There are significant difference between China and Japan; Japanese had/has free market; Capital/liquidities can easily move in and out; but you can't do this within China. And if you talk to Japanese; you find that older generations are more loyal toward their company; but not the case for younger generation; in a sense; people can be easily manipulated by their company; when their company raking in more profits from overseas; and their employee had taken pay cut at same time. The same technique can not apply to Chinese. Most Chinese will do all sort thing to hurt their ex-employer if their employer had tried to screw them. Chinese don't think and feel "obedient" the same way as Japanese. Watch out British; Chinese are coming for you.
You know, I had a vision the other day. The lightbulb clicked. Bernanke saved the stock market just like it was saved in 1907. You want examples of free markets? 1929. Not enough was done to prevent the crash. In fact, a little was done and the stock market recovered most of its losses in 1930. (some might say a bear correction). The depression took years to develop, in part because of air head Hoover and his laissez faire policies. Roosevelt was no better, business hated him. What was Bernanke supposed to do? Let the august correction reach 10,000? Where would we be now? All this talk about hyperinflation is silly. Hyperinflation won't happen tomorrow. We might have high inflation, it's already at 4%, but it remains to be seen what Bernanke or whomever is in charge will do about it. Right now their priority is the economy. They cannot let inflation go much higher from where it is because that would be bad for business. Their goal once the data comes in and the economy is better is to stabilize the dollar. He still has several tests to fail before he's called hyperinflation Ben.
detective is definitely on a 'mission from god' (thanks blues brothers). 1 thing: all of this money supply infusion has merely helped stabilize things, and offset monetary supply destruction. There is a MASSIVE destruction of money supply going on right now. Banks have been kicked in the groin, and this is merely a shot of novacaine and a chair. Banks are lending LESS now than ever (in this cycle). House assets declining 20-40% is MASSIVELY deflationary. But seriously, while oil demand is inelastic (which he so beautifully brings up), you have to realize that the demand on the margin (ie, demand at 87 mb/d versus an arbitrary base demand of 85 mb/d) has an inordinate effect on price, since supply is relatively difficult to change (lets say 85 mb/d is the base supply and we can not produce any more). The point is that the extra 2 mb/d of demand against a backdrop of fixed supply has the power to quickly change price not 3% (or whatever increase of demand it actually is), but 100% ! [from $50 to $100 this yr for example] But that marginal demand of 2 mb/d [and the speculative fantasy associated with hoardes of cash looking for a safe home, not happy with stock markets or bond markets] takes back as quickly as it giveths. Just do the math. Lets say your hyperinflationary panic happens: $300 crude oil. Imagine. People stop driving (and consuming Chinese goods), because they don't have spare cash for anything. US is 25% of world oil demand. So what happens to oil price when our 20 million barrels a day oil demand falls to 15 million barrels a day, yet. So now world oil demand falls from 87 mb/d to 82 mb/d, leaving a 3 mb/d production margin, and possibly accelerating negative. Now do the math -- what happens when there is much more supply than demand? And convince me how the EU or the Japanese (largest consumers of crude) are so different from the US in terms of reckless policy (which I agree with you on) ? EU pumped hundreds of billions of cash into their system to help cushion this reigning in of credit (which will continue). You think the Japanese are suffering now? Imagine $300 crude? Their consumption would plummet. They are dependent on their exports to the US for their business to thrive!!! What happens when us poor US buyers can't afford Japanese products? The Japanese have no cash, and definitely none for crude. Take the EU, Japan, and US out, and you are left with no support on commodities demand !! China falls out of bed; Australia (which feeds china the commodities) falls out of bed. ETC ETC. Fill in the blanks. Dumb money is chasing commodities (as a primary long term investment) at this stage. This is merely a function of money being afraid of other asset classes (bonds, stocks), since 'recession' is all the rage right now. Interestingly enough, this inflation runup and the credit reigning will likely kill the global economy for the next few years, until everyone figures out that demand actually does drop. Your Weimerian hyperinflationary dream won't happen. Deflation is the next game. And bond markets are figuring that out. Anyone who thinks commodities have a lot of upside here is making this bet: that the developed world can afford much higher prices WITHOUT wiping out demand. If you believe that, then you should be buying stocks and houses as well, because that means people have plenty of discretionary cash for ipods and houses still. If you want to bet on economic collapse of the US alone, then just short the dollar. My bold prediction: 10 year asset yields will fall to 2% and even lower over the next 2 years, as commodity demand starts faltering, and people realize the commodity move was nearly another bubble. So the game goes: Tech stocks -> Houses / Commodities -> Bonds -> Stocks (2012 and beyond), since who knows how long it'll take for the consumer and producer to die and be reborn.
Hyperinflation you can bet on it. How does 100,000% sound like...just look at Zimbabwe. Germany was a 1st world country when they had hyperinflation....as will the US if the current f'wits in Washington keep running things the same way....printing press running on overtime.... http://www.thezimbabweindependent.com/viewinfo.cfm?linkid=12&id=12400 Inflation hits 100 580% ZIMBABWEâS year-on-year inflation for January has breached the 100 000% barrier after picking up 34 367,9 percentage points to hit a new high of 100 580,2%. All indications are that the economy will crumble further this year. Figures released last week showed that the year-on-year inflation figure for December 2007 stood at 66 212,3%. The January inflation figure means that prices as measured by all items on the Consumer Price Index (CPI) increased by an average 100 580,2% between January 2007 and January 2008. Food and non-alcoholic beverage inflation was at 105 580,2% while the non-food and alcoholic stood at 97 885,7%. The Central Statistical Office (CSO) said the month-on-month inflation for January was 120,8% indicating a 119,3 percentage points drop on the December figure of 240,1%. "The month-on-month food and non-alcoholic beverages inflation stood at 86,9% in January 2008," the CSO said. On the month-on-month basis the non-food inflation stood at 147,8% showing a drop of 51,2 percentage points on the December figure of 199%. The surge in inflation came as the fragile Zimbabwean dollar continued to crumble against the major currencies. The Zimbabwe dollar which ended last week at $6,5 million against the United States dollar was by yesterday trading at $11 million. Foreign market traders expect it to reach $15 million by the end of next week. The Zimbabwean dollar also continued to weaken against the rand and the pound sterling.
Not that I care if you all short commodities.... but deflation is an almost impossible scenario IMO. How do you pay off our massive and growing personal and govt. debt on a deflating currency? It would cause almost everyone, including the govt., to default. Then the currency would collapse anyway due to the defaults. Seems simple that we will inflate at any cost - I can't wait to get my negative interest loan from Bernanke and cover your gold shorts
Perhaps you shouldn't be so sanguine about inflating "at any cost"... when there is "enough" inflation, nearly all US citizens will have been bankrupted. Deflation would be preferable... for the harm of fewer people, and for the overall good of the country. We'd eventually recover from a deflation. We won't recover from "enough" inflation.
Well stated, scrappy. That's what I am starting to believe now - that the massive money supply growth is reactionary to the massive deflationary influences that have been glossed over to the public. Why bring an expert in the depression into the fed chair? Really. Think about it. Long term bond yields to 3% after the commodity boom plays itself out. Why not. FWIW, I position myself both ways.
Sorry but because money supply has grown out of control. It has grown out of control so much that Fed decided to stop pubilshing M3 money supply at all....