MONDAY, MARCH 15, 2010
March 15 2010: Inflation: God is the ultimate hedge
"Guests of trailer park enjoying the sun and sea breeze at the beach, Sarasota, Florida"
Ilargi: Today we have a guest contribution from one of our regular commenters, El Gallinazo, who weighs in on the dead horse of inflation vs. deflation, dissecting a John Williams Shadowstats paper. And while Stoneleigh and I here at The Automatic Earth haven't had any doubts on the issue in "like forever", keeping the discussion alive in some form may be useful, if only simply since it won't go away.
Just let me state two issues that are obvious to us before handing you over to the cantankerous vulture:
- There is no way we'll get into hyperinflation BEFORE debt deflation has run its course.
- There is no way the Federal Reserve (or ECB, Bank of Japan) can print enough money, electronically or physically, to fabricate hyperinflation, as long as the debt deflation train hasn't finished running over our economic systems.
- After that train is done, it's anybody's guess; the damage done will be so severe there may not be a Fed left to inflate even a party balloon.
El Gallinazo: Beating the Dead Horse (again)
Everyone with three functional synapses and an opposable thumb knows that we are headed into a second great depression. Optimizing survival strategies for anyone lucky enough to have any assets really boils down to the question of deflation versus hyperinflation, or a sequential mixture of the two. Most of the hyperinflationistas are morons, even the ones that don't have a faux Nobel. So it was a pleasure when a commenter at The Automatic Earth tipped me off to John Williams' -relatively- recent paper:
Hyperinflation Special Report (Update 2010)
Even my cantankerous self wouldn't dare to call Williams a moron. So here we have three hyper-intelligent people with three different viewpoints on the subject.
- Robert Prechter: Depression with giant deflation. Cash is king. Inflation nowhere in sight.
- Stoneleigh (as well as Ilargi) at The Automatic Earth: Same as Prechter but with the caveat that when nearly all credit disappears and globalized markets cease, then hyperinflation is likely to kick in. As to a timeline of transition from deflation to hyperinflation, Stoneleigh recently indicated 2 to 5 years.
- John Williams : Like the two above, he also predicts a great depression with deflation as the immediate outcome. However, Williams differs in that he claims that the deflation will be very short lived, a matter of months, and will morph quickly into hyperinflation.
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