Deflation Will Be DEFEATED

[Spectrism]

For the last couple of years I have been strongly in the DEFLATION camp.... and still am... with a small caveat. Since we have become a nation that disregards rules and laws in favor of expedience to benefit those in power, we need to view things with peculiar lenses.

The argument for deflation is absolutely correct in a world that follows rules. If we look at the defaults on mortgages, the drastic slowing of money velocity and the destruction of the wealth engine (a balanced economy of manufacturing, research & development, services)- then we see an imploding world of hollow construction sucked into an irresistible black hole.

Here is why I no longer hold ONLY to the deflation scenario. Our money system is based on a debt currency. Every dollar (actually they are federal reserve notes and not dollars), must be borrowed into existence. The rule has been that the federal reserve issues each note as a debt instrument to be paid back plus interest. This, in itself, is deflationary as you will always owe more back than the amount of money borrowed. Overcoming this vacuum is the wealth engine of the economy which MUST produce more value than the amount of interest owed. As long as the economy marches along in production, there will be sufficient fat to feed the bankers their interest for the priviledge they afforded us in loaning us nothing but an imaginary thing- debt.

Almost 40 years ago a plan was put in place to shift the manufacturing base of the world into slave labor, third world locations. The vision of a global system had long been fostered in a supernatural realm with only glimpses by the global elite into what this meant. Useful tools that they were (and are), they only saw their personal profit and ignored the global destruction they implemented. For America, this meant stealing the wealth and blessing bestowed by God upon a nation that was founded on and operated under sound principles. The global elite needed to destroy any pockets that could resist the scheme. Removing the economic energy source was the perfect method.

Manufacturing is the means of producing a valuable product. That process includes: mining raw material, research, development, continued engineering, support, service support and dozens of industries to supply the laborers of those branches. When manufacturing was moved to China, Indonesia, India, etc... so also went 70% of the infrastructure. A hollowed-out service economy is doomed to fail in time. The seeds were planted for destruction of the wealth machine.

Government regulation was carefully modulated over the last 70+ years to set up the tsunami about to hit us. Growth of the real estate market assured a ready vein for the blood-thirsty bankers to loan imaginary dollars and extract interest like a vampire bat feeding on its host. Tax deductions for mortgage interest payments and rental depreciation made these more palatable. A slew of maneuvers in the 1990s and continuing today have made it possible for certain groups to legally cheat on their accounting while leveraging imaginary assets that the common man would immediately be jailed for. The crash of the real estate bubble continues with trillions of dollars evaporating and their explosive derivatives exposed to flames & sparks.

I read a report last week that the federal reserve cannot account for a "lost" sum of more than one trillion dollars over the last year. That sounds very much to me like they violated a rule of loaning all money into existence in order to snuff out a flame near a powder keg. If the federal reserve is GIVING out that kind of money OFF THE BOOKS, there will be no need to have a deflationary collapse. The key thing here is that they are giving to only certain places- their friends, and they are doing it at the expense of the dollar value. Add in more than $6 trillion of money given away through Fannie & Freddie and we no longer have a system of rules and laws.

Figuring out what they will do requires that we know the end of things. If we can figure out where all this is going, we can know what cars they will play, although maybe not the exact sequence. I have many more ideas on this but would like to open it to discussion. Following are some interesting articles I came across.

NUF- Sea Salt, Sea Salt, Hand Sanitizer, Shave Cream

[Spectrism]

http://goldscents.blogspot.com/2010/09/deflation-never-had-chance.html


Wednesday, September 8, 2010
DEFLATION NEVER HAD A CHANCE

Lately we've been hearing a lot of talk about Kondratieff cycles, Elliot Wave super cycle, end of the world, deflation, deflation, deflation.

What the deflationists fail to acknowledge is that in a purely fiat monetary system deflation is a choice not an inevitability. To put it in simple terms, if a government is willing to sacrifice its currency there is absolutely no way deflation can take hold in a modern monetary system.

It doesn't matter how large the debt contraction is, 10 trillion, 100 or 1000 trillion, any government with a purely fiat currency can, with the stroke of a computer key, print enough money to wipe out the debt. Granted they will destroy the currency by doing so, but at some point we are going to be faced with the choice of print or deflate. I have little doubt Bernanke will choose to throw the dollar on the sacrificial alter.

Consumer credit isn't growing you say. Consumers are deleveraging. Not possible to have inflation unless consumers are borrowing and wages are rising. Pure nonsense!

Let me point out one indisputable fact and then I will delve deeper into the deflation/inflation argument and where investors need to put their capital to protect themselves from the coming inflationary storm. In a purely fiat monetary system a government that is willing to sacrifice its currency can, if they so desire, print enough money to mail every man, woman, and child a check for $1,000, $100,000 or a million dollars. To do so would halt any deflationary force right in its tracks. It would for most practical purposes wipe out all consumer debt. Impossible you say? Well the US has already done it twice. (It was called a tax rebate, in case you forgot.)

Here's the thing, where the inflationary forces show up is determined by who gets first use of the money. So far that has been the banking system. Through the myriad bailout programs the Fed has created money out of thin air and forced into the insolvent financial system. That has resulted in selective inflationary forces being unleashed. Instead of loaning credit to consumers or businesses who don't really want it, the financial system has plowed the money back into financial marketss. It's the reason the stock market rallied 80% despite flawed fundamentals. It's why oil rallied from $35 to over $80 despite impaired fundamentals. It's why gold is threatening to break out again to new historic highs.

If instead of forcing the liquidity into the financial system it had instead been mailed to the average consumer, we would now be seeing real estate prices rising rapidly again, food prices and gasoline would be going through the roof. Wages would be rising out of control.

Where inflation shows up is a direct result of who gets first use of the freshly minted dollars. I can assure you we don't have an impending deflation problem; we have a rapidly approaching inflation problem and currency crisis.


I've said for a long time now that eventually the market is going to make Bernanke pay a terrible price for his insane monetary policy. That price is going to be a currency crisis in the dollar and I think it's already begun.

While everyone was busy watching the Euro crack during the first part of this year what no one foresaw was that eventually the cancer that began in Europe would at some point spread into the dollar. It began 3 months, ago although no one has noticed yet.

Next I'm going to illustrate the long term cyclical nature of the dollar as the cycles are now lining up perfectly to bring on a major currency crisis in the US dollar, much worse than what just transpired in the Euro.

First let me show you a chart of the largest cycle, the three year cycle.
(see more at link... charts.... good article)

-------------------------------------------------------

http://goldscents.blogspot.com/2010/09/dollar-in-jeopardy.html

Monday, September 13, 2010
DOLLAR IN JEOPARDY

The dollar is going to be the key to virtually all markets. If it continues down it's going to act to support asset prices. Well at least initially. At some point we are going to see the decline become unruly and the Fed's efforts to prop up asset prices will have serious unintended consequences. Namely, surging inflation. Which is already starting to show up in China, India and many emerging markets.

On a cyclical basis if the dollar drops below 81.88 it will mark a failed daily cycle.

(see more at link.... charts)

[General of Darkness]

Great thread Spectrism. IMHO, I think we'll have both.

Deflation for Commodities - Things you can live without
1 - Computers
2 - General Electronics
3 - New Cars
4 - Boats
5 - ETC

Inflation for Consumables - Things you can't live without
1 - Food
2 - Fuel
3 - Electricity
4 - Natural Gas
5 - Water
6 - ETC

Grant you I've been saying this for about 4 years now. But WTF do I know. :dunno

[Horn]

That is one thing that always gets overlooked in most of the deflation vs. inflation threads, GD.

One things for certain though, the dollar is caught in the crosshairs.

China/Mexico manufacture of the "deflationary" items could be telling. As those prices could be more or less fully supported by NWO.

[Spectrism]

Great thread Spectrism. IMHO, I think we'll have both.

Deflation for Commodities - Things you can live without
1 - Computers
2 - General Electronics
3 - New Cars
4 - Boats
5 - ETC

Inflation for Consumables - Things you can't live without
1 - Food
2 - Fuel
3 - Electricity
4 - Natural Gas
5 - Water
6 - ETC

Grant you I've been saying this for about 4 years now. But WTF do I know. :dunno


I think we are about to see a time where the dollar is so devalued that even those things that have become cheaper will begin to shoot up. Here is why:

The government has a long term strategy to make everything GLOBAL. To that end, certain things MUST be destroyed. Individual currencies must be ruined in order to bring on a global currency. Why global? This is all happening to make ready the rule of the devil's chosen one. This stuff written in the Bible is real. The beast will have one seat of rule in the world and all resistance must be wiped out. America was the home of the free. There may be no sovereign men in a global system.

But it is not yet time for this to all happen.... we are close. The dollar will be destroyed over the next year to maintain the anaesthesia for the masses. Whenever you hear about "green shoots", "stimulus", "kick start the economy", "emergency funding", "recovery"- these are the sleep drugs being applied to the people. The image must be maintained: anything that looks like 1932 must be hidden. Stock market crash is stopped by the federal reserve and selected & funded third-person government accounts BUYING stocks. The stock market stays up inspite of dead fundamentals. Unemployment numbers are faked. Food lines and soup kitchens are replaced by by food stamps.

There is NO WAY our national debt will be paid back with tax revenues. Debt forgiveness will come in the form of dollar destruction. This will require the switch to a new global currency. In order for this to happen without strong revolt, the power of the people must be drained. The vampires will take much more life blood from the sleeping Amerikans.

http://www.youtube.com/watch?v=VQxFi0oGZl4

[Spectrism]

Spectrism,

I have always enjoyed reading your thoughts and opinions as well as Carl's, Eric's, and HT's regarding deflation. I'm still in that camp.

At this point I have no idea what will happen. But I just don't see hyper inflation because of the lack of wage increases. I know these type of threads can turn into a flame war and many will say that we will have both deflation and inflation, but I will leave that to others. I appreciate your OP and the link you provided. Most of us can agree that the end result will be the same regardless of how we get there.

GOD hit the nail on the head as far as wants and needs and where those prices will continue to move.


I see that Mamboni posted the "Melt Up" video. It has alot of good ideas.
http://gold-silver.us/forum/general-discussion/meltup!-nia-documentary-on-america's-economic-crisis/


The deflation concept is true as the wealth creation engine is broken and the system is unable to exceed the deflationary interest hunger of a debt currency. BUT- they are not following the rules. We need to see where they are maneuvering the herd in order to know what the loud noices mean.

Wages will not rise fast enough for the commoner to avoid destruction. The first to get the free money will be the elite. By the time it gets to the commoner, it will have much less buying power.

[Ponce]

General? some of that stuff that you listed as "need" we really don't.......if we now "need" it is only because like a junkie we need our fix.........we became slave to them.

[Gknowmx]

For you deflationists IMHO there isn't a better blogger out there than FOFOA to explain hyperinflation. Enjoy his last three blogs (and the comments, including a pathetic response from Mish)

http://fofoa.blogspot.com/2010/09/just-another-hyperinflation-post-part-3.html

[Dogman]

Great thread Spectrism. IMHO, I think we'll have both.

Deflation for Commodities - Things you can live without
1 - Computers
2 - General Electronics
3 - New Cars
4 - Boats
5 - ETC

Inflation for Consumables - Things you can't live without
1 - Food
2 - Fuel
3 - Electricity
4 - Natural Gas
5 - Water
6 - ETC

Grant you I've been saying this for about 4 years now. But WTF do I know. :dunno


Basics

1- Shelter
2- Food/Water
3-Fuel = what ever burns to heat and cook with + for transportation if needed.

All else is gravy!

[uranian]

there was a CFR blog about a year ago (brad setser, no longer running now) that echoed the idea that stuff you'd typically buy on credit (cars, houses) will deflate as the credit bubble goes poof, while stuff you'd pay for in cash (food, energy) will inflate with the money supply. i saw somewhere today that john williams of shadowstats is now saying 6 to 9 months to hyperinflation. but when you've got charts like this one, it's anyone's guess (though that every fiat currency has collapsed into hyperinflation is a wee hint to my mind):

http://www.shadowstats.com/imgs/charts/mbase.gif

[Gknowmx]

the lack of confidence that debtors can repay has sparked deflation
the lack of confidence in the currency marks the beginning of hyperinflation, not the increase in amount of physical currency. When John William's says that we are 6-9 months out from hyperinflation, what he should be saying is that we are 6-9 months from attempting to remedy the already existing hyperinflation with QE-- the printing of physical dollars.

Given that the dollar is the reserve currency and given that digital dollars can be turned over in fractions of a second, one question is how will this QE be manifested: a bank holiday to deliver physical dollars or a complete decoupling from physical dollars to edollars + plasitc.

The failure to execute either could result in immediate seizure of the global monetary system. Even if there isn't immediate seizure, if confidence isn't restored, things will get ugly fast. The monetary crisis will lead to a global civilization crisis because the standard of living of 7 billion people absolutely depends on global trade which absolutely depends on global monetary stability which absolutely depends on productivity. In the vacuum created by the lack of confidence in a global monetary system, the advantage will go to those who can maintain the longest chain of trusted communication network in place AND back it with tangible and deliverable goods.

[Spectrism]

the lack of confidence that debtors can repay has sparked deflation
the lack of confidence in the currency marks the beginning of hyperinflation, not the increase in amount of physical currency. When John William's says that we are 6-9 months out from hyperinflation, what he should be saying is that we are 6-9 months from attempting to remedy the already existing hyperinflation with QE-- the printing of physical dollars.
Given that the dollar is the reserve currency and given that digital dollars can be turned over in fractions of a second, one question is how will this QE be manifested: a bank holiday to deliver physical dollars or a complete decoupling from physical dollars to edollars + plasitc.

The failure to execute either could result in immediate seizure of the global monetary system. Even if there isn't immediate seizure, if confidence isn't restored, things will get ugly fast. The monetary crisis will lead to a global civilization crisis because the standard of living of 7 billion people absolutely depends on global trade which absolutely depends on global monetary stability which absolutely depends on productivity. In the vacuum created by the lack of confidence in a global monetary system, the advantage will go to those who can maintain the longest chain of trusted communication network in place AND back it with tangible and deliverable goods.

I agree. I think the next phase will be ushered in to keep the system from collapsing yet.

QE will only be a temporary bridge until the world currency is established. All must be brought to the same point. The ability to enforce through martial law any new moves must also be established. Any QE that we see will come through power elite first so that they reap the biggest benefit and the survival scraps are then doled out to the boot-licking lemmings.

Yes- little carrot and big stick. The confidence in the existing system must be destroyed so that the new one will be embraced.

Agreed. Those who are self-sufficient will not be easily herded.

[7th trump]

The beast get a mortal head wound. (this one world government doesnt quite come together. diversity in world monetary and political power is its down fall. Yep you betcha the dollar is going to fall.)
Only the appearence of the fake messiah (satan) will the nwo have life again.
Just as Spectrism has said this is all headed up by satan.
satan comes to this earth to make his nwo happen because the political beast is given life again, however satan comes looking like the Lamb (fake imitation of Christ) having horns (power) like the Lamb, but has a voice as the dragon (because the fake lamb is the same serpent from the garden that fooled Eve into eating of the tree of knowledge of good and evil (satan).

[woodman]

My bank seems to be doing everything they can too slow down the availability of deposited checks. First they started making me wait a full week before the funds were available to me, (written on a bank account they trusted before) then they instituted a policy of releasing only a partial amount after a week. This seems completely unfair to me and arbitrary also. Could it be an attempt to slow velocity? Are other institutions doing the same?

[Spectrism]

My bank seems to be doing everything they can too slow down the availability of deposited checks. First they started making me wait a full week before the funds were available to me, (written on a bank account they trusted before) then they instituted a policy of releasing only a partial amount after a week. This seems completely unfair to me and arbitrary also. Could it be an attempt to slow velocity? Are other institutions doing the same?


Sounds more like one bank not trusting another.

I noticed my company has gotten real strict on credit. They started requiring letters of credit from contractors that are questionable. I think there is just a mood of caution that companies which owe you something may not be in business next week. There is no way I would put any deposits down with companies and risk them filing for bankruptcy. Pre-buying heating oil is a good example of what NOT to do.

[Gknowmx]

My bank seems to be doing everything they can too slow down the availability of deposited checks. First they started making me wait a full week before the funds were available to me, (written on a bank account they trusted before) then they instituted a policy of releasing only a partial amount after a week. This seems completely unfair to me and arbitrary also. Could it be an attempt to slow velocity? Are other institutions doing the same?


Sounds more like one bank not trusting another.

I noticed my company has gotten real strict on credit. They started requiring letters of credit from contractors that are questionable. I think there is just a mood of caution that companies which owe you something may not be in business next week. There is no way I would put any deposits down with companies and risk them filing for bankruptcy. Pre-buying heating oil is a good example of what NOT to do.


Excellent example of a lack of faith in the currency; a sure sign of the early stages of hyperinflation.