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licopter ben is finally getting a chance to fire up that whirlybird and commence his much anticipated monetary bombardment as the article alludes so that article should state this will preciptate a currency crisis and us dollar will finally collapse in value leading to a rapid upward correction in us and global interest rates real wages will fall as they fail to keep pace with inflation the debt burden will be purged one way or not from the system the us will default de facto on its foreign debt causing sheer apoplexy in china the us will then unable to borrow externally be forced to repair its domestic balance sheet and productive capacity slowly american savings will begin to rise and the u s will progressively return to productive growth all other things remaining the same but then again they never do posted by peter at 6 34 pm 0 comments wednesday march 11 2009 the great recession an eponymous post link above from the australian apparentlty the international monetary fund agrees this is the great recession posted by peter at 11 36 am 1 comments thursday march 05 2009 choo choo from bloomberg the rampant printing of currencies won t immediately lead to inflation as banks reduce borrowing and asset values decline bass 39 wrote in the march 2 letter a copy of which was obtained by bloomberg news the greater concern is the potential inflationary time bomb that grows as governments continue to borrow print and stimulate economies you will have seen a stream of artciles here at this blog explaining how we are headed for significant increases in inflation associated with sovereign induced currency impairment and debasement unlike mr bass quoted in this article i do not believe the us dollar will be immune at all indeed it could be the greatest victim of global sovereign risk impairment just remember when everyone says again no one saw it coming you saw the light at the end of a tunnel here and yes it was a freight train posted by peter at 1 32 pm 2 comments tuesday march 03 2009 thin air the title of this article needs very little additional commentary britain s last policy hope create money there seems to be a consensus that the global reponse to the great depression shouldn t be repeated it seems governments are committed on a path of mutually assured currency destruction unlike before we no longer have a gold standard as a modicum of restraint so there is little constraint upon central banks going the full weimar as kohler was quoted in the previous post sovereign risk is now the key issue i m moving my super into gold posted by peter at 9 40 am 0 comments friday february 27 2009 sovereign opening line to alan kohler s latest article in business spectator spot on at its heart the global financial crisis is morphing from a credit crunch real economy feedback loop into a problem of sovereign risk and unfortunately there are few signs that politicians actually understand how much trouble we re all in yet what mr kohler is saying is that each government is trying to bailout its own economy simultaneously the real danger is all this borrowing can t be repaid and that some major global economy is going to end up like iceland i have always assumed the economy and currency to break first will be the us it is borrowing more than it can repay it was already running astounding deficits in the good times a legacy of the worst adminsitration in the western world the deficits under the obama administration beggar belief those lending to the us now will not be repaid and although the default is unlikely to be de jure it will be de facto firstly default will occur via the rapid decline in the relative value of the currency and secondly through concomitant inflation that will accompany a substantial decline in the us exchange rate china as the us s chief creditor is going to end up booking an unimaginable loss on its us treasury and currency holdings it s playing a game of chicken and riding in both cars what the us really needs is to liquidate the excesses from its financial system book the losses in its banking sector and commence the process of rebuilding its savings and capital base posted by peter at 5 58 pm 0 comments monday february 16 2009 the art of being wrong the link to the above article is a a reprint of a reprint from the age forecasters are now telling us we are in for an extended period of low inflation and low interest rates just like their counterparts in late 19c bayer pharmaceutical they have it wrong read this well informed article to understand why the upcoming cycle is likely to be stagflationary like the 70 s rather than deflationary like the 30 s just as severe and unpleasant but slightly more weimar flavoured posted by peter at 2 33 pm 0 comments tuesday february 03 2009 schiff was right i recently read a post on www europac net where peter schiff felt the need to defend himself from a critic this doesn t surprise me i call it the day trader mentality which is the real reason we are in our current mess it is the generation x get rich quick mentality that drove excessive risk taking rather that considered medium to long term value investing understanding economic cycles is not about picking the peak or troughs in markets but in developing a comprehension of what part of the cycle we are currently experiencing the warning signals of the bubble economy had been growing since the 1990 s with the first bubble emerging in the internet economy from 1996 2001 its collapse lead to a mini recession it should have been a full correction but alan greenspan attempted to monetise the recession away possibly for political reasons to achieve this greenspan floored us interest rates and delayed and greatly amplified the effect massive monetary expansion occurred with huge bubbles emerging in asset prices in both equity and property especially the us these asset prices were fuelled by cheap credit leveraging and inappropriate pricing of risk securitisation and derivative products were key culprits in this process as was cited in the very first post of this blog in 2004 as a result the recession of 2001 02 was smothered and has emerged as the depression of 2008 2015 or as we like to say here the great recession where we are at now is really the beginning of the downward slope probably akin to 1931 the next two to three years will likely see the worst of it mr schiff has my sympathies he has been and continues to be the most insightful and prescient economic commentator over the last decade unfortunately people who allow there own self interest to govern their thinking those who operate without self examination or intellectual rigour will always be jealous of those that do especially when their follies are magnified by reality do a search for peter was right videos on youtube that s peter schiff not this one posted by peter at 11 43 am 0 comments thursday january 29 2009 the bailout ocean see the above link to a bloomberg article to everyone s dismay we believe some of grandpa ben s predictions are playing out greenlight said in the letter a copy of which was obtained by bloomberg news the size of the fed s balance sheet is exploding and the currency is being debased how very true when hedge funds start buying bullion that s got to be the biggest buy signal for gold i think i have seen it is an astute article and another reference point to explain why the pundits forecasting long term low interest rates are dead wrong for future reference the us bond market will implode the us dollar will fall precipitously us interest rates will rise dramatically in a very short period of time global interest rates to various extents will follow this is an inexorable consequence of current actions as the united states already running unsustainable deficits pushes its currency over the brink posted by peter at 11 30 am 0 comments friday january 16 2009 the stability of china talk of a 2010 recovery is absolute rubbish follow the above link to an article from today s australian that correctly identifies the real risks facing the global economy and geo political order as we have stated here several times before the current chinese political compact between the government and its people is unsustainable and will unravel quickly in the face of economic recession the resulting political discord is likely to lead to one of two outcomes both of which are equally unpalatable either china breaks as a coherent political entity or the chinese communist party will be required to conduct vicious and broadspread totalitarian suppression of its populace the only way this could be successfully achieved in my opinion is with the unwaivering support of the people s liberation army the sort of support that you only get in a time of war posted by peter at 10 40 am 1 comments tuesday december 30 2008 inflation tsunami the undersea earthquake may well be occuring but the wave is still very far from shore and no more than a bump in a far away ocean but it is coming it is an unavoidable cliche that governments solutions are inevitably worse that the original problems that they seek to fix the link to the above article from john kemp is another warning of the severely inflation consequences of current government monetary policy this is a phenomenon not just confined to the us but ultimately the us is the epicentre of current world economic events along with their co dependant partner china if the us can manage inflation in the low teens for half a decade they may pull this off this is dependant on whether the us dollar holds up or drops to 20 to 40 of its current value more likely we will see a low us dollar high inflation and high interest rates within 2 4 years but for now merry christmas and a happy new year to all posted by peter at 4 57 pm 0 comments wednesday december 10 2008 the weimar theory this is an article i really enjoyed reading and i recommend you go to the above link in the last ten weeks total federal reserve credit increased by 1290bn this is an increase of 151 over the same period a year ago and an annualised rise since sept 10th of 755 this degree of expansion in base money is without precedent in the fed s history i share the authors view as the inflationary nature of current us federal reserve actions however when he states that this is not the great depression version 2 he is only partially correct it is a multi generational economic disaster precipitated by the same cultural and generational factors as the one that started in 1929 its underlying characteristics of rapid monetary expansion contained price inflation for different reasons and asset price bubbles are also shared a controlled increase in inflation will have very positive effect in reducing consumer indebtedness as opposed to allowing deflation to persist which would be catastrophic so we find ourselves in a balancing game where modest inflation will facilitate a de facto default on debt i very much doubt we will see hyperinflation weimar republic style but high inflation levels as in the high teens and accompanying interest rates are very likely while this would assist with mitigating consumer debt burden it could also result in a rapid decline in real incomes as increases in consumer prices outstrip increases in wages posted by peter at 2 12 pm 0 comments friday december 05 2008 recession to depression peter schiff seems to have reached a degree of cult status with the circulation of the peter schiff was right video on youtube in fact peter was more precient that even that video shows i recall an interview he gave in 2002 warning of the upcoming financial implosion there are also some critics jealous ones i assume claiming that because peter didn t pick exactly when the world economy would implode that somehow he was wrong it is a laughable notion indeed driven by the same get rich quick day trader mentality which has proven the scourge of this generation just as the irresponsible monetary expansion of the early part of this decade would ultimately lead to our current financial disaster so to will the attempted remedies and bailouts that the us is currently in the midst of turn a severe recession into a us and global depression i suspect it will be more intense in the us but certainly not confined to its shores let me quote a comment from the above linked article it s not just u s stocks and real estate that are going to lose value but u s bonds this is the last bubble yet to burst i think we re going to see a collapse of the bond market sometime during obama s first term and interest rates are going to spiral out of control and the dollar is going to just be destroyed read again interest rates are going to spiral out of control a us dollar collapse followed by global currency instability and sharply higher interest rates will make 2008 look like party compared to 2010 11 unfortunately we are just at the beginning of the downward slope of a multi generational economic downturn of broadly equivalent length and intensity to the great depression so if you are out telling people how this recession will become a depression ask how the economy would look if overnight everyones mortage interest rate doubled posted by peter at 12 35 pm 2 comments thursday november 13 2008 pallative care it seems a few governments australia and the u s included are taking the opportunity to put distressed businesses on life support protectionism cannot be far behind failing car manufacturers need to be restructured and rebuilt in both the us and australia i find it difficult to imagine that after spending wasting aud 6 3b of taxpayers money supporting two us multinationals that additional supportive measures won t be considered posted by peter at 5 56 pm 2 comments tuesday november 11 2008 the day after please find a link above to mr solberg s article on the future of the us dollar from prudent bear you may wonder how a recession can become a depression the suffering citizens of iceland recent woke up over night to 6 higher interest rates the following day a future run on the us dollar and its potential collapse as the world s reserve currency remains somewhat ethereally between the possible and the probable as the author points out the current interventions in global markets are highly inflationary i agree fully that inflation rate targeting is now a historical concept and central banks seem to have settled on inflation as the lesser of two evils high inflation will help heavily indebted entities by reducing the relative size of their existing liabilities however it will may also function as a mechanism for significant reductions in real wages as this article correctly identifies the real danger for the world economy in stage 2 of the great recession is a sudden decline in the value of the us dollar leading to the federal reserve being forced to rapidly rise us interest rates to protect the value of the currency that s the week you wake up one morning to find your mortgage rate 6 higher than the day b...
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