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The Death of Inflation

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jazz's Avatar Mar 8, 2021 | 09:37 61 Think hard about a situation where gold goes up 10x in value and becomes a medium of exchange again. You are talking about a social dystopia. Gold would be the least of your concerns. its value would be worthless because what goods would you exchange it for?

In that situation, do you really want to walk into a city with gold bars in your pocket? Reply With Quote
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  • Mar 8, 2021 | 09:40 62
    Quote Originally Posted by biglentil View Post
    Fed never loses. Its a private entity with the authority to print money out of thin air with interest due. With all the money printing still hate gold Errol?
    Fed is losing big-time and in big trouble . . . . Money printing is simply adding to debt. Little to no inflationary response. Gold prices have been thrashed toward their next key support of $1,680 per oz today.
    Should gold break $1,680, next key support technically appears to be around $1,580 per oz (IMO).

    China annouced they are tightening monetary policy yesterday. This is bearish global commodity prices and credit markets. Reply With Quote
    Mar 8, 2021 | 11:29 63
    Quote Originally Posted by biglentil View Post
    A dollar can only come into existence as debt. It's a bizzaro world where $1900000000000 can be printed and somehow that can be justified as deflationary.
    That is only because most people think of paper money as a store of wealth rather than a medium of exchange. I don't think people will ever understand that debt of a sovereign nation issued in the "coin of the realm" is not the same as the debt of the people of the nation.
    If a person dies and they are in possession of 10 million in 50's you could throw it all in the burning barrel and it wouldn't change anything.
    Assets, precious metals and economies only have worth because people view them as having value. Reply With Quote
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  • Mar 8, 2021 | 12:11 64
    Quote Originally Posted by farming101 View Post
    That is only because most people think of paper money as a store of wealth rather than a medium of exchange. I don't think people will ever understand that debt of a sovereign nation issued in the "coin of the realm" is not the same as the debt of the people of the nation.
    If a person dies and they are in possession of 10 million in 50's you could throw it all in the burning barrel and it wouldn't change anything.
    Assets, precious metals and economies only have worth because people view them as having value.
    Dang, why do I feel like you just callously went and cracked my piggy bank? Reply With Quote
    Mar 8, 2021 | 12:53 65
    Quote Originally Posted by biglentil View Post
    A dollar can only come into existence as debt. The Fed is quickly becoming the buyer of only resort for the treasuries they create . When the Fed prints treasuries and they buy those treasuries back with dollars providing liquidity to the system that is called monetizing the debt. Treasuries become an asset on the Fed's balance sheet and a liability on governments balance sheet. If you or I were to print money they would call it counterfeiting and throw us in jail. The Fed has no liabilities explain how the Fed can lose? It's a bizzaro world where $1900000000000 can be printed into existence and somehow that can be justified as deflationary.

    Re: Printing money. Agreed. Stimulus out the ass to keep the short-term economy rolling, then wait to see what the fallout is.
    Question for economists on AV:
    What happens when number of dollars circulating in the US economy increases by 1.9T?
    Doesn't the value or purchasing power of each dollar become diminished?
    That's the classic definition of inflation. isn't it?
    We're already seeing the value of money declining, aren't we? How else to explain ultra low borrowing costs, rising equity prices, global demand for commodities, questionable investments in zombie companies that produce nothing except fairy dust, growth in SPACs that are looking for positions in anything, rising land prices and an overheated real estate market in the middle of a global pandemic.
    Agree with Errol on the fact that Fed has limited remaining ability to control inflation by adjusting rates. They'll probably try in the coming months and years, but the stock markets will scream bloody murder and concerns over loan and mortgage defaults will grow louder and louder if the Fed is too aggressive.
    Seems to me that when inflationary concerns become loud enough, investors will look more aggressively for safe havens. Blue chip stocks, real estate, houses, land, commodities, cars, art - any tangible asset that has actual value and utility.
    Gold might not be considered the safe haven that it once was. Bitcoin and crypto dollars seem to be taking the shine off gold. But given the choice in a hyper inflationary environment, I'd take gold over fairy dust any day. Reply With Quote
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  • Mar 8, 2021 | 14:07 66 Some of the money created is not circulating.
    Household savings rates are way higher than last year. The funds are likely either parked in a checking account, squirreled away who knows where or invested in some short term GIC
    Name:  Can HH savings rate.jpg
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    https://betterdwelling.com/canadas-h...supports-slow/ Reply With Quote
    ajl
    Mar 8, 2021 | 14:08 67 Despite the hyper printing of money, actual inflation has been very muted in reality. Case in point: we upgraded my wife's car early partially due to a fear of inflation so we have a good used car for sale which is a 2012 Toyota Rav4. Used car prices, the business press said, inflated a lot last year. Well actual experience has been shifting a used car is not proving to be easy. Real estate agent just sent through a new land listing this morning. Granted this is mediocre land as is the other land we farm, and the ask is around what land has been selling for since 2012 in the area. So no inflation there either. (Hope the bank man don't find out) This area is commutable to Edmonton. Fuel prices in Edmonton dropped last week from 1.11 to 1.04 for pump gas. If it wasn't for carbon tax, the price would be even lower. Those screaming inflation with eyes closed may want to open them and check gold and oil right now. The cycle of depression includes the first phase which is inflationary followed by the second phase which is deflationary. We are about to transition from the first to the second now. Reply With Quote
    Mar 8, 2021 | 14:35 68
    Quote Originally Posted by farming101 View Post
    Some of the money created is not circulating.
    Household savings rates are way higher than last year. The funds are likely either parked in a checking account, squirreled away who knows where or invested in some short term GIC
    The other side, is the insatiable demand for USD in most other parts of the world. They are accumulating them as a hedge against their own inflationary pressures, and to be used in the black market/illegal/ underground economy. We might see the US currency as becoming worth less as compared to other assets, but compared to many banana republic currencies, it is rock solid. The world is bigger than the US. Reply With Quote
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  • Mar 9, 2021 | 09:12 69
    Quote Originally Posted by farming101 View Post
    Some of the money created is not circulating.
    Household savings rates are way higher than last year. The funds are likely either parked in a checking account, squirreled away who knows where or invested in some short term GIC
    Name:  Can HH savings rate.jpg
Views: 703
Size:  81.5 KB

    https://betterdwelling.com/canadas-h...supports-slow/
    I could be dreaming but I'm pretty sure its all circulating, even savings. Unless we're talking about dollars that are stuffed in mattress or hidden in a coffee can in the back of grandma's cupboard.
    Household savings aren't stacks of dollars sitting in a bank vault.
    Every dollar saved is recirculated by the banks (loans, mortgages, investments and sometimes worthless mortgage backed securities).
    The only money that isn't circulated is cash reserves that banks keep on hand to ensure adequate liquidity. Happy to be corrected if I'm mistaken on this. Reply With Quote
    jazz's Avatar Mar 9, 2021 | 09:31 70
    Quote Originally Posted by HITTG****vine View Post
    Happy to be corrected if I'm mistaken on this.
    That spike is basically govt money printed up and hoarded into bank accounts. its not personal savings of any sort. Its all debt just shuffled into personal accounts and if its sitting in a bank account as deposits, eventually down payments, the banks can make loans against it hence the refi and real estate boom we are seeing.

    And now that inflation will cause rates to rise which will increase profits for lenders. Insidious. Reply With Quote
    Mar 9, 2021 | 09:51 71
    Quote Originally Posted by HITTG****vine View Post
    I could be dreaming but I'm pretty sure its all circulating, even savings. Unless we're talking about dollars that are stuffed in mattress or hidden in a coffee can in the back of grandma's cupboard.
    Household savings aren't stacks of dollars sitting in a bank vault.
    Every dollar saved is recirculated by the banks (loans, mortgages, investments and sometimes worthless mortgage backed securities).
    The only money that isn't circulated is cash reserves that banks keep on hand to ensure adequate liquidity. Happy to be corrected if I'm mistaken on this.
    True , and I bet the only uncirculated money is in trust funds in the Cayman Islands and or Panama .... like Justin’s ... Reply With Quote
    Mar 9, 2021 | 21:10 72 Everyone has made great points in this thread . . . .

    There is certainly two sides to the inflation / deflation debate. To me, markets really feel look like they are heading to a major crossroads shortly.

    David Rosenberg had an interesting article this week suggesting potential ugly inflation heading into spring/summer, then followed by deflation.

    Can’t see rates being hiked much, if at all, as it could spell disaster for many sectors. Crazy world, crazy times indeed . . . . Reply With Quote
    Mar 9, 2021 | 21:41 73
    Quote Originally Posted by ajl View Post
    Despite the hyper printing of money, actual inflation has been very muted in reality. Case in point: we upgraded my wife's car early partially due to a fear of inflation so we have a good used car for sale which is a 2012 Toyota Rav4. Used car prices, the business press said, inflated a lot last year. Well actual experience has been shifting a used car is not proving to be easy. Real estate agent just sent through a new land listing this morning. Granted this is mediocre land as is the other land we farm, and the ask is around what land has been selling for since 2012 in the area. So no inflation there either. (Hope the bank man don't find out) This area is commutable to Edmonton. Fuel prices in Edmonton dropped last week from 1.11 to 1.04 for pump gas. If it wasn't for carbon tax, the price would be even lower. Those screaming inflation with eyes closed may want to open them and check gold and oil right now. The cycle of depression includes the first phase which is inflationary followed by the second phase which is deflationary. We are about to transition from the first to the second now.
    Interesting living in the same province we experience a much different reality. Land here continues upward in price. Most recent quarter in my area, central Alberta east of Red Deer sold for $5000 an acre. Cash rent ranges $100-110 an acre. Lumber going up 3/8 OSB $38 a sheet. My son in law is a machinist, steep increases in steel prices in January. Still in the first phase right now in my opinion. Reply With Quote
    Mar 10, 2021 | 00:45 74 Google 3 items.


    "Biden 30x30"

    The second


    "Renewable diesel"

    Now look at a soy oil weekly chart

    Inflation, per se, might be dead. But the phucking racket created in renewable fuels which procures veg oil at half price of present crude, then extracts $4 of govt credits and sells the end product at market price of refined crude..... will put anyone making less then $250k/yr on the street with a pitchfork. Corruption has gone insane, big oil no longer needs to drill, cue the drilling ban, they make 2x in govt credits over lowest cost procurement, then collect the 3-2-1 crack spread. So if you hate big oil, the green agenda is not for you because Marathon and Valero are at the top the heap and they are looking to kill ethanol. The lobbyist in Washington and Ottawa have earned their keep.
    Last edited by macdon02; Mar 10, 2021 at 00:48.
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    Mar 10, 2021 | 08:56 75 Was watching Bloomberg this morning,,, seems everyone forecasting full global economic recovery from covid plus biden spending equals = higher equities and lower commodities. Not just recovery,,, but sooner than expected recovery!

    Money exiting commodities, moving to equities. Reply With Quote
    Mar 10, 2021 | 09:47 76 CHINA TIGHTENING MONETARY POLICY: Inflation is the talk-of-the-town these days, but China's recent announcement to tighten monetary policy is a potential blow to global commodity prices heading into spring. China is by far the largest buyer of commodities consuming about 50% of the entire market. This tightening in money policy could also impact credit markets. ProMarket Wire, Calgary Reply With Quote
    Mar 10, 2021 | 09:53 77
    Quote Originally Posted by beaverdam View Post
    Was watching Bloomberg this morning,,, seems everyone forecasting full global economic recovery from covid plus biden spending equals = higher equities and lower commodities. Not just recovery,,, but sooner than expected recovery!

    Money exiting commodities, moving to equities.
    Makes for a good headline.

    What kind of recovery doesn't require raw materials?

    Are equities so far detached from the real world that they can (continue) to rise unabated without affecting demand for any of the tangible assets used to create things?

    Sounds like the service oriented economy has been a roaring success. Primary production is no longer relevant to growth. Amazing. Reply With Quote
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  • Mar 10, 2021 | 11:05 78
    Quote Originally Posted by AlbertaFarmer5 View Post
    Makes for a good headline.

    What kind of recovery doesn't require raw materials?

    Are equities so far detached from the real world that they can (continue) to rise unabated without affecting demand for any of the tangible assets used to create things?

    Sounds like the service oriented economy has been a roaring success. Primary production is no longer relevant to growth. Amazing.
    Isn't proof of what you're questioning, in the fact that the value/cost of the raw commodity in proportion of the retail product, seems to get smaller in every passing year. Reply With Quote
    Mar 10, 2021 | 11:31 79 For those that are concerned with the velocity of money, then inflation is stimulus to increase the velocities. Reply With Quote
    biglentil's Avatar Mar 11, 2021 | 04:43 80 Peter Schiff article "There is a big difference between earning money and just receiving money that’s been printed. When you have a job you earn money because you have contributed some value to society. You have helped produce a product or provide a service. As compensation, you earn some money that you can use to buy some of the goods and services in the economy that you helped create.

    But if you don’t create anything, if you don’t have a job and the government just prints money and gives it to you, now you go out to spend it — you contributed nothing. Yet, you’re drawing from the supply of goods and services that you didn’t help to expand. So, it’s pure inflation. Prices just go up. That’s the only thing that can happen.”

    But a lot of people have bought into the myth that you can consume without producing.

    The recent spike we have seen in price inflation is just the beginning. Reply With Quote
    Mar 11, 2021 | 06:34 81 It would depend how much money for nothing people are given. If it is just enough to keep them alive and provide the basics it is not inflationary.
    It also depends whether or not the availability of goods and services remains abundant. If a portion of the workforce is productive enough to supply everything the whole population requires inflation should not be a big deal.
    Government policy is to regulate inflation, not get rid of it Reply With Quote
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  • Mar 11, 2021 | 06:53 82 So, if the Canadian Economy needs to “grow” and interest rates are going to stay down because of that fact, then why would Trudeau keep raising Carbon taxes and defeat that rationale. Instead he should be reducing consumption taxes to grow the economy. Low interest rates do nothing but create housing bubbles - dangerous policy to go unchecked as seen in 2008 US. Too low-too long. Reply With Quote
    Mar 11, 2021 | 06:55 83 This has the double wham effect.
    Money for nothing reduces productivity, we’re seeing it already with the shortages of product thus creating inflation.
    Now the people have a more difficult time making ends meet, government answers with more handouts perpetuating the problem. Reply With Quote
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  • Mar 11, 2021 | 06:59 84
    Quote Originally Posted by sumdumguy View Post
    So, if the Canadian Economy needs to “grow” and interest rates are going to stay down because of that fact, then why would Trudeau keep raising Carbon taxes and defeat that rationale. Instead he should be reducing consumption taxes to grow the economy. Low interest rates do nothing but create housing bubbles - dangerous policy to go unchecked as seen in 2008 US. Too low-too long.
    People need to work, Trudeau doesn’t know the meaning of the word, he thinks we should all sit around the fire singing kumbaya. Reply With Quote
    Mar 11, 2021 | 07:13 85 Container yard east of Regina is packed to the nines with full containers sitting. What’s going on? Don’t see any trains being filled, none on the tracks either. Maybe those of you moving around see some rail movement. Are railcars moving down those tracks. Something seems off. Reply With Quote
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  • Mar 11, 2021 | 10:12 86 The processor who takes our IP soys is having one heck of a time getting empty cans for shipping them overseas. Consistently dealing with getting a very small percentage cans ordered and promised.

    Asia is paying shipping companies to return them empty for a faster turn-around. Reply With Quote
    helmsdale's Avatar Mar 11, 2021 | 12:16 87 Used 8'x 40' can was $5500 last month.

    $7500 a couple days ago... if you can find one.

    Another one today... not necessarily apple's to apple's, but going rate on a 30ish hp Kohler auger motor was ~$3000 around christmas time. First place phoned yesterday said they've gone up alot, and new price is $4200.

    Neighbor said a bundle of posts was ~$650 last year. $950 the other day.
    Last edited by helmsdale; Mar 11, 2021 at 13:05.
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    Mar 11, 2021 | 12:44 88
    Quote Originally Posted by jwab View Post
    This has the double wham effect.
    Money for nothing reduces productivity, we’re seeing it already with the shortages of product thus creating inflation.
    Now the people have a more difficult time making ends meet, government answers with more handouts perpetuating the problem.
    This has been tried in Canada for decades ... and has done exactly as you pointed out . Reply With Quote
    Mar 11, 2021 | 23:02 89 Every American can sit on-the-couch this weekend and have their bank balance jacked-up automatically.

    Is this inflation risk?. . . lack of productivity risk? . . . or both? . . . or is this crash risk? Reply With Quote
    biglentil's Avatar Mar 12, 2021 | 00:13 90
    Quote Originally Posted by errolanderson View Post
    Every American can sit on-the-couch this weekend and have their bank balance jacked-up automatically.

    Is this inflation risk?. . . lack of productivity risk? . . . or both? . . . or is this crash risk?
    1 and 2 yes but crash risk unlikely, not until they cut off the free money to the addicts. Plenty of it will find its way into Robinhood and crypto exchanges. Used cars under $3000 might get hard to find along with Xbox's. Saving in dollars is a sucker bet only for those willing to watch the purchasing power of their hard earned money get eroded by inflation. The ones that get money for nothin know better.
    Last edited by biglentil; Mar 12, 2021 at 00:25.
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