POLL: How Much Time Does America Really Have Left?

[dlbww]

.

[Jason]

Jason,

It would be more correct to say that one gajillion dollars sitting in banks won't immediately cause price inflation. Monetary inflation and price inflation do not happen in sync, there is always a delay. The question right now is... how long will that delay be.

Money velocity decreases with confidence, until confidence gets below a certain point and then suddenly velocity increases exponentially and inverse to confidence. In other words, all it takes is a sufficient trigger point for a few to panic and start getting out of the dollar... and then more and more do the same as confidence continues to slide and people continue to divest from the currency (ie they buy anything they can). When that happens suddenly there is a huge inflationary spike.

Actually, a bit of price deflation is exactly what you would expect to see before major price inflation. There are a number of graphs of monetary value around the periods of hyperinflation events that show just this effect. It's not a trend of its own, it's part of a bigger trend.

Well the delay will end when debt forgiveness occurs or free money is passed out. Until then more debt doesn't cure debt saturation and the banks have no motive to lend.

Agreed....and I think that will happen when the government collapses....or we get free money or debt forgiveness on a macro scale. Until then debt obligations must be satisfied (destruction of money) and deflation is the natural result (dollars get more valuable - which is currently occurring).

I look to specific causes (what specifically caused the reversal) rather than general trends.

[dlbww]

.

[jonesde]

Jason,

It would be more correct to say that one gajillion dollars sitting in banks won't immediately cause price inflation. Monetary inflation and price inflation do not happen in sync, there is always a delay. The question right now is... how long will that delay be.

Money velocity decreases with confidence, until confidence gets below a certain point and then suddenly velocity increases exponentially and inverse to confidence. In other words, all it takes is a sufficient trigger point for a few to panic and start getting out of the dollar... and then more and more do the same as confidence continues to slide and people continue to divest from the currency (ie they buy anything they can). When that happens suddenly there is a huge inflationary spike.

Actually, a bit of price deflation is exactly what you would expect to see before major price inflation. There are a number of graphs of monetary value around the periods of hyperinflation events that show just this effect. It's not a trend of its own, it's part of a bigger trend.

"And start getting out of the dollar ..." like this article from zerohedge? http://www.zerohedge.com/news/foreigner ... -concerned" onclick="window.open(this.href);return false;
Market forces tend to react before the crisis arrives.

I'm not nearly connected enough to know what the intended timing is around all of this.

It could be a great time to get into the dollar and out of gold if the deflation will last a while. Or, it could be that we're hitting the bottom of the trough and the dollar's glory days are over.

Economics doesn't help with whens, just with whats.

[Jason]

Jason,

It would be more correct to say that one gajillion dollars sitting in banks won't immediately cause price inflation. Monetary inflation and price inflation do not happen in sync, there is always a delay. The question right now is... how long will that delay be.

Money velocity decreases with confidence, until confidence gets below a certain point and then suddenly velocity increases exponentially and inverse to confidence. In other words, all it takes is a sufficient trigger point for a few to panic and start getting out of the dollar... and then more and more do the same as confidence continues to slide and people continue to divest from the currency (ie they buy anything they can). When that happens suddenly there is a huge inflationary spike.

Actually, a bit of price deflation is exactly what you would expect to see before major price inflation. There are a number of graphs of monetary value around the periods of hyperinflation events that show just this effect. It's not a trend of its own, it's part of a bigger trend.

"And start getting out of the dollar ..." like this article from zerohedge? http://www.zerohedge.com/news/foreigner ... -concerned" onclick="window.open(this.href);return false;
Market forces tend to react before the crisis arrives.

I'm not nearly connected enough to know what the intended timing is around all of this.

It could be a great time to get into the dollar and out of gold if the deflation will last a while. Or, it could be that we're hitting the bottom of the trough and the dollar's glory days are over.

Economics doesn't help with whens, just with whats.

Credit is definitely tightening up.....what just a few years ago was handed out in plentiful quantities unsecured to a pulsating corpse that was capable of providing a signature.....now is carefully metered out in much smaller quantities and requires securitization w/ hard assets.

That is called a deflationary noose....and results in demand destruction (job losses, production declines, etc). Typically this also results in price drops. We aren't seeing that as much this time around. For example gasoline is being exported to third world countries rather than dropping prices here. Energy prices are staying high. Of course most of the major inputs have been monopolized during the past couple decades thus taking away price leverage from the consumer on core staples. The government and its subsidiary structures (as well as the big, mostly secret, private, trading houses - i.e. the trillion dollar trading club....Trafigura, Glencore, Vitol, etc.) effectively control/set prices in the commodity markets.

We are dealing with a different beast this time (depression). Its effectively a double whammy. For example on the currency front the Fed began paying interest on non-reserve assets for the banks. So instead of seeing increasing interest payments to savers for deposits....the money sits at the Fed. Meanwhile loans continue to decline. In other words instead of it being an open and fair market for wealth transfer (from debtors to savers)....it is a government/insider controlled wealth transfer.

In this environment the debt is even weightier.....less income and the same or higher expenses - i.e. faster wealth transfer.

And no one can run away from it. Temporary speculation in precious metals....or even the remotely possible issues of currency confidence....don't change the fundamental problem which is debt in dollars. You either pay the debt in dollars....or you default and lose your assets. If dollars were as plentiful as all the precious metals junkies suggest.....then the debt service wouldn't be as onerous as it is....and we wouldn't be witnessing the demand destruction and resultant production decline (job losses). As long as the debt in dollars remains....there will be demand for dollars to satisfy that debt. Again if you see massive across the board debt forgiveness (or a change in debt denomination or tax obligation denomination)....then by all means run away to precious metals. Until that day arrives.....there will be plenty of inherent demand for dollars to satisfy debt obligations (or we lose our assets).

[Silver Pie]

I think the cleansing has begun, and that it will increase in frequency and pain as time goes on.