The Death of Inflation

[errolanderson]

Who's going to pay for this recent bout of inflation?

Never-ending credit market expansion? Print more money till the cows come home? That appears to be the central bank game plan. But if it's real inflation, don't interest rates have to rise to cool? But, a rise in rates could trigger an overly leveraged, margined market to rethink high prices. Even the Fed itself is now warning of heightened risk of asset devaluation . . . I call that incoming deflation.

The current price rise (ie: gouging) may be seen as an inflationary huge head-fake, if credit markets fail. And how much leverage is there in credit markets? INSANE LEVERAGE. Inflation can quickly become a distant memory if leverage is remotely impacted.

Is this real or a bubble? Today's U.S. jobs numbers were a major miss . . . treasury yields quickly dropped. Gold is breaking out of its downtrend this week, believing inflation is real. Inflation is talk of the town. To me, price gouging is real, until it can't be done anymore. Right now, commodity strength is now largely driven by computer algorithms (fund buying).

And when was the last time a commodity bull market held?

When economic fundamentals have no meaning and being disregarded by investors taking on massive risk fueled by insane greed, economic reality will be the check and eventually have the final say.
And it may be a shock to investors fueled by added risk and greed (IMO).

[errolanderson]

Can real demand hold-up prices for the long-haul?

The red-hot lumber chart is showing significant cracks, (off 25% from recent highs) and now in its-own-form of 'price timber', precious metal strength appears weak at-best, the Cdn dollar is now technically overbought, while grain futures have clearly stumbled of-late.

Massive debt levels will have a definite say in the value of commodities heading into the 2nd half of 2021. Realize inflation is the buzz word these days, but could rapid fund liquidation, debt defaults and deflation be right-around-the-corner?

These are interesting, but strange economic times . . . .

[canolacrazy]

Can real demand hold-up prices for the long-haul?

The red-hot lumber chart is showing significant cracks, (off 25% from recent highs) and now in its-own-form of 'price timber', precious metal strength appears weak at-best, the Cdn dollar is now technically overbought, while grain futures have clearly stumbled of-late.

Massive debt levels will have a definite say in the value of commodities heading into the 2nd half of 2021. Realize inflation is the buzz word these days, but could rapid fund liquidation, debt defaults and deflation be right-around-the-corner?

These are interesting, but strange economic times . . . .

Thanks Errol, i believe that we are in for a repeat of 2008-09 crash. that was precipitated by the housing crisis which led to a world wide financial crisis. i think this time will be much worse because central banks have no ammo to fight the coming deflationary collapse because of excess money printing and quantative easing. there's nowhere left to go. if the central banks would have followed normal course, they would have raised rates two years ago and let the market correct. they didn't and that's led us to where we are now.
the good news for farmers is that if we use 2008 as an example, grain prices held up or rose through that period with a commodity boom unseen in history. let's hope and expect for more of the same.

[biglentil]

Thanks Errol, i believe that we are in for a repeat of 2008-09 crash. that was precipitated by the housing crisis which led to a world wide financial crisis. i think this time will be much worse because central banks have no ammo to fight the coming deflationary collapse because of excess money printing and quantative easing. there's nowhere left to go. if the central banks would have followed normal course, they would have raised rates two years ago and let the market correct. they didn't and that's led us to where we are now.
the good news for farmers is that if we use 2008 as an example, grain prices held up or rose through that period with a commodity boom unseen in history. let's hope and expect for more of the same.

The Great reset coming between beginning of June and end of August. But I do not think it will be a buying opportunity for those with cash.

[Taiga]

Reset is coming for sure, insolvencies spiking.

https://financialpost.com/executive/executive-summary/posthaste-the-backlog-of-debt-put-off-by-pandemic-aid-is-catching-up-with-canadians

[errolanderson]

Agrivillers . . . my apologies for being such a pain-in-the-ass on this subject.

But I genuinely believe the current inflation hype we are all seeing is not sustainable. Markets are setting up for a big surprise from real estate to commodities to equities . . . . it's going to come in strong . . . economic reality that is. Central bankers can be blamed for creating free money and fueling the bubbles.

This reality check is soooo far past due. And its going to hurt a lot of investors.

It's going to impact our financial institutions. It going to impact the value of global commodities. It's going to trigger a rash-of-defaults. Credit markets will be impacted. But for true recovery to occur, a housecleaning is-in-order and unavoidable.

[Happytrails]

It's going to impact our financial institutions. It going to impact the value of global commodities. It's going to trigger a rash-of-defaults. Credit markets will be impacted. But for true recovery to occur, a housecleaning is-in-order and unavoidable.

I’m with burnt. Since the end of WWII we have lived through the most charmed period in human history. We can debate whether inflation or deflation will cause the decline of our collective standard of living but I think we agree that it will happen. Sadly the housecleaning that Errol speaks of may go on for decades or centuries before a similar sweet spot is achieved again. That doesn’t mean that life will be harder than it was on average for people during the last few millennia. It just hurts to contemplate how far below us that average is.

[burnt]

...That doesn’t mean that life will be harder than it was on average for people during the last few millennia. It just hurts to contemplate how below us that average is.

This. ↑↑

[GDR]

I’m with burnt. Since the end of WWII we have lived through the most charmed period in human history. We can debate whether inflation or deflation will cause the decline of our collective standard of living but I think we agree that it will happen. Sadly the housecleaning that Errol speaks of may go on for decades or centuries before a similar sweet spot is achieved again. That doesn’t mean that life will be harder than it was on average for people during the last few millennia. It just hurts to contemplate how below us that average is.

I'm 43 yrs old, dont have any complaints about lifestyle etc... But my parents were baby boomers and I have heard this before and do believe it's true. Each generation has had it better off than their parents generation, with the boomers being the last in that cycle. Not sure what it means going forward but it is a concern.

[errolanderson]

Massive selloff in cryptos today said to be taking the whole market down. This just shows what a deck of cards have been holding markets up (IMO). The impact of overleverage.

Gold ralling on crypto capulation today but its main fuel, inflation now taking a heavy hit. Big gold swings possible in next few days . . . .

[biglentil]

Massive selloff in cryptos today said to be taking the whole market down. This just shows what a deck of cards have been holding markets up (IMO). The impact of overleverage.

Gold ralling on crypto capulation today but its main fuel, inflation now taking a heavy hit. Big gold swings possible in next few days . . . .

Crypto carnage forsure, total capitulation. I got blasted by crypto heads for posting this a few weeks back suggesting we were in the return to normal phase when Bitcoin rallied back to $62kusd. They called me names like 'no coiner' and 'boomers. When it comes to market bubbles its never different this time. Problem is the dollar is the biggest bubble of all.

Warren Buffett said it best when he stated: “What the wise do in the beginning, fools do in the end.”

[biglentil]

Barn find

[Sodbuster]

Barn find [ATTACH]8001[/ATTACH]

Not sure if the song would be as good as the original.

[biglentil]

A handy diagram that explains MMT.

[errolanderson]

Warning shot is recent collapse of crypto’s (IMO). Crypto washout shook equities and commodities due to excessive leverage in markets, all markets. And crypto’s have turned from trendy to thrashy rather quickly. Nothing like having to pay-the-piper to suddenly change the momentum of a market’s perceived value.

If the piper demands more payment soon (market correction), inflation will be checked rather quickly. Deflation could and will quickly erupt (which is not a trendy opinion these days). Cracks are now also appearing in commodities. The elephant chart above doesn’t explain this well (IMO).

My apologies for my edgy comments, but I’m amused how the market has become smug with inflation these days and it’s just clear sailing ahead. Nothing could be further from the real economic truth.