Your Future View: Stagflation, Deflation, Inflation, Biflation?

[Oz Waver]

What's your view on the future?

Definitions

Stagflation = Stagnation + Inflation. Low economic activity, poor wages, less employment and higher costs of goods (inflation).

Deflation = As money dries up in a system there's less money and items especially assets become cheaper.

Hyperinflation = Inflation at a dramatic rate. Example 50% increase in prices within a month until collapse.

Biflation = simultaneous inflation and deflation. Over printing of money, higher unemployment. Costs of essentials like food, electricity rise with non essentials falling like technology and debt based assets cars, house, etc.


Sorry thread title should read hyperinflation not inflation, everything else is fine.

[Zilver]

my vote is for flation

[Gcubed]

The economy will continue to suck.

[oldgaranddad]

My best guess is Biflation.

[Oz Waver]

Thanks to everyone that voted so far.

Well so far that pretty much means that no one that voted believes in the line pushed by media gurus like Max Keiser, Peter Schiff, James Turk, David Morgan, Marc Faber et al. because these guys all heavily favoured the "hyperinflation" scenario.

The system requires more debt to be taken on to service the interest. When that fails to happens a type of biflation/stagflation is created then you'd expect full deflation to set in. Why?

Here's my thoughts...
Massive de-leveraging, people refusing to borrow whilst then paying down debt. This is extremely deflationary as money is debt and if it's not being borrowed into existence and put into the hands of the public then the velocity slows as does the pool of capital. This means the value of non-essentials should see falls globally (including gold, silver and equities). The reason why essentials are increasing is because we are a captive market and the costs of production still high due to oil, machinery etc. These essentials become the major source of money velocity in the system as other areas grind to a halt.
So the more money we use the faster it essentially dries up, it is consumed by taxes on every transaction and paying interest in the system to service the debt. Essentially unless money hits the ground, the population is stuffed. This is why in America many rely on food stamps as there sole way to feed themselves. They've got you thinking it's money from "your" taxes and have people emotionally committed to that line of thinking. When in fact it is the puppet master controlling every move. They want their new system at all costs to come into "light".

Gold and silver might not appreciate at all under these circumstances and has given me pause to reflect on what I think is likely.

Saving cash instead of stacking might be something to consider...

Thought?

[Weatherman]

i don't know the timeline, but I am sure that hyperinflation (when measured in the fiat FRN dollars we currently use) is unavoidable. The USA is borrowing massive amounts to stay solvent and to keep the spending at a high enough rate so that at least some of the politicians have a chance to get reelected. I don't think there is a snowball's chance in hell that politicians will decide to cut all spending that exceeds income because of the political heat that would be applied to them before they are kicked out of office. All the politicians will talk a fair game, but you can bet they will walk along the inflationary path with printing presses running at full speed as long as they are allowed to do so. It could be that there will be a change in the currency (like knock off three zeros, for example), but the chart of prices measured in current fiat FRNs will rise rapidly enough to look like hyperinflation.

[Oz Waver]

i don't know the timeline, but I am sure that hyperinflation (when measured in the fiat FRN dollars we currently use) is unavoidable. The USA is borrowing massive amounts to stay solvent and to keep the spending at a high enough rate so that at least some of the politicians have a chance to get reelected. I don't think there is a snowball's chance in hell that politicians will decide to cut all spending that exceeds income because of the political heat that would be applied to them before they are kicked out of office. All the politicians will talk a fair game, but you can bet they will walk along the inflationary path with printing presses running at full speed as long as they are allowed to do so. It could be that there will be a change in the currency (like knock off three zeros, for example), but the chart of prices measured in current fiat FRNs will rise rapidly enough to look like hyperinflation.

This is a likely scenario but it doesn't mean that hyperinflation will result. If the public doesn't have any money how can hyperinflation result? In many poor countries it doesn't result that way. It looks more like stagflation... where to public is poor and the cost of goods are high and increase.

[Oz Waver]

Also Jim doesn't understand why gold hasn't risen further with all the billionaires and money out there and thinks that all at once they'll go all in for gold within 24-48 hours "event". It's possible.

OR

Another possibility is that whilst debt based assets decrease as long as they hold on to their cash then they will be able to purchase these assets for pennies. We are seeing this occur in Greece. Essentially they are making a slave class out of the population.

At that level the true billionaires of this world are in a club that we are not invited into, they have an agenda. I'm not saying Jim's a part of the club but what if he is?

[smilershouse]

my vote is for flation

Flation it is, yet given the masses are the ends that justify the means, I'll go with bi-inflation.

SH

[Tiger44]

This is a likely scenario but it doesn't mean that hyperinflation will result. If the public doesn't have any money how can hyperinflation result? In many poor countries it doesn't result that way. It looks more like stagflation... where to public is poor and the cost of goods are high and increase.

When Bernanke starts dropping FRNs from helicopters (aka stimulus checks) then you'll have your hyperinflation.

[Oz Waver]

When Bernanke starts dropping FRNs from helicopters (aka stimulus checks) then you'll have your hyperinflation.

None of that cash of QE was given to the people on the street. It was all keep by the wealthy. Do you think any future money will get to the ground level, I doubt it.

[Scorpio]

After Japans crash, they continued to inflate, but experienced 10 yrs of deflation anyway,

To this day, with ultra low interest rates, they have no hyperinflation,

even while still printing,

[Oz Waver]

After Japans crash, they continued to inflate, but experienced 10 yrs of deflation anyway,

To this day, with ultra low interest rates, they have no hyperinflation,

even while still printing,

That's right. Where does all that printed money go? Certainly not to the public. Japan's case is considered stagflation.

[bemac]

After Japans crash, they continued to inflate, but experienced 10 yrs of deflation anyway,

To this day, with ultra low interest rates, they have no hyperinflation,

even while still printing,

The Japanese do not have the world's reserve currency.

Folks, as long as we live in a world of printing presses, deflation (i.e., a higher valued currency), will not be the end game. It will occur, but when it does, they will print. If they cannot inflate via new debt, they will just print.

[Oz Waver]

The Japanese do not have the world's reserve currency.

Folks, as long as we live in a world of printing presses, deflation (i.e., a higher valued currency), will not be the end game. It will occur, but when it does, they will print. If they cannot inflate via new debt, they will just print.

Hmmm... a lot of responses to biflation and stagflation.

So yeah they print, but that money never gets into the hands of the people on the street. So hyperinflation is unlikely, although we might see an acceleration in biflation/stagflation.

Houses are deflating around the world and so too are cars, technology and lots of non-essentials. Japan's stock market and property market have never seen their previous highs. Being the world's reserve currency has little to do with it. It's who's willing to buy... say a house. Unless the population en masse borrow and bid up the market it's going to be really difficult for deflation not to take place (at least in some areas).

[andial]

I say we will have Biflation, an increase in the amount of bisexual peoples.

[Ishkabibble]

We are experiencing biflation now, and will for some time. It will change to hyperinflation when:

1. The wealthy lose faith in US fiat and exchange it for assets en masse
2. The world looses faith in US fiat and exchanges it for assets en masse

There's an important function of timing here. If we're examining the short-term future, it's biflation. Medium term is anyone's guess. And further out, it's hyperinflation.

Only if the US can stave off International fear of US dollar devaluation, and only if it can prevent other nations from growing in financial might, will we experience stagflation. The remaining option, deflation, would have been a very real possibility in a closed market economy.

[bemac]

Hmmm... a lot of responses to biflation and stagflation.

So yeah they print, but that money never gets into the hands of the people on the street. So hyperinflation is unlikely, although we might see an acceleration in biflation/stagflation.

Houses are deflating around the world and so too are cars, technology and lots of non-essentials. Japan's stock market and property market have never seen their previous highs. Being the world's reserve currency has little to do with it. It's who's willing to buy... say a house. Unless the population en masse borrow and bid up the market it's going to be really difficult for deflation not to take place (at least in some areas).

I didn't say we would have hyperinflation. But a strong devaluation of the dollar is inevitable. And yes, it being the world's reserve currency matters. How many dollars are overseas? How many will come home?

[Carl]

I didn't say we would have hyperinflation. But a strong devaluation of the dollar is inevitable. And yes, it being the world's reserve currency matters. How many dollars are overseas? How many will come home?

Currency devaluation isn't a market event, it is a political event to which the markets react and bandwagon. What country or groups of countries do you see as initiating that political event against the USG and the FRN?

I would guesstimate that there are about 600 billion frns held overseas, and I would also guesstimate that very few of them will make it back to our economy.

As long as people continue to conflate cash and credit, they will keep getting their guesstimates about future probabilities wrong....

[<===Foolsgold]

I'm getting screwed coming and going - whatever that's called.

[Joseph]

Thanks to everyone that voted so far.

Well so far that pretty much means that no one that voted believes in the line pushed by media gurus like Max Keiser, Peter Schiff, James Turk, David Morgan, Marc Faber et al. because these guys all heavily favoured the "hyperinflation" scenario.

The system requires more debt to be taken on to service the interest. When that fails to happens a type of biflation/stagflation is created then you'd expect full deflation to set in. Why?

Here's my thoughts...
Massive de-leveraging, people refusing to borrow whilst then paying down debt. This is extremely deflationary as money is debt and if it's not being borrowed into existence and put into the hands of the public then the velocity slows as does the pool of capital. This means the value of non-essentials should see falls globally (including gold, silver and equities). The reason why essentials are increasing is because we are a captive market and the costs of production still high due to oil, machinery etc. These essentials become the major source of money velocity in the system as other areas grind to a halt.
So the more money we use the faster it essentially dries up, it is consumed by taxes on every transaction and paying interest in the system to service the debt. Essentially unless money hits the ground, the population is stuffed. This is why in America many rely on food stamps as there sole way to feed themselves. They've got you thinking it's money from "your" taxes and have people emotionally committed to that line of thinking. When in fact it is the puppet master controlling every move. They want their new system at all costs to come into "light".

Gold and silver might not appreciate at all under these circumstances and has given me pause to reflect on what I think is likely.

Saving cash instead of stacking might be something to consider...

Thought?

Interesting - after reading the definitions, I voted biflation. a bit unsettling. evidently, my opinion is that the system will deteriorate in a manner in which gold and silver value might well depreciate. So why am I hoarding Au and Ag ? My head hurts

[bemac]

When a lack of new debt taking causes deflation, they will just print. It is not politically popular for the economy to shrivel up because there is not enough money flowing around. The government has the authority to print. At will. When increasing credit ceases to increase the supply of money, they will just directly increase the supply of money. Bernanke has already been taking slack from Paul Krugman. Print baby print. And they will. No one since Harding was elected to say "we just have to hunker down an take our medicine."

[Carl]

When a lack of new debt taking causes deflation, they will just print. It is not politically popular for the economy to shrivel up because there is not enough money flowing around. The government has the authority to print. At will. When increasing credit ceases to increase the supply of money, they will just directly increase the supply of money. Bernanke has already been taking slack from Paul Krugman. Print baby print. And they will. No one since Harding was elected to say "we just have to hunker down an take our medicine."

The government surrendered their authority to print to a private banking cartel known as the Federal Reserve. The Federal Reserve backs every FRN (the Federal Reserve's note, not the government's) they put into circulation with their assets, they will print no more than what they are willing to lose or what commercial banks can afford to buy.

Do a google of "U.S. money or currency in circulation" and note the FRB's response, then ponder the implications across all markets with their 10's of trillions of assumed promises to pay at stake.

If it cannot be done by credit, it will not be done. The Fed is under no contractual obligation to print FRNs to save anyone, to include the government or what's alleged to be in your bank account.

[bemac]

The government surrendered their authority to print to a private banking cartel known as the Federal Reserve. The Federal Reserve backs every FRN (the Federal Reserve's note, not the government's) they put into circulation with their assets, they will print no more than what they are willing to lose or what commercial banks can afford to buy.

Do a google of "U.S. money or currency in circulation" and note the FRB's response, then ponder the implications across all markets with their 10's of trillions of assumed promises to pay at stake.

If it cannot be done by credit, it will not be done. The Fed is under no contractual obligation to print FRNs to save anyone, to include the government or what's alleged to be in your bank account.

The treasury can make whatever denominated money they wish. Take a look at your gold and silver eagles, they have a dollar denomination. They have the legal authority to print paper dollars if they wish. They may not be federal reserve notes, but they are legal tender. And if the Congress wants, they can abolish the FRB and print all the money they want. The people elect congress, the people don't give a **** about the FRB when the economy is crashing and people don't have jobs.

[chris_is_here]

If you are not in the hyper inflationary camp, then answer this one question: How will the USA resolve its national debt situation without the luxury of printing money. If you claim taxes on the rich, forget it, the top 1% could only provide so much - there simply aren't enough of them to make the numbers. Taxes on the middle class? Not when 50% of them are already on some form of government assistance. Default on the debt? Currency collapse, complete economic disaster and revolution, as well as WWIII with our creditor nations....and, BTW, wars cost money, which we could not fund if our currency collapses. So, you can't do that.

If you want to understand how bad hyperinflation will get, just pull up a spreadsheet and do a simple calculation.....assume that the rate of inflation increases by one or two hundred basis points each month, and see what the cumulative impact is of this over time. Now, that would be technically considered galloping inflation, not real hyperinflation. If you want to understand hyperinflation, start with a penny and double it the next day, and keep doubling the amount each day thereafter, keep doing this for a month, and see where you end up. Hyperinflation would act roughly in a similar fashion. Savings would be swept away like a tidal wave, and prices would escalate so fast, no one could even begin to predict what prices would be several days ahead. Very scary stuff and the sole reason why I continue to stack silver, whenever possible.

[smooth]

I voted biflation... I'm hedging with dollars short term, cause who really knows for sure.

[bemac]

I voted biflation... I'm hedging with dollars short term, cause who really knows for sure.

Sure. I don't think there's any doubt, we'll see deflation on a massive scale. Much worse than 2008. But it's not the end of the world, it's not the end of the story. What will be the American peoples' reaction? What will the headlines say? Peter Schiff and Ron Paul can stand up and say, "I told you so." But they won't be the only ones saying it. Paul Krugman is going to say the same thing. He's been up Bernanke's ass saying he isn't doing enough, comparing Professor Bernanke to Chairman Bernanke...

http://www.nytimes.com/2012/04/29/ma...pagewanted=all

Now in 2008, did people listen to Ron Paul and Peter Schiff? Even though they were right? NOPE. Lada Gaga videos on youtube have 10 million views. How many does Peter Schiff's 2006 Mortgage bankers speech have? A measly 156 thousand as of today.

They are going to listen to Krugman, and they are going to print. People aren't borrowing? Big deal. Print anyway. They don't call him "helicopter Ben" for nothing. How did he get that nickname? According to his wiki...

"In 2002, following coverage of concerns about deflation in the business news, Bernanke gave a speech about the topic.[49] In that speech, he mentioned that the government in a fiat money system owns the physical means of creating money. Control of the means of production for money implies that the government can always avoid deflation by simply issuing more money. He said "The U.S. government has a technology, called a printing press (or today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at no cost." (He referred to a statement made by Milton Friedman about using a "helicopter drop" of money into the economy to fight deflation.) Bernanke's critics have since referred to him as "Helicopter Ben" or to his "helicopter printing press." In a footnote to his speech, Bernanke noted that "people know that inflation erodes the real value of the government's debt and, therefore, that it is in the interest of the government to create some inflation."[49]"

If you want to use the term "deflation" as a description of peoples' standard of living, meaning it will drop, then sure, deflation is a end game scenario. But if you're talking about the value of our current US dollar, no way. No way in hell will they allow it to happen. They will print, they will print like there's no tomorrow. They will devalue the dollar until people stop accepting it. And all along the way, people will cheer it, Wall Street will beg for it, and the people will re-elect the printing presses until they stop working.

[Carl]

~ They will print, they will print like there's no tomorrow. They will devalue the dollar until people stop accepting it. And all along the way, people will cheer it, Wall Street will beg for it, and the people will re-elect the printing presses until they stop working.

What evidence do you have that supports your assumption the Fed/Gov will "print"?

The Euro credit is in even worse shape that the FRN credit, what if it collapses first?

What if the major multinational banks collapse before either the EURO or the FRN?

Didn't the USG default on its debt in 1971, with no resulting collapse of the economy or major wars breaking out?

How many FRNs have been "printed" and put into circulation since the crisis began?

Is there ant difference between money and credit?

If the Fed is responsible for filling your bank account with FRNs then what is the point of the FDIC?

[bemac]

What evidence do you have that supports your assumption the Fed/Gov will "print"?

Almost 100 years of history.

The Euro credit is in even worse shape that the FRN credit, what if it collapses first?

Doesn't matter, that's still not the end of the story.

What if the major multinational banks collapse before either the EURO or the FRN?

They'll get bailed out. Which means, printing.

Didn't the USG default on its debt in 1971, with no resulting collapse of the economy or major wars breaking out?

The USG has defaulted MANY times, and we've gone from $20.67 oz gold all the way to $1600 oz gold (as I type).

How many FRNs have been "printed" and put into circulation since the crisis began?

A lot.

Is there ant difference between money and credit?

Yes, but they aren't mutually exclusive.

If the Fed is responsible for filling your bank account with FRNs the what is the point of the FDIC?

LOL, why are you asking me this? I'm not getting the point of a lot of your questions.

[Carl]

In 100 years of history, there is not one instance of the Fed/Gov printing us into hyperinflation, so the evidence does not support your assumption.

The collapse of either the Euro or the FRN or most likely both, will definitely be the end of their story.

Why do you feel the multinational banks will be bailed out after they've collapsed and the 10s, if not 100s of trillions in credit they've created has been destroyed?

The commodity POG is irrelevant. The fact is the USG has defaulted on its debt obligations in the past and there's no reason to assume they won't default in the future.

Since Aug 2007, the Fed has "printed" an additional 300 billion FRNS for a grand total of about 1,040 billion in circulation to back the 10s of trillions in credit that currently passes for currency.

The USG is under no obligation to make any bank's debt good.

The difference between money and credit is the difference between payment and an assumed promise of payment.

The Federal Reserve has no contractual obligation to monetize your, or anyone else's, credited bank account. That's why the FDIC was created.

Your credit is sombody else's debt, it wouldn't exist otherwise.

Credit has no value to gain or lose, you either have credit or you don't.

Credit's existence is determined by the value of the asset that was used to create it.

[bemac]

In 100 years of history, there is not one instance of the Fed/Gov printing us into hyperinflation, so the evidence does not support your assumption.

Accept that's not my assumption. No where in this thread did I say we'd have hyperinflation. It is a possibility, some day, but I did not suggest it.

Edit: Well, crap, I did exaggerate a bit. But I'm arguing against the suggestion that deflation (increase in value of dollar) being an end-game scenario. Let me be clear. They will devalue, they will NOT let the value of the dollar soar and not fight it.

[Argentsum]

Don't limit yourself. We can have it all.

[Carl]

Accept that's not my assumption. No where in this thread did I say we'd have hyperinflation. It is a possibility, some day, but I did not suggest it.

Edit: Well, crap, I did exaggerate a bit. But I'm arguing against the suggestion that deflation (increase in value of dollar) being an end-game scenario. Let me be clear. They will devalue, they will NOT let the value of the dollar soar and not fight it.

Deflation in a credit currency system is not an increase in the value of the dollar, it is the systemic collapse of credit as currency. It's the; you go to bed fat, dumb and happy only to wake up the next day to everybody being broke and the government implementing emergency measures just so you can have limited access to what's left of the credit in your bank account at your failed bank.

That's what the collapse of the dollar means in a credit based system...Deflation, credit goes "POOF!"....

[bemac]

Deflation in a credit currency system is not an increase in the value of the dollar, it is the systemic collapse of credit as currency. It's the; you go to bed fat, dumb and happy only to wake up the next day to everybody being broke and the government implementing emergency measures just so you can have limited access to what's left of the credit in your bank account at your failed bank.

That's what the collapse of the dollar means in a credit based system...Deflation, credit goes "POOF!"....

I figured we're arguing using different definitions.

[Carl]

I figured we're arguing using different definitions.

I don't think it's a matter of definitions, it's more a matter of applying the proper context to the terms used. It's still deflation, just not the type most think of when they're viewing the system with an erroneous physical dollar bias..

And it's easy to get led astray, with people constantly yammering on about the Fed "printing money" when that is simply not the case.

[BUILT TO LAST]

The Japanese do not have the world's reserve currency.

Folks, as long as we live in a world of printing presses, deflation (i.e., a higher valued currency), will not be the end game. It will occur, but when it does, they will print. If they cannot inflate via new debt, they will just print.

Both of you have good points. Also, they hold their own debt.