Saturday, July 21, 2012

Hyperinflation, February 2014?

Money supply explosion will lead to accelerating inflation

The second chart shows gold’s established hyperbolic course. This chart was put together by Armand Koolen, a Dutch physicist, after reading James Turk’s and my writings on gold and economics. In Koolen’s words, the hyperbola fits in with the official gold price in the early 1900s, the revaluation to $35 in 1934, the onset of the secular bull market in 2001, the bottom in October 2008 and its approximate track since then. His discovery is interesting. Singularity for this curve, or the point where the gold price goes to theoretical infinity, is in February 2014, only 26 months away. Unless this long-term trend is somehow broken, gold is also telling us the dollar is heading for hyperinflation.

Posted by libertas @ 06:29 PM (2736 views)
Please complete the required fields.



19 thoughts on “Hyperinflation, February 2014?

  • With undoctored charts from 1900, how could they be wrong?

    Reply
    Please complete the required fields.



  • general congreve says:

    I can do better than 1900. 😉

    I came across this comment the other day on a sky article on London property:

    THis is very much a regional thing. In the Inner London Boroughs prices are still rising. I unearthed the original deeds to my house built in 1874. The house cost £250 to build and my neighbour with a similar house just sold theirs for £978,000. Some inflation rate for housing.

    I agree it’s regional, in that London is most gravity defying, but looking beyond that fact…

    £250 in 1874, or 250 pounds sterling, was 250 gold sovereigns.

    Today a gold sovereign is valued at around £250. So, in 1874, the house in question was supposedly worth around £62,500 in 2012 pounds, if the price of gold has accurately tracked the devaluation of the pound.

    That currently makes this particular London house 93.6% overvalued at £978,000.

    Now, I’m willing to concede London property is up to 50% overvalued in fiat terms, so let’s say the house is really worth £489,000.

    That still makes the house in 87.2% overvalued in 2012 pounds compared to its 1874 price!

    Either that, or some other part of the equation is seriously out of kilter, i.e. a gold sovereign should be currently valued at £1956 (£8308/Oz), or between that and 4k (£16,000/Oz) if you believe London house prices to be less than 50% overvalued.

    Of course, a lack of supply of housing could has distorted things recently to a degree, but on the other side of the equation, there was huge overcrowding in the 1800’s compared to today. So, if anything the opposite effect on house value should be the case, i.e. housing was more overvalued per £ in 1874 than it is today on a per person basis.

    Of course there are other to consider in this equation. One is the fact there is now only approximately 2/3rds of an ounce of gold per person in the world, compared to roughly an ounce per person in the 19th century – a cheap-energy-driven explosion in mining yields in the 20th century has been more than outpaced by global population growth. So, more or less, another 33% increase in valuation of the above range of figures needs to be factored in.

    Then of course there is the natural deflationary effects on stable currency of a more productive economy. The 20th century saw an explosion in global production and efficiency, driven by cheap energy from coal, oil and nuclear that was combined with huge gains in transport efficiency from the the invention of the internal combustion engine. So, that has to be taken into consideration as well when looking at what the purchasing power of a currency that has been more or less stable in quantity per head of population since 1874 is worth today, i.e. there is 33% less gold currency per person in existence today, but tonnes more stuff to buy with it.

    £978,000 indeed, should be more like £125 if we’d kept 1874 money.

    I think this neatly illustrates the degree to which people have been continually robbed by TPTB, over the last 100 years and the degree of obfuscation that is involved in covering up this fact. Not that I’m complaining, I like getting a cheap deal.

    Reply
    Please complete the required fields.



  • I think that the current demand for gold is lower now than in 1874 when it was much more popular for day to day trading rather than everyone using the dollar, so perhaps gold was 50% more valuable in 1874 than today when not many give a dam about it.
    Of course that can change, but I believe it will take time especially with manipulating bankers politicians and media involved. You may not see gold return to a position where people find it more valuable.
    Don’t forget international governments and bankers are all in this together. They will not let an ‘important’ countries fiat go down the pan (like the £) because it will expose their own currency for the joke that it is.
    For example if the pound gets into trouble there will either be printing in the US to support the currency of a shotgun marriage into the Euro.
    I for one believe that either all of the ‘important’ currencies go down together or none will. Of course it will be orchestrated and you will see higher gold prices prior to this happening as the privileged sell equities to buy precious metals and land.
    This is not happening at the moment. If you think this is happening please supply some evidence.

    Reply
    Please complete the required fields.



  • General, you have hit the nail on the head and have noted the only real solution for the powers that be. Devalue currencies all at once with a big meeting like Bretton Woods. Default and devalue relative to gold. Politicians would rather see gold go to £13,000 an ounce than see London properties fall to £63,000, so that will be the way they go, because in seeking out a currency base they will have stabilized the monetary system. My theory is that gold is being pooled with the IMF and World Bank so that the end result will be a global currency or at least a global trading currency akin to SDR’s, against which national currencies would be fixed. Their theory would be that this would launch world government for and by the corporations and, present a global re-set which would set the seeds for another 80 to 100yr long ponzi scheme to follow.

    Khards, gold demand has not diminished, but gold funds trading paper gold contracts as if they were real gold is sapping demand and undermining real prices, for now.

    Reply
    Please complete the required fields.



  • Yup there will be a debt write down, which is of course how fiat money systems regulate always themselves over the long term and then we start again. The new system will not be underpinned by gold but by much greater credit regulation which will become debauched over time only to be resolved and so on

    Reply
    Please complete the required fields.



  • If a new monetry system was underpinned by gold wouldn’t that make South Africa, Australia and China the richest countries in the world?
    Can’t see the Americans, Brits and Russians liking this much….

    The current debt based system is backed by the promise to repay, until this backing evaporates the system will continue to exist in it’s current but unstable form.

    Reply
    Please complete the required fields.



  • general congreve says:

    @3 – Obviously gold was effectively the reserve country of the world in 1874, so admittedly, that is something that would have given it extra strength at the time, as the dollar enjoys extra strength today from its global demand. Although even if this accounted for 50% of its strength, as you suggest, gold would still be 300% undervalued at today’s prices going on my calculations @2.

    The solution you proffer about countries devaluing together to avoid gold looking good, isn’t really a solution. Gold will still appreciate against all, making all look bad. As the currencies devalue against real things, more and more people will start to wake up and look for somewhere to protect their wealth. Gold will be a prime mover in this regard and it will be difficult for countries to stop this without draconian capital controls.

    As Libertas says, gold demand has not diminished, not to the extent the price indicates, it has been diluted by paper gold derivatives, apparently by as much as 100-1. Such chicanery did not exist in 1874 in the gold market.

    Reply
    Please complete the required fields.



  • general congreve says:

    @6 – No, they wouldn’t like it much. Apparently the Chinese are stockpiling like there’s no tomorrow. What is anyone going to do when they turn round and say the Yuan is gold-backed. The world will flock to its safety and they will have all the benefits of a reserve currency. That’s what the west deserves for p1ssing all out money up the wall, nought we can do now.

    Reply
    Please complete the required fields.



  • I suppose that at least if the Yaun did become backed by something tangible and the $€£ did simultaneously devalue against a basket of good, then the wests debt problems would be fixed and wages would become competitive against countries like China.
    Do you really think that China wants to destroy it’s manufacturing base by moving to a gold backed currency? Not sure if I can foresee this during this decade. I hope it does for our benefit, but I just can’t see it happening.

    Reply
    Please complete the required fields.



  • General, it is more likely that a State like Kazakstan, purchasing gold hand over fist will go first to gold backing. Maybe Vietnam. Libya was about to prior to being invaded, but a Russian client state will be harder to invade and the New World Order’s forces are overstretched.

    Reply
    Please complete the required fields.



  • general congreve says:

    @9 – I agree with your point on the competitive front, China going gold backed would cull their export business heavily. However, China have also got themselves into a fix by pumping up an economy on empty IOUs from the west. They will never get paid in real terms on those IOUs, so they need to extricate themselves as carefully as possible, while limiting losses. It’s either that or keep working at a loss and effectively keep slaving for the west indefinitely.

    They will suffer to some degree when the current order breaks down, but will come off much better in the medium term as a result. It is all a matter of them timing the optimum exit from the current system to their best advantage now.

    Reply
    Please complete the required fields.



  • general congreve says:

    @11 – Good point. The US have bases in 140 countries enforcing the dollar as global reserve currency, and Iraq and Libya have served as glaring examples of what happens to those that step out of line. But a wildcard like Kazakhstan would really throw the cat amongst the pigeons, although the US have bases in neighbouring countries and a close relationship supporting the oppressive regime there, through sales of military equipment and training, so maybe they aren’t a prime candidate at the moment.

    Reply
    Please complete the required fields.



  • I think that the current demand for gold is lower now than in 1874 when it was much more popular for day to day trading rather than everyone using the dollar, so perhaps gold was 50% more valuable in 1874 than today when not many give a dam about it.

    There have been fools on here, more than once, claiming that gold was a bubble…..

    Reply
    Please complete the required fields.



  • I was not implying that gold is now in a bubble, just merely suggesting that the global demand for gold is now lower than in 1874 thus today’s gold price is lower in relative terms.

    Reply
    Please complete the required fields.



  • Gold IS in a bubble….. it doesnt mean that the bubble wont get bigger or suck in more on the way up, who only become fools when they refuse to get out before the inevitable falls / collapse.

    Reply
    Please complete the required fields.



  • Also the TMS doesnt include credit – which is of course the whole point why the MS has been “recently” bumped up so much. So credit isnt important? Right so where is the credibility there?

    Reply
    Please complete the required fields.



  • general congreve says:

    @15 – No, his point was that others say it is, but you were saying it was more valued then than now, so historically, it couldn’t be a bubble if that is the case. The comment wasn’t aimed at you.

    @17 – If it helps, I agree credit is important techie, after all, money is primarily debt in our currency system. Just wish they’d let the whole thing collapse. I’d rather have quick deflationary implosion followed by currency collapse than this mind numbing grind.

    Reply
    Please complete the required fields.



  • @16 – Gold is NOT in a bubble, there is not a shred of evidence of herd behaviour, or participation by the masses, yet.

    it is still very much the contrarian play, survey the masses and you will find that most are more likely to sell their jewellery for a little paper, than buy gold. it will one day be in a bubble, but first we have to have a mania and the masses accept that gold can only ever go up, we are far away from that still.

    the Sprott report on institutional involvement http://www.sprott.com/media/34091/MAAG-02-11-Debunking-the-Gold-Bubble-Myth.pdf is the key IMO, when the dumb money (your insolvent pension funds) finally catch on, gold’s real bull run will be awe-inspiring

    Reply
    Please complete the required fields.



Add a comment

  • Your email address is required so we can verify that the comment is genuine. It will not be posted anywhere on the site, will be stored confidentially by us and never given out to any third party.
  • Please note that any viewpoints published here as comments are user´s views and not the views of HousePriceCrash.co.uk.
  • Please adhere to the Guidelines

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes:

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>