U.S. Inflation to Approach Zimbabwe Level, Faber Says

makloda · May 27, 2009

Quote from piezoe:

What may be of more interest to some of you are the actual CPI data published by John Williams, as these are comparable to the Government's method of computing the CPI in 1980. These have the U.S. with double digit inflation throughout much of 2006-2007 and the early part of 2008. According to this data, the U.S. is presently, as of 15 May, experiencing about a 7% inflation rate. These numbers are consistent with my own observation, and probably yours too, of what prices are doing in reality.
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A little reality check for the Shadowstats non-sense: According to his numbers the US has been in a constant recession since the 1980s as real GDP (using his CPI) was constantly in negative territory -- which of course is a ridiculous conclusion.

For a more practical inflation analysis consider Shedlock's Case-Shiller modified OER CPI: http://globaleconomicanalysis.blogspot.com/2009/04/cs-cpi-negative-50-third-straight-month.html

By ignoring housing prices, CPI massively understated inflation for years. The CPI is massively overstating inflation now.
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The CS OER-adjusted CPI is now in deeply deflationary territory.

426653478 · May 27, 2009

I am highly confident that we will see double digit inflation rates by the end of 2011, I think more important than how inflation will be created is why it will be created. The federal budget that was cut for 2010 speaks of the reason, an increase of $500B (15%) from previous years budget can not be paid for by increasing tax rates, we already know that incomes have eroded and also a high tax increase will easily cause wealth to flee this country specially under current economic conditions, the only way to make up for the difference is to devalue the USD. There is no way around this, all other options will result in even greater losses.

makloda · May 27, 2009

The wealthy may flee the country, but they can't flee the iron grip of the IRS. US citizens (or should I say slaves) pay based on citizenship, not based on residence.

426653478 · May 27, 2009

Quote from makloda:

The wealthy may flee the country, but they can't flee the iron grip of the IRS. US citizens (or should I say slaves) pay based on citizenship, not based on residence.
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I'm sure they're not that stupid, you and I don't know the ways, but surely they do

Daal · May 27, 2009

US will do a quasi default without zimbabwe printing. Wealthy citizens will not get access to social security and medicare benefits by and large. Retirement age will likely be increased, this will cut down the massive unfunded liabilites by a lot, taxes will be raised on net in the next 10 years. Current debt levels are sustainable, tons of countries have more as a % of GDP

There will be some monetization but faber is just saying what his target audience of fed bashers wants to hear

TraderJoe08 · May 27, 2009

Quote from 426653478:

I'm sure they're not that stupid, you and I don't know the ways, but surely they do
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Let's say i i move to hong kong, what if i just 10-99 my income, i mean what are they gonna do come to hong kong and audit me?

Probably a terribly ignorant question, sorry

Dr. Zhivodka · May 27, 2009

I have bread....who wants to trade it for one billion usd?

Quote from S2007S:

Im sure 99% here will not agree with the word hyperinflation and about 75% believe were probably not going to see any inflation at all, however inflation is will come no matter what the fed does. Everyone knows the fed is always a tad late in moving interest rates and with them being at historical lows the chances of them making any attempt to keep inflation in check is going to be nearly impossible as the trillions they are printing will be too much for them to even put a handle on. I believe inflation is going to skyrocket and the dollar is going to collapse. With trillions of dollars and lack of knowledge with the magnitude of this credit crisis, it will be nearly impossible to keep inflation tame at any point.

U.S. Inflation to Approach Zimbabwe Level, Faber Says (Update2)

By Chen Shiyin and Bernard Lo

May 27 (Bloomberg) -- The U.S. economy will enter âhyperinflationâ approaching the levels in Zimbabwe because the Federal Reserve will be reluctant to raise interest rates, investor Marc Faber said.

Prices may increase at rates âclose toâ Zimbabweâs gains, Faber said in an interview with Bloomberg Television in Hong Kong. Zimbabweâs inflation rate reached 231 million percent in July, the last annual rate published by the statistics office.

âI am 100 percent sure that the U.S. will go into hyperinflation,â Faber said. âThe problem with government debt growing so much is that when the time will come and the Fed should increase interest rates, they will be very reluctant to do so and so inflation will start to accelerate.â

Federal Reserve Bank of Philadelphia President Charles Plosser said on May 21 inflation may rise to 2.5 percent in 2011. That exceeds the central bank officialsâ long-run preferred range of 1.7 percent to 2 percent and contrasts with the concerns of some officials and economists that the economic slump may provoke a broad decline in prices.

âThere are some concerns of a risk from inflation from all the liquidity injected into the banking system but itâs not an immediate threat right now given all the excess capacity in the U.S. economy,â said David Cohen, head of Asian economic forecasting at Action Economics in Singapore. âI have a little more confidence that the Fed has an exit strategy for draining all the liquidity at the appropriate time.â

Action Economics is predicting inflation of minus 0.4 percent in the U.S. this year, with prices increasing by 1.8 percent and 2 percent in 2010 and 2011, respectively, Cohen said.

Near Zero

The U.S.âs main interest rate may need to stay near zero for several years given the recessionâs depth and forecasts that unemployment will reach 9 percent or higher, Glenn Rudebusch, associate director of research at the Federal Reserve Bank of San Francisco, said yesterday.

Members of the rate-setting Federal Open Market Committee have held the federal funds rate, the overnight lending rate between banks, in a range of zero to 0.25 percent since December to revive lending and end the worst recession in 50 years.

The global economy wonât return to the âprosperityâ of 2006 and 2007 even as it rebounds from a recession, Faber said.

Equities in the U.S. wonât fall to new lows, helped by increased money supply, he said. Still, global stocks are ârather overboughtâ and are ânot cheap,â Faber added.

Faber still favors Asian stocks relative to U.S. government bonds and said Japanese equities may outperform many other markets over a five-year period. âOf all the regions in the world, Asia is still the most attractive by far,â he said.

Gloom, Doom

Faber, the publisher of the Gloom, Boom & Doom report, said on April 7 stocks could fall as much as 10 percent before resuming gains. The Standard & Poorâs 500 Index has since climbed 9 percent.

Faber, who said heâs adding to his gold investments, advised buying the precious metal at the start of its eight-year rally, when it traded for less than $300 an ounce. The metal topped $1,000 last year and traded at $949.85 an ounce at 12:50 p.m. Hong Kong time. He also told investors to bail out of U.S. stocks a week before the so-called Black Monday crash in 1987, according to his Web site.
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Cutten · May 27, 2009

Quote from makloda:

The wealthy may flee the country, but they can't flee the iron grip of the IRS. US citizens (or should I say slaves) pay based on citizenship, not based on residence.
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But corporations don't. Pretty easy to move out of the USA, form a corporation in another country (preferably with low or 0% corp tax), invest a chunk of money into the corporation, then trade with it. Voila, decades of tax free profits entirely out of reach of uncle sam and the IRS without breaking any laws.

Draw out the $80k tax-free non-resident income each year to live off, anything you need beyond that just make loans or live off your current capital. After 10 years give up citizenship and you can pay the entire compounded corporate capital tax free.

Cutten · May 27, 2009

"100% sure"?

What odds is Dr Faber offering, I'd quite like to take the other side of that trade. I'll even offer him 99-1 odds instead of infinity/100-0.

Debaser82 · May 27, 2009

http://www.youtube.com/watch?v=LcdlBoHaBt4

Here is the video