D. McHattie

Commodities Will Lead the Recovery - Matt McCall

John S. Gordon, thank you for the additional historical detail. I appreciate your response.

I don't mean to be argumentative here, just stating my understanding of how the weimar hyperinflation began. And only how it began, not the other forces that exacerbated it. And yes, savings are destroyed by inflation.

The way I understand it, when germany announced that it would no longer pay war reparations, france and belgium invaded germany's industrial zone to obtain 'payment in kind'. German workers then went on strike to frustrate their invaders. In solidarity with german workers, the german government continued to pay strikers - so everyone had the same amount of money but were not producing anything. Same amount of money chasing a lot less 'stuff' and the inflationary cycle began.

Is this inaccurate?

Commodities Will Lead the Recovery - Matt McCall

"[W]ithout a decent level of growing consumption there is no inflation."

This makes a lot of sense and I almost agree with it. It might end up being right. But...

The forgotten half of the inflation equation, to me, is production (stuff). You could have consumption decline but if production falls even further, meaning there is less 'stuff' on which to spend the money, then you could still have inflation, couldn't you?

We typically think of inflation as more money chasing the same or less stuff, creating a rise in prices. But couldn't we just as easily have inflation from (approximately) the same amount of money but significantly less 'stuff'?

I haven't read this notion anywhere else so, of course, I haven't read a strong rebuttal either.

I'm not saying we'll get weimar-style hyperinflation, but I would give you weimar germany as an example where an inflationary spiral began, not because consumption and the money supply increased, but because production fell.

Aren't we seeing a decline in production as unemployment rises and businesses and farmers fail to obtain loans to finance equipment, ventures, seed, fertilizer?

Through unemployment insurance payouts (that are being extended), the unemployed have not reduced their consumption commensurate with their decline in productivity.

Is this not a possible, though uncertain, pathway to inflation?

Commodities Will Lead the Recovery - Matt McCall

It's tough to argue with McCall's concern about inflation.

The Chinese have been grumbling about the safety of their US treasuries holdings. They're signing a lot of long-term contracts to buy soft and hard commodities instead of buying more treasuries.

The US has, what, doubled the amount of treasuries they're going to need to issue to fund this massive deficit? It doesn't look like the Chinese are going to buy them all and the formerly rich oil producing countries don't have the money to buy them either.

So that leaves Bernanke and the Fed who have already been very clear that they intend to buy long-term treasuries to keep rates down. What is the difference between this and just printing money? I can't see the difference.

And then there's the zero interest rate policy.

Hey, I'm no genius, but I just don't see how we can avoid inflation.

Gold Earnings Season Set for Kick Off

Do we know any more details? Isn't fuel one of the largest costs for miners? Couldn't miners stand to benefit from lower fuel prices.