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Hyper-inflation Ahead, Fed To Blame

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http://moneynews.newsmax.com/streettalk/in.../26/218321.html

John Hussman says the government has crowded out $1 trillion of private investment and virtually guaranteed double-digit inflation by insisting on bailing out bank bondholders to the tune of 100-cents on the dollar.

"Any incipient recovery will be cut short, because the only reason that our economy is able to absorb the present supply of government liabilities is extreme risk aversion that creates a demand for default-free instruments," Hussman, of Hussman Strategic Growth Fund, writes in his weekly note to investors.

By issuing an enormous volume of debt, the Treasury has effectively financed a massive and largely needless transfer of wealth to bank bondholders over the short-term that the longer-term cost has been almost completely obscured, Hussman notes.

Hussman says that by transferring wealth from those who did not finance reckless loans to those who did — "providing monetary compensation without economic production" — the Treasury and Federal Reserve pushed aside “investment that would have otherwise have been made by responsible people in the coming years, shifted assets to the control of those who have proven themselves to be irresponsible destroyers of capital, and have planted the seeds of inflation that will cut short any emerging recovery.”

Philadelphia Federal Reserve Board President Charles Plosser issued a stern warning that inflation pressures will likely be greater than most anticipate, and dismissed the output gap theory that many point to as a reason why inflation should not be feared, according to Reuters.

Plosser said he sees inflation near 1.2 percent in 2009 and 2.5 percent by 2011, and said these predictions take into account steps the Fed will take to curb inflation.

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Hyperinflations
John Hussman says the government has crowded out $1 trillion of private investment and virtually guaranteed double-digit inflation

Thanks for the link: it's really interesting, but I really wish you lot would stop conflating "hyper-inflation" with "double digit inflation".

Y'know, sometimes I get high and don't pay enough attention, but I don't have ADHD.

FFS. 10% Inflation is not HYPER! OMG MONEY WILL BE WORTHLESS TOMORROW!

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Thanks for the link: it's really interesting, but I really wish you lot would stop conflating "hyper-inflation" with "double digit inflation".

Y'know, sometimes I get high and don't pay enough attention, but I don't have ADHD.

FFS. 10% Inflation is not HYPER! OMG MONEY WILL BE WORTHLESS TOMORROW!

Don't confuse hyperinflation with its aftermath like currency destruction.

"Inflation is a sustained increase in the aggregate price level. Hyperinflation is very high inflation. Although the threshold is arbitrary, economists generally reserve the term “hyperinflation” to describe episodes when the monthly inflation rate is greater than 50 percent. At a monthly rate of 50 percent, an item that cost $1 on January 1 would cost $130 on January 1 of the following year.

"

"Hyperinflations are caused by extremely rapid growth in the supply of “paper” money. They occur when the monetary and fiscal authorities of a nation regularly issue large quantities of money to pay for a large stream of government expenditures. In effect, inflation is a form of taxation in which the government gains at the expense of those who hold money while its value is declining. Hyperinflations are very large taxation schemes."

Some interesting examples here:

http://www.econlib.org/library/Enc/Hyperinflation.html

We're not there yet but it could be close, nobody really knows but printing isn't a good sign.

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Hussman's right.

Prudent people have been robbed, to bailout those with governmental connections

So glad now I worked my ****** off and saved. :angry: Is there an 'automatic weapons' smiley available?

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so bondholders are bailed....that'll be pension funds and other savings funds.

OK, so what have they been bailed with? cash, and the cash is soon going to be worthless? doesnt sound much of a bailout to me.

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so bondholders are bailed....that'll be pension funds and other savings funds.

OK, so what have they been bailed with? cash, and the cash is soon going to be worthless? doesnt sound much of a bailout to me.

It's all about making sure that bank credit remains confused with cash in the popular mind.

If the ability to conflate one with the other goes from the popular mindset then the whole banking empire vanishes into history for good, the bankers will be butchered by baying mobs etc etc

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Thanks for the link: it's really interesting, but I really wish you lot would stop conflating "hyper-inflation" with "double digit inflation".

Y'know, sometimes I get high and don't pay enough attention, but I don't have ADHD.

FFS. 10% Inflation is not HYPER! OMG MONEY WILL BE WORTHLESS TOMORROW!

It is all relative.

If people are losing their jobs, having their jobs redefined, converted to short term contracts, offshored, outsourced, pension strippped which effectively means having their rate of pay rates cut - all because they are no longer competitive or even needed at all then even that 10% inflation is gong to feel like hyperinflation.

This is not 10% inflation and 10% increase in wage, 10% increase in savings, 10% increase in pension.

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I don't know why people get so worked up about inflation. It will mean a transfer of wealth from creditors (the banks) to debtors (most of the public).

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I don't know why people get so worked up about inflation. It will mean a transfer of wealth from creditors (the banks) to debtors (most of the public).

savers are creditors

profligate borrowers are debtors

inflation: move wealth from the prudent to the feckless

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I don't know why people get so worked up about inflation. It will mean a transfer of wealth from creditors (the banks) to debtors (most of the public).

I dont think you can say a bank is a creditor.

The creditor is the person from whom the bank borrows who lends to the bank.

The bank is a go between party who gaurantees the security of the true creditors by ensuring the bank has collateral on the loans to recover the creditors money if the debtors default.

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savers are creditors

profligate borrowers are debtors

inflation: move wealth from the prudent to the feckless

Correct. Witness the 1970's.My grandad worked all his life in the steel mills of Sheffield, made decent money, paid into a pension fund all his life, was never on the dole and finished up with a pension that cost nearly as much to post as it was worth. We are heading down the same road.

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Correct. Witness the 1970's.My grandad worked all his life in the steel mills of Sheffield, made decent money, paid into a pension fund all his life, was never on the dole and finished up with a pension that cost nearly as much to post as it was worth. We are heading down the same road.

Land, because the ain't making any more of it. I know, I know . . .

These pension things are a con.

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Correct. Witness the 1970's.My grandad worked all his life in the steel mills of Sheffield, made decent money, paid into a pension fund all his life, was never on the dole and finished up with a pension that cost nearly as much to post as it was worth. We are heading down the same road.

Quick!! BTL!!

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savers are creditors

profligate borrowers are debtors

inflation: move wealth from the prudent to the feckless

Most people in Britain are reckless debtors. In a democracy, inflation will win.

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Most people in Britain are reckless debtors. In a democracy, inflation will win.

Of course.

The main macro economic problem of inflation/hyperinflation is it removes the ability to financially plan long term. After that comes the fact that people who are stolen from repeatedly simply stop working.

Which is why - hyperinflationary depression.

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This analysis seems on the money.

We've been renting for the past ten years and saving like mad.

Although I expect further falls in house prices, we've bitten the bullet and purchased this week, but with a fairly cautious mortgage (2x joint income). I expect inflation to creep up steadily which is why we've been cautious. We have safe steady jobs (teacher and lecturer in a well known school + University).

Basically with a young family I wanted to make sure we had a house as a hedge against what might happen to the paper money we'd saved (nearly 200K in ten years). We've had some scares (e.g. 50k in Kaupthing edge, which we knew was a British subsidiary) + quite a bit in Northern Rock. I now believe that Brown and the Fed are embarking on what they know to be a long term systematic devaluation of their currencies. They are doing this so that people do not realize just how much they have really lost as the nominal amount of savings etc will look the same while he purchasing power of their paper is steadily eroded. Although house prices have dipped and will probably continue to do so for a while, my guess is that we will soon have a 1970s scenario where house prices nominally plateau but the 'real' value' continues to be eroded by annual inflation of 8% or more.

I expect we could have done better by waiting another 6 months and I wish all on here well but in the end the desire to live somewhere you actually want rather than a cramped rental place (enabling you to save more of course)just gets too much, especially with a family. There is no way that we could have afforded the place we've just purchased two years ago and perhaps naively this seems like a window to us. I will continue to save like a b*stard to pay down the mortgage as quickly as we can.

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This analysis seems on the money.

We've been renting for the past ten years and saving like mad.

Although I expect further falls in house prices, we've bitten the bullet and purchased this week, but with a fairly cautious mortgage (2x joint income). I expect inflation to creep up steadily which is why we've been cautious. We have safe steady jobs (teacher and lecturer in a well known school + University).

Basically with a young family I wanted to make sure we had a house as a hedge against what might happen to the paper money we'd saved (nearly 200K in ten years). We've had some scares (e.g. 50k in Kaupthing edge, which we knew was a British subsidiary) + quite a bit in Northern Rock. I now believe that Brown and the Fed are embarking on what they know to be a long term systematic devaluation of their currencies. They are doing this so that people do not realize just how much they have really lost as the nominal amount of savings etc will look the same while he purchasing power of their paper is steadily eroded. Although house prices have dipped and will probably continue to do so for a while, my guess is that we will soon have a 1970s scenario where house prices nominally plateau but the 'real' value' continues to be eroded by annual inflation of 8% or more.

I expect we could have done better by waiting another 6 months and I wish all on here well but in the end the desire to live somewhere you actually want rather than a cramped rental place (enabling you to save more of course)just gets too much, especially with a family. There is no way that we could have afforded the place we've just purchased two years ago and perhaps naively this seems like a window to us. I will continue to save like a b*stard to pay down the mortgage as quickly as we can.

You're assuming they can even get that dark plan right, if true I'd doubt they're competent at managing anything, the words p-up and brewery come to mind.

after all, if they had a clue thus far they'd not need Plan B now.

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You're assuming they can even get that dark plan right, if true I'd doubt they're competent at managing anything, the words p-up and brewery come to mind.

after all, if they had a clue thus far they'd not need Plan B now.

But even they know how to devalue a currency: just print loads of extra money (QE) try to con the gilt markets for as long as possible with talk of deflation (even though CPI remains almost 1% above the inflation target) and have enough placemen on the MPC to keep base rates artificially low. If we lose our AAA status then sterling really will be screwed.

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But even they know how to devalue a currency: just print loads of extra money (QE) try to con the gilt markets for as long as possible with talk of deflation (even though CPI remains almost 1% above the inflation target) and have enough placemen on the MPC to keep base rates artificially low. If we lose our AAA status then sterling really will be screwed.

and the last thing on your mind will be "glad I put that 200K in a house".

the foremost will be, "where is my next meal coming from?"

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But even they know how to devalue a currency: just print loads of extra money (QE) try to con the gilt markets for as long as possible with talk of deflation (even though CPI remains almost 1% above the inflation target) and have enough placemen on the MPC to keep base rates artificially low. If we lose our AAA status then sterling really will be screwed.

Exactly, it's not exactly rocket science, or even difficult economics and accountancy. Hell, an innumerate 'historian' could manage to do that.

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