D. McHattie

The Next Leg of the Crisis: Unavoidable Catastrophe

It seems we may not get much circulation of this huge wave of money while banks continue to constrict lending to 'main street' (ie: small businesses).

But the example of the mortgage market shows what will induce banks to lend to small businesses: make it risk-free for banks via securitization and, critically, government guarantees courtesy of a fannie and freddie-like agency.

The fed could even buy these Small Business Loan Backed Securities.

That could be when the wall of money comes crashing down.

Global Farmland Disappearing at an Alarming Rate

People speak of peak oil - what about peak food?

Why Investors Should Avoid TIP

An extremely timely and insightful article. But I only agree with the recommendations in your last paragraph.

International TIPS are no better than those in the US - they fall victim to the same flaws in CPI calculations and will ultimately understate inflation.

I also have concerns about shorting us treasuries with TBT. Although you are right that the fundamentals of treasuries are terrible, the federal reserve is openly attempting to manipulate high prices and low yields in all treasuries and I'm reluctant to fight the fed head-on.

So just stick to GLD or the higher returning GDX for gold exposure; stick to DBA or its leveraged cousing DAG for ag commodity exposure; stick to DXO or perhaps PBW for energy exposure.

As I've remarked elsewhere, TIPS are now the ultimate sucker's bet.

Not Your Grandpa's Deflation

Great article.

"Printing money always leads to inflation - in fact, printing money, or quantitative easing, is inflation. Rising prices - which follow - are the symptoms of inflation."

Price 'inflation' is so uneven across goods, services and asset classes that to use one single metric to attempt to gauge price 'inflation' is a misleading oversimplification.

We need to think in terms of the 'effective money supply' for individual goods, services and assets and the effect on the prices of those individual goods, services and assets.

The effective money supply chasing real estate will continue to fall so real estate prices will continue to fall.

The effective money supply to purchase commodities will continue to rise and prices will continue to rise.

If we just looked at an aggregate measurement of price increases and called that 'inflation' then it would all be a wash and we would all be Larry Kudlow crowing about a 'goldilocks' inflation environment.

But as the fed prints money, the rest of the world seeks alternatives to the USD as its reserve currency and continues to seek the necessities to sustain its citizens and economies.

The countries on the other side of our current account deficit will be shedding USD and increasing the effective money supply chasing necessary items like food, water, industrial metals and energy. These items will experience price 'inflation' in spite of the continued US economic slowdown.

Jim Rogers: U.S. About to Have a Currency Crisis

HardwoodFlooring said "the dollar is in bad shape in relation ship to what?"

Jim Rogers has the answer for you, Hardwood: commodities. The dollar is in bad shape relative to real things of real value like food and metal.

Yes, practically all currencies will suck due to central bank easy money policy. But people still need to eat.

Agriculture: Follow the Money

Other central banks have printing presses too - we may not see much of a dollar breakdown relative to other currencies.

But other governments do not have magic machines to create real things that people need to survive out of thin air (ie: agricultural commodities).

My point is that we don't necessarily need to see what you might refer to as a 'dollar breakdown' in order to see higher prices of agricultural commodities.

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.