Mike, point by point my responses immediately follow your comments.
Mish
1. Money supply growth in the US is running anywhere between 10-20% a year. Consumer inflation is running at 8-10%, poised to accelerate.
1A. I Disagree. CREDIT is expanding that fast (just as it did in 1929). Consumer inflation is nowhere near 8-10% a year (especially for the last 6 months or so). All kinds of prices are down: homes, gasoline, restaurant prices, prices at Walmart, generic drugs, and to top it off wage growth is nonexistent (for the masses). Homes dramatically understated CPI on the way up and seem to be overstating CPI on the way down.
2. The Fed has already gone unconventional, having started bond market monetization in order to support housing. Money supply growth should hit 20-25% next year because of that.
1A. Disagree. There is no indication of bond monetization to support housing and IF Money supply rises that fast (as opposed to credit) it will be because credit is out and out plunging (aka massive bankruptcies).
3. No economic statistic and no number can be trusted anymore.
3A. A few but not many can (initial job claims is for the most part accurate, and I actually happen to believe M1. Coupon passes should confirm growth in Money (as opposed to credit).
4. The Fed has/is injecting cash into Fannie Mae. That is why risk has vanished overnight, stock is rising and no reports are being filed.
4A. Certainly speculation with no proof. Possible but unlikely. Occam's Razor would disagree and simply call it insane risk tolerance on behalf of investors.
5. Stock market is rising because the measuring unit, in which stocks are denominated, the dollar, is losing value quickly.
5A. Stocks are rising primarily because of an insane appetite for risk. Period. In a world awash in both over capacity and dollars, those dollars are seeking risk. The process continues until it blows up or the appetite for risk changes. Neither of those outcomes will have anything remotely to do with hyperinflation. A credit crunch with this much debt in a slowing economy will send unbelievable amounts of credit to money heaven. DEFLATION.
6. All around, there is a flight from money that is slowly gathering steam, with people frantically searching for a vehicle that will increase in price the fastest.
6A. Yes, just as happened in 1929.
Bottom line Mike J: is that money is being printed at a rapid clip. With money growth at 10-20% combined with 4% interest rates, hyperinflation is a guaranteed outcome.
Bottom Line Mish: Credit is expansing at a rapid clip. YOY growth in money is actually close to zero (and I have some charts to prove it, and will do so soon). There is no productive use for money, only speculation. Unlike Weimar printing presses in Germany where money was printed by the government, we are in a situation where credit extended on the money that is printed has exponentially soared (and NONE of it for productive uses). Again this is exactly what happened in 1929 and is playing out right in front of our eyes. If you really believe in hyperinflation then I suggest buying houses and leap calls on Google and Goldman. The further out of the money the better. This extended credit is going to money heaven and there is one word for that: DEFLATION
Mish |
