Prices, Inflation/Deflation, Interest Rates & The Fed

Coja Petrus Uscan

Crow
Orthodox Inquirer
Gold Member
Bitcoin advert, or gold self-custody, if you will.

 
bfm501.jpg

Although only a small move notice how this matches what I said earlier, despite the official narrative in the financial industry and among inflationistas who want to offload their junk to you...

Taper? You see rates go DOWN instead of up! That's DEMAND for the 10y against the Fed.

Still waiting for us to hit that predicted 2% from earlier in the thread.
 

Blade Runner

Ostrich
Orthodox
Yes, the point of worry will be when the 10 year yield starts actually increasing dramatically, presumably people are dumping treasuries due to confidence loss. No?
 

SlickyBoy

Hummingbird
Are your savings safe in your bank account? Waiting for prices to drop on certain items in the next while, or is now the time to get in?

A separate Thread for trying to determine whether we are heading into a deflationary or inflationary environment. We can also use this thread to track price changes in specific goods/services. I believe deflation and inflation will occur at the same time dependant on products, but that inflation will be what is coming in the next 5 - 10 years.

Inflation
Inflation article for quote below
Keeping any more than what's necessary for day to day transactions in the bank account is a losing proposition, and given the state of the US dollar, an increasingly risky bet in the event of hyperinflation. There are other options - foreign bank accounts in foreign denominated currencies. Sure, many other countries have their problems too, but there are currencies not being printed at the rate we are printing which are less likely to inflate (CHF, CAD, DKK, SEK, AUD, and GBP, to a lesser extent).

We are definitely heading into inflationary times. Deflation happens when the fed UNDERprints money. When was the last time they did that? We are over printing like mad, with no end in sight.
 
USD and US treasuries will be the “last man standing” compared to all other currencies. 1 to 4 years from now: Europe and China are far weaker economically, and their currencies will fail before the USA. As that is happening, treasury yields will fall as everyone in the world flocks to the perceived safety of the US debt and dollar. As the dollar strengthens, you will see a deflating stock market, real estate, and commodities. A strengthening dollar will worsen the crisis though, since the worlds debt just got more expensive to pay. As the stock market is crashing and theres another banking or bond crisis overseas (strong dollar)…the Fed will print a gorillion dollars to try and weaken the dollar, to keep asset prices from crashing, and the world debt economy from imploding.
So yes, I expect a deflation, an everything crash, to be followed by clown world levels of money printing. Maybe Bitcoin goes to $5k…but at some point, when the dust clears, it’s going to be $1M, $10M, who knows. By then, we won’t be thinking of things in terms of dollars, because they will have the same meaning and value as Zimbabwe dollars.
Am I trying to time the market and hold USD or bonds? No, though I have considered that some 2 year treasury call options might be very profitable if things continue like I think they will.
By the time the 10 year yield goes above 3%, we’ve either A) discovered cold fusion. Or B) hyperbitcoinization is well underway with 1 billion users, and every sovereign nation is buying gold or Bitcoin for a reserve asset.

Look at foreign sovereign CDS if you want an early warning. Don’t look at the credit ratings, look at what the market price is for insurance on default of their sovereign debt.
If a bond crisis starts in Canada, you know that the party is starting.
 
Last edited:

Blade Runner

Ostrich
Orthodox
I generally agree, @chance vought , and your thesis sounds very similar to Erik Townsend of MacroVoices. I have had the theory of inflation first then deflation, and we are seeing that, but it is complicated by supply chains and fake covid narratives/artifical control responses by world governments. You could also say that your theory is akin to the milkshake theory put forth by Brent Johnson, who I like because he's one of the most realistic and honest macro thinkers out there, from both a geopolitical and economic point of view.
 

Blade Runner

Ostrich
Orthodox
I have a feeling something will set off a market loss (not necessarily a crash) next year. Then huge money printing rallies it back; by then, though we are at the level of historical confidence loss due to the a) Fed balance sheet b) National Debt and c) major political divide over a fake media, elections, and disunity at large in the USA.
 
I generally agree, @chance vought , and your thesis sounds very similar to Erik Townsend of MacroVoices. I have had the theory of inflation first then deflation, and we are seeing that, but it is complicated by supply chains and fake covid narratives/artifical control responses by world governments. You could also say that your theory is akin to the milkshake theory put forth by Brent Johnson, who I like because he's one of the most realistic and honest macro thinkers out there, from both a geopolitical and economic point of view.
I think the “dollar milkshake theory” holds in the short-medium term, or appears to. The reason it appears to, even if there is no ”straw”, is the glass is much bigger than it appears, due to Eurodollars. A majority of the “dollars” are created by banks outside of the United States, so the Fed can print trillions, but those are so diluted by the sheer size of the system that it’s not immediately noticeable.
 

Blade Runner

Ostrich
Orthodox
I think the “dollar milkshake theory” holds in the short-medium term, or appears to. The reason it appears to, even if there is no ”straw”, is the glass is much bigger than it appears, due to Eurodollars. A majority of the “dollars” are created by banks outside of the United States, so the Fed can print trillions, but those are so diluted by the sheer size of the system that it’s not immediately noticeable.
Who creates the "dollars" vis a vis "Eurodollar" system?

How high do you think the US debt goes before the confidence crisis?
 
Who creates the "dollars" vis a vis "Eurodollar" system?

How high do you think the US debt goes before the confidence crisis?
My very basic understanding: foreign banks create them through lending, same as US banks. Since the “petro dollar” creation there is huge demand for dollars, created by European banks to loan to various state actors that the US has tried to financially ostracize. USSR and other disfavored states created entities that with some legal gymnastics were able to obtain these US dollars (like most dollars, they are just numbers in a ledger on a computer, not actual greenbacks) from non-US banks. Since all middle east oil had to be sold in US dollars, disfavored countries had to obtain those dollars somehow if they didn't have sufficient domestic oil.

Incidentally this is one way the USSR was bankrupted. The USA had very advanced futures markets, starting in the mid 1970s, enough that they could manipulate oil prices low enough to strangle the USSR, since they had a huge amount of oil in the USSR. That would have been a money printer for the USSR if they could have sold at realistic prices, but US oil futures market held the price artificially low for decades. The same thing has been used to keep gold artificially low in price. After the Nixon shock of 1971, when gold went from $35/oz to $120, people started to see the ponzi for what it was, until there were futures and derivatives created that could keep it from trading at true market value. It doesn't last forever, it just makes what would be a fairly steady sloping line up and to the right, into one that looks like long flat lines followed by abrupt, vertical rises in price, followed by a decade long flat line.

How high does the US debt go? I have no idea when everything breaks, or even how it breaks. My guess is things start in some weak economy, spreads worldwide, world capital flows into the US economy, causing a temporary boost in the US, but worsening the global crisis. US bond prices soar, and yields become negative. That's a straw in the milkshake, deflation. (But asset price inflation, due to capital inflows). After that, as yields go negative, everyone who can pile on even more debt will, and world debt goes $400T to who knows what. Once that extra debt is taken on, at a ludicrous negative interest rate, now rates have to remain negative or there will be a default, and system collapses. Banks will have to make money through even higher fees or charging a negative interest to savers. Pension funds that are required to hold a certain amount in government bonds, will have shrinking incomes with ballooning expenditures. Other savers will try and escape the banking system by holding assets or physical cash, but if we have a digital dollar, there will be a punitive exchange rate from physical dollars to digital, so either way, they can charge negative interest on your money.

Not sure how much longer the clown show can continue from there, but I assume smart people will start holding Bitcoin by that point, and opting out of the whole system.
 

SlickyBoy

Hummingbird
Other savers will try and escape the banking system by holding assets or physical cash, but if we have a digital dollar, there will be a punitive exchange rate from physical dollars to digital, so either way, they can charge negative interest on your money.

Not sure how much longer the clown show can continue from there, but I assume smart people will start holding Bitcoin by that point, and opting out of the whole system.
People hear stories about what their great grandmother did and mistakenly apply that to future scenarios where everything goes to crap. But hoarding cash worked during the depression because the dollar still had value. People were stealing apples that cost five cents apiece.

If (when) hyperinflation hits, the purchasing power of the notes - electronic or paper - will be worth less as the day goes by. Ask anyone who lived through it in Turkey in the 1990s, Israel in the mid-1980s (yes, they had it briefly), and of course the historical accounts from Austria and Germany.

And yes, people are already shifting cash into crypto of all flavors - traditional finance is feeling it and putting their weight behind congress to try to get stupid regulations passed that will only hinder the development of this new technology in America while the world passes us by. They can throw sand in the gears temporarily but as the smarter big money and hedge funds continues to move into BTC and other cryptos, so too does the political action money. The legacy systems will not be able to hold off the tide of crypto forever.

We saw similar dynamics with marijuana laws, immigration enforcement, gay marriage and child transexuals. All of those paradigm shifts seemed impossible to imagine just a couple of decades ago. Hence, it's only a matter of time before crypto also gets normalized. And no, I am not equating the use of crypto with those aforementioned disgraces to civilization, just the political dynamic of how the rules will change in spite of early attempts to fight it.
 

budoslavic

Eagle
Orthodox
Gold Member
3969273e14542c45.png



 

SlickyBoy

Hummingbird
3969273e14542c45.png



Don't worry, I heard there's a plane load of Afghani jingle truck drivers on the way, very eager to take over. For cheap, of course.
 

2Infinity

Woodpecker
I have a source that's knowledgeable about importing/production in China and he tells me that the electricity shortage situation is causing less capacity there, this combined with the high freight rates (200-300% higher than historical) means that we are going to see much higher prices and stockouts on retail shelves this Christmas for anything that's typically imported from China.

Michael Burry also made a tweet about this too, he's serious about the view that we are gong to see a lot more inflation:

 
Last edited:

SlickyBoy

Hummingbird
I have a source that's knowledgeable about importing/production in China and he tells me that the electricity shortage situation is causing less capacity there, this combined with the high freight rates (200-300% higher than historical) means that we are going to see much higher prices and stockouts on retail shelves this Christmas for anything that's typically imported from China.

Michael Burry also made a tweet about this too, he's serious about the view that we are gong to see a lot more inflation:

This is likely connected to their crackdown on Bitcoin mining everywhere except Shanghai, if I recall correctly. Shanghai uses a lot of power from hydroelectric, whereas the miners shut down elsewhere were using fossil fuels needed for other power production. That and China is working on their own CBDC (central bank digital currency) and wants to wipe out unauthorized BTC miners.
 

NoMoreTO

Hummingbird
Tim Pool has been talking a fair bit about the Federal Reserve and inflation recently. While I don't find he is a source for a deep dive on the topic, the conversations are always intelligent and practical. In this video he discusses some recent fed changes:
- Saving accounts have been declared M1 from M2 along with Chequing, altering the money supply.
- He also talks a fair bit about how the federal reserve no longer requires "reserves" to generate loans.
- They also echo the 14% figure noted above ^^
- They finish off with a discussion of "debt recall", aka the great reset.

I wish these guys would really do a dive on a specific part of this, but I suppose there are other podcasters who cover that.

 
Last edited:
Top