Ae Prichard Telegraph

[mbga9pgf]

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/6927923/Global-bear-rally-of-2009-will-end-as-Japans-hyperinflation-rips-economy-to-pieces.html

Apparently, it will be the far east's fault.

The contraction of M3 money in the US and Europe over the last six months will slowly puncture economic recovery as 2010 unfolds, with the time-honoured lag of a year or so. Ben Bernanke will be caught off guard, just as he was in mid-2008 when the Fed drove straight through a red warning light with talk of imminent rate rises – the final error that triggered the implosion of Lehman, AIG, and the Western banking system.

As the great bear rally of 2009 runs into the greater Chinese Wall of excess global capacity, it will become clear that we are in the grip of a 21st Century Depression – more akin to Japan's Lost Decade than the 1840s or 1930s, but nothing like the normal cycles of the post-War era. The surplus regions (China, Japan, Germania, Gulf ) have not increased demand enough to compensate for belt-tightening in the deficit bloc (Anglo-sphere, Club Med, East Europe), and fiscal adrenalin is already fading in Europe. The vast East-West imbalances that caused the credit crisis are no better a year later, and perhaps worse. Household debt as a share of GDP sits near record levels in two-fifths of the world economy. Our long purge has barely begun. That is the elephant in the global tent.

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We will be reminded too that the West's fiscal blitz – while vital to halt a self-feeding crash last year – has merely shifted the debt burden onto sovereign shoulders, where it may do more harm in the end if handled with the sort of insouciance now on display in Britain.

Yields on AAA German, French, US, and Canadian bonds will slither back down for a while in a fresh deflation scare. Exit strategies will go back into the deep freeze. Far from ending QE, the Fed will step up bond purchases. Bernanke will get religion again and ram down 10-year Treasury yields, quietly targeting 2.5pc. The funds will try to play the liquidity game yet again, piling into crude, gold, and Russian equities, but this time returns will be meagre. They will learn to respect secular deflation.

Weak sovereigns will buckle. The shocker will be Japan, our Weimar-in-waiting. This is the year when Tokyo finds it can no longer borrow at 1pc from a captive bond market, and when it must foot the bill for all those fiscal packages that seemed such a good idea at the time. Every auction of JGBs will be a news event as the public debt punches above 225pc of GDP. Finance Minister Hirohisa Fujii will become as familiar as a rock star.

Once the dam breaks, debt service costs will tear the budget to pieces. The Bank of Japan will pull the emergency lever on QE. The country will flip from deflation to incipient hyperinflation. The yen will fall out of bed, outdoing China's yuan in the beggar-thy-neighbour race to the bottom. By then China too will be in a quandary. Wild credit growth can mask the weakness of its mercantilist export model for a while, but only at the price of an asset bubble. Beijing must hit the brakes this year, or store up serious trouble. It will make as big a hash of this as Western central banks did in 2007-2008.

The European Central Bank will stick to its Wagnerian course, standing aloof as ugly loan books set off wave two of Europe's banking woes. The Bundesbank will veto proper QE until it is too late, deeming it an implicit German bail-out for Club Med.

More hedge funds will join the EMU divergence play, betting that the North-South split has gone beyond the point of no return for a currency union. This will enrage the Eurogroup. Brussels will dust down its paper exploring the legal basis for capital controls. Italy's Giulio Tremonti will suggest using EU terror legislation against "speculators".

Wage cuts will prove a self-defeating policy for Club Med, trapping them in textbook debt-deflation. The victims will start to notice this. Articles will appear in the Greek, Spanish, and Portuguese press airing doubts about EMU. Eurosceptic professors will be ungagged. Heresy will spread into mainstream parties.

Greece's Prime Minister Papandréou will balk at EMU immolation . The Hellenic Socialists will call Europe's bluff, extracting loans that gain time but solve nothing. Berlin will climb down and pay, but only once: thereafter, Zum Teufel.

In the end, the Euro's fate will be decided by strikes, street protest, and car bombs as the primacy of politics returns. I doubt that 2010 will see the denouement, but the mood music will be bad enough to knock the euro off its stilts.

The dollar rally will gather pace. America's economy – though sick – will shine within the even sicker OECD club. The British will need the shock of a gilts crisis to shatter their complacency. In time, the Dunkirk spirit will rise again. Mervyn King's pre-emptive QE and timely devaluation will bear fruit this year, sparing us the worst.

By mid to late 2010, we will have lanced the biggest boils of the global system. Only then, amid fear and investor revulsion, will we touch bottom. That will be the buying opportunity of our lives.

Your damn right it will be. Good job I will have 125K banked by then!

Equities or house. Or both? That is the question.

Personally, I probably will go for Equities ----> Rebound ------> House

[interestrateripoff]

A bit optimistic if he thinks it's going to be bottom and all fixed by the end of the year.

They will do all the can not to lance the boil

[Realistbear]

The dollar rally will gather pace

. America's economy – though sick – will shine within the even sicker OECD club. The British will need the shock of a gilts crisis to shatter their complacency. In time, the Dunkirk spirit will rise again. Mervyn King's pre-emptive QE and timely devaluation will bear fruit this year, sparing us the worst.

[Georgia O'Keeffe]

The dollar rally will gather pace

. America's economy – though sick – will shine within the even sicker OECD club. The British will need the shock of a gilts crisis to shatter their complacency. In time, the Dunkirk spirit will rise again. Mervyn King's pre-emptive QE and timely devaluation will bear fruit this year, sparing us the worst.

yes, isnt it that time of the month for one of your "imminent gold collapse" threads

[Realistbear]

yes, isnt it that time of the month for one of your "imminent gold collapse" threads

QUOTE FROM FARTICLE:

Gold will be the next bubble if we don't learn our lesson

They don't call the 'ol fella "Realistbear" for owt!

All bubbles burst, the key is knowing when to get out. Warren B suggets getting out when the herd are still piling in--the surest sign of an imminent collapse you will get. I believe we are at or very near the peak since the last peak in 1980 when gold was $2833.00 and ounce, inflation adjusted. History shows that when the sell off came it did so quickly catching the vast majority of speculators napping. Watch out for the pendulum swing!

Edited January 4, 2010 by Realistbear

[MississippiJohnHurt]

I love how he predicts a hyperinflation catastrophe in Japan, the break up of the Euro on North/South lines, and a number of other world changing evbents, and then says we'll have reached the bottom by the end of the year. Sounds like AEP expects an interesting first half of the year then. What a drama queen.

[jpidding]

QUOTE FROM FARTICLE:

Gold will be the next bubble if we don't learn our lesson

They don't call the 'ol fella "Realistbear" for owt!

All bubbles burst, the key is knowing when to get out. Warren B suggets getting out when the herd are still piling in--the surest sign of an imminent collapse you will get. I believe we are at or very near the peak since the last peak in 1980 when gold was $2833.00 and ounce, inflation adjusted. History shows that when the sell off came it did so quickly catching the vast majority of speculators napping. Watch out for the pendulum swing!

Last time I looked gold was at $1100 or so. So according to your calculations it will rise another 2.5 fold? Thats not what I call "near the peak". Also those inflation adjusted calculations use "official" inflation stats. If you use the shadow stats you get an adjusted figure of more like $5000. If you use an adjustment based upone money supply growth vs available gold growth you get astronomical numbers.....well above $20,000.

I agree gold will one day be in a bubble, but it has ceratinly not gone mainstream yet. How many people discuss their gold holdings at dinner parties, or which junior mining stock is about to go into production?

JP.

[tahoma]

All bubbles burst, the key is knowing when to get out. Warren B suggets getting out when the herd are still piling in--the surest sign of an imminent collapse you will get. I believe we are at or very near the peak since the last peak in 1980 when gold was $2833.00 and ounce, inflation adjusted. History shows that when the sell off came it did so quickly catching the vast majority of speculators napping. Watch out for the pendulum swing!

Attention. Attention. The RB ContraroBoost is in. Buy Gold now. Buy Gold now. Rush, don't walk.

Incidentally, the RB bot seems to be starved of processor cycles recently - are they being hogged by the Injin bot I wonder?

[The Masked Tulip]

Just prior to, and over Christmas, I began to think about transferring some of my sterling to bucks - anyone know the easiest and cheapest way to do this?

I think you can simply own a Citibank account in London which is dollar denominated and any currency you put in there becomes bucks? Anyone know for def?

[DONKEY2409]

Tangentially related this...a question for wiser minds than mine. I put some of my cash into Euros at the beggining of this year,

I was thinking about buying more, but this article intimates that tensions between Club Med and the richer Northern nations

could undermine the Euro.

My question is this..if push came to shove and Greece, Spain etc dump/get dumped from the Euro would this really undermine the currency, or would it actually strengthen it as the weakest links in the Euro, so to speak, would have gone?

I'd be interested to hear opinions...

Edited January 4, 2010 by DONKEY2409

[gasket37]

Just prior to, and over Christmas, I began to think about transferring some of my sterling to bucks - anyone know the easiest and cheapest way to do this?

I think you can simply own a Citibank account in London which is dollar denominated and any currency you put in there becomes bucks? Anyone know for def?

you could always try

http://www.nationwideinternational.com/accounts/accounts_sterling_glance.htm

for € and $

or open an account with www.goldmoney.com and hold funds in other currencies e.g. CAD. then drip feed them into silver/gold.

works for me.

[Georgia O'Keeffe]

Tangentially related this...a question for wiser minds than mine. I put some of my cash into Euros at the beggining of this year,

I was thinking about buying more, but this article intimates that tensions between Club Med and the richer Northern nations

could undermine the Euro.

My question is this..if push came to shove and Greece, Spain etc dump/get dumped from the Euro would this really undermine the currency, or would it actually strengthen it as the weakest links in the Euro, so to speak, would have gone?

I'd be interested to hear opinions...

id think that breakup might sorta lead to a tad of uncertainty in the market , i would wager it would get crucified (you can see the effect on it just from the hint of union problems with greece) as it would call the whole european union into question, theres not many bigger turd currencies than GBP over the next few years out there but i wouldnt put it past the euro to be one of them and wouldnt touch it accordingly.

[The Masked Tulip]

you could always try

http://www.nationwideinternational.com/accounts/accounts_sterling_glance.htm

for € and $

or open an account with www.goldmoney.com and hold funds in other currencies e.g. CAD. then drip feed them into silver/gold.

works for me.

Thanks, I'll take a look.

[DONKEY2409]

id think that breakup might sorta lead to a tad of uncertainty in the market , i would wager it would get crucified (you can see the effect on it just from the hint of union problems with greece) as it would call the whole european union into question, theres not many bigger turd currencies than GBP over the next few years out there but i wouldnt put it past the euro to be one of them and wouldnt touch it accordingly.

Ohhhh...oh dear, now you got me worried!! Thanks for the info!!!

[Gone baby gone]

I love how he predicts a hyperinflation catastrophe in Japan, the break up of the Euro on North/South lines, and a number of other world changing evbents, and then says we'll have reached the bottom by the end of the year. Sounds like AEP expects an interesting first half of the year then. What a drama queen.

Yes, the timescale does seem a little optimistic (pessimistic?) If these were his predictions for the next half decade, they might be closer to reality.

[AnObserver]

Just prior to, and over Christmas, I began to think about transferring some of my sterling to bucks - anyone know the easiest and cheapest way to do this?

I think you can simply own a Citibank account in London which is dollar denominated and any currency you put in there becomes bucks? Anyone know for def?

http://www.oanda.com/

Not used it myself but know is popular/cheap/well trusted. DYOR etc

[aa3]

One problem with his analysis is he doesn't factor in feed back mechanisms. For example if Japan actually does get inflation rolling, which looks possible.. their consumption at home could shoot to the moon. Especially if the insanely large Japanese savings pile.. if those savers feel threatened that inflation will wipe them out.

If Japan went on a big time consumption binge that is going to have a positive feedback elsewhere in the system.

This is a big reason the bears didn't predict how fast China would emerge from problems, when they unleashed their stimulus programs and huge new lending.

One point he is definately right on is the surplus nations will eventually have to crack and switch to consuming. China has taken the plunge with very beneficial effects for itself and others exporting to it, like Australia and Korea. Germany and Japan are still holding out trying to export their way out. Germany is increasingly the key player with its stubborness.

This year Germany is going to have to decide how it wants to stimulus spend. Will it be by bailing out the PIIGS and letting them spend, or will it be letting Germans spend. My bet is Germany will continually bail out the PIIGS when push comes to shove. Which Greece especially is bringing the tight pursestrings strategy to a head.

[interestrateripoff]

One problem with his analysis is he doesn't factor in feed back mechanisms. For example if Japan actually does get inflation rolling, which looks possible.. their consumption at home could shoot to the moon. Especially if the insanely large Japanese savings pile.. if those savers feel threatened that inflation will wipe them out.

If Japan went on a big time consumption binge that is going to have a positive feedback elsewhere in the system.

Sorry but I think you are getting confused here inflation does not automatically mean consumption is increasing. Consumption can remain flat as prices go up and depending on how much prices go up consumption may actually decrease.

The only thing that will happen if they get inflation booming is prices will shoot to the moon.

With your analysis you should consider working for the Labour party.

[council dweller]

hyperinflation in Japan? Can someone talk me through that?

Does that mean that we'll be able to buy their products at 1970's prices as the Yen sinks? Would Toyota, Nissan and Honda close their UK factories within weeks? Or could they have Zimbabwe style inflation at home but be able to maintain a good exchange rate abroad (Mugabe's wet dream.)

Surely it would be the mother of all destablizations?

[scepticus]

What a drama queen.

An essential attribute for any telegraph economics writer.

[MississippiJohnHurt]

An essential attribute for any telegraph economics writer.

yeah Halligan, Conway too I suppose. I like Roger Bootle though he's an opinion guy rather than journalist.

I do like AEP, he has an interestingly apocalyptic mind and some of his points are plausible, it's just that he seems a little too keen for them to be proved right, and that's led him to come out with more and more outrageous statements over the last year (a la Kaletsky, before the Times did the sensible thing...)

[MississippiJohnHurt]

An essential attribute for any telegraph economics writer.

yeah Halligan, Conway too I suppose. I like Roger Bootle though he's an opinion guy rather than journalist.

I do like AEP, he has an interestingly apocalyptic mind and some of his points are plausible, it's just that he seems a little too keen for them to be proved right, and that's led him to come out with more and more outrageous statements over the last year (a la Kaletsky, before the Times did the sensible thing...)

[scepticus]

it's just that he seems a little too keen for them to be proved right, and that's led him to come out with more and more outrageous statements over the last year

yes. Marc faber falls into this catagory too.

If he's not careful AEP will end up being a foaming at the mouth madman like faber.

some of these doom pundits are just far too impatient for their own good.

can't be healthy to ones sanity to have a vested professional interest in social and economic collapse, because it basically pits you against everyone else.

[Timm]

yeah Halligan, Conway too I suppose. I like Roger Bootle though he's an opinion guy rather than journalist.

I do like AEP, he has an interestingly apocalyptic mind and some of his points are plausible, it's just that he seems a little too keen for them to be proved right, and that's led him to come out with more and more outrageous statements over the last year (a la Kaletsky, before the Times did the sensible thing...)

I think he just wants more printy.

He will scream until he gets it, and then it will be time for tea.

[buyerbeware]

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/6927923/Global-bear-rally-of-2009-will-end-as-Japans-hyperinflation-rips-economy-to-pieces.html

In the end, the Euro's fate will be decided by strikes, street protest, and car bombs as the primacy of politics returns. I doubt that 2010 will see the denouement, but the mood music will be bad enough to knock the euro off its stilts.

The dollar rally will gather pace. America's economy though sick will shine within the even sicker OECD club. The British will need the shock of a gilts crisis to shatter their complacency. In time, the Dunkirk spirit will rise again. Mervyn King's pre-emptive QE and timely devaluation will bear fruit this year, sparing us the worst.

By mid to late 2010, we will have lanced the biggest boils of the global system. Only then, amid fear and investor revulsion, will we touch bottom. That will be the buying opportunity of our lives

This gives me comfort if it goes to AEP's plan I can retire next year.

But then again I will probably be back to work the year later when I lose my shirt in 2011.

Edited January 4, 2010 by buyerbeware