Google Groups
Join To Get Blog Update Notices
Visit the Hickory Hound Group

Friday, May 23, 2014

Economic Relevance - Inflation in commodities + Deflation in property = the Great Reset

Devaluation in the value of the dollar is/will lead to a rise in the cost of living through a rise in the cost of necessary commodities (Food and Fuel) and a deflationary cycle with the value of property and discretionary spending (Housing, Personal Property, Electronics, Personal Assets, Items for Resell). You are going to need money to live, but as the economy slows, you aren't going to want to have anything you don't need to survive and you are going to want to sell things to have additional money to survive, but since most people will be in the same boat, then through excess in suplly and reduction in demand the value of non-necessities will plummet in real value. Anything related to fuel will increase in price. Assets to a great extent can become a burden. A lot of times they will cost more to maintain than they are worth. We have seen that already and will continue to see that with more rapidity.

The Federal Reserve is stuck. If the Fed continues with Quantitative Easing, then the value of the dollar continues to fall until we enter a Hyperinflationary cycle. If the Fed pulls back on Quantitative Easing, then the dollar strengthens, interests rates rise, and we enter a deflationary cycle, which will slow the economy by seizing the credit markets. It will also cost more to service governmental debt and necessitate a debt jubilee (forgiveness), which will lead to the banks in the United States becoming insolvent. The excesses of properties that the banks have on the banks will will devalue, many becoming worthless, which will lead to their insolvency. Their liabilities (debt) versus their assets (properties, loan portfolios and other investments) will grow to such an extent that they will be forced into default. There will be no way to get back to profitability. This was the road we were headed down in 2008.

Quantitative Easing (Artificial Lower of interest rates through Monetary Expansion) helped the banks remain solvent, but did nothing to help the average person maintain their personal wealth, because they did not have access to the increased money supply. The banks have maintained an artificial market, but you can't have a real market without people being able to participate in the marketplace. There hasn't been any velocity to the real marketplace. We have seen a stagnation of the real marketplace since 2008.

The current economic structure in unsustainable. What is necessary is a Great Reset. We will either do so voluntarily or we will be volunteered through natural economic forces, which will be much worse. What the government should have done is helped the public write down the artificial value of equity built into their homes caused by the housing bubble, basically a debt jubilee, which would have given homeowners a 20% reduction in the value of their homes over a specified period (say 10 years), then we would basically have been nearly out of this debt glut caused by the irrational exuberance caused by the excessive marketing, sales, and speculation and artificially low interest rates that occurred in the housing market in the late 1990s and early to mid 2000s. Instead, we are going to have to deal with these issues through the greatest disruption of the American Economic System of a lifetime.


Published on May 18, 2014 John Williams of predicts an explosion of U.S. debt. He says, "All the projections on the budget deficit are based on positive economic growth going forward. With the ongoing contraction, you'll see a much worse budget deficit. It's going to do bad things to the banking system. The Fed is going to be easing, and they'll say they are easing to stimulate the economy; but in reality, they'll be doing this to prop up the banking system. The rest of the world sees this and they don't want to hold the dollar, and they will sell off the dollar. The Fed is going to have to come in and prop up the system until it falls apart."

Published on May 20, 2014 - On the U.S. dollar, renowned financial analyst Charles Nenner predicts, "Timing is our business, and we've always said the dollar is going to collapse in end of 2014.

There are different reasons for this. The government has loans outstanding that are very short term. If interest rates only go up a half a percent, they are already in trouble. Also, the United States doesn't have the power to force a lot (of Treasury bonds) on other countries because the United States has decided not to be a power anymore. So, of course, the dollar goes with it.

Oil is going to be much higher, and inflation is going to start moving its tail. This is the start of inflation. Five years from now, you will see inflation started in 2014. It's not that everything happens in 2014 it's just the beginning. I still do cycles of war and I have been predicting a big war is in the making in 2013. And, when they ask me does it start with a bang, I say no, it starts slowly without us noticing. In ten years, you will look back and see it started in 2013. . . . I still think the big war will come from the Middle East."

No comments: