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Williams STILL Believes a Hyperinflationary Great Depression is Coming! Here’s Why

Editor — Mon, 30 Jan 2012 05:40:09 +0000

The U.S. economic and systemic-solvency crises of the last five years continue to deteriorate yet they remain just the precursors to the coming Great Collapse: a hyperinflationary great depression. The unfolding circumstance will encompass a complete loss in the purchasing power of the U.S. dollar; a collapse in the normal stream of U.S. commercial and economic activity; a collapse in the U.S. financial system, as we know it; and a likely realignment of the U.S. political environment.

So says John Williams (www.shadowstats.com) in a recent interview: Read More @ KingWorldNews.com and in his previous articles:

“A Hyperinflationary Great Depression Is Coming to America by 2014! Here’s Why“
“Williams: U.S. Can Not Avoid Coming Financial Armageddon” and
“Williams: Expect Hyperinflation Within the Next 5 Years“
as posted on www.munKNEE.com.

Related Articles:

1. A Hyperinflationary Great Depression Is Coming to America by 2014! Here’s Why

The U.S. economic and systemic-solvency crises of the last four years only have been precursors to the coming Great Collapse: a hyperinflationary great depression. Outside timing on the hyperinflation remains 2014, but there is strong risk of a currency catastrophe beginning to unfold in the months ahead…moving into a full blown hyperinflation [in a few] months to a year… depending on the developing global view of the dollar and reactions of the U.S. government and the Federal Reserve. [Let me go into more detail.] Words: 2726

2. Williams: U.S. Can Not Avoid Coming Financial Armageddon

The U.S. economy is in an intensifying inflationary recession that eventually will evolve into a hyperinflationary great depression… [at which time] a $100 bill in the United States will become worth more as functional toilet paper/tissue than as currency. The U.S. government and Federal Reserve already have committed the system to this course through the easy politics of a bottomless pocketbook, the servicing of big-moneyed special interests, and gross mismanagement. The article is long but well worth the read. Words: 3565

3. Williams: Expect Hyperinflation Within the Next 5 Years

Pushing the big problems into the future appears to have been the working strategy for both the Fed and recent Administrations, yet the U.S. dollar and the budget deficit do matter, and the future is at hand. The day of ultimate financial reckoning has arrived, and it is playing out. Words: 1096

4. Hyperinflation to Occur in U.S. as Early as 2013! Here’s Why

In our estimation, the most likely time frame for a full-fledged outbreak of hyperinflation in America is between the years 2013 and 2015 [based on 12 warning signs that are on the horizon.] Americans who wait until 2013 to prepare, will most likely see the majority of their purchasing power wiped out. It is essential that all Americans begin preparing for hyperinflation immediately. Words: 2065

5. New Boom-bust Cycle Risks Hyperinflationary Depression and Much Higher Gold Price – Here’s Why

It is my view that the world has entered a new boom-bust cycle driven by oil prices. Oscillating oil prices – as opposed to credit cycles – will repeatedly stimulate and crash the highly levered global economy. Governments have not recognized this new cycle, and as part of a fruitless effort to retain control over deteriorating real growth and rising unemployment central banks will print more and more money, risking a hyperinflationary depression (stagflation at best). [As such,] the only respite for many investors is gold. [Let me explain.] Words: 925

6. 2012: More Money-printing Leading to Accelerating Inflation, Rising Interest Rates & Then U.S. Debt Crisis! Got Gold?

Evidence shows that the U.S. money supply trend is in the early stages of hyperbolic growth coupled with a similar move in the price of gold. All sign point to a further escalation of money-printing in 2012…followed by unexpected and accelerating price inflation, followed by a rise in nominal interest rates that will bring a sovereign debt crisis for the U. S. dollar with it as the cost of borrowing for the government escalates…[Let me show you the evidence.] Words: 660

7. True Money Supply Is Already Hyperinflationary! What’s Next?

Economists are telling central banks to accelerate monetary growth even faster…to avoid a bank balance sheet implosion with all the deflationary consequences that implies. [As such,] the prospects for 2012, and thereafter, are for Total Money Supply to continue its hyperbolic trend – and when such a trend becomes established it becomes almost impossible to stop because the whole debt-based economy and the banking system would collapse. [Let me explain further.] Words: 550

8. How Likely Will Hyperinflation Occur in the U.S.?

There is a difference between inflation and hyperinflation…and there is no gradual path from one to the other. To wind up with true hyperinflation, some very bad things have to happen. The government has to completely lose control… the populace has to completely lose faith in the system… or both at the same time. [Are we there yet? Let's take a look.] Words: 1188

9. 21 Countries Have Experienced Hyperinflation In Last 25 Years – Is the U.S. Next!

[Hyperinflation is not an unusual phenomenon. 32 countries have experienced hyperinflation over the last 100 years of which no less than 21 have experienced it in the past 25 years and 4 in the past 10 years. The United States is one of the few countries to have experienced two currency collapses during its history (1812-1814 and 1861-1865). Is it about to happen again?] Words: 1450

10. The Great American Apocalypse 2011-2012: The Video

Unlike the credit crisis that triggered the last major stock market collapse … the “Fiscal Armageddon” that could “dwarf 2008″ will be intensely personal. Millions of Americans will face the specter of lost incomes … lost savings … lost buying power … lost homes … lost liberty. View the video for all the details.

11. Will This Be The USA in 2012?

The economic condition of the country continues to decline toward its rendezvous with an, as yet, unknowable catastrophe. Here is… a look (not a prediction) at a series of not improbable events that could develop [and which] would change our economic world overnight. Words: 1550

12. Coming Inflation to Make U.S. Dollar Not Only Worth Less – But Worthless!

The Federal Reserve is now trying to figure out ways to boost inflation expectations… so that Americans are encouraged to spend more before their money is worth less. Unfortunately, not only will their money soon be worth less, it will literally become worthless! Words: 904

13. Washington Politicians Will Cause Rampant Inflation With Their In-Action and Mis-Action!

The National Inflation Association (NIA) believes it is very unlikely that our representatives in Washington will have the political backbone and courage to implement any of the National Commission on Fiscal Responsibility and Reform’s proposed cuts in domestic and defense expenditures and increases in tax revenues. [Instead, as the NIA sees it,] the U.S. is on a path towards exploding budget deficits in the years ahead that could cause an outbreak of hyperinflation by the end of calendar year 2015. Words: 887

14. Remedies to Fiscal Gap Guarantee Hyperinflation!

Boston University economist, Prof. Kotlikoff, maintains that the U.S. cannot end its fiscal crisis by doubling taxes, as the International Monetary Fund suggests, or further stimulus spending [as Bernanke is doing] because it will simply increase the debt. [Instead he has some radical proposals of his own.] Words: 704

15. The Fed MUST Inflate Away Debt or Default So MAJOR Inflation IS Coming!

If our assessment is correct, over the coming years, stocks, precious metals, commodities and real-estate will appreciate in value versus paper currencies. Furthermore, on a relative basis, we expect precious metals and commodities to outperform all other asset-classes. Conversely, we anticipate that cash and fixed income instruments will probably turn out to be the worst assets to own over the next decade. Words: 869

16. Investors Should Prepare Now for Coming Inflationary Depression – Got Gold?

It is an old saying that the “road to hell is paved with good intentions”. Well, in recent years, that road has been changed to a super-highway! America was put on that super-highway a few years ago and right now we are traveling at break-neck speed toward the financial abyss. Words: 1132

17. What’s Coming: A Hyperinflationary or A Deflationary Depression?

While I believe that the US is heading towards a Weimar style hyperinflationary depression there are several developments that point to the possibility of another deflationary depression, similar to the 1930’s. Words: 858

18. Finally: A Clear Understanding of Hyperinflation, Money Demand & the “Crack-Up Boom”

Some people consider a rise in overall prices of 10 percent per month (which implies an annual rate of price increases of around 214 percent) as hyperinflation; others indentify hyperinflation as a monthly price rise of at least 20 percent (which implies an annual increase in prices of nearly 792 percent). Words: 1353

19. Coming Inflationary Depression Means Future Commodities Super-boom

Mladjenovic explains his contention that we are in for a inflationary depression and, as such, investors should put their money in those things that will benefit from both inflation and strong demand and supply and stay away from where there is a deflationary impact, such as real estate. Words: 825

Ian Campbell’s Commentary: What’s Coming – a “Slight Depression” (Niall Ferguson) or “A Form of Stagflation”?

Editor — Fri, 07 Oct 2011 07:49:39 +0000

Harvard Professor/Economic Historian Niall Ferguson wrote recently that he is of the opinion that, while all the fiscal and monetary government stimuli undertaken by many of the governments of the world’s developed countries since 2007 may have averted a second Great Depression, they will, most likely, still experience a “slight” depression. Campbell reviews the rationale behind Ferguson’s position and then presents his view that, as he sees it, most developed countries will face, instead, ”a form of” Stagflation where the prices of non-durable goods (food, energy, and basic consumables) inflate, but the price of durable goods (long-term assets such as houses, cars, refrigerators, etc.) deflate. Campbell’s commentary makes for a very thought-provoking read. Words: 922

Ian R. Campbell, FCA, FCBV (stockresearchportal.com/) makes the following comments in his Today’s Economic & Resource Stocks Commentary* which Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), has further edited ([ ]), abridged (…) and reformatted below for the sake of clarity and brevity to ensure a fast and easy read. The author’s views and conclusions are unaltered and no personal comments have been included so as to maintain the integrity of the original article. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.[Campbell's commentary emanates from an article by Mike Dolan in the Financial Post entitled 'Permafunk, Japanization, Long Depression: Which is This?' in which he presents and comments] on views expressed by… Ferguson that:

the fiscal and monetary developed country government stimuli (read the U.S. in particular) after 2007 has had modest impact, but that said stimuli may have averted a second ‘Great Depression’ but not a depression per se;

today is not the 1930′s because (1) China has emerged as the world’s second largest economy, (2) globalization has not broken down into protectionism, and (3) during the recent ‘developed country’ economic downturn “the era’s rapid technological revolution has not skipped a beat”; and,

what the world most likely faces is a “slight depression”, and not a ‘Great Depression’.

The article says that anecdotal rules of thumb suggest ‘depression’ to be a circumstance where a peak to trough drop in a country’s… real GDP… is more than 10%, or where a recession lasts more than 3 years. By way of a reference point, the article says that in the 18 month U.S….recession of 2008/2009 U.S. real GDP dropped 5%.

…My sense of [Ferguson] is that he didn’t get to be a Harvard professor by being stupid, and he certainly is articulate. Like everyone I ‘follow’, I [reflect on their] observations and opinions and weigh them in my own thinking [and] in Ferguson’s case, I listen and think harder than I do in the case of some others. That said, my comments on the foregoing are as follows:

whether in the developed countries going forward we face hyperinflation, inflation, recession, stagflation, or depression…I am less interested in Ferguson’s statement that ‘globalization has not broken down into protectionism’…than I am in knowing his views on whether protectionism is about to erupt in spades in the United States in particular. I dealt with this in my e-mail on Tuesday under the headings ‘Global Trade War’…and ‘More On Trade – Gloves Coming Off’…;

I am not sure what Ferguson infers from “rapid technological revolution not skipping a beat” [but] to me continued rapid technological revolution leads to ever more capital intensive manufacturing processes which employ less people. A continuing mantra of mine is that ‘service businesses typically to not add durable value goods to an economy’ in the way durable goods manufacturing businesses do. Combine that view of mine with…[the fact that we now have a world population of 7 billion compared to only 1.4 billion in the largely agrarian world of 1870 and] then work to convince me that world events…of 1870,…which the referenced article refers to a period of ‘long recession’, and the 1930′s ‘Great Depression’ period (when the world population was about 2 billion…) can be used as benchmarks to intelligently discuss today’s world in economic terms. Trust me, that would be a ‘hard sell’ for me to be convinced; and,

at the end of the day, like everyone else, I am forced to ‘make bets’ based on my own ‘consensus thinking’. My current view is that what most of the developed countries will face going forward is a form of Stagflation,…where the prices of non-durable goods (food, energy, and basic consumables) inflate, but the price of durable goods (long-term assets such as houses, cars, refrigerators, etc.) deflate. Contextually, ‘stagflation’ describes an economic environment where the inflation rate is high, and the economic growth rate is low’ or, alternately, ‘a period when an economy is stagnant while inflation is rising’. Hence I say that what I think we will face in developed countries is a ‘form of’ Stagflation, as contrasted with simply adopting the word ‘Stagflation’.

I have discussed Stagflation previously in these commentaries – for example see ‘Inflation – Stagflation?‘ (April 25, 2011) – reading time 4 minutes, and ‘Inflation or Stagflation?‘ (April 13, 2011) – reading time 1 minute. I have read and reviewed a lot of ‘stuff’ since April 25, and so far nothing has altered my view as to where we, in the developed countries, are headed. You might want to visit my prior commentaries and think about whether you agree or disagree with me.

I think all of the foregoing is worth your time to think hard about, and then reach your own conclusions. I urge you to increasingly think about what people say, and then determine if what they say makes sense to you – as contrasted with thinking about what others say about the people that say things.

*http://www.stockresearchportal.com/commentary/steve-jobs-inflation-recession?TabId=1

About Ian R. CampbellIan R. Campbell, FCA, FCBV, is a recognized Canadian business valuation authority who shares his perspective about the economy, mining and the oil & gas industry on each trading day. Ian is also the founder of Stock Research Portal, which provides stock market data, analysis and research on over 1,600 Mining, Oil and Gas Companies listed on the Toronto and Venture Exchanges. Ian can be contacted at icampbell@srddi.com

Other Commentary by Campbell:

1. Campbell’s Commentary: Canada’s Many Economic Advantages Make it #1 – Here’s Why

Canada’s size, political structure and culture will enable it to – properly governed – be more resilient to worldeconomic problems than any other developed country. [For one thing] we don’t have the extent of political polarization that… [is currently the case] in Washington…and now exacerbated to new levels in these difficult economic times – and that will, in my view, cause the U.S. to continue down an increasingly rocky economic road. [Below I put forth Canada's economic advantages and disadvantages.] Words: 1026

2. Ian Campbell’s Commentary: More on Gold!

I read an article yesterday about the price of physical gold…that I think is worth bringing to your attention [not only because of what was conveyed but who was the source of the comments made and the great credibility of those comments given his] immediate access… to people he knows in high-level positions [and] can, and no doubt does, interact and share views with on a daily basis. [Let me explain more fully.] Words: 840

3. Ian Campbell’s Commentary: Gold – The Safest Haven?

Is physical gold the best available ‘safe-haven’ or is it the U.S. dollar – or perhaps even U.S. Treasuries? Words: 793

Reduce Your Exposure Next Time the Market Bounces – Here’s Why

Editor — Sun, 31 Jul 2011 07:04:00 +0000

Unless the S&P 500 rebounds and stays above 1250-1260, the recent 10% drop in the index may well be an indication that the markets have capitulated and a signal of the beginning of a renewed severe downturn. Words: 752

So says Yoni Jacobs (www.ChartProphetCapital.com) in edited excerpts from his original article* which Lorimer Wilson, editor of www.munKNEE.com (It’s all about Money!), has further edited ([ ]), abridged (…) and reformatted below for the sake of clarity and brevity to ensure a fast and easy read. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement. Jacobs goes on to say:

“Head-and-Shoulders” Reversal Pattern Suggests Beginning of a Renewed Downturn

Forming a large Head-and-Shoulders reversal pattern since the beginning of 2011, the S&P 500, Dow Jones Industrial Average, and many other market sectors and stocks may have just capitulated signaling the beginning of a renewed downturn.

Head and Shoulders patterns are usually seen at stock market peaks following significant price increases. A downside breakout from the pattern marks the beginning of a steep drop that may not be recovered for some time. Unless the market rebounds and stays above 1250-1260, expect the drop to continue.

Up-leg Since March 2009 May Have Been Just a “Dead Cat Bounce”

To make matters worse, our current “bull” market which has propelled the stock market up over 100 percent from the 2009 bottom may be just an illusion. Instead, our 2+ year recovery may have just been a “dead cat bounce” before the next, and much steeper market decline.

Current Market Performance Similar to the Great Depression

In fact, our market since the 2007 top is eerily similar to the market of the Great Depression:

Dow Jones, 1929-1930

(Click to enlarge)

S&P 500, 2006-2011

(Click to enlarge)

The Crash of 1929 was nothing compared to the Great Depression that ensued. The “dead cat bounce” from November 1929 to May 1930 was just a temporary pause and trap before the next drop. If our current market from 2006 to 2011 is anything like the market preceding the Great Depression, we may be setting up for a huge upcoming recession.

Head and Shoulders tops the “dead cat bounce” of 1929-1930 before the Great Depression:
(Click to enlarge)

I’d prefer not to be such a doomsayer, but with our market currently behaving so similarly to that of the Great Depression, I can’t help but at least present the possibilities.

Stock Market Euphoria a Set-up for a Down Market

A compelling piece of evidence that the market is full of euphoria – over 90 percent of analyst ratings were “buy” or “outperform.” This decisive number of bullish analyst opinion undoubtedly spurs extra excitement and optimism among investors, which in turn results in increased buying, until the point where buyers run out or reality sets in. When over 90 percent of analysts prepare for a well-performing market, investors should prepare for the worst-performing market.

(Click to enlarge)

Gold Will Not Offer Any Protection

If those analysts are right – and the market continues to rise – gold will fall because the fear in the markets will subside and economies will get back on track. More likely, however, markets will fall and gold will follow. Gold will not be able to fulfill its role as a safe haven; it will fall together with a dropping market. Its failure to act as protection, as people had hoped, will cause them to sell gold.

How to Protect Your Money

The market will likely bounce back for a few days as selling takes a breather but this may just be a pullback in price before the next much steeper drop. Protect your money by selling some stocks after this bounce.

*http://seekingalpha.com/article/285061-has-the-500-point-drop-confirmed-a-great-depression-2-0?source=email_macro_view

Related Articles:

Dow Theory Signals New Bear Market is Imminent http://www.munknee.com/2011/08/dow-theory-signals-new-bear-market-is-imminent/
This Pattern Suggests Stock Market Crash Coming in the Fall http://www.munknee.com/2011/08/this-pattern-suggests-stock-market-crash-coming-in-the-fall/
The S&P 500 is Highly Vulnerable – Here’s Why http://www.munknee.com/2011/08/the-sp-500-is-highly-vulnerable-heres-why/
Market Crash Will Hit By Christmas 2011! Here’s Why http://www.munknee.com/2011/07/the-sp-500-is-worth-only-910-get-out-or-lose-big/
S&P 500 Likely To Top Out at 1400 – 1500 & Then Topple to 400! Here’s Why http://www.munknee.com/2011/02/uncanny-relationship-with-nikkei-1929-crash-suggests-sp-500-about-to-top-out-and-then-tumble/
Stock Market is Due for a 15-20% Correction – Here’s Why http://www.munknee.com/2011/06/stock-market-is-due-for-a-15-20-correction-heres-why/
A Violent Correction Is Coming For the S&P 500! Here’s Why http://www.munknee.com/2011/06/a-violent-correction-is-coming-for-the-sp-500-heres-why/
Why a Major Stock Market Correction is Imminent http://www.munknee.com/2011/05/why-and-how-best-to-play-a-major-stock-market-correction-is-imminent/
S&P 500 is 45% Overvalued According to Reversion to Mean Analysis! http://www.munknee.com/2011/01/these-2-historical-charts-show-how-high-then-how-low-the-sp-500-might-go/
How Mean Will the S&P 500′s Future Regression to Trend Be? http://www.munknee.com/2011/01/how-mean-will-the-sp-500s-future-regression-to-trend-be/

Editor’s Note:
- The above article consists of reformatted edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered.
- Permission to reprint in whole or in part is gladly granted, provided full credit is given as per paragraph 2 above

How Likely Will Hyperinflation Occur in the U.S.?

Editor — Sun, 24 Apr 2011 07:27:53 +0000

So says Justice Litle (www.taipanpublishinggroup.com) in edited excerpts from his original article*.

Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds) and www.munKNEE.com (Your Key to Making Money!) has edited ([ ]), abridged (…) and reformatted (some sub-titles and bold/italics emphases) the article below for the sake of clarity and brevity to ensure a fast and easy read. The report’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.

Litle goes on to say:

Do You Still have Faith in the Monetary System?

Faith in the system is a very important concept and it is very hard to kill and by “faith” I don’t mean liking what the government is doing, or being happy about the direction the country is going…Here are a few simple questions to determine whether you still have “faith” or not:

Do you still have a meaningful amount of cash in checking or savings accounts?
Do you rely on electronic payment systems (credit cards, bill pay etc.) for most of your transactions?
Are you still comfortable with your employer paying you in legal tender or, if you own a business, with your customers paying in same?
Does the percentage of your net worth tied up in physical hard [i.e. gold and/or silver] assets amount to] less than 50%?

If you answered “yes” to the above questions, then…you are still invested in the functioning financial system as we know it. You still have “faith”… not in your heart but in your deeds

Inflation Versus Hyperinflation

Inflation, even double-digit inflation, can be handled within the confines of the system. The unofficial inflation rate in Argentina is somewhere around 25% right now, and people aren’t even rioting in the streets. They aren’t super-happy, obviously, but they are adjusting. (The government is pumping up wages, so that may have something to do with it.)

Hyperinflation, in contrast, means that all hell has broken loose. To get true hyperinflation, the economic engine has to break down or there has to be a clear sense the government has lost all control and this is why hyperinflation tends to come in the aftermath of wars, or at the tail end of badly mismanaged regimes where the economy has been going from bad to worse for a very long time.

The possibility of rapidly accelerating inflation in the United States is very real…but hyperinflation is a much darker prospect. To get to that point, cash has to be seen as not just undesirable, but worthless. [You would be in a] real-life nitty-gritty panic mode [going] to the grocery store as soon as your paycheck hit on Friday knowing [full well] that prices [would be going] up again on Saturday; buying two months of food at a time; fighting for the last loaf of bread on the shelf; turning off the heat because the gas bill is double the rent.

Hyperinflation in the U.S.

[While] hyperinflation could come about in the United States I would argue [that it would not happen] quickly or easily. Americans won’t just wake up one day and say “Gosh, look at that.” In fact, to get to U.S. hyperinflation, I believe something else would have to happen first — the onset of a new Great Depression scenario, even worse than the last one.

Already the deficit hawks are yelling and screaming [citing] high inflation risk… In Washington, this is playing out as dramatic lip service to austerity – massive budget cuts and a timetable for raising interest rates so here’s the thing: If the inflation problem becomes too serious for the hawks to be ignored [one of two scenarios could unfold:]

eventually the Federal Reserve will be forced to…pull a “Volcker” and hit the inflation mule over the head with a sledgehammer. This “Volcker action” could then trigger a collapse in the value of paper assets, as all the rebuilt Ponzi schemes pumped with Federal Reserve money come tumbling down again. [Why? Because] the underpinnings of the U.S. economy were much stronger in Volcker’s day [back in the 70's when] there was far less debt and leverage built into the system… [or]
the stock market could crash on its own, as investors realize the stimulus rainbow has delivered them to the edge of a cliff.

Either way, some aggressive action will be taken to stop the build-up of inflation, be it through Washington policy backlash or the organic effects of another Wall Street meltdown. (As a side note, China and the Middle East are two other strong candidates for “meltdown catalyst.” If the China miracle implodes, the global economy goes with it. If the Middle East goes up in flames, oil becomes the $200 a barrel grim reaper.)

When…[such an] inflation-stopping event drops [our current] recovery in its tracks positive sentiment will quickly collapse. The dreaded “D” word, deflation, will be back on everyone’s lips – and that is one of the great ironies at this juncture of financial history. The deflation monster still has not been vanquished! It is simply hiding under the bed, biding its time until the Fed-and-China-created stimulus bubble pops and when that bubble DOES pop, that’s when things [will] get really frightening.

What Would Cause Hyperinflation to Occur in the U.S.?

When the global economy encounters some domino chain combination of Japan/Middle East/China/America implosion, the threat of Great Depression 2.0 [will] come roaring back, bigger and uglier than before [because] all the “extend and pretend” actions [that have been] undertaken until now [will] have only made the problems worse… [Those past] attempts to stop “normal” inflation [will] trigger an economic collapse that rivals [the conditions experienced during the] Great Depression… At that juncture, it will be apparent to all that the Federal Reserve has run out of bullets – that “more stimulus” simply cannot work – that trillions have already been thrown down the drain. That is the point where true panic comes in.

Who in the world is currently reading this article along with you? Click here to find out.

It is then, when the monetary authorities wet their pants in the face of a new deflationary panic, that the real threat of hyperinflation [will] return to the fore. If all hope becomes lost… we could see the Fed desperately propose something like QE2 times 10, on the order of not $600 billion but $6 trillion. That is when the real horror would begin.

Not since the Civil War has there been a crisis serious enough to tear families apart at the seams – but we believe this one will turn brother against brother.

*http://www.taipanpublishinggroup.com/tpg/taipan-daily/taipan-daily-041511.html

Ian Gordon: LongWave Cycle of Winter to Drive Gold to $4,000/oz.

Editor — Tue, 21 Sep 2010 07:46:37 +0000

Given the American national debt and deficit problems … the U.S. greenback has the potential for considerable downside … and by axiom, gold bullion has significant upside potential to $1,500 per ounce over the short to mid-term time horizon of 1 – 2 years and $4,000 per ounce over the longer term. Words: 1104

Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com, provides below further reformatted and edited [..] excerpts from Ian Gordon and Christopher Funston’s (www.longwavegroup.com) original article* for the sake of clarity and brevity to ensure a fast and easy read. They go on to say:

The entire world is now in an economic depression which always occurs at this point in the 60 to 70 year long cycle we refer to as the Longwave Cycle.

The Longwave Cycle
An understanding of the Longwave Cycle enables us to identify where we are in the cycle, to recognize each season in the cycle and, critically, to determine the move from one season to the next. That determination enables us to make correct investment decisions. There are good and bad investment mediums appropriate to each of the seasons. Typically, investments that perform well in one season do poorly in the following season.

Editor’s Note: Don’t forget to sign up for our FREE weekly “Top 100 Stock Market, Asset Ratio & Economic Indicators in Review“

The Longwave Winter
In the Longwave Cycle there is always a deflationary depression and this occurs in the winter of the cycle. The onset of winter is signaled by the peak in stock prices which ends the biggest stock bull market of the cycle. During the Longwave winter, debt is purged, which causes huge stress and significant bankruptcies to creditors and debtors alike. In order to protect ourselves from the financial and economic onslaught that ensues, we buy precious metals, particularly gold and the gold equities of producers and explorers.

Deflation Coming
During this recent surge in gold activity, there appear to be many investors getting aboard because they fear a return of the demon inflation. They perceive that many economies are on the road to recovery from the recent economic downturn and credit crunch, thus they are looking for an insurance policy as a hedge against an inflationary outbreak. As previously mentioned, gold can also appreciate in value within a deflationary economic environment. While inflation may rear its ugly head at some juncture well down the road, it is a deflationary outlook that Long Wave Analytics is embracing as the most realistic probability to unfold over the near to mid-term time horizon. Witness the Japanese deflationary experience which is still unfolding.

Understanding Inflation and Deflation
Understanding inflation and deflation is critical to making the right investment decisions. Strictly speaking, inflation is simply an increase in the supply of money and deflation is a decrease in the money supply. Most financial advisors are now calling for inflation to resume and even hyper-inflation to run rampant in the United States, because of the Federal Reserve’s current effort to circumvent deflation by excessive money printing. We are of the opposite, and certainly the minority, view.

We believe that central banks will be unable to forestall deflation and that when it arrives, it will be unprecedented in magnitude. This conclusion is based upon three factors:

1. Once the debt bubble is unwound, it is deflationary in nature because it is painful and results in bankruptcies on both side of the ledger. Actually, it takes money out of the system and during our Kondratieff winter, trillions of dollars of debt will be expunged.

2. Under these circumstances, banks won’t lend money because those banks that survive bankruptcies, and most won’t, will conserve it. Consumers and corporations won’t be able to borrow money, even if they so desire.

3. The velocity of money will essentially come to a standstill, since there will be none to spend. Money will be hoarded, either under the mattress, or in banks that consumers believe will survive the debt deflationary onslaught. During inflation, as in the 1970s, the velocity of money increases as people spend their money today, rather than pay higher prices tomorrow. In deflation, as in the 1930s, those few people with money curtail their spending in the knowledge that prices will be lower tomorrow, next month and next year. As the early 19th Century saying goes ‘money like manure, does no good till it is spread’.

Between October 1929 and April 1933, despite the desperate efforts of the Federal Reserve to reflate the economy, money supply contracted by 28%. The argument today – supported by Ben Bernanke, the current Federal Reserve chairman – is that the Fed didn’t do enough at that time… This interpretation is at best false and at worst dishonest. All strenuous efforts by the Federal Reserve to overcome deflation failed back then because the amount of money coming out of the economy, through bankruptcy and bank failure, overwhelmed the Federal Re¬serve’s attempts to reflate.

We are gold bulls and deflationist but most gold bulls are inflationist. How do we explain this dichotomy? During inflation, the price of gold rises along with all other ‘things’, such as out-of-print comic books, art, antiques, etc. Why? Because as we have just explained, during inflation the price of everything rises and people buy today because prices are cheaper than they will be tomorrow. In these times, gold is viewed primarily as a commodity, although it does still perform a minor monetary role versus the dollar, which is being debased through monetary inflation. In the inflationary summer there is absolutely no threat to the banking system because debt is not that high and there is no threat to the economy because money is plentiful and easy to access. So, when the threat of inflation passes, as in 1980, the prices of gold, commodities, comic books and antiques fall.

However, deflation is another kettle of fish, since it comes about through the destruction of the financial system and the economy, because of the bursting of the debt bubble. When that occurs as in 1873, 1929, and now, there is fear and panic.

In all panics, there exists an instinctive will in all of us to survive. We instinctively turn to the people and things we trust. When it comes to money, people always go to gold – or gold equities.

*http://www.longwavegroup.com/publications/winter_warning/2009/_pdf/2009_Winter_Warning_Volume_10_Issue_1.pdf

Editor’s Note:

The above article consists of reformatted edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered.

Permission to reprint in whole or in part is gladly granted, provided full credit is given as per paragraph 2 above.

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Gold

Here’s the Best Way to Protect Against both Inflation AND Deflation

Editor — Fri, 09 Apr 2010 07:51:37 +0000

There is no shortage of debate these days regarding the future purchasing power of the dollar—and understandably so. With the recent explosion of the Federal Reserve’s balance sheet, it is easy to understand why many are terrified of the possibility of the kind of rampant inflation often found in banana republics. After all, prices are more or less a product of the money supply and its velocity and the Fed has more than doubled the monetary base since September 2008. Words: 1142

In further edited excerpts from the original article* Nathan Kawaguchi (www.IgnoreTheMarket.com) goes on to say:

Be that as it may, we have not yet seen high inflation because the velocity, or multiplier, of money has gone down by roughly half over the same period. The potential for high inflation is there, however, and this is what folks are rightfully worried about.

To make matters worse, the U.S. was already heading down a dangerous path in regards to budget deficits and an unmanageable mountain of unfunded Social Security, Medicare, and Medicaid liabilities. The stimulus response to the financial crisis only added fuel to an already blazing fiscal fire.

Arguments for Inflation
The strongest risk of inflation comes from rapidly increasing government debt that currently carries a low average interest rate and low average maturity. This is the economic equivalent of an adjustable rate loan because we don’t have the resources to repay principal. Recent data from the U.S. Treasury show an average maturity of about 4.5 years at an average interest rate of 2.5%. This equates to about $165 billion in annual debt service (interest only), which is about 7% of total estimated 2010 receipts of $2.381 trillion. There are three specific factors that could exacerbate this problem and push interest rates higher:
1) Investor fear of dollar devaluation;
2) Rising fear of technical default;
3) Simple supply and demand forces from ever-increasing debt issuance due to the $1 trillion annual budget deficit that is estimated to persist for at least the next decade and the government is notorious for making overly optimistic budget predictions.

Arguments for Deflation
On the other end of the spectrum, we find another large camp of people who believe that massive deleveraging will lead to a second Great Depression. This makes sense because we have a debt-based monetary system in which money is born into existence from debt and, of course, all debt needs not only to be repaid, but repaid with interest. As debt is destroyed through repayments and defaults, the money supply is also destroyed. Lower money supply leads to more defaults and more debt destruction, and the vicious cycle continues. This was at the heart of the Great Depression. It is easy to understand why Ben Bernanke, a student of the Great Depression, made the decision to flood the market with liquidity in response to the financial crisis.

Other strong arguments for deflation are the rising unemployment rate and potentially higher tax rates to pay down ballooning debts at federal, state and local levels. Both of these would have the effect of lower total discretionary income, which would decrease demand for goods and services.

So Which Will It Be?
In a world of self-proclaimed experts, almost everyone with an opinion is firmly in one camp or the other. In fear of appearing indecisive or incompetent, many overlook the most rational answer: I don’t know. Since when did it become so shameful to admit that we don’t know what the future holds?

There are very compelling arguments for both inflation and deflation. The answer will eventually depend on decisions made in Washington and how people react to those decisions. For now, let’s stop fooling ourselves and admit that we don’t know. It is a problem that has to be dealt with and there is no easy medicine. Either path will be painful, but that’s what we get for our two and a half decade debt binge.

How Can We Protect Ourselves?
Once we admit that we don’t know what the end result will be, we can focus on how to protect ourselves based on a range of different outcomes. Investors and savers should focus on the likelihood that different outcomes will materialize and also look at the resulting consequences if they don’t and the more uncertainty there is, the more they should diversify.

Because there are such strong arguments on both sides, it may be wise to diversify your risks and build a portfolio with exposure to both outcomes. One word of caution here: even if we did know the end result, the ability to profit from it is diminished because we don’t know the timing of the end result. If we are, indeed, heading down the path of a banana republic, it may not come to fruition for another decade or longer. Conversely, the deflation scenario may be long and drawn out, much like in Japan.

If you are concerned more about inflation, you may want to favor things such as:
1. commodities and other hard assets
2. real estate
3. foreign denominated assets
4. businesses that are paid in foreign currencies
5. floating rate debt.

If you are concerned about hyperinflation, you may even consider:
1. gold and silver coins. However, the problem with these and other commodities is that they produce no cash flows and so value investors cannot estimate their intrinsic value. The return is completely dependent upon the resale price. In other words, this would be a form of speculation. It is a speculation on a bad outcome and a further speculation that these assets will protect you from the bad outcome.

If you find yourself more concerned about deflation, then the choice is easy:
1. You will want to hold a lot of cash and invest in U.S. denominated assets.

Conclusion
There is no better way to protect against both inflation and deflation than to be a value investor. Buying cheap assets and cheap cash flows can build and protect wealth in any environment – it protects on the downside and amplifies the upside.

When no opportunities exist with a sufficient margin of safety, value investors are content to hold cash—and perhaps a little hard cash (gold and silver) as speculative insurance against the unknown.

*http://seekingalpha.com/author/nathan-kawaguchi/instablog (Nathan Kawaguchi is a Research Analyst for IgnoreTheMarket.com which provides independent, value-based stock and mutual fund research, a blog, and acts as a hub for value investing information and research.)

Editor’s Note:
- The above article consists of reformatted edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered.
- Permission to reprint in whole or in part is gladly granted, provided full credit is given.
- Sign up to receive every article posted via Twitter, Facebook, RSS feed or our Weekly Newsletter.
- Submit a comment. Share your views on the subject with all our readers.
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How to Protect Your Portfolio From Inflation

Editor — Sun, 04 Apr 2010 07:57:40 +0000

One of the biggest threats to your portfolio’s performance over time is inflation. For every additional point of inflation, your portfolio will lose about 20% of its purchasing power over the next 25 years. In addition, taxes are levied on your portfolio’s nominal return, even if it does not experience a real increase in purchasing power. All combined, you can easily lose a third or more of the value of your portfolio over time with just a tiny bit of extra inflation. Words: 1335

In further edited excerpts from the original article* Kent Smetters (www.IgnoreTheMarket.com) goes on to say:

Inflation: Financial Death by a Thousand Cuts
Moreover, unlike jarring market crashes — such as the Great Depression or the recent crisis — inflation lurks in the shadows. It destroys value by gradually eroding real returns over time. It is financial death by a thousand cuts. Investors too often look at “the numbers” in their portfolio without asking what those numbers can actually buy over time. It’s a classic mistake that John Maynard Keynes termed “money illusion.”

There are two good reasons to now start paying close attention to inflation again:

1. The expansion of the Federal Reserve’s money supply during the past 18 months has been enormous and unprecedented and, as Milton Friedman most clearly articulated decades ago, more money chasing the same number of goods usually generates higher prices. In fact, had the recent monetary explosion happened during “normal” times, prices would have likely doubled.

2. Projected federal deficits are ballooning out of control. According to the Congressional Budget Office, the new Obama Budget will add almost $9.8 trillion to the national debt over the next decade. Astonishingly, the market has even recently priced some corporate bonds as safer than government securities. Eventually, it will be too tempting to reduce the value of this snowballing debt simply by printing more money.

Investing for the Short and Long Run of Inflation
To be sure, recent core inflation numbers (that exclude volatile food and energy) have been well below expectations and, given the severity of the economic slump, many experts believe that low inflation will continue for a while. For investors, however, the current debate over the inflation outlook is incomplete and misleading. Diversified investors hold many types of assets and some of these investments are more sensitive to inflation over the short run while some are more sensitive over the long run. As such, both time horizons should matter to investors.

a) Short Term
In the short run, say over the next three years, inflation is likely to continue to be quite low. One reason is that explosive growth in the Federal Reserve’s balance sheet has been mostly matched by enormous increases in excess reserves held by commercial banks despite a very steep yield curve. In other words, the banks are “hoarding the cash,” preventing it from becoming part of everyday transactions. Why? One reason that is the Federal Reserve now pays banks interest to encourage them to hold additional reserves. Some banks also fear that rising short-term interest rates will increase their costs over the life of the loan. (Their fears are indeed reflected in prices of one-year futures contracts for Fed Funds.)

There are three phases to the residential real estate mortgage for the banking sector:

1. the so-called “subprime” mess which we have recently been concluded

2. the defaults of “Alt A” types of residential loans that were often issued to sole proprietors with less formal income documentation which will begin later this year

3. the defaults of “Option ARM” loans in which interest rates sharply increase a few years after the loans start which will begin to increase next year.

Banks need to reserve against all of the above potential losses, however, if banks happen to be over-reserving for these losses, then inflation might come sooner if the Fed can’t quickly yank money out of the banking system but that scenario is unlikely. Indeed, “Phase Four” of the mortgage crisis — this one stemming from the commercial lending side — has received very little attention this far. If anything, banks are probably still not reserving enough for these defaults.
Combined with the recent economic slowdown in Europe, it is likely that inflation will be held in check for a while.

b) Long Term
Longer-run inflation (beyond five years) should be on everyone’s radar screen. In fact, it is unlikely that the current yields on 30-year Treasury securities will be enough to cover inflation over time, much less provide a real return. Present value shortfalls in Social Security and Medicare are in excess of $70 trillion and will likely lead to an “inflation tax.” Yields on 10-year Treasury securities — which policymakers try to keep low because of their indirect relationship to mortgages — may not be high enough to cover inflation.

What is an Investor to do About Inflation?
The traditional choice is to invest in commodities, metals, oil and the like. The broadest investible measure of commodities is almost 85% correlated with the Consumer Price Index (CPI) on an annual basis, meaning that the value of commodities tends to move in the same direction as inflation. Gold is almost 60% correlated, oil stands at 21%, and real estate and natural gas are both at 5%. However, contrary to conventional wisdom, none of these asset classes are actually good inflation hedges anymore. They are already too popular.

Don’t be fooled by correlation either. Two data series can appear to be highly correlated even though one of them consistently underperforms the other. In fact, commodities are about the only major asset class that actually underperforms the CPI over time. More targeted sector plays — such as gold, oil and natural gas — tend to beat the CPI, but not by nearly enough to compensate for their enormous risks (they are about twice as risky as the S&P 500). In fact, corporate bonds and equities actually appear to do a better job of “keeping up” with the CPI over time on a risk-adjusted basis, despite their low mathematical correlation.

Here are a few specific investment recommendations, starting with the lowest hanging fruit:

1. Increase your exposure to Treasury Inflation Protected Securities (TIPS) inside of your tax advantaged retirement accounts.

Put a quarter or more of your retirement stash into TIPS. While TIPS are not tax efficient enough for taxable accounts, they provide a good inflation hedge for retirement accounts where taxes are either deferred or already paid.

2. For your taxable accounts, buy $10,000 per year in Treasury I Bonds.

Like TIPS, I Bonds provide solid protection against inflation. Unlike TIPS, you are not taxed on “phantom income” along the way. Because I Bonds are such a “win-win”, the government caps the amount that you can purchase each year to $5,000 in paper form and $5,000 in electronic form. So do both.

3. Invest up to 15% of your portfolio in emerging market equities.

To be sure, many of these markets have already experienced large gains recently but they still offer a “twofer” of sorts:
a) a hedge against U.S. currency depreciation
b) diversification into countries that still have strong growth prospects.

4. Move some of your lower yield government bond portfolio toward Ginnie Mae centric mutual funds.

Ginnie Mae’s are the only mortgage-backed securities carrying the full faith and credit of the federal government. They usually provide a yield between one half a percent and one percent greater than comparable maturities.

Quinn: Gold Going to $1500, Silver to $20 and Oil to $100 This Year

Editor — Mon, 15 Mar 2010 23:00:21 +0000

I’m not too optimistic about 2010. Below are my prognostications in the areas of the economy, domestic politics, global geopolitics, and the investment markets. Words: 681

In further edited excerpts from the original article* James Quinn (www.seekingalpha.com) goes on to say:

1. Double Dip Recession Will Commence by June of 2010
To date, the Federal Reserve has printed
a) $700 billion wasted on a bank bailout,
b) $787 billion wasted on a stimulus package
c) $3 billion wasted on Cash for Clunkers ($24,000 per vehicle),
d) $28 billion squandered on the $8,500 homebuyer tax credit, and
e) $300 billion of mortgage-backed securities purchased by the Federal Reserve and Treasury and all we’ve received is a 2.2 percent increase in GDP. As the government stimulus winds down in the first half of 2010, the true weakness of the economy will reveal itself.

2. Official Unemployment Rate Will Grow to More Than 11% by Late 2010
With the economy sinking back into recession, the true non-government manipulated figure will approach the Great Depression levels of 25 percent. The side effects from this fact will ripple through the country for years.

3. Foreclosures Will Surge in 2010
A tsunami of Alt-A and Option ARM mortgages will reset in 2010. These two developments will lead to another surge in foreclosures.

4. House Prices Will Fall a Further 10% in 2010

5. Commercial Real Estate Foreclosures Will Reach Record Numbers in 2010

6. Retail Bankruptcies and Store Closings to Increase in 2010

7. Bank Failures Will Reach 500 in 2010
The bulk of these losses will be borne by regional banks. There were 150 bank failures in 2009. The FDIC just announced they would add 1,600 employees in 2010, doubling their work force.

8. The 2010 Deficit Will Increase to Almost $2 Trillion
The Federal Budget for 2010 anticipates a $1.5 trillion deficit. I believe the Obama administration will pull out all the stops to boost the economy before the 2010 elections. This means more spending.

9. Interest rates Will Rise in 2010
The bond market and foreign buyers will choke on this amount of debt. The result will be much higher interest rates. Ten year Treasuries will start the year at 3.8 percent. By year end, rates will exceed 5 percent.

10. The US Dollar Will Fall by 15% to Record Low in 2010

11. Gold Will Surge to $1500/oz. and Silver to $20/oz.
A falling dollar will result in a surge in gold and silver.

12. Oil Prices Will Exceed $100
As world demand increases and peak oil becomes acknowledged, oil prices will exceed $100 a barrel further depressing the U.S. economy.

13. A New ‘Jobs Program’ Stimulus Program Will be Implemented
Obama will announce another stimulus program and call it a “jobs program.” This will cost another $200 billion.

14. Democrats Will Have Huge Losses in the 2010 Congressional Elections
The Democrats will lose 50 seats in the House and 6 seats in the Senate.

15. The Stock Market Will Drop 30% in the First Half of 2010
After the Republicans regain power in Washington DC, the stock market will rally.

16. Isreal, Iran, Iraq, Afghanistan, Pakistan and India Tensions Will Escalate into Additional Hostilities
a) The uprisings in Iran are likely to provoke the current leadership to stir up more trouble in Afghanistan and Iraq.
b) The imposition of sanctions by the U.S. could also provoke Iran to lash out against Israel.
c) I expect Israel to attack Iran’s nuclear facilities before the end of 2010.
d) Iran’s response will be to disrupt the flow of oil through the Strait of Hormuz.
e) This will bring the U.S. Navy into conflict with Iran.
f) Oil prices will soar when this conflict breaks out.
g) The conflict in Afghanistan will worsen.
h) Tensions between Pakistan and India will increase as terrorists again attack within India.

17. Greece, Latvia and Hungary Will Default on Their Debts in 2010
Economically, Eastern Europe will crash with Greece, Latvia, and Hungary defaulting on their debt. This will plunge European banks into deeper losses and cause the next leg down in Europe. These foreign risks have the potential to spiral out of control.

[Now you know why] I’m not too optimistic about 2010. Let’s hope I’m wrong.

*http://seekingalpha.com/article/181126-2010-economic-outlook-the-tipping-point

Magnitude of Current Credit Destruction is Deflationary

Editor — Fri, 12 Mar 2010 18:21:15 +0000

Periodically in history, the expansion of credit creates the illusion of prosperity which, regretfully, ends in the inevitable bust which seems to be the case today. The sheer magnitude of credit destruction occuring right now is depressionary. The return to growth will be a long and painful process. Words: 625

In further edited excerpts from the original article* Moses Kim (www.expected returns.net) goes on to say:

In a functioning gold standard, current account imbalances self-correct. However, in our fiat-based system – with the dollar as the reserve currency – current account deficits persist as foreigners use their acquired dollars to purchase Treasuries. This sterilization process holds inflation in check, while suppressing interest rates. Crudely, massive current account deficits serve to reinforce the creation of credit and perpetuate the historic debt bubble.

The Bubble is Deflating
Unfortunately, the bubble has started to deflate. To see how this depression will potentially play out, we will have to turn for guidance to:

a) The Great Depression saw an enormous expansion in credit that led to the debt driven “Roaring Twenties”. People were similarly under the illusion that a new era of prosperity was at hand, regardless of increasing debt obligations. The bubble eventually popped, and excessive margin on stocks led to the stock market collapse in 1929. Massive debt liquidation hindered economic growth for over a decade.

The current debt crisis dwarfs that of the Great Depression for many reasons. To begin, indebtedness is more widespread, spanning the government, consumer, and corporate sectors, whereas, during the Great Depression, debt was isolated to the government sector. The magnitude of debt is also greater. At the onset of the Great Depression, interest bearing debt was 170% of GDP; in 2008, total interest bearing debt reached 350% of GDP. This monumental debt burden doesn’t even take into account unregulated derivatives, which are perhaps the biggest threat to our financial system.

Warren Buffett called derivatives “weapons of financial mass destruction”, and indeed they are. The collapse of Lehman almost brought down our whole financial edifice. The truth is, Lehman was a small player in the derivatives game. Anyone who thinks the threat of systematic collapse has been averted is underestimating the potential effect of over 500 trillion dollars in derivatives imploding as counterparties default.

b) The “Lost Decade” in Japan provides another illustration of a collapsing debt bubble. The level of total household debt as a percentage of disposable income reached 130% prior to Japan’s collapse. U.S. households reached similar levels of indebtedness in 2008 before the start of the current crisis.

Using stocks as a means of comparison, we can expect a downturn in the Dow in line with the Nikkei’s 80% collapse. Although this may seem unfathomable, the Dow is certainly pointing to this possibility.

In addition the Japanese were saving at a rate of 11% when their debt bubble imploded, which left them in a relatively strong financial position. In contrast, our savings rate was close to 0% in 2007, with consumption playing a far greater role in our GDP growth. This suggests the retrenchment in our consumption, reflected by collapsing personal consumption expenditures, will have a tremendous negative impact on our GDP.

Economists and media pundits who are calling for an end to the “recession” this year plainly do not understand the nature of credit in our system. The sheer magnitude of credit destruction occuring right now is depressionary. The return to growth will be a long and painful process. Like all bubbles, the U.S. debt bubble is ending.

*http://expectedreturns.blogspot.com/2009/06/case-for-depression-part-2-credit.html (Expected Returns is a blog dedicated to a spin-free analysis of current economic events and the gold market.)