Hyperinflation or Deflation?
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The following is excerpted from an ongoing debate inside the Diner on the differences in the outcomes between Hyperinflation and Deflation in a Monetary System Collapse. Come join us at the Economics Table in the Diner to chip in your Two Cents on this still nagging and popular question!
Topic: Hyperinflation or Deflation?
ross
The difference between hyper inflation and deflationary collapse matters to people with cash money and assets. Much depends on the type of assets you have.
Ben Bernanke is waving at the market like a drunk with his dick hanging out that he wants inflation. Serious inflation. And that explains a lot of the asset choice behaviors over the last 18 months. Inflation expectation are extreme. Wouldn’t you know, we just had our first shock in the form of a 25% increase for gas inside of three months.
The only outcome is deflation no matter what. The dynamics of the credit leverage we employ in the economy (30 year home financing, 5 year zero interest financing for automobiles) and the (loss of) velocity of money ensure a deflationary event is in our future. We are facing a global breakdown in trade because of failures in the credit/currency markets and availability of low cost energy. The reasons people freaked and made a lot of people full-time TSHTF about “TSHTF” in 2008 is because it looked like the global markets were imploding and going into a terminal collapse.Even after hyper inflation comes a deflation where money is practically worthless. Meaningful trade is done in barter or “backed scrip.”
We are stuffing the toilet bowl to avoid the flush. It won’t work. But it can go on a lot longer….Read the rest at
https://www.doomsteaddiner.org/blog/2012/04/01/hyperinflation-or-deflation/
RE
RE,
Enjoyed reading the discussion on deflation/inflation at The Diner. I wouldn’t really call it a debate – did anyone really voice much support towards the probability of inflation? But I think the discussion is really about more than “probabilities”…which is good.
Well, I think both Ross and myself are mostly Deflationatos, but the general debate is about the possible differing effects and how you might try to secure yourself.
Generally speaking I think if you have some money, you have to Hedge against either possibility. Long term though, I don’t see it making much difference since its my belief the monetary system will collapse in its entirety.
One of the more unusual “deflationist” perspectives has been posted over at ZeroHedge:
https://www.zerohedge.com/news/guest-post-gold-cracked-dam-and-feds-small-thumb
I would love to hear if anyone finds merit in the argument. It’s an odd one. Essentially, the writer tries to demonstrate that a drastic deflation will accompany total US dollar fiat currency collapse. In fact, the writer insists that the USD collapse will be a driver behind deflating asset prices.
Typically, a deflationist would be arguing that US dollars will appreciate in purchasing power in a deflation, as cash is the only king, and the US dollar will be the least ugly choice among currencies. The only way I can imagine arguing for deflation AND a USD collapse is if you are really arguing for hyper-inflation in all currencies, including the USD, except you expect gold to appreciate wildly as the only safe-haven asset. It’s hard to imagine a single commodity like gold appreciating wildly in any deflation…but have a read and tell me what you think of it all.
skipbreakfast post=1840 wrote: One of the more unusual “deflationist” perspectives has been posted over at ZeroHedge:
https://www.zerohedge.com/news/guest-post-gold-cracked-dam-and-feds-small-thumb
I would love to hear if anyone finds merit in the argument. It’s an odd one. Essentially, the writer tries to demonstrate that a drastic deflation will accompany total US dollar fiat currency collapse. In fact, the writer insists that the USD collapse will be a driver behind deflating asset prices.
Typically, a deflationist would be arguing that US dollars will appreciate in purchasing power in a deflation, as cash is the only king, and the US dollar will be the least ugly choice among currencies. The only way I can imagine arguing for deflation AND a USD collapse is if you are really arguing for hyper-inflation in all currencies, including the USD, except you expect gold to appreciate wildly as the only safe-haven asset. It’s hard to imagine a single commodity like gold appreciating wildly in any deflation…but have a read and tell me what you think of it all.
Well first off I have a real problem with the Gold Bug aspect of this fellow’s argument. He makes a tacit assumption that the collapse of Fiat will enable a Gold based economy to be rebooted. I do not see how that can happen since Gold simply does not circulate in any meaningful way.
The next problem is in trying to figure out how anything at all gets “valued” in a dollar collapse scenario. Dollar collapse is not the same as a Peseta collapse or even Euro or Yen collapse. When a small subsidiary currency collapses, its reletaive worth against the surviving Major currency gets adjusted, radically downward of course. When you have only one major currency left standing, what does it revalue against?
Since the Dollar is basically a proxy for Oil, the simple conclusion is that it would devalue with respect to Oil, but that ignores the issues of Demand Destruction in a deflationary environment. It also ignores the fact that the Dollar distribution chain is already terminally broken. Helicopter Ben can issue endless Dollars to the Primary Dealers, they can in turn prop up the Stock Market, but that does not translate into job creation or the distriution of the dollars to end consumers.
Deflation is almost a certainty as far as the dollar is concerned, but really only in earnest after subsidiary currencies like the Euro and Yen go to the Great Beyond. Despite the Nickname, I do not see any way Helicopter Ben will go sprinkling Dollars down on the end Consumer here, so if they do not have money to buy, prices must fall or more liekly production simply ceases as there is no profit to be made in it.
A while ago I thought this process would happen very rapidly, but these days I think its going to be stretched out by triaging out some economies off of Oil and only gradually killing subsidiary currencies. By arbtraging between these currencies as long as they function, you can ladder down without a massive crash. It takes a lot of liquidity at the top level though and a lot of swaps of currency to do that, which I think is what both Da Fed and the ECB and the BoJ are currently engaged in doing.
Mr Paladin, You have a problem with the gold bug part of it because it doesn’t circulate. The paper money that is circulating now was a derivative of gold. The link was broken by the banksters so they could print all the paper money and create all the credit that they wished. That is why we are in a financial disaster. The gold will be resurrected and its link restored to the derivative paper in the resurrection of the deflated world economy.
Golden Oxen post=2069 wrote: Mr Paladin, You have a problem with the gold bug part of it because it doesn’t circulate. The paper money that is circulating now was a derivative of gold. The link was broken by the banksters so they could print all the paper money and create all the credit that they wished. That is why we are in a financial disaster. The gold will be resurrected and its link restored to the derivative paper in the resurrection of the deflated world economy.
Any link that paper money ever had to Gold was a complete chimera. Back in the Gold era, banks regularly went Bust because Banksters ALWAYS print more paper than they actually have Gold to redeem for that paper. There is no profit in Banking if you don’t Fractional Reserve the lending and hope the whole system grows with still more Gold getting dug up out of the ground.
Probably 90% of the gold ever mined is now sequestered away in various Vaults uder the control of a few Sovereign states and a few Illuminati. This stuff is never going to be distributed out to people to use as coinage and basing any Paper Money on it is just a load of Horseshit that Banksters have been pulling since the time of Babylon. Gold has no real intrisic value anyhow, any more than a Cowrie Shell does, it just made for a diffiucult to Couterfeit form of money for while. All money is just a Proxy for the value of other things, and when the actual value of other things changes it wreaks havoc on the proxy value of money.
The real Value in our society was leveraged up on the back of a whole lot of cheap energy. All the factories built, all the McMasions and all the Carz are the “Value” of Industrial Civilization. All the Debt taken on to leverage up that system is a part of the “value” also. ALL these things LOSE their value once the Oil becomes too expensive to run them all. Substituting Gold as Money does not resolve that problem even if you could get it all out of the Basement Safes of the Pigmen who control it, and you can’t do that either.
Gold has a long history and has a hold on the desire of people to be able to store their accumulated wealth in some manner. The problem is that the accumulated wealth of this society is resultant from the thermodynamic energy of fossil fuels, and that is past its peak and on the way down here. What value Gold will have in this slide remains open to question, but its actual utility as money is not in question. That is about done here.
RE
If it was a chimera Mr Paladin, why did they ever have to break the link? In the case of the US by an official proclamation from tricky Dick Nixon.
Golden Oxen post=2087 wrote: If it was a chimera Mr Paladin, why did they ever have to break the link? In the case of the US by an official proclamation from tricky Dick Nixon.
Because that which occurs at the Nation-State level is not the same as that which occurs at the Main Street level of an economy. The link had to be broken because without an ever increasing money supply you could not continue on with the Industrial Paradigm. By going off a fixed standard the War Machine could continue onward for these last 40 years or so. Had Nixon not broken the Gold link, the Pentagon would have run outta cash and all that we are seeing now would have begun a whole lot sooner. The economy would have deflated then and Americans would have begun living in the same kid of 3rd World Poverty the rest of the world was in. The Industrial Economy and its associated War Machine was propped up with Debt. If you Nixon had remained fixed to Gold, none of this would have been possible and the whole thing would have crashed 40 years ago. We got a 40 year long Party on Debt here as a result of this choice, but had Nixon chosen otherwise the paradigm would have crashed all that much sooner. Nixon was a survivor, and he was as bought and paid for as any Politician ever was. So he shut the Gold Window to stay Rich to his death, and keep his Illuminati Masters even more rich.
RE
The Subject title is a false dichotomy.
You will likely see both a wicked deflation and and serious inflation.
The one consistency is that both will work in the self interest of the international money changers who, essentially, controls the world’s money.
We went through a serious inflation, this is cash looting / society debt saturation stage, the deflation / societal asset stripping stage is next and then, more than likely, a serious, if not hyper, inflation will ensue to “balance the multinational / mega bank books” post societal asset stripping.
If you are having trouble understanding DEFLATION and the wisdom of having cash then take a peek into this news report.
https://www.reuters.com/article/2012/06/26/us-spain-banks-stakes-idUSBRE85P0DJ20120626
Spain formally requested euro zone rescue loans to recapitalize debt-laden former savings banks on Monday, but those who receive funds will be subject to European Union state-aid rules that include selling equity assets.
A flock of “vulture” funds is already watching over the banking sector shakeout in the hope that it will finally deliver a bonanza of distressed company assets at rock bottom prices.
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