highmax

Dr. Copper Spots a Monster Crash

If China de-pegs their currency in six months time, that would make buying these commodities they supposedly need so badly much cheaper depending how much it appreciated. Why wouldnt they wait till then to stuff their warehouses? Maybe they are?
It would cause quite a crash in all asset prices!

www.bloomberg.com/apps...

Jim Rogers on the Next 10 Years

Near term could get interesting if the Chinese start consuming more, saving less and start running trade deficits. Then they wont be inclined or probably able to finance the U.S. deficit and interest rates will start to kick upward, meaning higher cost of capital as it becomes scarcer worldwide. Could lead to new round of QE, just when Treasury wants to start reining in the deficit.

Monetary Madness in a Single Chart: Hyperinflation's Just Around the Corner

I do not agree hyperinflation is inevitable because the level of consumer indebtedness has been reduced by only $178B over the last quarter in which weve seen the money supply expanded by over five times as much. Since wages are sinking, unemployment is rising, commodities are for the time being rising, combined with the precipitous overhang of debt any marginal incremental cash injection that does reach the consumer must be used to reduce such debt. Real wealth can only come from savings, not consumption, so a long readjustment period will have to take place during which deflation is the more likely outcome.

This guy is on the right track. Money will be DEVALUED, truly it already has been greatly eg: in Canada since last summer B of C holdings backing the loonie have switched from 100% AAA Gov Bonds to include about %40 bank questionably toxic and non-marketable assets and consumer debt. Interest rates have to increase to accomodate the increase in risk.

>Not to dminish Laffer's points but he didn't see this coming in 2005 and 2006 when he said the U.S. economy was stronger than it's ever been.

We need to stop calling rising prices inflation. Inflation is growth (just like blowing up a balloon - a bubble) in the money supply. This growth causes a decrease in the Purchasing Power of Money (PPM). Laffer states in his article the Fed signaled a 180 shift from an anti-inflation position to an anti-deflation position. The Fed has NEVER been anti-inflation and has ALWAYS been anti-deflation. Unless you know of any one else besides the Fed who can create money either by printing new paper slips (Federal Reserve Notes) or increasing member bank reserves (expansion of bank credit) only the Fed can create inflation.

Why do we continue to discuss the Fed as if it is sometimes "hawkish" on inflation. The purpose of the Fed is to be the "lender of last resort" and to inflate the money supply. Here's a quick peice of trivia: since 1913 the U.S. dollar has lost approximately 96% of its purchasing power under the watchful eye of the ever hawkish Federal Reserve Bank whose initial mission was, get this, price stabilization. In the 93 years prior to the birth of the Federal Reserve Bank (1820-1913), a terrible time for sure since there was no Central Bank run by geniuses whose very words were worshipped by the chattering classes, what cost $1.00 in 1820 cost $0.63 in 1913 due to increased productivity and the growth of goods and services in the market place competing for dollars. This was a time when money still had both of its original purposes (1) a meduim of exchange and (2) a store of value. It is no longer a store of value thanks to our wise rulers in Washington D.C. But I digress.

Laffer's predictions are most likely true which proves one can actually be right, some times, even for the wrong reasons. Currency devaluation is a better description of what lies ahead and it will entail both rising prices and rising interest rates. It will be very interesting.<