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The Masked Tulip

My Safety Plan For A Deflationary Bust

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Talks about inflation and IRs re house prices - nothing that we have not talked about a thousand times or more on here.

http://www.moneyweek.com/news-and-charts/economics/uk/my-safety-plan-for-a-deflationary-bust-54418

" I'm still long corporate bonds. As I've said before, with a bond you've got the promise of getting your interest and money back."

and the promise can be worth diddly in a deflationary bust, clearly a genius at work

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If you actually believe in a deflationary bust then simply hold physical cash. (Not a bank's promises to pay you cash)

It will magically become worth much more as the entire banking system and economy around you implodes due to lack of money .. because despite the fact that the government could in fact issue unlimited amounts of fiat currency to stop this happening, for some unfathomable reason they won't actually do that in the deflationary bust scenario.

The improbability of the statement in the previous paragraph should tell you how unlikely a deflationary bust is.

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If you actually believe in a deflationary bust then simply hold physical cash. (Not a bank's promises to pay you cash)

It will magically become worth much more as the entire banking system and economy around you implodes due to lack of money .. because despite the fact that the government could in fact issue unlimited amounts of fiat currency to stop this happening, for some unfathomable reason they won't actually do that in the deflationary bust scenario.

The improbability of the statement in the previous paragraph should tell you how unlikely a deflationary bust is.

Exactly. When Iceland went broke the Krona devalued by over two thirds (69%) against the Euro. Fair enough, at least Icelanders who stored physical cash saved 31% of their wealth compared to zero if it was in the bank, but still, hardly the winner of winning wealth protection and investment strategies was it?

Likewise Icelandic Bonds lost more or less the same, but that was only after a bailout of the Icelandic government by the FED.

The Icelandic Stock Market fell 90%, but that was in Krona, so lop another 69% off the final price and losses were over 95% from peak.

What did that leave? Gold. The price exploded by 259% when Iceland collapsed. However, because that was in Krona, the 69% devaluation in the Krona versus the Euro meant gold holders still made a real loss of 23.5%. Still, it was the best of an otherwise awful bunch.

What has to be remembered with gold in that scenario is that Iceland is only a small country of approx. 300,000 people. At the time the gold price was subject to negative external pressures and dipping lower, as the collapse of Lehman (and then Iceland) created a dash for the perceived safety of cash (dollar and Euro). Also many large financial firms were selling gold to lock in profits to cover losses in the stock markets, thereby putting more negative pressure on gold. This is why gold still gave a negative return in Iceland, despite the local fundametals of everything being toast.

Now we find ourselves in a situtation where the safety of the dollar and Euro are being being resolutely questioned. When the finances of the governments and economies backing the two biggest 'safe-haven' currencies are in question, where else is there left to turn? What happens when gold explodes 259% higher in your local currency, but is doing so in all currencies, because they are all toast? That's right, KERCHIIIIING!!!

Obviously, just telling people to buy loads of lovely gold (and some silver) and sit tight until the SHTF does not sell magazines. Hence why Bengt writes nonsense articles like this from time to time. :rolleyes:

Edited by General Congreve

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I only see a deflationary bust after the hyper inflationary recession has played out in full.

They'll fight any form of deflation with the printing press until they cannot fight it anymore.

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I only see a deflationary bust after the hyper inflationary recession has played out in full.

They'll fight any form of deflation with the printing press until they cannot fight it anymore.

+1

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I only see a deflationary bust after the hyper inflationary recession has played out in full.

They'll fight any form of deflation with the printing press until they cannot fight it anymore.

If you were to remove the word hyper, I might agree with you.

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How about super duper inflation then?

No. I'm expecting highish inflation of the price of things bought everyday with cash, food, clothing etc, along with minimal inflation or in some cases (houses) deflation of the price of things often bought with borrowed money, followed by a deflationary recession across the board.

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No. I'm expecting highish inflation of the price of things bought everyday with cash, food, clothing etc, along with minimal inflation or in some cases (houses) deflation of the price of things often bought with borrowed money, followed by a deflationary recession across the board.

Biflation is the order of the day. Most things bought with real money will inflate in price, most things traditionally bought with credit, especially those assets already pumped to the sky with credit (like houses) will deflate in price.

What level of inflation we get to before the plug is pulled remains to be seen. It partly depends on the public's appetite for price inflation/asset deflation and their response to monetary policy, i.e. how much people will take before kicking off about prices going up, or their houses going down in value.

Either way they'll be a lot of p1ssed off people, so the government will probably flip-fop along with high inflation until something suddenly gives, be that the sudden onset of hyperinflation or mass civil unrest leading to the plug being pulled and a deflationary collapse occuring. Of course, what is most important is the banks being made technically whole again with funny money before the plug is pulled.

Please note, the deflationary collapse won't actually mean a shrinking of the money supply (true deflation). It will be a deflationary collapase of the economy, i.e. house price going down, businesses going bust etc. So cash will be trash, as the economic Armageddon flows through into currency devaluation.

For example, Iceland's currency devaued 69% against the Euro when they had their 'defaltionary' collapse, followed by 18% inflation the following year.

However, you can expect deflation in the price of everything if you hold REAL money. The sort with no counter-party risk, that can't just be printed into oblivion.

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What did that leave? Gold. The price exploded by 259% when Iceland collapsed. However, because that was in Krona, the 69% devaluation in the Krona versus the Euro meant gold holders still made a real loss of 23.5%. Still, it was the best of an otherwise awful bunch.

Do you think that a lot of the gold buying now is being done on leverage?

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Do you think that a lot of the gold buying now is being done on leverage?

The CME (Chicago Merchantile Exchange) have hiked gold and silver margins to 85% to prevent gold and silver being bought with anything but negligible leverage (you have to stump up 85% of the purchase price to play futures) and I'm pretty sure I haven't seen the banks falling over themselves to offer everyone gold purchasing loans, even if the buyer posts 99%+ collateral.

So, in answer to your question, no, gold is not under threat of credit-based ponzi deleveraging. :lol:

Edited by General Congreve

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The CME (Chicago Merchantile Exchange) have hiked gold and silver margins to 85% to prevent gold and silver being bought with anything but negligible leverage (you have to stump up 85% of the purchase price to play futures) and I'm pretty sure I haven't seen the banks falling over themselves to offer everyone gold purchasing loans, even if the buyer posts 99%+ collateral.

So, in answer to your question, no, gold is not under threat of credit-based ponzi deleveraging. :lol:

What are lease rates doing presently?

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What are lease rates doing presently?

Lease rates are climbing, are they not? It is becoming more expensive to lease gold - to prize the real thing! - from those that have it, in order to sell it into the 'gold market'.

Leased gold has been leased many times over by the criminal banking cartel. So now we have huge multiples of the total existing global supply of gold that is now mere paper (they say 99%), traded as if it were gold, which it isn't. By now, the only thing that flimsy promissory note has in connection to gold is some words on paper or a computer screen somewhere.

So yes, there will be massive deleveraging. It will be a one way ticket south, very quickly to a big fat ZERO for PAPER GOLD, when the chips fall and people call for the delivery of their paper gold contract or the return of their leased gold.

Now, just what will that do for the price of the real physical metal? I'll give you a clue, it involves large amounts of leverage! :D

Edited by General Congreve

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  • 312 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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