Well RE is going to get his wish. His friend at Automatic Earth is going to debate Gonzalo Lira regarding whether we are headed for a deflationary or inflationary crash. Does it really matter at the end of the day? A crash is a crash. If Bernanke was not printing at hyper-speed we would have experienced a deflationary crash already. If he continues to print and ramps it up, we will experience an inflationary crash. It sucks either way. Here is a link to the site.
It’s on Thursday, Feb. 10, at 9pm EST. The link is here: http://fosslira.blogspot.com/
Maybe I should charge $45 to watch me thrash Smokey and SSS like rag dolls about Boomers destroying the world.
• A 1930s-style deflationary depression?
• Or a Weimar-style hyperinflationary crisis?
For the first time ever, two of the most prominent writers on this issue will face one another in a live online debate, to be held on Thursday, February 10, 2011.
NICOLE FOSS, a.k.a. “STONELEIGH” at The Automatic Earth, ranks among the most prominent of the deflationists. She maintains that the ongoing contraction of jobs and overall income in the US will lead us into a sustained deflationary depression. Consequently—and in direct contradiction to the advice of hyperinflationists such as Lira—Foss strongly recommends Americans stay liquid in US Dollars and avoid going into any debt. As jobs and many businesses disappear, Foss foresees a crash in the money supply, leaving most people without cash or credit, and a minority hoarding the little that remains.
GONZALO LIRA has emerged as one of the web’s most high-profile hyperinflationists. Drawing on personal experience from Chile in the early 1970’s, Lira says the same hyperinflationary crisis will soon take place in the United States, due to the massive oversupply of debased U.S. dollars chasing after a finite supply of tangibles. He argues that Americans would be well-advised to structure their investments and their own personal lives in anticipation of a rapid and stunning hyperinflation.
This live online debate will be moderated by Jay Carter of Financial Survival Radio.
Stoneleigh & Lira will be taking audience questions—live. Attendees are advised to have a microphone attached to their computer, in order to ask spoken questions in the live Q&A, though written questions will also be taken.
DATE & TIME: Thursday, Febrary 10, 2010 beginning at 9:00 PM EST
It’s clear that some type of economic depression is coming to the United States and to much of the rest of the world. In many ways, it has already begun.
Deflation vs. Hyperinflation
Where is the United States headed?
• A 1930s-style deflationary depression?
• Or a Weimar-style hyperinflationary crisis?
For the first time ever, two of the most prominent writers on this issue will face one another in a live online debate, to be held on Thursday, February 10, 2011.Stoneleigh & Lira will be taking audience questions—live. Attendees are advised to have a microphone attached to their computer, in order to ask spoken questions in the live Q&A, though written questions will also be taken.
DATE & TIME: Thursday, Febrary 10, 2010 beginning at 9:00 PM EST
NICOLE FOSS, a.k.a. “STONELEIGH” at The Automatic Earth, ranks among the most prominent of the deflationists. She maintains that the ongoing contraction of jobs and overall income in the US will lead us into a sustained deflationary depression. Consequently—and in direct contradiction to the advice of hyperinflationists such as Lira—Foss strongly recommends Americans stay liquid in US Dollars and avoid going into any debt. As jobs and many businesses disappear, Foss foresees a crash in the money supply, leaving most people without cash or credit, and a minority hoarding the little that remains.
GONZALO LIRA has emerged as one of the web’s most high-profile hyperinflationists. Drawing on personal experience from Chile in the early 1970’s, Lira says the same hyperinflationary crisis will soon take place in the United States, due to the massive oversupply of debased U.S. dollars chasing after a finite supply of tangibles. He argues that Americans would be well-advised to structure their investments and their own personal lives in anticipation of a rapid and stunning hyperinflation.
This live online debate will be moderated by Jay Carter
REGISTER HERE:
The dollar is now woth .04 cents. It lost 80% of its value after Dick[head] Nixon slammed the gold window in 1971.
How anyone can say that the monetization of debt [we’d default without QEI and QEII] to cover money spent already by our government will cause a stronger dollar doesn’t equate.
I’d seriously like to see deflation. It ain’t going to happen. You can’t have these central bankers going to FOMC meetings and discussing charts showing the dollar devaluing by 10% per year and get lower prices. Don’t confuse reduced demand caused by disqualified prime and subprime buyers in the housing market by considering it deflation.
Inflation deals with the money supply. More money = less value. More of anything = less value.
Don’t get fooled by the money doesn’t have velocity it isn’t circulating. It is. Uncle Scam spent money we don’t have and QE give $$$ to the treasury which forks it over to Uncle Scam and that money is sent to pay for stuff that was already purchased, food stamps, unemployment, bond roll overs, Social Security and on and on.
Banksters are investing in hard assets.
Jesse is very smart, but I disagree with him on the reserve notion. Our dollar is just a piece of paper with pretty ink, just like any other currency which has an historical life span of 39 years, we are at age 40 dating back to Dick[head] Nixon’s gold window force majeure with de Gaulle.
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There has been a lot of arguing lately in the financial press about inflation vs. deflation. This is because controversy = ratings. The answer is simple once we properly define our terms and look to the data for answers:
Inflation vs. Deflation
Money supply = cash + credit
Expansion of the money supply = inflation, and contraction of money supply = deflation. BY DEFINITION. Rising prices are a symptom of inflation.
Expanding the money supply typically leads to price increases. It can be across the board like in the 1970s or selective like the housing boom from 2002 – 2007 which was driven by credit expansion.
Currently we have expansion of cash (“quantitative easing” aka money printing) and contraction of credit. Since there is much more credit than cash, the net effect on the money supply is one of contraction (deflation).
Expansion of cash is causing selective price increases in commodities like gold, silver, oil, gas, wheat, corn, sugar, copper, etc.
Contraction of credit is causing selective price decreases in financed items like real estate, autos, private businesses, etc.
These two effects balance each other to some degree causing CPI to increase a paltry 1-2% in 2010 while the commodities above increased by 14-74% in 2010. This is a horrible blow to the poorest segment of society who spend a large percentage of their income on basic items like food and energy.
Pundits make the mistake of confusing the rapid price increases in commodities as inflation. Defining inflation as an increase in prices is a sloppy and imprecise definition, because the choice of items included in the measurement index will dramatically alter results (see above). Inflation is properly defined as expansion of the money supply.
Eventually when credit stops contracting, and cash continues to expand (due to the inevitable money printing by bankrupt governments to fund their spending commitments) we will have serious inflation (defined as expansion of the money supply) which will cause serious price increases across the board. Inflation has the effect of taxing the population by reducing the value of your hard earned money so that the government can spend your money without overtly raising taxes. Hard commodities will not wait for this to happen – they are reacting now to the expansion of cash, even as the overall money supply is deflating due to credit contraction.
Watchdog
That was one of the clearest explanations of inflation and deflation I’ve ever read. Excellent post. The rotweillers on this site will now proceed to rip you limb from limb and fart in your general direction. Ignore them and keep posting.
Watchdog, nice post !
” Contraction of credit is causing selective price decreases in financed items like real estate, autos, private businesses, etc. “
We are quickly approaching the point where the commodities used to produce assembled or manufactured items (read houses and cars) are going to outstrip any contraction in credit.
The bottom line: You can not have deflation or any semblance of any balance with an absolutely worthless store of value. We are less than .04 cents from the bottom of the barrel.
Futures contracts are based on supply/demand not yet realized,
Bernanarchy supplies cheap feed.
Speculation drives the herd.
Windhandel ensues.
Cheers of riches
Implosion occurs
Cries of despair
Repeat process.
Watchdog,
I like your explanation but I have a question. If cash is expanding and credit is contracting, where is the actual cash that the Bernanke is madly printing actually sitting? Is it that the Fed gives out cash to banks and large corporations (at 0%) and instead of issuing credit, they are using the cash to buy commodity stocks that are in return creating inflation?
@ Matt, it’s electronic. It’s not physically sitting anywhere.
Unfortunately I’ll be working when this debate is set to go off, but I am sure there will be a transcript of it both on AE and Gonzo’s Blog. Should be entertaining.
Watchdog’s explanation was pretty good, except he overlooks one thing, which is that the money printing is credit issued to the TBTF Banks. Da Fed is expanding money supply at this level, the issue is that it isn’t moving through the system to be loaned out again at lower levels. The money goes into driving up wholesale prices on the comex, but fewer people will buy the merchandise, even food since they are tapped out.
Anyhow, it will be interesting to see how Stoneleigh and Gonzo go at it.
RE
@watchdog–that was a very nice, concise explanation. one question/disagreement, i offer in the interest of prompting further posts from you.
during the housing bubbletop, 2002-2007, didn’t we see a broad increase of prices? sure, food did not increase in price anywhere near as great as real estate assets, but it seems to me there was a general increase in the price levels for americans. even wages were nominally up; even worldwide, labor prices rose, even if by only a few dollars per day per worker in china/india.
i agree price is a symptom of money+credit supply increase/decrease; and that price for any particular item or sector responds to other factors in addition to money+credit supply.
tia for your further comments.
Watchdog
While I appreciate your anatomical explanation, and for the most part agree, I don’t think my mother will give 2 shits the next time I take her to the market.
Mike,
I understand there is not a mountain of physical cash somewhere, but isn’t the result the same? By lending TBTF banks at 0% there isn’t any reason to lend money out because it dosen’t cost anything to borrow. There is more incentive to use money to purchase assets than to lend to consumers, which causes a credit crunch and increases inflation, as well as kills any savings rate for consumers because the TBTF don’t need your paltry savings anymore.
Anyway, this whole thing is totally fucked up, on that I am sure we can all agree.
Administrator,
You posted just about verbatim what I was getting ready to say regarding Watchdog’s terrific comment.
He absolutely fucking teed it up and powdered it. Fabulous post.
BTW, there is a difference in how you will play out the game here. If you believe in the Hyperinflation scenario, then you should be divesting yourself of all the cash you have to buy hard assets. If you believe the Deflationary scenario is correct, you should be retaining liquid Cash.
Eventually both scenarios lead to a monetary system failure, the difference is mainly how you play the game over the medium term between now and the complete crash.
RE