Friday, Mar 27, 2009
China and US to inflate their way out of the mess
Market Oracle: Investing in China and Dow 10,000
In short, the Euro region will get stuck with massive deflation as the U.S. and China try to inflate their way out of the global financial crisis, together
Posted by sold 2 rent 1 @ 11:10 AM (1179 views) Add Comment
29 Comments
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1. sold 2 rent 1 said...
This ties in with my thinking that the eurozone will implode next March/April.
2. inbreda said...
does that relate to callemans fifth hairy twitch? ;-)
3. flashman said...
get with it inbreda. it's the sixth lairy snatch
4. sold 2 rent 1 said...
QUOTE
"Somewhere along the way, also within two to three years from now, China, the U.S. and Europe will get together under a new G-20 series of meetings, and a new, single world currency will be born."
"Like it or not, it's coming. First, the dollar's reserve status must come under question. And as you've seen in the markets and the press recently, that process has already begun."
It looks like the NWO have laid the path to a single world currency by forcing the collapse the euro.
5. sold 2 rent 1 said...
flashman
"get with it inbreda. it's the sixth lairy snatch"
Yeah dude, the fifth night destruction is so yesterday. Keep up man.
We are in the sixth day now.
Also Armstrong has kindly highlighted his destruction window in this graph
6. sold out said...
how will any of this effect sterling?
any guesses anyone?
7. guiriduro said...
Probably the eurozone will find a way to engage in some kind of QE if it becomes absolutely necessary. Whilst bad for exporters, the QE monster is destroying value in other currencies, so there is a flight to euro going on; this means more inward investment, and should rebalance the risk within the eurozone favourably, so lending conditions may even improve there faster than elsewhere. This will improve domestic demand, making the recessionary forces slightly weaker. (Think of it from a US banks view - not only are you taking on the lending risk of new credit, but also the devaluation/inflation risk that the money you will be paid back in is worth less than when you lent it. In the eurozone, the poor risk appetite on the lending is balanced by the appreciation of the currency to some degree.)
8. Nemo said...
This site being about house prices, I would have thought the following extract would have attracted a comment or two:-"The reason: When a currency is deliberately devalued, as the dollar is experiencing now, asset prices must adjust upwards to reflect the loss of purchasing power in that currency."
9. flashman said...
guiriduro: it doesn't seem to have been reported yet but the word is that the ECB is about to start buying assets, mortgages and general debt on the open market. In other words they have already joined the QE party
10. flashman said...
str1: You are my hero. Incidentally, I have put April 19th on the white board at work. We're probably the only outfit in the (trading) world to have done this. Just for the hell of it, I'm giving the chaps a 'go short' direction on the 18th April. How long should we wait for the plunge? This Calleman chap looks like he needs more roughage in his diet but if he makes us a bundle, I'll take the kids to see the Mayan temples for their next holiday
11. sold 2 rent 1 said...
flashman,
19 April is Armstrong's not Calleman's date. So you need to reschedule that trip to a US prison - LOL - You can show the kids some water boarding techniques
I wouldn't put too much emphasis on the date itself, as it is a turning point, that can be a few days out and we don't know what index it will show up in. I have been speculating that US bonds could be the peak, but I might be wrong. More general though it is like to be where deflation turns to inflation.
If you are looking for big dates in the future where both models line up exactly then I have 2 here. 16 April 2010 and 22 September 2010.
16 April 2010 - an Armstrong's "high +PI" date that resonates with 11 Sept 2001 (the last "high + PI" date). It also maps to Feb 1981 oil price peak on the Calleman model. For those who followed last year’s oil price spike, it resonated very closely with the atomic bombs on Japan in 1945. So 16 April 2010 has 2 references (1 strong , 1 weak) to bombs/attacks - it could be a grim day indeed.
22 September 2010 – An Armstrong high on the 8.6 monthly internal cycle. Calleman's model resonance (to the day) when the Berlin Wall came down in 1989. Could this be the day when we get our freedom from the corrupt bankers/politicians?
12. crunchy said...
str1 has he's faith in something which is more than you can say for most of the clueless and aimless here.
Keep the faith, good on you!
13. watchman said...
flashman and crunchy: glad to see people who can show some appreciation for s2r1
s2r1: glad to see you're still posting ;)
What gets me is some of the people in here who find his posts tiresome are as tiresome themselves in their own replies... just because some of the ideas he brings may not be to their way of thinking they seem to forget there's a lot of "relevant" information he brings them as well (all his information and opinions are relevant for me)
Keep it up s2r1!!
14. flashman said...
crunchy: Amen to that. As I've said before, I'd rather a thousand str1's than the waspish, passionless farts cluttering up the place
15. icarus said...
Larry Edelson's scenario has two active, colluding players - China and the US - and one passive, lonely player - the EU - forced to take whatever comes down the line from the other two. Does this ring true?
16. flashman said...
icarus: Not really. The EU has a larger economy than the US, and Europe as a whole, has an economy roughly the same size as that of the US and China combined. We are pretty far from insignificant
17. mountain goat said...
S2R1 - April 19th deflation turns to inflation.
The bond market definitely is important to how the crisis resolves. My vote is the other way. It might be a temporary high of confidence in the current financial establishment that it can sort itself out with inflation. After this point it becomes increasingly clear that QE and re-inflation are pushing on a string because debt levels have reached tipping point. Up till now we haven't really seen deflation, and the verdict on deflation versus inflation has been up for debate. So in what way can it be a turning point if we get bigger inflation? It's a turning point only if there is some kind of capitulation of neo-Keynesian squad leading us at the moment.
Agree with the support for you expressed above. Wish someone hadn't wound up the NOW conspiracy discussions again of the past few days though. But then probably less tiring than my own stupid rants on here sometimes.
18. sold 2 rent 1 said...
flashman,
Be careful on the trading front, as the intermediate high in 1987 turned out to be the October 19 crash date.
Read
http://www.contrahour.com/contrahour/2006/06/martin_armstron.html
But if US Bonds are spiking all time highs around that time then shorting them could be a good deal.
19. 51ck-6-51x said...
flashman - so it'll need to be long vol and long gamma trades...
mountain goat - we've been seeing decreasing inflation (generally), so increasing inflation would be a turn.
20. crunchy said...
17. sold 2 rent
Do I hear hands rubbing already? Don't fight the market embrace it!
Let's ride!
21. flashman said...
51ck-6-51x : Gamma scalping gives me a headache but yes long vol would be pretty tasty if Calleman was right. Are you in the business?
22. sold 2 rent 1 said...
flashman,
"pretty tasty if Calleman was right"
Armstrong not Calleman.... aaaaaaaaaaaaaaaaarrrrrrrrrrrrrrrrgggggggggggggghhhhhhhhhhhhhhhhhh
23. mountain goat said...
51ck-6-51x - yes you and S2R1 could be right there
Still I like my idea because inflation is exactly what the financial authorities want. So we would get increasing confidence from here if that was the case. Stock markets and the housing markets will have bottomed too if we now get run away inflation. All seems a bit early for me. We have yet to hit many toxic debt landmines in the global economy before this crisis is over I believe.
6 months ago I remember arguing with Techieman that inflation was inevitable. With QE central banks have surpassed even my imaginations at that point. However, I am starting to think the other way now. I think there was a point, that last straw, when $1 of debt too many was created, and now the situation cannot be rescued with more debt. Since the new innovative money markets of the past decade have frozen over, the problem will be resolved in the bond markets, one way or the other.
24. flashman said...
str1: Terribly sorry old chap. I did mean to write Armstrong. All this mystic stuff is very confusing for newbies. There was another Armstrong (Herbert W. Armstrong) who prophesised conflict and crashes and also talked about hidden human potential.
25. 51ck-6-51x said...
flashman - No I am not, but may get in soon - but more likely as a quant since I have recently completed 7 City's Certificate In Quantitative Finance on a scholarship. Big changes are afoot, so it could well satisfy my 'problem solving fetish'.
26. 51ck-6-51x said...
mountain goat - I totally agree that individual states wants slightly higher inflation than the taxpayer, and that this could lead to run away inflation (the state does not want that, however). Theoretically, at least, with fiat we (globally) can always pass ever more debt onto our children - so it may not be the notional itself, but more likely a revolutionary event (uprising) that would be the break the debt mountain I think (after a nasty, nasty period). It may be good that this thing is global in nature in the end, since there is always the chance of a race to the bottom which individual states would want to avoid, although it could end up being worse as we find the push for a world currency which would end up causing more wealth imbalance and forges the need for a global government leading to further possibilities of corruption on a greater scale than we see with today's intertwining of politics and business.
RE: Inflation inevitable... well I am not so sure it's 100% inevitable in theory (just likely). Inflation results from an increase in money's circulation (velocity or quantity), but QE only actually bolsters banks' central bank account deposit (i.e. gives them better capitalisation) so if the banks all decide to keep their new capital there between now and enough counteracting deflationary pressures (defaults & further devaluations, etc... are pretty certain) then there is not induced inflation from the QE. (All the banks keeping it all there is not so likely though I think, so hence probable, rather than inevitable in my opinion)
27. flashman said...
51ck: Good luck with that. I see loads of ads for quants to get involved in FX-Commodity/IR-Commodity hybrids. Seems to be a growth area. They are also still hiring you guys in the credit derivatives area but that could get you arrested on HPC
28. 51ck-6-51x said...
flashman - Thanks. I already get it for being such a capitalist, but I don't want to go to HPC prison :(
29. Davidsmithiseatingmysavings said...
Yes, that's right flash - tell your gang members they are the victims of the others on the site.