Interesting quotes on money and inflation.

[RichardC]

No doubt these are extracts from larger articles and indeed there were more than just these few quotes in the article I just read.

I post them without comment. (At least till after you've read them. LOL)
.........................................

Steve Saville, Speculative Investor
"It is very unlikely, however, that the US$ will ever COLLAPSE in value relative to any other fiat currency. The reason is that ALL of these currencies are in the process of being inflated into oblivion; it's just that over the next few years the dollar is likely to move towards that ultimate destination at a modestly faster pace than some of the other major currencies."


Jim Puplava, Financial Sense
"Inflation can manifest itself in either of two ways. It can show up in the real economy in the price of goods and services as it is doing now or it can surface in the asset markets in the form of higher prices for assets be it bonds, stocks, commodities or real estate. Just look at the '80s and '90s for financial inflation and this new decade for hard asset inflation in the price of real estate and commodities.

This brings me to the next reinflation effort which has now begun. Why else would M3, which has been growing at an annual rate of 8%, no longer be reported by the Fed? Monetary inflation is the reason. The U.S. is spending and borrowing too much money. Our current rate of spending is out of control and beyond balancing through tax increases, so monetary inflation through monetization is next. As the Fed goes on hold—perhaps after the Fed funds rate is taken to 5-5.25%—the dollar will begin its relentless decline."


Puru Saxena, Money Matters
"The absurd money-creation continues. Slowly yet surely, the "stealth" confiscation of savings is gaining momentum as money loses its value. Central banks claim that they are raising interest-rates to fight inflation. At the same time they are slipping in more rum into the punch bowl, thus creating just what they say they want to fight - inflation! Take a look at the latest year-on-year money supply growth-rates around the world:

Australia + 9.1%
Britain + 11.7%
Canada + 7.7%
Denmark + 14.7%
US + 8.1%
Euro area + 7.3%

When I glance at these mind-boggling figures, at least I don't see any monetary tightening taking place! Make no mistake, this excessive liquidity is inflation that banks are creating and this inflation is destroying the purchasing power of your hard-earned money. As asset-prices continue to benefit from this monetary insanity, the wealth inequality is getting wider resulting in social unrest in several parts of the world. The ultimate truth about inflation is that it always benefits the rich who are able to ride the inflationary wave by investing in assets, whereas the poor become even more impoverished as things continue to become more expensive."
.......................................

You may have gathered that this is from a site advocating investment in "hard" assets, in this case silver. As you know I too like silver but while these guys believe RE is in a bubble, it is definately a hard asset. I just don't like "cash money" or those who trade in it eg Banks.

Bill

ps Note: Oz printing faster than the US!

 

[Tim]

Richard,

that post is particularly interesting. I like how inflation is categorised as either being reflected in goods and services, or through assets.

It does seem to me that inflation is about to creep in very soon to be reflected in interest rate rises....

Great post!

Tim

 

[Tim]

Richard,

seeing as you posted this thread, I assume you have an interest in where this inflation is up to and where it might be going? I would be interested in any other views you have. I tend to think this is a quite a significant situation in some ways...

Cheers,

Tim

 

[RichardC]

Tim, I'm not really competant to comment. But few are so I don't feel inadequate.

I do read a lot tho and I am not inspired with confidence. It's hard to explain. I think I see a train wreck coming but have no real idea whether to duck left or right ie Borrow heaps and let inflation pay off your debts or sell out and hunker down to survive the "Greater Depression".

Meanwhile "Wot! Me worry" will suffice. "Another tequilla, bartender!"

 

[stretchy]

I have heard alot about the M3 not being reported anymore - mostly doom and gloom about the end of the world. But never have I read someone explaining why the M3 is still relevant when the US Reserve Bank claims its not anymore.

I'm more inclined to beleve Bernanke and Co than some blog/column writer to be honest. Perhaps the M3 just isnt relevant anymore - therefore your 8-10% y-on-y growth isnt such a big deal....

 

[Andrew_A]

Jim Puplava

If you are feeling upbeat, having a nice day or just an incurable optimist then I prescribe a solid dosage of Jim Puplava.

Jim Puplava on Money Supply and Inflation

He's a super bear and very articulate so you are guaranteed to finish listening to any of his stuff listless and feeling like a good strong drink. Also Gold Bugs and Silver Beatles love the guy as he feeds their wildest fantasies.

In all the hours (many hours) I have listened to his show I haven't heard one intelligent dissenting voice to the theme that the US is headed toward an inflationary depression. All of his 'guests' are promoting their book or websites which strangely enough all tend to agree with his viewpoint. It's quite funny sometimes as you hear the 'I agree completely' or 'Thats my opinion as well' backslaps going on.

He may well be right. Just that the complete lack of balance irks me, life and the markets are rarely that simple in my experience, probably like Y2k the truth of the matter will be somewhere between no effect and the end of the world scenario's Jim forecasts.

For those not interested in listening to him I can save you hundreds of hours with a brief summary of his views.

* The US is likely to experience a 70's like environment, inflation + rising interest rates. A decade of listless equity returns but soaring commodities, a time to buy quality 'stuff' diversify out of paper assets and watch your debt gearing.
* Oil, Gold, Silver and other precious metals are heading to the moon.
* Alternate energy, water and oil sands will boom.
* Commodities will just keep going higher.
* The world is addicted to Oil and we are all seriously screwed because of Peak Oil. The Saudi's have been fudging the books on oil supply figures and everywhere else is at or past peak oil.
* Petro Euro's is a seriously frightening scenario for the USD. In short if you are Iranian (they are threating to do this) and feeling nervous at the moment about the US forces on your doorstep in Iraq you have a VERY GOOD reason to be nervous.
* If you hold a lot of USD then.... do something about it fast!
* The Fed is dangerously incompetent and hiding money supply figures so they can inflate without being monitored.
* Greenspan was a fool.
* Bernanke doesn't know much about the real world.

I think you get the idea by now.

Food for thought, but hardly balanced journalism.

 

[keithj]

If you are feeling upbeat, having a nice day or just an incurable optimist then I prescribe a solid dosage of Jim Puplava.

Food for thought, but hardly balanced journalism.

I too endured some of his weekly outpouring. It was to depressing, unbalanced - the recurring theme didn't change....... I stopped quite a while ago. No doubt he will be right eventually and will be able to say I warned about this 10 years ago.....

 

[redwing]

Shadow Statistics

SHADOW STATISTICS
by Chris Mayer


"Listen," I interrupted, "what nationality are you?"
"I'm English," she replied. "That is, I was born in Poland, but my
father
is Irish."
"That makes you English?"
"Yes," she said...
- Henry Miller, Tropic of Cancer


Ben Bernanke, Fed chairman, recently delivered an upbeat view of the
U.S.
economy. It was cheerful, optimistic...and delusional.

The official government statistics hide many warts on the face of
the U.S
economy. Like makeup dabbed on an aging film star, they are an
attempt to
cover the wrinkles and present a veneer of youth. To most people,
this is
no revelation. Like plastic surgery and tummy tucks, it is what
stars do
to keep up appearances.

However, few know the extent of the deceit. What if you learned that
inflation were closer to 7% than to the official 3%? What if
unemployment
were closer to 12%, rather than the official 5%? What if the economy
were
actually contracting, as opposed to growing?

What follows is a partial peek at the economy - sans makeup. And,
more
importantly, what it means for you and your hard-earned dough.

It was the genius of writer George Orwell that he chose to build his
dystopia on the foundations of language and information - how it is
used
to deceive, manipulate and control. His chilling novel 1984 stands
out
precisely because it is only a distortion of things that are
happening now
and that have always happened. Orwell's dystopia is a mirror in a
funhouse, as you see enough of your own world in this disturbing
reflection.

Thankfully, there are still some people doing the important work of
getting at the truth behind the official statistics - piercing the
veil of
Newspeak, sweeping away the cobwebs of sham. John Williams is an
economist
dedicated to doing just that. His Shadow Government Statistics
reveals the
extensive rot under the floorboards of the U.S. economy.

Let's take the official inflation rate, tracked using the consumer
price
index, or CPI. The idea behind the CPI is to have a fixed basket of
goods
and track how the prices of these things change from year to year.
It only
gained prominence after World War II, as a way to adjust autoworkers'
labor contracts, a practice that soon spread.

Over time, its importance grew and more people looked to it as a
gauge of
general price inflation - and, hence, to get a feel for the health
of the
economy.

The thing is, the way the CPI is calculated changed dramatically
over the
years. Politicians have figured out that these statistics are useful
in
winning elections. Ergo, nearly every administration has altered the
calculation. And always, the changes made the CPI lower. Every
effort to
change the CPI, by design, aims to make the economy look "better"
than it
looked before the changes.

The accumulation of these changes creates a huge difference over
time.
It's like making a series of small changes to a ship's course in the
midst
of a long voyage. Soon, you wind up way off course, miles and miles
from
where you think you are. The chart below is from William's Web page.
It
shows the extent of the difference, which is just massive. The rate
of
inflation using only the pre-Clinton era CPI is closer to 7%!

The "Experimental C-CPI-U" is another innovation, introduced by the
Bush
administration to lower the CPI yet again, once again to paint a
kinder
portrait of the old hag known as the U.S. economy.

But it's about more than just making the economy look better. For
example,
since increases in Social Security payments link to the CPI, a lower
CPI
also saves the government money. According to Williams, if you used
the
CPI when Jimmy Carter was president, you'd get Social Security
checks 70%
higher than today's levels. Yes, 70% higher.

The government also duped all those people who thought it was such a
great
idea to buy TIPS (Treasury inflation-protected securities). Changes
in the
CPI determine the interest paid on these bonds. The higher the CPI,
the
more interest paid to bondholders. Some people loved the idea,
figuring
here was a bond that would keep pace with inflation. Given the
government
manipulates the CPI, you can be sure the interest rate paid will not
keep
pace with inflation - nor has it ever.

The manipulation of the CPI explains the great disconnect between
what the
man in the street feels when he pays his bills and what the
confident,
well-dressed Fed chiefs and politicians try to tell him. The cost of
living is rising a lot more than they want you to believe. At a 7%
annual
rate of inflation, the cost of living would double in about 10 years.
Looked at differently, the purchasing power of your dollar will fall
in
half.

What about unemployment? The government, since the time of the
Kennedy
administration, has been changing the definition of "unemployed."
Again,
many small changes over time lead to dramatic end results. According
to
Williams, if you back out the changes, you get an unemployment number
closer to 12%!

Let's look at the federal deficit - basically, the amount of money
the
government is losing every year. The official deficit for 2005 was
$319
billion. However, this excludes unfunded Social Security and Medicare
obligations. Throw them into the mix and calculate the deficit the
way a
business does in its financial statements - and you get an annual
deficit
around $3.5 trillion.

That's more than 10 times the so-called "official" deficit. By
Williams'
calculations, you could raise the tax rate to 100% - dump everyone's
salaries into the U.S. Treasury - and still have a deficit.

Years of such deficits have created a mountain of obligations for
the U.S.
government. As Williams says, "The fiscal 2005 statement shows that
total
federal obligations at the end of September were $51 trillion; over
four
times the level of GDP." These debts are unsustainable. The bills
must go
unpaid. If the U.S. government were a private corporation, its
bankruptcy
would be beyond dispute.

This is why Social Security and Medicare are not going to exist in
the
not-too-distant future. As Williams says, "There is no way the
government
can pay the Social Security or Medicare it has committed to."

Williams believes GDP is contracting now. The government reported
only a
1.1% increase in the fourth quarter. Even in an election year, and
despite
the government's best efforts to paint a pretty face, all it could
muster
was a measly 1.1%. More likely, the economy actually contracted 2%
in the
fourth quarter. This means we are in a recession NOW.

This is not conspiracy-theory stuff. As Williams points out, it's all
disclosed in the footnotes in the government's reports. All he is
doing is
backing out many of the changes to more realistically compare these
numbers with the numbers of the past.

The great H.L. Mencken, a scathing attack dog of idiocy in all its
forms,
wrote about "damning politicians up hill and down dale for many
years as
rogues and vagabonds, frauds and scoundrels." We need more Menckens.
In
the meantime, we'll have to make do with Williams and his cogent
analysis
of government skulduggery.

Oddly enough, these insights do not change our approach here in the
pages
of Capital & Crisis. In fact, Williams' work reinforces several
things
we've already covered in past letters. To wit:

Yields on real estate investment trusts (REITs) and utilities - to
say
nothing about the bond market - appear even more pathetic against an
inflation rate of 7%. The yield for risks taken is simply not
adequate. If
the slumbering bond market awoke to the reality of a 7% inflation
rate,
there would be a sell-off the likes of which this country has never
seen.
Interest rates would bolt upward like a frightened cat.

And the U.S. dollar is a doomed currency over the long haul.
Bernanke, the
self-professed student of the Great Depression, accepts the
mainstream
view that the Fed's great mistake then was not to flood the system
with
dollars. He won't make that "mistake" again. Expect the printing
presses
to run day and night at full capacity when the trouble starts.

Trying to pin down the economy in precise numbers is futile anyway.
It's
too big, too complex. All macro statistics are severely flawed. This
is
why I seldom write about them. Investing using macro statistics is
like
trying to find the nearest post office with a globe. They are so
vague as
to be useless.

The basic idea I want to leave you with is this: The economy is far
weaker
than generally portrayed. Most investors ignore the rat's nest of
risks
and invest indiscriminately in stocks - without proper due
diligence. As
investors, we need to stick to our fundamentals more carefully than
ever.


Regards,

Chris Mayer
for The Daily Reckoning

 

[gigigoodyear]

let me see if puplava was correct

* The US is likely to experience a 70's like environment, inflation + rising interest rates. A decade of listless equity returns but soaring commodities, a time to buy quality 'stuff' diversify out of paper assets and watch your debt gearing.

US Interest rates are now 5% and may rise another 25bp. Hedge funds are diversifying out of equity into commodities...I see scary rising prices - P. may be right

* Oil, Gold, Silver and other precious metals are heading to the moon.

What can i say...to da moon with all these precious metals and oil and uranium and ...- P. is definitely on the money

* Alternate energy, water and oil sands will boom.

Time will tell

* Commodities will just keep going higher.

To da moon already and still going higher - P. right on the money and has been predicting it since 2001

* The world is addicted to Oil and we are all seriously screwed because of Peak Oil. The Saudi's have been fudging the books on oil supply figures and everywhere else is at or past peak oil.

I'm afraid Virginia, all major oil fields in decline and that's the end of cheap oil - I think P. is correct and after reading Matt Simmons book - got any other hard evidence?

* Petro Euro's is a seriously frightening scenario for the USD. In short if you are Iranian (they are threating to do this) and feeling nervous at the moment about the US forces on your doorstep in Iraq you have a VERY GOOD reason to be nervous.

Time will tell

* If you hold a lot of USD then.... do something about it fast!

Dollar skydiving at the moment to below support levels- P. may have something there

* The Fed is dangerously incompetent and hiding money supply figures so they can inflate without being monitored.

Check the previous months M3 money supply - seems they were inflating away before they hid M3 - maybe even more so now...maybe this is why all commodity prices are to da moon. It is telling us something

* Greenspan was a fool.

Agreed. But a wise fool. He demanded gold as payment for his speeches after retirement

* Bernanke doesn't know much about the real world.

Well, would u trust an academic with his head hiding up George Bush' ar$e