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The Future Will Not Be Deflationary


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First post wasn't as funny, needed an edit ;)

RB's house purchase made perfect sense to me, seeing as I already knew he was economically illiterate. :lol:

Brutal. BTW I'm liking this free man vibe you have going on, especially since I worked my way through the original 'The Prisoner' recently.

Not sure what RB's game is really, starting to believe he maybe a US banker shill herding people towards that flaky looking Dollar ;)

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Brutal. BTW I'm liking this free man vibe you have going on, especially since I worked my way through the original 'The Prisoner' recently.

Not sure what RB's game is really, starting to believe he maybe a US banker shill herding people towards that flaky looking Dollar ;)

Yeah, a bit harsh perhaps, but it needed to be said, I hate to think people believe and act on the nonsense he spouts. He has to be kept in check -

$1374! BAD BEAR!

Glad you like the free man vibe. Things I have done towards being a free man:

1. Bought gold and silver

2. Discharged all my debts.

3. Refused to fill in the census ;)

Proud to say all the images in the signature are my own work. Well the word placement, font choice and photoshopping anyway, I didn't program the pioneering Dire Straits video :lol: Glad my efforts are appreciated!

Edited by General Congreve
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We're dealing with something a little different here. A banking elite who hold the reigns of power and will make damn sure they get paid and politicians who do not want to see a deflationary collapse and debt default on their watch.

In a nutshell, the banks, via central banks and complicit governments, are enforcing repayment of debts owed to them through inflation. So the bankers end up getting paid (rather than going bust) and society is forcibly made to pay the outstanding debts to the banks by having their wealth stolen via inflation.

In tandem with this, the politicians would rather print and pay for running the country, thereby punting the problem into the future, than face the deflationary music.

With big money and big politics both with a vested interest in inflation, I cannot see how deflation will be allowed to happen, short of violent revolution. And even if we do get that in Greece, it will not be enough to set off deflation in the UK, as we can print our way out of it. Revolution would have to take place here too for deflation to hit our shores.

And my, don't we need it. Just to get back to 2008 we need to take 40% off the price of bread, petrol and car insurance for starters. Let's hope that deflation comes soon and hits hard. :lol:

Very near to it's different this time.

Ultimately the collapse will come, however it's becoming apparent they will try and beat the deflation trap by printing as much as they can to keep up demand.

Ludwig von Mises describes the endgame brought on by reckless expansion of credit: "There is no means of avoiding the final collapse of a boom brought about by credit (debt) expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit (debt) expansion, or later as a final and total catastrophe of the currency system involved."

Please enlighten me as to how they will avoid the end? The invisible hand has never missed a bitch slap yet.

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Very near to it's different this time.

Ultimately the collapse will come, however it's becoming apparent they will try and beat the deflation trap by printing as much as they can to keep up demand.

Ludwig von Mises describes the endgame brought on by reckless expansion of credit: "There is no means of avoiding the final collapse of a boom brought about by credit (debt) expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit (debt) expansion, or later as a final and total catastrophe of the currency system involved."

Please enlighten me as to how they will avoid the end? The invisible hand has never missed a bitch slap yet.

Are you asking me to enlighten you or is that a rhetorical question?

Anyway, I also believe defaltion is bullish for gold as it will also lead to currency collapse, I have argued this many times before. In a nutshell, collapsed economy, bust banks, government in default on it's bonds = f4cked currency.

So, debt-burden induced deflationary collapse, or printing-induced inflationary collapse (in an effort to avoid the former) will result is the same thing, the destruction of the currency at stake. So, whatever choice the powers that be make (so far they have chosen the second path), you do not want to be holding the paper currency at stake when the sh1t goes down.

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Let's be clear: inflation is an increase in the supply of money and credit relative to available goods and services, while deflation is the opposite.

Therefore price movements alone have no explanatory or predictive value. We can bitch and moan about fuel and food however it is not real inflation.

John Rubino wrote:

”With a few months of hindsight, it's now clear that debt-as-money was not one of humanity's better ideas. When the U.S. housing market -the source of all that mortgage-backed pseudo money- began to tank, hedge funds found out that an asset-backed bond wasn't exactly the same thing as a stack of hundred dollar bills. The global economy then started taking inventory of what it was using as money. And it began crossing things off the list. Subprime ABS? Nope, that's not money. BBB corporate bonds? Nope. High-grade corporates? Alas, no. Credit default swaps? Are you kidding me?

No longer able to function as money, these instruments are being "repriced" (a slick little euphemism for "dumped for whatever anyone will pay"), which is causing a cascade failure of the many business models that depend on infinite liquidity. The effective global money supply is contracting at a double-digit rate, reversing out much of the past decade's growth.”

We are on the verge of a deflationary debt default tsunami. More and more individuals, companies and governments at all levels are approaching the point where servicing their debts will no longer be possible.

Now that credit is contracting, that 'free money' has turned into unpayable debts and illiquid asset markets, which will eventually have to be marked-to-market. Now balance sheets must be rebuilt and neither borrower nor lender is willing to dig themselves into an even deeper hole. The velocity of money will inevitably fall dramatically as risk aversion rises, reserves are held again looming defaults and cash is hoarded. The scale of the bad debt in our global economy is gargantuan.

The problem with inflationists is that they fail to recognise the role of credit and the nature of deflation.

Dislaimer: I hold both cash and gold/silver.

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One of the best arguments I have ever heard for Inflation and against Deflation as the desired outcome;

YOU CAN'T TAX DEFLATION

Exactly. If they let deflation win then the governments debts will crush them. Printing pays the debts off quicker. Both scenarios destroy the currency and screw the little guy.

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Let's be clear: inflation is an increase in the supply of money and credit relative to available goods and services, while deflation is the opposite.

Therefore price movements alone have no explanatory or predictive value. We can bitch and moan about fuel and food however it is not real inflation.

John Rubino wrote:

We are on the verge of a deflationary debt default tsunami. More and more individuals, companies and governments at all levels are approaching the point where servicing their debts will no longer be possible.

Now that credit is contracting, that 'free money' has turned into unpayable debts and illiquid asset markets, which will eventually have to be marked-to-market. Now balance sheets must be rebuilt and neither borrower nor lender is willing to dig themselves into an even deeper hole. The velocity of money will inevitably fall dramatically as risk aversion rises, reserves are held again looming defaults and cash is hoarded. The scale of the bad debt in our global economy is gargantuan.

The problem with inflationists is that they fail to recognise the role of credit and the nature of deflation.

Dislaimer: I hold both cash and gold/silver.

Yes, inflation is an expansion in the money supply and rising prices a side effect that follows that. Deflation is the opposite.

Prices are going up. Some of this is admittedly due to devaluation of the pound, which is just another side of the currency coin to inflation. However, we are also experiencing real inflation of the money supply right now.

Just because banks have stopped loaning money into the economy, all previously loaned money doesn't just disappear in a puff of smoke. It's still busy working its way round the economy, it is now feral. It isn't even locked up in house prices, because ultimately someone got paid all that money and went and spent it on stuff, so the money is still circulating out there. So a house price collapse (bought on by lack of credit - because that's what put the prices up anyway) will cause the notional asset value of houses to 'deflate', but it will not suck money out of the system, so will not cause deflation in the real sense of the word.

If central banks are also printing and filling in the holes in bank balance sheets and other companies, and they also monetise government debt out of thin air, which is spent straight into the economy in the form of public sector wages etc.(all things they are doing as we speak), that is an inflation of the money supply and causes prices to rise.

The only deflation we will get is where previously debt-steroided assets like houses plunge in notional value. This is debt deflation and is a problem for the banks because they go broke and a problem for the government because an economy built on house prices that are declining will collapse and destroy their tax revenue. Of course, even savings 'lost' in collapsing banks are not really lost, as these go to pay bank creditors. So no currency will be harmed in 'deflation', you will not see prices fall.

And just in case you aren't sure, when Iceland suffered their collapse they experienced INFLATION! :lol:

Maybe I am wrong, perhaps you can explain where deflation of the money supply has occurred?

Edited by General Congreve
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In response to a thread posted earlier by RB about how the future is deflationary. Think it deserves it's own thread. Please discuss...

RB, you are confusing the gilt market with a free market. The BoE talking about more QE (which means it will happen), so you can forget the notion of bond vigilantes forcing up interest rates. For every gilts sold by a 'vigilante' QE will be magicked from thin air by the BoE and they will buy that gilt, thereby creating the necessary demand to keep interest rates low.

They will cry it is not inflationary, because at some unspecified time in the future the will sell the bonds back into the market at the same price and the newly created money will be cancelled out, so it is a zero sum game. But if there isn't demand for the debt now, what do you think the likelihood will be in the future, when even more debt has been created to plug the gaps in the UK's finances?

Ergo, they will never be able to sell these bonds back into the market at the value they bought them for. So the money they have created to buy them will stay in the system. So they might as well be printing up directly to fund the deficit and cut out the bullsh1t.

ZIRP is inflationary and QE is a tool of maintaining ZIRP which is inflationary as of itself.

They will use these tools to continue to support asset prices and fund government expenditure. Can you really see our government saying, "Sorry, we're slashing pensions, closing hospitals and old people's homes, cutting teachers etc. and by the way, you've got no savings left cos we let the banks collapse". They'd be riots.

Christ, they can't even get the public sector to retire a couple of years later and pay the equivalent contributions as private sector workers towards retirement. If the public won't swallow the cuts, then they'll just have them forced on them via inflation. Same difference.

The future is inflationary.

Dear god. Another gold ramping thread. You have the same fixated delusions about gold that most of the 'investors' on Singing Pig had about property back in 2006.

Two questions for you:

i) I think that you said a few weeks back that only 30% of your portflio was in gold. What is the other 70% in?

ii) What will be the trigger for you to sell your gold?

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ii) What will be the trigger for you to sell your gold?

When Injin comes on to HPC and says I told you so. And RB daren't show his face around here...

I consider gold tbh as TSHTFF scenario rather than an investment and tbh it is increasing as a % of my net worth not because I'm buying more but paper keeps falling against it.

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Dear god. Another gold ramping thread. You have the same fixated delusions about gold that most of the 'investors' on Singing Pig had about property back in 2006.

Perhaps some of those Singing Pig 'investors' knew what they were doing, maybe they knew houses don't always go up and pulled the plug in 2007 for some nice profits?

I bought my own place in 2002, could see the market was bubbling, but had to make some hard choices based on rent costing more than the mortgage and second guessing the market would continue up for a bit longer. I judged it right and sold bang on the peak at August 2007. All thanks to due diligence.

I then reinvested the proceeds in Icesave at 6% for a year, pulled it out 2 days before they collapsed. Due diligence.

I then reinvested half of the money in gold and silver and have made a 50% return on gold so far and a 100% return on silver (that's AFTER it's recent crash to $35/Oz).

Seems I've made some reasonable calls. The first two couldn't have been more on the money, could they? Exact month of the property peak and, well ok, I could have pulled the Icesave savings with one day to go instead of two, so I admit I was 24hours early on that one, you got me there. :lol:

With anything, there is a time to have skin in the game and a time and a time not too. The time to be in gold is now. The time to be investing in property is not now (certainly if you are leveraged with a big mortgage), the time to be investing in bonds is not now, the time to be out of fiat currencies IS now. Will it be this way forever? No and I have never claimed that, I merely say gold/silver is the best place for your wealth NOW.

Edited by General Congreve
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Let's be clear: inflation is an increase in the supply of money and credit relative to available goods and services, while deflation is the opposite.

Therefore price movements alone have no explanatory or predictive value. We can bitch and moan about fuel and food however it is not real inflation.

John Rubino wrote:

We are on the verge of a deflationary debt default tsunami. More and more individuals, companies and governments at all levels are approaching the point where servicing their debts will no longer be possible.

Now that credit is contracting, that 'free money' has turned into unpayable debts and illiquid asset markets, which will eventually have to be marked-to-market. Now balance sheets must be rebuilt and neither borrower nor lender is willing to dig themselves into an even deeper hole. The velocity of money will inevitably fall dramatically as risk aversion rises, reserves are held again looming defaults and cash is hoarded. The scale of the bad debt in our global economy is gargantuan.

The problem with inflationists is that they fail to recognise the role of credit and the nature of deflation.

Dislaimer: I hold both cash and gold/silver.

Credit is not money, and money doesn't dissapear.

Its the fundamental error of all deflationists.

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Exactly. If they let deflation win then the governments debts will crush them. Printing pays the debts off quicker. Both scenarios destroy the currency and screw the little guy.

Deflation isn't the problem it's the commitments already made by govt on an ever inflating/growing economy. Everything always goes up. If govt ran a balanced budget and didn't make forward commitments deflation isn't an issue.

The very fact that deflation will be so debilitating shows how inept our leaders are. Deflation is part of the natural economic cycle, it should be embraced. However no one has ever planned for a deflationary environment.

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Dear god. Another gold ramping thread. You have the same fixated delusions about gold that most of the 'investors' on Singing Pig had about property back in 2006.

To be fair I don't think any Goldbugs are 'investing' in Gold, more likely de-investing from paper.

You have to hold your wealth in some kind of container and not everyone likes the default container the FED and BoE keep shooting holes in...

At the end of the day you pays your money your makes your choice.

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This is what I see playing out right now. If they carry on with these tragic policies inflation will ultimately go hyper until it cannot continue any further, then it all blows up into a deflationary depression.

Bankers need inflation in order for the money they created to be repaid. Interest has to be summoned up as it existed outside of the money supply at the point of loan creation.

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Credit is not money, and money doesn't dissapear.

Its the fundamental error of all deflationists.

Exactly.

1. Bank creates money

2. Loans money to mortgagee

3. Mortgagee spends money on house

4. Former house owner takes money

5. Former house owner spends money

6. Money is now feral in the economy

The economy now collapses in a defaltionary (!) spiral where house prices crash! How does this destroy the money the bank created to buy the house? It doesn't. The only thing deflating is the house prices, effectively all that is happening is the notional price tag on the house has to be lowered. Meanwhile the money supply is unchanged. Seeing as the true definition of deflation is a contraction in the money supply, then this is NOT deflationary.

It is true the side effects of real deflation are lower prices, but house prices are only falling because the credit creation that allowed the pyramid selling scheme has been turned off, so the housing pyramid is collapsing. What is critical to understand is that while the credit creation has been stopped, it has not been reversed. A little money is being paid back to banks, but that isn't then destroyed, it stays on the balance sheet, it still exists. They are also still printing more money to fill the holes in bank balance sheets made by falling house prices etc.

Even if they let the banks collapse and take savers money with them, savers money would not be destroyed, but would be an asset that would be used to pay the banks creditors. So...

NO MONEY WAS HARMED IN THE MAKING OF THIS 'DEFLATION'.

Edited by General Congreve
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