Wednesday, Dec 30, 2009

Printing money ALWAYS creates inflation....or does it?


The dollar, debt destruction, S&P movements, herding rather than news moves markets, do financial markets move because of economics or is there another reason???
1st of a 2 parter - 2nd part :
As i said before Mr. P is often a little early on his calls. HNY!!!

Posted by techieman @ 11:20 PM (14651 views)
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1. techieman said...

if interested for a more detailed "technical" analysis - i.e. with nice pictures....

part 1:

part 2 :

Part 3:

Wednesday, December 30, 2009 11:42PM Report Comment

2. fallingbuzzard said...

People forgot that credit collapse creates immensely powerful deflation.

Thursday, December 31, 2009 12:00AM Report Comment

3. techieman said...

Also Peter Schiffs counter (inflationary) argument - 50mins - take yr pick :

Thursday, December 31, 2009 12:02AM Report Comment

4. fallingbuzzard said...

I'll stick with my wild guess that credit contraction is still more significant than money creation

Thursday, December 31, 2009 12:20AM Report Comment

5. Tom101 said...

Very interesting. What if oil heads up though....??

I realise oil price is related to consumer spending and business activity. However, if production gets hit then price would go up and subsequently be a contributor to inflation....right?

Thursday, December 31, 2009 12:23AM Report Comment

6. fallingbuzzard said...

Thats the reality in the UK. There's no credit even if there's equity available and actually I don't see why lenders should lend. The government had its chance to nationalise the whole banking sector, rationalise and restructure it, which it should have done, but didn't because it appeared too problematic.

Thursday, December 31, 2009 12:26AM Report Comment

7. Crunchy said...

Associate with men of good quality if you esteem your own reputation; for it is better to be alone than in bad company.

(George Washington)

Thursday, December 31, 2009 03:02AM Report Comment

8. hpwatcher said...

People forgot that credit collapse creates immensely powerful deflation.

Not necessarily; today, we have wonders like QE.

Moreover, I am seeing prices, house prices etc UP, UP, UP, and cost of money is still VERY cheap.

Deflation simply ain't happening, sadly.

Thursday, December 31, 2009 07:57AM Report Comment

9. inbreda said...

@2 fallingbuzzard

I WOULD agree with you, if the original creation of that credit had proved inflationary. Which it didn't.

Credit is effectively a proxy for money creation, but slightly different as it can be viewed as spending real money that just hasn't been earned yet, rather than an actual creation of new money. But as it wasn't inflationary when created, it won't be deflationary when removed.

I'm with hpwatcher@6. Inflation is coming. Mixed with deflating wages and rising unemployment and massive social turbulence. As well as a big dose of currency devaluation. I think that what has happened already is too big to stop. It is the catalyst that will once and for all show that england is an EX superpower. An empire no more.

Thursday, December 31, 2009 08:55AM Report Comment

10. fallingbuzzard said...

@7, so I would like to hear your argument that the creation of credit hasn't been inflationary seeing as that's where you disagree with me. Give me the evidence that there hasn't been major inflation over the past decade.

Thursday, December 31, 2009 09:28AM Report Comment

11. techieman said...

sometimes it would be nice if people did read / watch the posted articles before commenting. I cant be too critical as i have done that myself. But Prechter and schiff both give a good analysis - even though their views are opposite.

Perhaps the deflation is only gonna happen in the US so perhaps IT IS different here. Perhaps it wont even happen in the US. If you actually give it some thought and watch / listen rather than shoot from the hip, then you might actually appreciate a few things. I cant understand the comment "if it wasnt inflationary when created then it wont be when removed". The statement is true as it stands but the underlying sentiment is wrong. Of course the creation of credit is inflationary unless its used mostly to facilitate the means of production and is paid back by the productivity increases. In other words if its used MOSTLY for debt that is created just to consume then it will create inflation. If there is a "correct" balance between the two then it wont be. Of course i would be the first to say i have no idea what that balance would be only to say though that the self liquidating credit has been GROSSLY outpaced by non-self liquidating.

Also how the inflation manifests is another issue. Is the manifestation the increase in the value of good or the decrease in value of the paper used to buy those goods? or both?

Personally i have believed the inflationists dogma for years, that there will always be inflation in a fiat system. But actually Mr P provides a powerful argument why thats not always right. And its very rare that its not right and yes once we have had the deflation then there will probably be massive inflation, or perhaps something worse. The inflationists are right but in my world timing is everything and my money is actually that their timing sucks.

Rather than dismiss that argument i have thunk[sic] quite alot about it. The penny dropped for me in about 2006. The £ can fall against other currencles thats true, and its also true that a fall in particular against the Euro would insulate the uk to an extent, [this of itself is a huge discussion]. But if the "everything will be alright veneer is lost" then the game (of the past inflation and associated increase in GDP) will be shown as a charade.

As i have said before if the government didnt think deflation was an issue, would they really be using all the ammo (whatever the cost) to fight it? Brown has previously adopted the "golden rule" and now that has been abandoned.

The point is that Mr. P has been predicting the deflation for years now. As to why watch the videos and you might actually learn something of use, otherwise to be perfectly honest its just lazyness. And no that doesnt mean i am saying that my view is correct - you have to just understand why i think it is.

Thursday, December 31, 2009 12:21PM Report Comment

12. techieman said...

infact by actually being on this site and supporting a HPC then surely you ARE arguing against inflation and for deflation?!??? That has always bewildered me on here. I think its very difficult to argue both ways - as inbreda does. What do people spend most of their money on?

How on earth do you inbreda KNOW that the credit wasnt inflaionary anyway? You dont have the benefit of knowing the aggregate numbers without the credit! Why do you think we have not had a major recession when one was due according to the cycles? Luck? No because credit was thrown at the economy. The very things (liar loans, huge income multiples, force feeding of credit cards, bankers salries etc) of which on this site most contributors complain. Without that worldwide ponzi increase in credit dont you think we may have had a deflationary depression before now?

Contributors have put up the idealised K-Wave that has been rubbished on here. Its quite an insult to Professor Nikolai Dmyitriyevich Kondratyev who died for the reporting of what he found. It wasnt based on his opinion or beliefs.

Thursday, December 31, 2009 12:36PM Report Comment

13. quiet guy said...

"by actually being on this site and supporting a HPC then surely you ARE arguing against inflation and for deflation?!???"

Well Schiff has warned about property price drops and the inflationary risks for years. The American HPC is a matter of record. We'll have to wait and see about inflation.

"The inflationists are right but in my world timing is everything and my money is actually that their timing sucks."

Fair enough.

Thursday, December 31, 2009 01:05PM Report Comment

14. techieman said...

quiet guy - we all are entitled to our opinions. Thats why i thought it best to put the alternative views from people that know their stuff - just to show that no one should be dogmatic in their views.

Of course no-one KNOWS what will happen. I have what i think are high probability calls - you may have seen some BUT if i KNEW i was right on every call then i wouldnt have a stop and i would just put my whole net worth on the line.

Schiff is convinced of inflation - P says it could happen but only after some deflation first. The latter makes more sense to me, but i understand why some go with the former and yes they may be right.

Thursday, December 31, 2009 01:52PM Report Comment

15. quiet guy said...


Basically, I agree with what you're saying but I'd like to point out a difference in perspective.

If I've understood correctly, you make trades in equities, currencies and probably other things several times a year, or maybe much more frequently than that. To trade you are obliged to look at short term factors such as Prechter's idea's about herd mentality and many other things ...

I don't trade. I'm only interested in the bigger picture, for now - particluarly how to preserve savings over the next decade. For me, Schiff's ideas seem more persuasive and more relevant to my long term future.

Not many of my peers own equities - most just have savings accounts. I'm just guessing but I suspect that the majority of the blog readers are similar i.e. you are the exception. If I'm right, it's hardly surprising that you get some questionable comments.

Thursday, December 31, 2009 02:17PM Report Comment

16. hpwatcher said...

The point is that Mr. P has been predicting the deflation for years now. As to why watch the videos and you might actually learn something of use, otherwise to be perfectly honest its just lazyness. And no that doesnt mean i am saying that my view is correct - you have to just understand why i think it is.

The deflationist argument only hold water, if you regard gold as the ''real'' money and measure everything else against it. BUT if you are talking in terms of dollars....the story is very different....

Thursday, December 31, 2009 02:31PM Report Comment

17. hpwatcher said...

As i have said before if the government didnt think deflation was an issue, would they really be using all the ammo (whatever the cost) to fight it?

What they are doing is keeping interest rates low and using their cheap money to provide a stimulant. They aren't doing it because they fear deflation, they are doing it to provide a debt fuelled boom into a general election year.

Thursday, December 31, 2009 02:35PM Report Comment

18. techieman said...

QG - yes your 2nd para is correct.

Re preserving savings then i have acknowledged on here - in another post - that people should just "stay safe". By that i mean dont invest in assets - particularly shares as i lean toward P.

The reason i lean toward P is for one thing he told everyone to get short of equities (or get out if you are not involved) before the big falls in 2008. He also then advised in 2009 to get out of shorts - potentially to buy shares, although he was suggesting a bounce back to be fair he had a range of probabilities as to the extent of the rise back. Now (since about August) he has advised people to go back to being short. I have always said he is usually a bit early. You may have come across me warning MG on that, and personally i have been short but with very small positions. So yes i have lost money on those equity index positions but have been bailed out by the currency moves (where i was alot more conident). I also trade other stuff that i make a point of not discussing here. I dont trade individual shares but do trade the major share indicies.

When i am fully loaded i will have positions in most of the major indices. [S&P, FTSE, Dax, SMI, Nikkei etc.]. To give you an idea i have just been since march playing with S&P and FTSE only, and then one at a time. My view is that 5500 looks good on the FTSE. Thats just application of some TA. But much past there i would be surprised, but not "astonished". Astonished is my highest description of reversal probability.

Anyway - i understand what you say but i dont agree with you. The point is (if P is right) then the way to preserve savings is to have savings now - save as much as possible in cash, and then at a certain time use other things as a savings vehicle. As for Gold, I actually dont agree with P for the moment - i do think it goes higher into the new year (they dont) but then i do think we will have a crash in gold. So IMO you cant just say right i will buy all the gold i can, because that really is putting all yr eggs in one basket.

You would be surprised, i risk very little of my trading capital on any one position - i have always been conservative since i have seen so many people lose everything because they KNEW they were right.

The capital not at risk is held in "secure" funds - between currencies and not earning very much in the way of interest. Even though you would think i was a speculator, i am actually very safety concious.

I have a relatively large amount of gold - at very low price, from years ago. That was a mixture of luck and analysis , and if im honest mostly luck!! i sold some in March 2008 near that high, and i said, on here that solely because of S2R1s views i would keep the rest. I wouldnt add to that - not because i dont think it will appreciate - now i do, but because i have enough exposure if it doesnt and i dont want more.

I hope this makes sense. Really i do think i am in the same boat as everyone else here. Basically "my job" is a little different, so if you like you have a job and some savings. Whatever you or i earn is irrelevant. We both (i assume) have savings that we want to maximise in terms of the life they can buy us. So i really dont think i am an exception.

Thursday, December 31, 2009 02:52PM Report Comment

19. techieman said...

hi hpwatcher. Have a HNY. Fair points you raiseth, although if you could expand a little on the dollar that would be good.

Did you take a look at that link i sent you before - the Neowave one? What did you think?

Nice GBP rally btw over the last two days back to the top of the trend channel (USD). Interesting and not that surprising. A conservative 159.20 purchase doesnt look so silly now, although i count myself unlucky that i didnt get the last 5% of the position away at 1.5815 (low print i have is 1.5830)

Thursday, December 31, 2009 02:59PM Report Comment

20. techieman said...

hpwatcher - i do love the way you take my comments out of context though. I suppose thats easy for people to do when i am admittedly verbose.

At the end of the day we all do what we think is right or best for us. I dont agree that i cannot accept you disagree with me, and really i dont disagree with everything you say, or do so for the sake of it. My basic point is dont put all your eggs in one basket - spread the risk but not a la global equities.

Of course everyone can have an opinion. I just try to give people more content on which to base that on. I haven't got round to posting a Martin Armstrong post which is pretty opposite to what Pretcher says but i will. Frankly i find armstrongs posts difficult to follow, so perhaps i dont believe him so much because of my lack of intelligence or his inability to simplify the issues involved.

Thursday, December 31, 2009 03:06PM Report Comment

21. techieman said...

7 minutes of schiff for even more balance - its part of the 50 odd mins above. he says this:

Peter Schiff says DEFLATION will be BIG . . . . . . . . . . . . . . . . when you mesure it in gold !

But not when you measure it in dollars.

Thursday, December 31, 2009 05:05PM Report Comment

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