Jim Rogers videos: inflation inevitable & "quite sure" gold will hit $2000
techticker videos short and to-the-point. Both are at link.
http://finance.yahoo.com/tech-ticker
Inflation Inevitable, Rogers Says: Could Be "Much Worse" Than the 1970s
Oct 12, 2009 10:30am EDT by Aaron Task
Given the Fed's extremely easy policies, runaway government spending and shortages of many commodities, inflation pressures are building and destined to get much worse, according to famed investor Jim Rogers of Rogers Holdings.
"The Federal Reserve has laid the groundwork for some serious inflation down the road by printing all this money," Rogers says. "So have many other central banks."
Although "the U.S. government lies about inflation" in its official data, inflationary pressures are already evident in nearly everything, excluding energy, Rogers says. Inflation is "going to continue, going to accelerate," he says. "We're going to be paying more for just about everything down the road."
Posted Oct 12, 2009 09:00am EDT by Aaron Task in
Famed investor Jim Rogers is "quite sure gold will go over $2000 per ounce during this bull market."
Rogers' confidence gold will continue to rally stems from a view the U.S. dollar is on its way to losing status as the world's reserve currency.
"Is it going to happen? Yes," Rogers says. "I don't like saying it [and] I'm extremely worried about it but we have to deal with the facts. America is not getting better [and] the dollar is going to be replaced just like pound sterling [was]."
Rogers didn't offer a timetable, and it's likely gold would exceed $2000 per ounce if the dollar were to lose its reserve status.
Still, "I wouldn't buy gold today," Rogers says. "I think I'll make more money in other commodities, which are cheaper," as discussed in more detail here.
i wonder...
why guys like rogers and others in the inflationary camp fail to recognize the extreme deflation that we will need to go through before we see any sort of massive inflation...
you know--- this economic crisis we are having right now... it is all a result of bad debt that now needs to be cleared.... when this debt was created-- the money supply increased--- this is inflationary--- now, that debt is all being destroyed in this economic crisis... and there is ALOT of it... we will not be getting massive inflation until all of the debt is washed clean away....
if you are basing your investment strategy on inflationary predictions-- you are missing a large part of the picture....
if you dont think that the destruction of debt and credit is anything to worry about-- then you also should not be worried about inflation--- do you know the definition of inflation and deflation----
we grew the money supply by trillions with a bunch of bad loans and credit.... this was indeed inflationary---
but it is all now going to be detroyed--- this decreases the money supply--- and in this case BY A WHOLE LOT!!! never before seen in the history of man sort of thing...
best thing to do is to be out of debt--- all debt--- that is your move going into this---
we will have inflation--- but not until all of the bad debt is gone... and the way the feds are stringing this along and kicking the can down the road--- it will not happen for a long time.... deflation however starts building a momentum-- and soon spirals out of control--- so if you think you are immune to what is about to happen--- you might want to check your pride at the door...
good luck!
Inflation
Yes, the halt in new bank credit has dramatically curtailed the supply of new money. And that is the cause of the dramatic business slow down. The new money the Fed has poured into the banks is just sitting there, or has been invested elsewhere, because the banks are afraid to lend. So very little new credit money is being created by banks at the moment. And people paying back loans also destroys money. Defaulting does not, by the way. However, consider the following:
1. The world is about to dump the dollar as the reserve currency. This will be highly inflationary by itself.
2. The Fed is going to have to loan trillions of dollars into existence to keep the US government afloat. Highly inflationary and absolutely inevitable.
3. Direct government subsidy of certain industries will start prices rising in those industries.
4. Once prices start rising in some sectors, and prices on real estate and other assets has fallen, the banks will start pouring new credit into those sectors. Remember, banks profit from lending. When they see a chance for moderate risk lending again they will be all over it.
5. When world demand for the dollar dives, government/Fed creation and distribution of new dollars hits its stride, and the banks get back into the lending game, hold onto your underwear or the acceleration will tear them right off.
Think of a whip cracking. First you draw the handle back, then you swing it forward HARD! But even as the handle is moving forward hard, the tip is still moving backwards - until the body catches up. Then the tip comes forward so fast it breaks the sound barrier.
Jim’s Formula: September
Jim’s Formula:
September 1, 2006
1) First interest rates rise affecting the drivers of the US economy, housing, but before that auto production goes from bull to a bear markets.
2) This impacts many other industries and the jobs report. An economy is either rising at a rising rate or business activity is falling at an increasing rate. That is economic law 101. There is no such thing in any market as a Plateau of Prosperity or Cinderella - Goldilocks situations.
3) We have witnessed the Dow rise on economic news indicating deceleration of activity. This continues until major corporations announced poor earnings, making the Dow fall faster than it rose, moving it deeply into the red.
4) The formula economically is inherent in #2 which is lower economic activity equals lower profits.
5) Lower profits leads to lower Federal Tax revenues.
6) Lower Federal tax revenues in the face of increased Federal spending causes geometric, not arithmetic, rises in the US Federal Budget deficit. This is also true for cities & States as it is for the Federal government.
7) The increased US Federal Budget deficit in the face of a US Trade Deficit increases the US Current Account Deficit.
8) The US Current Account Balance is the speedometer of the money exiting the US into world markets (deficit).
9) It is this deficit that must be met by incoming investment in the US in any form. It could be anything from businesses, equities to Treasury instruments. We are already seeing a fall off in the situation of developing nations carrying the spending habits of industrial nations; a contradiction in terms.
10) If the investment by non US entities fails to meet the exiting dollars by all means, then the US must turn within to finance the shortfall.
11) Assuming the US turns inside to finance all maturities, interest rates will rise with the long term rates moving fastest regardless of prevailing business conditions.
12) This will further contract business activity and start a downward spiral of unparalleled dimension because the size of US debt already issued is of unparalleled dimension.
Therefore as you get to #12 you are automatically right back at #1. This is an economic downward spiral.
I heard all this "slow business" as negative to gold talk in the 70s. It was totally wrong then. It will be exactly the same now.
A prudent man foresees the difficulties ahead and prepares for them; the simpleton goes blindly on and suffers the consequences. Proverbs 22:3
A prudent man foresees the difficulties ahead and prepares for them; the simpleton goes blindly on and suffers the consequences. Proverbs 22:3
Matthew 10:34 Think not that I am come to
send peace on earth: I came not to send peace,
but a sword.
some of you just don't
some of you just don't get it...... see zimbabwe...did Zimbabwe have massive deflation before inflation???
A prudent man foresees the difficulties ahead and prepares for them; the simpleton goes blindly on and suffers the consequences. Proverbs 22:3
A prudent man foresees the difficulties ahead and prepares for them; the simpleton goes blindly on and suffers the consequences. Proverbs 22:3
Matthew 10:34 Think not that I am come to
send peace on earth: I came not to send peace,
but a sword.
Zimbabwe never had much debt
Zimbabwe never had much debt built on top of their monetary base, as it was always considered too risky to lever up too much there. In the US at the peak, there were $50 in credit perched atop every $ of base money, for a total of $50+ trillion in outstanding credit. And all that credit were fungible for money, i.e. created demand similarly to what money does. Now, my guess is 40-60% of this credit will be found to be unserviceable, hence won't be serviced. That's a $20-30 trillion reduction in demand generating outstanding credit. A trillion or so of newly printed base money is simply a drop in the bucket compared to that.
The credit losses will of course not be realized at once, and Benny B and cronies are desperately trying to hide them, but they will be taken over time, as the loans are bad, and will eventually be defaulted on. That's exactly what has been happening in Japan over the last couple of decades. Loan losses from old days slowly but surely being realized as servicing cash flow dries up. And the central bank printing and printing to keep these losses from completely decimating the lenders who made the bad loans.
The Fed is also constrained in its monetization by the need to keep "some" confidence in the dollar. If they print too much, interest rates on dollar debt will go through the roof, destroying even more credit, further accelerating the pace of deflation. So, they are, just like Japan, forced to babysit a slow deflation sucking the life out of the economy for the foreseeable future, hoping cold fusion or some other external shock can bring the economy back to life before everything comes crashing down on their heads.
This only prevents them from creating controlled inflation. Hyperinflation Zimbabwe style they can create anytime, anywhere, by simply printing up quadrillions if nothing else. But hyperinflation is a completely different phenomenon from controlled inflation in a fractional reserve world, as it does not in any way support fractional reserving. Noone will lend in Zimbabwe, which is why their credit and stock markets operate in US Dollars, to the extent they operate at all. And the same will happen here; The only way for the Fed to create inflation, is to act so recklessly that they change the US (and world) economy from one based on fractional reserves and debt, to one of cash on the barrel with all base money. And that will take replacing a good chunk of the $50 trillion in debt that is currently outstanding.
Some are still drinking the Kool-Aid from the MSM, like this.
I cannot believe this stuff still gets printed.
Survey of top economists find most believe recession is over
Chris Isidore, CNNMoney.com senior writer
10:28 am EDT, Monday October 12, 2009
More than 80% of top economists believe that the recession that started almost two years ago is finally over. But most don't expect meaningful improvement in jobs, credit or housing for months to come.
That's according to a survey released Monday by the National Association for Business Economics (NABE). The group asked 43 top economists last month if they believe the battered U.S. economy has pulled out of the worst U.S. downturn since World War II. Those surveyed include economists from leading Wall Street firms and major corporations, as well as from highly respected universities and research firms.
Thirty-five respondents, or 81%, believe the recovery has begun. Only four, or 9%, believe the economy is still in a recession. The other four say they're uncertain.
Economists in the survey forecast that the U.S. economy grew at an annual rate of 3% in the three months that ended in September, though the official reading of gross domestic product won't be out for weeks.
And all of the economists surveyed expect the recovery to be slow and painful, leaving many people and businesses feeling the effects of the downturn for years to come.
The only organization that can officially declare the beginning or the end of a recession is the National Bureau of Economic Research. But that group doesn't make any sort of declaration until months after the fact, in order to take into account final readings of various economic measures such as employment, income and industrial production. For example, the NBER didn't declare that the recent recession had begun in December 2007 until a full year after the fact.
(BUT THEN THE REST OF THE STORY)
Lingering weakness
More:
http://finance.yahoo.com/news/Survey-of-top-economists-find-...
the naive public is getting
the naive public is getting set up to be skinned again...
A prudent man foresees the difficulties ahead and prepares for them; the simpleton goes blindly on and suffers the consequences. Proverbs 22:3
A prudent man foresees the difficulties ahead and prepares for them; the simpleton goes blindly on and suffers the consequences. Proverbs 22:3
Matthew 10:34 Think not that I am come to
send peace on earth: I came not to send peace,
but a sword.
@PaulRevere
Would you say that Credit IS Debt or Debt IS Credit? It comes out to be the same yes?
A complication is that most
A complication is that most commentators and policy makers use CPI changes as a metric for inflation / deflation, instead of demand generating money supply. So, it is indeed possible to have debt destruction alongside CPI increases. As CPI is pretty much entirely arbitrary anyway (like most measures in contemporary macro-"economics"), assume it included only oil. In that case, we could very well have massive reported "inflation" in the midst of credit destruction, if only oil production drops quickly enough.
But, in the larger scheme of things, I absolutely agree with you. We had crazy high inflation for thirty years, and are now starting to deflate back to sustainability. There's no even remotely orderly way to avoid it.
I believe Rogers and Faber and others argue that the Fed / Government simply won't stand by and let this inevitable deflation happen, even if it means a complete Hail Mary purposeful destruction of the world monetary system and most of those who populate it; almost like a hard reset.
And with a citizenry comprised almost exclusively of star struck illiterate sheep, they may well be able to get away with doing that. All it would take is printing up $100 trillion and using it to buy every debt instrument on the planet at grossly over inflated prices. Or, if that doesn't do it, $500 trillion. At some level of intervention, they can change any tide. And of course, once they have done this, in order for people to have any faith in whatever money they choose to replace it with, that money will likely, for at least a few decades to centuries, have to be backed by specie. Which goes some way to explain some analysts gold bullishness.
good points...
there is no way they can print fast enough to keep up with the destruction...
not even close..
I guess my question is..
I guess my question is.. what destruction?
A prudent man foresees the difficulties ahead and prepares for them; the simpleton goes blindly on and suffers the consequences. Proverbs 22:3
A prudent man foresees the difficulties ahead and prepares for them; the simpleton goes blindly on and suffers the consequences. Proverbs 22:3
Matthew 10:34 Think not that I am come to
send peace on earth: I came not to send peace,
but a sword.
destruction of credit...
Thanks to a credit boom that dates back to at least the early 1980s, and which accelerated rapidly after the millennium, the vast majority of the effective money supply is credit. A credit boom can mimic currency inflation in important ways, as credit acts as a money equivalent during the expansion phase. There are, however, important differences. Whereas currency inflation divides the real wealth pie into smaller and smaller pieces, devaluing each one in a form of forced loss sharing, credit expansion creates multiple and mutually exclusive claims to the same pieces of pie. This generates the appearance of a substantial increase in real wealth through leverage, but is an illusion. The apparent wealth is virtual, and once expansion morphs into contraction, the excess claims are rapidly extinguished in a chaotic real wealth grab. It is this prospect that we are currently facing today, as credit destruction is already well underway, and the destruction of credit is hugely deflationary. As money is the lubricant in the economic engine, a shortage will cause that engine to seize up, as happened in the 1930s. An important point to remember is that demand is not what people want, it is what they are ready, willing and able to pay for. The fall in aggregate demand that characterizes a depression reflects a lack of purchasing power, not a lack of want. With very little money and no access to credit, people can starve amid plenty.
Attempts by governments and central bankers to reinflate the money supply are doomed to fail as debt monetization cannot keep pace with credit destruction, and liquidity injected into the system is being hoarded by nervous banks rather than being used to initiate new lending, as was the stated intent of the various bailout schemes. Bailouts only ever benefit a few insiders. Available credit is already being squeezed across the board, although we are still far closer to the beginning of the contraction than the end of it.
yes they can...... A prudent
yes they can......
A prudent man foresees the difficulties ahead and prepares for them; the simpleton goes blindly on and suffers the consequences. Proverbs 22:3
A prudent man foresees the difficulties ahead and prepares for them; the simpleton goes blindly on and suffers the consequences. Proverbs 22:3
Matthew 10:34 Think not that I am come to
send peace on earth: I came not to send peace,
but a sword.
they most certainly cannot...
Printing one's way out of deflation is impossible as printing cannot keep pace with credit destruction (the net effect is contraction).
There will be a lot of dollars around when this happens.
The world is about to dump the dollar as the reserve currency. This will be highly inflationary by itself.
No one will want dollars in the future.
dumping the US dollar will not happen anytime soon...
at least not before we experience the mother of all deflationary drops...
Paul: All the signs are there that this already started.
When the bankers are done, they will cut the dollar support loose and us with it.
I hope you are right.
Dollar Reaches Breaking Point as Banks Shift Reserves (Update3)
By Ye Xie and Anchalee Worrachate
Oct. 12 (Bloomberg) -- Central banks flush with record reserves are increasingly snubbing dollars in favor of euros and yen, further pressuring the greenback after its biggest two- quarter rout in almost two decades.
Policy makers boosted foreign currency holdings by $413 billion last quarter, the most since at least 2003, to $7.3 trillion, according to data compiled by Bloomberg. Nations reporting currency breakdowns put 63 percent of the new cash into euros and yen in April, May and June, the latest Barclays Capital data show. That’s the highest percentage in any quarter with more than an $80 billion increase.
World leaders are acting on threats to dump the dollar while the Obama administration shows a willingness to tolerate a weaker currency in an effort to boost exports and the economy as long as it doesn’t drive away the nation’s creditors. The diversification signals that the currency won’t rebound anytime soon after losing 10.3 percent on a trade-weighted basis the past six months, the biggest drop since 1991.
“Global central banks are getting more serious about diversification, whereas in the past they used to just talk about it,” said Steven Englander, a former Federal Reserve researcher who is now the chief U.S. currency strategist at Barclays in New York. “It looks like they are really backing away from the dollar.”
http://www.bloomberg.com/apps/news?pid=20601068&sid=a4x9dIJs...
bump for a wise analyst
.