. These guys sound like a couple of gold rampers to me.

Maybe they are right - and many of their arguments are quite convincing - but I can't get away from the feeling that they are wishing for a hyperinflation situation and that this is clouding their view.

There is a rather desperate interlude where they start blaming, or perhaps just citing, recent movies and other entertainment as being evidential of a societal breakdown which is somehow an indication that we are about to descend into a Weimar republic type thing.

I'm not saying that they are wrong, or that people shouldn't listen to the link but I'm concerned about the motivation behind this particular broadcast. I know they’re fund managers for a start, which would make you wonder, wouldn't it?

Japhy

JR,
Your:
"Maybe they are right - and many of their arguments are quite convincing - but I can't get away from the feeling that they are wishing for a hyperinflation situation and that this is clouding their view"

Well, if you haven't heard FS before, it may seem like that,
but alot of Puplava's strange ideas have proven right, so I treat them
with respect now. Barbera's good too

EG,

Gearing, gearing everywhere, but not a borrower to think.
The risk is huge, while the complacency has become enormous.
The change will destroy alot of wealth

"Better to moo than mew...."

Haha. i will chew on that

Their analysis is better than their prescription.

I note that Gates, Buffet and Soros are buying Euro's not Gold. They point out that South Korea, China etc. are discreetly buying strategic commodities... not Gold.

Gold may well offer a speculative opportunity, but its interesting to me what the smart money is doing.

http://www.netcastdaily.com/broadcast/fsn2005-0305-2.asx

I cannot access the broadcast, it loads WMP by default but does not download.
My firewall bans WMP from accessing the internet, will I have to give it permission, as WMP is Gate`s little spyware programme when accessing the net. Can it be accessed with Realplayer or Quick Time player.

Charlie

A sad old f**t who never went to uni to study IT or computer science

"Gates, Buffet and Soros are buying Euro's not Gold"

Actually,
Buffett owns alot of Silver, Gates owns Silver stocks, and Soros may still ahve a big position in Newmont, a gold share.

I suspect they are little quiet about what specific Gold shares they may own

Thanks for the fascinating link Dr Bubb.

If Barbera's prediction of collapsing stock markets comes true (i.e. Dow to 4000, Nasdaq to 800), do you think gold stocks would still hold up?

Try right clicking on this link.. http://netcastdaily.com/broadcast/fsn2005-0305-2.mp3.. and saving it.. should be able to play it in any mp3 player thing.

Thats how I've downloaded it.. but haven't had time to listen to it all yet.

Problem solved.
A man who knows his beer is the best man to ask.

I'll take the big green statue of the chick holding the torch. Look nice in my front yard



Seriously.... the writing is on the wall. Just like the Housing market. TO paraphrase the sixth sense "I see bankrupt people, they just don't know it yet"

We just had a 0.25% IR rise. People are screaming blue murder and the pollies are pointing the blame at everyone except their inept handling of the economy.

Bring it on. My moola is in the bank and in Gold and Silver.

Charlie,
That is the Windows Media link I gave you.

There are also other Links like REAL player, and you can
find them HERE: http://www.netcastdaily.com/fsnewshour.htm

- - -

GC:
TO paraphrase : "I see bankrupt people, they just don't know it yet"
I AGREE,
and the biggest of all is... the US Government.
From my banking days, I can recall that you can be technically bankrupt,
but you are not actually bankrupt, until the the creditors ask for their money back

I've been listening to this guy for a few months now - so long that it is begining to distort my thinking. He has written an incredible amount on his perfect financial storm thesis and some interesting stuff on world politics too. To my mind it is beyond doubt that we are heading for a bust. The really tough question is will it be inflationary or deflationary. As a country we have borrowed a phenominal amount of money from the future. Individuals have borrowed through mortgages and credit cards and the government has borrowed through bonds, golden rules and pension and healthcare promises. If we had a stable monetary system this money would be payed back in full driving us into a deflationary bust (ie a scarcity of available cash because it is all going toward debt repayment). The fear for savers is that the debt will just be inflated away - which will destroy savings. I really do not know what is going to happen but I am very scared. There are so many players in this game, Paplava points out:
- Huge levels of personal debt.
- Black holes in government finances.
- Financial markets all geared up.
- Companies making future interest rate bets (and I think it is certain that the consumer is going to stop spending to boot)
- Bond holders not scared about inflation for some reason.
- Very scary things afoot in the currency markets.
- Developing economies with an insatiable demand for natural resourses, who hold much of the dollar deficit and who are the workshop of the world.
Is our economy strong enough to repay the debt? We have no real manufacturing base and probably import a lot of food too.

So where do savers put their money to preserve its buying power? I wish I knew but I don't. I think I expect a short deflationary or stagflationary period followed by high inflation.

Does anyone know how to look out for the government and the bank of england leading us into high inflation. Is the only way they can do this through monetising debt or are there other anvenues available? Does the ONS publish anything on debt monetisation? I don't trust the state broadcaster to warn us of any danger.

Thanks for any thoughts, N.O.

"Does anyone know how to look out for the government and the bank of england leading us into high inflation. Is the only way they can do this through monetising debt or are there other anvenues available? Does the ONS publish anything on debt monetisation? I don't trust the state broadcaster to warn us of any danger"

A GOOD WARNING sign is when they are printing money excessively.
It is especially easy for the US, since foreigners have seemed to have an
unending appetite for US dollar denominated debt. But I suspect this will
not go on forever. At some point, a key creditor will wake up and say,
"The Emperor has no clothes / I want my money back: Give me gold."

Hmmm. I have been talked into buying some gold and to be honest I will probably get some more but there is a hard limit to my appetite. I'm not sure how well the price will hold up if we go into a deflationary environment. Also gold is a severe threat to our current financial system. If people started exiting our currencies in any great number then governments would be forced to act. Another problem is that you couldn't possibly describe gold as a free market, it is so tightly controlled by governments and central banks. They have a massive stake in suppressing the price. I don't mind a small speculation, playing chicken with the central banks but I don't want to go too far. If there was an easy way for the man in the street to hold some of his money in other currencies where the credit (read debt) bubble has not been so severe then I would be interested.

i listened to all of it. goes for about 50 miunutes before it ends and they say 'we continue with the second half after the break...'

where can we listen to the second half ?

Go here http://www.netcastdaily.com/fsnewshour.htm
and look in the right hand top box and you'll see links for both parts 1 and 2.

here is the story they refer to in the interview:

The day after tomorrow


http://www.kitco.com/ind/Puplava/feb222005.html

The period 1914-1924 - was the worse disaster in modern history.
Then http://www.spartacus.schoolnet.co.uk/GERschacht.htm inflation was cured - by tying currency to the land, and selling these new currency bonds to raise finance on a rising era of prosperty.
One man was responsible for this - Hjalmar Schacht.
Things got better till 1929 - the wall street crash.

In 1928 Hitler got just 2.4% of the vote.
Then the wall street crash occured with massive effects on Germany.
In 1930 Hitler got 25% of the vote (and my grandmother soon had to flee the country with her mother as the nazis took over).

When the crash occured with massive effects in Germany, people just gave up on democracy.

However, after the crash from 1933 to 1940 how did germany do so well? It was all down to one man. Again.

Hjalmar Schacht. Now he was Hilters banker.

This is the real story behind the scenes that you are never told about. He was set on one purpose - German rearming.
He then offered part payment on the existing massive versalle treaty debts Germany had to pay, said take it or leave it, knowing that the allies would not want to goto war over it.
He knew that only a militarly strong Germany would be able to stop the incredible debt slavery and poverty of the German people.
http://www.spartacus.schoolnet.co.uk/GERschacht.htm

Night Owl,
Your:
"governments ... have a massive stake in suppressing the price"

They may be able to suprress for awhile, but not forever.
Eventually reluctant dollar holdser will disgorge

Brainclamp
wtf is your point?

Now sie sprechen mein language,baby!!!!

It is all part of the moral value decline of western society
Debt greed drugs sex alcohol the chavs .

It is not just a house-price crash that we are to face that may be the least of our problems !

Still we live in interesting and eventful times !

But surely the argument against this is - if one of the countries that has bought bucketloads of US dollar debt stops buying - it will precipitate a big fall in the dollar and, when the come to redeem the debt, they'll only get back half of what they lent. Isn't this what keeps Japan and China buying?

I think what keeps them buying is the selling of goods to the US. But why keep the reserves in USD ? Because most of the goods are paid for in USD and secondly after the asian currency crisis USD was seen as a safe haven. But you are right, if they starting selling USD (let say replacing it with EUR) then the last person holding USD will lose out. There are around five or six nations in asia holding huge USD reserves. Recently Korea, the fourth largest holder (behind China, Japan and Taiwan) informed the world that it will start looking to move reserves out of USD. This caused quite a stir. The worry is that none of the other nations would want to be the last ones left holding the currency if others starting dumping USD and create a world awash with the dollar. IMHO this scenario although rightly feared would not come to fruition as the Fed looks to be tightening credit and the US deficit has now got the attention of politicians in the USA. Thats not to say the USD will not continue to decline, but I don't think the Asian countries will panic themselves into thinking the mountains of green paper they are storing is worthless.

Real Uber-bears, these two. Should give even the most optomistic individual pause for thought.

I was replying to the weimark posts by Dr Bubb on inflation.
This was caused through the terrible debts carried by Germany.
Many people here are following Dr Bubbs well intentioned advice in purchasing gold as a method of protecting themseves against such an outcome.

However, the period he quotes from 1914-1923, is very selective, as things changed drastically after that as well I know as part of my family had to flee the Nazis.

In fact landlords had the better deal in such an enviroment, not holders of gold. They also had a better outcome after the inflation ended.

Thanks for the clarification brainclamp- the initial posting of a link to an article about Hitler's banker was a little bewildering, to say the least!

Interesting to see the chap was a Keynesian....

Brainclamp,

Interesting timing, Hitler's rise.
After the Hyperinflation, came the Depression, and the rise of Hitler.

Here's the hyperinflation:

Wholesale Price Index : US$1.00 equals
July 1914 :...... 1.0 : ..... 4.2 Mark
Jan. 1919 :...... 2.6 : ..... 8.9 Mark
July 1919 :...... 3.4 : .... 14.0 Mark
Jan. 1920 :..... 12.6 : .... 64.8 Mark
July 1920 :..... .... : .... 39.5 Mark
Jan. 1921 :..... 14.4 : .... 64.9 Mark
July 1921 :..... 14.3 : .... 76.7 Mark
Jan. 1922 :..... 36.7 : ... 191.8 Mark
July 1922 :.... 100.6 : ... 493.2 Mark
Jan. 1923 :.. 2,785.0 : .. 17,972 Mark
July 1923 : 194,000.0 : . 353,412 Mark
Aug. 1923 :.......... : 4.6millionMark
Sep. 1923 :.......... : 98.millionMark
Oct. 1923 :.......... : 25.billionMark
Nov. 1923 726 Billion. 4.2trillionMark

Imagine if you'd been able to spreadbet forex in those days....

OK, so where does this leave the STR who has a very healthy sum of money on deposit because he sold at the peak of the property market. What can he do to stop his capital being eroded by a nasty dose of inflation?

Equities? No.
Property? Absolutely not!

What does that leave us?

Index-linked gilts?


Full allocation of Premium Bonds?

http://www.nationalsavings.co.uk/products/pb/index.jsp

I would say that a substantial portfolio of high-yield shares could provide you with an income for life. You would never need to buy again:

http://www.fool.co.uk/valueinvesting/2005/vi050107.htm

AAA Corporate bonds?

http://www.insightinvestment.com/Documents...nd_standard.pdf

Thanks Ernie £200 this month between me and Mrs C.

Poor trackers of inflation. Real inflation is running much higher than index-linked gilts suggest. Thanks for constantly moving the goal posts, Gordon.



Hmmm. Generally, payout is inline with BoE rates / 2 and this lags the BoE by about 6 months. No risk to capital (other than inflation erosion) but not much chance of a big payout.



Sometimes high-yield means high risk. Sage of Omaha himself sees little opportunities in the market at the moment.

With yield spreads to treasuries so low, if long term rates rise, capital will be eroded quickly.

Gold and commodities (alternative hard currencies) are usually the favourite in high inflation periods. But they produce no income so you have to trust in the capital gains.

At least index-linked gilts track the RPI, and not the ridiculously low CPI (HICP).



RB was looking for protection from inflation, not big capital gains.



But not in this case. Investing in breweries, insurers and utility companies is the very antithesis of risk (which is why such portfolios are often referred to as "defensive").



So worse than property (at least a property has utility value, ie you or someone else can live in it and can produce an income) and much riskier.What kind of suggestion is that for an STR who wants to preserve his capital?



That may well be true for those looking to invest $43 billion (ie only the most liquid of markets can take that kind of inflow without it distorting the price mechanism). I would suggest that the prospects for the small retail investor are a little rosier.

Found this link on the BBC site about the US Deficit

Fed chief warning on US deficit


seems to ring true with whats been said in this thread and apply not only to the US but here in the UK too

So how would the hyperinflation in the US effect us and is the UK in a similar position that could lead to Hyperinflation

kam

Like the US, the UK runs both a trade and budget deficit. Per capita, the trade deficit is on par with the US, the budget deficit is about 25% less in the UK (measured as a % of GDP). Some economists predict the pound will fall with the dollar (although, perhaps not as fast).

On balance, similar but not as bad?

Perhaps property would not be such a bad bet for STRs...

After all, IRs are set for two years hence and so in this case inflation could be seen as lagging behind increased IRs. The rapidly increased IRs would destroy the housing market before inflation has a chance to eat up savings.

Then FTB/STR with a good deposit can buy property quickly to forestall high inflation (that's if their jobs have not gone in the storm...)

Sound reasonable?

Perhaps. If, after a couple of years of falling prices (relative to inflation), you should find yourself with cash (or income), you could well find that property is a good bet. Certainly was a good bet in 95 and 82. All I know is that right now, property is a one way bet in the UK. Down.

Not quite. UK IR's are set so that UK inflation as measured by the CPI (HICP) hits the 2% target at the two-year horizon assuming that interest rates remain unchanged over that period. It is perfectly possible, and has in fact already happened, that the BOE's central projection for inflation is for it to initially rise above target over the duration of the two-year forward forecasting window before falling back again to meet the target. So it is inaccurate to describe inflation as "lagging" IR's; that (foreseen) increase in inflation has already been factored in to the present interest rate.



High inflation is not on the horizon, so it would be stupid to buy property as an inflation hedge when inflation is low and set to remain so.

I have 1000 Reichsbanknote (number 101443) and a Iraqi 5 Dinar note (with a picture of our mate Saddam) next to me computer. Reminds me that at the end of the day what we call money is paper and electronic digits.