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Inflation Or Deflation Debate

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Inflation or deflation. The jury is still out.

One Blogger has claimed that a large part of the 600trillion dollars in Derivatives is held by five american banks and that much of it is interest rate hedges. If so, he speculates that the central banks will have no option but to continue deflating the global economy. If they dont, rates will rise resulting in massive calls on derivatives, which are backed by CDSs. The blogger argues this would trigger complete collapse of the financial system. Fitch have provided data that would seem to support this point of view. Do others have insight they can share? This is the most important question facing us all.

BPW

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I expect Injin will be here any minute with his unshakeable inflation arguements:

More money in circulation = inflation

Less money in circulation = inflation

More people with money to spend = inflation

Less people with money to spend = inflation

and so on.

Basically hoping that gold does go to the moon. However, gold is currently being tipped by the shoe shine boy and therefor will plummet shaking off the sheeple before it takes off making money for the clever money.

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Something doesnt add up here. If they have $500bn of outright speculative exposure (notional? per b.p.?), surely these banks would've made a fortune as rates were slashed and 10yr US treasury yields fell to 2.5%?

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Guest spp

No doubt there is some deflation in the system right now, but When the banks start lending again (6mths - 1yr 1/2 from now) we will see Inflation/Hyperinflation!

Will that be 20% or 40% inflation?... we just don't know yet.

At the end of the hyperinflation we will get deflation...big time!

There is another bubble being inflated if you hadn't noticed.

When this bubble bursts...your going to know about it!

Edit: It hasn't got to be the banks lending again, it could simply be a currency crisis...take your pick.

Either way...this fraudulent fiat money system is in deep trouble!

Edited by spp

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Inflation or deflation. The jury is still out.

One Blogger has claimed that a large part of the 600trillion dollars in Derivatives is held by five american banks and that much of it is interest rate hedges.

450 trillion

If so, he speculates that the central banks will have no option but to continue deflating the global economy. If they dont, rates will rise resulting in massive calls on derivatives yes,if interest rates change they will have to net out.

So what is say, 3 % loss on 450 trillion?

which are backed by CDSs ======hmmmmmmmm ..nah.

The blogger argues this would trigger complete collapse of the financial system.-------yes

Fitch have provided data that would seem to support this point of view. ====LINK?

Do others have insight they can share? This is the most important question facing us all.

BPW

You're almost there! Well done.

Here is the final bit. Interest rates cannot be allowed to lurch up as it's then game over as you say.

BUT a deflationary spiral has to be fought off at all costs too.

Only solution is to sell governement debt, and when the bond market looks nervous and market interest rates start to rise, print .

The bank rate will not be going up.

Hyperinflation, via a currency crisis. Inevitable.

Nick

Edited by SurgeonGeneral

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I expect Injin will be here any minute with his unshakeable inflation arguements:

More money in circulation = inflation

Less money in circulation = inflation

More people with money to spend = inflation

Less people with money to spend = inflation

and so on.

Basically hoping that gold does go to the moon. However, gold is currently being tipped by the shoe shine boy and therefor will plummet shaking off the sheeple before it takes off making money for the clever money.

I'm not a goldbug.

Useless yellow metal.

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Guest Daddy Bear
Daddy Bear says no.

True

However I used to say YES

Daddy Bear July 2007

17. Apart from the consumer led boom based on credit card debt (unsecured) and MEW (secured debt) of £1.38 trillion, there has been massive borrowing by the government to pump money into the economy through public sector. For example an economy like Newcastle is mainly supported through government money. 60% of the working population is employed directly by the government and nearly all the rest depend on this money indirectly to keep their service industry jobs alive.

The government is running out of money and will have to reduce public sector spending dramatically over the next few years to balance its books. Many public sector jobs will be cut, this will contribute to a recession and unemployment and cause house prices to fall.

18. Due to the huge amount of cheap cash being pumped into the global economy there are asset bubbles in many areas e.g. the art market: With Monet's Waterloo Bridge fetching £17.9m and Warhol's Green Car Crash selling for $71m last month (June 2007) , it's no surprise that commentators are increasingly wondering if the art market is signaling a top in other markets. In 1990, the Japan's very own car crash was signaled when Japanese paper tycoon Ryoei Siato paid £50m for a Van Gogh. The wine market is another example of this phenomenon, as well as the huge growth in private equity and mergers and acquisition activity.

The ‘wealth’ has been fueled by "a tidal wave of cheap cash" which has allowed them to borrow vast sums to fund "the most spectacular takeover boom for 20 years... All the most dangerously inflated bubbles today are spin-offs of this global credit binge." The housing market is supported by a PONZI Scheme of debt. There is the potential for the biggest global asset bubble collapse in modern times. The consequences could be far worse then the recessions of the past, and may even be worse then the 1930’s depression.

19. The UK economy has had unprecedented growth since 1994. This boom has been mainly consumption/debt led. The boom has been fuelled by a huge supply of money and global low interest rates. (UK, US, and Japan). This money has to be paid back.

As the tap of liquidity has been turned off the Boom will turn into Bust. Japan is increasing Interest Rates, and as the Yen Carry Trade unwinds it will have devastating consequences on Hedge Funds and global markets will collapse. There has always been BOOM and BUST, it is the nature of capitalism. Why should it be any different now? Bigger BOOMs should become bigger BUST. This boom has gone on for nearly 15 years and has been mainly debt/consumption led; the consequences may be far reaching. The Bust may become deflationary and a globa economic depression may occur. Imagine paying back a £300K over 25 years when inflation has not eroded it's real value, like it did in the 60's and 70's and 80's

l

I have educated myself more since then

My views were naieve - but based on the current variables back then.

It is now a foregone conclusion we will have HYPERINFLATION

The question are:

When?

What else will come with it?

* Disclosure - I bought a house 3 months ago at 32% below peak. I believe average property indices will carry on falling in REAL TERMS for the forseeable future but NOMINAL PRICES will rise substantially.

Edited by Daddy Bear

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I don't understand your logic. From what I can tell the interest rate hedge/contract is against significant increase not decrease. I realise there is a lot more to this picture than my original and simplistic question . For example, how the hedges are tiered (+1, +2%, +2.5%??) and the term of the contract. And, have the 'counter parties' (if thats the right term) entered into contracts to hedge if they have to pay out - if so who took the other side of the bet. It would not surprise me to find the Chinese have been suckered into acting as the final party to foot the bill. Wouldn't that be just like Wall St and the City!!

- i have to admit here i am an engineer so I am hoping others help me frame the picture.

Something doesnt add up here. If they have $500bn of outright speculative exposure (notional? per b.p.?), surely these banks would've made a fortune as rates were slashed and 10yr US treasury yields fell to 2.5%?

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True

However I used to say YES

l

I have educated myself more since then

My views were naieve - but based on the current variables back then.

It is now a foregone conclusion we will have HYPERINFLATION

The question are:

When?

What else will come with it?

* Disclosure - I bought a house 3 months ago at 32% below peak. I believe average property indices will carry on falling in REAL TERMS for the forseeable future but NOMINAL PRICES will rise substantially.

daddy bear i think you had it right the first time round. there will be no inflation. the system only works if inflation gradually erodes debt. that ship has sailed

someone on the northern ireland forum was looking at the deeds to their house

1910 sold for £900

1933 sold for £650

thats what the future holds

the bond markets will never let them get close to printing enough money. give it up, go enjoy your house!

Edited by getdoon_weebobby

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someone on the northern ireland forum was looking at the deeds to their house

1910 sold for £900

1933 sold for £650

thats what the future holds

the bond markets will never let them get close to printing enough money. give it up, go enjoy your house!

That NI fall you quote is only 27% - even if it is over 23 years. We have already had 15-20% falls.

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I don't think the current deflation is a matter of plutocratic choice - credit is being destroyed at the consumer end.

As for a turn to hyperinflation - that is a choice for the plutocrats, and will be based on what scenario they're most scared of.

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Guest Daddy Bear
daddy bear i think you had it right the first time round. there will be no inflation. the system only works if inflation gradually erodes debt. that ship has sailed

someone on the northern ireland forum was looking at the deeds to their house

1910 sold for £900

1933 sold for £650

thats what the future holds

the bond markets will never let them get close to printing enough money. give it up, go enjoy your house!

I am very much enjoying house - the 32% discount and the fixed rate 4.99% small 10 year mortgage :D

HPC is just noise now - this is way beyond house price falls

Go to the thread in my sig - it's all there. Got moved to economics section as mods are frightened of others learning the truth. Not compatible with HPC in nominal terms.

DB

Edited by Daddy Bear

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