Elaine Supkis

Evidence That Big Inflation Is Coming

Oil is going to go up. By the way, who is the person who rates these comments? Not very good choices, I might suggest.

But this isn't my own site! To go back to 'deflation/inflation' we can have both at the same time! Isn't that amazing?

For an obvious example: housing was inflating rapidly from 2003 to 2007. Then, it rapidly deflated. Oil was deflating from 1994-1999. Then it began to inflate. Consumer goods dropped in price and deflated from 1994-2004. But then it began to inflate. For example, plywood from Canada was $3.50 a 4x8 sheet quarter inch and shot up to over $9 a sheet and now has fallen to $7 a sheet.

All of these things, incidentally, are part of our TRADE DEFICIT. This mostly grows and grows and grows. We take on more and more debt to service this trade deficit. Now, we can't take on more debt, the trade is falling but is STILL in a deficit.

As I keep saying, the true thing at work here isn't 'how much money is being printed' but 'what is going on in trade?' I may be the only person saying this, but this see saw of prices is very much balanced on the fulcrum of trade.

Evidence That Big Inflation Is Coming

EMS News here!

Look, inflation happens only when the working class has extra paper money to spend on whatever they spend it on. There are several different levels of 'inflation': buying things on credit, buying things one needs to survive and savings levels.

Easy credit at the BEGINNING of a bubble leads to manic bidding up the prices of various things such as fancy cars, properties, etc. The wealthy use this easy money to bid at art auctions, buy mansions, pay for ritzy prostitutes. The lower classes buy season tickets to sporting games, go to Vegas to gamble or go on vacations or get divorced [heh].

When debt builds up to the point that no one can afford to pay even Zero Interest Rates [ZIRP] we get a depression. The government, very early on tried to elevate spending artificially by giving all Americans $600. This led directly to a sudden and very destructive series of commodity bubbles that rose very rapidly from February, when the first money was mailed, to August, when the last checks were spent.

Virtually every penny of the 'free' bonus was soaked up by the sudden inflationary surge. Now, the deflation spiral is back and much nastier. The US is trying to do what Japan did when it had a huge credit bubble: keeping the zombie banks alive while trying to use government debt to float the entire economy.

Japan is now very deep in debt due to this. Debt owed nearly totally, 87%, to the Japanese. We are mired deep in debt to the Japanese and Chinese, not to ourselves. So all our government spending is turned into future tax obligations to our most dangerous trade rivals.

The simple question of 'deflation or inflation' has to be viewed from a global trade perspective to see where our real dangers lie. The US can't 'create money out of thin air' without getting totally entangled with our largest trade partners and creditors. All the fiddling we are seeing are being watched by these two dragons who will leap on us the minute we choose the 'inflate the currency' option and the dollar nosedives against the yen and yuan.

It is already diving against the yen and it 88 yen to the dollar! The Japanese prefer to have it at 120 to the dollar. Which is where it was at in July, 2007, back when the Japanese carry trade went suddenly into reverse.

Gold is neary $900 per ounce. But has barely budged in the last two months if you compare this to how many yen buys the same amount of gold! We are seeing the differential in the dollar, falling, rather than gold rising.

OPEC, being a consortium, a loose one, at that, always lags behind when it comes to cutting off the spigots when there is an economic downturn. But they will catch up with it, pretty soon. And then the one thing that can trigger global inflation will take off. For oil is the fundamental basis of all commodity and manufacturing pricing inflation. It doesn't affect property or equity values, right away. But it certainly has a very powerful effect on everything else.

High oil prices is the nightmare of world trade. It eats profits in industry and prevents customers from being able to take on more debt as they struggle to pay for food and energy.